SCHEDULE 14A
Information Required in Proxy Statement
Reg. 240.14a-101
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Koger Equity, Inc.
(Name of Registrant as Specified In Its Charter)
Koger Equity, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rules
14a-6(i)(3).
[ ] 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 0-11:1
4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] 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:
<PAGE>
KOGER EQUITY, INC.
3986 Boulevard Center Drive
Jacksonville, Florida 32207
(904) 398-3403
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of Shareholders of Koger Equity, Inc. ("KE") will
be held on May 10, 1994, at 10:00 a.m., Eastern Daylight Saving Time at the
Omni Jacksonville Hotel, 245 W. Water Street, Jacksonville, Florida, for the
following purposes:
1. To elect a Board of ten (10) directors to serve for the ensuing
year and until their respective successors are elected and
qualified.
2. To amend Article V of KE's Articles of Incorporation to authorize
the issuance of up to 50,000,000 shares of preferred stock,
including convertible preferred stock in such series with such
preferences and rights as the KE Board of Directors may determine
and to remove the restriction which prohibits the issuance of
non-voting capital stock.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof;
The close of business on March 2, 1994, has been fixed as the record
date for the determination of shareholders entitled to notice of and vote at
this meeting. All shareholders of record at that time are entitled to vote at
this meeting.
A copy of KE's Annual Report for the year ended December 31, 1993,
which report contains consolidated financial statements and other information
of interest with respect to KE and its subsidiaries, was previously mailed to
shareholders on or about March 23, 1994.
SHAREHOLDERS ARE REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY. AN
ENVELOPE IS ENCLOSED HEREWITH FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
By order of the Board of Directors
W. Lawrence Jenkins, Secretary
April 8, 1994
<PAGE>
KOGER EQUITY, INC.
3986 Boulevard Center Drive
Jacksonville, Florida 32207
(904) 398-3403
April 8, 1994
PROXY STATEMENT
INTRODUCTION
The enclosed proxy is solicited on behalf of and by the Board of
Directors of Koger Equity, Inc. ("KE") for use at the KE Annual Meeting of
Shareholders to be held on May 10, 1994, and at any adjournment thereof. It
is expected that this Proxy Statement and the enclosed form of proxy will be
mailed or otherwise given to shareholders beginning on or about April 8, 1994.
If the enclosed form of proxy is executed and returned, it will be
voted at the meeting, and where a choice has been specified thereon, will be
voted in accordance with such specifications, and where no choice has been
specified thereon, will be voted for the election of the directors named
herein, and for the approval of an amendment to the Articles of Incorporation
of KE to authorize the issuance of up to 50,000,000 shares of preferred stock,
including convertible preferred stock in such series with such preferences and
rights as the KE Board of Directors may determine and to remove the
restriction which prohibits the issuance of non-voting capital stock. If any
other matters properly come before the meeting or any adjournment thereof, the
holders of the proxies are expected to vote in accordance with their judgement
on such matters. A proxy may be revoked at any time to the extent that it has
not been exercised. A shareholder may revoke his or her proxy by writing the
Secretary of KE a letter of proxy revocation, executing a subsequently dated
proxy, or attending the shareholders' meeting and voting his or her shares
personally.
The close of business on March 2, 1994, has been fixed as the record
date for determination of the shareholders entitled to vote at the meeting.
The number of KE's shares of common stock, par value $.01 per share
(the "Shares"), outstanding at the close of business on March 2, 1994, was
17,597,177, of which State Street Bank holds [ ] Shares which will not
be voted and which are pending distribution to creditors in accordance with
the terms of the Plan of Reorganization in the Koger Properties, Inc. Chapter
11 Case. There is no other class of voting securities of KE outstanding and
each Share is entitled to one (1) vote, except for the [ ] shares held
by State Street Bank. A majority of the Shares issued and outstanding as of
the record date represented at the meeting, either in person or by proxy,
shall constitute a quorum. Irvin H. Davis, Victor A. Hughes, Jr. and S.D.
Stoneburner have, and each of them, has been designated as proxies to vote
the Shares solicited hereby. The Shares are not subject to cumulative voting.
MATTERS TO BE CONSIDERED
KE shareholders will consider and act upon a proposal to (i) elect
ten (10) directors for the following year, (ii) to approve an amendment to
Article V of KE's Articles of Incorporation to authorize the issuance of up
to 50,000,000 shares of preferred stock, including convertible preferred
stock in such series with such preferences and rights as the KE Board of
Directors may determine and to remove the restriction which prohibits the
issuance of non-voting capital stock, and (iii) such other business as may
properly come before the meeting.
ELECTION OF DIRECTORS
The ten (10) nominees listed in the table which follows are proposed
for election as directors for the ensuing year and until their successors
have been elected and qualified.
While management expects that all of the nominees will be able to
serve as directors, at the time of the Annual Meeting, or any adjournment or
postponement thereof, should a situation arise making it impossible for one
or more of the nominees to serve, the proxy will be voted in accordance with
the best judgement of its holders for another person recommended by the
present Board of Directors in lieu of any such nominee.
All nominees have served in the principal occupations indicated in
the table below or in other capacities with their respective employers for
more than five years prior to December 31, 1993. Information concerning the
nominees to the Board of Directors, based on information furnished by them,
is set forth below.
The Board of Directors recommends a vote "FOR" the election of each
of the following nominees.
<TABLE>
<CAPTION>
Beneficial Ownership
Principal Occupation of Shares at
Five-Year Employment Year First March 1, 1994
History and Other Became a (Percent of Class)
Name Directorships Director Age (1)
<S> <S> <C> <C> <C> <C>
D. Pike Aloian Managing Director of Rothschild 1993 38 0
(a)(e) Realty, Inc. (a real estate investment (0%)
management and advisory service
firm); Director, Charter Oak Group,
Ltd. (a privately held retail properties
real estate management company);
former Vice President of The Harlan
Company, Inc. (a real estate development
and advisory service firm).
Benjamin C.
Bishop, Jr. Chairman of the Board of Allen C. Ewing 1991 61 10,000
(a)(b) & Co. (an investment banking company); (.048%)
former Director of Grubb & Ellis Company
(a national commercial real estate brokerage
company); former Trustee of GMR Properties
(a real estate investment trust); former Director
of Cousins Properties, Inc. (a real estate
investment trust).
Charles E.
Commander, III Practicing attorney with the law firm 1993 52 2,000
(b) of Foley & Lardner, successor to Commander, (.011%)
Legler & Sadler in Jacksonville, Florida;
former Director of Computer Power, Inc.
(a computer service firm).
Irvin H. Davis President and Chief Executive Officer 1991 64 69,018 (2)
(c) of Koger Equity, Inc; former President (.392%)
and Chief Executive Officer of Koger
Advisors, Inc. (former investment advisor
to Koger Equity, Inc.); former Senior Vice
President/Asset Management of
Koger Equity, Inc.; former Senior Vice-
President of Koger Properties, Inc. (a
real estate development company)
David B. Hiley
(3) Managing Director of Berkshire Capital 1993 55 0
(d)(e) Corporation (an investment bank services (0%)
firm); Director and former Senior
Executive Vice President of Thomson
McKinnon Securities, Inc. (a securities
broker-dealer); consultant, Director and
former Executive Vice-President,
Thomson McKinnon, Inc. (a financial
services holding company); Director,
Newcity Communications, Inc. (a
communications firm)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
Principal Occupation of Shares at
Five-Year Employment Year First March 1, 1994
History and Other Became a (Percent of Class)
Name Directorships Director Age (1)
Victor A. Hughes,
<S> <S> <C> <C> <C> <C>
Jr. Senior Vice President and Chief 1992 58 72,307 (4)
(c)(e) Financial Officer of Koger Equity, Inc.; (.411%)
former Vice President of Koger Equity, Inc.;
former President of Koger Securities, Inc.
(a securities broker-dealer); former Senior
Vice President and Chief Financial Officer
of Koger Advisors, Inc. (former investment
advisor to Koger Equity, Inc.)
G. Christian
Lantzsch Director of Duquesne Light Company; 1988 69 2,047 (5)
(a)(b) retired Vice Chairman of the Board of (.012%)
Directors and Treasurer of Mellon Bank
Corp.; retired Vice Chairman and Chief
Financial Officer, Mellon Bank, N.A.
Thomas K. Smith,
Jr. Assistant Vice President of Trust 1993 29 3,312,009 (6)
(d) Company of the West; Assistant Vice (18.821%)
President of TCW Asset Management
Company, a wholly owned subsidiary of
The TCW Group, Inc. and the managing
general partner of TCW Special Credits,
for which Mr. Smith serves as an investment
analyst; former Management Associate at
Citicorp Mergers & Aquisitions; former
Merger Analyst at Dillon, Read & Co.,
Inc. (an investment bank).
George F.
Staudter Managerial and financial consultant, 1993 62 1,000
(c)(d) Director of Waterhouse Investor (.006%)
Services, Inc. (a securities broker
dealer); President and Director of
Family Steak Houses of Florida, Inc.
(a restaurant chain); former Principal
of Douglas Capital Management (a
registered investment advisor); former
Vice President and Treasurer of
Revlon, Inc. (a cosmetic manufacturer
and marketer)
S. D. Stoneburner Chairman of the Board of Directors 1988 75 44,536 (7)
(c) of Koger Equity, Inc.; former President (.253%)
and Chief Financial Officer of Koger
Equity, Inc.; former President and
Chief Operating Officer of Koger
Advisors, Inc. (former investment
advisor to Koger Equity, Inc.)
All Executive
Officers 3,534,474 (6)(8)
and Director Nominees as (20.085%)
a Group
(11 persons)
</TABLE>
<PAGE>
(a) Member of the Audit Committee.
(b) Member of the Litigation and Indemnification Committee.
(c) Member of the Executive Committee.
(d) Member of the Compensation Committee.
(e) Member of the Finance Committee.
(1) Unless otherwise noted, all shares are owned directly, with sole voting
and dispositive power or voting and dispositive power shared with spouse.
(2) Includes 67,018 Shares which are subject to presently exercisable options
(See "Executive Compensation - Stock Option Plans").
(3) Mr. Hiley was a director and executive officer of Thomson McKinnon, Inc.,
a financial service holding company, and its subsidiary Thomson McKinnon
Securities, Inc. ("TMSI"), a broker-dealer, both of which filed for
protection under Chapter 11 of the Bankruptcy Act within the past five
years. In a proceeding instituted by the State of Alabama in 1989 claiming
unregistered sales of securities by an Alabama branch of TMSI and alleging
a failure of supervision by him and other executives, Mr. Hiley consented
to an order barring him from registration as a securities dealer in
Alabama. In a related matter, TMSI admitted to a criminal violation of the
Alabama securities statute.
(4) Includes 49,807 Shares which are subject to presently exercisable options
(see "Executive Compensation - Stock Options Plans").
(5) Includes 47 shares which are subject to presently exercisable Warrants to
purchase Shares.
(6) The TCW Group, Inc. and its affiliates may be deemed to have voting and
dispositive powers over such Shares. TCW Special Credits, an affiliate of
The TCW Group, Inc., acts as general partner or investment manager of
certain separate accounts, trusts, and limited partnerships which hold
such Shares. To the extent Mr. Smith, as Assistant Vice President of Trust
Company of the West and TCW Asset Management Company (wholly-owned
subsidiaries of The TCW Group, Inc.) participates in the process of voting
or disposing of the Shares set forth herein, Mr. Smith may be deemed under
certain circumstances, for the purposes of Section 13 of the Securities and
Exchange Act of 1934, to be the beneficial owner of such Shares. Mr. Smith
disclaims beneficial ownership of such Shares. The above described separate
accounts, trusts, and limited partnerships which own the 3,312,009 Shares
may be entitled to receive additional Shares pursuant to the Plan of
Reorganization of Koger Properties, Inc. The number of additional Shares
was not known as of March 1, 1994.
(7) Includes 34,036 Shares which are subject to presently exercisable options,
and 7,000 shares which are held in a trust of which he is the beneficiary.
(8) Sole voting and dispositive power as to [ ] Shares, shared voting and
dispositive power as to [ ] Shares. Includes 148,436 shares which
are subject to presently exercisable options, or options which are
exercisable within 60 days. Includes shares which are subject to
presently exercisable Warrants to purchase Shares.
In accordance with the Third Amended and Restated Plan of
Reorganization (the "Plan") of the Koger Properties, Inc. ("KPI") Chapter 11
Bankruptcy Case (the "KPI Chapter 11 Case") at the effective date of the
merger of KPI with and into KE on December 21, 1993, pursuant to the Plan
(the "Merger"), KE's Board of Directors was increased to ten members which
were selected as follows: (i) seven members of the Board were designated by
the members of the Board of KE, and (ii) three members were designated by the
KPI creditors' committee in the KPI Chapter 11 Case. The KE designees were:
Messrs. Bishop, Davis, Hiley, Hughes, Lantzsch, Staudter and Stoneburner. The
Creditor Committee designees were Messrs. Aloian, Commander and Smith.
Corporate Governance
The Board of Directors of KE held eight meetings during the last
fiscal year. The Board of Directors maintains an Executive Committee, Audit
Committee, a Compensation Committee, a Finance Committee and a Litigation and
Indemnification Committee, the members of which are elected by the Board of
Directors.
The Executive Committee is composed of the Chairman of the Board of
Directors and the Chief Executive and Financial Officers of the KE plus an
outside Director. This Committee has been delegated broad authority to act on
behalf of the Board of Directors on an interim basis between board meetings.
As the Executive Committee was created since the last fiscal year, it had no
meetings during 1993.
The Audit Committee is composed exclusively of directors who are not
officers or employees of KE. It recommends to the Board of Directors the
selection of independent auditors, reviews the scope of the audit procedures
and the results of the audit, reviews the matter of independence of the
auditors, including non-audit services provided by the auditors and considers
and makes recommendations to the Board of Directors on matters referred to it
relating to the audit function, such as financial and accounting standards
and principals and internal accounting, auditing and financial controls. The
Audit Committee held one meeting during the last fiscal year and members of
the Audit Committee consulted with the officers of KE and the independent
auditors at various times throughout the year.
The Compensation Committee, none of the members of which are officers
or employees of KE, sets the salaries of KE's Executives, reviews and
recommends the adoption of compensation plans and granting of benefits under
such plans and makes grants of options pursuant to KE's Stock Options Plans.
The Compensation Committee held one meeting during the last fiscal year.
The Finance Committee is composed of the Chief Financial Officer and two
outside Directors. This Committee has been delegated the responsibility for
exploring, on behalf of KE's Board of Directors, various avenues for
providing ongoing financing for KE. As the Finance Committee was created
since the last fiscal year, it had no meetings during 1993.
The KE Board of Directors has appointed a Litigation and
Indemnification Committee. Pursuant to Florida Statutes Section 607.0850,
this Committee has made an initial determination that certain officers and
directors and former officers and directors of KE who are defendants in
certain litigation, described below, are entitled to the advancement of
expenses in defending these suits. This Committee will not make a final
determination regarding whether these defendants are entitled to
indemnification until there is a final resolution of these law suits, but on
an interim basis the Committee has agreed to indemnify these defendants to
the extent permitted by law. Should it be determined that any defendant is
not entitled to indemnification, such defendant is obligated to reimburse KE
for any expenses it has incurred or reimbursed in connection with the defense
of that defendant. See "Certain Relationships and Transactions - Legal
Proceedings". This Committee held [ ] meetings during the last fiscal
year.
The Board of Directors does not have a nominating committee.
Each of the directors attended at least 75% of the Board of Directors
meetings and meetings held by committees of the Board of which they were
members.
Executive Compensation
Directors of KE who are not officers receive a quarterly retainer of
$5,000, plus fees of $2,000 for each meeting of the Board of Directors
attended and $500 for each meeting of any committee of the Board of Directors
attended, together with expenses of attendance. The Chairman of the Board of
Directors receives an additional quarterly retainer of $5,000. Directors who
are officers of KE are not paid a director's fee. Amounts described herein
which are payable to Thomas K. Smith, Jr. are paid instead to Trust Company
of the West, Mr. Smith's employer. Directors who are not employees do not
participate in KE's stock option or retirement plans.
<PAGE>
Shown below is information concerning the annual and long-term
compensation of the Chief Executive Officer and all other officers whose
salary and bonus for the fiscal year ended December 31, 1993, exceeded
$100,000 (the "Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long Term Compensation
Awards Pay
outs
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Principal Year Salary Bonus Other Annual Restricted Options/ LTIP All other
Position Compensation Stock SARs Payouts Compensation
Award(s)
(2) (3) (4) (5) (6)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. 1993 $175,000 $3,365 $3,978 -0- -0- -0- $35,586
Irvin H.
Davis,
President & 1992 $175,000 $3,365 $3,978 -0- 125,000 -0- $35,586
Chief
Executive
Officer 1991 $153,125 $3,365 $4,064 -0- -0- -0- -0-
B. 1993 $152,000 $2,923 $4,500 -0- -0- -0- $31,352
Victor A.
Hughes, Jr.,
Senior Vice 1992 $152,000 $2,923 $4,500 -0- 107,500 -0- $31,352
President &
Chief
Financial Officer 1991 $152,000 $2,923 $ 934 -0- -0- -0- -0-
(1) KE paid no salaries for calendar year 1991. The salaries of its Officers
were paid by Koger Advisors, Inc. ("KA") for which KE reimbursed KA.
Therefore, the amounts reported herein for 1991 represent the salary and
benefits received by each officer from KA for its services to KE.
(2) Includes the CEO and the other executive whose salary and bonus exceed
$100,000.
(3) Includes an automobile allowance.
(4) The options are exercisable in cumulative annual increments of 20%
commencing on February 5, 1993. The options terminate seven years from
date of grant.
(5) KE has no other long-term incentive plans.
(6) Includes the funds contributed to an IRA for each executive under the
terms of the Simplified Employee Pension Plan (the "SEP Plan") adopted
by KE, together with the cost of certain life, health, hospitalization
and medical insurance plans (the "Insurance Plans"), provided by KE which
plans do not discriminate in scope, terms or operation in favor of
executive officers of KE and are available generally to all salaried
employees.
As to A: represents a contribution into a SEP IRA account in the amount
of $26,308; and the cost of the Insurance Plans in the amount of [$7,286]
for 1993.
As to B: represents a contribution into a SEP IRA account in the amount
of $22,935; and the cost of the Insurance Plans in the amount of [$6,890]
for 1993.
Option/Stock Appreciation Rights Grants. During the fiscal year ended
December 31, 1993, no grants were made to the Officers of KE with respect to
option/stock appreciation rights to purchase Shares.
<PAGE>
Options/Stock Appreciation Rights Exercises and Year-End Values. Shown
below with respect to the Officers is the aggregate options/stock
appreciation rights exercised in the fiscal year ended December 31, 1993,
values realized, the number of unexercised and the value of the unexercised
options/stock appreciation rights at December 31, 1993.
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Exercises and Year-End Value Table
Name Shares Value Realized Number of Value of Unexercised in-
acquired on ($) unexercised the-money options/SARs
exercise (#) options/SARs at FY- at
End (#) exercisable/ FY-end
unexercisable ($8.50)
exercisable/
unexercisable
(1) (2)
(a) (b) (c) (d) (e)
A.
Irvin H. Davis
President & Chief Executive
Officer
<S> <C> <C> <C> <C> <C> <C>
1988 KE Option -0- -0- 50,000/75,000 (1) $168,750/$253,125 (2)
1988 KA Option 17,018/-0- -0-/-0- (3)
B.
Victor A. Hughes, Jr.
Senior Vice President & Chief
Financial Officer
1988 KE Option -0- -0- 43,000/64,500 (1) $145,125/$217,687 (2)
1988 KA Option 6,807/-0- -0-/-0- (3)
</TABLE>
(1) The options are exercisable in cumulative annual increments of 20%
commencing on February 5, 1993. Currently the above options are 40%
exercisable.
(2) The closing price of the option stock on December 31, 1993, as reported
on the American Stock Exchange, was $8.50, which price is greater than
the exercise price of $5.125. The closing price of the option stock at
March 1, 1994, as reported on the American Stock Exchange, was $7.375.
(3) The exercise price of these options is $20, which is greater than the
closing price of the option stock on December 31, 1993.
Long-Term Incentive Plan Awards. KE made no long-term incentive plan
awards to any officer, director, or employee during the fiscal year ended
December 31, 1993.
Compensation Committee Report on Executive Compensation. This Compensation
Committee 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 of 1933 or under the Securities Exchange Act of 1934,
except to the extent KE specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts. Until
December 31, 1991, KE was administered by Koger Advisors, Inc. ("KA"), and,
accordingly, had no salaried employees. At January 1, 1992, KE became self-
administered and had six employees, including the Officers who performed the
functions of the Chief Executive Officer and Chief Financial Officer. The cash
compensation paid these Officers was comparable to the compensation they had
received as employees of KA.
A cash compensation study was sponsored by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") for the purpose of obtaining
meaningful and reliable information on compensation levels and practices for
executive positions in the industry. The participants in the study were
generally self-advised Real Estate Investment Trusts ("REITs") that hold and
manage primarily equity assets, and have total assets ranging from $51
million to $1 billion; Koger Equity has assets in excess of $600 million. It
was felt by the Committee that the study group compared favorably with KE.
According to the NAREIT Executive Compensation Survey for 1993, the self-
advised REIT survey participants paid annual cash compensation as described
below to executives of REITs.
Position Description Base Salary Range Total Cash Compensation Range
Top REIT Executive $266,000 - $348,000 $384,000 - $544,000
Chief Financial Officer $148,000 - $177,000 $150,000 - $198,000
The compensation paid the executive officers of KE during its last fiscal
year was not specifically related to corporate performance. In reaching a
conclusion concerning the annual cash compensation paid its officers, the
Compensation Committee has considered the adverse circumstances which have
impacted KE, including the KPI Chapter 11 Case. The Committee also considered
the fact that KE has not paid a dividend to its shareholders since October 23,
1991. Based on the foregoing, the KE Compensation Committee made a subjective
determination in setting the compensation of its executive officers.
In arriving at the compensation paid the KE President and Chief Executive
Officer, the Compensation Committee has considered its President's long
experience in the management of suburban office parks and his proven ability
to maintain high occupancy rates as compared to those which obtained in other
office parks in markets in which KE competes. In addition to his leasing
experience, KE's President and Chief Executive Officer has been involved with
the development of suburban office parks. While KE does not expect to begin
development activities in the near future, it plans to develop its vacant
land when market conditions for commercial real estate improve. Accordingly,
KE must obtain and keep persons with leasing, real estate development and
financing experience and talent. While the salaries paid by KE to its Chief
Executive Officer and its other officers are at this time below the average
paid officers in similar sizes and types of business, KE has also granted
stock options in order to supplement their compensation. The compensation
paid the President and Chief Executive Officer of KE during its last fiscal
year was not specifically related to corporate performance.
For the twelve-month period ended December 31, 1993, KE paid annual cash
compensation to its Chief Executive and Chief Financial Officers at the rate
of $175,000 and $152,000, respectively. KE's Chief Executive Officer has been
paid at the rate of $175,000 per annum for the past three years. KE's Chief
Financial Officer was paid at the rate of $152,000 per annum for the past
three years. With the Merger, the size of the KE organization has been
considerably increased. The Merger resulted in the property management
functions of KE, former KPI and The Koger Partnership, Ltd. being brought
under the administration of KE management. While the responsibilities of the
KE executive officers have increased, the Committee has set these officers'
annual compensation at the same rate for the current fiscal year. The
Committee may revisit this matter during 1994 and make some adjustments in
the executive officers' compensation either through additional salary, a
supplemental retirement program, additional options, cash bonuses or all of
the above.
The foregoing report has been furnished by the Compensation Committee of
the Company consisting of the following individuals:
Thomas K. Smith, Jr., Chairman
David B. Hiley
George F. Staudter
Retirement Plan. During fiscal 1992 the Compensation Committee adopted a
Simplified Employee Pension Plan ("SEP Plan") pursuant to which KE made a
contribution with respect to each eligible employee's compensation paid from
January 1, 1993 through December 20, 1993, in an amount equal to 15% of such
compensation. The SEP Plan contribution was made to the Individual Retirement
Account of each such employee. With the Merger of KPI with and into KE, the
SEP Plan was terminated and the KPI 401(k) Plan ("401(k) Plan") was adopted
by KE which will permit an employer contribution to each eligible employee's
account. KE has made no contribution pursuant to this Plan.
Stock Option Grants. KE did not grant any options to purchase Shares
pursuant to its Stock Option Plans during fiscal year 1993.
Shareholder Return Performance Presentation. Set forth below is a line
graph comparing yearly percentage change in cumulative total shareholder
return on KE Common Stock against the cumulative total return of the American
Stock Exchange Market Value Index and the National Association of Real Estate
Investment Trusts ("NAREIT") Total Return Index for the period commencing
January 1, 1989, with KE's organization, and ending December 31, 1993.
[ G R A P H ]
<PAGE>
KE = Koger Equity, Inc.
AMEX = American Stock Exchange Market Value Index
NAREIT = NAREIT Total Return Index
KE 100 96.84 103.96 53.22 28.65 33.12
AMEX 100 103.80 128.20 104.50 134.00 135.40
NAREIT 100 97.50 95.690 79.10 107.360 120.40
AMENDMENT TO ARTICLES OF INCORPORATION
TO AUTHORIZE ISSUANCE OF PREFERRED STOCK
Proxies are solicited from the shareholders of KE to authorize an
amendment to Article V of its Articles of Incorporation providing for the
authorization for the issuance of up to 50,000,000 shares of preferred stock,
par value $.01 per share, and removal of a restriction which prohibits the
issuance of non-voting capital stock. The Company is currently authorized to
issue 100,000,000 shares of common stock, par value $.01 per share (the
"Shares"). Reference is made to Exhibit "A" hereto for a complete statement
of the present Article V and as it is proposed to be amended. The description
contained in this Proxy Statement is modified by and subject to this
amendment. With the adoption of this proposed amendment to the KE Articles of
Incorporation, the Board of Directors of KE would be authorized to issue
preferred stock and determine without further action by the holders of the
outstanding Shares, except as otherwise provided by law or the American Stock
Exchange, the conversion rights, the dividend rights, voting rights, rights
in terms of redemption, liquidation preferences, sinking fund terms and other
rights and terms of any series of preferred stock, the number of shares
constituting any such series, and the designation thereof, and any other
preferences or other terms which the Board in its discretion may determine.
In connection with the Plan, which authorized the merger of KPI with and
into KE, Section 1123(a)(b) of the United States Bankruptcy Code required
that KE adopt an amendment to its Articles of Incorporation prohibiting the
issuance of non-voting capital stock. As the then current Articles of
Incorporation of KE only permitted the issuance of Common Stock and required
that each Share of Common Stock be entitled to one vote, the adoption of the
amendment prohibiting the issuance of non-voting capital stock had no effect
upon KE and its shareholders. As KE now desires to be permitted to issue
preferred stock and is seeking shareholder approval of an amendment to its
Articles of Incorporation to authorize such issuance, it is the opinion of
management of KE that it is in the best interest of KE and its shareholders
that KE have the broadest flexibility possible and be permitted to issue not
only voting but also non-voting preferred shares. Accordingly, in order to
have such full flexibility in the issuance of such stock, it is necessary to
remove the prohibition against the issuance on non-voting capital stock.
The Board of Directors believe that the amendment to the Articles of
Incorporation which authorizes the Board of Directors, from time to time, to
issue shares of preferred stock and to determine the conversion, dividend,
voting, redemption, liquidation, sinking fund terms and any other preferences
and rights for any series of preferred stock without further action or
authorization by the shareholders (except as required by law or by the
American Stock Exchange) is in the best interest of KE and its stockholders.
The ability to issue such shares of preferred stock without further action by
KE stockholders would permit the possible issuance in the future of shares of
preferred stock for corporate purposes. Such corporate purposes might
include, without limitation, additional public or private financings.
Should the Board of Directors of KE elect to exercise its authority to
issue shares of preferred stock, the rights, preferences and privileges of
the holders of the Shares of Common Stock would be subject to the rights,
preferences and privileges of such preferred stock. Although KE has no
present specific plans or proposals to issue any such preferred stock, the
KE Board of Directors may consider the issuance of such stock in connection
with future financings which will be necessary in order to reduce KE's debt.
Although KE has no intention at the present time of doing so, it could
authorize one or more series of preferred stock or rights thereto that could,
depending on the terms of such series, either impede or facilitate the
completion of a merger, tender offer or other takeover attempt. Any series
of preferred stock may, if so determined by the Board of Directors, have full
voting rights with the KE Shares of Common Stock or superior or limited
voting rights, be convertible into Common Stock or another security of KE,
and have such other relative rights, preferences and limitations as the KE's
Board of Directors shall determine. As a result, any class or series of
preferred stock could have rights which would adversely affect the rights of
the holder of the Common Stock. The shares of any class or series of
preferred stock need not be identical. The issuance of a new series of
preferred stock, while providing desirable flexibility in connection with
possible financings or other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or discouraging a
third party from acquiring, a majority of the outstanding voting stock of
KE. The KE Board of Directors does not, at present, intend to seek
shareholder approval prior to any issuance of currently authorized KE common
stock, or any additional shareholder approval for issuance of preferred
stock should this proposed amendment be adopted, unless otherwise required
by law. Frequently, opportunities arise that require prompt action, and the
KE Board of Directors believes that the delay occasioned by seeking
shareholder approval of a specific issuance could be to the detriment of KE
and its shareholders.
Reference is made to Exhibit "A" to this Proxy Statement which contains
a copy of Article V to the KE Articles of Incorporation as it currently
exists and as it is proposed to be amended.
The favorable vote of the holders of a majority of the outstanding shares
represented in person or by proxy at the KE Annual Meeting of Shareholders is
required for approval of this proposal.
The Board of Directors of KE recommends a vote "FOR" the adoption of the
proposed amendment to Article V of its Articles of Incorporation.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
From its organization in 1988, KE's business consisted of the acquisition
from Koger Properties, Inc. ("KPI") and its affiliates of completed and
substantially leased commercial office buildings and the holding of such
properties for the production of rents. As of December 31, 1993, KE owned 219
commercial properties in 16 metropolitan areas in the Southeast and Southwest.
A total of 126 buildings were acquired from KPI or its subsidiaries through
1990. During 1993, an additional 93 buildings were acquired from KPI as the
result of the merger of KPI with and into KE ("the Merger"), which was
consummated on December 21, 1993. As a result of the Merger, KE assumed
property management agreements to manage (i) the 20 office buildings owned
by Centoff Realty Company, Inc., a subsidiary of Morgan Guaranty Trust
Company of New York, and (ii) the 92 office buildings owned by The Koger
Partnership, Ltd. ("TKP"), a Florida limited partnership.
Merger of KE and KPI; Resolution of KPI Chapter 11 Case
On September 25, 1991, KPI filed a petition under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") in the United State
Bankruptcy Court for the Middle District of Florida (the "Bankruptcy Court").
KE was the single largest creditor of KPI in the KPI Chapter 11 Case
(indebtedness to KE of approximately $116 million). On April 30, 1993, KE
and KPI jointly proposed a plan of reorganization of KPI (the "Plan") which
provided for the Merger in exchange for the issuance of shares of KE common
stock (the "Shares") to certain creditors of KPI and the issuance of warrants
to purchase Shares (the "Warrants") to shareholders of KPI and holders of
certain securities law claims against KPI and the settlement of KE's claim
against KPI. On August 11, 1993, the KE shareholders approved the Merger and
the issuance of the Shares and Warrants pursuant thereto.
On December 8, 1993, the Plan was confirmed by the Bankruptcy Court and
the Merger became effective on December 21, 1993. Pursuant to the Merger,
6,158,977 Shares, or approximately 35% of the Shares outstanding after the
Merger, and Warrants to purchase an aggregate of 644,000 Shares (3.5% of
currently outstanding shares on a fully diluted basis) were issued under the
Plan and Merger. The Warrants are exercisable until June 30, 1999, at $8.00
per share, and are subject to redemption at the option of KE at prices
ranging from $1.84 to $5.24 per Warrant.
With the Merger, KE succeeded to substantially all of the assets of KPI,
free and clear of all liens, claims and encumbrances, except (i) encumbrances
relating to certain secured indebtedness of KPI (aggregating $182.6 million)
which was restructured under the Plan and (ii) an option and a right of first
refusal held by TKP on certain developed buildings and parcels of undeveloped
land, which are located in TKP office centers. KPI assets acquired by KE in
the Merger included 93 buildings containing 3,848,130 net rentable square
feet, together with approximately 295 acres of unimproved land suitable for
development, and 1,781,419 Shares held by KPI representing 13.47% of the
outstanding Shares before the Merger. As a result of the Merger, KE assumed
all of the leasing and other management responsibilities for its properties
including those acquired in the Merger. In addition, KPI transferred all of
its debt and equity interests in TKP to a newly formed wholly-owned subsidiary
of KE, Southeast Properties Holding Corporation, Inc. ("Southeast"), which
became the managing general partner of TKP. These interests included (1)
39,918 Units of general partnership interest and 50,442 Units of limited
partnership interest in TKP, and (2) a restructured unsecured note in the
aggregate amount of $32,587,000, including accrued interest as of December
31, 1993. This indebtedness is subordinated to all of the other restructured
debt of TKP. In light of the terms of the TKP Plan of Reorganization in its
Chapter 11 Bankruptcy Case (the "TKP Plan") and its restructured debt, KE
has determined that these investments have no value.
Agreements with The Koger Partnership, Ltd.
A Management Agreement (the "Management Agreement") between TKP and
Southeast, as successor to KPI, provides that Southeast, in its capacity as
Managing General Partner of TKP, generally has responsibility for all aspects
of TKP's operation. Southeast receives as compensation for its services a
management fee, payable monthly, equal to nine percent of any Gross Rental
Income (as defined) derived from the real estate properties and interests
managed thereby. This fee amounted to $1,544,000 for the seven months ended
December 31, 1993. The Management Agreement is effective for an initial term
of five years from the Effective Date of the TKP Plan, June 1, 1993 (the
"Effective Date"), subject to automatic renewal for additional one year
periods unless terminated by either party thereto at least 90 days prior to
the expiration of the initial term or any extended term, unless sooner
terminated pursuant to certain terms of the Management Agreement. Total fees
incurred under the previously existing management agreement with KPI amounted
to $[ ] for the five-month period ended May 31, 1993.
An Incentive Fee Agreement (the "Incentive Agreement") between Southeast
as successor to KPI and TKP under which reorganized TKP will pay Southeast a
fee (the "Incentive Fee") in respect of certain property dispositions and
refinancings effected following the Effective Date ("Covered Transactions").
The Incentive Fee will be equal to a percentage (the "Fee Percentage") of
the Net Proceeds (as defined) realized by reorganized TKP from each Covered
Transaction. Under the Incentive Agreement, the Fee Percentage will be equal
to, in respect of (a) Covered Transactions consummated on or before the
fourth anniversary of the Effective Date, fifteen percent, (b) Covered
Transactions consummated after the fourth anniversary of the Effective Date,
but on or before the sixth anniversary of the Effective Date, five percent,
and (c) Covered Transactions consummated after the sixth anniversary of the
Effective Date, zero percent.
The first $5 million of Incentive Fees to be paid to Southeast under the
Incentive Agreement will be deposited in an account as collateral for
repayment of the obligations represented by certain of the TKP Restructured
Mortgage Notes (as defined). In the event that the Incentive Agreement is
terminated before an aggregate of $5 million (the "Minimum Deposit Amount")
is accumulated in this account, TKP will covenant to continue to pay amounts
into such account as if the terms of the Incentive Agreement has remained in
effect until the Minimum Deposit Amount has been achieved.
KE currently owns three developed office buildings and nine parcels of
undeveloped land located in office centers in which TKP owns office buildings.
Pursuant to the terms of an option and purchase and sale agreement (the "TKP
Option Agreement") executed pursuant to the Merger, KE has granted
reorganized TKP a first option and right of first refusal in respect of
certain of these properties. The option generally has a seven year term and
will be exercisable at a price determined by reference to then-current fair
value.
Under a New Partnership Agreement between TKP and Southeast, as
successor to KPI, as Managing General Partner of TKP, and Newleaf Services
Corporation, as Alternate General Partner of TKP, adopted pursuant to the
TKP Plan, if the New Mortgage Notes (as defined) and New TKP Secured Notes
(as defined) which at December 31, 1993, were $ are not incrementally
reduced commencing the fourth year after the Effective Date and fully paid
seven years after the Effective Date, the Alternate General Partner shall
automatically succeed Southeast as the Managing General Partner of TKP and
shall supervise the orderly liquidation of TKP.
Agreements with TCW Special Credits
On August 9, 1993, KE entered into a Shareholder's Agreement (the
"Shareholder's Agreement") and a Registration Rights Agreement (the
"Registration Rights Agreement") with TCW Special Credits, a California
general partnership ("TCW Special Credits"), as general partner or investment
manager of certain funds and accounts (the "TCW Shareholders"). Thomas K.
Smith, Jr., a Director of KE, is an Assistant Vice President of Trust Company
of the West and TCW Asset Management Company ("TAMCO"), wholly-owned
subsidiaries of The TCW Group, Inc. TAMCO is the managing general partner of
TCW Special Credits.
The Shareholder's Agreement provides, among other things, that as
determined by the Board of Directors of KE pursuant to Article V(D) of KE's
Articles of Incorporation, the ownership by the TCW Shareholders of up to
the greater of (i) 4,047,350 Shares, as adjusted for recapitalizations and
(ii) 23% of the then outstanding Shares (the greater of (i) and (ii) being
the "Maximum Shares") is exempt from the operations of Article V(D). Article
V(D) of the KE Articles of Incorporation allows its Board of Directors to
limit holdings of the Shares by any person to no more than 9.8% of the
outstanding Shares if the Board determines such limits are necessary in order
for KE to maintain its qualification as a real estate investment trust under
the Internal Revenue Code of 1986 (a "REIT"). The KE Board of Directors
determined that exempting the TCW Shareholders from the aforesaid limitation
would not jeopardize KE's qualification as a REIT. Unless waived by TCW
Special Credits, this exemption will continue for a period of eight years
following the date of consummation of the Merger, December 21, 1993.
Pursuant to the terms of the Shareholder's Agreement, KE amended its
Common Stock Rights Agreement (the "Rights Agreement"), which amendment was
effective December 21, 1993. The amendment provides that the TCW Shareholders
are exempt persons under the Rights Agreement (the "Exempt Persons") so long
as the Exempt Persons do not collectively own beneficially more than the
Maximum Shares with certain exceptions. Pursuant to the Rights Agreement,
all Shares have rights to purchase Shares (the "Rights") which become
exercisable if any person, except for Exempt Persons, acquires 15% or more
of the outstanding Shares (the "Acquiring Person"). Each Right gives the
holder, except an Acquiring Person, the right to acquire Shares with a market
value of two times the exercise price of the Rights. If the Exempt Persons
acquire Shares in excess of the number of shares for which they are exempt,
they would then be an Acquiring Person and could not exercise their Rights.
KE has also covenanted that following the effective date of the Merger
(December 21, 1993), for a period of eight years KE will not amend, alter or
otherwise modify the Rights Agreement or take any action which would limit or
eliminate the Rights of the TCW Shareholders without the prior consent of TCW
Special Credits. As of March 1, 1994, the TCW Shareholders owned approximately
19% of the then outstanding Shares (see "Principal Holders of Voting
Securities").
The Registration Rights Agreement gives TCW Shareholders the rights to,
for a period of eight years following the effective date of the Merger
(December 21, 1993), (i) demand that KE register any Shares owned by the TCW
Shareholders pursuant to the registration requirements of the Securities Act
of 1933 in up to four public offerings for the account of the TCW
Shareholders and (ii) have any Shares owned by the TCW Shareholders included
in an unlimited number of public offerings of KE's securities which may be
made on behalf of KE or others. All expenses, except for brokerage discount,
of any of these offerings will be borne by KE.
Compliance with Section 16(a) of the Securities and Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that KE
directors and executive officers file with the SEC and the American Stock
Exchange initial reports of ownership and reports of changes in ownership of
the KE Common Stock. Executive officers and directors are required by the SEC
regulation to furnish KE with copies of all Section 16(a) forms they file.
To KE's knowledge, based solely on review of the copies of such reports
furnished to KE and written representations that no other reports not
previously reported were required, during the fiscal year ended December 31,
1993, all Section 16(a) filing requirements applicable to its executive
officers and directors were complied with.
Legal Proceedings
An action in the U.S. District Court, Middle District of Florida (the
"District Court"), was filed on October 11, 1990 by Gerald and Althea Best
and Jerome Wilem, shareholders of KE, against KPI, KE, two subsidiaries of
KPI, Messrs. Allen R. Ransom (a former director of KE), Ira M. Koger (a
former director of KE), S.D. Stoneburner, and W.F.E. Kienast (a former
director of KE), alleging that various press releases, shareholder reports,
and/or securities filings failed to disclose and/or misrepresented KE's
business policies and seeking damages therefor (the "Securities Action").
William L. Coalson, a shareholder of KE, was subsequently added as an
additional plaintiff. KE believes that the claims asserted in the complaint
filed in the Securities Action are without merit and intends to vigorously
contest the Securities Action.
A derivative action in the District Court, was commenced on October 29,
1990, by Howard Greenwald and Albert and Phyllis Schlesinger, shareholders
of KE, against KE, KPI, all of the then current directors of KE including:
Ira M. Koger, James B. Holderman, Allen R. Ransom, Wallace F.E. Kienast,
S.D. Stoneburner, Yank D. Coble, Jr., G. Christian Lantzsch, A. Paul Funkhouser
and Stephen D. Lobrano, alleging breach of fiduciary duty by favoring KPI
over the interest of KE and failing to disclose or intentionally misleading
the public as to KE's cash flow, dividend and financing policies and status,
and seeking damages therefor (the "Derivative Action"). During the course of
the Derivative Action, the Plaintiffs therein further alleged that Mr.
Lobrano was liable to KE for certain alleged acts of legal malpractice. KE's
Board of Directors' Special Litigation Committee, which was composed of
outside independent members of KE's Board of Directors, completed an extensive
investigation of the facts and circumstances surrounding the Derivative Action
including the allegation against Mr. Lobrano. It was the conclusion of this
Committee that the ultimate best interest of KE and its shareholders would not
be served in prosecuting this litigation; subsequently, KE moved that the
Derivative Action be dismissed under the provisions of Florida law. Thereafter,
the plaintiffs filed a Second Amended and Supplemental Complaint which
realleged the original cause of action ("Count I"), and realleged the cause
of action against Stephen D. Lobrano ("Count II") and a new cause of action
against the members of the KE Special Litigation Committee for alleged
violation of fiduciary duty in conducting their investigation ("Count III").
During 1993, KE filed motions seeking dismissal of the Second Amended and
Supplemental Complaint. On January 27, 1994, the United States Magistrate
issued its Report and Recommendation, concerning this derivative suit, which
recommended that (1) Count I should be dismissed pursuant to the Special
Litigation Committee Report, (2) Count III against the Special Litigation
Committee members should be dismissed, and (3) Count II should not be
dismissed. Both plaintiffs and KE have filed objections to portions of this
Report and Recommendations, which is now pending before the District Court.
Pursuant to Florida Statutes Section 607.0850, the Indemnification
Committee of KE's Board of Directors has made an initial determination that
certain officers and directors and former officers and directors of KE who
are defendants in each of the Securities Action and the Derivative Action are
entitled to the advancement of expenses in defending these actions. This
Committee will not make a final determination on indemnification of these
defendants until there is a final resolution of these actions. The Committee
has agreed to indemnify these defendants to the extent permitted by law.
Should it be determined that any defendant was not entitled to indemnification,
such defendant will be obligated to reimburse KE for any expenses it has
incurred or reimbursed in the defense of that defendant. In accordance with
Florida law, each of the present and former directors and officers, who are
defendants in the suits described above, have so agreed to reimburse KE.
During the year ended December 31, 1993, KE paid $141,127 in attorney's fees
and expenses incurred on behalf of itself, certain directors and officers and
former directors and officers in connection with the above litigation.
On March 23, 1993, the Securities and Exchange Commission (the
"Commission") entered an Order directing a private investigation with respect
to KPI's accounting practices, including the accuracy of financial
information included in certain reports filed with the Commission, possible
insider trading in KPI's stock, and possible misleading statements concerning
the financial condition of KPI and its ability to pay dividends to its
shareholders. Prior to March 23, 1993, the Commission had been engaged in a
confidential investigation without a formal order. As a result of the Merger,
KE has assumed responsibility for responding to the requests and subpoenas
of the Commission staff in connection with this private investigation.
Although the staff of the Commission had subpoenaed KPI documents and former
employees of KPI, who are presently employees of KE, for testimony, on
February 8, 1994, the Commission staff advised KE, through its counsel, that
the scheduled depositions of former KPI employees and the review of KPI
documents had been suspended. KE has received no communication from the
Commission staff since the above notice of suspension. Based on the
information currently available to KE, it is unable to determine whether or
not this private investigation will lead to formal legal proceedings or
administrative actions or whether or not such legal proceedings or
adminstrative actions will involve KE.
PRINCIPAL HOLDERS OF VOTING SECURITIES
A beneficial owner of a security includes any person who directly or
indirectly has or shares voting power and/or investment power with respect
to such security. Voting power is the power to vote or direct the voting of
securities; investment power is the power to dispose of or direct the
disposition of securities.
The table set forth below presents certain information regarding the
beneficial ownership of Shares by each shareholder known to KE to own more
than five percent of the outstanding Shares as of March 1, 1994.
Name and Address of Number of Shares
Beneficial Owner Percent of Class Beneficially Owned
The TCW Group, Inc. and affiliates (1) 18.821% 3,312,009
865 South Figueroa Street
Suite 1800
Los Angeles, California 90017
(1) Based upon information provided by TCW to KE as of March 1, 1994.
Represents Shares held by certain limited partnerships, trusts, and
separate accounts for which TCW Special Credits, an affiliate of The TCW
Group, Inc., acts as general partner or investment manager. The TCW Group,
Inc. and its affiliates may be deemed to be the beneficial owners of such
shares for purposes of the reporting requirements of the Securities
Exchange Act of 1934; however, The TCW Group, Inc. and its affiliates
expressly disclaim beneficial ownership of such Shares. The limited
partnerships, trusts, and separate accounts which own the 3,312,009 Shares
may be entitled to receive additional Shares pursuant to the Plan of
Reorganization of Koger Properties, Inc. The number of additional Shares
was not known as of March 1, 1994.
INDEPENDENT PUBLIC ACCOUNTANTS
During the year ended December 31, 1993, KE engaged Deloitte & Touche to
provide certain audit services. These services included the audit of the
annual financial statements, a review of the quarterly data furnished to the
Securities and Exchange Commission ("SEC") for the quarters ended March 31,
June 30, and September 30, 1993, and March 31, 1994, services performed in
connections with filing this Proxy Statement and the Annual Report on Form
10-K with the SEC, attending meetings with the Audit Committee, and
consultation on matters relating to accounting, tax and financial reporting.
The Audit Committee approved all services performed by the auditors in
advance of their performance. Deloitte & Touche has acted as independent
public accountants for KE since its organization on June 21, 1988. Neither
the firm nor any of its associates has any relationship to KE or any of its
subsidiaries except in their capacity as auditors.
It is expected that representatives of the independent public accountants
will attend the Annual Meeting and be available to respond to appropriate
questions and be permitted to make a statement concerning KE should they
desire.
As of the date hereof, the Board of Directors of KE had not selected
independent public accountants to audit the books and accounts of KE for the
fiscal year ending December 31, 1994. It is anticipated that auditors will be
selected later in the fiscal year.
OTHER BUSINESS
It is not anticipated that there will be presented to the Annual Meeting
any business other than the election of directors and the approval of the
amendments to the KE Articles of Incorporation. The Board of Directors was
not aware, a reasonable time before this solicitation of proxies, of any
other matters which might properly be presented for action at the Annual
Meeting or any adjournment thereof. If any other business should come before
the Annual Meeting or any adjournment thereof, the persons named on the
enclosed proxy will have discretionary authority to vote such proxy in
accordance with their best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders to be presented at the 1995 Annual Meeting of
Shareholders of KE must be received at KE's executive offices by December 7,
1994, to be considered for inclusion in KE's proxy materials relating to that
meeting. Proposals must comply with the SEC proxy rules relating to
shareholder proposals in order to be included in KE's proxy material.
GENERAL
KE will bear the costs of solicitation of proxies. In addition to the use
of the mails, proxies may be solicited by personal interview, telephone and
telegram by directors and officers of KE, and no additional compensation will
be paid to such individuals. KE also has retained Morrow & Co., Inc.,
345 Hudson Street, New York, New York 10014, to solicit proxies by mail, by
telephone, telegraph, or personally, for which service KE anticipates a cost
not in excess of $7,000 plus reasonable out-of-pocket expenses. Arrangements
may also be made with the stock transfer agent and with brokerage houses and
other custodians, nominees and fiduciaries who are record holders of Shares
for the forwarding of solicitation material to the beneficial owners of the
Shares. KE will, upon the request of such entities, pay their reasonable
expenses for completing the mailing of such material to such beneficial
owners.
Consistent with state law and under KE's by-laws, a majority of the
shares entitled to be cast on a particular matter, present in person or
represented by a proxy, constitutes a quorum as to such matter.
The ten nominees for election as directors at the KE Annual Meeting of
Shareholders who receive the greatest number of votes properly cast for the
election of directors shall be elected directors. A majority of the votes
properly cast on the matter is necessary to approve the action proposed in
Item 2 as well as any other matter which comes before the Annual Meeting,
except where law or the KE's Articles of Incorporation or By-laws require
otherwise.
KE will count the total number of votes cast "for" approval of proposals,
other than the election of directors, for purposes of determining whether
sufficient affirmative votes have been cast. KE will count shares represented
by proxies that withhold authority to vote for a nominee for election as a
director or that reflect abstentions and "broker non-votes" (i.e., shares
represented at the annual meeting held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter) only as Shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum, but neither abstentions nor broker non-votes will have
any effect on the outcome of voting on the matter.
The KE Annual Report to Shareholders for the fiscal year ended December
31, 1993, which contains financial statements and other information, was
previously mailed to shareholders on or about March 23, 1994, but is not to
be regarded as proxy soliciting material.
A COPY OF KE'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED, WITHOUT CHARGE, BY ANY SHAREHOLDER UPON
WRITTEN REQUEST TO THE SECRETARY, KOGER EQUITY, INC., 3986 BOULEVARD CENTER
DRIVE, JACKSONVILLE, FLORIDA 32207. EXHIBITS TO THE FORM 10-K WILL NOT BE
SUPPLIED UNLESS SPECIFICALLY REQUESTED, FOR WHICH THERE MAY BE A REASONABLE
CHARGE.
<PAGE>
EXHIBIT A
Set forth below is the entire text of ARTICLE V of the Koger Equity, Inc.
Article of Incorporation showing the new language to be added by the proposed
amendment to the Articles solicited in the proxy statement in bold face type
and the language to be deleted pursuant to such proposal indicated by a line
passing through such language.
ARTICLE V - CAPITAL STOCK
The aggregate number of shares of all classes which the Company shall have
the authority to issue is one hundred million (100,000,000) shares, par value
$.01 per share, all of which shall be non-assessable and designated as common
stock (the "Common Stock").
The total number of shares of stock that this corporation shall have
authority to issue is 100,000,000 shares of Common Stock, each of which shall
have a par value of $.01 per share (the "Common Stock") and 50,000,000 shares
of Preferred Stock, each of which shall have a par value of $.01 per share
(the "Preferred Stock"). The board of directors is authorized to issue the
Preferred Stock from time to time in one or more classes or series thereof,
each such class or series to have such voting powers (if any), conversion
rights (if any), designations, preferences and relative, participating,
optional or other special rights, and such qualifications, limitations or
restrictions thereof, as shall be determined by the board of directors and
stated and expressed in a resolution or resolutions thereof providing for
the issue of such Preferred Stock. Subject to the powers, preferences and
rights of any Preferred Stock, including any class or series thereof, having
any preference or priority over, or rights superior to, the Common Stock
and except as otherwise provided by law, the holders of the Common Stock shall
have and possess all powers and voting and other rights pertaining to the
stock of this corporation and each share of Common Stock shall be entitled to
one vote.
Except as otherwise provided in the Articles of Incorporation and subject
to the rights of the holders of Preferred Stock, the following is a description
of the voting rights, limitations as to dividends, preemptive rights,
restrictions, and terms and conditions of redemption of the Common Stock of
the Company:
(A) Voting Rights
1. Except as otherwise provided in these Articles of Incorporation,
at every annual or special meeting of stockholders of the Company, every holder
of Common Stock shall be entitled to one vote, in person or by proxy, for
each share of Common Stock standing in the stockholders name on the books of
the Company in the election of directors and upon all other matters submitted
to a vote of the stockholders of the Company.
2. The Company shall not issue any non-voting capital stock.
(B) Dividends and Liquidation Rights
1. Dividends. The holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Company which are legally available therefor, dividends payable either
in cash, in property or in shares of Common Stock.
2. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
liquidation, or winding up of the affairs of the Company after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of all outstanding shares of Common Stock shall be entitled to share
ratably in the remaining net assets of the Company.
(C) Preemptive Rights. No stockholder of the Company shall have any preemptive
or other right to purchase or subscribe for any shares of the Common Stock of
the company which it may issue or sell, whether now or hereafter
authorized, other than such right, if any, as the Board of Directors in its
discretion from time to time may determine.
(D) Restrictions on Transfer Redemption.
1. The stockholders shall upon demand disclose to the Board of Directors
in writing such information with respect to direct and indirect ownership of
the Common stock of the Company at the Board of Directors deems necessary to
comply with the provisions of the Internal Revenue Code of 1986, as amended
or as hereafter amended if such amendements are applicable to the Company
(the "Code"), pertaining to the qualification of the Company as a real estate
investment trust (a "REIT") or to comply with the requirements of any taxing
authority or governmental entity or agency.
2. Whenever it is deemed by the Board of Directors to be reasonably
necessary to protect the tax status of the Company as a REIT, the Board of
Directors may require a statement or affidavit from any stockholder or
proposed transferee of shares of Common Stock setting forth the number of
shares of Common Stock already owned by the stockholder and any related Person
(as hereinafter defined) specified in the form prescribed by the Board of
Directors for that purpose. If, in the opinion of the Board of Directors,
which opinion shall be conclusive on the proposed transferor and transferee,
the proposed transfer may jeopardize the qualification of the Company as a
REIT, the Board of Directors has the right, but not a duty, to refuse to
transfer the shares of Common Stock to the proposed transferee. All contracts
for the sale or other transfer of shares of Common Stock shall be subject to
this provision.
3. Notwithstanding any other provision of these Articles of Incorporation
to the contrary and subject to the provisions of Section 6 of Paragraph (D) of
this Article V, no person shall at any time directly or indirectly acquire
ownership in the aggregate of more than 9.8% of the outstanding shares of
Common Stock of the Company (the "Limit"). Shares of Common Stock owned by a
Person in excess of the Limit at any time shall be deemed excess shares
("Excess Shares"). For purposes of this Article V a person shall be deemed to
own shares of Common Stock actually owned by such Person after applying the
rules of Section 544 of the Code as modified in the case of a REIT by
Section 856(a)(6), Section 856(d)(3), and Section 856(h) of the Code. All
shares of Common Stock which any Person has the right to acquire upon exercise
of outstanding rights, options, and warrants, and upon conversion of securities
convertible into shares of Common Stock, if any, shall be considered
outstanding for purposes of the Limit if such inclusion will cause such Person
to won more than the Limit.
4. If at any time the Board of Directors shall in good faith determine that
direct or indirect ownership of shares of Common Stock of the Company by any
Person or Persons has or may become concentrated to the extent which would
cause the Company to fail to qualify or to be disqualified as a REIT or that
any Person has acquired Excess shares (including shares of Common Stock that
remain or become Excess shares because of the decrease in the outstanding
shares of Common Stock resulting from such redemption), the Board of Directors
shall have the power to all for the purchase from any stockholder of the
Company, by notice to such stockholder, of a number of shares of Common Stock
sufficient in the opinion of the Board of Directors to maintain or to bring
the direct or indirect ownership of shares of Common Stock into conformity
with the provisions of the Code pertaining to the qualifications of the
Company as a REIT and/or to redeem all shares of Common Stock that are Excess
Shares owned by such Person. From and after the date fixed for redemption by
the Board of Directors, the holder of any shares of Common Stock so called
for redemption shall cease to be entitled to distributions, voting rights,
and other benefits with respect to such shares of Common Stock, excepting
only the right to payment by the Company of the redemption price pursuant to
this Article V as set forth in the following paragraph.
The redemption price of each share of Common Stock so called for redemption
shall be:
(a) the average daily per share composite closing sales price if the shares
of the Company are listed on a national securities exchange, and if the shares
are not so listed shall be the mean between the average per share closing bid
prices and the average per share closing asked prices, in each case during the
twenty (20) trading day period ending on the business day prior to the
redemption date, or
(b) if there have been no sales on a national securities exchange and no
published bid quotations and no published asked quotations with respect to
shares of the Company during such twenty (20) trading day period, the
redemption price shall be the price determined in good faith by the Board
of Directors.
In order to assure further that ownership of the shares of Common Stock
of the Company does not become concentrated so as to cause the Company to
fail to qualify or be disqualified as a REIT, any transfer of shares that
would prevent the Company from continuing to be qualified as a REIT under
the Code, including any attempt to effect a transfer that was prohibited
by the Board of Directors, under Sections 6 of Paragraph (D) of this Article
V, shall be void ab initio and the intended transferee of such share shall be
deemed never to have had any legal or equitable interest therein. If the
foregoing provision is determined to be void and invalid by virtue of any
legal decision, statute, rule, or regulation, then the transferee of such
shares of Common Stock shall be deemed, at the option of the Company, to
have acted as agent on behalf of the Company in acquiring such shares of
Common Stock and to hold such shares of Common Stock on behalf of the Company.
A conspicuous legend noting the restrictions on transfer set forth in these
Articles of Incorporation shall be placed on each certificate evidencing
ownership of shares of Common Stock of the Company.
5. Notwithstanding any other provision of these Articles of Incorporation
or the By-Laws to the contrary, any purported acquisition of shares of
Common Stock of the Company which results in the disqualification of the
Company as a REIT under the Code shall be null and void. All contracts for
the sale or other transfer or shares of Common Stock shall be subject to
this provision.
6. The Limit set forth in Section 3 of this Article V shall not apply to
acquisitions of shares of Common Stock pursuant to a cash tender offer made
for all outstanding shares of Common Stock of the Company (including securities
convertible into shares of Common Stock) in conformity with applicable federal
and state securities laws where two-thirds (2/3) of the outstanding shares
of Common Stock (not including shares of Common Stock or securities
convertible into shares of Common Stock held by the tender offered and/or
any "affiliates" or "associates" thereof within the meaning of the
Securities Exchange Act of 1934, as amended) are duly tendered and
accepted pursuant to the cash tender offer; nor shall the limit apply to the
acquisition of shares of Common Stock by an underwriter in a public offering
of shares of Common Stock, or in any transaction involving the issuance
of shares of Common Stock by the Company in which the Board of Directors
determine that the underwriter or other person or party initially acquiring
such shares of Common Stock will make a timely distribution of such shares
of Common Stock to or among other holders such that, following such
distribution, none of such shares of Common Stock will be Excess Shares. The
Board of Directors in their discretion may exempt from the Limit ownership
of certain designated shares of common stock while owned by a person who has
provided the Company with evidence and assurances acceptable to the Board
of Directors that the qualification of the Company as a REIT would not be
jeopardized thereby.
7. As used in this Article V the word "Person" shall mean and include
individuals, corporations, limited partnerships, general partnerships, joint
stock companies or associations, joint venturers, companies, trusts, banks,
trust companies, land trusts, business trusts, estates, or other entities and
governments and agencies and political subdivisions thereof and also includes
a group as that term is used or purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
8. Nothing contained in this Article V or in any other provision of these
Articles of Incorporation shall limit the authority of the Board of Directors
to take such other action as it deems necessary or advisable to protect the
Company and the interests of the stockholders by preserving the Company's
qualification as a REIT under the Code.
9. If any provision of this Article V or any application of any such
provision is determined to be invalid by any court having jurisdication over
the issues, the validity of the remaining provisions shall not be affected
and other applications of such provisions shall be affected only to the extent
necessary to comply with the determination of such court. To the extent this
Article V may be inconsistent with any other provision of these Articles of
Incorporation or the By-Laws this Article V shall be controlling.
