Education Realty Trust
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to § 240.14a-12
Education Realty Trust, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
¨ Fee paid previously with preliminary materials.
¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
530 Oak Court Drive, Suite 300
Memphis, Tennessee 38117
(901) 259-2500
April 21, 2006
Dear Stockholder:
I would like to extend a personal invitation for you to join us at our Annual Meeting of
Stockholders on Wednesday, May 24, 2006, at 9:00 a.m. (Central Time) at the Companys headquarters
located in Memphis, Tennessee.
At this years meeting, in addition to the election of five directors, you will be asked to
ratify the appointment of Deloitte & Touche LLP as the Companys independent registered public
accounting firm for 2006.
I urge you to vote, as the Board of Directors has recommended, for each of the director
nominees. I also ask that you ratify the appointment of Deloitte & Touche LLP as the Companys
independent registered public accounting firm for 2006.
Attached you will find a notice of meeting and proxy statement that contains further
information about these items as well as specific details of the meeting.
Your vote is important. Whether or not you expect to attend the meeting, I encourage you to
vote. Please sign and return your proxy card prior to the meeting. This will assure that your
shares will be represented and voted at the meeting, even if you cannot attend.
Sincerely,
Paul O. Bower
Chairman of the Board of Directors,
Chief Executive Officer and President
530 Oak Court Drive, Suite 300
Memphis, Tennessee 38117
(901) 259-2500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
You are invited to attend the 2006 Annual Meeting of Stockholders:
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When |
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9:00 a.m. (Central Time) on Wednesday, May 24, 2006. |
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Where |
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Corporate Headquarters, 530 Oak Court Drive, Suite 300, Memphis, Tennessee 38117. |
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Items of Business
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To elect five directors to serve until the 2007 Annual Meeting of
Stockholders or until their successors have been duly elected and qualified
(Proposal 1); |
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To ratify the appointment of Deloitte & Touche LLP as the Companys
independent registered public accounting firm for the fiscal year ending
December 31, 2006 (Proposal 2); and |
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To conduct such other business as may properly come before the meeting
or any adjournment or postponement thereof. |
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Record Date |
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You are entitled to vote if you are a stockholder of record at the close of
business on April 10, 2006. |
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Voting by Proxy |
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The Board of Directors is soliciting your proxy to assure that a quorum is
present and that your shares are represented and voted at the meeting. Please
see the attached proxy statement and enclosed proxy card for information on
mailing back the traditional proxy card (no extra postage is needed for the
enclosed envelope if mailed in the U.S.). If you later decide to vote at the
meeting, information on revoking your proxy prior to the meeting is also
provided. You may receive more than one set of proxy materials and proxy cards.
Please promptly complete, sign and return each proxy card you receive in order
to ensure that all of your shares are represented and voted. |
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Recommendations |
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The Board of Directors recommends that you vote FOR each nominee for director
and FOR Proposal 2. |
By Order of the Board of Directors,
Randall H. Brown
Secretary
April 21, 2006
Memphis, Tennessee
TABLE OF CONTENTS
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EDUCATION REALTY TRUST, INC.
530 Oak Court Drive, Suite 300
Memphis, Tennessee 38117
PROXY STATEMENT FOR THE
2006 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement and the enclosed proxy card are furnished on behalf of the Board of
Directors of Education Realty Trust, Inc., a Maryland corporation (the Company, we, us or
our), for use at the 2006 Annual Meeting of Stockholders (the Annual Meeting), or at any
adjournment or postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. We intend to mail this Proxy Statement and the accompanying Proxy on or
about April 21, 2006, to all stockholders entitled to vote at the Annual Meeting.
INFORMATION ABOUT THE MEETING
When is the Annual Meeting?
The Annual Meeting will be held at 9:00 a.m., Central Time, on Wednesday, May 24, 2006.
Where will the Annual Meeting be held?
The Annual Meeting will be held at the Companys headquarters, located at 530 Oak Court Drive,
Suite 300, Memphis, Tennessee 38117.
What items will be voted on at the Annual Meeting?
There are two matters scheduled for a vote:
1. To elect five directors to serve until the 2007 Annual Meeting of Stockholders or until
their successors have been duly elected and qualified; and
2. To ratify the appointment of Deloitte & Touche LLP as the Companys independent registered
public accounting firm for the fiscal year ending December 31, 2006.
As of the date of this proxy statement, we are not aware of any other matters that will be
presented for consideration at the Annual Meeting.
What are the Board of Directors recommendations?
Our Board of Directors recommends that you vote:
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FOR the election of each of the five nominees named herein to serve on the Board of
Directors; and |
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FOR the ratification of the appointment of Deloitte & Touche LLP as the Companys
independent registered public accounting firm for the fiscal year ending December 31, 2006. |
Will the Companys directors be in attendance at the Annual Meeting?
The Company encourages, but does not require, its directors to attend annual meetings of
stockholders. However, the Company anticipates that all of its directors will attend the Annual
Meeting.
INFORMATION ABOUT VOTING
Who is entitled to vote at the Annual Meeting?
Only stockholders of record at the close of business on the record date, April 10, 2006, are
entitled to receive notice of the Annual Meeting and to vote the shares that they held on that date
at the Annual Meeting, or any postponement or adjournment of the Annual Meeting. As of the close
of business on April 10, 2006, the Company had 26,411,000 shares of common stock outstanding.
Stockholders of Record: Shares Registered in Your Name. If on April 10, 2006 your shares were
registered directly in your name with the Companys transfer agent, SunTrust Bank, then you are a
stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote
by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return the
enclosed proxy card to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank. If on April 10, 2006
your shares were held in an account at a brokerage firm, bank, dealer or other similar
organization, then you are the beneficial owner of shares held in street name and these proxy
materials are being forwarded to you by that organization. The organization holding your account
is considered the stockholder of record for purposes of voting at the Annual Meeting. As a
beneficial owner, you have the right to direct your broker or other agent on how to vote the shares
in your account. You are also invited to attend the Annual Meeting. However, since you are not
the stockholder of record, you may not vote your shares in person at the meeting unless you request
and obtain a valid proxy from your broker or other agent.
How do I vote?
You may either vote FOR all the nominees to the Board of Directors or you may withhold your
vote for all nominees or for any nominee you specify. For each of the other matters to be voted
on, you may vote FOR or AGAINST or abstain from voting. The procedures for voting are fairly
simple:
Stockholder of Record: Shares Registered in Your Name. If you are a stockholder of record,
you may vote in person at the Annual Meeting or vote by proxy using the enclosed proxy card.
Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is
counted. You may still attend the meeting and vote in person if you have already voted by proxy.
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To vote in person, come to the Annual Meeting and we will give you a ballot when you
arrive. |
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To vote using the enclosed proxy card, simply complete, sign and date the enclosed proxy
card and return it promptly in the postage paid envelope provided. If you return your
signed proxy card to us before the Annual Meeting, we will vote your shares as you direct. |
Beneficial Owner: Shares Registered in the Name of Broker or Bank. If you are a beneficial
owner of shares registered in the name of your broker, bank or other agent, you should have
received a proxy card and voting instructions with these proxy materials from that organization
rather than from the Company. Simply complete and mail the proxy card to ensure that your vote is
counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker
or bank. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker,
bank or other agent. Follow the instructions from your broker or bank included with these proxy
materials, or contact your broker or bank to request a proxy form.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as
of April 10, 2006.
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What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting selections, your shares
will be voted FOR the election of all five nominees for director and FOR the ratification of
the appointment of Deloitte & Touche LLP as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2006. If any other matter is properly presented at
the meeting, your proxy (one of the individuals named on your proxy card) will vote your shares as
recommended by the Board of Directors or, if no recommendation is given, will vote your shares
using his or her best judgment.
Can I change my vote after I return my proxy card?
Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are
the record holder of your shares, you may revoke your proxy in any one of three ways:
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You may submit another properly completed proxy bearing a later date; |
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You may send a written notice that you are revoking your proxy to 530 Oak Court Drive,
Suite 300, Memphis, Tennessee 38117, Attention: Randall H. Brown, Corporate Secretary; or |
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You may attend the Annual Meeting and notify the election officials at the meeting that
you wish to revoke your proxy and vote in person. Simply attending the meeting will not,
by itself, revoke your proxy. |
If your shares are held by your broker or bank as a nominee or agent, you should follow the
instructions provided by your broker or bank.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting, who will
separately count FOR and withheld votes, and, with respect to proposals other than the election
of the five director nominees, AGAINST votes, abstentions and broker non-votes. Abstentions will
be counted towards the vote total for each proposal (other than for the election of the five
director nominees) and will have the same effect as AGAINST votes. Broker non-votes have no
effect and will not be counted towards the vote total for any proposal.
If your shares are held by your broker as your nominee (that is, in street name), you will
need to obtain a proxy form from the institution that holds your shares and follow the instructions
included on that form regarding how to instruct your broker to vote your shares. Please note that
brokers that have not received voting instructions from their clients cannot vote on their clients
behalf on non-routine proposals, but may vote their clients shares on other proposals. In the
event that a broker, bank, custodian, nominee or other record holder of our common stock indicates
on a proxy that it does not have discretionary authority to vote certain shares on a particular
matter, then those shares will be treated as broker non-votes. Shares represented by such broker
non-votes will, however, be counted in determining whether there is a quorum.
How many votes are needed to approve each proposal?
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For the election of the five director nominees, the nominees receiving the most FOR
votes (among votes properly cast in person or by proxy) will be elected. Only votes FOR
or votes withheld with respect to any or all of the nominees will affect the outcome. |
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To be approved, Proposal No. 2, the ratification of the appointment of Deloitte & Touche
LLP as the Companys independent registered public accounting firm for the fiscal year
ending December 31, 2006, must receive FOR votes from the majority of shares present and
entitled to vote either in person or by proxy. |
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What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at
least a majority of the outstanding shares entitled to vote are represented by stockholders present
at the meeting or by proxy. On April 10, 2006, the record date, there were 26,411,000 shares
outstanding and entitled to vote. Thus, 13,205,501 shares must be represented by stockholders
present at the meeting or by proxy to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is
submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the
Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement.
If there is no quorum, either the Chairman of the meeting or a majority of the votes present in
person or represented by proxy at the Annual Meeting may adjourn the meeting to another date.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. Final results will be
published in the Companys quarterly report on Form 10-Q for the second quarter of 2006.
ADDITIONAL INFORMATION
How and when may I submit a stockholder proposal for the Companys 2007 Annual Meeting?
Our annual meeting of stockholders generally is held in May of each year. We will consider
for inclusion in our proxy materials for the 2007 Annual Meeting of Stockholders, stockholder
proposals that are received at our executive offices no later than December 22, 2006 and that
comply with all applicable requirements of Rule 14a-8 promulgated under the Securities Exchange Act
of 1934, as amended (the Exchange Act) and our Bylaws. Proposals must be sent to our executive
offices at 530 Oak Court Drive, Suite 300, Memphis, Tennessee 38117, Attention: Randall H. Brown,
Corporate Secretary.
Pursuant to Section 11 of the Companys Bylaws, stockholders wishing to submit proposals or
director nominations that are not to be included in our proxy materials must have given timely
notice thereof. To be timely for the 2007 Annual Meeting of Stockholders, you must notify our
Corporate Secretary, in writing at the address above, no earlier than the close of business on
November 22, 2006 and no later than the close of business on December 22, 2006. However, if the
Companys 2007 Annual Meeting of Stockholders is not held within 30 days of the anniversary date of
this Annual Meeting, then you must notify our Corporate Secretary, in writing, not earlier than the
close of business on the 150th day prior to the date of the 2007 Annual Meeting of Stockholders and
no later than the close of business on the later of (i) the 120th day prior to the date of the 2007
Annual Meeting of Stockholders or (ii) the 10th day following the day we make a public announcement
of the date of the 2007 Annual Meeting of Stockholders. We also advise you to review the Companys
Bylaws, which contain additional requirements about advance notice of stockholder proposals and
director nominations.
The Chairman of the 2007 Annual Meeting of Stockholders may determine, if the facts warrant,
that a matter has not been properly brought before the meeting and, therefore, may not be
considered at the meeting. In addition, the proxy solicited by the Board of Directors for the 2007
Annual Meeting of Stockholders will confer discretionary voting authority with respect to any
matter presented by a stockholder at that meeting for which the Company has not been provided with
timely notice.
How can I obtain the Companys Annual Report on Form 10-K?
Our Annual Report to Stockholders is being mailed along with this Proxy Statement. Our Annual
Report to Stockholders and Annual Report on Form 10-K for the fiscal year ended December 31, 2005,
as filed with the Securities and Exchange Commission (SEC), are available on our website at
www.educationrealty.com or upon written request by writing to Education Realty Trust, Inc., 530 Oak
Court Drive, Suite 300, Memphis, Tennessee
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38117. A copy of our Annual Report on Form 10-K has also been filed with the SEC and may be
accessed from the SECs homepage (www.sec.gov).
Neither the Annual Report to Stockholders nor the Annual Report on Form 10-K for the fiscal
year ended December 31, 2005 is to be treated as part of the proxy solicitation materials.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy
materials, our directors and employees may also solicit proxies in person, by telephone or by other
means of communication. Directors and employees will not be paid any additional compensation for
soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of
forwarding proxy materials to beneficial owners.
How many copies should I receive if I share an address with another stockholder?
The SEC has adopted rules that permit companies and intermediaries, such as brokers, to
satisfy the delivery requirements for proxy statements and annual reports with respect to two or
more stockholders sharing the same address by delivering a single proxy statement addressed to
those stockholders. This process, which is commonly referred to as householding, potentially
provides extra convenience for stockholders and cost savings for companies.
The Company and some brokers may be householding our proxy materials by delivering a single
proxy statement and annual report to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders. Once you have received notice from
your broker or us that they or we will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If at any time you no
longer wish to participate in householding and would prefer to receive a separate proxy statement
and annual report, or if you are receiving multiple copies of the proxy statement and annual report
and wish to receive only one, please notify your broker if your shares are held in a brokerage
account or us if you are a stockholder of record. You can notify us by sending a written request
to 530 Oak Court Drive, Suite 300, Memphis, Tennessee 38117, Attention: Randall H. Brown, Corporate
Secretary, or by calling 901-259-2500. In addition, the Company will promptly deliver, upon
written or oral request to the address or telephone number above, a separate copy of the annual
report and proxy statement to a stockholder at a shared address to which a single copy of the
documents was delivered.
Who should I contact if I have any questions?
If you have any questions about the Annual Meeting, these proxy materials or your ownership of
our common stock, please contact Randall H. Brown, Corporate Secretary, at 530 Oak Court Drive,
Suite 300, Memphis, Tennessee 38117, or by calling 901-259-2500.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Directors and Executive Officers
The following table sets forth information as of April 1, 2006 regarding the beneficial
ownership of our common stock by:
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each of our directors and nominees for director; |
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each of our Named Executive Officers; and |
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all directors and executive officers as a group. |
The number of shares owned and percentage ownership in the following table is based on
26,411,000 shares of common stock outstanding on April 1, 2006. Except as otherwise indicated
below, the address of each executive officer and director listed below is c/o Education Realty
Trust, Inc., 530 Oak Court Drive, Suite 300, Memphis, Tennessee 38117.
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Common Stock Beneficially Owned(1) |
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Number of Shares |
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Percentage of |
Name of Beneficial Owner |
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of Common Stock |
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Paul O. Bower |
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884,604 |
(2) |
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3.25 |
% |
Randall H. Brown |
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84,232 |
(3) |
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Craig L. Cardwell |
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81,729 |
(4) |
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William W. Harris |
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53,832 |
(5) |
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Thomas J. Hickey |
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66,522 |
(6) |
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Monte J. Barrow |
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6,500 |
(7) |
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William J. Cahill, III |
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1,500 |
(7) |
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Randall L. Churchey |
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10,782 |
(7) |
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John L. Ford |
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1,500 |
(7) |
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All
directors and executive officers as a group (10 persons) |
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1,201,201 |
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4.38 |
% |
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Less than 1% of the outstanding common stock. |
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Beneficial ownership is determined in accordance with the rules of the SEC, and includes
voting or investment power with respect to shares. Shares of common stock issuable upon the
conversion of units of limited partnership interest in Education Realty Operating Partnership,
LP (the Operating Partnership) or University Towers Operating Partnership, LP (the
University Towers Partnership) or under derivative securities that are exercisable within 60
days after April 1, 2006, are deemed outstanding for computing the percentage ownership of the
person, entity or group holding the securities but are not deemed outstanding for computing
the percentage ownership of any other person. Unless otherwise indicated, to our knowledge,
all persons named in the tables have sole voting and investment power with respect to their
shares of common stock, except to the extent authority is shared by spouses under applicable
law. |
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The shares shown as beneficially owned by Mr. Bower include: (i) 45,000 shares of
restricted common stock that vest ratably over five years; (ii) 656,585 shares of common stock
issuable upon the redemption of limited partnership units of our Operating Partnership held by
Allen & OHara, Inc., of which Mr. Bower is the sole stockholder; (iii) 142 shares of common
stock issuable upon the redemption of limited partnership units of our Operating Partnership
held directly by Mr. Bower; (iv) 118,430 shares of common stock issuable upon the redemption
of limited partnership units of University Towers Partnership held by Allen & OHara, Inc.;
and (v) 63,447 shares of common stock issuable upon the redemption of limited partnership
units of University Towers Partnership held directly by Mr. Bower. The shares exclude 30,000
profits interest units in Education Realty Limited Partner, LLC, which holds partnership
interests in our Operating Partnership. Upon the occurrence of certain capital account
equalization events, the profits interest units will become exchangeable for shares of our
common stock. |
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The shares shown as beneficially owned by Mr. Brown include: (i) 40,000 shares of restricted
common stock that vest ratably over five years and (ii) 43,832 shares of common stock issuable
upon the redemption of limited |
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partnership units of our Operating Partnership. The shares exclude 30,000 profits interest units
in Education Realty Limited Partner, LLC, which holds partnership interests in our Operating
Partnership. Upon the occurrence of certain capital account equalization events, the profits
interest units will become exchangeable for shares of our common stock. |
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The shares shown as beneficially owned by Mr. Cardwell include: (i) 35,000 shares of
restricted common stock that vest ratably over five years and (ii) 44,729 shares of common
stock issuable upon the redemption of limited partnership units of our Operating Partnership.
The shares exclude 30,000 profits interest units in Education Realty Limited Partner, LLC,
which holds partnership interests in the Operating Partnership. Upon the occurrence of certain
capital account equalization events, the profits interest units will become exchangeable for
shares of our common stock. |
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The shares shown as beneficially owned by Mr. Harris include: (i) 10,000 shares of restricted
common stock that vest ratably over five years and (ii) 43,832 shares of common stock issuable
upon the redemption of limited partnership units of our Operating Partnership. The shares
exclude 20,000 profits interest units in Education Realty Limited Partner, LLC, which holds
partnership interests in the Operating Partnership. Upon the occurrence of certain capital
account equalization events, the profits interest units will become exchangeable for shares of
our common stock. |
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The shares shown as beneficially owned by Mr. Hickey include: (i) 10,000 shares of restricted
common stock that vest ratably over five years; (ii) 43,832 shares of common stock issuable
upon the redemption of limited partnership units of our Operating Partnership; and (iii)
12,690 shares of common stock issuable upon the redemption of limited partnership units of
University Towers Partnership. The shares exclude 20,000 profits interest units in Education
Realty Limited Partner, LLC, which holds partnership interests in our Operating Partnership.
Upon the occurrence of certain capital account equalization events, the profits interest units
will become exchangeable for shares of our common stock. |
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Includes 1,500 shares of restricted stock. |
Beneficial Owners of More Than 5% of Common Stock
The following table sets forth information regarding the beneficial ownership of our common
stock by each person, or group of affiliated persons, who is known by us to beneficially own five
percent or more of our common stock.
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Common Stock Beneficially Owned |
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Number of Shares |
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Percentage of |
Name and Address of Beneficial Owner |
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of Common Stock |
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Class |
FMR Corp
82 Devonshire Street
Boston, MA 02109 |
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3,279,000 |
(1) |
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14.735 |
% |
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Wellington Management Company, LLP
75 State Street
Boston, MA 02109 |
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1,608,300 |
(2) |
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6.09 |
% |
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Teachers Insurance and Annuity Association of America
Teachers Advisors, Inc.
TIAA-CREF Investment Management, LLC
730 Third Avenue
New York, NY 10017 |
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1,441,102 |
(3) |
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5.45 |
% |
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Cohen & Steers, Inc.
Cohen & Steers Capital Management, Inc.
280 Park Avenue 10th Floor
New York, NY 10017 |
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3,706,500 |
(4) |
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14.0 |
% |
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(1) |
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The indicated ownership is based solely on an amendment to the Schedule 13G filed with the
SEC by the beneficial owners on February 14, 2006, reporting beneficial ownership as of
December 31, 2005. Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. and an investment adviser registered under the Investment Advisers Act of 1940, is the
beneficial owner of 2,465,300 shares or 11.079% of |
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the Companys common stock as a result of acting as investment adviser to various investment
companies registered under the Investment Company Act of 1940. Fidelity Management Trust
Company, a wholly-owned subsidiary of FMR Corp., is the beneficial owner of 813,700 shares or
3.657% of the Companys common stock as a result of its serving as investment manager of the
institutional accounts. |
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(2) |
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The indicated ownership is based solely on the Schedule 13G filed with the SEC by the
beneficial owners on February 14, 2006, reporting beneficial ownership as of December 31,
2005. Wellington Management Company, LLP (Wellington Management), in its capacity as
investment advisor, may be deemed to have beneficial ownership of 1,608,300 shares of the
Companys common stock . Such shares are owned by numerous investment advisory clients of
Wellington Management, none of which is known to own more than 5% of the Companys common
stock. As of December 31, 2005, Wellington Management shared voting power over 711,300 shares
and shared dispositive power over 1,608,300 shares of the Companys common stock. |
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(3) |
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The indicated ownership is based solely on the Schedule 13G filed with the SEC by the
beneficial owners on February 13, 2006, reporting beneficial ownership as of December 31,
2005. Teachers Insurance and Annuity Association of America (TIAA) presently holds 600,000
shares of the Companys common stock for the benefit of TIAA Real Estate Account, a separate
account of TIAA. In addition, TIAA, as the parent of two registered investment advisers, may
be deemed to have indirect voting or investment discretion over 841,102 shares of the
Companys common stock that are beneficially owned by five registered investment
companiesCollege Retirement Equities Fund (CREF), TIAA-CREF Institutional Mutual Funds
(Institutional Funds), TIAA-CREF Mutual Funds (Mutual Funds), TIAA Separate Account VA-1
(VA-1) and TIAA-CREF Life Funds (Life Funds), as well as the TIAA-CREF Asset Management
Commingled Funds Trust I (TCAM Funds)whose investment advisers are TIAA-CREF Investment
Management, LLC (in the case of CREF) and Teachers Advisors, Inc. (in the case of
Institutional Funds, Mutual Funds, VA-1, Life Funds and TCAM Funds), both of which are wholly
owned subsidiaries of TIAA. |
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(4) |
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The indicated ownership is based solely on an amendment to the Schedule 13G filed with the
SEC by the beneficial owners on February 13, 2006, reporting beneficial ownership as of
December 31, 2005. The Schedule 13G was filed jointly by Cohen & Steers, Inc. (Cohen &
Steers) and Cohen & Steers Capital Management, Inc., an investment advisor registered under
Section 203 of the Investment Advisers Act (Capital Management). Cohen & Steers holds a 100%
interest in Capital Management.. Cohen and Steers and Capital Management possessed sole voting
power over 3,570,700 shares and sole dispositive power over 3,706,500 shares of the Companys
common stock. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires our executive officers and directors and the
holders of greater than 10% of our common stock to file initial reports of ownership and reports of
changes in ownership with the SEC. Executive officers and directors are required by SEC regulations
to furnish us with copies of these reports. Based solely on a review of the copies of these reports
furnished to us and written representations from such executive officers, directors and
stockholders with respect to the period from January 1, 2005 through December 31, 2005, we are not
aware of any required Section 16(a) reports that were not filed on a timely basis, with the
following exceptions:
A Form 4 was not timely filed to report Mr. Cardwells acquisition of 1,000 shares of common
stock on December 1, 2005, but this transaction was reported on a Form 4 filed on December 6, 2005.
Mr. Bower failed to report his acquisition of 1,000 shares of common stock on January 26, 2005.
This transaction was reported on a Form 4 filed April 17, 2006.
Copies of the insider trading reports can be found on the Investor Relations page of our
corporate website at http://www.educationrealty.com, under the category SEC Filings.
8
PROPOSAL 1
ELECTION OF DIRECTORS
Introduction
At the Annual Meeting, five persons will be elected to serve on our Board of Directors, each
for a one-year term. The terms of the directors will expire upon the election and qualification of
successor directors at the 2007 annual meeting of stockholders. There are no family relationships
among any of the members of our Board of Directors.
Directors are elected by a plurality of the votes present in person or represented by proxy
and entitled to vote at the Annual Meeting. Shares represented by executed proxies will be voted,
if authority to do so is not withheld, for the election of the five nominees named below. In the
event that any nominee should be unavailable for election as a result of an unexpected occurrence,
such shares will be voted for the election of such substitute nominee as the Board of Directors may
select. Each person nominated for election has agreed to serve if elected, and management has no
reason to believe that any nominee will be unable to serve.
Nominees
Paul O. Bower, age 63, has served as Chairman of our Board of Directors since July 2004. He is
also our Chief Executive Officer and President. Mr. Bower joined our predecessor, Allen & OHara,
Inc. (Allen & OHara), in July 1969, and from 1969 to 1977, he served as Assistant General
Manager of Granville Towers (University of North Carolina), General Manager of The Towers
(University of Wisconsin) and Summit Hall (West Virginia University), and Regional Director and
Branch Manager of Allen & OHaras student housing/foodservice group. In 1977, Mr. Bower was
promoted to Vice President of the student housing group of Allen & OHaras Management Services
department, and he became Senior Vice President of that department in 1979. In 1994, Mr. Bower was
named Senior Vice President of Management Contract Development, and in 1997 he was named Executive
Vice President of Development. In January 1998, he became President and Chief Executive Officer of
Allen & OHara. Mr. Bower holds the Certified Property Manager designation conferred by the
Institute of Real Estate Management (IREM) and is a member of the Memphis Board of Realtors and the
Association of College and University Housing Officers International.
Monte J. Barrow, age 61, has served as a member of our Board of Directors since January 2005.
From February 1982 until August 2002, Mr. Barrow served as the Chief Financial Officer and Senior
Vice President of MS Carriers, Inc., a publicly-traded trucking transportation company (NASDAQ:
MSCA). While serving as Chief Financial Officer of MS Carriers, Mr. Barrow was responsible for the
accounting, financial, human resources and information technology departments of the company. Mr.
Barrow retired in August 2002, following the sale of MS Carriers to Swift Transportation Company,
Inc. Since February 2003, Mr. Barrow has been self-employed as the owner and operator of two
privately-held businesses.
William J. Cahill, III, age 60, has served as a member of our Board of Directors since January
2005. Mr. Cahill has served as the Corporate Vice President of Human Resources of FedEx Corporation
(NYSE: FDX) since June 2004 and served as Vice President of Human Resources of FedEx Corporation
from February 1998 until June 2004. He has been with FedEx since December 1979. In his current
role, Mr. Cahill is responsible for executive compensation, succession planning, healthcare
strategy, retirement investment, employment, legal compliance and other human resources functions
at FedEx Corporation.
Randall L. Churchey, age 45, has served as a member of our Board of Directors since January
2005. Mr. Churchey became the President and Chief Executive Officer of Golden Gate National Senior
Care (the successor to Beverly Enterprises), effective March 15, 2006. Golden Gate National Senior
Care is the second largest long-term care company in the United States. Mr. Churchey also serves
as Chief Executive Officer of Encore Real Estate Company, LLC, a hotel construction and management
company that currently owns and manages one hotel. Mr. Churchey served as President and Chief
Operating Officer of RFS Hotel Investors, Inc., a publicly-traded hotel REIT (NYSE: RFS), from
November 1999 until its sale in July 2003. From 1997 to 1999, he served as Senior Vice President
and Chief Financial Officer of FelCor Lodging Trust, Inc., a publicly-traded hotel REIT (NYSE:
FCH). From 1982 until 1997, Mr. Churchey held various positions in the audit practice of Coopers &
Lybrand, LLP, where
9
he most recently served as a Partner and as Chair of the firms Hospitality and Real Estate
practice for the southwestern United States. Mr. Churchey is currently a private investor and
serves on the board of trustees and as the audit committee chairperson for Innkeepers USA Trust, a
publicly-traded REIT (NYSE: KPA), and for Great Wolf Resorts, Inc., a publicly-traded owner and
operator of resorts (NASDAQ: WOLF). Mr. Churchey is a Certified Public Accountant
John L. Ford, age 60, has served as a member of our Board of Directors since January 2005.
Dr. Ford has served as the Senior Vice President and Dean of Campus Life for Emory University since
January 2001. In this role, Dr. Ford oversees a department of approximately 350 employees with an
annual budget of $43 million. From September 1992 through December 2000, he served as Dean of
Students at Cornell University. In both this and his current position, Dr. Ford leads and oversees
student life outside of the classroom.
The Board of Directors recommends a vote FOR each nominee named above.
EXECUTIVE OFFICERS
In addition to Paul O. Bower, the following individuals serve as our executive officers and
other key employees:
Randall H. Brown, age 48, is our Executive Vice President, Chief Financial Officer, Treasurer
and Secretary. Mr. Brown joined Allen & OHara as its Chief Financial Officer, Treasurer and
Secretary in June 1999. Prior to joining Allen & OHara, Mr. Brown served as director of corporate
finance for Promus Hotel Corporation (now part of Hilton Hotels Corporation). Prior to his
promotion to director of corporate finance, Mr. Brown served as manager of capital analysis and
planning for Promus. Mr. Brown began his career at PriceWaterhouse and also held various financial
and accounting positions at Holiday Inns, Inc. and International Paper Company. Mr. Brown is a
Certified Public Accountant (inactive), and is a member of the American Institute of Certified
Public Accountants.
Craig L. Cardwell, age 56, is our Executive Vice President and Chief Investment Officer. Mr.
Cardwell joined Allen & OHara in 1971 and managed food service operations at residence halls
located in California and Georgia through 1976. From 1977 to 1980, he served as General Manager of
the Castilian (University of Texas). In 1980, Mr. Cardwell was promoted to Regional Director of
Student Housing, and in 1984, he became Regional Director of Apartments. Commencing in 1993, Mr.
Cardwell was responsible for the regional directorship of both student housing and apartments for
Allen & OHara, and in 1998, Mr. Cardwell became Allen & OHaras Vice President of Acquisitions.
Mr. Cardwell is a member of the Memphis Chapter of the IREM. He formerly served as a member, board
member, and president of the IREMs Memphis chapter. He currently serves as a governing counselor
of the IREM and holds its Certified Property Manager designation. Mr. Cardwell was also founding
director of the VECA community development corporation, a corporation founded to redevelop
inner-city residential housing.
William W. Harris, age 60, is our Senior Vice President of Development and President of Allen
& OHara Development Company, LLC, which is our development company. Mr. Harris joined Allen &
OHara in 1982 and became its Vice President of Development in January 1986. Mr. Harris has over
25 years of experience in development, appraisal, consulting and mortgage finance. Prior to
joining Allen & OHara, Mr. Harris served as Head of Development, Vice President of Real Estate
Services for McAllister Associates, Inc. and Vice President of Gates Mortgage & Equity. Mr. Harris
holds the MAI designation, the highest award granted by the Appraisal Institute, and has served as
president of the Memphis Chapter of that organization. Mr. Harris is also a member of Lambda Alpha
International, an honorary land economics society.
Thomas J. Hickey, age 59, is our Senior Vice President of Operations. Mr. Hickey joined Allen
& OHara in 1972 and has served as Assistant General Manager at Granville Towers (University of
North Carolina), General Manager at Osceola Hall (Florida State University), General Manager of
Fontana Hall (University of South Florida), and Regional Director of the housing/foodservice group
of the management services department. Mr. Hickey was promoted to Vice President of the apartment
group in 1983, Vice President of Operations in 1984 and he assumed responsibilities relating to
Vice President of Management Services in 1988. Mr. Hickey is both a current member and
10
past president of the Memphis chapter of the IREM. He also holds the Certified Property
Manager designation conferred by the IREM and was chairman of the board of directors of the Diocese
of Memphis Housing Corporation.
J. Drew Koester, age 35, is our Vice President and Chief Accounting Officer. Mr. Koester
joined Allen & OHara in September 2004. From January 1999 until September 2004, Mr. Koester
served as Vice President of Finance for TruGreen Companies, LLC, a division of The ServiceMaster
Company. From August 1998 until January 1999, Mr. Koester was a financial analyst at The
ServiceMaster Company. Mr. Koester began his career at Deloitte & Touche LLP, and was a Financial
Reporting Manager for Continental PET Technologies prior to joining The ServiceMaster Company. Mr.
Koester is a Certified Public Accountant (inactive).
Key Employees
Thomas Trubiana, age 54, has served as Senior Vice President of Development of our development
company, Allen & OHara Development Company, LLC, since February 2005. He served as a financial
advisor to Eagle Strategies Corporation from June 2004 until joining us in February 2005. Mr.
Trubiana served as President of American Campus Communities, Inc. from July 1997 until October
2003. Prior to serving as President of American Campus Communities, Mr. Trubiana served as Senior
Vice President of Management Services for Cardinal/Lexford Realty Services. Mr. Trubiana began his
career as a resident assistant at Allen & OHara in 1972, and was promoted to general manager,
regional manager and finally director of development, before leaving Allen & OHara in 1987.
Wallace L. Wilcox, age 57, is our Vice President of Construction and Engineering. Mr. Wilcox
joined Allen & OHara in 1980 and has served in various capacities in the areas of project
management, maintenance and engineering. He became Vice President of Construction and Engineering
for Allen & OHara in May 2000. For the past 25 years, Mr. Wilcox has supervised the consummation
and development of student housing communities as well as hotels, office buildings and churches.
Susan B. Arrison, age 56, is our Vice President of Human Resources. Ms. Arrison joined Allen
& OHara as Vice President of Human Resources in 1980. In 1988, she became Vice President of
Employment/ Employee Relations at National Bank of Commerce, and she served in that capacity for
over eight years. In January 1996, Ms. Arrison returned to her role as Vice President of Human
Resources at Allen & OHara. Ms. Arrison is a member of the Society of Human Resource Management.
11
CORPORATE GOVERNANCE
Director Independence
As required under the New York Stock Exchange (NYSE) listing standards, a majority of the
members of a listed companys board of directors must qualify as independent, as affirmatively
determined by the Board of Directors. Consistent with the requirements of the SEC, the NYSE, our
Corporate Governance Guidelines and general corporate best practices proposals, our Board of
Directors reviews all relevant transactions or relationships between each director, and the
Company, senior management and our independent registered public accounting firm. During this
review, the Board considers whether there are any transactions or relationships between directors
or any member of their immediate family (or any entity of which a director or an immediate family
member is an executive officer, general partner or significant equity holder) and members of the
Companys senior management or their affiliates. The Board consults with the Companys corporate
counsel to ensure that the Boards determinations are consistent with all relevant securities and
other laws and regulations regarding the definition of independent.
As a result of this review, our Board of Directors affirmatively determined that the following
four of our five directors are independent within the meaning of the applicable NYSE listing
standards and our Corporate Governance Guidelines: Messrs. Barrow, Cahill and Churchey and Dr.
Ford. Mr. Bower, our President and Chief Executive Officer, is not independent within the
meaning of the NYSE listing standards.
In determining that each of the non-management directors is independent, the Board considered
the following relationship, which it determined was immaterial to the directors independence: Mr.
Cahill is a Corporate Vice President of Human Resources of FedEx Corporation. In the normal course
of business, we use FedEx as an overnight courier. The Board of Directors concluded that this
relationship is not material and does not otherwise impair, or appear to impair, Mr. Cahills
independent judgment, and therefore does not prevent him from being independent.
Board and Committee Meetings; Attendance
The Company encourages, but does not require its directors to attend annual meetings of
stockholders. All of the directors attended the 2005 Annual Meeting of Stockholders. For 2005,
the average aggregate Board and committee meeting attendance for all current directors was
approximately 94%, with each director attending at least 75% of the aggregate of all meetings of
the Board and any committees on which he served. In 2005, the Board of Directors held 3 meetings;
the Audit Committee held 6 meetings (including telephonic meetings); the Compensation Committee
held 3 meetings; and the Nominating and Corporate Governance Committee held 3 meetings. In
addition, our independent directors conduct regularly scheduled meetings without the presence of
non-independent directors or management. Mr. Barrow serves as chairman for executive sessions of
the independent directors and presides over these meetings.
Board Compensation
Non-employee members of the Board of Directors receive an annual fee of $15,000, which is
payable quarterly. All non-employee members of the Board of Directors receive a fee of $1,000 for
each board meeting attended in person and $500 for each board meeting attended by telephone
conference or similar communications equipment. Independent directors receive a fee of $750 for
each committee meeting attended, except that committee chairmen receive an additional $500 for
attendance at each meeting of the committee for which they serve as chair. In January 2005, we
issued an initial grant of restricted stock to each of our independent directors representing 1,000
shares of our common stock, which vested 180 days following the grant date. We will issue annual
grants of restricted stock to each of our independent directors representing 500 shares of our
common stock, which will be fully vested on the grant date. We reimburse our independent directors
for all reasonable expenses incurred in connection with their service on the Board of Directors.
Directors who are employees of our Company or our subsidiaries will not receive compensation for
their services as directors.
12
Board Committees
In January 2005, the Board of Directors established three permanent committees that have
certain responsibilities for our governance and management. These committees are the Audit
Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The
Board of Directors has adopted charters for the Audit Committee, Compensation Committee and the
Nominating and Corporate Governance Committee, which can be found on our website at
www.educationrealty.com. The Company will also provide a copy of these documents to any person,
upon request, by writing to the Company at Education Realty Trust, Inc., Investor Relations
Manager, 530 Oak Court Drive, Suite 300, Memphis, Tennessee 38117.
The Board of Directors has determined that each member of the Audit Committee meets the
independence requirements of the NYSE applicable to members of the Audit Committee, as well as the
Audit Committee independence standards established by the SEC. Further, the Board of Directors has
determined that Mr. Churchey is an audit committee financial expert, as defined by the rules of
the SEC. In addition, the Board of Directors has determined that all members of the Compensation
Committee and the Nominating and Corporate Governance Committee meet the independence requirements
of the NYSE.
The current membership of and information about each of our Board committees is shown below.
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Committee and |
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Committee Functions |
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Current Members |
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Audit Committee
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appoints our independent registered public accounting firm,
oversees their work, reviews the scope of the audit to be conducted by
them, as well as the results of their audit; |
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Current
Members:
Mr. Churchey (Chairman)
Mr. Barrow
Mr. Cahill
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reviews the scope of our internal system of controls, appraises
our financial reporting activities (including our proxy statement and
annual report) and the accounting standards and principles followed; |
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reviews and discusses with management and the independent
registered public accounting firm various topics and events that may have
significant financial impact on our business, and it reviews and
discusses with management major financial risk exposure and steps that
management has taken to monitor and control such exposure; and |
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reviews the adequacy and effectiveness of our internal controls,
internal audit procedures and disclosure controls and procedures, as well
as our managements reports thereon. |
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Nominating and Corporate
Governance Committee
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identifies, screens and recommends outstanding individuals who
qualify to serve as members of the Board of Directors and recommends to
the Board of Directors the director nominees for election by our
stockholders at each annual stockholder meeting; |
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Current Members:
Dr. Ford (Chairman)
Mr. Barrow
Mr. Churchey
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reviews and makes recommendations to the Board of Directors
regarding our corporate governance principles, including the structure,
composition and functioning of the Board of Directors and all committees
of the Board, the delegation of authority to management, oversight by the
Board of management actions and reporting duties of management; and |
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reviews procedures for meetings of the Board of Directors,
including the appropriateness and adequacy of the information supplied to
directors prior to and during Board meetings. |
13
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Compensation Committee
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approves the compensation and benefits for our executive officers;
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Current Members:
Mr. Cahill (Chairman)
Mr. Barrow
Dr. Ford
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reviews general policies relating to compensation and benefits of
our employees; and |
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directs our 2004 Incentive Plan. |
Board Membership Criteria and Selection of New Director Candidates
The Board has delegated to the Nominating and Governance Committee the responsibility for
reviewing and recommending nominees for membership on the Board. In its review, the Committee
considers factors such as values and disciplines, ethical standards, age, diversity, background and
skills, all in the context of an assessment of the perceived needs of the Board at that point in
time. Other characteristics, including but not limited to, the director nominees material
relationships with the Company, time availability, service on other boards of directors and their
committees, or any other characteristics which may prove relevant at any given time as determined
by the Nominating and Corporate Governance Committee shall be reviewed for purposes of determining
a director nominees qualification.
Candidates for director nominees are evaluated by the Nominating and Corporate Governance
Committee in the context of the current composition of the Board, the operating requirements of the
Company and the long-term interests of the Companys stockholders. In the case of new director
candidates, the Nominating and Corporate Governance Committee also determines whether the nominee
is independent for NYSE purposes, which determination is based upon applicable NYSE listing
standards, applicable SEC rules and regulations, our Corporate Governance Guidelines and the advice
of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network
of contacts to compile a list of potential candidates, but may also engage, if it deems
appropriate, a professional search firm. The Nominating and Corporate Governance Committee
conducts any appropriate and necessary inquiries into the backgrounds and qualifications of
possible candidates after considering the function and needs of the Board. In the case of
incumbent directors whose terms of office are set to expire, the Nominating and Corporate
Governance Committee reviews such directors overall service to the Company during their term,
including the number of meetings attended, level of participation, quality of performance, and any
other relationships and transactions that might impair such directors independence. The
Nominating and Corporate Governance Committee meet to discuss and consider such candidates
qualifications and then selects a nominee for recommendation to the Board by majority vote. To
date, the Nominating and Corporate Governance Committee has not paid a fee to any third party to
assist in the process of identifying or evaluating director candidates.
Nominations by Stockholders
In accordance with the provisions of our Bylaws, stockholders may directly nominate
prospective director candidates by delivering to our Corporate Secretary certain information about
the nominee. For deadlines on submitting proposals for the 2007 Annual Meeting of Stockholders,
see the section in this Proxy statement entitled Additional Information How and when may I
submit a stockholder proposal for the Companys 2007 Annual Meeting? above. The Nominating and
Corporate Governance Committee has not adopted a formal policy with regard to consideration of any
director candidate nominated by stockholders. The Nominating Committee believes that such a policy
is not necessary or appropriate because of the stockholders ability to directly nominate director
candidates to serve on the Board of Directors. The Nominating and Corporate Governance Committee
does not intend to alter the manner in which it evaluates candidates, including the minimum
criteria set forth above, based on whether the candidate was recommended by a stockholder or not.
14
Code of Ethics and Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines and a Code of Business
Conduct and Ethics that is applicable to all members of our Board of Directors, our executive
officers and our employees. We have posted these documents in the Corporate Governance section of
our website at www.educationrealty.com. The Company will provide a copy of these documents to any
person, without charge, upon request, by writing to the Company at Education Realty Trust, Inc.,
Investor Relations Manager, 530 Oak Court Drive, Suite 300, Memphis, Tennessee 38117. Any waiver
of the Code of Business Conduct and Ethics for an executive officer or director will be promptly
disclosed to stockholders in any manner that is acceptable under the NYSE listing standards,
including but not limited to distribution of a press release, disclosure on our web site, or
disclosure on Form 8-K. We intend to satisfy our disclosure obligations under Item 5.05 of Form 8-K
related to amendments or waivers of the Code of Ethics for Senior Financial Officers by posting
such information on the Companys web site.
Communications with the Board
We have established procedures for stockholders or other interested parties to communicate
directly with the independent and non-management members of our Board of Directors. Such parties
can contact the Board by mail at: Education Realty Trust, Inc. Board of Directors, 530 Oak Court
Drive, Suite 300, Memphis, Tennessee 38117. All communications made by this means will be received
directly by the chairman of the Audit Committee. Employees and others who wish to contact the
Board or any member of the Audit Committee to report complaints or concerns with respect to
accounting, internal accounting controls or auditing matters, may do so anonymously by using this
address.
15
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain summary information for the year 2005 with respect to
the compensation awarded to, earned by, or paid to our Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company whose total annual salary and bonus
exceeded $100,000. We refer to these executive officers in this proxy statement as the Named
Executive Officers. We commenced operations in January 2005 and did not pay executive
compensation prior to that date.
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Long Term |
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Compensation |
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Annual Compensation |
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Restricted Stock |
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All Other |
Name and Principal Position |
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Year |
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Salary |
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Bonus |
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Awards(1) |
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Compensation(2) |
Paul O. Bower |
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Chairman, Chief Executive
Officer and President |
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2005 |
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$ |
275,000 |
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-0- |
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$ |
755,550 |
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$ |
491,677 |
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Randall H. Brown |
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Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary |
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2005 |
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$ |
206,250 |
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-0- |
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$ |
671,600 |
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$ |
493,823 |
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Craig L. Cardwell |
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Executive Vice President and
Chief Investment Officer |
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2005 |
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$ |
160,417 |
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-0- |
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$ |
587,650 |
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$ |
487,256 |
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William W. Harris |
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Senior Vice President of
Development |
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2005 |
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$ |
128,333 |
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$ |
71,336 |
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$ |
167,900 |
|
|
$ |
322,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J. Hickey |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President of
Operations |
|
|
2005 |
|
|
$ |
137,500 |
|
|
$ |
29,063 |
|
|
$ |
167,900 |
|
|
$ |
332,334 |
|
(1) |
|
Represents the value, as of January 31, 2005, the date of grant, of restricted stock
awards to the Named Executive Officers. Each restricted stock award vests ratably over five
years from the grant date. Dividends on restricted stock awards are paid at the same rate and
time as paid to holders of our common stock. The number and value of the aggregate restricted
stock, based on the closing market price of the common stock on December 30, 2005 of $12.89,
are as follows: |
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Name |
|
Shares |
|
Value |
Paul O. Bower |
|
|
45,000 |
|
|
$ |
580,050 |
|
Randall H. Brown |
|
|
40,000 |
|
|
$ |
515,600 |
|
Craig L. Cardwell |
|
|
35,000 |
|
|
$ |
451,150 |
|
William W. Harris |
|
|
10,000 |
|
|
$ |
128,900 |
|
Thomas J. Hickey |
|
|
10,000 |
|
|
$ |
128,900 |
|
16
(2) |
|
The amounts reported under All Other Compensation are comprised of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profits |
|
Matching |
|
Premiums Paid for |
|
Group |
|
|
Interest |
|
Contributions |
|
Group Health and |
|
Disability |
Name |
|
Units* |
|
to 401(k) Plan |
|
Term Life Insurance |
|
Insurance |
Paul O. Bower |
|
$ |
480,000 |
|
|
|
|
|
|
$ |
10,178 |
|
|
$ |
1,499 |
|
Randall H. Brown |
|
$ |
480,000 |
|
|
$ |
1,856 |
|
|
$ |
10,467 |
|
|
$ |
1,499 |
|
Craig L. Cardwell |
|
$ |
480,000 |
|
|
$ |
1,444 |
|
|
$ |
4,313 |
|
|
$ |
1,499 |
|
William W. Harris |
|
$ |
320,000 |
|
|
$ |
1,155 |
|
|
|
|
|
|
$ |
1,499 |
|
Thomas J. Hickey |
|
$ |
320,000 |
|
|
$ |
1,238 |
|
|
$ |
9,598 |
|
|
$ |
1,499 |
|
* Reflects profits interest units granted on January 31, 2005 in connection with our initial
public offering. See the discussion of Profits Interests Units below.
Profits Interest Units
Profits Interest Units (PIUs) are units in a limited liability company (the LLC)
controlled by us that holds a special class of partnership interests in our Operating Partnership.
Each PIU awarded is deemed equivalent to an award of one share of common stock under the 2004 Plan,
reducing availability for other equity awards on a one-for-one basis. PIUs, whether vested or not,
receive the same quarterly per unit distributions as one common unit of our Operating Partnership.
This treatment with respect to quarterly distributions is similar to the treatment of restricted
stock awards and restricted stock units.
PIUs will not initially have full parity with common units of our Operating Partnership with
respect to liquidating distributions. Upon the occurrence of specified capital equalization events,
PIUs may, over time, achieve full or partial parity with common units of our Operating Partnership
for all purposes, and could accrete to an economic value equivalent to our common stock on a
one-for-one basis. If such parity is reached, vested PIUs may be exchanged into an equal number of
our shares of common stock at any time. However, there are circumstances under which full parity
would not be reached. Until such parity is reached, the value that may be realized for vested PIUs
will be less than the value of an equal number of shares of our common stock, if there is any value
at all.
Holders of the PIUs are entitled to customary registration rights, including demand and
piggyback registration rights, with respect to the shares of common stock that may be received by
the PIU holders upon a conversion and/or exchange of the PIUs in accordance with the terms of the
partnership agreement. The Company will bear all fees, costs and expenses of such registrations,
other than underwriting discounts and commissions.
The grant or vesting of PIUs is not expected to be a taxable transaction to recipients.
Therefore, a recipient who wishes to hold incentive equity awards for the long term may be able to
do so more efficiently with PIUs and ultimately enjoy a greater after-tax return when disposing of
them. Conversely, the Company will not receive any tax deduction for compensation expense from the
grant of PIUs.
Option Grants During 2005
There were no option grants or grants of other forms of equity-based awards made by the
Company during the fiscal year ended December 31, 2005.
Aggregated Option Exercises in 2005 and 2005 Year-End Values
There were no options or share appreciation rights exercised during the fiscal year 2005 or
outstanding at December 31, 2005.
Employment Agreements
We have entered into employment agreements, effective as January 31, 2005, with each of our
Named Executive Officers. The employment agreements provide for Mr. Bower to serve as our Chief
Executive Officer and
17
President, Mr. Brown to serve as our Executive Vice President and Chief Financial Officer, Mr.
Cardwell to serve as our Executive Vice President and Chief Investment Officer, Mr. Harris to serve
as our Senior Vice President of Development and Mr. Hickey to serve as our Senior Vice President of
Operations. These employment agreements each require Messrs. Bower, Brown, Cardwell, Harris and
Hickey, as applicable, to devote substantially full-time attention and business time to our
affairs. Each of the employment agreements provide for a three-year term, expiring on January 31,
2008, and automatically extends for additional one-year periods unless either party terminates the
agreement by providing prior written notice to the other party not later than 60 days prior to the
expiration thereof.
The employment agreements provide for:
|
|
|
an annual base salary of $300,000, $225,000, $175,000, $140,000 and $150,000 for
Messrs. Bower, Brown, Cardwell, Harris and Hickey, respectively, subject in each
case to an annual increase in accordance with our normal executive compensation
practices as approved annually by our Board of Directors; |
|
|
|
|
eligibility for annual cash performance bonuses of up to 100% of base salary for
Messrs. Bower, Brown and Cardwell and up to 50% of base salary for Messrs. Harris
and Hickey, with the actual award amounts determined by our Board of Directors in
accordance with the terms of a bonus plan adopted by the Board of Directors and on
the same basis as our other executives (with appropriate adjustments due to title
and salary); and |
|
|
|
|
participation in other employee benefit plans available to all employees. |
Under the terms of their respective employment agreements, on January 31, 2005, Messrs. Bower,
Brown, Cardwell, Harris and Hickey were granted 45,000 shares, 40,000 shares, 35,000 shares, 10,000
shares and 10,000 shares, respectively, of restricted stock vesting ratably over five years worth,
in the aggregate, $2,240,000 valued at the $16.00 per share initial public offering price of our
common stock. In addition, also on January 31, 2005, Messrs. Bower, Brown and Cardwell each
received 30,000 profits interest units and Messrs. Harris and Hickey each received 20,000 profits
interest units (representing an aggregate 0.59% interest in our Operating Partnership and worth an
aggregate of $2,080,000 valued at the $16.00 per share initial public offering price of our common
stock), which were immediately vested.
Termination of Employment Agreements
These employment agreements permit us to terminate the executives employment for or without
cause. Cause is generally defined to mean:
|
|
|
the executives insubordination or breach of his employment agreement; |
|
|
|
|
the executives dishonesty, fraud, malfeasance, negligence or misconduct or any
act or omission by the executive which injures, or is likely to injure, us or our
business reputation; |
|
|
|
|
the executives failure to (i) satisfactorily perform the executives duties
under his employment agreement, (ii) follow the direction of any individual to whom
the executive reports, (iii) abide by our policies, procedures and rules or (iv)
abide by laws applicable to the executive in the executives capacity as our
employee, executive or officer; |
|
|
|
|
the executives arrest, indictment for, conviction of, or entry of a plea of
guilty or no contest to, a felony or crime involving moral turpitude; |
|
|
|
|
the executives resignation unless such resignation is based upon good reason; or |
|
|
|
|
the executives refusal to perform duties unless such refusal is based upon good reason. |
If the executives employment is terminated by us for cause upon the action of our Board of
Directors, the executive shall be entitled only to his salary earned through the date of
termination.
Each employment agreement provides that, if the respective executives employment is
terminated by us without cause or by the executive for good reason, as described below, prior to a
change in control, the executive will be entitled to continue to receive his base salary for the
greater of one year or the remaining term of his employment
18
agreement for Mr. Bower, for the greater of one year or the remaining term of his employment
agreement minus twelve months for Messrs. Brown and Cardwell and for one year for Messrs. Harris
and Hickey. In addition, the executive will receive all accrued but unpaid salary and bonus
through the termination date, and we will pay premiums for COBRA continuation coverage for the
executive and eligible dependents for a period of up to 18 months.
Each employment agreement further provides that, if the executives employment is terminated
by us without cause or by the executive for good reason, as described below, within twelve months
after a change of control, then the executive will receive a termination payment equal to three
times base salary and average bonus for the past two years for Mr. Bower, two times base salary and
average bonus for the past two years for Messrs. Brown and Cardwell, and then-current base salary
for Messrs. Harris and Hickey. In addition, the executive will receive all accrued but unpaid
salary and bonus through the termination date, and we or our successor will pay premiums for COBRA
continuation coverage for the executive and eligible dependents for a period of up to 18 months. In
general terms, a change of control occurs under the following circumstances: (i) the sale, transfer
or other disposition of 80% or more of the aggregate value of our assets, or (ii) a sale of 50% or
more of our then-outstanding voting stock in a single transaction or a series of related
transactions.
Change of Control
In addition, either prior to or after a change in control of our Company, each executive has
the right under his employment agreement to resign for good reason under the following
circumstances: (i) we materially reduce the executives current title, duties or responsibilities;
(ii) the executive provides us with written notice of such action and provides us with a 30-day
cure period to remedy such action; (iii) we fail to remedy such action within the cure period; and
(iv) the executive resigns within ten days of the expiration of the cure period.
Non-Compete Agreements
Each employment agreement provides that the executive agrees not to compete with us,
individually or on behalf of any person or entity engaged in the business of owning and managing
off-campus student housing communities, providing third-party management services for student
housing communities and providing third-party development consulting services for student housing
communities, within the territory specified in the agreement. The duration of these restrictions
is three years following termination of employment for Mr. Bower, two years following termination
of employment for Messrs. Brown and Cardwell and one year following termination of employment for
Messrs. Harris and Hickey. The executive also agrees that he will not, during such respective
period, directly or indirectly, solicit any of our customers for the purpose of providing any goods
or services competitive with us within the specified territory, and not to, directly or indirectly,
solicit, recruit or induce any of our employees to terminate their relationship with us or work for
any other person or entity competitive with us. The executive also agrees not to use or disclose
any of our trade secrets for so long as the information constitutes a trade secret and not to use
or disclose any of our confidential information.
2004 Incentive Plan
The Education Realty Trust, Inc. 2004 Incentive Plan (the 2004 Plan) was adopted by our
Board of Directors and approved by our sole stockholder effective on January 31, 2005. The 2004
Plan provides for the grant of stock options, restricted stock units, restricted stock, stock
appreciation rights, other stock-based incentive awards and profits interest units to our
employees, directors and other key persons providing services to us and our subsidiaries. The 2004
Plan initially reserved 800,000 shares of our common stock for issuance pursuant to the 2004 Plan,
which amount may be increased annually on January 1st of each year so that the total
number of shares reserved under the 2004 Plan is equal to 4% of the aggregate number of shares
outstanding on the last day of the preceding fiscal year; provided that such annual increase
generally may not exceed 80,000 shares. The number of shares reserved under the 2004 Plan is also
subject to any adjustments for changes in our capital structure, including share splits, dividends
and recapitalizations.
In the event of any change of control of our Company (as defined in the 2004 Plan),
including certain mergers, consolidations, divisions, business combinations and the sale of all or
substantially all of our assets, our Compensation Committee may, in its discretion, provide that
all outstanding non-vested options, stock appreciation rights or restricted stock units will
terminate as of the consummation of such change of control. The Compensation
19
Committee also may accelerate the exercisability of, or cause all vesting restrictions to lapse on,
all outstanding options, stock appreciation rights or restricted stock units to a date within the
30-day period prior to the date of such change of control and/or may provide that holders of
options, stock appreciation rights or restricted stock units will receive a payment in respect of
cancellation of their awards based on the amount, if any, by which the per share consideration
being paid for our common stock in connection with such corporate event exceeds the applicable
exercise price. In addition, our Compensation Committee may, in its discretion, provide that all
outstanding awards will vest upon any change of control of our Company.
401(k) Plan
We maintain a retirement and deferred savings plan for our employees (the Plan). The
retirement and deferred savings plan is intended to qualify as a tax-qualified plan under Section
401 of the Code. The retirement and deferred savings plan provides that each participant may
contribute, up to a statutory limit, which for most employees in 2006 is $15,000. Employees are
eligible to participate in the Plan on the first day of the next calendar quarter following six
months of service and reaching 21 years of age. Additionally, the Company will provide a matching
contribution of 50%, upon eligible employees contributions up to the first 3% of compensation.
Employees vest in the matching contribution over a 3-year period.
Limitation of Liability and Indemnification of Officers and Directors
Maryland law permits us to include in our charter a provision limiting the liability of our
directors and officers to us and our stockholders for money damages, except for liability resulting
from (i) actual receipt of an improper benefit or profit in money, property or services or (ii)
active and deliberate dishonesty established by a final judgment and material to the cause of
action. Our charter contains a provision that eliminates directors and officers liability to the
maximum extent permitted by Maryland law. In addition, we have entered into indemnification
agreements with each of our executive officers and directors.
Maryland law also requires a corporation (unless its charter provides otherwise, which our
charter does not) to indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she is made, or threatened to be made, a
party by reason of his or her service in that capacity. Corporations are permitted to indemnify
their present and former directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with any proceeding to
which they may be made a party by reason of their service in those or other capacities unless it is
established that:
|
|
|
an act or omission of the director or officer was material to the matter giving
rise to the proceeding and was committed in bad faith or was the result of active
and deliberate dishonesty; |
|
|
|
|
the director or officer actually received an improper personal benefit in money,
property or services; or |
|
|
|
|
in the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. |
A Maryland corporation may not, and we will not, indemnify a director or officer for an
adverse judgment in a suit by or in right of the corporation or for a judgment of liability on the
basis that personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, Maryland law permits a corporation to,
and we will, advance reasonable expenses to a director or officer upon receipt of:
|
|
|
a written affirmation by the director or officer of his good faith belief that
he or she has met the standard of conduct necessary for indemnification; and |
|
|
|
|
a written undertaking by the director or on the directors behalf to repay the
amount paid or reimbursed by the corporation if it is ultimately determined that
the director did not meet the standard of conduct. |
20
Our Bylaws obligate us, to the fullest extent permitted by Maryland law, to indemnify and,
without requiring a preliminary determination of the ultimate entitlement to indemnification, pay
or reimburse reasonable expenses in advance of final disposition of a proceeding to:
|
|
|
any present or former director or officer who is made, or threatened to be made,
a party to the proceeding by reason of his or her service in that capacity; or |
|
|
|
|
any individual who, while serving as our director or officer and at our request,
serves or has served another corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or any other enterprise as
a director, officer, partner or trustee and who is made, or threatened to be made,
a party to the proceeding by reason of his or her service in that capacity. |
Our Bylaws also obligate us to indemnify and advance expenses to any person who served a
predecessor of ours in any of the capacities described above and to any person who served as an
employee or agent of us or our predecessor.
The partnership agreements of our Operating Partnership and University Towers Partnership
provide that we, as general partner of our Operating Partnership and University Towers Partnership,
and our officers and directors are indemnified to the fullest extent permitted by law.
Insofar as the foregoing provisions permit indemnification of directors, officers or persons
controlling us for liability arising under the Securities Act of 1933, as amended (the Securities
Act), the SEC has indicated that this indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Compensation Committee Interlocks and Insider Participation
The following non-employee directors are the current members of the Compensation Committee of
the Board of Directors: Messrs. Barrow and Cahill and Dr. Ford. During 2005, none of the Companys
executive officers served as a director or member of the Compensation Committee or any other entity
whose executive officers served on the Companys Board of Directors or Compensation Committee.
21
COMPENSATION COMMITTEE REPORT
Generally, the Compensation Committee of the Board of Directors (the Compensation Committee)
establishes, oversees and directs the Companys executive compensation policies and programs,
directs the Companys 2004 Incentive Plan and seeks to ensure that the Companys executive
compensation philosophy is consistent with the Companys best interests. The Compensation Committee
currently is composed of three independent directors, Messrs. Cahill (Chairman), Barrow and Dr.
Ford. Prior to completion of the Companys initial public offering (IPO) in January 2005, the
Company had no operations and, therefore, did not have a Compensation Committee or make payments to
its executive officers.
Compensation Philosophy
The Compensation Committee believes that a well-designed compensation program should align the
goals of the stockholders with the goals of the executive, and that a significant part of an
executives compensation, over the long term, should be dependent upon the value created for
stockholders. Executives should be held accountable through their compensation for the performance
of the Company, and compensation levels also should reflect the executives individual performance
in an effort to encourage individual contributions to the Companys performance. The compensation
philosophy is designed to motivate executives to focus on operating results and create long-term
stockholder value by:
|
|
|
establishing a plan that attracts, retains and motivates executives through
compensation that is competitive with other publicly-traded real estate investment
trusts (REITs) of similar size; |
|
|
|
|
linking a portion of the executives compensation to the achievement of the
Companys business plan by using measurements of the Companys operating results
and stockholder return; and |
|
|
|
|
building a pay-for-performance system that encourages and rewards successful
initiatives within a team environment. |
The Compensation Committee believes that each of the above factors is important when
determining compensation levels. In connection with the Companys IPO, the Company entered into
employment agreements with its top 5 executive officers, Messrs. Bower, Brown, Cardwell, Harris and
Hickey. The material terms of each employment agreement were approved by the managing underwriters
in connection with the Companys IPO. A description of the employment agreements is set forth
under the section of this Proxy Statement titled Executive Compensation-Employment Agreements.
Set forth below is a discussion of the compensation philosophy utilized to design appropriate forms
of compensation under these employment agreements.
Types of Compensation
The executive compensation policies adopted by the Compensation Committee will be structured
to provide short- and long-term incentives for executive performance that promote continuing
improvements in the Companys financial results and returns to stockholders. The executive
compensation system consists of three elements: (i) base salary; (ii) annual bonus; and (iii)
long-term compensation, which may include grants of restricted shares or profit interest units
(PIUs). The Compensation Committee does not allocate a fixed percentage of compensation to these
elements.
Base salaries. Base salaries are paid for ongoing performance throughout the year. In order
to compete for and retain talented executives who are critical to the Companys long-term success,
the Compensation Committee has determined that the base salaries of executive officers should
approximate the average of those of executives of other equity REITs that compete with the Company
for employees, investors and business. The Compensation Committee also takes into account the
executive officers performance and tenure and the Companys performance relative to similar size
companies within the REIT sector. Base salaries and bonus compensation for our senior executives
are set by the Compensation Committee after considering recommendations by management and factors
such as the nature and responsibilities of each executives position, the executives experience,
the achievement of corporate goals, the achievement of individual goals and competitive industry
compensation. These employment agreements and the 2005 base salaries were approved and ratified by
the Compensation Committee. Under the terms of the Companys
22
employment agreements, any increase in the base salaries for each executive officer will be
determined by the Compensation Committee. In addition, the Compensation Committee may increase
base salaries for all executive officers based on a review of base salaries for executive officers
at comparable REITs with similar market size as well as based on the executives performance during
the prior fiscal year and the Companys operating results and financial performance. The
Compensation Committee has the authority to engage its own independent compensation consultant to
assist in the determination of appropriate levels of compensation for executive officers.
Annual Incentive Cash Bonus. The Companys philosophy of awarding annual cash incentive
awards is designed to relate the executives pay to the Companys performance and to reward
individual contributions to the Companys performance. The Compensation Committee believes that in
order to motivate key executives to achieve annual strategic business goals, executives should
receive annual incentive cash bonuses for their contributions in achieving these goals. Pursuant
to their employment agreements, each executive officer is eligibility for annual cash performance
bonuses of up to 100% of base salary for Messrs. Bower, Brown and Cardwell and up to 50% of base
salary for Messrs. Harris and Hickey, with the actual award amounts determined by our Board of
Directors in accordance with the terms of a bonus plan adopted by the Board of Directors and on
the same basis as our other executives (with appropriate adjustments due to title and salary). The
performance criterion for the attainment of corporate goals for all executive officers of the
Company is pre tax net operating income. The individual performance goals with respect to each
executive officer consist of a number of defined responsibilities and business objectives tailored
to his position within the Company.
In 2005 no bonus was paid out to Mr. Bower related to corporate goals because the pre tax net
operating income criterion was not met. In 2005 no bonus was paid to other named executive
officers related to corporate goals because the pre tax net operating income criterion was not met.
Actual bonuses for 2006 will be determined by the Compensation Committee based on the
satisfaction of the corporate and individual performance goals as described above, and paid in an
amount equal to a percentage of the executive officers base salary based on threshold, target and
superior levels for each individual as approved by the committee. The Compensation Committee
believes that the Companys annual incentive bonus policies for executive officers provide a
compensation package that is competitive with comparable equity REITs of similar size.
Long-Term Compensation. Because todays business decisions affect the Company over a number
of years, long-term incentive awards are tied to the Companys performance and the long-term value
of its shares. Grants of restricted shares and PIUs are an important part of the Companys
long-term compensation plan. Restricted stock and PIUs granted in 2005 were made to retain
talented executives who are critical to the Companys long-term success. No restricted stock or
PIUs will be granted to executive officers in 2006 based on the Companys operating performance in
2005.
The Compensation Committee will, in the future, continue to grant restricted shares or other
equity-based awards under the Companys 2004 Incentive Plan. The exact number and form of
equity-based awards to be granted to executive officers and other employees is expected to vary
depending on the position and salary of the employee and the Companys success in delivering annual
total stockholder returns that meet targets established by the Compensation Committee. Any
equity-based awards granted by the Company to executive officers and other key employees are
expected to be designed to link compensation to the Companys long-term common stock performance
and to vest over a period of time, such that the awards will encourage the employees to remain with
the Company.
The Compensation Committees Conclusion
In terms of analyzing total compensation of executive officers, the Compensation Committee
considered the fact that executive officers received additional benefits in connection with the
Companys IPO, including Operating Partnership units received by the executive officers upon
completion of the IPO. See the section of this Proxy Statement titled Certain Relationships and
Related Transactions. The Compensation Committee has reviewed all components of the chief
executive officers compensation, including salary, bonus, equity and long-term incentive
compensation, and discussed the actual projected payout obligations under the severance and
change-in-control provisions under the Companys employment agreement with Mr. Bower. The
Compensation Committee has reviewed all components of the other executive officers compensation,
including salary, bonus, equity and long term incentive compensation, and discussed the actual
projected payout obligations under the severance and change-in-
23
control provisions under the Companys employment agreements with Messrs Brown, Cardwell, Harris
and Hickey. Based on this review, the Compensation Committee finds that the executive officers
total compensation in the aggregate for 2005 was reasonable.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), disallows a tax
deduction for any publicly held corporation for individual compensation of more than $1.0 million
in any taxable year to any named executive officers, other than compensation that is
performance-based under a plan that is approved by the stockholders and that meets certain other
technical requirements. Our Compensation Committees policy with respect to Section 162(m) is to
make every reasonable effort to ensure that compensation is deductible to the extent permitted
while simultaneously providing executives with appropriate rewards for their performance.
Submitted by the Compensation Committee of the Board of Directors:
William J. Cahill, III (Chairman)
Monte J. Barrow
John L. Ford
24
PERFORMANCE GRAPH
Prior to January 26, 2005, the Companys common stock was not publicly traded and there was no
public market for its securities. The following performance graph below compares the cumulative
total return of the Companys common stock with that of the Standard & Poors 500 Stock Index (S&P
500 Index) and the Morgan Stanley REIT Index from January 26, 2005 (the date the Companys shares
of common stock began to trade publicly) through December 31, 2005. The performance graph assumes
that a stockholder invested $100 at the close of market on January 26, 2005 in shares of the
Companys common stock and $100 invested at that same time in each of the indexes. The comparisons
in this graph are provided in accordance with SEC disclosure requirements and are not intended to
forecast or be indicative of the future performance of our common shares.
COMPARISON
OF 11 MONTH CUMULATIVE TOTAL RETURN*
AMONG EDUCATION REALTY TRUST, THE S & P 500 INDEX
AND THE MORGAN STANLEY REIT INDEX
* $100 invested on 1/26/05 in stock or on 12/31/04 in index-including reinvestment of dividends. Fiscal year ending December 31.
Copyright © 2006, Standard & Poors, a division of the McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
Cumulative Total Return
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1/26/05 |
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2/05 |
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3/05 |
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4/05 |
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5/05 |
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6/05 |
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7/05 |
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8/05 |
|
9/05 |
|
10/05 |
|
11/05 |
|
12/05 |
Education Realty
Trust |
|
|
100 |
|
|
|
102.74 |
|
|
|
101.09 |
|
|
|
98.42 |
|
|
|
105.62 |
|
|
|
112.57 |
|
|
|
123.95 |
|
|
|
115.32 |
|
|
|
104.38 |
|
|
|
98.81 |
|
|
|
79.62 |
|
|
|
82.17 |
|
S &
P 500 |
|
|
100 |
|
|
|
99.62 |
|
|
|
97.85 |
|
|
|
96.00 |
|
|
|
99.05 |
|
|
|
99.19 |
|
|
|
102.88 |
|
|
|
101.94 |
|
|
|
102.77 |
|
|
|
101.05 |
|
|
|
104.88 |
|
|
|
104.91 |
|
Morgan Stanley REIT |
|
|
100 |
|
|
|
95.08 |
|
|
|
93.40 |
|
|
|
98.46 |
|
|
|
102.16 |
|
|
|
107.09 |
|
|
|
113.98 |
|
|
|
111.00 |
|
|
|
110.74 |
|
|
|
107.34 |
|
|
|
112.05 |
|
|
|
112.55 |
|
The material in this section is not soliciting material, is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company under the Securities Act or
the Exchange Act whether made before or after the date hereof and irrespective of any general
incorporation language in such filing.
25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Benefits Received by our Executive Officers in our Formation Transactions
Each of our Named Executive Officers, as well as Wallace L. Wilcox, our Senior Vice President
of Construction and Engineering, had a direct or indirect interest in certain of the assets that we
acquired on January 31, 2005 in our formation transactions. Each of Messrs. Bower, Brown,
Cardwell, Harris, Hickey and Wilcox had a direct or indirect interest in Allen & OHara Education
Services, Inc., which is our management company subsidiary, and in our properties known as The
Reserve at Athens, Players Club, NorthPointe, The Reserve at Clemson, College Station and The
Gables, each of which we acquired on January 31, 2005. In addition, Messrs. Bower and Hickey held
an indirect interest in the University Towers property that we also acquired on January 31, 2005.
We paid these officers and directors aggregate consideration of $19.9 million in the form of $2.8
million in cash, Operating Partnership units having a value of approximately $14.0 million and
University Towers Partnership units having a value of approximately $3.1 million. We also entered
into a registration rights agreement with all of the persons who received Operating Partnership
units in connection with the acquisition of our initial assets, including certain of our officers
and directors. On January 25, 2006 these shares were registered with the SEC on a Form S-3 filed
by the Company (File No. 333-131284) in accordance with the registration rights agreement.
Shared Services Agreement
In connection with our formation transactions, which occurred on January 31, 2005, we acquired
the student housing business of Allen & OHara, Inc., a company that is wholly-owned by Paul O.
Bower, our Chairman, Chief Executive Officer and President. Prior to the completion of our
formation transactions, Allen & OHaras student housing business shared the cost of certain common
services with Allen & OHaras hotel properties operations, which we did not acquire and which
continue to be operated by Allen & OHara. These services include human resources, information
technology, accounting, legal, payroll, office space, office equipment and furniture and certain
management personnel. We have entered into a shared services agreement with Allen & OHara to
provide these services to Allen & OHara for the benefit of its hotel business in exchange for
reimbursement to us of the fair value of the services performed, which were $560,000 for the period
ended December 31, 2005. Because Mr. Bower is the sole stockholder of Allen & OHara, he will
realize any of the economic benefit of this agreement that is realized by Allen & OHara.
In March of 2006, Allen & OHara paid a bonus of $210,000 in total to Messrs. Bower, Brown and
Cardwell, former executives of Allen & OHara. The bonus was paid to compensate these executives
for services provided to Allen & OHara prior to our formation.
26
AUDIT COMMITTEE REPORT
The Audit Committee assists the Board of Directors in its oversight of the Companys financial
reporting process and implementation and maintenance of effective controls to prevent, deter and
detect fraud by management. In addition, the Audit Committee is directly responsible for the
appointment, compensation and oversight of the Companys independent registered public accounting
firm. The Audit Committees responsibilities are more fully described in its charter, which is
accessible on the Companys website at www.educationrealty.com.
In overseeing the preparation of the Companys financial statements, the Audit Committee met
with both management and Deloitte & Touche LLP (Deloitte), the Companys independent registered
public accounting firm, to review and discuss the financial statements prior to their issuance and
to discuss significant accounting issues. Management advised the Audit Committee that all
financial statements were prepared in accordance with generally accepted accounting principles, and
the Committee discussed the statements with both management and Deloitte.
The Audit Committee has discussed with Deloitte, the matters required to be discussed by
Statement of Auditing Standards No. 61, Communication with Audit Committees, which includes,
among other items, matters related to the conduct of the audit of the Companys financial
statements. In addition, the Audit Committee has received the written disclosures and the letter
from Deloitte required by Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees and has discussed with Deloitte its independence from the Company and its
management.
The Audit Committee has also considered whether the provision of non-audit services by
Deloitte is compatible with maintaining the audits independence. The Audit Committee meets on a
regular basis privately in separate executive sessions with certain members of senior management
and Deloitte. Each of the members of the Audit Committee qualifies as an independent director
under the current NYSE listing standards and applicable SEC rules.
Based on the review and discussions referred to above, the Audit Committee recommended to the
Companys Board of Directors that the Companys audited financial statements be included in the
Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2005. The Committee has
selected and the Board of Directors has approved, subject to shareholder ratification, the
appointment of the Companys independent auditor.
Submitted by the Audit Committee of the Board of Directors
Randall L. Churchey (Chairman)
Monte J. Barrow
William J. Cahill, III
The foregoing report shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the Securities Act or under
the Exchange Act, except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under such Acts.
27
PROPOSAL 2
RATIFICATION AND SELECTION OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors has appointed Deloitte & Touche LLP to serve as the Companys
independent registered public accounting firm for the fiscal year ending December 31, 2006. The
appointment of this firm was recommended to the Board of Directors by the Audit Committee, and the
Board of Directors has further decided that management should submit the appointment of Deloitte &
Touche to the stockholders at the annual meeting. Deloitte & Touche has audited the Companys
financial statements since its inception in 2004. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting. They will have an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions from stockholders.
Audit and Non-Audit Fees
The following table presents the aggregate fees billed by Deloitte & Touche LLP, the Companys
independent registered public accounting firm, for the most recent fiscal years ended December 31,
2004 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
2005 |
Audit Fees (1) |
|
$ |
1,175,319 |
|
|
$ |
1,011,200 |
|
Audit-Related Fees (2) |
|
|
-0- |
|
|
$ |
21,852 |
|
Tax Fees (3) |
|
$ |
299,860 |
|
|
$ |
278,395 |
|
All Other Fees |
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
TOTAL FEES |
|
$ |
1,475,179 |
|
|
$ |
1,311,447 |
|
(1) |
|
Fees for audit services billed in fiscal 2004 and 2005 included the following
(a) audits of our annual financial statements and all related financial statements
required to be audited pursuant to regulatory filings, including student housing
property and/or portfolio acquisitions; (b) reviews of unaudited quarterly financial
statements; and (c) services related to the issuance of comfort letters, consents and
other services related to SEC matters. |
(2) |
|
Amount represents fees billed related to financial accounting and reporting
consultations. |
|
(3) |
|
Amount represents fees billed for tax compliance services and tax planning. |
The Audit Committee has determined that the provision of non-audit services by Deloitte &
Touche LLP is compatible with maintaining the independence of Deloitte & Touche LLP.
The affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the
appointment of Deloitte & Touche LLP. Abstentions will be counted toward the tabulation of votes
cast on proposals presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
On behalf of the Audit Committee, the Board of Directors recommends a vote in favor of
Proposal No. 2.
Pre-approval Policies and Procedures
Pursuant to the Audit Committees Charter, the Audit Committee reviews and pre-approves audit
and non-audit services performed by the Companys independent registered public accounting firm as
well as the fee charged for such services. The Audit Committee may not approve any service that
individually or in the aggregate may impair, in the Audit Committees opinion, the independence of
the independent registered public accounting firm. The Audit Committee may delegate to one or more
designated committee members the authority to grant pre-approvals of audit and permitted non-audit
services, provided that any decisions to pre-approve shall be presented to the full Audit Committee
at its next scheduled meeting. For fiscal 2005, all of the audit and non-audit services provided by
the Companys independent registered public accounting firm were pre-approved by the Audit
Committee in accordance with the Audit Committee Charter.
28
OTHER MATTERS
Our management is not aware of any other matter to be presented for action at the Annual
Meeting other than those mentioned in the Notice of Annual Meeting of Stockholders and referred to
in this Proxy Statement. However, should any other matter requiring a vote of the stockholders
arise, the representatives named on the accompanying Proxy will vote in accordance with their best
judgment as to the interests of the Company and our stockholders.
|
|
|
|
|
By Order of the Board of Directors, |
|
|
|
|
|
|
Randall H. Brown |
|
|
Secretary |
29
EDUCATION REALTY TRUST, INC.
530 Oak Court Drive, Suite 300
Memphis, Tennessee 38117
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul O. Bower and Randall H. Brown, or either of them, with
full power of substitution, as proxy to represent and vote all the shares of common stock, $.01 par
value per share, of Education Realty Trust, Inc. held of record by the undersigned as of the close
of business on April 10, 2006, at the Annual Meeting of Stockholders to be held on May 24, 2006 or
any adjournment or postponement thereof, as designated on the reverse side hereof and in their
discretion as to other matters.
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature |
|
|
|
|
|
|
|
|
|
|
|
|
Signature if held jointly |
|
|
|
|
|
|
|
|
|
Please sign exactly as your name appears on the reverse side. When
shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian, please give
full title as such. If shares are held by a corporation, please sign
in full corporate name by authorized officer. If shares are held by a
partnership, please sign in partnership name by authorized person. |
Please mark, date and sign as your name appears above and return in the enclosed envelope.
YOUR VOTE IS IMPORTANT
Please mark, sign and date this proxy card and return it promptly in the enclosed postage-paid
envelope, or otherwise to Corporate Election Services, P.O. Box 3230, Pittsburgh, PA 15253, so your
shares may be represented at the Meeting.
|
|
|
|
|
|
EDUCATION REALTY TRUST, INC.
|
|
PROXY |
The shares represented by this Proxy will
be voted as directed by the undersigned.
If no direction is given when the duly
executed Proxy is returned, such shares
will be voted FOR all nominees in
Proposal 1 and FOR Proposal 2.
The Board of Directors Recommends a vote FOR all nominees in Proposal 1 and FOR Proposal 2.
|
|
|
Proposal 1 |
|
Election of the following Nominees as Directors: |
|
|
|
|
|
|
|
|
|
Paul O. Bower
|
|
Monte J. Barrow
|
|
William J. Cahill, III
|
|
Randall L. Churchey
|
|
John L. Ford |
|
|
|
|
|
|
|
|
|
o
|
|
FOR all Nominees listed at right
(except as marked to the contrary)
|
|
|
|
o
|
|
WITHHOLD
for all Nominees listed above |
(Instruction: To withhold authority to vote for any individual nominee,
strike a line through the nominees name above.)
|
|
|
Proposal 2 |
|
Ratification of appointment of Deloitte & Touche LLP as the Companys
independent auditors for the fiscal year ending December 31, 2005. |
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
o I Plan To Attend The Meeting .