KOGER EQUITY INC, DEF 14A, 1998-04-21

KOGER EQUITY INC
DEF 14A, 1998-04-21
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

KOGER EQUITY, 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)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

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. (the "Company")
will be held on Tuesday, May 19, 1998, at 11:00 a.m., Eastern Daylight Saving
Time, at the Omni Jacksonville Hotel, 245 Water Street, Jacksonville, Florida,
for the following purposes:

1. To elect a board of twelve (12) directors to serve for the ensuing
year or until their respective successors are elected and qualified;

2. To approve the Koger Equity, Inc. 1998 Equity and Cash Incentive
Plan; and

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 11, 1998, has been fixed as the record date
for the determination of shareholders entitled to receive notice of, and to vote
at, this meeting and any adjournment or postponement thereof. All shareholders
of record at that time are entitled to vote at this meeting and any adjournment
thereof.

A copy of the Company's Annual Report for the year ended December 31, 1997,
which report contains consolidated financial statements and other information of
interest with respect to the Company and its subsidiaries, is included herewith.

SHAREHOLDERS ARE REQUESTED TO MARK, 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 17, 1998
<PAGE> 3

KOGER EQUITY, INC.
3986 BOULEVARD CENTER DRIVE
JACKSONVILLE, FLORIDA 32207
(904) 398-3403
---------------------

PROXY STATEMENT
APRIL 17, 1998
---------------------

INTRODUCTION

The enclosed proxy is solicited on behalf of and by the Board of Directors
(the "Board of Directors") of Koger Equity, Inc., a Florida corporation (the
"Company"), for use at the Company's Annual Meeting of Shareholders to be held
on Tuesday, May 19, 1998 (the "Annual Meeting"), and any adjournment thereof.
This Proxy Statement and the enclosed proxy have first been mailed or otherwise
given to shareholders on or about April 17, 1998.

If the enclosed proxy is executed and returned, it will be voted at the
Annual Meeting and any adjournment thereof, 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 the Koger Equity, Inc. 1998
Equity and Cash Incentive Plan. If any other matters properly come before the
Annual 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 the Company
a letter of proxy revocation, executing a subsequently dated proxy, or attending
the Annual Meeting or any adjournment thereof and voting his or her Shares (as
defined below) personally.

The close of business on March 11, 1998, was fixed as the record date for
determination of the shareholders entitled to vote at the Annual Meeting and any
adjournment thereof.

The number of the Company's shares of common stock, par value $.01 per
share (the "Shares"), outstanding at the close of business on March 11, 1998,
was 25,481,642. There is no other class of voting securities of the Company
outstanding, and each Share is entitled to one (1) vote. A majority of the
Shares issued and outstanding as of the record date represented at the Annual
Meeting or any adjournment thereof, either in person or by proxy, shall
constitute a quorum. Victor A. Hughes, Jr., J. C. Teagle and W. Lawrence Jenkins
have, and each of them has, been designated to vote the proxies solicited
hereby. The Shares are not subject to cumulative voting.

MATTERS TO BE CONSIDERED

The Company's shareholders will consider and act upon proposals (i) to
elect twelve (12) directors for the following year, (ii) to approve the Koger
Equity, Inc. 1998 Equity and Cash Incentive Plan, and (iii) such other business
as may properly come before the Annual Meeting or any adjournment or
postponement thereof.

ELECTION OF DIRECTORS

NOMINEES

The twelve (12) nominees listed in the table below are proposed for
election as directors for the ensuing year or until their successors have been
duly elected and qualified.

While management expects that all of the nominees will be able to serve as
directors, if, at the time of the Annual Meeting or any adjournment thereof, a
situation should arise making it impossible for any nominee to

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serve, the proxies will be voted in accordance with the best judgement of the
holders thereof for another person recommended by the present Board of Directors
in lieu of such original nominee.

Each nominee has served in the principal occupations indicated in the table
below with the respective employers indicated in such table during the five-year
period ended on December 31, 1997. The table below also sets forth information
concerning each nominee to the Board of Directors, based on information
furnished by such nominee.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES.

2
<PAGE> 5

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRINCIPAL OCCUPATION YEAR FIRST OF SHARES AT
FIVE-YEAR EMPLOYMENT HISTORY BECAME A FEBRUARY 20, 1998(1)
NAME AND OTHER DIRECTORSHIPS DIRECTOR AGE (PERCENT OF CLASS)
- ---- ---------------------------- ---------- --- --------------------
<S> <C> <C> <C> <C>
David B. Hiley(5)............ Executive Vice President and 1993 59 10,446(3)
Chief Financial Officer (as of (.04%)
April 1, 1998) and Director of
Koger Equity, Inc.; formerly a
financial consultant; former
Managing Director of Berkshire
Capital Corporation (an
investment banking services
firm); Director and former
Senior Executive Vice President
of Thomson McKinnon Securities,
Inc. (a securities broker-
dealer); consultant, Director
and former Executive Vice
President of Thomson McKinnon,
Inc. (a financial services
holding company); former
Director of Newcity
Communications, Inc. (a
communications firm)
Victor A. Hughes, Jr......... Chairman and Chief Executive 1992 62 260,238(6)
Officer of Koger Equity, Inc.; (1.02%)
former President, Chief
Financial Officer, Senior Vice
President and Assistant
Secretary of Koger Equity,
Inc.; Director, Chairman, Chief
Executive Officer and Chief
Financial Officer of Koger
Realty Services, Inc. (a Koger
Equity, Inc. related entity and
manager of office properties in
five markets)
John R. S. Jacobsson (5)..... Partner responsible for 1997 29 4,492(3)(7)
investments at Apollo Real (.02%)
Estate Advisors (manager of
three real estate investment
funds); Director of Metropolis
Realty Trust, Inc. (owner of
high rise office buildings);
Director of Roland
International, Inc. (a land
development company)
G. Christian
Lantzsch(2)(5)............. Retired Director of Duquesne 1989 73 10,772(3)
Light Company; retired Vice (.04%)
Chairman of the Board of
Directors and Treasurer of
Mellon Bank Corp.; retired Vice
Chairman and Chief Financial
Officer of Mellon Bank, N.A.
</TABLE>

3
<PAGE> 6

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRINCIPAL OCCUPATION YEAR FIRST OF SHARES AT
FIVE-YEAR EMPLOYMENT HISTORY BECAME A FEBRUARY 20, 1998(1)
NAME AND OTHER DIRECTORSHIPS DIRECTOR AGE (PERCENT OF CLASS)
- ---- ---------------------------- ---------- --- --------------------
<S> <C> <C> <C> <C>
William L. Mack.............. Senior Partner of Apollo Real 1996 58 5,659(3)(7)
Estate Advisors (manager of (.02%)
three real estate investment
funds); President and a Senior
Partner of the Mack
Organization (national owner,
developer and investor in
industrial buildings and other
real estate investments);
Director of The Bear Stearns
Companies, Inc. (an investment
banking firm); Director of
Mack-Cali Realty Corporation (a
national office REIT); Chairman
of the Board of Metropolis
Realty Trust, Inc. (owner of
high rise office buildings);
Director of Vail Resorts, Inc.
(owner and operator of ski
resorts)
Lee S. Neibart(2)............ Partner in charge of portfolio 1996 47 5,659(3)(7)
and asset management at Apollo (.02%)
Real Estate Advisors (manager
of three real estate investment
funds); former Executive Vice
President and Chief Operating
Officer of the Robert Martin
Company (a real estate
development and management
firm); Director of Atlantic
Gulf Communities Corporation (a
land development company);
Director of Meadowbrook Golf
Group, Inc. (a golf management
company); Director and
President of Metropolis Realty
Trust, Inc. (owner of high rise
office buildings); Director of
NextHealth, Inc. (operator of
wellness and spa facilities)
and Director of Roland
International, Inc. (a land
development company)
</TABLE>

4
<PAGE> 7

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRINCIPAL OCCUPATION YEAR FIRST OF SHARES AT
FIVE-YEAR EMPLOYMENT HISTORY BECAME A FEBRUARY 20, 1998(1)
NAME AND OTHER DIRECTORSHIPS DIRECTOR AGE (PERCENT OF CLASS)
- ---- ---------------------------- ---------- --- --------------------
<S> <C> <C> <C> <C>
George F. Staudter(5)........ Managerial and financial 1993 66 10,386(3)
consultant; Director of (.04%)
Waterhouse Investors Cash
Management Funds, Inc. (a
family of mutual funds); former
Director of Waterhouse Investor
Services, Inc. (a securities
broker-dealer); former
President, Chief Executive
Officer 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............ Director of Koger Equity, Inc.; 1988 79 22,160(3)(8)
former Chairman of the Board of (.09%)
Directors, President and Chief
Financial Officer of Koger
Equity, Inc.
James C. Teagle(11).......... President, Chief Operating 1996 56 110,055(9)
Officer and Director of Koger (.43%)
Equity, Inc.; former Executive
Vice President, Senior Vice
President and Vice President of
Koger Equity, Inc.; former Vice
President of Koger Properties,
Inc.; Director, President and
Chief Operating Officer of
Koger Realty Services, Inc. (a
Koger Equity, Inc. related
entity and manager of office
properties in five markets)
All Executive Officers and...................................................... 758,870(10)
Director Nominees as (2.94%)
a Group (15 persons)(11)
</TABLE>

- ---------------

(1) Unless otherwise noted, all Shares are owned directly, with sole voting and
dispositive power or with voting and dispositive power shared with spouse.

(2) Member of the Audit Committee.

(3) Includes 4,000 Shares which are subject to presently exercisable options.

(4) Includes 120,333 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

(5) Member of the Compensation Committee. Mr. Hiley resigned from the
Compensation Committee on February 18, 1998.

(6) Includes 33,300 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

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<PAGE> 8

(7) Beneficial ownership excludes 5,559,895 shares of Common Stock of Koger
Equity, Inc. (the "Issuer"), owned by Apollo Real Estate Investment Fund
II, L.P. ("AREIF II") and AREIF II Realty Trust, Inc. ("ARTI"), a
subsidiary of AREIF II. The general partner of AREIF II is Apollo Real
Estate Advisors II, L.P. ("ARE Advisors II"). The general partner of ARE
Advisors II is Apollo Real Estate Capital Advisors II, Inc. ("ARECA II").
Messrs. Jacobsson, Neibart and Mack are officers of ARECA II and limited
partners of ARE Advisors II. Each of Messrs. Jacobsson, Neibart and Mack
disclaim beneficial ownership of all securities owned by ARTI, AREIF II and
any of their affiliates.

(8) Includes 8,000 Shares which are held in a trust for which Mr. Stoneburner
is the beneficiary.

(9) Includes 100,511 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

(10) Sole voting and dispositive power as to 748,098 Shares, and shared voting
and dispositive power as to 10,772 Shares. Includes 386,992 Shares which
are subject to presently exercisable options, or options which are
exercisable within 60 days.

(11) Koger Properties, Inc., a Florida Corporation ("KPI"), filed for protection
from creditors under Chapter 11 of the United States Bankruptcy Code on
September 25, 1991; on December 21, 1993, KPI was merged with and into the
Company (the "Merger"). Mr. Teagle was a former Vice President of KPI, Mr.
Robert N. Bridger was a former Senior Vice President of KPI, and Mr. W.
Lawrence Jenkins was a former Vice President and Corporate Secretary of
KPI. Messrs. Teagle, Bridger and Jenkins became officers of the Company
after the Merger.

CORPORATE GOVERNANCE

The Board of Directors of the Company held six (6) meetings during the last
fiscal year. The Board of Directors maintains an Audit Committee (the "Audit
Committee") and a Compensation Committee (the "Compensation Committee"), the
members of which are elected by the Board of Directors. The Board of Directors
does not have a nominating committee.

The Audit Committee is composed exclusively of directors who are not
officers or employees of the Company. 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
principles and internal accounting, auditing and financial controls. The Audit
Committee held one (1) meeting during the last fiscal year and members of the
Audit Committee consulted with the officers of the Company and the independent
auditors at various times throughout the year.

The Compensation Committee is composed exclusively of directors who are not
officers or employees of the Company. It sets the total compensation of the
Company's Chief Executive Officer and the Chief Operating Officer, and reviews
the compensation proposed by management for all other executive officers of the
Company. The Compensation Committee is also responsible for (i) making grants
under the Company's stock option plans, (ii) making contributions, subject to
approval by the Board of Directors, under the 401(k) Plan and any other plan or
plans as may be determined by the Board of Directors, and (iii) approving
participation in the Company's Supplemental Executive Retirement Plan (the
"SERP").

Each of the directors attended at least 75% of the Board of Directors
meetings and meetings held by committees of the Board of Directors of which they
were members, except Mr. John R. S. Jacobsson who became a director of the
Company on August 19, 1997. The Board of Directors held two meetings in 1997
after the election of Mr. Jacobsson and Mr. Jacobsson attended one of those
meetings.

Directors of the Company who are not officers receive a monthly retainer of
$1,667, 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. Mr. Davis, the Vice Chairman of the Board,
received an additional quarterly retainer of $2,500. Directors who are officers
of the Company are not paid a

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director's fee or retainer. Directors may elect to receive payment of part or
all of their monthly retainer in Shares by participating in the Stock Investment
Plan. For more information concerning the Stock Investment Plan, reference is
made to the section "Executive Compensation -- Stock Investment Plan" of this
Proxy Statement.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below sets forth information concerning the annual and long-term
compensation of the Chief Executive Officer (the "CEO") and the other named
executive officers whose salary and bonus for the fiscal year ended December 31,
1997, exceeded $100,000 (collectively with the CEO, the "Executive Officers").

<TABLE>
<CAPTION>
LONG-TERM(2)
COMPENSATION
AWARDS
ANNUAL ---------------------
COMPENSATION ALL OTHER
----------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS/SARS(#)(3) ($)(4)
- --------------------------- ---- ------------ -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Victor A. Hughes, Jr.......... 1997 $268,750 $275,770(5) -- $2,237,714(6)
Chairman of the Board 1996 230,917 240,533(7) 135,833(8) 15,318
and Chief Executive 1995 204,200 110,227 -- 35,771
Officer
James C. Teagle............... 1997 $198,750 $204,423(5) -- $ 8,800(6)
President and Chief 1996 166,667 173,590(9) 96,250(10) 13,050
Operating Officer 1995 141,750 27,546 -- 28,415
W. Lawrence Jenkins........... 1997 $120,833 $ 41,467(5) -- $ 6,518(6)
Vice President and 1996 112,917 57,363(5) 28,840(11) 10,120
Corporate Secretary 1995 107,500 20,316 -- 22,729
James L. Stephens............. 1997 $112,833 $ 38,813(5) -- $ 62,809(6)
Vice President and Chief 1996 103,990 49,346(5) 29,916(12) 44,873
Accounting Officer 1995 97,331 5,219 -- 25,029
Robert N. Bridger............. 1997 $130,833 $ 44,784(5) -- $ 126,102(6)
Senior Vice President 1996 122,575 57,634(5) 28,801(13) 13,233
1995 118,885 2,292 -- 14,283
</TABLE>

- ---------------

(1) Includes (a) an amount equal to 10% of salary paid to Messrs. Hughes,
Jenkins and Teagle in 1997 and 20% of salary paid to Mr. Stephens in 1997;
(b) an amount equal to 10% of salary paid to Messrs. Hughes, Teagle,
Jenkins and Stephens in 1996; and (c) an amount equal to 10% of salary paid
(from August 1, 1995 to December 31, 1995) to Hughes, Jenkins and Stephens
in 1995, which amounts were paid by KRSI.

(2) There were no restricted stock awards or long term incentive plan payouts
for any of the last three fiscal years.

(3) For information concerning the number and market value of Shares subject to
the Company's stock option plans as to the Executive Officers, reference is
made to the "Option/SAR Exercises and Year-End Values" table and the notes
thereto.

(4) Includes the taxable portion of certain excess life insurance premiums (as
defined by the Internal Revenue Code) paid by the Company on behalf of each
qualifying employee, including the Executive Officers (the "Life Insurance
Premiums") and 401(k) Plan contributions, each of which were Company
benefits which did not discriminate in scope, terms or operation in favor
of the Executive Officers and were available generally to all salaried
employees of the Company.

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<PAGE> 10

(5) Includes a cash bonus which was earned in the year reported, but which was
paid in the following calendar year.

(6) For 1997, includes a matching contribution in the form of Shares made by
the Company to the account of each qualifying employee, including each
Executive Officer, under the 401(k) Plan, which contribution was equal to
50% of such employee's contributions to his or her account under the 401(k)
Plan, subject to a maximum employee contribution of 6% of eligible
compensation, and was based on the market value of the Shares on December
31, 1997, which was $21.94 per Share (the "401(k) Contribution").

As to Mr. Hughes, for 1997, includes Life Insurance Premiums in the amount
of $5,911, and a 401(k) Contribution in the amount of $4,750. For 1997,
includes $2,227,053 of income associated with the exercise of options on a
total of 200,000 Shares, at per share exercise prices ranging from $5.125
to $11.50, at various times from April 23, 1997, to September 19, 1997,
which Shares were valued at prices ranging from $15.875 to $20.125 on the
dates of exercise.

As to Mr. Teagle, for 1997, includes Life Insurance Premiums in the amount
of $4,050, and a 401(k) Contribution in the amount of $4,750.

As to Mr. Jenkins, for 1997, includes Life Insurance Premiums in the amount
of $1,872, and a 401(k) Contribution in the amount of $4,646.

As to Mr. Stephens, for 1997, includes Life Insurance Premiums in the
amount of $614, and a 401(k) Contribution in the amount of $4,355. For
1997, includes $57,840 of income associated with the exercise of options on
a total of 4,255 Shares, all at an exercise price of $5.125, at various
times from January 8, 1997 to December 22, 1997, which Shares were valued
at prices ranging from $18.00 to $21.00 on the dates of exercise.

As to Mr. Bridger, for 1997, includes Life Insurance Premiums in the amount
of $4,914 and a 401(k) Contribution in the amount of $4,750. For 1997,
includes $116,438 of income associated with the exercise of options on a
total of 9,000 Shares, all at an exercise price of $7.625 on December 18,
1997, which Shares were valued at a price of $20.563 on the dates of
exercise.

(7) Includes a bonus earned by Mr. Hughes for calendar year 1996 in the amount
of $235,724, the value of which was paid in Shares, net of taxes, by the
issuance of 9,013 Shares on January 6, 1997.

(8) Of the total options granted to Mr. Hughes in 1996, 35,833 options were
granted on May 6, 1996, for a 10-year term, became 100% exercisable six
months after the date of grant at a per Share price of $11.50; 94,144
options were granted on December 9, 1996, for a ten-year term and will be
exercisable at the annual rate of 33 1/3% commencing six months from the
date of grant at a per Share price of $15.375; and 5,856 options were
granted on December 9, 1996, for a 7-year term and will be exercisable at
an annual rate of 33 1/3% commencing six months from the date of grant at a
per Share price of $15.375.

(9) Includes a bonus earned by Mr. Teagle for calendar year 1996 in the amount
of $170,128 the value of which was paid in Shares, net of taxes, by the
issuance of 6,442 Shares on January 6, 1997.

(10) Of the total options granted to Mr. Teagle in 1996, 46,250 options were
granted on May 6, 1996, for a 10-year term, became 100% exercisable six
months after the date of grant at a per Share price of $11.50; and 50,000
options were granted on December 9, 1996, for a 10-year term, and will be
exercisable at the annual rate of 33 1/3% commencing six months from the
date of grant at a per Share exercise price of $15.375.

(11) Of the total options granted to Mr. Jenkins in 1996, 1,340 were granted on
May 6, 1996, became 100% exercisable six months after the date of grant,
terminate 10 years from the date of grant and are exercisable at a per
Share price of $11.50; and 27,500 were granted on December 9, 1996, become
20% exercisable annually, terminate 10 years from the date of grant and are
exercisable at a per Share price of $15.375.

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<PAGE> 11

(12) Of the total options granted to Mr. Stephens in 1996, 2,416 were granted on
May 6, 1996, became 100% exercisable six months after the date of grant,
terminate 10 years from the date of grant and are exercisable at a per
Share price of $11.50; and 27,500 were granted on December 9, 1996, become
20% exercisable annually, terminate 10 years from the date of grant and are
exercisable at a per Share price of $15.375.

(13) Of the total options granted to Mr. Bridger in 1996, 1,301 were granted on
May 6, 1996, became 100% exercisable six months after the date of grant,
terminate 10 years from the date of grant and are exercisable at a per
Share price of $11.50; and 27,500 were granted on December 9, 1996, become
20% exercisable annually, terminate 10 years from the date of grant and are
exercisable at a per Share price of $15.375.

OPTION/STOCK APPRECIATION RIGHTS GRANTS

During the fiscal year ended December 31, 1997, the Company granted no
options to its Executive Officers.

OPTION/STOCK APPRECIATION RIGHTS EXERCISES AND YEAR-END VALUES

The table below sets forth information with respect to (i) the aggregate
number of options/stock appreciation rights exercised, and the values realized
in respect thereof, by the Executive Officers during the fiscal year ended
December 31, 1997, and (ii) the aggregate number of options/stock appreciation
rights, and the value of the in-the-money options/stock appreciations rights, in
each case held by the Executive Officers at the end of such fiscal year.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FISCAL YEAR-END (#) AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- ------------ --------------------- ---------------------
<S> <C> <C> <C> <C>
Victor A. Hughes, Jr............ 200,000 $2,227,053 33,300 / 66,700 $218,531 / $437,719
James C. Teagle................. -- -- 100,511 / 49,489 $1,130,313 / $449,843
W. Lawrence Jenkins............. -- -- 28,286 / 27,361 $357,020 / $221,110
James L. Stephens............... 4,255 $ 57,840 49,947 / 22,000 $767,957 / $144,375
Robert N. Bridger............... 9,000 $ 116,438 18,615 / 27,204 $218,767 / $218,852
</TABLE>

- ---------------

(1) The value reported herein is based on a per Share price of $21.9375, which
is the closing price of the Shares on December 31, 1997, as reported on the
American Stock Exchange.

LONG-TERM INCENTIVE PLAN AWARDS

The Company made no long-term incentive plan awards to any Executive
Officer during the fiscal year ended December 31, 1997.

EXECUTIVE EMPLOYMENT AGREEMENTS

On June 21, 1996, the Company entered into three-year employment agreements
with both Messrs. Hughes and Teagle. Effective April 1, 1998, the Company
entered into new employment agreements with these executives for the primary
purpose of extending these agreements, in the case of Mr. Hughes, through
December 31, 2000, and, in the case of Mr. Teagle, through March 31, 2001. These
agreements provide for, among other things, an annual base salary for Mr. Hughes
of $300,000 and an annual base salary for Mr. Teagle of $230,000. Also effective
April 1, 1998, Mr. Hiley, a Director of the Company, has been engaged as the
Company's Executive Vice President and Chief Financial Officer. In this
connection, the Company entered into a three-year employment agreement with Mr.
Hiley commencing April 1, 1998, at an

9
<PAGE> 12

initial annual base salary of $200,000 and on February 18, 1998 granted him a
ten-year option to purchase 125,000 Shares at an exercise price of $22.8125 per
share, the fair market value on the date of grant. In addition, he was made a
participant in the Supplemental Executive Retirement Plan for Executives of
Koger Equity, Inc. and Participating Related Entities (the "SERP"). These
employment agreements provide that the officers (1) serve the Company on a
full-time basis, (2) perform such duties and responsibilities as may be
designated by the Board and (3) devote substantially all of their business time
and best efforts, business judgement, skill and knowledge exclusively to the
advancement of the business and interests of the Company.

In the event of an early termination of employment other than for cause,
each employment agreement provides that, at the officer's option, (1) he may
either continue to receive his base salary for the term of the agreement or its
present value in a lump sum, and (2) continue to participate in the Company's
medical and life insurance arrangement for employees during the term of the
agreement or be paid a lump sum present value of the cost of such insurance
coverage. The officer will also be deemed to have satisfied the vesting
requirements for benefits under the SERP and all stock options, which would
otherwise become vested during the term of the employment agreement, in the
event of an early termination of employment other than for cause.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The SERP provides additional retirement benefits for the Executive
Officers. In the case of Messrs. Hughes and Teagle, the SERP provides (i) such
Executive Officer with a lifetime benefit of 50% of final three-year average
annual base salary, less social security benefits and the annuitized equivalent
of profit sharing contributions by the Company to the account of such Executive
Officer under the 401(k) Plan, and (ii) the surviving spouse of such Executive
Officer with a lifetime benefit of 50% of such Executive Officer's benefit. In
the case of Mr. Hiley, the SERP provides (i) him with a lifetime benefit of 35%
of final three-year average annual base salary less social security benefits and
the annuitized equivalent of profit sharing contributions by the Company to the
account of Mr. Hiley under the 401(k) Plan and (ii) his surviving spouse with a
lifetime benefit of 50% of his benefit. The SERP also provides Messrs. Hughes,
Teagle and Hiley and their spouses with lifetime medical coverage (which is
intended to be roughly equivalent to that provided by the Company for the
Executive Officers). In the case of each other Executive Officer, the SERP
provides a 15-year benefit (reduced in any case in which such Executive Officer
has less than 20 years of service) equal to 40% of final three-year average
annual base salary, less social security benefits and the annuitized equivalent
of profit sharing contributions by the Company to the account of such Executive
Officer under the 401(k) Plan. Benefits under the SERP generally vest only if
the applicable Executive Officer remains in the Company's employ for a period
ranging from two to five years after commencement of his participation in the
SERP (depending upon such Executive Officer's age at the commencement of his
participation in the SERP). However, if a change of control of the Company (as
defined in the SERP) occurs and an Executive Officer leaves the employ of the
Company under certain circumstances, then (a) in the case of Messrs. Hughes,
Teagle and Hiley, such Executive Officer would be entitled to his benefits,
commencing immediately and without regard to the vesting requirement, and (b) in
the case of each other Executive Officer, such Executive Officer, at his option,
would be entitled to either a continuation of his base salary for a period of 18
months or his vested benefits under the SERP.

10
<PAGE> 13

The table below sets forth information with respect to the estimated annual
benefit (determined before any reduction for social security benefits and 401(k)
Plan contributions as described above) payable to SERP participants (except Mr.
Hiley; see note below) upon age 65 retirement at different levels of
compensation and service.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
FINAL AVERAGE ANNUAL REMUNERATION 15 20 25 30 35
- --------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................. $ 37,500 $ 50,000 $ 50,000 $ 50,000 $ 50,000
150,000................................ 45,000 60,000 60,000 60,000 60,000
175,000................................ 52,500 70,000 70,000 70,000 70,000
200,000................................ 100,000 100,000 100,000 100,000 100,000
225,000................................ 112,500 112,500 112,500 112,500 112,500
250,000................................ 125,000 125,000 125,000 125,000 125,000
300,000................................ 150,000 150,000 150,000 150,000 150,000
</TABLE>

The compensation base used by the SERP is average base salary for the final
three years of employment. As of December 31, 1997, the base salary and
estimated years of service credit for each Executive Officer is listed below:

<TABLE>
<S> <C> <C>
Mr. Bridger................................................. $135,000 35 years
Mr. Hughes.................................................. $300,000 15 years
Mr. Jenkins................................................. $125,000 27 years
Mr. Stephens................................................ $117,000 11 years
Mr. Teagle.................................................. $230,000 25 years
</TABLE>

Because the SERP generally provides a 50% gross benefit for life to Messrs.
Hughes and Teagle, and a 40% gross benefit for 15 years to the other Executive
Officers, the Pension Plan Table above reflects a 50% benefit for salaries above
$175,000 and a 40% benefit for salaries up to and including $175,000. [Note: Mr.
Hiley's age 65 annual SERP benefit is 35% of final three-year average annual
base salary, or $70,000.] The benefits shown will be reduced by (i) the amount
of social security benefits received by the applicable Executive Officer and
(ii) the annuitized equivalent of profit sharing contributions made by the
Company to the account of such Executive Officer under the 401(k) Plan. At
retirement, benefits under the SERP are paid in annuity form.

STOCK INVESTMENT PLAN

The Company has a Stock Investment Plan (the "SIP") pursuant to which
participating employees and directors of the Company may purchase Shares. Under
the SIP, the Company is authorized to purchase up to an aggregate of 200,000
Shares on behalf of such participating employees and directors. Each
participating employee pays for his or her Shares pursuant to a monthly payroll
deduction plan established by the participating employees, and each
participating director pays for his Shares pursuant to a deduction from such
director's retainer. Pursuant to the SIP and subject to certain limitations, the
Company contributes a portion of the purchase price of such Shares, which
contribution equals the following percentage of the aggregate monthly deduction
from such employee's pay or such director's retainer: (i) 25% of each monthly
deduction less than or equal to $50; (ii) 20% of each monthly deduction greater
than $50 but less than or equal to $100; and (iii) 15% of each monthly deduction
greater than $100 but less than or equal to $1,700. The Company also pays all
commissions and related expenses of the SIP. The Company's contribution and
expenses incurred in administering the SIP totaled approximately $59,300 for the
year ended December 31, 1997.

11
<PAGE> 14

During 1997, the Company paid the following amounts on behalf of the
following directors:

<TABLE>
<CAPTION>
STOCK INVESTMENT PLAN
COMPANY
DIRECTOR NAME CONTRIBUTION
- ------------- ---------------------
<S> <C>
D. Pike Aloian......................................... $ 3,090
Benjamin C. Bishop, Jr. ............................... 3,090
David B. Hiley......................................... 3,090
John R. S. Jacobsson................................... 1,149
G. Christian Lantzsch.................................. 3,090
William L. Mack........................................ 3,090
Lee S. Neibart......................................... 3,090
W. Edward Scheetz(1)................................... 2,060
George F. Staudter..................................... 3,090
S. D. Stoneburner...................................... 3,090
-------
Total Contributed on behalf of Directors..... $27,929
=======
</TABLE>

- ---------------

(1) Mr. Scheetz resigned from the Board of Directors on August 19, 1997, at
which time contributions under the terms of the SIP were discontinued.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the information included under the "Shareholder Return Performance Presentation"
including the performance graph which follows shall not be deemed to be
incorporated by reference into any such filings.

The Compensation Committee consists of G. Christian Lantzsch, John R. S.
Jacobsson and George F. Staudter, Chairman, all of whom were outside directors
of the Company.

The Compensation Committee is responsible for setting the total
compensation of the Chairman of the Board and Chief Executive Officer (the
"CEO") and the President and Chief Operating Officer (the "COO") and for
reviewing the compensation, including year-end bonuses, proposed by management
for all other Executive Officers of the Company. The Compensation Committee is
also responsible for (i) making grants under the Company's stock option plans,
(ii) making contributions, subject to approval by the Board of Directors, under
the 401(k) Plan and any other plan or plans as may be determined by the Board of
Directors, and (iii) approving participation in the SERP. It is the Committee's
objective to structure executive compensation packages that have and will
continue to provide incentives to create shareholder value. Through stock
options and other stock related awards, the Compensation Committee has sought to
forge a strong link between Share performance and Executive Compensation. In
addition, the Company believes that the Executive Compensation program should
attract, retain and motivate a quality, performance-oriented management team.

Currently, the key elements of the Company's compensation package for the
Executive Officers are base salary, bonuses, contributions to the 401(k) Plan,
stock options, and participation in the SERP.

In determining the compensation paid to the Executive Officers in 1997, the
Compensation Committee took into consideration a number of factors, including
among others, the following: (i) increase in shareholder value; (ii) the
improvement in the Company's operations, including increases in rental revenues
and lease terms; (iii) the successful completion of a public offering of its
Shares; (iv) the establishing of a revolving credit facility; and (v) the
implementation of an active and aggressive, yet prudent, development and
acquisition program.

The Company's strategy has been to improve its financial condition by
increasing occupancy and revenues, reducing indebtedness relative to total
market capitalization, refinancing indebtedness and broaden-

12
<PAGE> 15

ing its asset base. The Company has made significant progress in these areas.
During 1997, the Company continued to improve its operating efficiencies by (i)
maintaining the percent leased rate of its buildings at approximately 92%, and
(ii) increasing its rental revenues by approximately $10.6 million, or 10.8%. In
December 1997, the Company received $67 million in net proceeds from the sale of
3.5 million Shares and obtained a $100 million revolving credit facility. The
Company also reduced indebtedness by approximately $21 million, from
approximately $203 million at the beginning of 1997 to approximately $182
million at the end of the year, or approximately 10.3%. The Company's
debt-to-total market capitalization ratio improved from approximately 34% as of
the end of 1996 to 24.6% as of the end of 1997. In addition, the market price of
the Company's Shares increased from $18.75 on December 31, 1996, to $21.9375 on
December 31, 1997, a 17% increase.

During 1997, the Company completed construction on two new buildings
containing approximately 102,000 net rentable square feet and closed on the
purchase of 11 buildings containing approximately 718,000 net rentable square
feet. The Company's operating properties increased from 215 to 228, or 6.0%,
during 1997, with net rentable square feet increasing from approximately 7.7
million to approximately 8.5 million, or 10.7%, and the average rental rate
increasing from $14.24 to $15.02, or 5.5%, during 1997. Also during 1997, the
Company commenced construction of nine new office buildings on some of its
existing inventory of land held for development.

While the Compensation Committee considered all of the foregoing and
although the Committee has from time to time reviewed the executive compensation
levels of other real estate investment trusts and referred to other available
information concerning the salaries of executive officers in peer group
companies, it did not, and has not as yet, set any specific criteria in arriving
at any particular Executive Officer's compensation. Accordingly, based on the
above, the Compensation Committee made a subjective determination in setting the
compensation of the CEO and COO and reviewed and approved the compensation of
the other Executive Officers.

In arriving at the compensation paid Victor A. Hughes, Jr., the Chairman of
the Board, Chief Executive Officer (the "CEO") and Chief Financial Officer (the
"CFO") during 1997, the Compensation Committee considered the outstanding
performance of the Company under his leadership as both CEO and CFO, as well as
his experience in corporate finance.

In recognition of his outstanding performance as CEO and CFO, Mr. Hughes'
annual salary was increased to $300,000 in August 1997, from $250,000 in 1996.
In addition, in January 1998, he was awarded a cash bonus of $270,000 for his
1997 performance.

Conclusion. The Compensation Committee believes that the compensation
packages of the Company's Executive Officers have been generally commensurate
with the Company's financial performance and the total value received by its
shareholders. The Compensation Committee intends to continue review of Executive
Officers compensation with the assistance of an outside compensation consultant
and will make such modifications in its approach to executive compensation as it
determines to be appropriate in light of the Company's financial condition, the
performance of its officers and peer group analysis.

The foregoing report has been furnished by the Compensation Committee.

John R. S. Jacobsson
G. Christian Lantzsch
George F. Staudter, Chairman

13
<PAGE> 16

SHAREHOLDER RETURN PERFORMANCE PRESENTATION

The line graph below sets forth the cumulative total shareholder return on
the Shares as compared with the cumulative total return of each of the American
Stock Exchange Market Value Index and the NAREIT Total Return Index, in each
case (i) on an annual basis for the period commencing December 31, 1992 and
ending December 31, 1997 and (ii) assuming that $100 was invested on December
31, 1992 and that all dividends were reinvested.

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) KE AMEX NAREIT
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 184.00 120.00 119.00
1994 157.00 109.00 120.00
1995 230.00 137.00 141.00
1996 405.00 146.00 192.00
1997 483.00 177.00 228.00
</TABLE>

The Company has used a different industry group for compensation
comparisons from that used for its shareholder return performance presentation.

14
<PAGE> 17

APPROVAL OF THE COMPANY 1998 EQUITY AND CASH INCENTIVE PLAN

On March 10, 1998, the Company's Board of Directors approved, subject to
shareholder approval, the Company 1998 Equity and Cash Incentive Plan (the "1998
Incentive Plan") and the issuance of up to 1,000,000 Shares pursuant to awards
thereunder. Attached as Exhibit 1 to this Proxy Statement is the full text of
the 1998 Incentive Plan and the following description of the Plan is qualified
by reference to Exhibit 1 hereto.

The purpose of the 1998 Incentive Plan is to advance the interests of the
Company and its subsidiaries by enhancing their ability to attract and retain
employees and other persons or entities including, but not limited to, directors
of the Company, who are in a position to make significant contributions to the
success of the Company and its subsidiaries, and to reward participants for such
contributions through ownership of Shares and cash incentives. The 1998
Incentive Plan is intended to accomplish these goals by enabling the Company to
grant awards in the form of options, stock appreciation rights, restricted
stock, unrestricted stock, deferred stock, or performance awards (in cash or
stock), or combinations thereof, all as more fully described below (the
"Awards").

GENERAL

The 1998 Incentive Plan will be administered by a committee of the Board of
Directors designated for such purposes consisting of at least two directors (the
"Committee"). During such times as the Shares are registered under the
Securities Exchange Act of 1934 (the "1934 Act"), all members of the Committee
will be "non-employee directors" within the meaning of Rule 16b-3 as promulgated
under the 1934 Act and "outside directors" within the meaning of Section
162(m)(4)(C)(I) of the Internal Revenue Code of 1986 (the "Code"). Under the
1998 Incentive Plan, the Committee may grant stock options, stock appreciation
rights, restricted stock, unrestricted stock, deferred stock and performance
Awards (in cash or stock), or combinations thereof, and may waive the terms and
conditions of any award. A total of 1,000,000 Shares is reserved for issuance
under the 1998 Incentive Plan. The Committee will have the authority, among
other things, to waive compliance by a holder of an Award with any obligations
imposed under the Award, waive any terms or conditions of an Award, and amend or
cancel an existing Award in whole or in part, and if an Award is canceled, grant
another Award in its place on terms and conditions determined by the Committee.

Awards under the 1998 Incentive Plan may also include provision for the
payment of dividend equivalents with respect to Shares subject to Awards.
Employees of the Company and its subsidiaries and other persons or entities,
including, but not limited to, directors of the Company, who are in a position
to make a significant contribution to the success of the Company, are eligible
to receive Awards under the 1998 Incentive Plan.

Section 162(m) of the Code places annual limitations on the deductibility
by public companies of compensation in excess of $1,000,000 paid to any of the
chief executive officer and the other four most highly compensated officers,
unless, among other things, the compensation is performance-based. For
compensation attributable to stock options and stock appreciation rights to
qualify as performance-based, among other required events, the plan, under which
the stock options or stock appreciation rights are granted, must state a maximum
number of shares with respect to which options and rights may be granted to an
individual during a specified period and must be approved by the company's
shareholders. To comply with these requirements, the 1998 Incentive Plan
provides that the maximum number of shares as to which Awards may be granted to
any participant in any one calendar year is 250,000, and the 1998 Incentive Plan
is being submitted for shareholder approval.

Stock Options. The exercise price of an incentive stock option ("ISO")
granted under the 1998 Incentive Plan or an option intended to qualify as
performance-based compensation under Section 162(m) of the Code shall not be
less than 100% of the fair market value of the Shares at the time of grant.
Subject to the foregoing, the exercise price of options granted under the 1998
Incentive Plan is determined by the Committee. Options granted under the 1998
Incentive Plan will expire and terminate no later than 10 years from the date of
grant. The exercise price may be paid in cash or check acceptable to the
Company. Subject to certain additional limitations, the Committee may also
permit the exercise price to be paid by tendering Shares, by delivering to the
Company an undertaking by a broker, bank or other financial institution,
15
<PAGE> 18

acceptable to the Company, to deliver promptly sufficient funds to pay the
exercise price, or a combination of the foregoing.

Stock Appreciation Rights (SARs). Stock appreciation rights ("SARs") may
be granted either alone or in tandem with stock option grants. Each SAR entitles
the holder, upon exercise, to receive an amount in cash or Shares or a
combination thereof (such form to be determined by the Committee) determined in
whole or in part by reference to appreciation in the fair market value of a
Share. SARs may be based solely on appreciation in the fair market value of the
Shares or on a comparison of such appreciation with some other measure of market
growth. The date as of which such appreciation or other measure is determined
shall be the exercise date unless another date is specified by the Committee. If
a SAR is granted in tandem with an option, the SAR will be exercisable only to
the extent the option is exercisable. To the extent the option is exercised, the
accompanying SAR will cease to be exercisable, and vice versa.

Stock Awards; Deferred Stock. The 1998 Incentive Plan provides for Awards
of nontransferable Shares of restricted stock subject to forfeiture ("Restricted
Stock"), as well as for Awards of unrestricted Shares. Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable restricted period and the
satisfaction of any other conditions or restrictions established by the
Committee. Other Awards under the 1998 Incentive Plan may also be settled with
Restricted Stock. The 1998 Incentive Plan also provides for deferred grants
entitling the recipient to receive Shares in the future at such times and on
such conditions as the Committee may specify.

Performance Awards. The 1998 Incentive Plan provides for performance
Awards entitling the recipient to receive cash or Shares following the
attainment of performance goals determined by the Committee. Performance
conditions and provisions for deferred stock may also be attached to other
Awards under the 1998 Incentive Plan. In the case of any performance award
intended to qualify for the performance-based remuneration exception described
in Section 162(m) of the Code (an "Exempt Award"), the Committee will
pre-establish specific performance goals in writing that are based upon any one
or more of the following (determined on a consolidated, divisional, subsidiary,
line of business or geographical basis or in combinations thereof): (i) sales;
revenues; assets; expenses; earnings before or after deduction for all or any
portion of interest, taxes, depreciation or amortization, whether or not on a
continuing operations or an aggregate or per share basis; return on equity,
investment, capital or assets; inventory level or turns; one or more operating
ratios; borrowing levels, leverage ratios or credit rating; market share;
capital expenditures; cash flow; Share price; shareholder return; or any
combination of the foregoing; or (ii) acquisitions and divestitures (in whole or
in part); joint ventures and strategic alliances; spin-offs, split-ups and the
like; reorganizations; recapitalizations, restructurings, financings (issuance
of debt or equity) and refinancings; transactions that would constitute a change
of control (as defined under the 1998 Incentive Plan); or any combination of the
foregoing. Performance goals need not be based upon an increase, a positive or
improved result or avoidance of loss. The maximum Exempt Award payable to an
individual in respect of any performance goal for any year cannot exceed
$2,500,000. Payment of performance Awards based upon a performance goal for
calendar years 2004 and thereafter is conditioned upon re-approval by the
Company's shareholders no later than the first meeting of shareholders in 2003.

Loans and Supplemental Grants. The 1998 Incentive Plan provides that the
Company may make loans to assist Participants with the purchase of Shares under
the Plan and/or the payment of taxes due with respect to an Award. The Plan also
provides that the Board may cause the Company to make supplemental cash Awards
("Supplemental Grants") to assist Participants with the payment of taxes
relating to an Award and that Supplemental Grants may be made on a grossed-up
basis.

Termination. Except as otherwise provided by the Committee, (i) in the
case of a participant's death, options and SARs become fully exercisable
immediately without regard to any vesting requirements and may be exercised by
the participant's executor, administrator or personal representative or the
person to whom the option or SAR passes at death during a period of one year
following such death (or for the remainder of their original term, if less),
(ii) in the case of retirement or disability, options and SARs may be exercised
by the participant at any time in accordance with their original terms, except
that in the case of disability, options and SARs will become fully exercisable
without regard to any vesting requirements, (iii) in the case of termination

16
<PAGE> 19

for any reason, outstanding Awards of Restricted Stock must be transferred to
the Company and deferred stock grants, performance Awards and Supplemental
Awards to which a participant is not irrevocably entitled will be forfeited
unless otherwise provided, and (iv) in the case of termination for reasons other
than death, retirement or disability, options and SARs remain exercisable, to
the extent they were exercisable immediately prior to termination, for three
months (or for the remainder of their original term, if less), shares of
Restricted Stock must be resold to the Company, and other Awards terminate,
except as otherwise provided.

In the case of a change of control as defined in the 1998 Incentive Plan
except as provided by the Committee at the time of grant, all Awards pursuant to
the plan shall immediately vest with options and SARs being immediately
exercisable, Restricted Stock becoming unrestricted and performance Awards being
fully due and payable to the participant. In the case of certain mergers,
consolidations or other transactions in which the Company is acquired or is
liquidated or otherwise ceases to exist, Awards payable in Shares will then
terminate.

Amendment. The Committee may amend the 1998 Incentive Plan or any
outstanding Award at any time or may at any time terminate the Plan, provided
that no such amendment will, without the approval of the shareholders of the
Company, effectuate a change for which shareholder approval is required in order
for the 1998 Incentive Plan to continue to qualify for the award of ISOs under
section 422 of the Code or for the Award of performance-based compensation under
Section 162(m) of the Code.

NEW PLAN BENEFIT

The future benefits or amounts that would be received under the 1998
Incentive Plan by the executive officers, the non-executive officer directors
and the non-executive officer employees are discretionary and are therefore not
determinable at this time.

FEDERAL TAX EFFECTS

The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the 1998 Incentive Plan. The
summary does not purport to cover federal employment tax or other federal tax
consequences that may be associated with the 1998 Incentive Plan, nor does it
cover state, local or non-U.S. taxes.

Incentive Stock Options. In general, an optionee realizes no taxable
income upon the grant or exercise of an ISO. However, the exercise of an ISO may
result in an alternative minimum tax liability to the optionee. With certain
exceptions, a disposition of Shares purchased under an ISO within two years from
the date of grant or within one year after exercise produces ordinary income to
the optionee (and a deduction to the Company) equal to the value of the Shares
at the time of exercise less the exercise price. Any additional gain recognized
in the disposition is treated as a capital gain for which the Company is not
entitled to a deduction. If the optionee does not dispose of the Shares until
after the expiration of these one- and two-year holding periods, any gain or
loss recognized upon a subsequent sale is treated as a long-term capital gain or
loss for which the Company is not entitled to a deduction.

Nonstatutory (Non-ISO) Options. In general, in the case of a non-ISO, the
optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at the
time of exercise) of the fair market value of the Shares acquired upon exercise
over the exercise price; a corresponding deduction is available to the Company;
and upon a subsequent sale or exchange of the Shares, appreciation or
depreciation after the date of exercise is treated as capital gain or loss for
which the Company is not entitled to a deduction.

In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is treated
as a non-ISO. ISOs are also treated as non-ISOs to the extent they first become
exercisable by an individual in any calendar year for Shares having a fair
market value (determined as of the date of grant) in excess of $100,000.

Under the so-called "golden parachute" provisions of the Code, the vesting
or accelerated exercisability of Awards in connection with a change in control
of the Company may be required to be valued and taken into
17
<PAGE> 20

account in determining whether participants have received compensatory payments,
contingent on the change in control, in excess of certain limits. If these
limits are exceeded, a substantial portion of amounts payable to the
participant, including income recognized by reason of the grant, vesting or
exercise of Awards under the 1998 Incentive Plan, may be subject to an
additional 20% federal tax and may be nondeductible to the Company.

GRANT OF OPTIONS UNDER THE 1998 INCENTIVE PLAN

Subject to approval and ratification of the Shareholders of the Company, on
March 10, 1998, the Committee, under the 1998 Incentive Plan, granted options to
purchase 180,000 Shares to Victor A. Hughes, Jr., and 100,000 Shares to James C.
Teagle, each option having a term of ten years, at an exercise price of $21.875
per Share, which price is equal to the closing price of the Shares on March 10,
1998, as reported on the American Stock Exchange. The option granted to Mr.
Hughes shall be exercisable at a cumulative rate of one-third of the Shares
underlying the option on each of December 31, 1998, 1999 and 2000, and the
option granted to Mr. Teagle shall be exercisable at a cumulative rate of
one-third of the Shares underlying the option over three years commencing one
year from the date of grant.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE KOGER
EQUITY, INC. 1998 EQUITY AND CASH INCENTIVE PLAN.

Unless instructions are given to the contrary, it is the intention of the
persons named as proxies to vote the Shares to which the proxy is related FOR
approval of the 1998 Incentive Plan, authorizing the adoption of the plan by the
Company, with 1,000,000 Shares reserved for issuance under the terms of the
plan.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

From its organization in 1988, the Company's business involved the
acquisition of completed and substantially leased commercial office buildings
and the operation of such properties for the production of rents. As of December
31, 1997, the Company owned 228 commercial properties in 13 metropolitan areas
in the southeastern and southwestern United States. A total of 126 buildings was
acquired from KPI or its affiliates through 1990. During 1993, an additional 93
buildings were acquired from KPI as the result of the Merger, which was
consummated on December 21, 1993, as part of the Plan of Reorganization in the
KPI Bankruptcy. During 1997, an additional 11 buildings were purchased and
construction on two buildings was completed. At December 31, 1997, the Company
had begun construction on eight additional buildings. As a result of the Merger,
the Company also assumed property management agreements to manage 92 office
buildings owned by The Koger Partnership, Ltd. ("TKP").

During 1995, TKP sold its 92 buildings and parcels of related land to Koala
Miami Realty Holding, Inc., Koala Norfolk Realty Holding, Inc., Koala Raleigh
Realty Holding, Inc., Koala Richmond Realty Holding, Inc., and Koala Tampa
Realty Holding, Inc., (each a "Koala Entity"), all of which are wholly owned
subsidiaries of a co-mingled pension trust for which Morgan Guaranty Trust
Company of New York is the trustee and J. P. Morgan Investment Management Inc.
is the investment manager.

Simultaneously with the sale by TKP of its properties, the Company sold to
certain Koala Entities three buildings and certain parcels of related land
located in or contiguous to office centers substantially owned by TKP. A certain
Koala Entity exercised an option to purchase from the Company two additional
parcels of land in Miami, Florida, in February 1997 for a purchase price of
$2.97 million.

In connection with the acquisition by the Koala Entities from TKP and the
Company of the properties described above, Koala entered into a Management
Agreement with Koger Realty Services, Inc., a Delaware corporation ("KRSI"), in
which the Company has a significant economic interest, pursuant to which KRSI
will manage such properties for a five-year period, subject to renewal on July
31, 2000.

KRSI was incorporated to provide, among other things, leasing and property
management services to owners of commercial office buildings. The Company owns
all of the preferred stock of KRSI, which currently represents in excess of 95%
(by value) of the economic benefits of KRSI. Such preferred stock is nonvoting

18
<PAGE> 21

stock and is not convertible into the common stock of KRSI while held by the
Company. All of the outstanding common stock of KRSI was acquired by officers
and employees of KRSI, including: Victor A. Hughes, Jr., James C. Teagle, W.
Lawrence Jenkins, James L. Stephens, all officers of the Company, and certain
other employees of KRSI who are not employed by the Company. In addition to
serving as officers of KRSI, Messrs. Hughes, Teagle and Jenkins comprise the
Board of Directors of KRSI. In the event that any of the forgoing persons leave
the employ of KRSI, KRSI has the right to reacquire any Shares of common stock
of KRSI held by such officer or employee.

The Company accounts for its investment in the preferred stock of KRSI
using the equity method. During 1997, KRSI earned approximately $5.3 million in
management fees from the Koala Entities and other entities for which it performs
services.

Messrs. Mack, Neibart and Jacobsson were elected to the Company's Board
under the terms of an agreement dated October 10, 1996, between the Company and
an affiliate of Apollo Real Estate Investment Fund II, L. P. ("Apollo") pursuant
to which Apollo purchased three million Shares from the Company for $43.5
million ($14.50 per share). Apollo has been granted registration rights and a
conditional exemption from certain of the Company's takeover defenses that
provide that for a period of three years (subject to earlier termination under
certain circumstances): (i) Apollo may purchase up to 25% of the Company's
outstanding stock; (ii) Apollo will be entitled to Board representation of up to
three directors on a board of not more than 12, (depending upon Apollo's level
of ownership of the common stock); and (iii) Apollo will not acquire more than
25% of the Company's outstanding stock and will vote its Shares as to certain
matters either in accordance with the recommendation of the Board or
proportionately with other shareholders, unless the Company breaches its
agreements or, without Apollo's consent, the Company takes certain significant
actions such as certain amendments of the Company's organizational documents,
liquidation, termination of REIT status, sale of the Company, acquisitions or
disposition over a certain size, issuance of more than 9.8% of the outstanding
common stock to a person or group or failure by the Company to employ its
takeover defenses against another person who holds (or tenders for) 15% or more
of the common stock. In addition, with certain exceptions, in the event the
Company sells Shares or securities convertible into Shares ("Equity
Securities"), Apollo has a preemptive right to acquire from the Company that
amount of Equity Securities that will increase its holdings to not more than 25%
of the Company's outstanding Equity Securities.

During December 1997, the Company completed a public offering of three
million Shares for an aggregate sales price of $60.75 million. In connection
with this public offering, the Company completed a concurrent offering of
500,000 of its Shares to an affiliate of Apollo Real Estate Investment Fund II,
L.P. for an aggregate sales price of $9.57 million.

Mr. Davis retired as an employee of the Company on December 31, 1996, but
continues to serve the Company as a consultant. Pursuant to the Consulting
Agreement between Mr. Davis and the Company, he will receive a consulting fee of
$50,000 per year through December 31, 1999. In addition, during 1997, Mr. Davis
received income in the amount of $136,866 from the SERP and $681,250 of income
associated with the exercise of options on a total of 50,000 Shares, all at an
exercise price of $5.125, at various times from January 30, 1997 to September 9,
1997, which Shares were valued at prices ranging from $19.63 to $22.06 per Share
on the dates of exercise.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers file with the Securities and Exchange
Commission (the "SEC") and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of the Company's equity
securities. Directors and executive officers are required by regulations of the
SEC to furnish the Company with copies of all Section 16(a) forms they file.

Except for the late reporting of the exercise of Stock Options to purchase
1,140 Shares by James L. Stephens, and the late reporting of the sale of 25,000
Shares by Irvin H. Davis, to the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company and written representations
that

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<PAGE> 22

no other reports not previously reported were required, during the fiscal year
ended December 31, 1997, its directors and executive officers complied with all
Section 16(a) filing requirements.

SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF BENEFICIAL OWNERS

The table below sets forth certain information with respect to the
beneficial ownership of Shares as of February 15, 1998, by each person known to
the Company to be the beneficial owner of more than 5% of the Shares. Except as
noted below, each of the persons listed has sole dispositive and voting power
with respect to the Shares indicated.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENT OF CLASS BENEFICIALLY OWNED
- ------------------------------------ ---------------- ------------------
<S> <C> <C>
Apollo Real Estate
Investment Fund II, L. P.................................. 21.9% 5,559,895
1301 Avenue of the Americas
New York, New York 10019
Alliance Capital Management, Inc............................ 9.7% 2,478,143
1290 Avenue of the Americas
New York, New York 10104
</TABLE>

SECURITY OWNERSHIP OF MANAGEMENT

The table below sets forth certain information with respect to the
beneficial ownership of Shares held as of February 20, 1998, (i) individually by
each Executive Officer and each director of the Company and (ii) by all
Executive Officers and directors of the Company. Except as noted below, each of
the persons listed below has (a) sole dispositive and voting power or (b) shared
dispositive and voting power with a spouse, in each case with respect to the
Shares indicated. The address of each Executive Officer and director listed
below is in care of the Company.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER PERCENT OF CLASS BENEFICIALLY OWNED
- ------------------------ ---------------- ------------------
<S> <C> <C> <C>
D. Pike Aloian........................................... .03% 7,779(3)
Benjamin C. Bishop, Jr................................... .11 26,986(3)
Irvin H. Davis........................................... .62 158,792(1)(2)(3)
David B. Hiley........................................... .04 10,446(3)
Victor A. Hughes, Jr..................................... 1.02 260,238(1)(2)
John R. S. Jacobsson..................................... .02 4,492(3)
G. Christian Lantzsch.................................... .04 10,772(3)
William L. Mack.......................................... .02 5,659(3)
Lee S. Neibart........................................... .02 5,659(3)
George F. Staudter....................................... .04 10,386(3)
S. D. Stoneburner........................................ .09 22,160(3)
James C. Teagle.......................................... .43 110,055(1)(2)
W. Lawrence Jenkins...................................... .12 31,000(1)(2)
James L. Stephens........................................ .23 57,878(1)(2)
Robert N. Bridger........................................ .14 36,568(1)(2)
---- -------
Total Shares Held by All Executive Officers and Directors
as a Group (15 persons)................................ 2.94% 758,870
==== =======
</TABLE>

- ---------------

(1) Includes for Messrs. Davis, Hughes, Teagle, Jenkins, Stephens and Bridger
116,333, 33,300, 100,511, 28,286, 49,947 and 18,615 Shares, respectively,
which such Executive Officers have the right to acquire pursuant to the
exercise of the options held by them under the 1988, 1993 and 1996 Stock
Option Plans.
20
<PAGE> 23

(2) Includes for Messrs. Davis, Hughes, Teagle, Jenkins, Stephens and Bridger
3,259, 3,426, 3,102, 2,714, 2,370, and 2,954 Shares, respectively, allocated
to the participant's account under the 401(k) Plan.

(3) Includes 4,000 shares which such Director has the right to acquire pursuant
to the exercise of options.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

During the year ended December 31, 1997, the Company engaged Deloitte &
Touche LLP to provide certain audit services. The services included the audit of
the annual financial statements, a review of the quarterly data furnished by the
Company to the SEC for the quarters ended March 31, June 30, and September 30,
1997, services performed in connection with filing of this Proxy Statement and
the Annual Report on Form 10-K by the Company with the SEC, attendance at
meetings with the Audit Committee and consultation on matters relating to
accounting, tax and financial reporting. The Audit Committee approved all
services performed by Deloitte & Touche LLP in advance of their performance.
Deloitte & Touche LLP has acted as independent certified public accountants for
the Company since its organization on June 21, 1988. Neither Deloitte & Touche
LLP nor any of its associates have any relationship to the Company or any of its
subsidiaries except in its 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 the Company should
they desire.

As of the date hereof, the Board of Directors has not selected independent
public accountants to audit the books and accounts of the Company for the fiscal
year ending December 31, 1998. 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
Company 1998 Equity and Cash Incentive Plan. A reasonable time before this
solicitation of proxies, the Board of Directors was not aware of any other
matters to be presented for action at the Annual Meeting or any adjournment
thereof. If any other business should properly 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
judgement.

SHAREHOLDER PROPOSALS

Proposals of shareholders to be presented at the 1999 Annual Meeting of
Shareholders of the Company must be received at the Company's executive offices
by December 19, 1998, to be considered for inclusion in the Company's proxy
materials relating to such meeting. Such proposals must comply with the SEC
proxy rules relating to shareholder proposals in order to be included in the
Company's proxy material.

GENERAL

The Company 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, officers and employees of the Company, and no
additional compensation will be paid to such individuals. The Company also has
retained Morrow & Co., Inc., 909 Third Avenue, New York, New York 10022 to
solicit proxies by mail, personal interview, telephone, or telegraph, for which
service the Company anticipates a cost not in excess of $5,000 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 Shares. The Company will, upon the request of any such
entity, pay such entity's reasonable expenses for completing the mailing of such
material to such beneficial owners.

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<PAGE> 24

Consistent with state law and pursuant to the Company's bylaws, a majority
of the Shares entitled to vote on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter.

The twelve nominees for election as directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of directors
will be elected directors. A majority of the votes properly cast is necessary to
approve any other matter which comes before the Annual Meeting, except as
otherwise required by law, the Articles of Incorporation, or the Company's
Bylaws.

The Company 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. The Company will count
Shares represented by proxies that withhold authority to vote for a nominee for
election as a director or that reflects 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) 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 Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1997, which contains financial statements and other information, is
being mailed to shareholders with this Proxy Statement, but it is not to be
regarded as proxy soliciting material.

AN ADDITIONAL COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH
THE SEC MAY BE OBTAINED, WITHOUT CHARGE, BY ANY SHAREHOLDER UPON WRITTEN REQUEST
TO THE CORPORATE SECRETARY, KOGER EQUITY, INC., POST OFFICE BOX 4339,
JACKSONVILLE, FLORIDA 32201; PROVIDED, HOWEVER, THAT A COPY OF THE EXHIBITS TO
SUCH ANNUAL REPORT ON FORM 10-K, FOR WHICH THERE MAY BE A REASONABLE CHARGE,
WILL NOT BE SUPPLIED TO SUCH SHAREHOLDER UNLESS SPECIFICALLY REQUESTED.

22
<PAGE> 25

EXHIBIT 1

KOGER EQUITY, INC.

1998 EQUITY AND CASH INCENTIVE PLAN

1. PURPOSE

The purpose of this Equity and Cash Incentive Plan (the "Plan") is to
advance the interests of Koger Equity, Inc. (the "Company") and its subsidiaries
by enhancing their ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
Common Stock, par value $.01 per share, ("Stock") and cash incentives.

The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards or Performance Awards in
Stock, cash or both, Loans or Supplemental Grants, or combinations thereof, (the
"Award(s)") all as more fully described below.

2. ADMINISTRATION

Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. During such times as the Company's Common Stock is registered
under the Securities Exchange Act of 1934 (the "1934 Act"), all members of the
Committee shall be "non-employee directors" within the meaning of Rule 16b-3
promulgated under the 1934 Act and "outside directors" within the meaning of
Section 162(m)(4)(C)(I) of the Internal Revenue Code of 1986, as amended (the
"Code").

The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a holder of an Award with
any obligations to be performed by such holder under an Award and waive any
terms or conditions of an Award; (f) amend or cancel an existing Award in whole
or in part (and if an Award is canceled, grant another Award in its place on
such terms and conditions as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants (as defined below),
and change such forms from time to time; (h) adopt, amend and rescind rules and
regulations for the administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations and actions of the Committee, and
all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and will bind
all parties. Nothing in this paragraph shall be construed as limiting the power
of the Committee to make adjustments under Section 8.6.

3. EFFECTIVE DATE AND TERM OF PLAN

The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Awards may be made prior to such stockholder
approval if made subject thereto. No Award may be granted under the Plan after
May 19, 2008, but Awards previously granted may extend beyond that date.

1
<PAGE> 26

4. SHARES SUBJECT TO THE PLAN

Subject to adjustment as provided in Section 8.6, the aggregate number of
shares of Stock that may be delivered under the Plan will be 1,000,000. If any
Award requiring exercise by the Participant for delivery of Stock terminates
without having been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of Stock as to
which such Award was not exercised or for which cash was substituted will be
available for future grants.

Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 250,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Code.

Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.

5. ELIGIBILITY AND PARTICIPATION

Each employee of the Company or any of its subsidiaries (an "Employee") and
each other person or entity (including without limitation non-Employee directors
of the Company or a subsidiary of the Company) who, in the opinion of the
Committee, is in a position to make a significant contribution to the success of
the Company or its subsidiaries will be eligible to receive Awards under the
Plan (each such Employee, person or entity receiving an Award, a "Participant").
A "subsidiary" for purposes of the Plan will be a corporation in which the
Company owns, directly or indirectly, stock possessing 50% or more of the total
combined voting power of all classes of stock.

6. TYPES OF AWARDS

6.1. OPTIONS.

(a) Nature of Options. An Option is an Award giving the recipient the
right, on exercise thereof, to purchase Stock.

Both "incentive stock options," as defined in Section 422(b) of the Code
(any Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not ISOs, may be granted under
the Plan. ISOs shall be awarded only to Employees. An Option awarded under the
Plan shall be a non-ISO unless it is expressly designated as an ISO at time of
grant.

(b) Exercise Price. The exercise price of an Option will be determined by
the Committee subject to the following:

(1) The exercise price of an ISO or an Option intended to qualify as
performance based compensation under Section 162(m) of the Code shall not
be less than 100% of the fair market value of the Stock subject to the
Option, determined as of the time the Option is granted.

(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.

(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.

(d) Exercise of Options. An Option will become exercisable at such time or
times, and on such conditions, as the Committee may specify. The Committee may
at any time and from time to time accelerate the time at which all or any part
of the Option may be exercised. Any exercise of an Option must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by (1) any documents required by the Committee and (2) payment in full in
accordance with paragraph (e) below for the number of shares for which the
Option is exercised.

2
<PAGE> 27

(e) Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option or by the instrument evidencing
the Option, (i) through the delivery of shares of Stock which have been held for
at least six months (unless the Committee approves a shorter period) and which
have a fair market value equal to the exercise price, (ii) by delivery of an
unconditional and irrevocable undertaking by a broker, bank or other financial
institution, acceptable to the Company, to deliver promptly to the Company
sufficient funds to pay the exercise price, or (iii) by any combination of the
foregoing permissible forms of payment.

(f) Discretionary Payments. If (i) the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2) exceeds the exercise price of
the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Stock (at a price per share equal to the fair market value per share) to the
person exercising the Option an amount equal to the difference between the fair
market value of the Stock which would have been purchased pursuant to the
exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.

6.2. STOCK APPRECIATION RIGHTS.

(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right (or
"SAR") is an Award entitling the holder, on exercise, to receive an amount in
cash or Stock or a combination thereof (such form to be determined by the
Committee) determined in whole or in part by reference to appreciation, from and
after the date of grant, in the fair market value of a share of Stock. SARs may
be based solely on appreciation in the fair market value of Stock or on a
comparison of such appreciation with some other measure of market growth such as
(but not limited to) appreciation in a recognized market index. The date as of
which such appreciation or other measure is determined shall be the exercise
date unless another date is specified by the Committee.

(b) Grant of Stock Appreciation Rights. SARs may be granted in tandem
with, or independently of, Options granted under the Plan.

(1) Rules Applicable to Tandem Awards. When SARs are granted in
tandem with Options, (a) the SAR will be exercisable only at such time or
times, and to the extent, that the related Option is exercisable and will
be exercisable in accordance with the procedure required for exercise of
the related Option; (b) the SAR will terminate and no longer be exercisable
upon the termination or exercise of the related Option, except that a SAR
granted with respect to less than the full number of shares covered by an
Option will not be reduced until the number of shares as to which the
related Option has been exercised or has terminated exceeds the number of
shares not covered by the SAR; (c) the Option will terminate and no longer
be exercisable upon the exercise of the related SAR; and (d) the SAR will
be transferable only with the related Option.

(2) Exercise of Independent SARs. A SAR not granted in tandem with an
Option will become exercisable at such time or times, and on such
conditions, as the Committee may specify. The Committee may at any time
accelerate the time at which all or any part of the SAR may be exercised.

Any exercise of an independent SAR must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.

6.3. RESTRICTED AND UNRESTRICTED STOCK.

(a) Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Stock in such amounts and upon such
terms and conditions as the Committee shall determine subject to the
restrictions described below ("Restricted Stock").

(b) Restricted Stock Agreement. The Committee may require, as a condition
to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms
3
<PAGE> 28

and conditions of the Award. In lieu of a Restricted Stock Award Agreement, the
Committee may provide the terms and conditions of an Award in a notice to the
Participant of the Award, on the Stock certificate representing the Restricted
Stock, in the resolution approving the Award, or in such other manner as it
deems appropriate.

(c) Transferability and Other Restrictions. Except as otherwise provided
in this Section 6.3, the shares of Restricted Stock granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable period or periods established by the Committee
and the satisfaction of any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock is subject to
such restrictions and conditions is referred to as the "Restricted Period").
Except as the Committee may otherwise determine under Section 7.1, if a
Participant suffers a Termination of Service (as defined at Section 7.1) for any
reason during the Restricted Period, the Company may purchase the shares of
Restricted Stock subject to such restrictions and conditions for the amount of
cash paid by the Participant for such shares; provided, that if no cash was paid
by the Participant such shares of Restricted Stock shall be automatically
forfeited to the Company.

During the Restricted Period with respect to any shares of Restricted
Stock, the Company shall have the right to retain in the Company's possession
the certificate or certificates representing such shares.

(d) Removal of Restrictions. Except as otherwise provided in this Section
6.3, a share of Restricted Stock covered by a Restricted Stock grant shall
become freely transferable by the Participant upon completion of the Restricted
Period, including the passage of any applicable period of time and satisfaction
of any conditions to vesting. The Committee, in its sole discretion, shall have
the right at any time immediately to waive all or any part of the restrictions
and conditions with regard to all or any part of the shares held by any
Participant.

(e) Voting Rights, Dividends and Other Distributions. During the
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock, including any dividends
and distributions paid in shares, shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.

(f) Other Awards Settled with Restricted Stock. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.

(g) Unrestricted Stock. Subject to the terms and provisions of the Plan,
the Committee may grant shares of Stock free of restrictions under the Plan in
such amounts and upon such terms and conditions as the Committee shall
determine.

(h) Notice of Section 83(b) Election. Any Participant making an election
under Section 83(b) of the Code with respect to Restricted Stock must provide a
copy thereof to the Company within 10 days of filing such election with the
Internal Revenue Service.

6.4. DEFERRED STOCK.

A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6.4 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.

4
<PAGE> 29

6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.

(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals (as hereinafter defined). Performance Goals may
be related to personal performance, corporate performance, departmental
performance or any other category of performance established by the Committee.
The Committee will determine the Performance Goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.

(b) Other Awards Subject to Performance Condition. The Committee may, at
the time any Award described in this Section 6.5 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 or any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award. Any such
Award made subject to the achievement of Performance Goals (other than an Option
or SAR) shall be treated as a Performance Award for purposes of Section 6.5(c)
below.

(c) Limitations and Special Rules. In the case of any Performance Award
intended to qualify for the performance-based remuneration exception described
in Section 162(m)(4)(C) of the Code and the regulations thereunder (an "Exempt
Award"), the Committee shall in writing preestablish specific Performance Goals.
A Performance Goal must be established prior to passage of 25% of the period of
time over which attainment of such goal is to be measured. "Performance Goal"
means criteria based upon any one or more of the following (on a consolidated,
divisional, subsidiary, line of business or geographical basis or in
combinations thereof): (i) sales; revenues; assets; expenses; earnings before or
after deduction for all or any portion of interest, taxes, depreciation or
amortization, whether or not on a continuing operations or an aggregate or per
share basis; return on equity, investment, capital or assets; inventory level or
turns; one or more operating ratios; borrowing levels, leverage ratios or credit
rating; market share; capital expenditures; cash flow; stock price; stockholder
return; or any combination of the foregoing; or (ii) acquisitions and
divestitures (in whole or in part); joint ventures and strategic alliances;
spin-offs, split-ups and the like; reorganizations; recapitalizations,
restructurings, financings (issuance of debt or equity) and refinancings;
transactions that would constitute a Change of Control; or any combination of
the foregoing. A Performance Goal and targets with respect thereto determined by
the Committee need not be based upon an increase, a positive or improved result
or avoidance of loss. The maximum Exempt Award payable to any Participant in
respect of any such Performance Goal for any year shall not exceed $2,500,000.
Payment of Exempt Awards based upon a Performance Goal for calendar years 2004
and thereafter is conditioned upon reapproval by Company's shareholders no later
than Employer's first meeting of shareholders in 2003.

6.6. LOANS AND SUPPLEMENTAL GRANTS.

(a) Loans. The Company may make a loan to a Participant ("Loan"), either
on the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with the
payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.

(b) Supplemental Grants. In connection with any Award, the Committee may
at the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under

5
<PAGE> 30

this Section 6. Any payments under this subsection (b) will be made at the time
the Participant incurs Federal income tax liability with respect to the Award.

7. EVENTS AFFECTING OUTSTANDING AWARDS

7.1. TERMINATION OF SERVICE.

If a Participant who is an Employee ceases to be an Employee, or if there
is a termination of the consulting, service or similar relationship in respect
of which a non-Employee Participant was granted an Award hereunder (such
termination of the employment or other relationship to be referred to as a
"Termination of Service"), except as otherwise provided by the Committee with
respect to an Award, the following will apply:

(a) Options and SARs.

(1) All Options and SARs held by the Participant immediately prior to
the Termination of Service may be exercised as follows:

(i) If the Termination of Service is on account of the Participant's
death, such Awards may be fully exercised without regard to vesting
requirements by the Participant's executor, administrator or personal
representative or the person or persons to whom the Option or Right is
transferred by will or the applicable laws of descent and distribution, at
any time within the one year period ending with the first anniversary of
the Participant's death, and shall thereupon terminate.

(ii) If Termination of Service is on account of retirement due to
disability, as determined by the Company's Employee Policy Manual, such
Award may be immediately fully exercised in accordance with the original
terms of the Award, except there shall be no vesting requirements.

(iii) If the Termination of Service is on account of the Participant's
retirement as determined by the Company's Employee Policy Manual other than
as the result of disability, as described above, such Awards may be
exercised by the Participant at any time in accordance with the original
terms of the Award.

(iv) If the Termination of Service is for any other reason, such
Awards may be exercised, to the extent exercisable, by the Participant at
any time within the three-month period following the Termination, and shall
thereupon terminate, unless the Award provides by its terms for immediate
termination of the Award in the event of such a Termination of Service or
unless the Termination of Service results from a discharge for cause that,
in the opinion of the Committee, casts such discredit on the Participant as
to justify immediate termination of the Award.

(2) In no event, however, shall an Option or SAR remain exercisable
beyond the latest date on which it could have been exercised without regard
to this Section 7.

(3) Options and SARs held by a Participant immediately prior to the
Termination of Service that are not then exercisable shall terminate upon
the Termination of Service.

(b) Restricted Stock. Restricted Stock held by the Participant must be
transferred to the Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock will be so
transferred without any further action by the Participant) in accordance with
Section 6.3(c).

(c) Deferred Stock and Performance Awards. Any payment or benefit under a
Deferred Stock Award, Performance Award or Supplemental Grant to which the
Participant was not irrevocably entitled prior to the Termination of Service
will be forfeited and the Award canceled upon the Termination of Service.

(d) Special Circumstances. In the case of a Participant who is an
Employee, a Termination of Service shall not be deemed to have resulted by
reason of (i) a sick leave or other bona fide leave of absence approved in
accordance with the Company's Employee Policy Manual, or (ii) a transfer of
employment between the Company and a subsidiary or between subsidiaries, or to
the employment of a corporation (or a parent or

6
<PAGE> 31

subsidiary corporation of such corporation) issuing or assuming an option in a
transaction to which Section 424(a) of the Code applies.

7.2. CHANGE OF CONTROL PROVISIONS.

(a) Effect of Change of Control. Notwithstanding any other provision of
the Plan to the contrary, except as otherwise explicitly provided by the
Committee in writing with respect to a particular Award at the time the Award is
granted, in the event of a Change of Control:

(1) Acceleration of Awards. As of the date on which such Change of
Control is determined to have occurred, (i) Options and SARs that are
outstanding and that are not then exercisable shall become exercisable to
the full extent of the original grants; (ii) shares of Restricted Stock
that are not otherwise vested shall vest (and any Stock to be delivered
under any other Award as Restricted Stock shall upon delivery be
unrestricted); (iii) holders of Performance Awards granted hereunder as to
which the relevant performance period has not ended shall be entitled at
the time of the Change of Control to receive a cash payment per Performance
Award equal to the full value of the cash component of such Award (if any)
plus the fair market value of any Stock included in such Award; (iv) any
Deferred Stock that has been awarded but not delivered shall be delivered
immediately; (v) any Supplemental Grant that has been awarded but not paid
shall be paid immediately; and (vi) any Loan containing a provision for
forgiveness shall be forgiven immediately, and any other Loan may, at the
discretion of the Committee, be forgiven regardless of the original
conditions of the Loan.

(2) Termination of Awards in Certain Transactions. If, as part of, or
in connection with, the Change of Control, there occurs a merger or
consolidation in which the Company is not the surviving corporation or
which results in the acquisition of substantially all the Company's
outstanding stock by a person, entity or group of persons and/or entities
acting in concert or there is a dissolution or liquidation of the Company,
Awards payable in Stock that are not cashed out or otherwise disposed of in
or prior to the transaction will terminate.

(3) Restriction on Termination of Awards Due to Termination of
Employment. Awards that remain outstanding after a Change of Control shall
not be terminated as a result of a Termination of Service, other than by
reason of death, and shall continue to be exercisable in accordance with
their original terms.

(4) Restriction on Amendment. In connection with or following a
Change of Control, neither the Committee nor the Board may impose
additional conditions upon exercise or otherwise amend or restrict an
Award, or amend the terms of the Plan in any manner adverse to the holder
thereof, without the written consent of such holder.

Notwithstanding the foregoing, if any right granted pursuant to this
Section 7.2 would make a Change of Control transaction ineligible for pooling of
interests accounting under applicable accounting principles that but for this
Section 7.2 would otherwise be eligible for such accounting treatment, the
Committee shall have the authority to substitute stock for the cash which would
otherwise be payable pursuant to this Section 7.2 having a fair market value
equal to such cash.

(b) Definition of Change of Control. A "Change of Control" shall be deemed
to have occurred if and when:

(1) The Company ceases to be a publicly owned corporation having at
least 500 stockholders; or

(2) There occurs any event or series of events that would be required
to be reported as a change of control in response to Item 1(a) on a Form
8-K filed by the Company under the 1934 Act or in any other filing by the
Company with the Securities and Exchange Commission unless the person
("Person"), as that term is defined or used in Section 13(d) or 14(d)(2) of
the 1934 Act, acquiring control is an affiliate of the Company as of the
date the Plan is approved by stockholders of the Company; or

(3) The Company executes an agreement of acquisition, merger, or
consolidation which contemplates that after the effective date provided for
in the agreement all or substantially all of the business
7
<PAGE> 32

and/or assets of the Company will be controlled by another Person;
provided, however, for purposes of this subparagraph (3) that (i) if such
an agreement requires as a condition precedent approval by the Company's
shareholders of the agreement or transaction, a Change of Control shall not
be deemed to have taken place unless and until such approval is secured
and, (ii) if the voting shareholders of such other Person shall,
immediately after such effective date, be substantially the same as the
voting shareholders of the Company immediately prior to such effective
date, the execution of such agreement shall not, by itself, constitute a
"Change of Control"; or

(4) Any Person (other than the Company, a majority-owned subsidiary of
the Company, an employee benefit plan maintained by the Company or a
majority-owned subsidiary of the Company) becomes the beneficial owner,
directly or indirectly (either as a result of the acquisition of securities
or as the result of an arrangement or understanding, including the holding
of proxies, with or among security holders), of securities of the Company
representing more than 25% of the votes that could then be cast in an
election for members of the Board unless within 15 days of being advised
that such ownership level has been reached, the Company's board of
directors adopts a resolution approving the acquisition of that level of
securities ownership by such Person; or

(5) During any period of 24 consecutive months, commencing after the
date this Plan is approved by stockholders of the Company, individuals who
at the beginning of such 24-month period were directors of the Company
shall cease to constitute at least a majority of the Board, unless the
election of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least two
thirds of (i) the directors then in office who were directors at the
beginning of the 24-month period, or (ii) the directors specified in clause
(i) plus directors whose election has been so approved by directors
specified in clause (i).

8. GENERAL PROVISIONS

8.1. DOCUMENTATION OF AWARDS.

Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.

8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.

Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, only upon the issuance of Stock. However, the Committee
may, on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.

8.3. CONDITIONS ON DELIVERY OF STOCK.

The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or The NASDAQ National Market, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or market and the Company has received official notice of the listing
of such shares, and (d) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If a sale of Stock which is required to be registered under the
Securities Act of 1933, as amended, has not been so registered, the Company may
require, as a condition to

8
<PAGE> 33

exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.

If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.

8.4. TAX WITHHOLDING.

The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").

In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock
or removal of restrictions thereon. If and to the extent that such withholding
is required, the Committee may permit the Participant or such other person to
elect at such time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver to the Company,
Stock having a value calculated to satisfy the withholding requirement. The
Committee may make such share withholding mandatory with respect to any Award at
the time such Award is made to a Participant.

If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to the
exercise or with respect to a disposition of the Stock received upon exercise,
the Committee may require as a condition of exercise that the person exercising
the ISO agree (a) to provide for withholding under the preceding paragraph of
this Section 8.4, if the Committee determines that a withholding responsibility
may arise in connection with such exercise, (b) to inform the Company promptly
of any disposition (within the meaning of section 424(c) of the Code) of Stock
received upon exercise, and (c) to give such security as the Committee deems
adequate to meet the potential liability of the Company for the withholding
requirements and to augment such security from time to time in any amount
reasonably deemed necessary by the Committee to preserve the adequacy of such
security.

8.5. TRANSFERABILITY OF AWARDS.

Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution.

8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.

(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to holders of Stock other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under the
first paragraph of Section 4 above and to the limits described in the second
paragraph of Section 4 and in Section 6.5(c).

(b) In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of Stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan; provided, that
adjustments pursuant to this sentence shall not be made to the extent it would
cause any Award intended to be exempt under Section 162(m)(4)(c) of the Code to
fail to be so exempt.

9
<PAGE> 34

(c) In the case of ISOs, the adjustments described in (a) and (b) will be
made only to the extent consistent with continued qualification of the Option
under Section 422 of the Code (in the case of an ISO) or Section 162(m) of the
Code.

8.7. EMPLOYMENT RIGHTS, ETC.

Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.

8.8. DEFERRAL OF PAYMENTS.

The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.

8.9. PAST SERVICES AS CONSIDERATION.

Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock, the Committee may determine that such price has been
satisfied by past services rendered by the Participant.

9. EFFECT, AMENDMENT AND TERMINATION

Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.

The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code.

10
<PAGE> 35

APENDIX A

Beginning of Koger Equity Proxy Card for the 1998 Annual
Shareholders Meeting - Side 1
KOGER EQUITY, INC.
PROXY
This Proxy is Solicited by the Board of Directors

The undersigned hereby appoints Victor A. Hughes, Jr., James C. Teagle, and W.
Lawrence Jenkins, and each of them, his (their) true and lawful agents and
proxies with full power of substitution in each, and hereby authorizes them to
vote at the Annual Meeting of the Shareholders of Koger Equity, Inc. to be held
at the Omni Jacksonville Hotel, 245 W. Water Street, Jacksonville, Florida, on
Tuesday, May 19, 1998, at 11:00 a.m., Eastern Daylight Saving Time, and any
adjournment or postponement thereof, all shares of Common Stock of Koger Equity,
Inc. that the undersigned would be entitled to vote if personally present. The
undersigned instructs such proxies, or their substitutes, to vote as specified
herein by the undersigned and to vote in such manner as they may determine on
any other matters that may properly come before the meeting or any adjournment
thereof.

Dated: , 1998
--------------------------------

--------------------------------------------
(Signature)
--------------------------------------------
(Signature if held jointly)

THIS PROXY MUST BE SIGNED EXACTLY AS
THE NAME(S) APPEARS HEREON

Executors, administrators, trustees, etc.
should give full title as such. If the
signer is a corporation, please sign full
corporate name by duly authorized officer.
If shares are held jointly, signature should
include both names.

<PAGE> 36

Proxy Card - Side 2
KOGER EQUITY, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 19, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.

1. ELECTION OF DIRECTORS

<TABLE>
<S> <C>
FOR ALL NOMINEES LISTED BELOW (OR) WITHHOLD AUTHORITY
(Except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]

INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:
NOMINEES:

D. Pike Aloian Victor A. Hughes, Jr. Lee S. Neibart
Benjamin C. Bishop, Jr. John R. S. Jacobsson George F. Staudter
Irvin H. Davis G. Christian Lantzsch S. D. Stoneburner
David B. Hiley William L. Mack James C. Teagle

</TABLE>

2. APPROVAL OF THE KOGER EQUITY, INC. 1998 EQUITY AND CASH INCENTIVE PLAN
FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE

End of the Koger Equity Proxy Card

<PAGE> 37
APPENDIX B

Beginning of Description of the Koger Equity 1997 Annual Report

KOGER EQUITY, INC. 1997
ANNUAL REPORT

FINANCIAL HIGHLIGHTS

The following unaudited selected financial data sets forth certain financial
information of Koger Equity, Inc. as of and for each of the four years in the
period ended December 31, 1997. (In thousands except per share data.)

<TABLE>
<CAPTION>
Income Information 1997 1996 1995(1) 1994

<S> <C> <C> <C> <C>
Rental revenues and other rental services $109,501 $ 98,805 $ 95,443 $ 94,388
Total revenues $113,989 $104,072 $125,750 $100,376
Property operations expenses $ 44,453 $ 41,597 $ 40,830 $ 39,711
Depreciation and amortization $ 24,073 $ 21,127 $ 19,102 $ 16,728
Mortgage and loan interest $ 16,517 $ 18,701 $ 23,708 $ 25,872
Net income $ 21,204 $ 10,501 $ 28,990 $ 4,215

Earnings per common share - basic $ 0.99 $ 0.57 $ 1.64 $ 0.24
- diluted $ 0.94 $ 0.54 $ 1.61 $ 0.24

Dividends declared per common share $ 0.55 $ 0.05 -- --

Weighted average shares outstanding - basic 21,374 18,523 17,724 17,599
- diluted 22,495 19,500 18,011 17,719

Balance Sheet Information 1997 1996 1995 1994

Operating properties (before depreciation) $681,249 $582,972 $571,313 $578,237
Total assets $656,097 $584,666 $578,756 $613,806
Mortgages and loans payable $181,963 $203,044 $254,909 $323,765
Total shareholders' equity $444,262 $364,135 $310,697 $280,601

Other Information 1997 1996 1995(1) 1994

Funds from operations $ 42,324 $ 33,154 $ 36,707 $ 23,475
Funds from operations per share - diluted $ 1.88 $ 1.70 $ 2.04 $ 1.32

Closing stock price as reported on AMEX
at year end $ 21.94 $ 18.75 $ 10.63 $ 7.25

Income before interest, income taxes,
depreciation and amortization $ 62,729 $ 51,144 $ 71,866 $ 47,042

Number of buildings (at end of period) 228 215 216 219
Percent leased (at end of period) 92% 92% 91% 90%
</TABLE>

(1) Includes $13,066 of interest revenue associated with TKPL mortgage notes.

<PAGE> 38

GRAPHS

1. KE Stock Price High/Low for the four years ended 1997.

2. Total market value of common stock at year end (At year end in
millions)
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C>
$557 $392 $189 $128
</TABLE>

3. Funds from Operations, Per Share *
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C>
$1.88 $1.70 $1.31* $1.32
</TABLE>

*For 1995, excludees $0.73 per share of interest revenue.

4. Debt-to-Market capitalization
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C>
24.6% 34.1% 57.5% 71.7%
</TABLE>

<PAGE> 39

MESSAGE TO THE SHAREHOLDERS

We are pleased to report that 1997 was a year of continued success for Koger
Equity. Operating results from our existing suburban office portfolio were
excellent. Our Company's business and growth plan has been to maximize funds
from operations to increase cash available for investment and distribution. To
accomplish this, we have been developing and acquiring suburban office buildings
in the Southeast and Southwest which complement our existing portfolio;
enhancing the existing portfolio of properties by adding new leases, renewing
existing leases at higher rental rates and implementing scheduled rent increases
under existing leases; and utilizing land owned by the Company which has road
and utility infrastructure in place to develop additional buildings. We have
made great strides in accomplishing these strategies in 1997.

The Company's public offering of common stock, along with its enlarged revolving
credit facility, has enabled us to capitalize on investment opportunities in
promising markets throughout the Southeast and Southwest. We expect to continue
to be successful in implementing our development and acquisition strategy and in
building the balance sheet to an institutional grade in the future. For 1998 and
beyond, we look forward to producing higher rental revenues, cash flow and
dividends for our shareholders.

Review Of 1997

Koger Equity's operating properties experienced accelerating growth and higher
rental revenues, with annualized rents at year-end reaching $116.6 million, an
increase of 16.2% over the previous year-end, while we achieved a 92% leased
percentage. During the year, we signed more than 1,100 leases, covering
approximately two million square feet. New leases in existing buildings totaled
approximately 838,000 net rentable square feet, with rates on these leases
averaging $15.63 per foot, up 1.2% over last year, while the weighted average
term of these leases increased to 64 months. Our leasing managers improved our
high retention rate to 65%, from 63% the previous year, renewing 1,167,000 net
rentable square feet at an average rental rate of $15.41 per foot, up 10% over
the rental rate prior to renewal.

Property operating expenses declined to 40.6% of total rental revenues.
Expenditures for tenant improvements, building improvements and leasing
commissions remained stable at $1.57 per net rentable square foot owned. The
operations team for the Company successfully improved the net cash flow from the
portfolio to over $52 million, an increase of 17.3% from the prior year.

The Company was able to execute its acquisition and development program in 1997
as a direct result of its improved balanced sheet, long-term debt refinancing,
and a new revolving credit facility. The Company acquired 11 high-quality
buildings, containing approximately 877,000 gross square feet in existing Koger
markets, with an investment of $76 million. These acquisitions are currently 92%
leased and are meeting or exceeding our budget requirements and projections.
Additionally, in 1997 the Company completed construction of two new buildings
totaling 123,600 gross square feet located within existing suburban parks - the
49,300-foot Grove Building, located in the Koger Center - Germantown in Memphis,
Tennessee, and the 74,300-foot Piedmont Building, located in the Koger Center -
Carmel in Charlotte, North Carolina. We also commenced construction of eight
buildings which will contain approximately 778,000 gross square feet in seven
markets. At year-end, approximately one-third of the space under construction
had been pre-leased.

Financial and Capital Markets Activity Included the Following:

1. During December 1997, the Company completed a public offering of 3.5 million
shares of its common stock, three million shares of which were sold in an
underwritten offering for an aggregate sales price of $60.75 million and 500,000
of such shares were sold to an affiliate of Apollo Real Estate Investment Fund
II, L.P. for an aggregate sales price of $9.57 million. The offering, our first
since 1989 and executed in a difficult market, successfully reintroduced Koger
Equity to the public equity market, enabling the Company to diversify ownership
and place shares with long-term investors. Approximately $51.6 million of the
proceeds from these sales was applied to the repayment of indebtedness with an
average interest rate of approximately 8.6%. The Company reduced total debt
during 1997 by approximately $21 million, or 10.3%, from $203 million to $182
million. In addition, the Company redeemed 99,871 warrants for $3.81 per warrant
on August 29, 1997. The remaining warrants were exercised by

<PAGE> 40

the holders prior to the redemption date. With a market capitalization of $739
million at year-end, these actions improved the Company's debt-to-total market
capitalization ratio from 34% to 25%.

2. In December 1997, the Company' s secured revolving credit facility was
increased to $100 million at competitive rates with an expanded participating
lender group. This facility, in combination with the additional equity, will
provide funding for the 1998 development and acquisition programs.

3. Rental revenues for 1997 totaled $108.9 million, as compared to $98.3 million
for the year ended December 31, 1996, up $10.6 million, or 10.8%.

4. Funds from operations totaled $42.3 million for 1997, compared to $33.2
million in 1996, up $9.1 million, or 27.7%. Funds from operations per diluted
share totaled $1.88, up 10.6% from the previous year.

5. Net income for 1997 totaled $21.2 million, compared to $10.5 million for
1996, up $10.7 million, or 102%.

6. During 1997, the Company's Board of Directors increased the regular
quarterly dividend to $0.25 per share from the initial quarterly dividend of
$0.05 per share at the beginning of the year, an increase of 400%.

7. The Company' s common stock, traded on the American Stock Exchange, increased
17%, from $18.75 on December 31, 1996, to $21.94 on December 31, 1997. Total
market capitalization increased 24.2% to $739.3 million, and the market value of
the Company's common stock increased 42.3 % to $557.4 million.

Koger Equity: Outlook for 1998

We have been successful in matching our customers' growth plans with Koger
Equity's new developments. Since the beginning of the year, in further response
to demand in specific sub-markets and our tenants' needs, we have started
construction on a five-story 141,500-square-foot building in San Antonio, and
have approved construction starts on six other new buildings totaling 610,700
feet in Atlanta, Jacksonville, El Paso and St. Petersburg.

As we began the year, the Company had an additional pipeline of about 1.2
million gross square feet of acquisition prospects in excellent markets.

The Company currently holds a land inventory totaling 91 acres in 10 markets,
which will support the development of approximately 1.4 million feet of office
space. We will continue in 1998 to invest prudently in our land account for
future growth.

We have seen over the past several years a large increase in the amount of
capital invested in the public markets for commercial real estate, including the
office sector. As of December 31, 1997, the total market capitalization of all
equity real estate investment trusts was $127.8 billion, of which
industrial/office was 32%. The return of such large sums of capital to the
office sector increases competition for high-quality, accretive investments,
long-term development opportunities, and tenants.

I am confident, as we look forward in 1998, that our fine real estate
professionals, many of whom have worked most of their real estate careers in
this organization, will continue to add value to the business. In a period of
near-perfect conditions in the nation's economy, we have seen significant growth
through acquisitions, merger transactions, and, recently, new development.
However, past lessons have not been forgotten. Real estate is still a local
business. Our center property managers, leasing agents, and tenant service
representatives are on-site, at each of the Company 's assets, delivering
service to our customers the Koger way.

As we continue to build, acquire and manage suburban office communities in
established locations, we expect to experience growth and success as a direct
result of our tenants' success and growth. Each working day, we will manage the
Company for the longer term, maintaining a conservative balance sheet, retaining
a portion of earnings and funds available for distribution to reinvest in the
portfolio. Koger office centers must be the best available value for our
customers today and tomorrow.

<PAGE> 41

Respectfully,

/s/VICTOR A. HUGHES, JR.
Victor A. Hughes, Jr.
Chairman and Chief Executive Officer

The foregoing message to the Shareholders contains forward- looking statements
concerning 1998. The actual results of operations for 1998 could differ
materially from those projected because of factors affecting the financial
markets, reactions of the Company ' s existing and prospective investors, the
ability of the Company to identify and execute development projects and
acquisition opportunities, the ability of the Company to renew and enter into
new leases on favorable terms, and other risk factors. See "Management' s
Discussion and Analysis of Financial Condition and Results of Operations -
Cautionary Statement Relevant to Forward-Looking Information for Purpose of the
'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of
1995" in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.

<PAGE> 42

FACTS OF INTEREST

- -Koger Equity, Inc. is a self-administered and self-managed real estate
investment trust which owns, operates and manages a portfolio of suburban office
buildings primarily located in 19 office centers (the"Koger Centers") located in
13 metropolitan areas throughout the southeastern and southwestern United
States.

- -As of December 31, the office buildings contained 8.5 million net rentable
square feet and were approximately 92% leased at an average annual rent of
$15.02 per net rentable square foot.

- -As of December 31, 1997, the Company owned 228 office buildings, of which 224
are in Koger Centers and four are outside Koger Centers but in metropolitan
areas where Koger Centers are located.

- -As a pioneer in the development of suburban office centers, the Koger
Organization has developed and constructed 18 of the Koger Centers, which were
among the first suburban office centers to feature on-site property management
and tenant services personnel.

- -The General Managers responsible for successfully operating the Koger Centers
have been with the Koger Organization an average of approximately 14 years,
while our seasoned team of department heads and senior management averages more
than 20 years of service with the Company.

- -More than 20 years ago, the Koger Organization implemented a national
marketing program which focuses on developing strong relationships with Fortune
500 companies, federal government departments and agencies and other large
prospective users of office space. This program has contributed significantly to
the success of our marketing efforts.

- -Approximately 60% of the Company's leased space is leased by national and
regional companies.

- -Governmental tenants account for about 22% of the Company's leased space.

- -During December 1997, the Company completed a public offering of 3.5 million
shares of its common stock. In connection with this public offering, 500,000 of
its common shares were acquired by an affiliate of Apollo Real Estate Investment
Fund II, L.P. for an aggregate sales price of $9.57 million, or $19.14 per
share. The price to the public of the remaining 3,000,000 shares was $20.25 per
share, or an aggregate offering price of $60.75 million. The underwriting
discount on these shares was $1.11, making the per share proceeds to the Company
$19.14, or an aggregate net proceeds of $57.42 million.

<PAGE> 43

SIGNIFICANT LEASING ACTIVITY FOR 1997 INCLUDED THE FOLLOWING:

- -41,912 feet with West Telemarketing Corporation in the Woodward Building,
Tulsa, Oklahoma.
- -38,519 feet with Sabre Group Inc. in the Pawnee Building, Tulsa, Oklahoma.
- -33,225 feet with Ahold Finance USA, Inc. in the Barnwell Building, Greenville,
South Carolina.
- -31,584 feet with Centers for Disease Control in the Williams Building, Atlanta,
Georgia.
- -23,630 feet with First Data Resources, Inc. in the Brunswick Building,
Charlotte, North Carolina.
- -35,428 feet with Ciba-Geigy Corporation in the Asheville Building, Greensboro,
North Carolina.
- -30,466 feet with United Healthcare Services, Inc. in the Salem Building,
Greensboro, North Carolina.
- -Approximately 40,000 feet to seven tenants upon completion of construction of
the Grove Building, Memphis, Tennessee.
- -77,000 feet with Travelers Property Casualty Corp., in the Tarleton Building in
Charlotte, North Carolina.

<PAGE> 44

SIGNIFICANT ACQUISITIONS FOR 1997 INCLUDED THE FOLLOWING:

- -On May 15, three buildings containing 161,700 gross square feet, and 3.5 acres
of land located in Greenville, South Carolina, for a purchase price of $14
million.

- -On June 4, two buildings containing 258,800 gross square feet, located in San
Antonio, Texas, for a purchase price of $15.5 million.

- -On June 18, one building containing 29,600 gross square feet, located in
Jacksonville, Florida, for a purchase price of $3.3 million.

- -On August 4, one building containing 94,600 gross square feet, located in
Tallahassee, Florida, for a purchase price of $9.6 million.

- -On September 23, two buildings, containing 52,000 gross square feet, and 2.44
acres of land located in El Paso, Texas, for a purchase price of $3.3 million.

- -On October 1, one building containing 181,100 gross square feet, located in
Atlanta, Georgia, for a purchase price of $21.2 million.

- -On December 1, one building containing 97,300 gross square feet, located in
Atlanta, Georgia, for a purchase price of $8.5 million.

<PAGE> 45

OFFICE PROPERTIES

Description: Map of the United States with the location of the Koger Centers
identified.

@ Owned and Managed by Koger
* 1997 Acquisitions and Developments
# Owned by a Third Party and Managed by Koger

<TABLE>
<S> <C> <C>
Atlanta @* 2601 Flowers Road South, Atlanta, GA 30341 770-458-7231
Austin @ 3420 Executive Center Drive, Austin, TX 78731 512-345-1893
Charlotte @* 6701 Carmel Road, Charlotte, NC 28226 704-543-3019
Columbia # 201 Executive Center Drive, Columbia, SC 29210 803-731-9440
El Paso @* 444 Executive Center Drive, El Paso, TX 79902 915-532-3456
Greensboro @* 2211 West Meadowview Road, Greensboro, NC 27407 336-294-6785
Greenville @* 150 Executive Center Drive, Greenville, SC 29615 864-288-5250
Jacksonville @* 8381 Dix Ellis Trail, Jacksonville, FL 32256 904-464-0900
Little Rock # 10809 Executive Center Drive, Little Rock, AR 72211 501-224-1200
Memphis @*# 65 Germantown Court, Cordova, TN 38018 901-757-8118
Nashville # 278 Franklin Road, Brentwood, TN 37027 615-373-2773
Orlando @* 930 Woodcock Road, Orlando, FL 32803 407-894-5851
St. Petersburg @ 877 Executive Center Dr.,W., St. Petersburg, FL 33702 813-576-1400
San Antonio @* 4538 Centerview Drive, San Antonio, TX 78228 210-736-2494
Tallahassee @* 1311 Executive Center Drive, Tallahassee, FL 32301 850-877-3151
Tulsa @ 9726 East 42nd Street, Tulsa, OK 74146 918-628-0810
</TABLE>

<PAGE> 46

PHOTOGRAPHS OF FOLLOWING BUILDINGS WERE INCLUDED IN KOGER EQUITY'S 1997 ANNUAL
REPORT:

Osborn Building, Jacksonville, Florida
Pacific Plaza Building, San Antonio, Texas (1997 acquisition)
Forrest Building, Tallahassee, Florida
Duke Building, Atlanta, Georgia
Cross Building, Austin, Texas
Brunswick Building, Charlotte, North Carolina
Broward Building, Jacksonville, Florida
Gainsborough Building, Memphis, Tennessee
Darlington Building, Greenville, South Carolina
Asheville Building, Greensboro, North Carolina
Laurel Building, Orlando, Florida
Lincoln Parkway Building, Atlanta, Georgia (1997 acquisition)
Alexander Building, Tallahassee, Florida (1997 acquisition)
Suwannee Building, Jacksonville, Florida (1997 acquisition)
Hamilton Building, Jacksonville, Florida

PHOTOGRAPHS OF THE FOLLOWING PERSONS WERE INCLUDED IN KOGER EQUITY'S 1997 ANNUAL
REPORT:

Victor A. Hughes, Jr., Chairman of the Board, Chief Executive Officer and Chief
Financial Officer; James C. Teagle, President, Chief Operating Officer and
Director

Kenneth D. Lund, Vice President/Division II; Bryan F. Howell, Vice
President/Operations; Bradford A. Chaffin, Vice President/Third-Party
Management; J. Velma Keen, II, Vice President/Division I; Thomas C. McGeachy,
Vice President/Division III

Diana R. Payne, Assistant Vice President/Human Resources; James L. Stephens,
Vice President and Chief Accounting Officer; W. Lawrence Jenkins, Vice
President/Administration and Corporate Secretary; G. Danny Edwards, Treasurer;
Mary H. McNeal, Assistant Vice President/Investor Relations

James W. Walker, Vice President/Marketing; Philip J. Bruce, Vice
President/Development; Robert N. Bridger, Senior Vice President/ Engineering
Services and Construction; Michael F. Beale, Vice President/Real Estate

KOGER EQUITY, INC., FORM 10-K:
The full text of the 1997 SEC Form 10-K (as previously filed with the SEC) was
included, except for Exhibits.

<PAGE> 47

GENERAL INFORMATION

Board of Directors
D. Pike Aloian
Benjamin C. Bishop, Jr.
Irvin H. Davis
David B. Hiley
Victor A. Hughes, Jr.
John R. S. Jacobsson
G. Christian Lantzsch
William L. Mack
Lee S. Neibart
George F. Staudter
S. D. Stoneburner
James C. Teagle

Executive Officers
Victor A. Hughes, Jr., Chairman of the Board, Chief Executive Officer
and Chief Financial Officer
James C. Teagle, President and Chief Operating Officer

Officers
Michael F. Beale, Vice President/Real Estate
Robert N. Bridger, Senior Vice President/Engineering Services
and Construction
Philip J. Bruce, Vice President/Development
Bradford A. Chaffin, Vice President/Third Party Management
G. Danny Edwards, Treasurer
Wade L. Hampton, Vice President/Special Marketing
Bryan F. Howell, Vice President/Operations
W. Lawrence Jenkins, Vice President/Administration and Corporate
Secretary
J. Velma Keen, II, Vice President/Division I
Luther W. Kiger, Vice President
Kenneth D. Lund, Vice President/Division II
Thomas C. McGeachy, Vice President/ Division III
Mary H. McNeal, Assistant Vice President/Investor Relations
Diana R. Payne, Assistant Vice President/Human Resources
James L. Stephens, Vice President and Chief Accounting Officer
James W. Walker, Vice President/Marketing

Counsel
Ropes & Gray
Boston, Massachusetts

Boling & McCart
Jacksonville, Florida

Martin, Ade, Birchfield & Mickler, P.A.
Jacksonville, Florida

Independent Certified Public Accountants
Deloitte & Touche LLP

Stock Listing
American Stock Exchange
Common Stock Symbol: KE

<PAGE> 48

Common Stock Transfer Agent,
Dividend Paying Agent and Registrar
First Union National Bank
Corporate Trust Client Services, NC-1153
1525 West W. T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
(800) 829-8432

Dividend Reinvestment Plan
Stockholders may elect to have dividends automatically reinvested in
additional shares of Koger Equity, Inc. common stock. For information
about dividend reinvestment, contact First Union National Bank at (800)
829-8432.

Automatic Dividend Deposit
Stockholders may elect to have dividends automatically deposited into
the financial institution of their choice. For information about
automatic dividend deposit, contact First Union National Bank at (800)
829-8432.

- -------------------------------------

Koger Equity, Inc.
Corporate Office
Post Office Box 4339 (ZIP 32201)
3986 Boulevard Center Drive
Jacksonville, Florida 32207
(904) 398-3403
Internet address: www.koger.com

End of the description of the Koger Equity 1997 Annual Report