<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.
8880 FREEDOM CROSSING TRAIL
JACKSONVILLE, FLORIDA 32256
(904) 732-1000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Thursday, May 18, 2000
Time: 11:00 a.m.
Place: Jacksonville Marriott Hotel
4670 Salisbury Road
Jacksonville, Florida
Dear Shareholder:
At our Annual Meeting, we will ask you:
1. To elect a board of nine (9) directors to serve for the ensuing
year or until their respective successors are elected and qualified;
2. To approve the amendment to the Koger Equity, Inc. Articles of
Incorporation;
3. To approve the Koger Equity, Inc. 1998 Equity and Cash Incentive
Plan, as Amended and Restated; and
4. To transact any other business that may properly be presented at
the Annual Meeting.
If you were a shareholder of record at the close of business on March 10,
2000, you may vote at the Annual Meeting.
A copy of the Koger Equity, Inc. Annual Report for the year ended December
31, 1999, which reports financial and other information, is enclosed.
You are asked to mark, date sign and return the enclosed proxy. An envelope
is enclosed 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 18, 2000
<PAGE> 3
KOGER EQUITY, INC.
8880 FREEDOM CROSSING TRAIL
JACKSONVILLE, FLORIDA 32256
(904) 732-1000
---------------------
PROXY STATEMENT
APRIL 18, 2000
---------------------
INTRODUCTION
We sent you this Proxy Statement and the enclosed proxy card because Koger
Equity's Board of Directors is soliciting your proxy to vote at the 2000 Annual
Meeting of Shareholders. This Proxy Statement summarizes the information you
need to know to vote intelligently at the Annual Meeting. However, you do not
need to attend the Annual Meeting to vote your shares. Instead, you may simply
complete, sign and return the enclosed proxy card. In this Proxy Statement,
Koger Equity, Inc., is generally referred to as either "Koger Equity" or the
"Company."
We will begin sending this Proxy Statement, the attached Notice of Annual
Meeting and the enclosed proxy card on April 18, 2000, to all shareholders
entitled to vote. Only those shareholders who owned Koger Equity common stock at
the close of business on March 10, 2000, are entitled to vote. On this record
date, there were 26,786,191 shares of Koger Equity common stock outstanding.
Koger Equity common stock is our only class of voting stock outstanding. We are
also sending along with this Proxy Statement, the Koger Equity 1999 Annual
Report, which includes our financial statements.
Each share of Koger Equity common stock that you own entitles you to one
vote. The proxy card indicates the number of shares of Koger Equity common stock
that you own. In this Proxy Statement, Koger Equity common stock is sometimes
referred to as the "Shares."
VOTE BY PROXY
Whether you plan to attend the Annual Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Annual Meeting and vote.
If you properly fill in your proxy card and send it to us in time to vote,
your "proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make specific
choices, your proxy will vote your shares as recommended by the Board as
follows:
- "FOR" the election of all nine nominees for director of the Company, and
- "FOR" the amendment to the Koger Equity Articles of Incorporation, and
- "FOR" the amendment to the Koger Equity 1998 Equity and Cash Incentive
Plan.
If any other matter is presented, your proxy will vote in accordance with
his best judgment. At the time this Proxy Statement went to press, we knew of no
other matters to be acted on at the Annual Meeting, other than those discussed
in this Proxy Statement.
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<PAGE> 4
TO REVOKE A PROXY
If you give a proxy, you may revoke it at any time before it is exercised.
You may revoke your proxy in any one of three ways:
(1) You may send in another proxy with a later date.
(2) You may notify Koger Equity's Corporate Secretary in writing
before the Annual Meeting that you have revoked your proxy.
(3) You may vote in person at the Annual Meeting.
TO VOTE IN PERSON
If you plan to attend the Annual Meeting and wish to vote in person, we
will give you a ballot when you arrive. You will complete the ballot at that
time and return it to the Inspectors of Election at the door. However, if your
shares are held in the name of your broker, bank or other nominee, you must
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares on March 10, 2000, the record date for
voting.
MATTERS TO BE CONSIDERED
PROPOSAL 1: ELECT NINE DIRECTORS
The nine nominees for director who receive the most votes will be elected.
So, if you do not vote for a particular nominee, or you indicate, "withhold
authority to vote" for a particular nominee on your proxy card, your vote will
not count either "for" or "against" the nominee.
PROPOSAL 2: APPROVAL OF THE AMENDMENT TO THE KOGER EQUITY, INC. ARTICLES OF
INCORPORATION
The affirmative vote of a majority of the outstanding shares of common
stock represented at the Annual Meeting either in person or by Proxy is required
to approve the amendment to our Articles of Incorporation.
PROPOSAL 3: APPROVAL OF THE AMENDMENTS TO THE KOGER EQUITY, INC. 1998 EQUITY
AND CASH INCENTIVE PLAN
The affirmative vote of a majority of the outstanding shares of common
stock represented at the Annual Meeting either in person or by Proxy is required
to approve the amendments to our 1998 Equity and Cash Incentive Plan.
BROKER VOTES
Under the rules of the New York Stock Exchange, if your broker holds your
shares in its name, the broker will be entitled to vote your shares on Proposals
1, 2 and 3 even if it does not receive instructions from you. If your broker
receives instructions from you, it must vote as instructed by you.
CONFIDENTIAL VOTING
We keep all the proxies, ballots and voting tabulations private as a matter
of practice. We only let our Inspectors of Election, representatives of Norwest
Bank, and certain employees of our independent tabulating agent, Morrow &
Company, examine these documents. We will not disclose your vote to management
unless it is necessary to meet legal requirements. We will, however, forward to
management any written comments you make, on the proxy card or elsewhere.
2
<PAGE> 5
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL 1: ELECT NINE DIRECTORS
The Board has nominated nine directors for election at the Annual Meeting.
Each nominee is currently serving as one of our directors. If you re-elect them,
they will hold office until the next annual meeting and until their successors
have been elected and qualified.
We know of no reason why any nominee may be unable to serve as director. If
any nominee is unable to serve, your proxy may vote for another nominee proposed
by the Board, or the Board may reduce the number of directors to be elected. If
any director resigns, dies or is otherwise unable to serve out his term, or the
Board increases the number of directors, the Board may fill the vacancy until
the next Annual Meeting of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 1999 DIRECTOR AGE
- ---- --------------------------- ---------- ---
<S> <C> <C> <C>
D. Pike Aloian(2)............. Currently serves as a Director of Koger 1993 44
Equity. Mr. Aloian is also the Managing
Director of Rothschild Realty Inc. (a
real estate investment management and
advisory service firm); and a Director
of Charter Oak Group, Ltd. (a privately
held owner and developer of factory
outlet and retail properties). Mr.
Aloian is also a Director of Angeles
Corporation (a holder of loans to and
equity investments in residential real
estate); and a Director of Merritt
Properties, LLC (a privately held owner
and developer of light industrial
buildings).
Benjamin C. Bishop, Jr.(1).... Currently serves as a Director of Koger 1991 67
Equity. Mr. Bishop is the Chairman of
the Board of Allen C. Ewing & Co. (an
investment banking company). He is a
former Director of Grubb & Ellis
Company (a national commercial real
estate brokerage company); a former
Trustee of GMR Properties (a real
estate investment trust); and a former
Director of Cousins Properties, Inc. (a
real estate investment trust).
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 1999 DIRECTOR AGE
- ---- --------------------------- ---------- ---
<S> <C> <C> <C>
Thomas J. Crocker............. Currently serves as the Chief Executive February 17, 2000 46
Officer (since March 1 ,2000) and a
Director of Koger Equity. Mr. Crocker
previously held the position of Chief
Executive Officer of Crocker Realty
Trust, Inc. (a private real estate
investment trust), and Chief Executive
Officer of Crocker & Associates, L. P.
(a private real estate limited
partnership). Mr. Crocker is the former
Chairman and Chief Executive Officer of
Crocker Realty Trust, Inc., (a public
real estate investment trust) and
previously served as the Chairman and
Chief Executive Officer of Crocker
Realty Investors, Inc. (a public real
estate investment trust). Mr. Crocker
is the former Chief Executive Officer
of Crocker & Sons, Inc. (a private real
estate company).
David B. Hiley................ Currently serves as a Director of Koger 1993 61
Equity. Previously served as the
Executive Vice President and Chief
Financial Officer (from April 1, 1998
to March 1, 2000). Mr. Hiley was
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);
and former Director of Newcity
Communications, Inc. (a communications
firm).
Victor A. Hughes, Jr.......... Currently serves as Chairman of the 1992 63
Board
of Directors of Koger Equity, Inc. and
previously served as the Chief
Executive Officer (until March 1,
2000). Mr. Hughes also is the former
President, Chief Financial Officer,
Senior Vice President and Assistant
Secretary of Koger Equity, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 1999 DIRECTOR AGE
- ---- --------------------------- ---------- ---
<S> <C> <C> <C>
John R. S. Jacobsson(2)....... Currently serves as a Director of Koger 1997 30
Equity, and is the Partner responsible
for investments at Apollo Real Estate
Funds (manager of four real estate
investment funds). Mr. Jacobsson is
also a Director of Metropolis Realty
Trust, Inc. (owner of high rise office
buildings) and a Director of Roland
International, Inc. (a land development
company); and a Director of Oasis Car
Wash, Inc. (a car care company).
Lee S. Neibart (1)............ Currently serves as a Director of Koger 1996 48
Equity. Mr. Neibart is also Partner in
charge of the day-to-day operation of
the Apollo Real Estate Funds. (manager
of four real estate investment funds);
and a Director of Wyndham International
(a major hotel company); 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).
George F. Staudter(1)(2)...... Currently serves as a Director of Koger 1993 67
Equity. Mr. Staudter is a managerial
and financial consultant; Director of
T. D. Waterhouse Family of 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).
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 1999 DIRECTOR AGE
- ---- --------------------------- ---------- ---
<S> <C> <C> <C>
James C. Teagle............... Currently serves as a Director, 1996 58
President and Chief Operating Officer
of Koger Equity, Inc.; and Director,
President and Chief Operating Officer
of Koger Realty Services, Inc. (a Koger
Equity, Inc. related entity and manager
of office properties in six markets).
Mr. Teagle is the former Executive Vice
President, Senior Vice President and
Vice President of Koger Equity, Inc.
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
PROPOSAL 2: APPROVE AMENDMENT TO THE KOGER EQUITY, INC. ARTICLES OF
INCORPORATION
As a condition to the Company's Shares being admitted to trading on the New
York Stock Exchange, which began on March 9, 2000, the Exchange required the
Company to agree to amend at its next annual meeting of shareholders its
Articles of Incorporation to state that nothing in its Articles of Incorporation
would preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange. Therefore, Section (D) of Article V
of the Koger Equity Amended and Restated Articles of Incorporation is proposed
to be amended by adding a subsection 10 which reads as follows:
While nothing contained herein shall in any way limit the powers of the
Board of Directors, neither the exercise of such power nor the
provisions of subsections 5. and/or 8. of this Section (D) shall
preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange.
Section (D) of Article V sets forth restrictions on transfer of the
Company's Common Stock and the Company's right to redeem Shares for the primary
purpose of the Company being able to maintain its qualification as a real estate
investment trust under the Internal Revenue Code of 1986. The above amendment
required by the New York Stock Exchange should have no effect on the Company's
ability to maintain that qualification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION.
PROPOSAL 3: APPROVE THE KOGER EQUITY, INC. 1998 EQUITY AND CASH INCENTIVE PLAN,
AS AMENDED AND RESTATED
On March 10, 1998, the Company's Board of Directors adopted, subject to
shareholder approval, the Company's 1998 Equity and Cash Incentive Plan, which
provided for the issuance of up to 1,000,000 Shares pursuant to awards
thereunder. This plan was approved by shareholders on May 19, 1998. All of the
1,000,000 Shares which were available for awards under this plan have been
awarded. The amendment which was adopted by the Company's Board of Directors on
March 29, 2000, subject to shareholder approval would permit, if approved, the
issuance of an additional 1,000,000 Shares for awards under this plan.
Currently, the 1998 Equity and Cash Incentive Plan provides for the payment of
performance awards based upon a performance goal for calendar years 2004 and
thereafter to be conditioned upon re-approval by the Company's shareholders no
later than the first meeting of shareholders in 2003. With the approval of the
amendment, such re-approval will now be required no later than the first meeting
of shareholders in 2005. Attached, as Exhibit A to this Proxy Statement, is the
full text of the 1998 Equity and Cash Incentive Plan as Amended and Restated
(the "1998 Incentive Plan").
6
<PAGE> 9
The purpose of the 1998 Incentive Plan has been, and continues to be, the
advancement of the interests of 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, 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 either in cash or stock (the
"Awards").
GENERAL
The 1998 Incentive Plan is administered by a committee of the Board of
Directors designated for such purposes consisting of at least two directors (the
"Committee") who will be "non-employee directors" as defined under the
Securities Exchange Act of 1934 and "outside directors" as defined in 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 were initially reserved for issuance under the 1998
Incentive Plan. The amendment would provide for an additional reserve of
1,000,000 Shares for issuance under this plan. The Committee has 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 annual 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
was, and this amendment 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,
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
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<PAGE> 10
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. Currently, the 1998 Incentive Plan provides that for the payment of
performance Awards based upon a performance goal for calendar years 2004 and
thereafter to be conditioned upon re-approval by the Company's shareholders no
later than the first meeting of shareholders in 2003. With the approval of the
amendment, such re-approval will be moved forward to the first shareholders'
meeting in 2005.
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 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.
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<PAGE> 11
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 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.
9
<PAGE> 12
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE KOGER
EQUITY, INC. 1998 EQUITY AND CASH INCENTIVE PLAN, AS AMENDED AND RESTATED.
INFORMATION ABOUT KOGER EQUITY COMMON STOCK OWNERSHIP
SHAREHOLDERS OWNING AT LEAST 5% OF KOGER EQUITY
The following table shows, as of December 31, 1999, all persons we know to
be "beneficial owners" of more than five percent of the Koger Equity common
stock (1). This information is based on Schedule 13G reports filed with the
Securities and Exchange Commission (the "SEC") by each of the firms listed in
the table below. If you wish, you may obtain these reports from the SEC.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENT OF CLASS OWNED BENEFICIALLY(1)
------------------------------------ ---------------- ---------------------
<S> <C> <C>
Apollo Real Estate
Investment Fund II, L. P.................................. 21.4% 5,733,771
1301 Avenue of the Americas
New York, NY 10019
Alliance Capital Management, Inc............................ 9.3% 2,489,899(2)
1290 Avenue of the Americas
New York, NY 10104
Public Employees Retirement System.......................... 7.9% 2,100,168
277 East Town Street
Columbus, Ohio 43215
EQSF Advisers Inc. et al.................................... 5.5% 1,462,136
767 Third Avenue
New York, New York 10017
</TABLE>
- ---------------
(1) "Beneficial ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own Koger Equity common stock not only if you hold it
directly, but also if you indirectly (through a relationship, a position as
a director or trustee, or a contract or understanding), have (or share) the
power to vote the stock, or to sell it, or you have the right to acquire it
within 60 days.
(2) Sole voting power as to 265,080 Shares; shared voting power as to 2,209,025
Shares; sole dispositive power as to 2,489,899 Shares and shared dispositive
power as to 6,454 Shares.
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of February 28, 2000, the Koger Equity common
stock owned beneficially by Koger Equity directors and executive officers. All
directors and executive officers as a group own beneficially 6.78% of the shares
of Koger Equity common stock.
10
<PAGE> 13
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ -----------------
<S> <C> <C>
Directors:
D. Pike Aloian............................................ 11,539 .04%(1)
Benjamin C. Bishop, Jr.................................... 31,177 .12%(1)
Thomas J. Crocker......................................... 500,000 1.82%(2)
David B. Hiley............................................ 292,228 1.08%(3)
Victor A. Hughes, Jr...................................... 510,715 1.88%(4)
John R. S. Jacobsson...................................... 7,720 .03%(1)(5)
Lee S. Neibart............................................ 9,074 .03%(1)(5)
George F. Staudter........................................ 14,406 .05%(1)
James C. Teagle........................................... 234,197 .86%(6)
Executive Officers:
Robert N. Bridger......................................... 51,815 .19%(7)
W. Lawrence Jenkins....................................... 52,404 .19%(8)
James L. Stephens......................................... 49,115 .18%(9)
Robert E. Onisko.......................................... 150,000 .55%(2)
--------- ----
Total Shares Held by All Executive Officers and
Directors as a Group (13 persons)............... 1,914,389 6.78%(10)
========= ====
</TABLE>
- ---------------
(1) Includes 4,000 Shares which are subject to presently exercisable options.
(2) Includes Shares which are subject to certain rights to acquire Shares
granted by the Board of Directors on February 17, 2000. As to Mr. Crocker,
includes 500,000 rights; as to Mr. Onisko, includes 150,000 rights. In
conjunction with the Company's plan to repurchase up to 2.65 million
Shares, the Board of Directors granted to Mr. Crocker the right to purchase
up to 500,000 Shares and to Mr. Onisko, the right to purchase up to 150,000
Shares. These officers are entitled to make purchases of one Share of every
three Shares purchased by the Company as part of this plan. The Shares may
be purchased from the Company at the same time and for the same price as
the Company purchases Shares. In addition, the Company will loan up to 75%
of the purchase price for these Shares to Mr. Crocker and to Mr. Onisko.
These loans will be collateralized by the Shares purchased and will be
without recourse. The loan amount can not exceed 75% of the collateral
value at any point in time. These loans will bear interest at 150 basis
points over the applicable LIBOR rate.
(3) Includes 129,000 Shares which are subject to presently exercisable options.
(4) Includes 180,000 Shares which are subject to presently exercisable options.
(5) Beneficial ownership excludes 5,733,771 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 and Neibart are officers of ARECA II and limited partners
of ARE Advisors II. Each of Messrs. Jacobsson and Neibart disclaim
beneficial ownership of all securities owned by ARTI, AREIF II and any of
their affiliates.
(6) Includes 162,916 Shares which are subject to presently exercisable options.
(7) Includes 21,801 Shares which are subject to presently exercisable options.
(8) Includes 21,840 Shares which are subject to presently exercisable options.
(9) Includes 22,416 Shares which are subject to presently exercisable options.
(10) Sole voting and dispositive power as to 1,914,389 Shares, and no shares
with shared voting and dispositive power. Includes 557,973 Shares which are
subject to presently exercisable options, or options which are exercisable
within 60 days.
11
<PAGE> 14
DIRECTORS, EXECUTIVE OFFICERS AND GREATER-THAN-10% SHAREHOLDERS COMPLIANCE WITH
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING IN 1999
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers, and greater-than-10% stockholders to file reports
with the SEC and the New York Stock Exchange on changes in their beneficial
ownership of Koger Equity common stock and to provide Koger Equity with copies
of the reports. Based on our review of these reports and of certifications
furnished to us, we believe that all of these reporting persons complied with
their filing requirements for 1999.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of Koger Equity
and monitors the performance of management. In accordance with corporate
governance principles, the Board does not involve itself in day-to-day
operations. The directors keep themselves informed through discussions with the
Chairman, other key executives and our principal external advisers (legal
counsel, auditors, investment bankers and other consultants), by reading reports
and other materials that we send them and by participating in Board and
committee meetings.
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. Lee S. Neibart.
THE COMMITTEES OF THE BOARD
The Audit Committee. The Audit Committee recommends the selection of the
independent auditors to the Board, approves the scope of the annual audit by the
independent auditors, reviews audit findings and accounting policies. The
Committee meets privately, outside the presence of Koger Equity management, with
both the independent auditors and the Company's internal auditors. The Audit
Committee met two times in 1999 and members of the Audit Committee consulted
with the officers of the Company, the Company's internal auditors and the
independent auditors at various times throughout the year.
The Compensation Committee. The Compensation Committee establishes and
approves all elements of compensation for certain executive officers. Each year,
as the SEC requires, the Committee reports to you on executive compensation. The
Committee's Report on Executive Compensation for 1999 is printed below at pages
18 to 21. The Committee administers the Stock Option Plans and the 1998 Equity
and Cash Incentive Plan and has sole authority for awards under the Plans,
including timing, pricing and amount. The Committee also administers Koger
Equity's Supplemental Executive Retirement Plan. The Committee met three times
during 1999.
HOW WE COMPENSATE DIRECTORS
Annual Retainer Fee. We compensate directors (except for the Chairman) who
are not employees of Koger Equity or our subsidiaries with an annual retainer of
$20,000. Effective February 17, 2000, following his retirement as Chief
Executive Officer, the Board authorized the payment of an annual retainer of
$50,000 to the Chairman of the Board.
Meeting Fees. We pay non-employee directors a fee of:
- $2,000 for attendance at each Board meeting; and
- $500 for attendance at each committee meeting.
Expenses and Benefits. We reimburse all directors for travel and other
related expenses incurred in attending shareholder, Board and committee
meetings.
Special Fee Paid to a Director. At its meeting held on February 17, 2000,
the Board of Directors authorized the payment of $100,000 to D. Pike Aloian, in
consideration of extraordinary services he provided
12
<PAGE> 15
to the Company during 1999 as a member of the finance committee of the Board of
Directors in connection with transactions considered by the Company.
Directors who are Koger Equity Employees. We do not compensate our
employees for service as a director. We do, however, reimburse them for travel
and other related expenses.
Award of Restricted Shares to Members of the Board of Directors. Effective
as of May 1, 1999, each member of the Board of Directors was granted 200 shares
of the Company's Common Stock. The Shares were held by the Company until certain
vesting restrictions were met. The vesting criteria were the same as that
described in note (2) to the Summary Compensation Table on page 14. In January,
2000, the Company determined that the vesting restrictions had been met. As a
result, the shares were issued and delivered to the Directors. At December 31,
1999, the Shares were valued at $16.875 per share.
Stock Options Held by Board Members. Each member of the Board of Directors
who is not also an employee of the Company currently holds an option to purchase
4,000 Shares. These options were granted on August 19, 1997 and are fully
exercisable at a per share price of $19.8125.
The Stock Investment Plan. Directors may elect to receive payment of part
or all of their monthly retainer in Shares by participating in the Stock
Investment Plan. Additional information concerning the Stock Investment Plan is
printed on page 18.
13
<PAGE> 16
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows annual compensation and long-term compensation of
the Chief Executive Officer and the other named executive officers whose salary
and bonus for the fiscal year ended December 31, 1999, exceeded $100,000.
Throughout the remainder of this Proxy Statement, these five persons will be
referred to as the "Executive Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-----------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
----------------------- STOCK OPTIONS/ ALL OTHER
SALARY AWARD(S) SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS($) ($)(2) (#)(3) ($)(4)
- --------------------------- ---- ------------ -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Victor A. Hughes, Jr. ........... 1999 $315,000 $156,058(5) $67,500 -- $ 10,026(6)
Chairman of the Board and 1998 308,750 156,058 -- 180,000 10,711
Chief Executive Officer 1997 268,750 275,770 -- -- 2,237,714
James C. Teagle.................. 1999 $241,500 $104,645(5) $67,500 -- $ 8,441(6)
President and Chief 1998 236,708 104,645 -- 100,000 8,850
Operating Officer 1997 198,780 204,423 -- -- 8,800
David B. Hiley................... 1999 $200,000 $103,846(5) $67,500 -- $ 18,256(6)(7)
Executive Vice President and 1998 150,000 102,855 -- 125,000 46,536
Chief Financial Officer 1997 -- -- -- 4,000 40,690
W. Lawrence Jenkins.............. 1999 $136,708 $ 54,798(5) $13,500 -- $ 7,790(6)
Vice President and 1998 129,893 27,599 -- 20,000 7,867
Corporate Secretary 1997 120,833 41,467 -- -- 6,518
Robert N. Bridger................ 1999 $158,617 $ 88,550(5) $13,500 -- $ 9,919(6)
Senior Vice President/ 1998 152,917 47,044 -- 20,000 96,039
Development 1997 130,833 44,784 -- -- 126,102
</TABLE>
- ---------------
(1) Includes an amount of salary paid by KRSI for the 1999 salary of Mr. Hughes,
$82,673; Mr. Teagle, $84,468; Mr. Hiley, $53,325; Mr. Jenkins, $36,492; and
Mr. Bridger, $26,250.
(2) Effective May 1, 1999, the Compensation Committee of the Board of Directors
authorized the issuance of Restricted Shares to certain Executive Officers
as described below:
<TABLE>
<CAPTION>
NUMBER OF
RESTRICTED
EXECUTIVE OFFICER SHARES
- ----------------- ----------
<S> <C>
Victor A. Hughes, Jr........................................ 4,000
James C. Teagle............................................. 4,000
David B. Hiley.............................................. 4,000
Robert N. Bridger........................................... 800
W. Lawrence Jenkins......................................... 800
</TABLE>
The shares were held by the Company until the following vesting
restrictions were met:
- 100% vesting if the Company obtained a per Share increase in funds
from operations of 10.6% for the year ended December 31, 1999, over
the prior year.
- 50% vesting if the Company obtained a per Share increase in funds from
operations of 8%, but less than 10.6%, for the year ended December 31,
1999, over the prior year, with the remainder forfeited.
In January, 2000, the Company determined that the funds from operations for
1999 was $2.32 per Share, an 11.5% increase over $2.08 per Share for the
prior year. As a result, the above Shares were released and
14
<PAGE> 17
delivered to each person named above. As of December 31, 1999, the Shares
were valued at $16.875 per share.
There were no restricted stock awards or long-term incentive plan payouts
for 1998 or 1997.
(3) There were no options granted to the CEO and the other Executive Officers
during the fiscal year ended December 31, 1999.
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.
(5) Includes a cash bonus which was earned for calendar year 1999, but was paid
in 2000: as to Mr. Hughes, $150,000; as to Mr. Hiley, $100,000; as to Mr.
Teagle, $100,000; as to Mr. Jenkins, $52,125; and as to Mr. Bridger,
$85,450.
(6) For 1999, 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, 1999, which
was $16.875 per Share (the "401(k) Contribution").
- As to Mr. Hughes, for 1999, includes Life Insurance Premiums in the
amount of $4,771, and a 401(k) Contribution in the amount of $4,800.
- As to Mr. Teagle, for 1999 includes Life Insurance Premiums in the amount
of $3,186, and a 401(k) Contribution in the amount of $4,800.
- As to Mr. Hiley, for 1999, includes Life Insurance Premiums in the amount
of $4,941, and a 401(k) Contribution in the amount of $4,800.
- As to Mr. Jenkins, for 1999 includes Life Insurance Premiums in the
amount of $2,535, and a 401(k) Contribution in the amount of $4,800.
- As to Mr. Bridger, for 1999, includes Life Insurance Premiums in the
amount of $ 4,664, and a 401(k) Contribution in the amount of $4,800.
(7) In 1999, the Company paid relocation expenses to Mr. Hiley totaling $32,240
for the period April 1, 1998, through March 31,1999, of which $8,060 was
allocated to 1999 compensation and $24,180 was allocated to 1998
compensation.
OPTION GRANTED DURING 1999
There were no options granted to the CEO or any other Executive Officers
during the fiscal year ended December 31, 1999. The Company has no outstanding
stock appreciation rights.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION
The table below provides the following information: (1) the aggregate
number of options exercised and the value realized by the Executive Officers
during the year ended December 31, 1999, and (2) the aggregate number of options
and the value of the in-the-money options in each case held by the Executive
Officer as of December 31, 1999. The Company has no outstanding stock
appreciation rights. In the event of a change of control (as defined in the
option agreements), all stock options become vested.
15
<PAGE> 18
AGGREGATED OPTION EXERCISES DURING 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN THE MONEY
OPTIONS/SARS AT OPTIONS/SARS
FISCAL YEAR-END (#) AT FISCAL YEAR-END($)
SHARES ACQUIRED ON VALUE REALIZED($) EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) (1) UNEXERCISABLE UNEXERCISABLE(2)
---- ------------------ ----------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Victor A. Hughes, Jr....... 66,666 -0- 93,333/120,000 $ 50,001/$ -0-
James C. Teagle............ -0- -0- 170,000/ 80,000 $820,781/$ -0-
David B. Hiley............. -0- -0- 45,667/ 83,333 $ -0-/$ -0-
W. Lawrence Jenkins........ -0- -0- 48,647/ 27,000 $279,917/$16,500
Robert N. Bridger.......... -0- -0- 32,819/ 27,000 $133,659/$16,500
</TABLE>
- ---------------
(1) This valuation represents the difference between $16.875, the closing price
of the Koger Equity common stock on the American Stock Exchange on December
31, 1999, and the exercise price of the stock options. "In-the-money" stock
options are options for which the exercise price is less than the market
price of the underlying stock on a particular date.
(2) The value reported herein is based on a per Share price of $16.875, which is
the closing price of the Shares on December 31, 1999, as reported on the
American Stock Exchange.
Effective March 9, 2000, the Shares ceased being traded on the American
Stock Exchange and began being traded on the New York 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, 1999.
EXECUTIVE EMPLOYMENT AND RETIREMENT 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. Also, effective
April 1, 1998, Mr. Hiley, a Director of the Company, was 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.
Effective February 29, 2000, Messrs. Hughes and Hiley retired from their
respective positions as Chairman of the Board and Chief Executive Officer and
Executive Vice President and Chief Financial Officer. At that time the Company
entered into severance agreements with Messrs. Hughes, Teagle and Hiley.
Pursuant to these agreements, Mr. Hughes was paid a lump sum severance benefit
of $1,617,361 and Mr. Hiley was paid a lump sum severance benefit of $911,538.
Under Mr. Teagle's severance agreement, in the event his employment as President
is terminated during the remaining term of his employment contract, at his
option or at the Company's option, or at the end of his employment contract,
which runs through March 31, 2001, Mr. Teagle will receive a lump sum severance
benefit of $1,207,158. Messrs. Hughes and Hiley, and Mr. Teagle after the
termination of his employment, (1) will continue to participate in the Company's
medical insurance arrangements for employees, (2) are deemed to have satisfied
the vesting requirements for benefits under the Supplemental Executive
Retirement Plan for Executives of Koger Equity, Inc. (the "SERP"), and (3) are
vested in all stock options which will continue to be exercisable for their
original term. Messrs. Hughes, Teagle and Hiley continue to serve on the Board.
On February 17, 2000, Thomas J. Crocker was elected to the Company's Board
of Directors, and effective March 1, 2000, he was appointed the Company's Chief
Executive Officer. Also, effective March 1, 2000, Robert E. Onisko was appointed
the Company's Chief Financial Officer.
16
<PAGE> 19
THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The SERP generally provides a gross benefit for life to Messrs. Hughes and
Teagle equal to 50% of final three-year average annual base salary, and a gross
benefit for life to Mr. Hiley equal to 35% of final three-year average annual
base salary, with the surviving spouse of these three Executive Officers
receiving a lifetime benefit of 50% of the Executive Officer's benefit. The SERP
provides a gross benefit for 15 years certain to the other Executive Officers
(reduced in any case in which such Executive Officer has less than 20 years of
service) equal to 50% of final three-year average annual base salary. The
benefits will be reduced by:
(i) 50% 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.
With their retirements on February 29, 2000, Mr. Hughes commenced receiving
an annual benefit under the SERP of $134,739, and Mr. Hiley commenced receiving
an annual benefit under the SERP of $60,250.
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 certain Executive Officers).
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 a covered Executive Officer leaves the employ of the Company under certain
circumstances, then (a) in the case of Mr. Teagle, he would be entitled to his
benefits, commencing immediately and without regard to the vesting requirement,
and (b) in the case of each other covered Executive Officer, such Executive
Officer, at his option, would be entitled to: (i) continue to receive his or her
base salary for a period of 18 months, or (ii) immediately become fully vested
in his or her retirement benefits, receive one year of annual base salary, in
lump sum payment, and continue to be provided all medical and other insurance
benefits for one year following termination.
The table below illustrates the annual pension benefits payable to
executive officers under the SERP. Since benefits shown in the table reflect a
straight life form of annuity benefit, if payment is made in the form of a joint
and survivor annuity, the annual amounts of benefit could be substantially below
those illustrated.
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................................ $ 46,875 $ 62,500 $ 62,500 $ 62,500 $ 62,500
150,000................................ 56,250 75,000 75,000 75,000 75,000
175,000................................ 65,625 87,500 87,500 87,500 87,500
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
350,000................................ 175,000 175,000 175,000 175,000 175,000
</TABLE>
17
<PAGE> 20
The compensation base used by the SERP is average base salary for the final
three years of employment. As of December 31, 1999, the base salary and
estimated years of service credit for each Executive Officer is listed below:
<TABLE>
<S> <C> <C>
Mr. Bridger................................................. $161,200 37 years
Mr. Hiley................................................... $200,000 21 months
Mr. Hughes.................................................. $315,000 17 years
Mr. Jenkins................................................. $139,000 29 years
Mr. Teagle.................................................. $241,500 27 years
</TABLE>
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 employee, and each participating
director pays for his Shares pursuant to a deduction from such director's
retainer.
Under the SIP, the Company contributes a portion of the purchase price of
such Shares, which contribution equals the following percentage of the total
monthly deduction from such employee's pay or such director's retainer:
- 25% of each monthly deduction less than or equal to $50;
- 20% of each monthly deduction greater than $50 but less than or equal to
$100; and
- 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 $54,700 for the year ended December 31, 1999.
During 1999, the Company paid the following amounts on behalf of the
following directors:
STOCK INVESTMENT PLAN
<TABLE>
<CAPTION>
COMPANY
DIRECTOR NAME CONTRIBUTION
- ------------- ------------
<S> <C>
D. Pike Aloian.............................................. $ 3,090
Benjamin C. Bishop, Jr...................................... 3,090
Thomas J. Crocker........................................... -0-
David B. Hiley.............................................. -0-
Victor A. Hughes, Jr........................................ -0-
John R. S. Jacobsson........................................ 3,090
Lee S. Neibart.............................................. 3,090
George F. Staudter.......................................... 3,090
James C. Teagle............................................. -0-
-------
Total Company Contribution on behalf of
Directors....................................... $15,450
=======
</TABLE>
REPORT ON EXECUTIVE COMPENSATION FOR 1999
BY THE COMPENSATION COMMITTEE
The Compensation Committee of the Board administers Koger Equity's
executive compensation program. The members of the Committee were independent
non-employee, non-affiliated directors. The Committee has furnished the
following report on executive compensation for 1999:
18
<PAGE> 21
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee is responsible for setting the total
compensation of the Chairman of the Board and Chief Executive Officer (the
"CEO"), the President and Chief Operating Officer (the "COO"), and the Executive
Vice President and Chief Financial Officer (the "CFO"). It also reviews the
compensation, including year-end bonuses, proposed by management for other
Executive Officers of the Company. The Compensation Committee is also
responsible for:
(i) making grants under the Company's stock option and other incentive
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 Supplemental Executive Retirement
Plan.
The Committee has designed Koger Equity's executive compensation program to
support what we believe to be an appropriate relationship between executive pay
and the creation of shareholder value. To emphasize equity incentives, we link a
significant portion of executive compensation to the market performance of the
Koger Equity common stock. The objectives of our program are:
- To support a pay-for-performance policy among all executives based on
both their individual performance and the performance of Koger Equity;
- To align the interests of executives with the long-term interests of
shareholders through awards whose value over time depends upon the market
value of Koger Equity's common stock;
- To provide compensation comparable to that offered by other leading
companies in our industry, enabling Koger Equity to compete for and
retain talented executives who are critical to our long-term success; and
- To motivate key executives to achieve strategic business initiatives and
to reward them for their achievement.
We compensate our executives through base salary, bonus paid in cash (or a
combination of cash and shares or restricted stock awards), and long-term
incentive awards (usually grants of stock options).
We also provide our executives with employee benefits, such as retirement
and health benefits. Koger Equity has entered into employment agreements and/or
change of control agreements with certain of our executive officers to provide
for certain payments and other benefits if they are terminated following a
change in control of Koger Equity.
GENERAL
The Committee annually reviews the base salaries of our executives to
determine if adjustments are appropriate to ensure that their salaries are
competitive and that they reflect the executive's increased responsibilities as
Koger Equity grows.
In determining the compensation paid to the Executive Officers in 1999, 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; and
(iii) the continued implementation of an active and aggressive, yet
prudent, development and acquisition program.
During 1999, the Company accomplished the following:
(i) The overall percent leased rate of its buildings increased from
90% at December 31, 1998, to 93% at December 31, 1999.
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<PAGE> 22
(ii) Its average rental rate per square foot increased from $15.82 to
$16.79, or 6.1% over the prior year.
(iii) Its rental and other rental services revenues increased from
$133,663,000 to $156,153,000, or 16.8% over the prior year.
(iv) Funds From Operations increased 15.1%, to $65 million.
(v) Dividends paid increased 18.2%, to $1.30 per diluted share.
(vi) The Company increased its term loan from an insurance company by
$45 million at an annual interest rate of 7.1%. The Company continues to
maintain a $150 million revolving credit facility.
(vii) Koger Equity completed construction of six new buildings
containing approximately 628,300 square feet and finalized the purchase of
four buildings containing approximately 508,600 square feet.
(viii) Consistent with its policy of recycling capital by disposing of
assets which no longer fit its portfolio standards, the Company sold two of
its oldest office centers, reducing the number of its operating properties
to 218 buildings from 251 and reducing the size of its portfolio by
approximately 300,000 square feet.
(ix) At December 31, 1999, the Company had six new office buildings
under construction on some of its existing land, which buildings will
contain approximately 579,200 square feet.
While the Compensation Committee considered all of these accomplishments
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. Therefore, the
Compensation Committee made a subjective determination in setting the
compensation of the CEO, the COO and the CFO.
In arriving at the compensation paid Victor A. Hughes, Jr., the CEO, during
1999, the Compensation Committee considered the outstanding performance of the
Company under his leadership as CEO, as well as his experience in corporate
finance.
BASE SALARIES OF THE EXECUTIVES
The Committee accepted Mr. Hughes's recommendation to increase the base
salaries of only certain of Koger Equity's executives. The Committee notes,
however, that while it increased the salaries of certain of our executives
(excluding the CEO) for 1999, the base salaries of our executives still
approximate the median for salaries of executives in the Comparison Group.
BASE SALARY OF THE CHIEF EXECUTIVE OFFICER
Upon the recommendation of Mr. Hughes, the Committee did not increase the
base salary of Mr. Hughes in 1999; it remained at $315,000 for the year.
BONUS COMPENSATION FOR 1999
General. The total amount of bonus compensation that the Committee paid
executives was based upon Koger Equity's success in certain performance
categories that we had identified at the beginning of 1999. The categories were:
- an increase of funds from operations per share, and
- total return to shareholders.
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BONUS COMPENSATION FOR EXECUTIVES OFFICERS
The Committee awarded bonus compensation for 1999 to each executive based
on the executive's scope of responsibility, and the specific contributions made
by the executive to Koger Equity's performance overall and to the performance
within the executive's area of responsibility. We also considered the Chief
Executive Officer's recommendations.
BONUS COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
For 1999, the Committee determined that Mr. Hughes' contributions to Koger
Equity's performance warranted a bonus of $150,000, payable in cash on February
17, 2000, the date the bonus was granted.
LONG-TERM INCENTIVE AWARDS IN 1999
We provide long-term incentive awards for executives by granting stock
options. The Committee believes that the granting of stock options helps align
the interests of its top executives with shareholders because these executives
receive value only if the market value of the common stock increases.
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 the 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.
This report has been furnished by the Compensation Committee.
D. Pike Aloian
John R. S. Jacobsson
George F. Staudter, Chairman
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<PAGE> 24
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, 1994 and
ending December 31, 1999 and (ii) assuming that $100 was invested on December
31, 1994 and that all dividends were reinvested.
<TABLE>
<CAPTION>
KE AMEX NAREIT
-- ---- ------
<S> <C> <C> <C>
1994 100 100 100
1995 147 129 118
1996 259 131 161
1997 308 163 191
1998 255 174 155
1999 272 224 145
</TABLE>
The Company has used a different industry group for compensation
comparisons from that used for its shareholder return performance presentation.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In 1995 certain entities 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 (the "Morgan Entities"), acquired certain properties from the Company
and from a partnership of which a subsidiary of the Company was the corporate
general partner. In connection with this acquisition the Morgan Entities 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.
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<PAGE> 25
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
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, and James L. Stephens, all of whom are officers of the
Company, and certain other employees of KRSI who are not employed by the
Company. 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. In addition to serving as officers of KRSI, Messrs. Hughes,
Teagle, Hiley and Jenkins comprise the Board of Directors of KRSI.
The Company accounts for its investment in the preferred stock of KRSI
using the equity method. During 1999, KRSI earned approximately $5.3 million in
management fees from the Morgan Entities and other entities for which it
performs services.
Messrs. Neibart and Jacobsson, Directors of the Company, are partners of
Apollo Real Estate Advisors II, L. P., which is the general partner of Apollo
Real Estate Investment Fund II, L. P. ("Apollo") which owned at December 31,
1999, 5,733,771 Shares or 21.4% of the Koger Equity common stock. Pursuant to
agreements between the Company and Apollo, Apollo has been granted registration
rights and a conditional exemption from certain of the Company's takeover
defenses so long as Apollo does not acquire more than 25% of the Company's
outstanding stock.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
During the year ended December 31, 1999, 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,
1999, 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, 2000. It is anticipated that auditors will be selected
later in the fiscal year.
OTHER BUSINESS
It is not anticipated that there will be presented to the Annual Meeting
any business other than the election of directors and the approval of the
amendments to the Company's Articles of Incorporation and its 1998 Equity and
Cash Incentive Plan. At the time this Proxy Statement went to press, we knew of
no other matters to be acted on at the Annual Meeting, other than those
discussed in this Proxy Statement. 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.
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<PAGE> 26
STOCKHOLDER PROPOSALS AND NOMINATIONS TO THE BOARD
If a shareholder intends to present a proposal for action at the 2001
Annual Meeting and wishes to have such proposal considered for inclusion in the
Company's proxy materials in reliance on Rule 14a-8 under the Securities
Exchange Act of 1934, the proposal must be submitted in writing and received by
the Company by December 19, 2001. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating to
shareholders' proposals.
The Bylaws of the Company establish an advance notice procedure with regard
to certain matters, including shareholder proposals and nominations of
individuals for election to the Board of Directors. In general, notice of a
shareholder proposal or a director nomination for a shareholders meeting must be
received by the Company not less than 70 days, nor more than 90 days before the
date of the annual meeting and must contain specified information and conform to
certain requirements, as set forth in the Bylaws. If the presiding officer at
any shareholders' meeting determines that a shareholder proposal or director
nomination was not made in accordance with the Bylaws, the Company may disregard
such proposal or nomination.
In addition, if a shareholder submits a proposal outside of Rule 14a-8 for
the 2001 Annual Meeting, and the proposal fails to comply with the advance
notice procedure prescribed by the Bylaws, then the Company's proxy may confer
discretionary authority on the persons who have been appointed as proxies on
behalf of management to vote on the proposal. Proposals and nominations should
be addressed to the Corporate Secretary of the Company, W. Lawrence Jenkins,
Koger Equity, Inc., Post Office Box 58120, Jacksonville, Florida 32241-8120.
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., 445 Park 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.
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 Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1999, 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 58120,
JACKSONVILLE, FLORIDA 32241; 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.
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<PAGE> 27
EXHIBIT A
KOGER EQUITY, INC.
1998 EQUITY AND CASH INCENTIVE PLAN,
AS AMENDED AND RESTATED
The 1998 Equity and Cash Incentive Plan of Koger Equity, Inc. (the
"Company") was originally adopted on May 10, 1998, by the Company's Board of
Directors, subject to shareholder approval, which was obtained on May 19, 1998.
This Plan originally provided for the issuance of up to 1,000,000 shares of the
Company's Common Stock, par value $.01 per share ("Stock") pursuant to awards
made under the Plan. This Amendment permits the issuance of an additional
1,000,000 shares of Stock for awards under the Plan. The Plan also provided for
the payment of Performance Awards based on Performance Goals. This Amendment
also extends by two years the date by which re-approval by shareholders is
required for performance based awards.
1. PURPOSE
The purpose of this Equity and Cash Incentive Plan, as Amended and
Restated, (the "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 who are in a position to make significant
contributions to the success of the Company and its subsidiaries through
ownership of shares of 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"), at least two 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
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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.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8.6, the aggregate number of
shares of Stock that have been, or may be, delivered under the Plan are
2,000,000. 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.
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(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.
(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.
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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 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.
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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.
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 2006
and thereafter is conditioned upon reapproval by Company's shareholders no later
than Employer's first meeting of shareholders in 2005.
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.
A-5
<PAGE> 32
(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 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).
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<PAGE> 33
(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 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.
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<PAGE> 34
(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 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.
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<PAGE> 35
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 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).
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<PAGE> 36
(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.
(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.
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<PAGE> 37
EDGAR Version of the Koger Equity, Inc. 1999 Annual Report
Cover: Photograph of a Painting: The Art and Soul of Koger.
A celebration of Koger's growth expressed in a colorful, light-dappled
buildingscape. 48"x72" acrylic collage on canvas by Beau Redmond, St. Augustine,
Florida 1998.
<PAGE> 38
TABLE OF CONTENTS
Photograph of the Chisholm Building, San Antonio Texas
<TABLE>
<S> <C>
2 Financial Highlights
4 Message to Our Shareholders
9 1999 Accomplishments
12 Operations Management - The Koger Way
14 Koger Centers
17 Form 10-K/A
</TABLE>
<PAGE> 39
FINANCIAL HIGHLIGHTS
The following selected financial data sets forth certain financial information
of Koger Equity, Inc. as of and for each of the five years in the period ended
December 31, 1999 (In thousands except per share and property data).
<TABLE>
<CAPTION>
Income Information 1999 1998 1997 1996 1995(1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Rental revenues and other rental services $ 156,153 $ 133,663 $ 109,501 $ 98,805 $ 95,443
Total revenues $ 160,093 $ 138,082 $ 113,989 $ 104,072 $ 125,750
Property operations expense $ 60,582 $ 53,719 $ 44,453 $ 41,597 $ 40,830
Depreciation and amortization $ 32,314 $ 28,381 $ 24,073 $ 21,127 $ 19,102
Mortgage and loan interest $ 21,893 $ 16,616 $ 16,517 $ 18,701 $ 23,708
Net income $ 36,586 $ 29,602 $ 21,204 $ 10,501 $ 28,990
Earnings per share - basic $ 1.37 $ 1.13 $ 0.99 $ 0.57 $ 1.64
diluted $ 1.35 $ 1.10 $ 0.94 $ 0.54 $ 1.61
Dividends declared per common share $ 1.35 $ 1.15 $ 0.55 $ 0.05 --
Weighted average shares outstanding - basic 26,689 26,294 21,374 18,523 17,724
diluted 27,019 26,901 22,495 19,500 18,011
<CAPTION>
Balance Sheet Information 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating properties (before depreciation) $ 927,523 $ 872,183 $ 681,249 $ 582,972 $ 571,313
Total assets $ 885,739 $ 834,995 $ 656,097 $ 584,666 $ 578,756
Mortgages and loans payable $ 351,528 $ 307,903 $ 181,963 $ 203,044 $ 254,909
Total shareholders' equity $ 467,826 $ 464,763 $ 444,262 $ 364,135 $ 310,697
<CAPTION>
Other Information 1999 1998 1997 1996 1995(1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Funds from operations $ 65,011 $ 56,486 $ 42,324 $ 33,154 $ 36,707
Funds from operations - per diluted share/unit $ 2.32 $ 2.08 $ 1.88 $ 1.70 $ 2.04
Closing stock price as reported on AMEX
at year end $ 16.88 $ 17.19 $ 21.94 $ 18.705 $ 10.63
Income before interest, income taxes,
depreciation and amortization $ 90,980 $ 75,555 $ 62,729 $ 51,144 $ 71,866
Number of buildings (at end of period) 218 251 228 215 216
Percent leased (at end of period) 93% 90% 92% 92% 91%
</TABLE>
(1) Includes $13,066 of interest revenue associated with mortgage notes
which the Company acquired during 1995. These mortgage notes were
retired during 1995.
<PAGE> 40
Photograph of office building: One Resource Square, Charlotte, North Carolina
Five year graphs illustrating the following information:
Rental and Other Rental Services Revenues (in Million of Dollars)
1999 - $156,153; 1998 - $133,663; 1997 - $109,501; 1996 - $98,805;
1995 - $95,443
Funds from Operations, Per Share *
1999 - $2.32; 1998 - $2.08; 1997 - $1.88; 1996 - $1.70; 1995 - $2.04
For 1995, excludes $0.73 per share of interest revenue
Debt-To-Total-Market Capitalization
1999 - 43%; 1998 39%; 1997 - 25%; 1996 - 34%; 1995 - 57%
<PAGE> 41
Message to our Shareholders
As 1999 began, we had established our plan to increase long-term
shareholder value. The principal priorities were to obtain more critical mass in
our existing target markets and enter additional ones where we forecast superior
business opportunity, to enhance our operating platform and delivery system
across every aspect of our business, to continue to strengthen the balance sheet
in order to provide additional financial flexibility for secure future earnings
growth, and to deepen the management bench and address the obvious succession
issues. During the year, like many other REIT managements, we spent considerable
time analyzing the merit of various strategic combinations with other public and
private real estate companies, as an alternative, to achieve our goals more
rapidly. As a part of this analysis, we also thoroughly explored the alternative
of a going-private transaction. In the end, we were convinced that Koger Equity
could create higher shareholder value by remaining independent and public. After
all, we've had years of experience as a company in our existing markets (an
average of 25 years) and our real estate managers, operating as a vertically
integrated team, have personally had years of experience working together in
these markets. We certainly wanted to be large enough to have a major influence
where we compete, but not so large as to lose our advantage as entrepreneurs.
How many times did we hear last year what a risk new development would be for
office companies, particularly the smaller capitalized REITs operating in the
Sunbelt. For Koger Equity, having the in-house development team along with
experienced on-site management and leasing professionals executing the suburban
office park concept, which we created, has been a distinct advantage. The
results of our efforts, as reflected in the portfolio's performance in 1999, are
strong evidence of this advantage.
Consistent with our priority to obtain more critical mass in our
existing target markets and enter additional submarkets in growing southeastern
cities, over the next several years we expect to execute the sale of certain
mature developed office parks, reinvesting the proceeds in development and
acquisitions where and when appropriate; pay down short term debt; and as long
as there is attractive value in the Company's common stock and it is financially
prudent to do so, purchase up to 2.65 million shares, as recently announced.
In September, we announced the sale for $70 million of two such office
parks located in Charlotte and Jacksonville, where we had been successful for
many years. The two centers together contained 42 buildings, over 1.2 million
rentable feet and a little over five acres of developable land. In November, we
acquired four recently constructed and fully leased office buildings containing
about 508,600 feet for a purchase price of $64.1 million, with a part of the
transaction structured as a tax free exchange to defer gains from the earlier
sale. This fine acquisition, the only one in 1999, in combination with the sale,
lowered the average age of our portfolio from 17 years to 15 years and added two
new growth submarkets to the Company's portfolio: Lake Mary and I-4 in Orlando,
two buildings containing a total of 318,000 feet, and the University area of
Charlotte near I-85, two buildings containing a total of 190,600 feet, and all
with fine new corporate customers. Through this sale and acquisition, we
exchanged buildings that were on average 23 years old and leased to 410 tenants
for buildings less than two years old with 40 leases in place. Both Orlando and
Charlotte are cities in which the Company has a long history and presence. We
now have 1.3 million feet in Orlando and 1.1 million feet in Charlotte. We are
continuing to reposition the portfolio with newer assets, primarily from
internal development, as we negotiate the sale of two other mature centers -
Tulsa and El Paso over the first half of the new year. Up to now, the securities
markets have made little distinction in valuing a traditional REIT that acquires
and manages, and a Koger Equity, that creates new rent streams on a predictable
basis with its established and experienced development team. Our Company should
be valued as more than just a company that owns and manages property. We will
work toward achieving higher market valuations by educating investors that we
have a distinct advantage - the ability and talent to create additional value
and profit premiums with in-house development. Last year, many viewed
development activities as a risk to be avoided. It certainly would have been
easier to explain our business plan to the analysts without any development in
1999. Instead, we completed construction on six buildings containing about
628,000 feet in five markets at a cost of almost $52 million, within budget, and
meeting or exceeding our lease-up pro formas. At year-end, the buildings were 84
percent leased. We have developed, with our own skilled and dedicated Koger
team, almost 80 percent of the Company's existing suburban office portfolio.
<PAGE> 42
Photograph of the Landstar Building, Jacksonville, Florida.
<PAGE> 43
At the end of 1999, we had six additional buildings containing about
579,000 feet in five markets under construction. Construction costs on these six
buildings will total approximately $54 million dollars and they are currently 40
percent leased. We expect all six buildings to be operational during the first
two quarters of 2000. Over all, we have not seen the overbuilding in our markets
that was predicted at the beginning of 1999. The Atlanta and Austin markets, for
example, performed better and absorbed more space than expected. We believe that
existing favorable market conditions should continue through the first half of
this year. Although new buildings have been recently developed in some of our
submarkets, we do not currently see over-supply as a major problem. Recent data
indicates that in the current capital-constrained real estate market, new office
construction nationwide is down 40 percent from the peak. We will continue to
monitor each of our submarkets for new construction and oversupply. At year-end,
we had 89 acres of land inventory in eight markets on which to build about 1.3
million feet, to meet the market and our customers' needs.
Our second priority was to continue to evaluate and enhance the
Company's operating platform and product delivery in development, acquisition,
asset management, property management, and leasing. Questioning the ways we do
business ultimately results in delivering a superior product to our customers
and higher shareholder return. Last year we made a major investment as we began
a two-year plan to overhaul and strengthen management information systems and
training programs for all employees throughout our organization.
A major element in our business plan was to maximize return on existing
inventory, resulting in 1999 net operating income on same store sales increasing
9.7 percent over last year, which was one of the highest increases for any
suburban or central business district office REIT. This outstanding same store
sales NOI performance, in combination with the successful disposition,
acquisition, and development activity across multiple markets, were highlights
of the year. Total rental and other rental services revenues increased 16.8
percent, with almost 20 percent of our revenues resulting from development and
acquisitions, up from 8 percent in 1998. Rents from development quadrupled to
$11.2 million, and acquisition rental revenue more than doubled to over $19
million. We were able to increase the rental rate 13.4 percent per net rentable
square foot for renewals and to increase our tenant retention rate to 66
percent. We reduced operating expenses on the portfolio to 38.8 percent of
rental revenue. Overall, net income increased 23.6 percent, and funds from
operations on a per diluted share/unit basis, increased 11.5 percent, to $2.32
per share for 1999.
During the third quarter, the Company closed on a $45 million secured
term loan with a major insurance company at a fixed rate of 7.10 percent. The
proceeds were used to reduce the $150 million secured line of credit with our
bank group to an outstanding balance of $94 million at year-end. In the present
rising interest rate environment, we are pleased that over two-thirds of our
outstanding debt is fixed at an average interest cost of 8.09 percent, with
fixed charge coverage excellent at four times. The debt-to-total-market
capitalization ratio of the Company was approximately 43 percent at December 31,
1999. We presently own 33 unencumbered buildings containing 2,354,000 feet.
Koger Equity's balance sheet is strong, providing financing for the foreseeable
future for all likely development projects and with the expected asset sales,
through the year 2001.
The Board of Directors appointed Thomas J. Crocker as CEO and Robert E.
Onisko as CFO effective March 1 of this year. These appointments resolve any
management succession issue, strengthen our senior executive team and represent
an excellent leadership acquisition for the Company. Tom and Bob have worked
together since 1984, and have operated both private and public office REITs in
many of our southeastern markets. I believe they will provide us with
significant experience as we strengthen our management bench for the next
decade.
In 1999, we achieved or surpassed our objectives for the overall
business plan, FFO growth, and the operating portfolio. However, we are
disappointed with the performance of our common stock and REIT shares in general
in the securities market. The total return for Koger Equity was 7.08 percent,
compared to the NAREIT office index total return of 4.25 percent, and the total
return of the composite REIT index of -6.48 percent. This marked the first
year-over-year (1998-1999) negative annual total return for the index since 1973
- -- 1974. Net investment flows were overwhelmingly positive for growth stocks,
and, in particular, technology and communication stocks, with income/value
stocks performing poorly for most of the year. Although investor sentiment has
not been this negative for REITs since 1973 -- 1974, we are optimistic about the
outlook for the REIT sector , and especially positive about Koger Equity. Total
REIT market capitalization is almost $125 billion and industrial/office REITs
represent about 30 percent of the total. Koger Equity is one of the smaller
office companies, but we expect growing retail and institutional interest in the
shares of our company because of our solid real estate fundamentals. We operate
in a competitive market place, but we are a mature public business that knows
how to compete. We have real estate professionals with years of experience both
in their areas of expertise and in working together as a team. We have generated
a total return, with dividends reinvested, of over 22 percent annually during
these past five years, including the past two difficult ones! During 1999,
dividends paid increased to $1.30 per share, an 18 percent increase over the
prior year.
The fundamentals are in place for an excellent year. We are carefully
examining new ways and relationships to develop additional income from our
franchise, including telecommunications, tenant services, vending, and power
deregulation. As we continue to increase rental rates and lease terms, bring
renewals up to market rate, and lease our new development, we expect
profitability to result in higher dividends in 2000.
On March 9, 2000, we listed the Company's common shares on the New York
Stock Exchange, continuing under the trading symbol "KE." The Board of Directors
believes that listing on the NYSE will afford the shareholders a broader market
for trading the Company's shares.
I would like to acknowledge and thank four of our directors who are
retiring at the 2000 annual meeting. William Mack, Chris Lantzsch, Irvin Davis,
and Seabury Stoneburner have provided sound advice and counsel over these past
years, have given freely of their time, and have made significant contributions
to the progress of Koger Equity. In the case of Irvin and Seab, this retirement
marks a total of 69 years of faithful service as either employees or directors.
I would also like to welcome Tom Crocker, our new Chief Executive Officer and
Director, and Bob Onisko, our new Chief Financial Officer, and I look forward to
working with them in the future as we take Koger Equity to the next level of
success.
It has been my privilege to serve the organization for these past
eighteen years - the last nine in senior management, first as Chief Financial
Officer, then as Chief Executive Officer. I would like to thank Ira Koger for
his invitation to work here with such special people. I would also like to thank
Seab Stoneburner for his leadership and guidance during our difficult times and
of course, all of our Board of Directors and employees for their support over
these past years.
As a shareholder, I have a mutual interest with each of you in Koger
Equity's future. I appreciate your continued confidence and interest in our
efforts. We have a strong platform and the commitment to grow our suburban
office franchise to higher valuations for all shareholders.
Respectfully,
/s/ Victor A. Hughes, Jr.
Victor A. Hughes, Jr.
Chairman of the Board
Photograph of Victor A. Hughes, Jr., Chairman of the Board
The foregoing message to the Shareholders contains forward-looking
statements concerning 2000. The actual results of operations for 2000 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/A for the fiscal
year ended December 31, 1999.
<PAGE> 44
Photograph of the Carlton Building, Jacksonville, Florida
<PAGE> 45
1999 ACCOMPLISHMENTS
1999 was a very successful year for Koger. Some of the more significant
achievements are listed below:
FINANCIAL HIGHLIGHTS
- - Total Rental and Other Rental Services Revenues increased 16.8 percent,
to $156.2 million.
- - Net Income was up 23.6 percent, to $36.6 million.
- - Earnings per diluted share increased 22.7 percent, to $1.35.
- - Funds From Operations per diluted share increased 11.5 percent, to
$2.32.
- - Dividends paid per share were up 18 percent, to $1.30.
- - At December 31, 1999, the debt-to-total-market capitalization ratio of
the Company was approximately 43 percent.
DEVELOPMENT AND ACQUISITION ACTIVITY
The Company completed six buildings during the year containing 628,300 feet in
Orlando, Greensboro, San Antonio, El Paso and Jacksonville (2). These buildings
were constructed at a cost of approximately $51.8 million (including land but
excluding tenant improvement costs) and, at December 31, 1999, were 84 percent
leased.
At December 31, 1999, the Company had six buildings containing 579,200 feet
under construction in Memphis, Birmingham, Atlanta (2), St. Petersburg and
Orlando. The projected construction costs for these buildings, including land
but excluding tenant improvement costs, is approximately $53.6 million.
The Company purchased four buildings containing 508,600 feet for $64.1 million
during the year. At December 31, 1999, those buildings were 96 percent leased.
These purchases included the following:
- - Two buildings containing 190,600 feet in Charlotte, North Carolina.
- - Two buildings containing 318,000 feet in Orlando, Florida.
LEASING ACTIVITY FOR 1999
- - At year-end, the office buildings contained 9.8 million net rentable
square feet and were approximately 93 percent leased at an average
annual rent of $16.79 per net rentable square foot.
- - Eighty percent of all space in Koger Centers is leased by national
companies and federal and state governments.
- - The Company leased approximately 2.2 million feet in 1999, including
new leases and renewals. The average rental rate for new leases was
$18.36 per net rentable square foot. For renewals, the average rental
rate was $17.37 per net rentable square foot, up 13.4 percent over the
rate prior to renewal.
- - Of the leases which were scheduled to expire during the year, leases
were renewed on approximately 66 percent of the net rentable square
feet represented by those leases.
- - Governmental tenants accounted for 19.3 percent of the Company's leased
space at December 31.
- - More than 25 years ago, the Koger Organization implemented a national
marketing program which focuses on developing strong relationships with
national and regional corporations - many of which are Fortune 500
companies, federal and state governmental departments and agencies and
other large prospective users of office space. This program has
contributed significantly to the success of our marketing efforts.
Major leases completed during the year included:
- - 55,300 feet with Aetna Life Insurance Company in San Antonio, Texas.
- - 25,000 feet with U. S. Government - Social Security Administration in
Orlando, Florida.
- - 28,600 feet with State Farm Mutual Auto Insurance in San Antonio,
Texas.
- - 18,500 feet with the State of Florida - Game and Fresh Water Fish
Commission in Tallahassee, Florida.
- - 18,700 feet with U. S. Government - Alcohol, Tobacco and Firearms in
Charlotte, North Carolina.
- - 43,900 feet with Zurich Insurance Services, Inc. in Jacksonville,
Florida.
- - 43,700 feet with Blue Cross and Blue Shield of Florida in Jacksonville,
Florida.
- - 36,500 feet with Decisionone Corporation in Tulsa, Oklahoma.
- - 35,500 feet with Insurance Management Solutions in St. Petersburg,
Florida.
- - 42,500 feet with Best Software, Inc. in St. Petersburg, Florida.
- - 18,900 feet with Harleysville Mutual Insurance in Greensboro, North
Carolina.
- - 18,000 feet with U. S. Government - Internal Revenue Service in St.
Petersburg, Florida.
GENERAL
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 office centers (the "Koger Centers") in 15
metropolitan areas throughout the southeastern and southwestern United States.
As of December 31, 1999, the Company owned 218 office buildings, of which 214
are in Koger Centers and four are outside Koger Centers but in metropolitan
areas where Koger Centers are located.
The General Managers responsible for successfully operating the Koger Centers
have been with the Koger Organization an average of 16 years, while our seasoned
team of department heads and senior management average 23 years of service with
the Company.
<PAGE> 46
Photograph of the DeSoto Building, Jacksonville, Florida
<PAGE> 47
OPERATIONS MANAGEMENT - THE KOGER WAY
It's four o'clock in the morning; the parking lots are empty. But Koger building
mechanical systems are coming to life to be ready for the arrival of the first
tenants. When they arrive, the building is already at work, providing heat or
air conditioning as the outside temperature dictates. Lobby and corridor lights
have come on, and security systems are switched to daytime operations. Through
the use of computerized heating and air conditioning controls and monitored
timing devices, Koger tenants are assured they will arrive to a comfortable work
environment.
Architecturally pleasing and functional buildings, a beautifully landscaped
campus environment with abundant parking -- these are the things you first
notice about a Koger office park. While they are certainly important, there are
other things equally as important in a Koger Center. To find those things, you
must look into the organization itself.
From the beginning of the suburban office park concept, originated by Koger, the
idea was to have on-site management that would provide careful attention to the
wants and needs of the tenants occupying our buildings. Today, that concept is
still at the heart of our organization.
Koger Centers are more than just bricks and mortar, and Koger is more than just
an office park development and leasing company. Much of what we do is client
service, day in and day out, at all our centers. Operations management is a big
part of our business, and it has a lot to do with our success in maintaining
high levels of occupancy along with a strong lease renewal rate.
Photograph Caption: Understanding and even anticipating our clients' needs are
the hallmark of tenant support at every Koger property. Our dedicated team of
Koger career professionals in Jacksonville, Florida, includes (top photograph)
Chuck Diebel, General Manager, Dave Foster, Senior Leasing Manager, (bottom
photograph) Steve Hart, Tenant Services Representative.
<PAGE> 48
A focus on customer satisfaction has been part of the Koger tradition for more
than 40 years. From the very first Koger Center, established back in 1957, our
operating philosophy has always been to provide professional, on-site management
service to our tenants. That's why we staff our Center management offices with
Koger career employees...and that's why we call our brand of tenant service "The
Koger Way."
As evidence of our commitment to service, about seventy percent of all Koger
employees are located on-site. That means they are available to respond to our
tenants at a moment's notice. They get to know our tenants, and that helps
significantly in anticipating how we can best serve them. Also important in
ensuring tenant satisfaction is the fact that we can make virtually all property
management decisions on-site.
Our uniformed Tenant Service Representatives, Administrative Staff, Operations
Supervisors, HVAC Mechanics, Leasing and Property Managers, and General Managers
are all on site for one reason -- to provide our tenants with prompt, efficient
and professional service. A tenant needs to expand -- our people are there to
help them. A lease negotiated -- our leasing managers can work out the details.
A wall moved -- we can do that, too. A light is out -- replaced in minutes. Our
tenants are our first concern!
After all, sound property management is sound customer service. Our success is
based on the Koger staff anticipating the needs of our tenants, and on how well
and how quickly those needs are met. At Koger, the formula for lasting property
management success is in the capable hands of our on-site professionals - "The
Koger Way!"
Photograph Caption: Client knowledge, coupled with a rapid response to every
problem or need, is "The Koger Way." (Top photograph) Mike Pye, Tenant Services
Supervisor, Jacksonville. (Bottom photograph) Judy Mitchell,
Secretary/Administrative Assistant in Jacksonville, and Laura McLeod, Property
Manager.
<PAGE> 49
Map of Southeastern and Southwestern United States showing the locations of the
property owned and/or managed by Koger.
KOGER CENTERS
* Atlanta
2951 Flowers Road South, #100
Atlanta, Georgia 30341
770-458-7231
* Austin
3420 Executive Center Drive, #100
Austin, Texas 78731
512-345-1893
* Birmingham
3800 Colonnade Parkway, #110
Birmingham, Alabama 35243
205-969-3030
* Charlotte
5445 77 Center Drive, #70
Charlotte, North Carolina 28217
704-527-7777
R Columbia
201 Executive Center Drive, #100
Columbia, South Carolina 29210
803-731-9440
* El Paso
444 Executive Center Boulevard, #120
El Paso, Texas 79902
915-532-3456
* Greensboro
2211 West Meadowview Road, #100
Greensboro, North Carolina 27407
336-294-6785
* Greenville
150 Executive Center Drive, #100
Greenville, South Carolina 29615
864-288-5250
* Jacksonville
8875 Liberty Ridge Drive, #100
Jacksonville, Florida 32256
904-464-0900
* Memphis
65 Germantown Court, #108
Cordova, Tennessee 38018
901-757-8118
R Miami
8300 Northwest 53rd Street, #100
Miami, Florida 33166
305-592-0681
M Nashville
278 Franklin Road, #100
Brentwood, Tennessee 37027
615-373-2773
<PAGE> 50
R Norfolk
6161 Kempsville Circle, #225
Norfolk, Virginia 23502
757-461-9477
* Orlando
930 Woodcock Road, #127
Orlando, Florida 32803
407-894-5851
R Raleigh
5540 Centerview Drive, #308
Raleigh, North Carolina 27606
919-233-9444
Richmond
R West
1500 Forest Avenue, #100
Richmond, Virginia 23229
804-282-5461
Richmond
* Paragon Place
6800 Paragon Place, #226
Richmond, Virginia 23230
804-282-1121
* St. Petersburg
877 Executive Center Drive West, #100
St. Petersburg, Florida 33702
727-576-1400
* San Antonio
4538 Centerview Drive, #150
San Antonio, Texas 78228
210-736-2494
* Tallahassee
1311 Executive Center Drive, #101
Tallahassee, Florida 32301
850-877-3151
R Tampa
5415 Mariner Street, #103
Tampa, Florida 33609
813-286-7921
* Tulsa
9726 East 42nd Street, #100
Tulsa, Oklahoma 74146
918-628-0810
Corporate Offices
8880 Freedom Crossing Trail
Jacksonville, Florida 32256
904-732-1000
www.koger.com
Map Legend:
* - Owned and managed by Koger Equity, Inc.
M - Managed by Koger Equity, Inc.
R - Managed by Koger Realty Services, Inc.
<PAGE> 51
Full page photograph of the Primera I, Orlando, Florida
<PAGE> 52
The full text of the Koger Equity, Inc. Form 10-K/A
<PAGE> 53
General Information
Executive Officers
Thomas J. Crocker, Chief Executive Officer
James C. Teagle, President and Chief Operating Officer
Robert E. Onisko, Chief Financial Officer
Officers
Michael F. Beale, Vice President/Real Estate
Robert N. Bridger, Senior Vice President/Development
Philip J. Bruce, Vice President/Development
Bradford A. Chaffin, Vice President/ Third Party Management
G. Danny Edwards, Treasurer
Bryan F. Howell, Vice President/Operations
W. Lawrence Jenkins, Vice President/Administration and
Corporate Secretary
J. Velma Keen, II, Vice President/Division I
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
Board of Directors
D. Pike Aloian
Benjamin C. Bishop, Jr.
Thomas J. Crocker
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
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
New York Stock Exchange
Common Stock Symbol: KE
<PAGE> 54
Common Stock Transfer Agent, Dividend Paying Agent and Registrar
Norwest Bank Minnesota, N. A.
Norwest Shareowner Services
P. O. Box 64854
St. Paul, Minnesota 55164-0854
(800) 468-9716 or (651) 450-4064
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 Norwest at (800) 468-9716.
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 Norwest at (800) 468-9716.
Koger Equity, Inc.
Corporate Office
Post Office Box 58120(ZIP 32241-8120)
8880 Freedom Crossing Trail
Jacksonville, Florida 32256-8280
(904) 732-1000
Internet address: www.koger.com
<PAGE> 55
FORM OF PROXY CARD
KOGER EQUITY, INC.
ANNUAL MEETING OF SHAREHOLDERS
May 18, 2000
11:00 a.m.
Jacksonville Marriott Hotel
4670 Salisbury Road
Jacksonville, Florida
[logo] Koger Equity, Inc.
8880 Freedom Crossing Trail, Jacksonville, Florida 32256 PROXY
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on May 18, 2000, or any adjournments thereof.
The shares of stock you hold in your account will be voted as you specify below
If no choice is specified, the proxy will be voted "FOR" Items 1, 2, and 3.
By signing the proxy, you revoke all prior proxies and appoint Victor A. Hughes,
Jr., James C. Teagle and W. Lawrence Jenkins, and each of them, with full power
of substitution, to vote your shares on the matters shown on the reverse side
and any other matters which may come before the Annual meeting and all
adjournments.
See reverse for voting instructions
<PAGE> 56
Company #
Control #
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Koger Equity, Inc., c/o Shareowner Services SM,
P. O. Box 64873, St. Paul, MN 55164-0873.
The Board of Directors Recommends a Vote FOR Items 1, 2, and 3.
1. Election of directors:
<TABLE>
<S> <C> <C>
01 D. Pike Aloian 06 John R. S. Jacobsson [ ] Vote FOR all nominees
(except as marked)
02 Benjamin C. Bishop, Jr. 07 Lee S. Neibart
03 Thomas C. Crocker 08 George F. Staudter [ ] Vote WITHHELD from all
nominees.
04 David B. Hiley 09 James C. Teagle
05 Victor A. Hughes, Jr.
</TABLE>
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.
<TABLE>
<S> <C> <C> <C>
2. To amend the Koger Equity Articles of [ ] For [ ] Against [ ] Abstain
Incorporation
3. To amend the Koger Equity 1998 Equity and Cash [ ] For [ ] Against [ ] Abstain
Incentive Plan
</TABLE>
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ]
Indicate changes below: Date:
<TABLE>
<S> <C>
Signature(s) in Box
Please sign exactly as your name(s) appear on proxy. If
held in joint tenancy, all persons must sign. Trustees,
administrators, etc., should include title and authority.
Corporation should provide full name of corporation and
title of authorized officer signing the proxy.
</TABLE>
