[LOGO]
October 15, 1998
Dear Fellow Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of Washington Homes, Inc. to be held on Friday, November 20, 1998,
beginning at 10:00 a.m., local time, at the Greenbelt Marriott Hotel, Greenbelt,
Maryland. I look forward to meeting as many of you as can attend the meeting.
Holders of Washington Homes Common Stock are being asked to vote on the
matters listed in the enclosed Notice of Annual Meeting of Shareholders. The
Board of Directors recommends a vote "FOR" the proposals listed as items 1 and 2
in the Notice.
Whether or not you plan to attend the Meeting in person, it is
important that your shares of Washington Homes Common Stock be represented and
voted at the Meeting. Accordingly, after reading the enclosed Notice of Annual
Meeting and Proxy Statement, please sign, date and mail the enclosed proxy card
in the envelope provided.
Sincerely,
/s/ Geaton A. DeCesaris, Jr.
---------------------------
Geaton A. DeCesaris, Jr.
President and
Chief Executive Officer
[ADDRESS]
<PAGE>
[LOGO]
1802 Brightseat Road
Landover, MD 20785-4235
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held November 20, 1998
--------------
To the Shareholders of
Washington Homes, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Washington Homes, Inc., a Maryland corporation (the
"Company"), will be held on November 20, 1998, at the Greenbelt Marriott Hotel,
6400 Ivy Lane, Greenbelt, Maryland, commencing at 10:00 a.m., local time, for
the following purposes:
1. To elect directors;
2. To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the Company for fiscal year 1999;
and
3. To transact such other business as may properly come before
the Meeting.
Only holders of the Company's voting common stock of record at the
close of business on October 8, 1998, the record date, are entitled to receive
notice of and to vote at the Annual Meeting and all adjournments thereof.
/s/ Christopher Spendley
------------------------------------
Christopher Spendley
Senior Vice President and Secretary
October 15, 1998
HOLDERS OF VOTING COMMON STOCK ARE URGED TO MARK, SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED PRE-ADDRESSED REPLY ENVELOPE, WHETHER OR NOT
THEY PLAN TO ATTEND THE MEETING.
<PAGE>
WASHINGTON HOMES, INC.
PROXY STATEMENT
This Proxy Statement is being furnished to holders of the voting common
stock, par value $.01 per share (the "Common Stock"), of Washington Homes, Inc.,
a Maryland corporation (the "Company"), in connection with the solicitation of
proxies by its Board of Directors for use at the Annual Meeting of the Company's
shareholders (the "Annual Meeting") to be held on Friday, November 20, 1998, at
the Greenbelt Marriott Hotel, 6400 Ivy Lane, Greenbelt, Maryland, commencing at
10:00 a.m., local time, and at any adjournment or postponement thereof.
This Proxy Statement and accompanying form of Proxy and Notice of
Annual Meeting are first being mailed to holders of Common Stock on or about
October 15, 1998. A copy of the Company's Annual Report to Shareholders for the
fiscal year ended July 31, 1998, including financial statements, has been sent
simultaneously with this Proxy Statement or has been previously provided to all
shareholders entitled to vote at the Annual Meeting.
Shareholders Entitled to Vote
Only holders of Common Stock of record at the close of business on
October 8, 1998, the record date, are entitled to notice of and to vote at the
Annual Meeting and adjournments thereof. As of October 8, 1998, there were
7,914,433 shares of Common Stock outstanding and entitled to be voted at the
Annual Meeting. In addition, the Company had 28,330 shares of non-voting common
stock outstanding which are convertible into voting common stock on a
share-for-share basis.
Each holder who is entitled to vote may cast one vote per share held on
all matters properly submitted for the vote of shareholders at the Annual
Meeting. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. A plurality of the votes duly cast is required
for the election of directors. The affirmative vote of a majority of the votes
duly cast is required to approve the other matters to be acted upon at the
Annual Meeting.
Proxies
All shares entitled to vote and represented by properly executed
proxies received prior to the Annual Meeting, and not revoked, will be voted at
the Annual Meeting in accordance with the instructions indicated on those
proxies. If no instructions are indicated on a properly executed proxy, the
shares represented by such proxy will be voted as recommended by the Board of
Directors. The Board of Directors recommends a vote FOR the election of the
nominees for election as directors;
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and FOR ratification of the appointment of Deloitte & Touche LLP as independent
auditors for the 1999 fiscal year.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy will vote on those matters in accordance with
their best judgment to the same extent as the person signing the proxy would be
entitled to vote. It is not currently anticipated that any other matters will be
raised at the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. A proxy may be revoked (i) by
filing with the Secretary of the Company, at or before the taking of the vote at
the Annual Meeting, a written notice of revocation or a duly executed proxy, in
either case later dated than the prior proxy relating to the same shares, or
(ii) by attending the Annual Meeting and voting in person (although attendance
at the Annual Meeting will not itself revoke a proxy).
1. ELECTION OF DIRECTORS
Eight directors are proposed to be elected at the Annual Meeting to
serve until the next annual meeting of shareholders and until their successors
are duly elected and qualified. Properly executed proxies returned in a timely
fashion will be voted in the election of each of the nominees named below,
unless the shareholder indicates on the proxy that the vote should be withheld
from any or all of such nominees.
The Board of Directors has proposed the persons listed below as
nominees for election as directors at the Annual Meeting. Thomas J. Pellerito is
being proposed as a nominee for the first time. All other nominees are currently
serving as directors of the Company. The Company expects each nominee for
election as a director at the Annual Meeting will stand for election and be able
to serve as a director. If any nominee is unable to stand for election and
serve, proxies will be voted in favor of the remainder of those nominated and
may be voted for substitute nominees.
Following is a listing of the nominees along with a brief summary of
their business experience:
Geaton A. DeCesaris, Sr., 67, has served as Chairman of the Board of
the Company since August 1988. From June 1985 to August 1988, he served as
Senior General Partner of Sonny DeCesaris and Sons Development Group, a real
estate development and construction firm. Prior thereto from 1973 to June 1985,
he was founder and President of Sonny DeCesaris and Sons Builders, Inc., and
from 1960 to 1973, President of Procopio and DeCesaris Construction Company.
Geaton A. DeCesaris, Jr., 43, has served as President, Chief Executive
Officer and a Director of the Company since August 1988. Prior thereto from June
1985 to August 1988, Mr. DeCesaris was Managing General Partner of Sonny
DeCesaris and Sons Development Group and, from 1973 to June 1985, Vice President
of Sonny DeCesaris and Sons Builders, Inc.
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<PAGE>
Thomas J.Pellerito, 51, has served as President, Homebuilding
Operations and Chief Operating Officer since July 1997. Prior thereto from 1985
to July 1997 he was President of Richmond American Homes, the northern Virginia
based regional subsidiary of a national homebuilder. He has over 18 years
experience in residential construction and related services.
Paul C. Sukalo, 47, has served as Senior Vice President and a Director
of the Company since August 1988. Prior thereto from June 1985 to August 1988,
he was a general partner of Sonny DeCesaris and Sons Development Group. He has
over 18 years of related construction experience, principally in residential
construction and related services.
Thomas Connelly, 49, has served as a Director since September 1992.
Since April 1997, he has been Vice President and Chief Financial Officer of
Western Pacific Housing, a homebuilder based in El Segundo, California. Prior
thereto from November 1996 to April 1997 he was Senior Vice President and Chief
Financial Officer of the Forecast Group, LP, a homebuilder based in Rancho
Cucamonga, California; from August 1988 to November 1996 he was a Senior Vice
President of the Company; and from September 1994 to September 1996 he served as
the Company's Chief Financial Officer. Mr. Connelly has over 22 years experience
in finance and real estate development
Richard S. Frary, 51, has been a Director of the Company since December
1995. Mr. Frary is a partner and managing director of Tallwood Associates, Inc.,
a merchant banking firm located in New York, which specializes in corporate
restructurings and real estate and has held that position since 1990. He is also
a director of CGA Group Ltd., a Bermuda based company that provides financial
guarantee insurance and of Wellsford Real Properties, Inc., a real estate
merchant bank.
Ronald M. Shapiro, 55, has been a Director of the Company since April
1993. Mr. Shapiro, an attorney, is President of Shapiro, Robinson & Associates,
Inc., a professional sports management and contract negotiations firm which he
founded in 1976. Since January 1992 he has served as Counsel To The Firm of
Shapiro and Olander, Baltimore, Maryland, a law firm he founded in 1972, and
since 1995 he has served as Chairman of the Shapiro Negotiations Institute
(negotiations consultants and seminar providers).
Richard B. Talkin, 61, has been a Director of the Company since April
1993. Mr. Talkin is an attorney specializing in real estate related matters and
has practiced law in Columbia, Maryland for over 25 years.
Geaton A. DeCesaris, Sr., Chairman of the Board, is the father of
Geaton A. DeCesaris, Jr., President and a Director; Marco A. DeCesaris, Vice
President; A. Hugo DeCesaris, Vice President; and Deborah A. Ailiff, Vice
President and Associate General Counsel; and is the father-in-law of Paul C.
Sukalo, Senior Vice President and a Director.
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MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has designated several committees of the Board,
including a Compensation Committee, an Audit Committee and an Executive
Committee, the functions and membership of which are described below.
The Compensation Committee is responsible for approving recommendations
to the Board of Directors regarding salaries, incentive bonuses and other
compensation arrangements with executive officers of the Company and for the
administration of the Washington Homes Employee Stock Option Plan. The Audit
Committee's functions include making recommendations to the Board of Directors
on the selection of the Company's auditors, reviewing the arrangements for and
scope of the independent auditors' examination, meeting with the independent
auditors to review the adequacy of internal controls and reporting and
performing any other duties or functions deemed appropriate by the Board. The
Executive Committee may, with certain limitations, act for the Board of
Directors between meetings of the Board.
The members of both the Compensation and Audit Committees during fiscal
1998 were Messrs. Frary, Shapiro and Talkin. Mr. Shapiro was Chairman of the
Compensation Committee and Mr. Frary was Chairman of the Audit Committee. The
Executive Committee consists of Geaton A. DeCesaris, Sr., Geaton A. DeCesaris,
Jr. and Paul C. Sukalo.
During fiscal 1998, the Board of Directors met five times, the
Executive Committee acted by unanimous consent four times, the Compensation
Committee met twice and acted by unanimous consent five times and the Audit
Committee met once.
DIRECTOR COMPENSATION
During fiscal 1998, the Company paid each non-employee director $6,000
per year plus $2,500 for each Board meeting and $1,000 for each committee
meeting not held in conjunction with a Board meeting which they attended and
reimbursed such directors for all out-of-pocket expenses incurred in connection
with their activities as directors. Total compensation to Messrs. Frary, Shapiro
and Talkin was $17,000 each and to Mr. Connelly $16,000. During fiscal 1998 each
non-employee director received an option under the Company's Non-Employee
Directors' Stock Option Plan to purchase 10,000 shares of Common Stock at a
price of $4.00 per share (the market price at the date of grant). During the
fiscal year ended July 31, 1998, the Company engaged Mr. Talkin as counsel to
provide legal services to the Company in certain matters.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of September 30,
1998, except as otherwise noted, with respect to the beneficial ownership of the
Company's voting common stock by
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each person known by the Company to be the beneficial owner of more than five
percent of its outstanding voting common stock:
Shares of Voting Common
Stock Beneficially Owned
----------------------------
Name and Address
of Beneficial Owners(1) Number Percent(2)
----------------------- ------ ----------
Geaton A. DeCesaris, Jr.(3)(4)(5)(6)............ 1,099,673 13.8
Geaton A. DeCesaris, Sr.(3)(4)(7)............... 705,527 8.9
A. Hugo DeCesaris(3)(4)(5)(8)................... 589,668 7.4
Marco A. DeCesaris(4)(5)(9)..................... 537,443 6.8
Joseph A. DeCesaris(3)(4)(5).................... 476,570 6.0
Tweedy, Browne Company, LLC and
Vanderbilt Partner, L.P.(10)
52 Vanderbilt Ave.
New York, NY 10017............................ 429,645 5.4
Dimensional Fund Advisors, Inc.(11)
1299 Ocean Avenue
Santa Monica, CA 90401....................... 415,500 5.2
Heartland Advisors, Inc.(12)
790 N. Milwaukee Street
Milwaukee, WI 53202........................... 624,200 7.9
Franklin Resources, Inc.(13)
777 Mariners Island Blvd
P.O. Box 777
San Mateo, CA 94403........................... 462,500 5.7
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(1) The address for DeCesaris family members is 1802 Brightseat Road, Landover,
Maryland 20785-4235.
(2) Based on 7,942,763 shares outstanding which includes 28,330 shares of
non-voting common stock which are convertible into shares of voting common
stock on a share-for-share basis.
(3) Includes shares held by spouse and jointly with spouse. Each person listed
has joint voting and investment power with that person's spouse with
respect to the shares jointly owned. Also includes shares held in that
person's retirement plan accounts.
(4) Geaton A. DeCesaris, Jr., Marco A. DeCesaris, A. Hugo DeCesaris and Joseph
A. DeCesaris are the sons and Paul C. Sukalo is the son-in-law of Geaton A.
DeCesaris, Sr. While these persons have acted together in various
businesses, principally in real estate, there is no agreement among them to
vote their shares together or to otherwise act in concert concerning the
affairs of the Company. Each of the individuals disclaims beneficial
ownership of any shares other than as listed opposite such person's name in
the table above or the table on the next page.
(5) Does not include shares held by certain DeCesaris family trusts for the
benefit of family members, portions of which may be deemed indirectly
beneficially owned as follows: 100,000 shares by Geaton A. DeCesaris, Jr.,
40,000 shares by Marco A. DeCesaris, 40,000 by A. Hugo DeCesaris and 80,000
by Joseph A. DeCesaris. The co-trustees of these trusts have shared voting
and investment power with respect to shares held.
(6) Includes 21,500 shares held as custodian for family members.
(7) Includes 590,000 shares held in a trust for family members for which Mr.
DeCesaris acts as trustee.
(8) Includes 72,000 shares held as custodian for family members.
(9) Includes 8,000 shares held as custodian for family members.
(10) Beneficial ownership is as of July 31, 1998. Tweedy Browne Company, LLC
("TBC") and Vanderbilt Partner LP ("Vanderbilt") have informed the Company
that TBC is a registered broker-dealer and investment advisor and that
Vanderbilt is a private investment partnership. TBC has sole voting power
with respect to 414,645
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shares and sole dispositive power with respect to 323,280 shares.
Vanderbilt has sole voting and dispositive power with respect to 15,000
shares.
(11) Beneficial ownership is as of December 31, 1997. Dimensional Fund Advisors,
Inc. ("DFA"), a registered investment advisor, has informed the Company
that it has sole power to vote 281,300 shares and sole dispositive power
with respect to all shares held. Officers of DFA have the power to vote
134,200 shares.
(12) Beneficial ownership is as of July 31, 1998. Heartland Advisors, Inc., a
registered investment advisor, has informed the Company that shares held
are in investment advisory accounts and that it has sole voting and
dispositive power with respect to 341,200 shares.
(13) Beneficial ownership is as of June 30, 1998. Shares are owned by one or
more investment companies and managed accounts advised by subsidiaries of
Franklin Resources, Inc. Sole dispositive and voting power is held by such
subsidiaries.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth information as of September 30, 1998
regarding beneficial ownership of the Company's common stock (both voting and
non-voting shares) by each Director, each nominee to become a Director, each of
the Company's five most highly compensated executive officers and the Directors
and executive officers of the Company as a group:
Percentage
of
Number of Shares Outstanding
Name Beneficially Owned Shares
---- ------------------ ------
Geaton A. DeCesaris, Jr............ 1,099,673(1)(2)(3) 13.8%
Geaton A. DeCesaris, Sr............ 705,527(1)(3)(4) 8.9
Thomas Pellerito................... 50,000(3) *
Paul C. Sukalo..................... 267,129(1)(3)(4) 3.4
Christopher Spendley............... --(3) --
Thomas Connelly.................... 48,514(1) *
Ronald M. Shapiro.................. 2,225(3) *
Richard B. Talkin.................. 9,000(1)(3) *
Richard S. Frary................... 53,830(1)(3)(6) *
All Directors and
executive officers as a
group (10 persons)............... 2,222,013(1)(2)(3)(4)(5)(6) 28.0
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* Less than 1% of issued and outstanding shares of common stock (both voting
and non-voting).
(1) Includes shares held by spouse or jointly with spouse, and/or shares held
in retirement plan accounts. (2) Does not include 100,000 shares held in
the DeCesaris family trusts which may be deemed indirectly beneficially
owned by Geaton A. DeCesaris, Jr., but does include 21,500 shares held as
custodian for family members.
(3) Does not include shares which such person has a right to acquire through
the exercise of options as follows: Mr. DeCesaris, Jr. 70,000; Mr.
DeCesaris, Sr. 10,000; Mr. Pellerito 300,000; Mr. Sukalo 24,000; Mr.
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Spendley 72,000; Mr. Connelly 10,000; Mr. Shapiro 17,000; Mr. Talkin
17,000; and Mr. Frary 15,000 and all executive officers and directors as a
group 569,000.
(4) Includes 590,000 shares held in a trust for the benefit of DeCesaris family
members for which Geaton A. DeCesaris, Sr. acts as trustee.
(5) Does not include 60,000 shares held in the DeCesaris family trusts which
may be deemed indirectly beneficially owned by Paul C. Sukalo.
(6) Includes 28,330 shares of non-voting common stock.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid to the
Company's chief executive officer and its four other most highly compensated
executive officers serving at July 31, 1998 for services rendered during the
last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long term
Annual Compensation Compensation
------------------------------------ ---------------
Number of
Shares
Underlying
Name and Principal Position Fiscal Year Salary Bonus Other(1)(2) Options Granted
- --------------------------- ----------- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Geaton A. DeCesaris, Jr. 1998 $400,000 $140,000 $1,000 15,000
President and Chief Executive Officer 1997 350,000 65,000 2,687 30,000
1996 350,000 -- 1,000 12,500
Geaton A. DeCesaris, Sr. 1998 260,000 -- 1,150 10,000
Chairman of the Board 1997 260,000 -- 2,340 --
1996 260,000 -- 1,000 --
Thomas Pellerito 1998 300,000 100,000 -- 300,000
President, Homebuilding Operations 1997 3,462 -- -- --
Chief Operating Officer 1996 -- -- -- --
Paul C. Sukalo 1998 148,750 73,950 1,670 8,000
Senior Vice President 1997 140,000 65,750 2,298 4,000
1996 135,300 48,430 1,000 6,000
Christopher Spendley 1998 175,000 50,000 1,890 32,000
Senior Vice President 1997 139,373 35,000 -- 40,000
1996 -- -- -- --
</TABLE>
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(1) Includes the matching amounts paid by the Company to the Company's 401(k)
Plan under which employee contributions are partially matched up to the
greater of $1,000 or 1.5% of compensation.
(2) Excludes perquisites and other personal benefits since the aggregate amount
of such compensation is the lesser of $50,000 or 10% of salary and bonus
combined.
The Company does not have employment agreements with any of its
executive officers. The following tables set forth certain information
concerning the granting and exercise of stock options during the fiscal year
ended July 31, 1998 by the persons named in the Summary Compensation Table and
the value of all unexercised options at the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised In The
Shares Unexercised Money Options
Acquired Value Options at 7/31/98 at 7/31/98
Name On Exercise Realized Exerciseable/Nonexerciseable Exerciseable/Nonexerciseable
- ---- ----------- -------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Geaton A. DeCesaris, Jr.............. -- 26,250/43,750 $12,526/44,268
Geaton A. DeCesaris, Sr.............. -- 0/10,000 $0/6,125
Thomas Pellerito . .................. -- 0/300,000 $0/356,250
Paul C. Sukalo....................... -- 10,000/14,000 $5,810/16,180
Christopher Spendley................. -- 10,000/62,000 $10,925/61,775
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
Number % of Total at Assumed Annual Rates of
of Shares Options Stock Price Appreciation for
Underlying Granted Exercise Option Term
Options to Employees Price Expiration ----------------------------
Name Granted in Fiscal Year Per Share Date 5% 10%
- ---- ------- -------------- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Geaton A. DeCesaris, Jr....... 15,000(1) 2.19 $4.95 10/20/03 $11,899 $34,459
Geaton A. DeCesaris, Sr....... 10,000(1) 1.47 $4.95 10/20/03 $7,933 $22,973
Thomas Pellerito.............. 150,000(2) 21.99 $4.00 9/02/07 $377,337 $956,245
150,000(2) 21.99 $4.75 4/19/08 $448,087 $1,135,542
Paul C. Sukalo................ 8,000(1) 1.17 $4.50 10/20/07 $22,640 $57,375
Christopher Spendley.......... 12,000(1) 1.76 $4.50 10/20/07 $33,960 $86,062
20,000(2) 2.93 $4.75 4/19/08 $59,745 $151,406
</TABLE>
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(1) Options are exercisable as follows: 25% beginning 1 year after grant; 50%
beginning 2 years after grant; and fully exercisable beginning 4 years
after grant.
(2) Options are fully exerciseable beginning August 1, 2000.
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CERTAIN TRANSACTIONS
The Company currently leases over 24,000 square feet of office space in
the Ingle West Office Building in Landover, Maryland from Citadel Land, Inc., a
corporation owned by members of the DeCesaris family, pursuant to a lease
expiring in May 2008 at a base annual rental of $392,000. The rental is subject
to adjustment for increased operating expenses and changes in the Consumer Price
Index. In fiscal 1998, the Company paid Citadel $435,000 in rentals.
REPORT OF COMPENSATION COMMITTEE
REGARDING EXECUTIVE COMPENSATION
The Board of Directors has determined that the Company's executive
compensation program will be administered by the Compensation Committee (the
"Committee") which consists of three non-employee independent directors. The
Committee was established in April 1993, following completion of the Company's
initial public offering.
For fiscal 1998 executive compensation consisted generally of base
salary, bonuses and grants of stock options under the Company's Employee Stock
Option Plan. The Committee annually reviews the Company's executive compensation
program and policies and approves compensation for executive personnel.
The overall policy objective of the Company's executive compensation
program is to provide base compensation levels and compensation incentives (in
the form of bonuses and stock options) that attract and retain the highest
quality individuals for key executive positions with the Company. The executive
compensation program is intended to recognize individual contribution to
corporate performance and to recognize the overall performance of the Company
relative to the performance of other corporations in the homebuilding industry.
Base Compensation
The Committee annually reviews base compensation levels of executive
personnel to determine that such compensation is competitive, both individually
and in the aggregate, with other homebuilding industry companies of comparable
size and profitability. Comparisons with other companies are obtained through
public information and surveys of homebuilding industry compensation available
from outside compensation advisors. Individual base compensation levels are set
based upon these competitive factors, but also are varied based upon
performance, experience and the scope of each particular position.
Bonuses
The Company awards annual and periodic cash bonuses to its executive
personnel. These bonuses tie a portion of compensation directly to results
achieved during each fiscal year. Individual
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amounts are determined by an evaluation of individual performance, division
performance and Company performance. As with base compensation, the Committee
reviews bonuses and the bonus structure annually in an effort to set a program
which promotes behavior which is intended to enhance shareholder value and is
competitive, both as to the bonus and when combined with base salary, with other
homebuilders of comparable size and profitability.
For fiscal 1998, bonuses for executive personnel in each of the
Company's operating divisions were tied, in large measure, to the ability of
each division to meet or exceed the business plan objectives established at the
beginning of the fiscal year and division performance measured against various
measurements of financial and operating performance.
Bonuses for executive personnel whose activities are not directly a
part of the operating divisions were based in part upon the ability of the
Company to meet or exceed pre-set performance goals, in part on the achievement
of specific objectives in programs of a broader nature and in part were set at
levels to bring total cash compensation in line with other homebuilders. A bonus
for the chief executive officer was to be based on achieving after-tax financial
results by the Company and its subsidiaries in relation to its business plan and
on the achievement of specific objectives in programs of a broader nature.
Stock Options
Stock options are granted as a means of aligning the economic interests
of key personnel with those of the shareholders of the Company. For fiscal 1998,
stock options were granted for 682,000 shares of the Company's Common Stock.
In the past, options were granted to all executive and other key
personnel at time of the Company's initial public offering who were not then
shareholders of the Company. Other options also have been granted to executive
and management personnel at the time of hire. For fiscal 1998 the Committee
established a program for grants for additional awards based on individual
performance. In addition, at the time of hire, options were granted in fiscal
1998 based on the potential for future contribution to the success of the
Company.
CEO Compensation
The criteria previously enumerated are those that have been applied to
the Company's Chief Executive Officer, Geaton A. DeCesaris, Jr. During fiscal
1998 Mr. DeCesaris received base compensation of $400,000, which was an increase
of $50,000 from fiscal 1997. Mr. DeCesaris received a bonus for fiscal 1998 of
$140,000. This was an increase of $75,000 from the fiscal 1997 level. In
determining Mr. DeCesaris' compensation the Committee recognized that the
Company greatly improved its performance from fiscal 1997 levels and made
progress in several areas including geographical expansion, integration of
expanded operations and improving the quality management
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of the Company. During the year, Mr. DeCesaris received options to purchase
15,000 shares of common stock.
Ronald M. Shapiro
Richard B. Talkin
Richard S. Frary
Members of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
Mr. Talkin, a member of the Compensation Committee, performs legal
services for the Company.
CUMULATIVE TOTAL RETURN
The following graph compares the total return of the Company's Common
Stock during the period from February 26, 1993 to July 31, 1998 with the
Standard and Poor's 500 Stock Index and the Dow Jones Home Construction Index:
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[INSERT GRAPH]
* $100 invested on February 26, 1993 in stock or index including reinvestment of
Dividends. Fiscal year ending July 31.
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4. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP to serve as
independent auditors for the Company and its subsidiaries for the fiscal year
ending July 31, 1999. The appointment was made subject to ratification by
shareholders. Deloitte & Touche LLP and its predecessors have served as
independent auditors for the Company since 1967.
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 questions from shareholders.
The affirmative vote of a majority of the shares represented at the
meeting is required for ratification.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who are holders of more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies of all forms filed. The
Company believes that during fiscal 1998, its officers, directors and greater
than ten-percent beneficial holders complied with all applicable Section 16(a)
filing requirements, with the exception of Paul Sukalo who did not report a
private sale of stock to a family member on a timely basis.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and other employees of the Company in person or by telephone, telegram
or other means of communication. Such directors, officers and other employees
will not be additionally compensated, but may be reimbursed for out-of-pocket
expenses in connection with such solicitation. Arrangements will be made with
custodians, nominees and fiduciaries for forwarding proxy solicitation materials
to beneficial owners of shares held of record by such custodians, nominees and
fiduciaries, and the Company will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
PROCEDURE FOR SUBMITTING SHAREHOLDER PROPOSALS
Shareholders may present proper proposals for inclusion in the
Company's proxy statement for consideration at the next annual meeting of its
shareholders by submitting proposals to the Company in a timely manner. In order
to be so included for the 1999 Annual Meeting, shareholder
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<PAGE>
proposals must be received by the Company no later than July 1, 1999, and must
otherwise comply with the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934.
OTHER MATTERS
The only matters expected to come before the Annual Meeting are those
set forth in this Proxy Statement. The Board of Directors does not know of any
other matters to be presented at the Annual Meeting. If any additional matters
are properly presented at the meeting or any adjournment thereof, the persons
named in the Proxy will have discretion to vote in accordance with their best
judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Christopher Spendley
-------------------------
Christopher Spendley
Senior Vice President and
Secretary
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<PAGE>
[LOGO]
WASHINGTON HOMES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Geaton A. DeCesaris, Jr. and Chistopher
Spendley, or either one, each with power of substitution, as proxies for the
undersigned to vote all shares of Common Stock of Washington Homes, Inc., a
Maryland corporation, which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on November 20, 1998, and any adjournments or
postponements thereof, as hereinafter specified and, in their discretion, upon
such other matters as may properly come before the meeting and any adjournments
or postponements thereof. The undersigned hereby revokes all proxies heretofore
given.
(Continued on reverse side)
o FOLD AND DETACH HERE o
<PAGE>
ON MATTERS FOR WHICH YOU DO NOT SPECIFY A CHOICE, YOUR SHARES WILL BE VOTED
AS RECOMMENDED BY THE BOARD OF DIRECTORS
Please mark
your vote as [ X ]
indicated in
this example
Election of Directors (mark only one)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Vote FOR all nominees Vote Geaton A. DeCesaris, Sr. Thomas Connelly, Richard S. Frary, Richard B. Talkin
listed and recommended by WITHHELD Geaton A. DeCesaris, Jr. Paul Sukalo, Ronald M. Shapiro, Thomas J. Pellerito
the Board of Directors from all
(except as directed to nominees
the contrary INSTRUCTION: To withhold authority to vote for any individual nominee, line through or
otherwise strike out that nominee's name above.
[ ] [ ] _________________________________________________________________________________________
Proposal to ratify appointment of independent
auditors
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
PLEASE SIGN, DATE AND RETURN THIS PROXY,
USING THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
________________________________________
Signature
Dated: __________________________, 1998.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If the
signer is a corporation, sign the full
corporate name by duly authorized
officer.
o FOLD AND DETACH HERE o
