<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Realty Information Group, Inc.
- ------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
<PAGE> 2
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
[CoSTAR LOGO]
June 16, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Realty Information Group, Inc., to be held at 10:00 a.m. on
Tuesday, July 13, 1999 at the Crowne Plaza, 1001 14th Street N.W., Washington,
D.C. 20005.
At the Annual Meeting, you will be asked to elect six Directors, to
ratify the Board of Directors' appointment of independent public accountants,
and to approve an amendment to our corporate charter to change our name to
CoStar Group, Inc. The accompanying Notice of 1999 Annual Meeting of
Stockholders and Proxy Statement describe these matters.
The Board of Directors unanimously recommends that stockholders vote in
favor of the election of the nominated Directors, in favor of the ratification
of accountants, and in favor of changing our name.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return your proxy card in the enclosed envelope as soon as possible.
Your stock will be voted in accordance with the instructions you have given in
your proxy card.
Sincerely,
Andrew C. Florance
President and Chief Executive Officer
<PAGE> 4
REALTY INFORMATION GROUP, INC.
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 13, 1999
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of Realty
Information Group, Inc. ("we" or the "Company") will be held at the Crowne
Plaza, 1001 14th Street N.W., Washington, D.C. 20005, at 10:00 a.m. on Tuesday,
July 13, 1999, for the following purposes:
1. To elect six Directors to hold office until the next annual
meeting of stockholders or until their respective successors are
elected and qualified;
2. To ratify the Board of Directors' appointment of Ernst & Young LLP
as the Company's independent public accountants;
3. To approve a proposal, which the Board of Directors has declared
advisable, to amend the Company's Restated Certificate of
Incorporation to change the Company's name to CoStar Group, Inc.;
and
4. To transact any other business properly presented before the
Annual Meeting.
The Board of Directors has fixed June 11, 1999 as the record date for
determining stockholders entitled to receive notice of and to vote at the Annual
Meeting (or any adjournment or postponement of it). Only stockholders of record
at the close of business on that date are entitled to notice of and to vote at
the Annual Meeting.
WE INVITE YOU TO ATTEND THE ANNUAL MEETING IN PERSON, BUT WHETHER OR NOT
YOU EXPECT TO BE ATTEND, TO ENSURE YOUR REPRESENTATION PLEASE MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID
ENVELOPE PROVIDED.
By Order of the Board of Directors
Carla J. Garrett
Secretary
<PAGE> 5
REALTY INFORMATION GROUP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JULY 13, 1999
The Board of Directors of Realty Information Group, Inc. ("we" or the
"Company") solicits your proxy for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at 10:00 a.m. on Tuesday, July 13, 1999, at
the Crowne Plaza, 1001 14th Street N.W., Washington, D.C. 20005, and at any
adjournment or postponement of the Annual Meeting.
Our headquarters are located at 7475 Wisconsin Avenue, Bethesda, Maryland
20814. We are mailing this Proxy Statement and the accompanying proxy card to
our eligible stockholders on or about June 16, 1999.
OUTSTANDING SECURITIES AND VOTING RIGHTS
At the close of business on the record date, June 11, 1999, we had
[12,805,224] shares of common stock outstanding and entitled to vote at the
Annual Meeting. Each outstanding share of common stock is entitled to one vote.
A quorum, which is a majority of the outstanding shares as of the record
date, must be present to hold the Annual Meeting. A quorum is calculated based
on the number of shares represented by the stockholders attending in person or
represented by proxy. If you return a signed proxy card marked as abstaining
from all matters, the shares that it represents will be counted toward a quorum,
but will not be voted on any matter.
The required vote and the calculation method for each of the matters
scheduled for consideration at the Annual Meeting are as follows:
Item 1 - Election of Directors. Each outstanding share of common stock is
entitled to cast one vote for up to six nominees. The six nominees who receive
the most votes will be elected as Directors. If you do not wish to vote your
shares for a particular nominee, you may so indicate on your proxy card.
Abstentions and broker nonvotes (i.e., when a broker does not have authority to
vote on a specific issue) will not affect the outcome.
Item 2 - Ratification of the Board's Appointment of Independent Public
Accountants. For stockholders to approve this proposal, the number of votes cast
in favor must exceed the number of votes cast against. Abstentions and broker
nonvotes will not affect the outcome.
Item 3 - Amendment of our Corporate Charter to Change our Name. For
stockholders to approve this proposal, a majority of outstanding shares must
vote in favor of it. This means that abstentions and broker nonvotes will have
the practical effect of voting against the proposal.
<PAGE> 6
PROXY VOTING AND REVOCATION
If you properly execute your proxy card and return it in time:
- Your shares will be voted in accordance with your instructions on
the proxy card.
- For any items for which you do not provide instructions, your
shares will be voted "FOR" the item, as recommended by the
Board of Directors.
We do not expect that any matter will be considered at the Annual Meeting other
than those described in this Proxy Statement. If, however, other matters are
properly presented, the persons named as proxies will vote as they think best.
You may revoke your proxy at any time before it is voted by:
- delivering to the Corporate Secretary written notice that you are
revoking your proxy;
- submitting a properly-executed proxy bearing a later date; or
- attending the Annual Meeting and voting in person.(If you are not
the owner of record, but rather hold your shares through a broker
or bank, you should take appropriate steps to obtain a legal proxy
from the owner of record if you wish to vote at the Annual
Meeting.)
If you intend to attend the Annual Meeting, please mark your proxy card
accordingly.
ITEM 1
ELECTION OF DIRECTORS
The Board has fixed the number of Directors constituting the Board at
six. The Board has nominated five of the current Directors for re-election.
Lanning Macfarland III, who currently serves as a Director, has decided to leave
that office when his successor has been elected. The Board has nominated Josiah
O. Low III to replace Mr. Macfarland. The persons named as proxy holders on the
proxy card will vote your shares FOR each of these six nominees unless you
instruct otherwise on your proxy card.
All of our Directors serve for one-year terms or until their successors
are elected and qualified. If any nominee were unable to serve, which we do not
anticipate, the Board could reduce the number of Directors or choose a
substitute. Information about each of the nominees appears below.
NOMINEES FOR THE BOARD OF DIRECTORS
Michael R. Klein is one of our founders and has been Chairman of our
Board of Directors since 1987. He has been, since 1974, a partner of the law
firm Wilmer, Cutler & Pickering, based in Washington, D.C., and was a member of
its five-person management committee until July 1998. Over the past five years
Mr. Klein has served as a member of the board of directors (and Audit Committee
Chairman) of both National Education Corporation and Steck-Vaughn Publishing
Corporation, a director (and member of the Executive Committee) of Perini
Corporation, and as a director of SRA International, Inc. Mr. Klein is 57 years
old.
2
<PAGE> 7
Andrew C. Florance is also one of our founders and has served as our
President and as a Director since 1987 and as our Chief Executive Officer since
1995. Prior to founding Realty Information Group, Inc., Mr. Florance was
president of a predecessor company, Real Estate Infonet, a real estate public
records publishing operation, from 1985 to 1987. Mr. Florance held primary
responsibility for developing the first generation of software products for
Federal Filings, an SEC Form 13-D tracking service, which was later acquired by
Dow Jones. Mr. Florance was a co-founder of a commercial real estate
information trade association (REI-NEX) and served on its board from 1993 to
1996. Mr. Florance served on the focus group responsible for developing the
concepts related to the Federal government's use of real estate in Vice
President Gore's National Performance Review. He received a B.A. in economics
from Princeton University. Mr. Florance is 35 years old.
David Bonderman is principal of Texas Pacific Group and an indirect
general partner of TPG Partners I, L.P. and TPG Partners II, L.P. Prior to
forming Texas Pacific Group, Inc., Mr. Bonderman served as Vice President and
Chief Operating Officer of Keystone, Inc. (formerly the Robert M. Bass Group,
Inc.) from July 1983 to August 1992. Mr. Bonderman was a partner in the law firm
of Arnold & Porter from 1971 to 1983. Mr. Bonderman currently serves on the
boards of directors of Continental Airlines, Inc., Bell and Howell Company,
Ducati Motorcycles S.p.A., Beringer Wine Estates, Denbury Resources, Inc.,
Ryanair, P.L.C., Washington Mutual, Inc., and Oxford Health Plans, Inc. He has
been one of our Directors since 1987. Mr. Bonderman is 56 years old.
Warren H. Haber has been, for more than twenty-five years, Chairman of
the Board and Chief Executive of Founders Equity, Inc. and its affiliates,
private investment concerns engaged in the business of identifying businesses
for acquisition in principal transactions and managing such businesses for their
own accounts. Mr. Haber currently serves on the boards of directors of Beverly
Glen Medical Systems, American Lifecare, Grand Charter, Ltd. and Warnex Pharma.
He has served as one of our Directors since 1995. Mr. Haber is 58 years old.
John Simon is a Managing Director of the investment banking firm Allen &
Company Incorporated, with which he has been associated for over 20 years. Mr.
Simon currently serves on the boards of directors of The Immune Response
Corporation, Neurogen Corporation, and Advanced Technical Products, Inc. Mr.
Simon has served on our Board of Directors since 1996. Mr. Simon is 56 years
old.
Josiah O. Low III is a Managing Director of the investment banking firm
of Donaldson, Lufkin & Jenrette, where he directs efforts in investment banking
and in the equity capital markets. Prior to joining that firm in 1985, Mr. Low
worked at Merrill Lynch, Pierce, Fenner & Smith and was a founding Managing
Director of the Merrill Lynch Capital Market Group in 1977. He serves on the
boards of directors of Centex Development Co., Hvide Marine, The Musicland
Group, and St. Laurent Paperboard Inc. Mr. Low, who is 60 years old, has not
previously served on our Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.
ITEM 2
RATIFICATION OF THE BOARD'S APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as independent
public accountants to audit the books, records and accounts of the Company and
its subsidiaries for 1999. Ernst & Young LLP has audited our consolidated
financial statements and the financial statements of our predecessors since
1994.
3
<PAGE> 8
Representatives of Ernst & Young LLP will attend the Annual Meeting, will
have an opportunity to make statements if they desire, and will be available to
respond to appropriate questions.
If the stockholders do not ratify the appointment of Ernst & Young LLP,
the Board will select another firm of auditors for next year. Because of the
difficulty in making a change in auditors so long after the beginning of the
current year, the appointment for 1999 will stand, unless the Board determines
that a more immediate change is necessary.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR RATIFYING
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
ITEM 3
APPROVAL OF AN AMENDMENT
TO OUR CORPORATE CHARTER
TO CHANGE THE NAME OF THE COMPANY TO
COSTAR GROUP, INC.
The Board of Directors has unanimously adopted an amendment to our
corporate charter to change the Company's name from Realty Information Group,
Inc. to CoStar Group, Inc. We now submit the proposed amendment for your
approval.
We do business and provide most of our services under the name
CoStar(TM). For example, CoStar Office and CoStar Industrial permit our clients
to research leasing options, analyze market conditions and competitive property
positions, and produce multimedia presentations. CoStar Tenant delivers detailed
information profiling the tenants occupying commercial buildings by tracking
over 310,000 tenants in 23 U.S. markets. We have several services under
development that use the CoStar name, including CoStar Exchange, CoStar
Analytic, and CoStar Comparables. In addition, we reorganized our corporate
structure at the beginning of this year, so that we now operate in large part
through a wholly-owned subsidiary known as CoStar Realty Information, Inc.
For these reasons, we believe that "CoStar Group, Inc." better identifies
us and the services we offer.
Changing our name will require an amendment to our corporate charter. We
are organized as a corporation under Delaware law, which requires that
stockholders approve amendments of this type. Specifically, if stockholders
approve the proposed amendment, we will change Article One of our Restated
Certificate of Incorporation, which currently reads:
"The name of the Corporation is: Realty Information Group, Inc."
so that it instead reads:
"The name of the Corporation is: CoStar Group, Inc."
The Board of Directors has considered, declared the advisability of, and
approved this amendment to the corporate charter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR AMENDING
THE CORPORATE CHARTER TO CHANGE OUR NAME TO COSTAR GROUP, INC.
4
<PAGE> 9
OTHER MATTERS
We do not know of any other matter that will be presented for
consideration at the Annual Meeting. If any other matter does properly come
before the Annual Meeting, the proxy holders will vote on it as they think best.
PROPOSALS OF STOCKHOLDERS
To be eligible for consideration for inclusion at the next Annual
Meeting, a stockholder proposal must be received by the Secretary of the Company
at least 60 days, but not more than 90 days, before next year's Annual Meeting.
We will list the date of next year's Annual Meeting in a future quarterly report
that we will file with the Securities and Exchange Commission. If you wish to
submit a proposal, we strongly recommend you send it by Certified Mail--Return
Receipt Requested. We reserve the right to reject, rule out of order, or take
other appropriate action with respect to any stockholder proposal that does not
comply with all applicable requirements.
ADDITIONAL INFORMATION
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During 1998, the Board held five meetings and acted on eight occasions
by unanimous consent. The Board of Directors has an Audit Committee that
reviews the results and scope of the annual audit and other services provided
by our independent public accountants. Michael R. Klein, Warren H. Haber, and
John Simon are the members of this Committee. During 1998, the Committee met
one time. The Board also has a Compensation Committee that makes
recommendations concerning salaries and incentive compensation for our
employees. The Board of Directors has designated the Compensation Committee as
the administrator of our Stock Option Plan. The members of the Compensation
Committee were David Bonderman, Warren H. Haber, and Michael R. Klein. The
Committee met one time in 1998. The Board does not currently have a nominating
committee. All Directors attended at least 75% of the meetings of the Board and
the Committees of which they were members.
DIRECTOR COMPENSATION
Each of our Directors who do not also serve as an officer or employee
with us is entitled to his expenses for attending each meeting of the Board of
Directors and each meeting of any committee. Until May 1998, Founders Equity
Inc. received a monthly fee of $10,000 and Mr. Klein a monthly fee of $6,667.
Since our initial public offering last year, our non-employee Directors have
been entitled to $15,000 annually payable in shares of our common stock. In
addition, on a going-forward basis, each non-employee Director will receive
$2500 per meeting of the Board of Directors, up to a maximum of $10,000
annually.
STOCK OWNERSHIP INFORMATION
The following table provides certain information regarding the beneficial
ownership of our common stock as of June 1, 1999 by:
- each person we know to be the beneficial owner of more than 5% of
the outstanding common stock;
- each of our Directors;
5
<PAGE> 10
- our Chief Executive Officer and President and each of our most
highly compensated executive officers who earned more than
$100,000 in salary and bonus in 1998 (who we refer to collectively
in this proxy statement as the "named executive officers"); and
- all of our executive officers and Directors as a group.
Except as indicated in the footnotes to the table, we believe that the persons
named in the table have sole voting and investment power with respect to the
indicated shares of stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS(1) NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED OUTSTANDING SHARES
- ---------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C>
Michael R. Klein(2) 1,823,385 14.19%
Andrew C. Florance(3) 456,762 3.51%
Frank A. Carchedi(4) 34,100 *
Curtis M. Ricketts(5) 68,100 *
David M. Schaffel(6) 57,420 *
David Bonderman 444,704 3.47%
Warren Haber(7) 128,866 1.01%
John Simon(8) 92,248 *
Lanning Macfarland III(9) 413,365 3.23%
All ten Directors and executive officers
as a group(10) 3,719,703 28.26%
</TABLE>
- ----------
* Less than one percent.
(1) Unless otherwise noted, each listed person's address is c/o Realty
Information Group, Inc., 7475 Wisconsin Avenue, Bethesda, Maryland 20814.
(2) Includes 14,496 shares held as trustee for his nieces and 14,496 shares
held by others as trustee for his children. Also includes warrants for
the purchase of 45,450 shares of common stock. See "Certain
Transactions."
(3) Includes 200,604 shares issuable upon options exercisable within 60 days.
Excludes 32,500 shares issuable upon options not exercisable within 60
days.
(4) Includes 30,100 shares issuable upon options exercisable within 60 days.
Excludes 25,050 shares issuable upon options not exercisable within 60
days.
(5) Includes 24,620 shares issuable upon options exercisable within 60 days.
Excludes 12,500 shares issuable upon options not exercisable within 60
days.
(6) Includes 32,120 shares issuable upon options exercisable within 60 days.
Excludes 20,000 shares issuable upon options not exercisable within 60
days.
(7) Includes 18,846 held by Mr. Haber's spouse and excludes 46,128 shares
held by Mr. Haber's adult children for which Mr. Haber disclaims personal
beneficial ownership.
(8) Excludes 152,752 shares held by Allen & Company Incorporated (of which
Mr. Simon is a Managing Director) and certain of its other officers and
affiliates; Mr. Simon disclaims personal beneficial ownership of such
shares. See "Certain Transactions." Mr. Simon's address is c/o Allen &
Company Incorporated, 711 Fifth Avenue, New York, New York 10022.
(9) Includes 410,335 shares held by Law Bulletin Publishing Company.
(10) Includes 308,644 shares issuable upon options exercisable within 60 days.
Excludes 173,700 shares issuable upon options not exercisable within 60
days.
6
<PAGE> 11
EXECUTIVE COMPENSATION
The following table provides the annual salary, bonuses, and all other
compensation awards and payouts to our named executive officers for 1996 through
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION AWARDS COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------
FISCAL OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
--------------------------- ------ ------ ----- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Andrew C. Florance.......................... 1998 $166,346 -- -- 65,000 $ 2,309
Chief Executive Officer & President 1997 150,000 $100,000 $150,000(1) -- 2,122
1996 150,000 100,000 150,000(1) -- --
Frank A. Carchedi........................... 1998 117,096 27,029 -- 40,000 865
Chief Financial Officer 1997 70,654(2) 20,000 -- 15,150 --
1996 -- -- -- -- --
Curtis M. Ricketts.......................... 1998 104,362 47,126 -- 25,000 2,108
Senior Vice President 1997 83,077 46,166 -- -- 1,700
of Sales and Marketing 1996 64,481 37,012 -- -- --
David M. Schaffel........................... 1998 136,871 3,044 -- 40,000 19,097
Vice President of 1997 117,898 3,000 -- -- 9,478
Product Development 1996 96,941 3,000 -- -- --
</TABLE>
- ----------
(1) In 1997, we paid Mr. Florance additional compensation in the form of
shares of a predecessor company valued at the equivalent of $4.62 per
share for our common stock.
(2) Mr. Carchedi joined us as Chief Financial Officer in May 1997. On an
annualized basis, his base salary was $110,000 per year in 1997.
EMPLOYMENT AGREEMENTS
We have employment agreements with each of our named executive officers.
Each of these agreements is effective as of January 1, 1998. Each entitles the
executive to a specified base salary, a bonus award up to a specified percentage
of base compensation based upon achievement of performance objectives, and an
award of stock options vesting over time. The executive also may participate in
any insurance, medical, disability or pension plan generally made available to
our senior executive officers.
The agreements are for initial terms of two years (three in the case of
Mr. Florance) and are automatically renewable for successive one-year terms
unless we or the executive terminate the agreement. Each agreement contains a
covenant not to compete with us for the two years immediately following
termination, but applicable law may limit the term or scope of this covenant.
The agreements generally provide that, if we terminate the executive's
employment without good cause, the executive is entitled to his base salary for
the greater of six months or whatever period remains under the agreement, to a
prorated share of his bonus for the year in which termination occurred, and to
the immediate vesting of all stock options due to vest within the following 12
months.
The termination provisions of Mr. Florance's agreement differ in that
they also apply if he terminates the agreement for good cause; in that his
termination payments will be for the greater of 12 months or the remaining
period under the agreement; that he will receive a gross-up payment to cover any
taxes assessed under Section 4999 of the Internal Revenue Code; and in that all
his unvested stock options will vest.
7
<PAGE> 12
The following table gives specific economic terms of these agreements.
<TABLE>
<CAPTION>
MAXIMUM BONUS NUMBER AND
AS PERCENTAGE OF EXERCISE PRICE OF
NAME INITIAL BASE SALARY BASE COMPENSATION STOCK OPTIONS(1)
- ------------------------- -------------------------- ------------------------ -------------------
<S> <C> <C> <C>
Andrew C. Florance....... $ 175,000 100% 65,000
at $9
Frank A. Carchedi........ 125,000 75 40,000
(as of July 1, 1998) at $9
Curtis M. Ricketts....... 110,000 100 25,000
(as of July 1, 1998) at $9
David M. Schaffel........ 120,000 50 40,000
(as of July 1, 1998) at $9
</TABLE>
- ----------
(1) 25% of the options vest on each of the following dates: July 1, 1998, and
December 31, 1998, 1999, and 2000.
OPTION GRANTS
The following table provides certain information about grants of stock
options to our named executive officers during 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTION EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR ($/SHARE) DATE PRESENT VALUE(1)
- ------------------------- -------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Andrew C. Florance....... 65,000 12.0% $ 9 6/30/2008 $ 433,550
Frank A. Carchedi........ 40,000 7.4 9 6/30/2008 266,800
Curtis M. Ricketts....... 25,000 4.6 9 6/30/2008 166,750
David A. Schaffel........ 40,000 7.4 9 6/30/2008 266,800
</TABLE>
- ----------
(1) The grant date present value is computed using the Black-Scholes
option-pricing model with the following assumptions: expected volatility
of 94%, dividend yield of 0%, risk-free interest rate of 5%, and expected
life of 5 years.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides certain information regarding fiscal 1998
stock option exercises by, and unexercised options held as of December 31, 1998
by, the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SHARES OPTIONS HELD
ACQUIRED AT DECEMBER 31, 1998
ON VALUE ----------------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
- ------------------------- ------------ ------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Andrew C. Florance....... -- -- 200,604 32,500
Frank A. Carchedi........ -- -- 25,050 30,100
Curtis M. Ricketts....... 48,480(1) $ 136,800(1) 24,620 12,500
David M. Schaffel........ -- -- 32,120 20,000
<CAPTION>
VALUE OF
UNEXERCISED IN THE MONEY
OPTIONS AT FISCAL YEAR-
END(2)
--------------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ------------------------- ------------------- -----------------
<S> <C> <C>
Andrew C. Florance....... 1,660,361 117,813
Frank A. Carchedi........ 118,840 165,179
Curtis M. Ricketts....... 156,528 45,313
David M. Schaffel........ 183,715 72,500
</TABLE>
- ----------
(1) In June 1998, Mr. Ricketts exercised unit options of one of our
predecessors equivalent to 48,480 shares of our common stock. The value
realized by this exercise is computed by subtracting the exercise price
per equivalent share of our common stock from our estimate of the fair
value.
(2) Calculated based on the amount by which the fair market value of the
underlying security (assumed to be equal to its year-end closing price of
$12 5/8 per share) exceeds the option exercise price.
8
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy and Review
The compensation philosophy of the Company is to provide a competitive
total compensation package so that the Company can attract, retain, and motivate
talented employees and executives. The Company also believes in maximizing value
for stockholders by linking compensation to individual achievement of agreed
goals as they relate to overall corporate performance. It also strives, as much
as possible, to align the Company's human resource strategy with its
high-growth business strategy.
In determining compensation levels for 1999 and beyond, the Company
commissioned a third-party consultant to perform a special study with respect to
the base salary, total annual cash compensation, and long-term incentive
compensation of similarly situated officers within its peer group. The peer
group consists of companies which are in the specialized industry of electronic
information technology, are high-growth companies, and are of a size comparable
to the Company's. Implementation of the consultant's recommendations over time
will result in compensation levels that are competitive with the Company's
peers.
The Company's Compensation Committee generally believes that base
salaries for covered executives should be competitive, and that annual and
long-term incentives should be competitive in order to encourage and reward
superior performance.
Elements of Executive Officer Compensation
The Company's executive compensation consists primarily of base salary,
health insurance and similar benefits, annual cash bonuses, and the award of
stock options. The Company also has employment agreements with the top tier of
executive officers. Each of these agreements entitles the executive to a
specified base salary, a bonus award up to a specified percentage of base
compensation based upon achievement of performance objectives, and a competitive
award of stock options vesting over time. The compensation of executives covered
by an employment agreement is reviewed on an annual basis.
Base Salaries
Salary levels of the Company's senior executives are reviewed annually,
and may be adjusted to reflect a senior executive's individual responsibilities
and performance as well as the Company's corporate performance. The Compensation
Committee also considers salaries paid to executive officers of the peer group
in determining base salary levels. Base salaries should be generally competitive
with high growth companies in the peer group.
Annual Incentive Programs
The Compensation Committee administers an annual incentive plan for
senior level executives which grants a cash bonus based on individual and
corporate performance. The bonuses range from 10% to 100% of base salary. The
Compensation Committee considers the annual incentive awards offered by members
of the peer group in determining annual incentive award levels and would like
annual incentive awards to be more than competitive for superior performance.
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<PAGE> 14
Long-Term Incentive Plans
In March 1996, the Company's predecessor adopted the 1996 Option and
Purchase Plan (the "1996 Plan"), under which interests equivalent to 606,000
shares of the Company's common stock were reserved for issuance upon the
exercise of options granted to officers, executive personnel, directors and key
employees. The Board of Directors of the Company administers the option plan.
Options were granted at prices which the Board of Directors believed
approximated the fair market value of shares of common stock. Individual grants
become exercisable over a period of three years from the date of grant. The
contractual terms of the options range from three to ten years from the date of
grant.
In 1998, the Board of Directors adopted, and shareholders approved, the
1998 Stock Option Plan. The Company has reserved 1,450,000 shares of common
stock for issuance under the 1998 Stock Option Plan. The Plan provides for the
grant of stock options to officers and employees of the Company or its
subsidiaries. Options granted under the 1998 Stock Option Plan may be qualified
or non-qualified stock options. The 1998 Stock Option Plan is administered by
the Compensation Committee, which has the authority, subject to the provisions
of the Plan, to determine which employees will be granted options, how many
options they will receive, and what type of options they will be. The 1998 Stock
Option Plan will terminate in 2006 if the Board of Directors does not terminate
it sooner.
Employment Agreements
The Company has employment agreements with Messrs. Florance, Carchedi,
Ricketts, and Schaffel, each effective as of January 1, 1998. Each entitles the
executive to a specified base salary, a bonus award up to a specified percentage
of base compensation based upon achievement of performance objectives, and an
award of stock options vesting over time. The executive also may participate in
any insurance, medical, disability or pension plan generally made available to
the Company's senior executive officers.
The agreements are for initial terms of two years (three in the case of
Mr. Florance) and are automatically renewable for successive one-year terms
unless the Company or the executive terminates the agreement. Each agreement
contains a covenant not to compete with the Company for the two years
immediately following termination, but applicable law may limit the term or
scope of this covenant. The agreements generally provide that, if the Company
terminates the executive's employment without good cause, the executive is
entitled to his base salary for the greater of six months or whatever period
remains under the agreement, to a prorated share of his bonus for the year in
which termination occurred, and to the immediate vesting of all stock options
due to vest within the following 12 months.
The termination provisions of Mr. Florance's agreement differ in that
they also apply if he terminates the agreement for good cause; in that his
termination payments will be for the greater of 12 months or the remaining
period under the agreement; that he will receive a gross-up payment to cover any
taxes assessed under Section 4999 of the Internal Revenue Code; and in that all
his unvested stock options will vest.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code disallows the deduction of
compensation by a company to any of its five most highly compensated executive
officers that is in excess of $1 million. Compensation that is considered
"performance-based" is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals under a plan approved by the
shareholders. The Compensation Committee will continue to monitor total
compensation and, should the 162(m) limitation become an issue, take the
measures that they deem appropriate.
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<PAGE> 15
By the Compensation Committee of the Board of Directors.
Warren H. Haber
David Bonderman
Michael R. Klein
STOCK PRICE PERFORMANCE GRAPH
The stock performance graph below shows how an initial investment of $100
in our common stock would have compared to:
- An equal investment in the S&P 500 Index.
- An equal investment divided equally among a peer group of
companies. The peer group consists of Abacus Direct Corp., Factset
Research System Incorporated, Forrester Research Incorporated, and
ProBusiness Services Incorporated. Each is a high-growth company
in the specialized industry of electronic information technology,
and each is of a size comparable to us.
The comparison covers the period beginning July 1, 1998, when we had our initial
public offering, and ending on December 31, 1998, and assumes the reinvestment
of any dividends. You should note that this performance is historical and is not
necessarily indicative of future price performance.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
7/1/98 12/31/98
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<S> <C> <C>
Realty Information Group, Inc. $100 $137.41
S&P 500 $100 $107.02
Peer Group $100 $129.99
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors
during 1998 were David Bonderman, Warren H. Haber, and Michael R. Klein, each of
whom serves as one of our non-employee Directors.
From time to time, these Directors, or entities with which they are
affiliated, have engaged in certain transactions with us and our predecessors,
OLD RIG, Inc. and a partnership, Realty Information Group, L.P., to provide
additional equity or debt financing to fund our growth. OLD RIG operated our
business until November 1994, at which point the partnership was organized to
hold and operate our business. Pursuant to a contribution agreement consummated
following our initial public offering in July 1998, the limited partners of the
partnership (other than OLD RIG) and all the stockholders of OLD RIG received
our common stock in exchange for their limited partnership units or OLD RIG
shares.
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<PAGE> 16
Mr. Haber is chairman and chief executive officer of Founders Equity,
Inc. ("Founders"). On May 15, 1995, Founders/RIG, LLC ("FR LLC"), an affiliate
of Founders, acquired units of the limited partnership for a total purchase
price of $3.1 million, equivalent to 898,856 shares of our common stock at an
effective price per share of $3.45. As part of the contractual arrangements that
accompanied this investment, Mr. Haber became a Director and we agreed to
register the securities FR LLC received for resale upon its demand at a future
date. On December 3, 1996, FR LLC and certain of its affiliates acquired
additional units of the partnership for an aggregate purchase price of $1.06
million, equivalent to 259,521 shares of our common stock at an effective price
per share of $4.08. FR LLC's right to designate a Director terminated following
our initial public offering in July 1998.
At the time of the Founders' investment in OLD RIG and the partnership in
May 1995, those entities were indebted to Mr. Klein for loans he had extended
with a then balance of $751,961. In connection with Founders' investment,
$426,693 was repaid and the remaining balance of $325,268 was converted into
units of the partnership equivalent to 94,312 shares of our common stock at an
effective price per share of $3.45, the same effective price at which FR LLC
purchased its interest in that transaction. In connection with that same
transaction, our predecessors agreed to pay monthly fees to Founders of $10,000
and to Mr. Klein of $6,667. Both of those fee arrangements terminated in May
1998. During 1997, Mr. Klein committed to extend up to $1.0 million of credit to
OLD RIG, which in turn agreed to loan such amounts to the partnership to support
a $1.0 million credit facility the partnership secured with Silicon Valley Bank.
The OLD RIG loan to the partnership was contractually subordinated, and Mr.
Klein's loans to OLD RIG were structurally subordinated, to the bank loan,
interest on the balance was payable to OLD RIG and Mr. Klein at the same rate
(2% over prime) as the bank loan, and no principal could be repaid until the
bank loan was paid. This bank loan and the OLD RIG/Klein loan were repaid with
part of the proceeds of our initial public offering. As consideration for Mr.
Klein's commitment, a committee of three independent Directors authorized the
issuance to Mr. Klein of warrants to purchase units of the partnership
equivalent to 45,450 shares of our stock at a price 10% less than the price at
which shares were offered in our initial public offering, exercisable during the
two years following the closing of that offering. We have, in the past, paid
legal fees to the law firm of which Mr. Klein is a partner. Under the policies
of his firm, Mr. Klein was not the partner responsible for supervising or
billing for the services provided to us.
Effective as of March 5, 1998, all of the limited and general partners of
the partnership and all of the stockholders of OLD RIG entered into a
contribution agreement. Pursuant to this agreement, each limited partner of the
partnership (other than OLD RIG) agreed to contribute all of its limited
partnership units to us, and all of the stockholders of OLD RIG agreed to
contribute all of their shares of OLD RIG to us, all in exchange for 3.03 shares
of our common stock for each limited partnership unit or share of OLD RIG common
stock. Consummation of the contribution agreement occurred in July 1998,
following our initial public offering.
CERTAIN TRANSACTIONS
Since January 1, 1996, some of our executive officers, Directors, or
nominees for Directors have engaged in the following transactions with us in
addition to those described above under "Compensation Committee Interlocks and
Insider Participation."
John Simon is a managing director of Allen & Company Incorporated and is
one of our Directors. Allen & Company Incorporated served and received fees as
one of the underwriters in our initial public offering in July 1998 and in our
follow-on public offering in May of this year. On December 3, 1996, RIG
Holdings, LLC ("RH LLC") acquired units of Realty Information Group L.P. (the
predecessor partnership that previously operated our business), for an aggregate
purchase price of $2.9 million, equivalent to 710,388 shares of our common stock
at an effective price per share of $4.08. RH LLC was granted the right to
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<PAGE> 17
designate one member of the board of directors of OLD RIG (a partner in RIG LP),
as well as certain registration rights in regards to the units it purchased.
Prior to our initial public offering, Allen & Company Incorporated was the
Member-Manager of RH LLC and, together with certain of its officers and
affiliates, was the owner of approximately 26% of RH LLC; as Member-Manager,
Allen & Company Incorporated was entitled to exercise voting power over all of
the limited partnership units of the partnership then held by RH LLC. For these
reasons, RH LLC may be deemed to have been an affiliate of Allen & Company
Incorporated. RH LLC's (and its members') right to designate a director of OLD
RIG terminated following our initial public offering in July 1998, at which time
RH LLC was dissolved and its ownership interests (and the associated
registration rights) distributed pro rata to its members. At that time, Allen &
Company Incorporated, together with certain of its officers and affiliates,
became the beneficial owner of 183,721 shares of our stock. Prior to making this
investment, on November 5, 1996, Allen & Company Incorporated had loaned the
partnership $250,000, bearing interest at a rate of 8.5% per year. This loan was
paid off in connection with RH LLC's investment.
Lanning Macfarland III is head of real estate publications at Law
Bulletin Publishing Company ("LBPC") and one of our Directors. On March 29,
1996, the partnership acquired all of the assets of Chicago ReSource from LBPC
for units of the partnership valued nominally at a price equivalent to 347,361
shares of our common stock at an effective price per share of $3.45. Chicago
ReSource was a real estate information provider in the Chicago, Illinois area.
On December 3, 1996, LBPC and certain of its affiliates acquired additional
units of the partnership for an aggregate purchase price of $288,000, equivalent
to 70,548 shares of our common stock at an effective price per share of $4.08.
LBPC's right to designate a director of OLD RIG has terminated.
Josiah O. Low III is a managing director of Donaldson, Lufkin & Jenrette
and has been nominated to become one of our Directors. Donaldson, Lufkin &
Jenrette served and received fees as one of the underwriters in our follow-on
public offering in May of this year.
Fred A. Heitzman III, who is one of our Senior Vice Presidents, was an
officer, director, and beneficial stockholder of LeaseTrend, Inc., which merged,
effective January 8, 1999, with a subsidiary we formed for that purpose. The
total consideration we paid to LeaseTrend stockholders in connection with the
merger was $4.5 million in cash and 566,671 shares of our common stock. Of this
consideration, a trust of which Mr. Heitzman was the sole beneficiary received
$1,684,074 in cash and 174,503 shares of our common stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
Directors and executive officers, and anyone who owns more than 10% of our
common stock, file with the Securities & Exchange Commission reports of initial
ownership and reports of changes in ownership of our common stock, and to
furnish us with copies of those reports. Based solely on a review of the reports
furnished to us, we believe that during 1998, our Directors, executive officers,
and 10% stockholders complied with these requirements, except that a report on
Form 3 reporting the initial holdings of options on our common stock held by
Fred A. Heitzman III, who became one of our Senior Vice Presidents on December
14, 1998, was not timely filed with the SEC. The required report was filed with
the SEC on March 4, 1999.
OTHER INFORMATION
We have included a copy of our Annual Report on Form 10-K for the year
ended December 31, 1998 with this Proxy Statement. You may obtain an additional
copy without charge by sending a request to Realty Information Group, Inc., c/o
Focus Partners LLC, 300 Park Avenue - Suite 1940, New York, NY 10022.
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<PAGE> 18
The Company will bear all expenses in connection with the Annual Meeting
and this proxy solicitation. We have retained The Altman Group, Inc. to assist
in distribution of these proxy materials and soliciting proxy voting
instructions, at an estimated cost of $5,000 plus reasonable expenses. They may
solicit proxies in person, by telephone, by mail, telegram, facsimile, or other
electronic or other means, and will request that brokerage houses, banks, and
other custodians forward proxy material to beneficial owners of our common
stock. We will reimburse brokerage houses, banks, and other custodians for their
reasonable expenses for forwarding these materials to beneficial owners.
American Stock Transfer and Trust Company will act as proxy tabulator.
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<PAGE> 19
[Proxy Card]
REALTY INFORMATION GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Realty Information Group, Inc., a Delaware
corporation (the "Company"), hereby appoints Michael R. Klein, Andrew C.
Florance, or Frank A. Carchedi, or any of them, with full power of substitution
in each, as proxies to cast all votes which the undersigned stockholder is
entitled to cast at the Annual Meeting of Stockholders (the "Annual Meeting") to
be held at the Crowne Plaza, 1001 14th Street N.W., Washington, D.C. 20005, at
10:00 a.m. local time on July 13, 1999, or any adjournment or postponement
thereof, with authority to vote upon the matters set forth on the reverse side
of this Proxy Card.
THIS PROXY, WHEN PROPERTY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS CONTRARY DIRECTIONS ARE GIVEN,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED IN THE
ACCOMPANYING PROXY STATEMENT, "FOR" RATIFYING THE BOARD OF DIRECTORS'
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS, AND "FOR" AMENDING THE COMPANY'S
CORPORATE CHARTER TO CHANGE THE COMPANY'S NAME, AND IN ACCORDANCE WITH THE
DISCRETION OF THE PROXIES AS TO OTHER MATTERS.
The undersigned hereby acknowledges receipt of the Company's Proxy
Statement and hereby revokes any proxy or proxies previously given.
(continued and to be signed on reverse side)
<PAGE> 20
The Board of Directors Recommends a Vote "FOR" the Proposals.
<TABLE>
<CAPTION>
WITHHOLD AUTHORITY WITHHOLD AUTHORITY (WRITE NAME(S) BELOW)
FOR ALL NOMINEES FOR ALL NOMINEES FOR INDIVIDUAL NOMINEES.
<S> <C> <C> <C> <C>
(1) Election of six Directors. Nominees:
Michael R. Klein, Andrew C. Florance,
David Bonderman, Warren H. Haber, John
Simon, and Josiah O. Low III ---------------------
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
(2) Ratify Ernst & Young LLP as
Independent Public Accountants
(3) Amend the Company's charter to
rename the Company "CoStar Group, Inc."
</TABLE>
If you expect to attend the Annual Meeting, please check the following box:
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments or
postponements thereof.
Please sign below exactly as your name appears on this Proxy Card. If
shares are registered in more than one name, each person must sign. A
corporation should sign in its full corporate name by a duly authorized officer,
stating his/her title. Trustees, guardians, executors and administrators should
sign in their official capacity, giving their full title as such. If a
partnership, please sign in the partnership name by authorized person(s).
If you receive more than one Proxy Card, please sign and return each card
in the accompanying envelope.
Signature(s): Date:
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