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:
( ) 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 Section 240.14a-11(c) or Section 240.14a-12
KONOVER PROPERTY TRUST, INC.
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(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
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2) Aggregate number of securities to which transaction applies: N/A
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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: N/A
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( ) 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: N/A
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2) Form, Schedule, or Registration Statement No.: N/A
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4) Date Filed: N/A
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<PAGE>
KONOVER PROPERTY TRUST, INC.
11000 Regency Parkway, Suite 300
Cary, North Carolina 27511
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 2000
----------------------------------------
NOTICE IS HEREBY GIVEN that the 2000 annual meeting of Stockholders of
Konover Property Trust, Inc., a Maryland corporation (the "Company"), will be
held at the offices of [TC]2, 211 Gregson Drive, Cary, North Carolina 27511, on
May 11, 2000, at 10:00 a.m. for the following purposes:
1. To elect directors to serve until the 2001 annual meeting of
stockholders or until their successors are duly elected and qualified
(Proposal One);
2. To amend the Company's 1995 Outside Directors' Stock Compensation Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder from 150,000 to 250,000 (Proposal Two); and
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
Only stockholders of record at the close of business on March 15, 2000
will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors
/s/ ROBIN W. MALPHRUS
ROBIN W. MALPHRUS, Esq.
Secretary
Dated: April 13, 2000
<PAGE>
KONOVER PROPERTY TRUST, INC.
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 11, 2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Konover Property Trust, Inc., a Maryland corporation
(the "Company"), of proxies from the holders of the Company's common stock for
use at the 2000 annual meeting of Stockholders to be held at 211 Gregson Drive,
Cary, North Carolina 27511, on May 11, 2000 at 10:00 a.m., and at any
adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders will consider and vote upon the
following matters:
1. Election of directors to serve until the 2001 annual meeting of
stockholders or until their successors are duly elected and qualified
(Proposal One);
2. Amendment of the Company's 1995 Outside Directors' Stock Compensation
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 150,000 to 250,000 (Proposal Two);
3. Such other business as may properly come before the meeting and any
adjournment thereof.
This Proxy Statement and the accompanying form of proxy are first being
sent to stockholders on or about April 13, 2000.
This solicitation is made on behalf of the Board of Directors of the
Company. Costs of the solicitation will be borne by the Company. The Company
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to stockholders. Directors, officers and employees of the Company may also
solicit proxies by telephone, telegraph, fax or personal interview.
Holders of record of common stock of the Company (the "Common Stock") as
of the close of business on March 15, 2000 are entitled to receive notice of,
and to vote at, the Annual Meeting. The outstanding Common Stock constitutes
the only class of securities of the Company entitled to vote at the Annual
Meeting, and each share of Common Stock entitles the holder thereof to one
vote. At the close of business on March 15, 2000, there were 31,142,930 shares
of Common Stock issued and outstanding.
Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted at the Annual Meeting FOR the
election of the nine nominees. A stockholder may revoke his or her proxy at any
time before exercise by delivering to the Secretary of the Company a written
notice of such revocation, by filing with the Secretary of the Company a duly
executed proxy bearing a later date, or by voting in person at the Annual
Meeting.
Proposal One, the election of the directors of the Company requires the
vote of a plurality of all of the votes cast at the Annual Meeting provided a
quorum is present. For purposes of the election of directors, abstentions will
not be counted as votes cast and will have no effect on the result of the vote.
Proposal Two, approval of an increase in the number of shares authorized
for issuance under the Company's 1995 Outside Directors' Stock Compensation
Plan, requires the affirmative vote of a majority of the votes cast on the
proposal, provided that the total vote cast on the proposal represents over 50%
in interest of all shares of Common Stock entitled to vote on the proposal. For
purposes of the vote on Proposal Two, an abstention will have the effect of a
vote against the proposals, unless holders of more than 50% in interest of all
shares of Common Stock entitled to vote on the proposals cast votes, in which
event an abstention will have no effect on the result of the vote.
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<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Company's bylaws authorize the Board of Directors to set the number of
directors at no less than three nor more than fifteen. The number of directors
is currently set at nine. The nine nominees named below have been nominated for
election for one-year terms expiring at the 2001 annual meeting of stockholders
or until their successors are duly elected and qualified.
Unless marked otherwise, proxies received will be voted for the election
of each of the nominees named below. If any nominee becomes unable or unwilling
to serve before the Annual Meeting, the shares represented by proxy will be
voted for a substitute nominee designated by the Board of Directors.
Alternatively, the vacancy may be filled by the Board after the Annual Meeting.
The Board of Directors has no reason to believe that any of the nominees will
be unwilling or unable to serve if elected as a director. The nominees for
election at the Annual Meeting are set forth below.
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
------------------------- ----- ------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C>
Simon Konover 77 Chairman of the Board 1998
C. Cammack Morton 48 President and Chief Executive Officer of the Company 1996
Patrick M. Miniutti 52 Executive Vice President and Chief Financial Officer of the 1996
Company
William D. Eberle 76 Chairman of Manchester Associates, Ltd. 1997
J. Richard Futrell, Jr. 69 Former Chairman and Chief Executive Officer of Centura 1993
Banks, Inc.
John W. Gildea 56 Managing Director of Gildea Management Company and 1996
Advisor for The Network Funds
J. Michael Maloney 53 Founder of Highland Capital Group, Inc. 1999
Jonathan O'Herron 70 Managing Director of Lazard Fr-res & Co. LLC 1999
Mark S. Ticotin 51 Chief Operating Officer of Lazard Fr-res Real Estate 1999
Investors LLC
</TABLE>
Simon Konover is the founder of Konover & Associates, a $500 million-plus
real estate enterprise located in West Hartford, Connecticut. The organization
includes shopping centers, office buildings, hotels and residential
communities. The shopping center portfolio includes over 100 centers and 11
million square feet. In the mid-1960s, Mr. Konover began developing retail
centers in South Florida and in late 1989 founded Konover & Associates South,
located in Boca Raton, Florida. The Company purchased Konover & Associates
South in 1998 and, in connection with the acquisition, committed to appoint Mr.
Konover as Chairman of the Board.
C. Cammack Morton joined the Company in December 1995 as Chief Operating
Officer and was elected President and a Director in January 1996. Effective
January 1, 1997, Mr. Morton became the Company's Chief Executive Officer. Prior
to his affiliation with the Company, Mr. Morton served as Managing Director of
Rothschild Realty, Inc. ("Rothschild") and President and Chief Executive
Officer of the Charter Oak Group, Ltd., a subsidiary of Rothschild engaged in
the development and management of outlet centers. He joined Rothschild in 1987
as Vice President, was promoted to Senior Vice President in 1989 and to
Managing Director in 1991.
Patrick M. Miniutti joined the Company as Executive Vice President, Chief
Financial Officer and Director in August 1996. Prior to his affiliation with
the Company, Mr. Miniutti served for three years as Executive Vice President,
Chief Financial Officer and Trustee of Crown American Realty Trust, a public
REIT that owns regional shopping malls. Prior thereto, Mr. Miniutti held senior
financial positions for a combined 12 years with New Market Companies, Inc.,
Western Development Corporation (predecessor to The Mills Corporation) and
Cadillac Fairview Corporation Limited, which was preceded by ten years in
public accounting, principally with national firms. Mr. Miniutti is a member of
the American Institute of Certified Public Accountants and a former member of
its Real Estate Accounting Committee, which was responsible for promulgating
most of the real estate accounting rules in practice today.
William D. Eberle was a founder of Boise Cascade and is Chairman of
Manchester Associates, Ltd., a venture capital and international consulting
firm and Of Counsel to the law firm of Kaye, Scholer, Fierman, Hays & Handler.
Mr. Eberle also serves as a director of the Board of America Service Group
Inc., a health care services company, Showscan Entertainment, Inc., a
movie-based software and technology company, Ampco Pittsburgh Corporation, a
steel fabrication equipment company, Mitchell Energy & Development Corp., a gas
and oil company, and Sirrom Capital Corporation, a venture financing company.
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<PAGE>
J. Richard Futrell, Jr. is the retired Chairman of Centura Banks, Inc., a
position he held from 1989 to 1993.
John W. Gildea has been Managing Director of Gildea Management Company, an
investment advisory firm, since 1990. From 1986 to 1990, he was Senior Vice
President of Donaldson, Lufkin & Jenrette Securities Corporation. He is a
director of America Service Group, Inc. and The General Chemical Group, Inc.
J. Michael Maloney is the founder of Highland Capital Group, Inc. ("HCG"),
an investment and consulting services company. Before forming HCG, he was
Senior Vice President of Corporate Property Investors ("CPI") from 1981 to
1998. Prior to joining CPI he served as Vice President and Senior Credit
Officer of Citibank's domestic real estate lending department from 1971 to
1981.
Jonathan O'Herron is a Managing Director in the Banking Group of Lazard
Freres & Co. LLC. He is a leading investment banker, serving as financial
advisor to major U.S. and multinational corporations. Prior to joining Lazard
in 1971, Mr. O'Herron was Executive Vice President -- Finance for the Penn
Central Company. Mr. O'Herron is a Trustee Emeritus of Middlebury College, a
Trustee of St. Vincent's Hospital and Medical Center and Chairman of the Board
of Trustees of the American Red Cross in Greater New York.
Mark S. Ticotin is Chief Operating Officer of Lazard Freres Real Estate
Investors, LLC ("LFREI"). Before joining Lazard, he was Senior Executive Vice
President of Simon Property Group, Inc., a publicly traded real estate
investment trust ("SPG"), after SPG acquired CPI in September 1998. Mr. Ticotin
had been President and Chief Operating Officer of CPI when it merged with SPG.
The portfolios of CPI and SPG consisted primarily of regional shopping centers.
From 1988 to 1997, Mr. Ticotin was Senior Vice President of CPI and responsible
for its Leasing, Legal and Marketing Departments. Prior to joining CPI in 1983,
he was an attorney with the law firm of Cravath, Swaine & Moore.
Messrs. Maloney, O'Herron and Ticotin are nominated for election at the
Annual Meeting pursuant to the Company's Stockholder's Agreement with
Prometheus Southeast Retail, LLC entered into in connection with the issuance
of a controlling interest in the Company to Prometheus in 1998. [See "Certain
Relationships and Related Transactions -- Prometheus Relationship" below.]
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL OF THE
ABOVE-LISTED NOMINEES FOR ELECTION AS DIRECTORS.
INFORMATION REGARDING MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, an Executive Compensation
Committee and a Nominating Committee. During the year ended December 31, 1999,
the Board of Directors held eight meetings, the Audit Committee held two
meetings, the Executive Compensation Committee held two meetings and the
Nominating Committee held one meeting. Each director attended at least 75% of
the Board of Directors meetings and assigned committee meetings held during
1999.
AUDIT COMMITTEE. The Audit Committee, which consists of Messrs. Eberle
(Chairman), Futrell and Maloney, makes recommendations concerning the
engagement of independent public accountants, reviews the plans and results of
the audit engagement, approves professional services provided and fees charged
by the independent public accountants, reviews the independence of the
independent public accountants and determines the adequacy of the Company's
internal accounting controls.
EXECUTIVE COMPENSATION COMMITTEE. The Executive Compensation Committee,
which consists of Messrs. Eberle, Gildea (Chairman) and O'Herron, determines
the compensation of the executive officers and administers the Company's 1993
Employee Stock Incentive Plan, its 1996 Restricted Stock Plan and its 1995
Outside Directors' Stock Award Plan.
NOMINATING COMMITTEE. The Nominating Committee, which consists of Messrs.
Futrell (Chairman), Miniutti and O'Herron, determines the slate of nominees for
election to the Board of Directors by vote of the stockholders. The Nominating
Committee does not generally consider nominees recommended by security holders.
COMPENSATION OF DIRECTORS
The Company pays an annual fee of $12,000 to directors who are not
employees of the Company, plus a fee of $1,000 for each Board of Directors or
assigned committee meeting attended. Pursuant to an agreement with Messrs.
O'Herron and Ticotin, the Company does not compensate them for serving on the
Board of Directors but it reimburses them for any expenses incurred in
attending meetings of the Board of Directors and assigned committees. The
annual fee is payable in equal installments semiannually. Under the Company's
1995 Outside Directors' Stock Award Plan, as amended by the Board,
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<PAGE>
up to $20,000 of a director's annual compensation is paid in shares of Common
Stock or options to purchase shares of Common Stock and the remainder paid in
cash, at the direction of the director. The option shares are issued
semiannually at an exercise price equal to 85% of the lower of the market price
on the date of issuance or six months earlier. The 15% discount from market
value represents the cash equivalent of the amount of Board of Directors fees
paid with option shares in lieu of a cash payment.
Each non-employee director also is reimbursed for expenses incurred in
attending meetings of the Board of Directors and assigned committees. Employees
of the Company who are directors receive no additional compensation for their
service as directors.
In addition, Mr. Konover receives $10,000 per month during his term on the
board pursuant to the Company's acquisition agreement relating to the Konover &
Associates South portfolio.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the current
executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- --------------------------- ----- ----------------------------------------------------------------
<S> <C> <C>
C. Cammack Morton 48 President and Chief Executive Officer
Patrick M. Miniutti 52 Executive Vice President and Chief Financial Officer
William H. Neville 55 Executive Vice President and Chief Operating Officer
Christopher G. Gavrelis 46 Executive Vice President, Management and Administration
Daniel J. Kelly 48 Senior Vice President and Chief Accounting Officer
Robin W. Malphrus 39 Senior Vice President, General Counsel and Secretary
Suzanne L. Rice 33 Senior Vice President and President, RMC/Konover Property Trust
Linda M. Swearingen 35 Senior Vice President, Finance and Investor Relations
</TABLE>
See the biographical information for Messrs. Morton and Miniutti under
"Proposal One: Election of Directors."
William H. Neville, has served as Executive Vice President and Chief
Operating Officer since September 1997. Before joining the Company, Mr. Neville
was Regional President of Horizon Group Realty, a real estate investment trust
specializing in outlet centers, from January 1996 to July 1997. Prior to
joining Horizon, Mr. Neville held various positions with Charter Oak Partners,
a privately held outlet center developer, from January 1993 to December 1995,
at which time he was the President of the company.
Christopher G. Gavrelis joined the Company in December 1995. Mr. Gavrelis
was named Senior Vice President of Management and Administration in January
1996 and promoted to Executive Vice President in January 1998. Prior to his
affiliation with the Company, Mr. Gavrelis was Vice President -- Property
Management of the Charter Oak Group for approximately four years. From 1989 to
1991, Mr. Gavrelis served as regional property manager for McArthur/Glen Realty
Corp. (now HGI Realty, Inc.), a company engaged in the development and
operation of factory outlet centers. Mr. Gavrelis is responsible for the
Company's management and administration activities.
Daniel J. Kelly joined the Company as Senior Vice President and Chief
Accounting Officer during November 1999. Prior to joining the Company he was
with Arthur Andersen LLP for 16 of the last 20 years. Since 1993, Mr. Kelly
served as an audit partner in Arthur Andersen LLP's Raleigh, North Carolina
office where he worked primarily with real estate, emerging growth, high-tech
and middle market companies, providing accounting and financial consulting
services. Mr. Kelly served as Chief Financial Officer for a real estate
development company from 1982 to 1986.
Robin W. Malphrus was promoted from Vice President, Secretary and General
Counsel to Senior Vice President, Secretary and General Counsel in January
1999. Prior to being named Vice President, Secretary and General Counsel in
August 1998, Ms. Malphrus was Vice President and Secretary, a position she had
held since June 1996. Ms. Malphrus joined the Company in August 1994 as
Corporate Counsel, and prior to joining the Company, Ms. Malphrus was Corporate
Counsel for North Hills, Inc. for five years.
Suzanne L. Rice was named Senior Vice President and President, RMC/Konover
Property Trust on April 1, 1999 upon Konover Property Trust, Inc.'s acquisition
of RMC Realty Companies, L.P. ("RMC") located in Tampa, Florida. RMC was the
largest manager and leasing agent of neighborhood and community shopping
centers in Florida. Ms. Rice was general partner and principal of RMC where she
had worked since 1989. Prior to joining RMC, she worked for the Federal Reserve
Bank of New York as a commercial bank examiner.
4
<PAGE>
Linda M. Swearingen was promoted from Vice President to Senior Vice
President in January 1998. Prior to being named Vice President of
Finance/Investor Relations in May 1996, Ms. Swearingen was Director of Leasing
for the Company, a position she had held since July 1993. From 1990 to 1993,
Ms. Swearingen served as Assistant Vice President -- Commercial Real Estate for
Bank One Dayton.
EXECUTIVE COMPENSATION
The following table sets forth the compensation of the Chief Executive
Officer and the four most highly compensated executive officers other than the
Chief Executive Officer who were serving as executive officers at December 31,
1999 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
---------------------------------------- -----------------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Awards($)(4) Options (#) Compensation ($)
- -------------------------------- ------ --------------- ----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
C. Cammack Morton 1999 330,000 (3) 758,858(5) 350,000(14) 20,042(11)
President and Chief 1998 330,000 (3) 726,133(5) -- 12,280(11)
Executive Officer 1997 330,000 (3) 670,538(5) -- 33,467(12)
Patrick M. Miniutti 1999 225,000 (3) 447,435(6) 200,000(14) 20,743(11)
Executive Vice President and 1998 225,000 (3) 426,532(6) -- 12,464(11)
Chief Financial Officer 1997 225,000 (3) 346,726(6) -- 19,000(12)
William H. Neville 1999 225,000 (3) 13,455(7) 200,000(14) 24,081(11)
Executive Vice President and 1998 225,000 (3) 196,425(7) -- 12,227(11)
Chief Operating Officer 1997 65,059(1) (3) 205,800(7) 50,000(10) --
Christopher G. Gavrelis 1999 184,500 (3) 130,995(8) 150,000(14) 9,088(11)
Executive Vice President 1998 173,996 (3) 134,156(8) -- 2,645(11)
1997 160,962 (3) 94,163(8) -- 11,915(12)
Suzanne L. Rice 1999 97,500(2) 95,615(13) 218,081(9) 2,865(11)
Senior Vice President 1998 -- -- -- -- --
1997 -- -- -- -- --
</TABLE>
- ---------
(1) Mr. Neville joined the Company in September 1997 and, therefore, his
salary for 1997 represents only a portion of the year.
(2) Ms. Rice joined the company in April 1999 and, therefore, her salary for
1999 represents only a portion of the year.
(3) Except as noted below, bonuses for all of the officers of the Company for
1999, 1998 and 1997 were paid in the form of shares of restricted Common
Stock ("Restricted Stock") and are reported under the Restricted Stock
Award column of this table. The shares of Restricted Stock paid as bonuses
vest all at once ("cliff vesting") after three years from issuance. The
number of shares awarded is based on the market price of a share of Common
Stock on the last day of the applicable calendar year. In consideration of
the three-year vesting period, Restricted Stock bonus amounts are set at
150% of an equivalent cash bonus determined under the Company's MBO Plan.
See " -- Executive Compensation Committee Report -- Bonuses."
(4) Unless otherwise indicated, all Restricted Stock reported here has been
exchanged for options to purchase shares of Restricted Stock at a purchase
price equal to 10% of the market value of a share on the date of grant
("Repurchase Rights"). The vesting schedule for all Repurchase Rights
mirrors that of the exchanged Restricted Stock. A dividend equivalent
right is associated with all Repurchase Rights.
(5) Mr. Morton receives a portion of his base annual salary, his periodic
increases in base annual salary, his annual bonus and his long-term
incentive compensation in the form of Restricted Stock as follows:
(a) 90,000 shares, with a value of $900,000 ($10.00 per share), were
granted in 1996 to Mr. Morton as long-term incentive compensation.
These shares were replaced with a grant of 150,000 shares, with a
value of $993,750 ($6.625 per share), on March 1, 1997. The
difference in value is reported as 1997 compensation. These shares
vest in ten equal installments commencing March 1, 1997;
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<PAGE>
(b) 30,000 shares, with a value of $198,750 ($6.625 per share), were
granted on March 1, 1997, subject to a one-year cliff vest, as part
of Mr. Morton's 1997 base annual salary;
(c) 6,000 shares, with a value of $39,750 ($6.625 per share), were granted
on March 1, 1997, subject to a three-year cliff vest, as an increase
in Mr. Morton's 1997 base annual salary;
(d) On November 11, 1997, Mr. Morton was awarded an additional 21,000
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Morton was exchanged for a Repurchase Right.
The additional 21,000 shares of Restricted Stock were awarded so
that, after taking into account the exercise price of the Repurchase
Rights, the value of such options would equal the value of Mr.
Morton's unvested Restricted Stock prior to the exchange. See " --
Executive Compensation Committee Report -- Restricted Stock";
(e) 48,500 shares, with a value of $338,288 ($7.75 per share) net of a
10% exercise price, were granted as of December 31, 1997, subject to
a three-year cliff vest, as Mr. Morton's 1997 bonus;
(f) 12,550 shares, with a value of $87,537 ($7.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded
March 1, 1998 as an increase in Mr. Morton's 1998 base annual salary;
(g) 28,700 shares, with a value of $200,183 ($7.75 per share) net of a 10%
exercise price, subject to a one-year cliff vest, were awarded March
1, 1998 as part of Mr. Morton's 1998 base annual salary;
(h) 86,600 shares, with a value of $438,413 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Morton's 1998 bonus;
(i) 21,800 shares, with a value of $112,815 ($5.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded
March 1, 1999 as part of Mr. Morton's 1999 base annual salary;
(j) 38,650 shares, with a value of $200,014 ($5.75 per share) net of a 10%
exercise price, subject to a one-year cliff vest, were awarded March
1, 1999 as part of Mr. Morton's 1999 base annual salary;
(k) 96,700 shares, with a value of $446,029 ($5.125 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
March 1, 2000 as Mr. Morton's 1999 bonus.
As of December 31, 1999, Mr. Morton held 454,300 shares of both vested and
unvested Restricted Stock (or Repurchase Rights) worth $2,557,241 ($6.3125
per share, net of a 10% exercise price for the Repurchase Rights).
Dividends or dividend equivalents are payable on such Restricted Stock and
shares underlying such Repurchase Rights.
(6) Mr. Miniutti receives a portion of his base annual salary, his periodic
increases in base annual salary, his annual bonus and his long-term
incentive compensation in the form of Restricted Stock as follows:
(a) 90,000 shares, with a value of $776,250 ($8.625 per share), were
granted in 1996 to Mr. Miniutti as long-term incentive compensation.
These shares were replaced with a grant of 120,000 shares, with a
value of $795,000 ($6.625 per share), on March 1, 1997. The
difference in value is reported as 1997 compensation. These shares
vest in ten equal installments commencing March 1, 1997;
(b) 15,000 shares, with a value of $99,375 ($6.625 per share), were
granted on March 1, 1997, subject to a one-year cliff vest, as part
of Mr. Miniutti's 1997 base annual salary;
(c) 4,500 shares, with a value of $29,813 ($6.625 per share), were granted
on March 1, 1997, subject to a three-year cliff vest, as an increase
in Mr. Miniutti's 1997 base annual salary;
(d) On November 11, 1997, Mr. Miniutti was awarded an additional 15,000
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Miniutti was exchanged for a Repurchase
Right. The additional 15,000 shares of Restricted Stock were awarded
so that, after taking into account the exercise price of the
Repurchase Rights, the value of such options would equal the value of
Mr. Miniutti's unvested Restricted Stock prior to the exchange. See "
-- Executive Compensation Committee Report -- Restricted Stock";
(e) 28,500 shares, with a value of $198,788 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Miniutti's 1997 bonus;
(f) 9,350 shares, with a value of $65,216 ($7.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded
March 1, 1998 as an increase in Mr. Miniutti's 1998 base annual
salary;
(g) 14,350 shares, with a value of $100,091 ($7.75 per share) net of a 10%
exercise price, subject to a one-year cliff vest, were awarded March
1, 1998 as part of Mr. Miniutti's 1998 base annual salary;
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<PAGE>
(h) 51,600 shares, with a value of $261,225 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Miniutti's 1998 bonus;
(i) 15,950 shares, with a value of $82,541 ($5.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded
March 1, 1999 as part of Mr. Miniutti's 1999 base annual salary;
(j) 19,350 shares, with a value of $100,136 ($5.75 per share) net of a 10%
exercise price, subject to a one-year cliff vest, were awarded March
1, 1999 as part of Mr. Miniutti's 1999 base annual salary;
(k) 57,400 shares, with a value of $264,758 ($5.125 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
March 1, 2000 as Mr. Miniutti's 1999 bonus.
As of December 31, 1999, Mr. Miniutti held 294,100 shares of both vested
and unvested Restricted Stock (or Repurchase Rights) worth $1,654,229
($6.3125 per share, net of a 10% exercise price for the Repurchase Rights).
Dividends or dividend equivalents are payable on such Restricted Stock and
shares underlying such Repurchase Rights.
(7) Mr. Neville receives his annual bonus and his long-term incentive
compensation in the form of Restricted Stock as follows:
(a) 20,000 shares, with a value of $150,000 ($7.50 per share), were
granted on September 8, 1997 to Mr. Neville as long-term incentive
compensation. These shares vest in three equal installments
commencing March 1, 1998;
(b) On November 11, 1997, Mr. Neville was awarded an additional 2,250
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Neville was exchanged for a Repurchase Right.
The additional 2,250 shares of Restricted Stock were awarded so that,
after taking into account the exercise price of the Repurchase
Rights, the value of such options would equal the value of Mr.
Neville's unvested Restricted Stock prior to the exchange. See " --
Executive Compensation Committee Report -- Restricted Stock";
(c) 8,000 shares, with a value of $55,800 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Neville's 1997 bonus;
(d) 38,800 shares, with a value of $196,425 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Neville's 1998 bonus;
(e) 2,600 shares, with a value of $13,455 ($5.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded
March 1, 1999 as part of Mr. Neville's 1999 base annual salary.
As of December 31, 1999, Mr. Neville held 71,650 shares of both vested and
unvested Restricted Stock (or Repurchase Rights) worth $405,896 ($6.3125
per share, net of a 10% exercise price for the Repurchase Rights). Dividend
equivalents are payable on all of the shares underlying such Repurchase
Rights.
(8) Mr. Gavrelis receives his annual bonus and his long-term incentive
compensation in the form of Restricted Stock as follows:
(a) On November 11, 1997, Mr. Gavrelis was awarded an additional 1,350
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Gavrelis was exchanged for a Repurchase
Right. The additional 1,350 shares of Restricted Stock were awarded
so that, after taking into account the exercise price of the
Repurchase Rights, the value of such options would equal the value of
Mr. Gavrelis' unvested Restricted Stock prior to the exchange. See "
-- Executive Compensation Committee Report -- Restricted Stock";
(b) 13,500 shares, with a value of $94,163 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Gavrelis' 1997 bonus;
(c) 26,500 shares, with a value of $134,156 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Gavrelis' 1998 bonus;
(d) 28,400 shares, with a value of $130,995 ($5.125 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
March 1, 2000 as part of Mr. Gavrelis' 1999 bonus.
As of December 31, 1999, Mr. Gavrelis held 58,461 shares of both vested and
unvested Restricted Stock (or Repurchase Rights) worth $333,541 ($6.3125
per share, net of a 10% exercise price for the Repurchase Rights).
Dividends or dividend equivalents are payable on all of such Restricted
Stock and the shares underlying such Repurchase Rights.
7
<PAGE>
(9) Ms. Rice receives her annual bonus in the form of Restricted Stock as
follows:
(a) 27,368 shares with a value of $162,500 ($5.9375 per share) were
awarded April 1, 1999 as a partial payment towards 32.5% development
fees earned through March 31, 2001 subject to a maximum payment of
$650,000 payable in Restricted Stock.
(b) 12,050 shares, with a value of $55,581 ($5.125 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded
March 1, 2000 as part of Ms. Rice's 1999 bonus.
As of December 31, 1999, Ms. Rice owned 27,368 shares of Restricted Stock
(or Repurchase Rights) worth $172,761 ($6.3125 per share). Dividend
equivalents are payable on all of the shares underlying such Repurchase
Rights.
(10) In November 1998 the Company exchanged all outstanding options for
Repurchase Rights (with an identical exercise price and vesting schedule).
The only economic effect of such exchange is the dividend equivalent right
associated with the Repurchase Rights. Securities underlying options
issued in 1997 as a replacement for options issued in 1996 have previously
been reported in 1996 compensation and are, therefore, not included here.
This table excludes shares underlying Repurchase Rights that have a 10%
exercise price, the value of which shares are reported under the
Restricted Stock Award column.
(11) Amounts shown represent matching contributions to the Company's 401(k)
Retirement and Savings Plan, car allowances and life and disability
insurance cost.
(12) In 1997 Messrs. Morton, Miniutti and Gavrelis received distributions from
the cancellation of a Split Dollar Insurance Plan in the amounts of
$29,746, $15,000 and $10,000, respectively, as well as matching
contributions to the Company's 401(k) Retirement and Savings Plan of
$3,721, $4,000 and $1,915, respectively.
(13) Includes one half of Ms. Rice's guaranteed annual bonus of $166,667
payable semiannually on the last day of August and of February for the
years ended February 29, 2000, and February 28, 2001 and 2002.
(14) These options vest five years from date of grant or, if earlier, on the
following schedule: 33% vest upon the Common Stock price reaching $12, an
additional 33% vest upon the Common Stock price reaching $14 and the
remaining 34% upon the Common Stock price reaching $19, in each case, less
dividends paid. The Named Executive Officer is entitled to receive certain
dividend equivalent amounts on the shares underlying the options as
follows: as of November 11, 1999, an amount equal to the dividends that
would have been paid since that date on 20% of the shares underlying such
options; each anniversary thereafter (through November 11, 2003), an
additional 20% of such shares enjoy dividend equivalent rights as though
such shares were outstanding as of November 11th of that year.
The following table provides information regarding the stock options
granted during 1999 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Total Annual Rates of Stock
Securities Underlying Options Granted Price Appreciation for
Options to Employees Exercise Option Term ($)(2)
Granted in Fiscal Year Price Expiration -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Name (#) (%) ($) Date 5%($) 10%($)
----------------------- ----------------- --------- ------------ -------- ---------
C. Cammack Morton 350,000(3) 23 $ 9.50 11/10/2008 523,264 2,802,717
Patrick M. Miniutti 200,000(3) 13 $ 9.50 11/10/2008 299,008 1,601,552
William H. Neville 200,000(3) 13 $ 9.50 11/10/2008 299,008 1,601,552
Christopher G. Gavrelis 150,000(3) 10 $ 9.50 11/10/2008 224,256 1,201,164
Suzanne L. Rice -- -- -- -- -- --
</TABLE>
- ---------
(1) Excludes Repurchase Rights with a 10% exercise price, which are reported
under the "Restricted Stock Awards" column of the Summary Compensation
Table.
(2) In accordance with SEC rules, these columns show gains that might exist
for the respective options, assuming the market price of the Company's
Common Stock appreciates from the date of grant over a period of ten years
at annualized rates of five and ten percent, respectively. The actual
value, if any, on stock option exercises will depend on the future
8
<PAGE>
performance of the Company's Common Stock, as well as the option holders'
continued employment through the five-year vesting period. There can be no
assurance that the value, if any, ultimately realized by the executive will
be at or near the values shown above.
(3) These options vest five years from date of grant or, if earlier, on the
following schedule: 33% vest upon the Common Stock price reaching $12, an
additional 33% vest upon the Common Stock price reaching $14 and the
remaining 34% upon the Common Stock price reaching $19, in each case, less
dividends paid. The Named Executive Officer is entitled to receive certain
dividend equivalent amounts on the shares underlying the options as
follows: as of November 11, 1999, an amount equal to the dividends that
would have been paid since that date on 20% of the shares underlying such
options; each anniversary thereafter (through November 11, 2003), an
additional 20% of such shares enjoy dividend equivalent rights as though
such shares were outstanding as of November 11th of that year.
The following table sets forth certain information concerning the number
of shares of Common Stock underlying options held by each of the Named
Executive Officers and the value of such options at December 31, 1999:
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-money
Unexercised Options Options at
at Fiscal Fiscal Year-End
Year-End (#) ($)
Exercisable/ Exercisable/
Name Unexercisable(2) Unexercisable(3)
- --------------------------- ----------------------- ---------------------
<S> <C> <C>
C. Cammack Morton 200,000/450,000 137,500/68,750
Patrick M. Miniutti 120,000/280,000 82,500/55,000
William H. Neville 30,000/220,000 -- / --
Christopher G. Gavrelis 21,000/164,000 14,438/9,625
Suzanne L. Rice -- / -- -- / --
</TABLE>
- ---------
(1) Excludes Repurchase Rights with a 10% exercise price, which are reported
under the "Restricted Stock Awards" column of the Summary Compensation
Table.
(2) Future exercisability is subject to vesting and the optionee remaining
employed by the Company.
(3) Value is calculated by subtracting the exercise price from the fair market
value of the securities underlying the option at fiscal year-end and
multiplying the results by the number of in-the-money options held. Fair
market value was based on closing market price of the Common Stock at
December 31, 1999 ($6 5/16th).
Employment Agreements
Annual Compensation and Basic Terms. The Company is a party to employment
agreements with Messrs. Morton, Miniutti, Gavrelis and Neville and Ms. Rice.
The agreements with Messrs. Morton and Miniutti currently continue through
February 28, 2005. These agreements originally had a three-year term, but were
extended to five years in connection with the change in control of the Company
as a result of the issuance of a controlling interest in the Company to
Prometheus Southeast Retail Trust in 1998 (see "Certain Relationships and
Related Transactions -- Prometheus Relationship" below). The agreement with Mr.
Gavrelis currently continues through February 28, 2003. The term of each of the
three employment agreements will be automatically extended for an additional
year on March 1, 2001 and each year hereafter, subject to the right of either
party to terminate as of the end of the then-existing term by giving written
notice at least 30 days before the March 1 extension date. If the employment of
any executive is terminated due to the change of control of the Company, an
additional two years will be added to the unexpired term of the respective
agreements. The agreements with Mr. Neville and Ms. Rice currently continue
through February 28, 2002. The employment agreements provide for base annual
cash salaries as follows: Mr. Morton -- $330,000; Mr. Miniutti -- $225,000; Mr.
Neville -- $225,000; Mr. Gavrelis -- $185,700 and Ms. Rice -- $130,000.
Ms. Rice's employment agreement also provides for a percentage of certain
development, leasing and management fees earned by the Company. Her agreement
also outlines a guaranteed annual bonus of $166,667 payable semiannually on the
last day of August and of February for the years ended February 29, 2000, and
February 28, 2001 and 2002.
In addition, Messrs. Morton and Miniutti receive Restricted Stock as part
of their base annual compensation, based on an equivalent cash value of
approximately $200,000 and $100,000, respectively. The number of shares of
Restricted Stock
9
<PAGE>
issued annually is adjusted on March 1st of each year based on the market price
of the stock on the date of grant. Such Restricted Stock is subject to a
one-year cliff vest. The base annual salaries are subject to periodic increases
based upon the performance of the Company and the executive. Messrs. Morton and
Miniutti agreed to take all raises in the form of Restricted Stock subject to a
three-year cliff vest. In consideration of such three-year cliff vesting, such
raises are increased 50% over any cash increase.
Pursuant to their respective agreements, each executive is required to
devote his entire business time to the Company and is prohibited from competing
with the Company for a period of one year following termination of employment.
If the employment of any executive is terminated without cause (as defined in
the respective agreements), such executive will be entitled to (i) the greater
of the base salary payable to the executive for the remainder of the
then-existing employment term or one year's base salary, (ii) the product of
the number of years representing the unexpired term of the agreement and an
amount equal to the average bonus paid to such executive over the three years
immediately prior to termination and (iii) certain other accrued benefits.
LONG-TERM COMPENSATION. As of March 1, 1997, in recognition of the
increases in their responsibilities and after consultation with an independent
executive compensation consultant, the Independent Directors replaced the
previous long-term incentive plan awards of 90,000 shares of Restricted Stock
for Messrs. Morton and Miniutti with grants of 150,000 shares and 120,000
shares, respectively. These grants were issued pursuant to the Company's 1996
Restricted Stock Plan. These restricted shares vest in ten equal annual
installments commencing on March 1, 1997, provided each executive continues to
be employed by the Company. If the Company terminates the executive without
cause (as defined in their respective employment agreements) all unvested
shares of Restricted Stock will become fully vested. Mr. Neville was awarded
20,000 shares of Restricted Stock, which vests in three equal annual
installments commencing March 1, 1998. Mr. Gavrelis was awarded 16,667 shares
of Restricted Stock, which vest in three equal annual installments commencing
December 14, 1996.
In addition, the employment agreements for Messrs. Morton, Miniutti,
Neville and Gavrelis called for the grant of options to purchase 300,000,
200,000, 50,000 and 35,000 shares of Common Stock, respectively. For
information regarding the Restricted Stock described in the preceding
paragraph, see the Summary Compensation Table above.
CHANGE IN CONTROL ARRANGEMENTS
Under the employment agreements, termination without cause includes any
termination resulting from a change in control of the Company. The term "change
in control" generally is defined under the employment agreements to include the
first to occur of the following: (i) any person or group owns or controls 50%
or more of the outstanding Common Stock, (ii) any person or group who owned
less than 5% of the outstanding Common Stock on the date of the agreement owns
50% or more of the outstanding Common Stock or (iii) the stockholders of the
Company approve a business combination that will result in a change in
ownership of 50% or more of the outstanding Common Stock. Upon the occurrence
of a change in control of the Company, all non-vested Restricted Stock will
become immediately vested.
In addition, upon the occurrence of a change in control of the Company (as
defined in the Stock Incentive Plan), all non-vested stock options granted
thereunder become immediately vested and exercisable in full. "Change in
control" generally is defined under the Stock Incentive Plan to occur at such
time as any person or group beneficially owns at least 25% of the outstanding
Common Stock.
EXECUTIVE COMPENSATION COMMITTEE REPORT
EXECUTIVE OFFICER COMPENSATION POLICIES. The goals of the Executive
Compensation Committee (the "Committee") with respect to the compensation of
the Company's executive officers are to (i) provide a competitive total
compensation package that enables the Company to attract and retain qualified
executives, (ii) align the compensation of such executives with the Company's
overall business strategies and (iii) provide each executive officer with a
significant equity stake in the Company, which serves to align compensation
with the interests of stockholders. To this end, the Committee determines
executive compensation consistent with a philosophy of compensating executive
officers based on their responsibilities and the Company's performance in
attaining financial and non-financial objectives.
The primary components of the Company's executive compensation program
are: (i) base salaries, (ii) performance-based annual bonuses, (iii) stock
options and (iv) Restricted Stock. The more senior the position, the greater
the compensation that varies with performance and the greater the portion that
is in the form of options or Restricted Stock.
10
<PAGE>
BASE SALARIES. Base salaries for the Company's Named Executive Officers,
as well as changes in such salaries, are based upon recommendations of the
Chief Executive Officer, taking into account such factors as competitive
industry salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer; and the length of the officer's
service. Under the Chief Executive Officer's direction, the Chief Operating
Officer reviews all salary recommendations with the Committee, which then
approves or disapproves such recommendations. The Chief Executive Officer
reviews any salary recommendations for the Chief Operating Officer with the
Committee. In 1998, the Committee engaged a national executive compensation
consultant for the purpose of obtaining comparative information and advice on
each of the components of executive compensation. The Committee believes that
the majority of the Company's executive officers are at or near the average for
base salaries and total compensation as compared to that of the Company's
peers. The 1999 base salary increases for executive officers approximated 4%
and were awarded in the form of Restricted Stock subject to a three-year cliff
vest, equal to 150% of the value of an equivalent cash raise. The Committee
would like to increase base salaries to the 75th percentile level in the
future. See " -- Employment Agreements -- Annual Compensation and Basic Terms."
BONUSES. Annual bonuses are determined under a Management By Objectives
(MBO) plan based on Company and individual performance. The weighting between
Company performance and individual performance is determined on the basis of
position and responsibilities. Performance targets are determined for both
Company performance and individual performance. Achieving the targets would
ordinarily result in bonuses ranging from 5% to 60% of base salary, with
maximum bonuses ranging from 10% to 70% of base salary for performance
achievements greater than the targets. All officers of the Company receive 100%
of their bonus in the form of Restricted Stock with a three-year cliff vest. In
consideration therefor, each officer receives shares of Restricted Stock equal
to 150% of the value of the appropriate cash bonus.
STOCK OPTIONS. The Company established an Employee Stock Incentive Plan
(the "Stock Incentive Plan") in 1993 for the purpose of attracting and
retaining the Company's executive officers and other employees. A maximum of
2,800,000 shares of Common Stock are issuable under the Stock Incentive Plan.
The Stock Incentive Plan allows for the grant of incentive and nonqualified
options (within the meaning of the Internal Revenue Code) that are exercisable
at a price equal to the closing price of the Common Stock on the New York Stock
Exchange on the trading day immediately preceding the date of grant. All of the
Company's executive officers are eligible to receive options to purchase shares
of Common Stock granted under the Stock Incentive Plan. The Committee believes
that stock option grants are a valuable motivating tool and provide a long-term
incentive to management. The Committee also believes that issuing stock options
to executives benefits the Company's stockholders by encouraging executives to
own the Company's stock, thus aligning executive compensation with stockholder
interests. In November 1998, certain holders exchanged 735,000 options for
Repurchase Rights (with identical exercise prices and vesting schedules). The
only economic effect of such change is the dividend equivalent right associated
with the Repurchase Rights. See " -- Restricted Stock and Repurchase Rights"
below. In June 1999, 1,525,000 options were issued to the Company's senior
management. These options vest five years from date of grant or, if earlier,
upon the following schedule: 33% vest upon the Common Stock price reaching $12,
an additional 33% vest upon the Common Stock price reaching $14 and the
remaining 34% upon the Common Stock price reaching $19, in each case, less
dividends paid. The Named Executive Officer is entitled to receive certain
dividend equivalent amounts on the shares underlying the options as follows: as
of November 11, 1999, an amount equal to the dividends that would have been
paid since that date on 20% of the shares underlying such options; each
anniversary thereafter (through November 11, 2003), an additional 20% of such
shares enjoy dividend equivalent rights as though such shares were outstanding
as of November 11th of that year.
RESTRICTED STOCK AND REPURCHASE RIGHTS. The Company established a
restricted stock plan (the "Restricted Plan") in 1996, reserving 350,000 shares
of Common Stock for issuance thereunder, to give the Committee more flexibility
in designing equity-based compensation arrangements to attract, motivate and
retain executives and other key employees. Such equity-based compensation is
designed to align more closely the financial interests of management with that
of the stockholders. In 1997 and 1998, the Company reserved in the aggregate an
additional 1,900,000 shares of Common Stock for issuance under the Restricted
Plan. The Restricted Plan, which is administered by the Committee, provides for
the grant of Restricted Stock awards to any new or existing employee of the
Company, including executive officers. Awards under the Restricted Plan
typically will be subject to various vesting schedules ranging from one to ten
years from the date of grant. The Restricted Plan permits the Committee to
customize the vesting schedule by deferring the commencement date, lengthening
the vesting period and/or conditioning vesting upon the achievement of
specified performance goals. During 1999, the Company granted 643,347 shares of
Restricted Stock to officers and other key employees.
In 1997, the Company supplemented the Restricted Plan so that officers
would not have to sell their shares of Restricted Stock to meet their tax
obligations incurred upon the vesting of such shares. The Restricted Plan, as
supplemented, provides that Restricted Stock may be replaced by Repurchase
Rights, which entitle the holder to purchase Restricted Stock at an
11
<PAGE>
exercise price equal to 10% of the value of a share on the date of grant of the
Repurchase Right. The Repurchase Rights vest on the same schedule as the shares
of Restricted Stock that they replaced. Under the supplemented Restricted Plan,
holders of Repurchase Rights will also be entitled to cash payments equal to
the value of the dividends that would have been paid on the shares underlying
the Repurchase Rights. The executives may exercise the Repurchase Rights at any
time after vesting and within 15 years of the date of grant. For purposes of
calculating the number of options and shares available for issuance under the
Company's Restricted Plan, when Restricted Stock is exchanged for Repurchase
Rights that have an exercise price equal to 10% of the stock price on the date
of exchange, no adjustment is made to the number of outstanding shares of
Restricted Stock under the Restricted Plan since the underlying number of
shares does not change.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. C. Cammack Morton's compensation
for 1999 as the Company's President and Chief Executive Officer consisted of an
annual base salary, pursuant to his above-described employment agreement, of
$642,829 ($312,829 of which was paid in the form of Restricted Stock, subject
to one-year and three-year cliff vesting), which is subject to periodic
increases to be determined by the Committee in its discretion based upon the
Committee's or the Board's subjective determination of the performance of the
Company and Mr. Morton. Mr. Morton's base salary was increased effective March
15, 1999 by $25,138, paid in the form of Restricted Stock with a three-year
cliff vest. The increase was primarily a cost of living increase. In addition,
consistent with the intent of the bonus plan discussed above, the Committee
granted a bonus to Mr. Morton for 1999 in the form of 96,700 Repurchase Rights
subject to a three-year cliff vest, which had a market value at date of grant
of $446,029, net of a 10% exercise price. Seventy percent of the bonus was
based on the Company exceeding the target increase in FFO for 1999; 10% of the
bonus was based on the Company exceeding the target for net operating income;
the remaining 20% was not based on any specific criteria but was awarded in the
subjective discretion of the Committee.
SECTION 162(M) OF THE INTERNAL REVENUE CODE. The Company does not expect
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
to affect the deductibility for federal income tax purposes of the compensation
of the Company's executive officers in 1999. In the future, the Company intends
to review periodically the applicability of Section 162(m) to the Company's
compensation programs, including its potential impact on stock options and
Restricted Stock awarded to executive officers, and, if considered appropriate,
to develop a policy with respect to the Company's compliance with Section
162(m).
The Executive Compensation Committee is pleased to submit this report to
the stockholders.
John W. Gildea, Chairman
William D. Eberle
Jonathan O'Herron
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the following individuals (none of whom was or had been an
officer or employee of the Company) served on the Executive Compensation
Committee: Messrs. Gildea, Eberle and O'Herron. No member of the Executive
Compensation Committee was or is an officer or employee of the Company.
12
<PAGE>
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of March 15, 2000 by:
(a) each Named Executive Officer; (b) each director and nominee; (c) current
executive officers and directors as a group; and (d) each person or group known
by the Company to beneficially own more than five percent of the Common Stock.
Except as otherwise described in the notes below, the following beneficial
owners have sole voting power and sole investment power with respect to all
shares of Common Stock set forth opposite their name.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Beneficial Ownership(1) of Class(2)
------------------------- ------------
<S> <C> <C>
C. Cammack Morton ........................................... 394,288(3) 1.3%
Patrick M. Miniutti ......................................... 234,820(4) *
William H. Neville .......................................... 54,096(5) *
Christopher G. Gavrelis ..................................... 48,393(6) *
Suzanne L. Rice ............................................. 30,041 *
William D. Eberle ........................................... 7,095 *
J. Richard Futrell, Jr. ..................................... 5,044(7) *
John W. Gildea .............................................. 946,877(8) 3.0%
Simon Konover ............................................... 30,897(9) *
J. Michael Maloney .......................................... -- --
Jonathan O'Herron ........................................... 21,052,631(10) 67.6%
Mark S. Ticotin ............................................. 21,052,631(10) 67.6%
All current executive officers and directors as a group (15) 22,835,275(11) 73.3%
Prometheus Southeast Retail Trust ........................... 21,052,631(10) 67.6%
</TABLE>
- ---------
(1) Includes shares issuable upon exercise or conversion of other securities
within the next 60 days.
(2) An asterisk (*) indicates less than one percent. Shares issuable upon
exercise or conversion of other securities within the next 60 days are
deemed outstanding for the purpose of computing the percentage of
outstanding securities owned by the person or group named but are not
deemed to be outstanding for the purpose of computing the percentage of
the class by any other person.
(3) Includes 377,350 shares issuable upon exercise of vested Repurchase
Rights. See " -- Executive Compensation -- Summary Compensation Table" and
" -- Executive Compensation Committee Report" for a discussion of
Repurchase Rights.
(4) Includes 222,600 shares issuable upon exercise of vested Repurchase
Rights.
(5) Includes 52,250 shares issuable upon exercise of vested Repurchase Rights.
(6) Includes 36,905 shares issuable upon exercise of vested Repurchase Rights.
(7) Includes 2,000 shares issuable upon exercise of vested stock options.
(8) Includes (i) 4,000 shares held by Mr. Gildea's spouse as custodian for
their children as to which Mr. Gildea has sole voting power only and as to
which he disclaims beneficial ownership, (ii) 111,111 shares of Common
Stock presently issuable upon conversion of Preferred Stock as to which
Mr. Gildea has sole voting and dispositive power, (iii) 20,000 shares
issuable upon exercise of warrants as to which Mr. Gildea has sole voting
power and sole dispositive power, (iv) 766,666 shares of Common Stock
presently issuable upon conversion of Preferred Stock and warrants owned
by Network Fund III, Ltd. ("Network"), with respect to which Mr. Gildea
has shared dispositive power only and (v) 18,100 shares of Common Stock
owned by Network, with respect to which Mr. Gildea has shared dispositive
power only. Mr. Gildea is a director of Network and a Managing Director of
Gildea Management Company, which has an investment advisory agreement with
Network.
(9) Represents shares issuable (at the Company's option) upon redemption of
partnership interests in KPT Properties, L.P.
(10) Prometheus Southeast Retail Trust ("Prometheus") is the direct owner of
this interest in the Company. Prometheus Southeast Retail LLC owns all of
the common equity interests in Prometheus. Prometheus Southeast Retail LLC
has one sole member, Lazard Freres Strategic Realty Investors II SPV REIT
Corp. ("SPV"). SPV has three owners of its common shares: LF Strategic
Realty Investors II L.P. ("LFSRI II") owns 86.1%, LFSRI II Alternative
Partnership L.P. ("Alternative") owns 10.4% and LFSRI II-CADIM Alternative
Partnership L.P. ("CADIM") is a 3.5%. Lazard Freres
13
<PAGE>
Real Estate Investors LLC ("LFREI") is the general partner of each of LFSRI
II, Alternative and CADIM. Mr. O'Herron is a Managing Director of Lazard
Freres & Co. LLC and Mr. Ticotin is the Chief Operating Officer of LFREI.
As a consequence of the foregoing, Messrs. O'Herron and Ticotin each have
an indirect beneficial ownership interest in the Company, as well as
indirect shared investment power and indirect shared voting power. Messrs.
O'Herron and Ticotin hereby disclaim beneficial ownership of the shares of
the Company held by Prometheus except to the extent of their pecuniary
interests therein.
(11) In addition to the information set forth in footnote 3 of this table, the
Company's executive officers who are not separately listed in this table
beneficially own 31,093 shares, of which 27,931 are issuable upon exercise
of vested Repurchase Rights.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PROMETHEUS RELATIONSHIP. Prometheus Southeast Retail Trust, which is
indirectly controlled by LFREI, acquired its 68% interest in the Company during
1998 pursuant to the shareholder-approved Stock Purchase Agreement with the
Company.
Pursuant to a related Stockholders Agreement with Prometheus, the Company
is obligated to take all actions necessary to cause the Board of Directors to
consist of at least nine members, three of which are designated by Prometheus
(the "Prometheus Nominees"). Two of the Prometheus Nominees are chosen at the
sole discretion of Prometheus; the third is subject to the reasonable approval
of the Company. Of the nine individuals nominated for election at the Annual
Meeting, the Prometheus Nominees are Messrs. Maloney, O'Herron and Ticotin.
The number of Prometheus Nominees that Prometheus is entitled to nominate
decreases as the value of its ownership interest in the Company decreases, as
set forth below:
<TABLE>
<CAPTION>
Investment Value Number of Prometheus Nominees
- ------------------------------ ------------------------------------------------------
<S> <C>
$50 million or more Three or proportional one-third share of the Board if
Board size over nine
$25 million to $50 million Two or proportional two-ninths share of the Board if
Board size over nine
$10 million to $25 million One or proportional one-ninth share of the Board if
Board size over nine
Less than $10 million None
</TABLE>
Mr. Ticotin is an executive officer of LFREI. Mr. O'Herron is a Managing
Director of Lazard Freres & Co. LLC, which indirectly controls LFREI and
Prometheus.
The Company also entered into a Contingent Value Right Agreement, which
provides that if Prometheus Southeast Retail L.L.C. has not doubled its
investment (through stock appreciation, dividends, or both) by January 1, 2004,
the Company will pay it in cash or stock, an amount necessary to achieve such a
return, subject to a maximum payment of 4,500,000 shares or the cash value
thereof.
AGREEMENT WITH AFFILIATE OF SIMON KONOVER. One June 7, 1999 the Company
transferred its obligation for the rent and certain payroll expenses for its
Boca Raton, Florida office to Konover Management South Corporation ("KMSC")
(which is 100% owned by Mr. Simon Konover). The Company paid KMSC $150,000 for
its assumption of these liabilities.
TRANSFER OF E-COMMERCE ASSETS TO TRUEFINDS.COM. During 1999, the Company
began selling apparel and other merchandise through its website
"truefinds.com", and commenced other strategic e-commerce initiatives. Although
the revenue from this start-up venture has been nominal to date, the Company
transferred its e-commerce operations to truefinds.com, Inc., a "preferred
stock subsidiary" incorporated in Maryland, in December 1999 to reduce the risk
that growth of the e-commerce business would jeopardize the Company's REIT
status.
Truefinds.com, Inc. is a "preferred stock subsidiary" in which the Company
owns 95% of the economic interest and Employee Investors LLC, 100% owned by C.
Cammack Morton, owns the remaining 5% interest. Employee Investors LLC owns all
of the voting stock in truefinds.com, Inc. The Company transferred the
e-commerce assets to truefinds.com, Inc. in exchange for $950,000 in stock and
a $2.4 million note from truefinds.com. In addition, the Company required a
simultaneous investment by Employee Investors LLC of $50,000. Because of the
difficulty in valuing the e-commerce assets, the Company also required Employee
Investors LLC to agree to pay an additional amount for its shares equal to the
positive difference, if any, between the value of 5% of truefinds.com as of the
date of the asset transfer (to be determined by an
14
<PAGE>
independent appraiser) and $50,000. Such note was guaranteed by Mr. Morton. The
Company has not yet engaged an appraiser for this purpose.
LOANS TO SUNSET KPT INVESTMENTS, INC. In order to satisfy income source
tests imposed on REITs, the Company's interest in certain development land and
a third-party management business is held through its 85% economic interest in
Sunset KPT Investments, Inc. (formerly Wakefield Investment, Inc.). Messrs.
Morton, Miniutti, Neville and Gavrelis are officers of in Sunset KPT
Investments, Inc. and own all of its voting stock, representing a 15% economic
interest in the subsidiary.
The following table provides information about certain loans from the
Company to Sunset KPT Investments, Inc.:
<TABLE>
<CAPTION>
Note Balance at
Project December 31, 1999 Interest Rate Purpose of Loan
- ------------------------------------- ------------------- --------------- --------------------------------------
<S> <C> <C> <C>
Carolina Bay $3,884,813 10% Provide funding to purchase and
develop land
Lake Carmel $1,814,272 11% Provide funding to develop land (site
was abandoned in 1999)
RMC/Konover Property Trust, LLC $3,153,503 11% Provide for operations of third-party
management company
</TABLE>
ACQUISITION OF RMC PROPERTY LEASING AND MANAGEMENT BUSINESS. The Company
entered into an agreement on March 18, 1999 to acquire the operations of RMC
Realty Companies, Inc., in Tampa, Florida. The acquisition, which was effective
on April 1, 1999, was part of the Company's growth strategy in the Southeast
and involved the acquisition of management and leasing contracts in excess of
7.2 million square feet in the state of Florida. The operation which is named
RMC/ Konover Property Trust, LLC, operates as a separate business unit under
Sunset KPT Investments, Inc.
SEVERANCE AGREEMENTS. Pursuant to a severance agreement entered into in
June of 1999 with Connell L. Radcliff, the Company agree to pay Mr. Radcliff a
severance payment of $155,997.97, an amount which approximates the balance of
his salary for 1999. In addition to the severance payment, the agreement
provides that the 20,000 unvested options held by Mr. Radcliff on the effective
date of the agreement would expire and the 30,000 vested options held by Mr.
Radcliff on that date would remain outstanding and excisable through February
28, 2001.
On December 17, 1999, the Company entered into a severance agreement with
Fred P. Steinmark, pursuant to which his employment relationship with the
Company was terminated on December 31, 1999. In January 2000, Mr. Steinmark
received a severance payment of $359,625, an amount which approximates the base
salary that he would have been paid through the remaining term of his
employment agreement. As of December 31, 1999, the options to purchase 20,000
shares of Common Stock previously granted to Mr. Steinmark became fully vested
and his remaining options expired. In addition, Mr. Steinmark's Repurchase
Rights to purchase 45,199 shares of Restricted Stock became fully vested upon
his termination.
LOAN TO AFFILIATE OF SIMON KONOVER. In December 1997 the Company issued an
$8.5 million note to Davie Plaza Limited Partnership, a Florida limited
partnership, of which Simon Konover is a 49% owner. The loan was secured by a
first mortgage position on a 299,778-square foot retail shopping center located
in Davie, Florida. In January 1999, the Company received a $2 million
repayment. The outstanding balance of $6.5 million was repaid in May 1999. The
loan was made in anticipation of the Company's acquisition of the center in
connection with the Konover Transaction and to take advantage of the ability to
repay the previous debt instrument at a discount. The center was ultimately not
acquired by the Company.
LOANS TO PATRICK M. MINIUTTI. On June 12, 1998, the Company issued a
$125,000 note to Patrick M. Miniutti, Executive Vice President, Chief Financial
Officer and Director. The loan matures June 30, 2003 and carries an interest
rate of 7.75%. On May 4, 1999, the Company issued a $75,000 note to Patrick M.
Miniutti of which $50,000 was repaid in 1999. This loan matures July 15, 2000
and carries an interest rate of 8.50%. Both loans are secured by his vested
Restricted Stock. The purpose was to allow Mr. Miniutti to raise funds without
selling his Restricted Stock.
INFORMATION REGARDING INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee,
has appointed the accounting firm of Arthur Andersen LLP ("Arthur Andersen") to
serve as independent auditors of the Company for the fiscal year ending
December 31, 2000. Arthur Andersen has served as independent auditors of the
Company since September 1997 and is considered by management of the Company to
be well qualified. The Company has been advised by that firm that neither it
nor any member thereof has any financial interest, direct or indirect, in the
Company or any of its subsidiaries in any capacity. Representatives of Arthur
Andersen will be present at the Annual Meeting, will have the opportunity to
make a statement if they so desire, and will be available to respond to
appropriate questions.
15
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative total return on the Common Stock with the cumulative
total return of a hypothetical investment in each of the Standard & Poor's
Composite -- 500 Index and the index of equity real estate investment trusts
prepared by the National Association of Real Estate Investment Trusts
("NAREIT") based on the respective market prices of each such investment on the
dates shown below, assuming an initial investment of $100 in the Common Stock
on December 31, 1994 and the reinvestment of dividends. Equity real estate
investment trusts are defined as those which derive more than 75% of their
income from equity investments in real estate assets. The NAREIT equity index
includes all tax qualified real estate investment trusts listed on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ National Market
System.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C> <C> <C>
Konover Property Trust 100 70 38 45 41 39
- ------------------------- --- -- -- -- -- --
S&P 500 Index 100 138 170 226 290 351
- ------------------------- --- --- --- --- --- ---
NAREIT Equity Index 100 115 156 188 155 148
</TABLE>
THE STOCK PRICE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, OR AMENDED, OR
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT
THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND
SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
PROPOSAL TWO:
AMENDMENT OF THE 1995 OUTSIDE DIRECTORS' STOCK COMPENSATION PLAN
The Board of Directors recommends that the stockholders approve an
amendment to the Company's 1995 Outside Directors' Stock Compensation Plan (the
"Directors' Plan") to increase the shares of Common Stock authorized to be
issued under the Directors' Plan from 150,000 to 250,000. The Directors' Plan
was adopted in 1995 by the Company to provide an incentive of increased Common
Stock ownership to the members of the Board of Directors of the Company who are
not officers or employees of the Company or any of its subsidiaries ("Outside
Directors"). The Directors' Plan is administered by the Executive Compensation
Committee. Information regarding the Directors' Plan is set forth below.
Outside Directors receive an annual retainer fee of $12,000 that is paid
in equal semiannual installments (the "Retainer Fee") plus a fee of $1,000
(plus out-of-pocket expenses) for attendance in person at each meeting of the
Board of Directors
16
<PAGE>
or a committee (the "Meeting Fee"). Outside Directors may elect to receive all
or a portion of their Retainer Fee and Meeting Fees in shares of Common Stock
or options to purchase Common Stock issued under the Directors' Plan in lieu of
a cash payment. If an Outside Director elects to receive a portion of his
Retainer Fee or Meeting Fee in shares of Common Stock, the number of shares of
Common Stock awarded to Outside Directors in lieu of a cash payment will be
based on the price of the Common Stock on the New York Stock Exchange on the
business day immediately preceding the relevant payment date. If an Outside
Director elects to receive a portion of his Retainer Fee or Meeting Fee in
options to purchase shares of Common Stock, the number of options awarded will
vary with the exercise price such that the difference between the fair market
value of the shares underlying the options and the aggregate exercise price of
the options equals such portion of the cash director fees foregone. The
Executive Compensation Committee may also grant discretionary awards of options
to purchase Common Stock to Outside Directors.
The exercise price for each option issued under the Directors' Plan will
be not less than the fair market value of a share of Common Stock on the date
of grant, except that options received in lieu of cash Retainer Fees or Meeting
Fees will have an exercise price of not less than such fair market value minus
the amount of such fees that the director elected to forego.
As of March 1, 2000, 80,466 shares of Common Stock had been issued or
reserved for issuance upon exercise of outstanding options under the Directors'
Plan. The proposed amendment to the Directors' Plan would increase the number
of shares of Common Stock authorized to be issued under the Directors' Plan
from 150,000 to 250,000. The Board of Directors believes this increase is
necessary because each current Outside Director has elected to receive up to
$20,000 of their Retainer Fee and Meeting Fees in shares of Common Stock in
lieu of a cash payment. Moreover, the Board of Directors believes that the
additional financial incentive inherent in new or additional ownership of
shares of Common Stock by its directors is beneficial to the Company.
Proposal Two requires the affirmative vote of a majority of the votes cast
on the proposal, provided that the total vote cast on the proposal represents
over 50% in interest of all shares of Common Stock entitled to vote on the
proposal. For purposes of the vote on Proposal Two, an abstention will have the
effect of a vote against the proposals, unless holders of more than 50% in
interest of all shares of Common Stock entitled to vote on the proposal cast
votes, in which event an abstention will have no effect on the result of the
vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL TWO.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and officer of the Company and each beneficial owner of 10%
or more of the Company's Common Stock is required to file with the Securities
and Exchange Commission and the New York Stock Exchange, by a specified date,
reports of Common Stock ownership and changes in Common Stock ownership. To the
Company's knowledge, based solely on copies of such filings furnished to the
Company and written representations that no reports on Form 5 were required,
during the fiscal year ended December 31, 1999, all such filings were timely
made, except that (i) Messrs. Ticotin, O'Herron, Maloney and Kelly and Ms. Rice
each filed their initial report of beneficial ownership, and (ii) Mr. Eberle
filed late a report disclosing one transaction.
ADDITIONAL INFORMATION
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, including matters incident to the Annual Meeting, the persons
named in the accompanying proxy will vote proxies as they deem appropriate with
respect to such matters if permitted by the rules promulgated under the
Securities Exchange Act of 1934.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any stockholder proposals intended to be presented at the Company's 2001
annual meeting of stockholders must be received by the Company at 11000 Regency
Parkway, Suite 300, Cary, North Carolina 27511, on or before December 14, 2000
for inclusion in the Company's proxy statement and form of proxy relating to
the 2001 annual meeting of stockholders. Under the Company's bylaws, no
shareholder proposal may be presented at the annual meeting, whether or not
included in the proxy statement, unless written notice of the proposal is
received by the Secretary of the Company not later than February 11, 2001 nor
prior to November 13, 2000. If, however, the annual meeting is postponed or
advanced so that it is not
17
<PAGE>
held between May 4 and August 2, 2001, notice must be received not earlier than
180 days prior to the 2001 annual meeting and not later than the later of (i)
90 days before the 2001 annual meeting and (ii) the tenth day following the day
on which public announcement of the postponement or advancement of the date of
the meeting is first made by the Company.
By Order of the Board of Directors
/s/ ROBIN W. MALPHRUS
ROBIN W. MALPHRUS, ESQ.
Secretary
Dated: April 13, 2000
18
<PAGE>
- --------------------------------------------------------------------------------
KONOVER PROPERTY TRUST, INC.
FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 11, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Cammack Morton and Patrick M. Miniutti, or
either of them, with full power of substitution, the attorney and proxy of the
undersigned, to appear and to vote all of the shares of common stock of
Konover Property Trust, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held at 211 Gregson Drive, Cary, North Carolina, 27511,
on May 11, 2000 at 10:00 a.m., and any adjournment thereof. Receipt of copies
of the Annual Report to Stockholders, the Notice of the Annual Meeting of
Stockholders and the Proxy Statement is hereby acknowledged.
This Proxy will be voted in accordance with the Instructions marked herein,
and in accordance with the recommendation of the Board of Directors if no
instructions to the contrary are marked herein. If any other business is
transacted at the Annual Meeting (including matters incident to the conduct of
the Annual Meeting), this Proxy wil be voted in the discretion of, and in
accordance with, the best judgement of the proxies (no other business is
currently known).
- --------------------------------------------------------------------------------
1. Election of nine directors to serve until the 2001 annual meeting or until
their successors are duly elected and qualified (Proposal One); Nominees:
Simon Konover, C. Cammack Morton, Patrick M. Miniutti, William D. Eberle,
J. Richard Futrell, Jr., John W. Gildea, J. Michael Maloney, Jonathan
O'Herron and Mark S. Ticotin.
[ ] FOR ALL (except as noted below) [ ] WITHHOLD AUTHORITY AS TO ALL
(Instruction: To withhold authority to vote for any individual nominee,
print the nominee's name for which authority is withheld below.)
- --------------------------------------------------------------------------------
2. Amendment of the Company's 1995 Outside Directors' Stock Award Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder from 150,000 to 250,000 (Proposal Two).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
FROM THE AIRPORT FROM RALEIGH
<S> <C> <C>
Take 1-40 East to Take US 1/Hwy 64 West to
US 1/Hwy 64 West Exit 98B onto Hwy 64 West
Take exit 98B onto Hwy 64 West Turn left at third traffic light (Gregson Drive)
Turn left at third traffic light (Gregson Drive) [TC]2 is on the left, #211
[TC]2 is on the left, #211
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Note: Please date and sign exactly as the name appears on this proxy.
Joint owners should each sign. If the signer is a corporation, please sign
full corporate name by a duly authorized officer. Executors, trustees, etc.
should give full title as such.
Dated:--------------------------
Signature:------------------------
Signature:------------------------
Please mark boxes in blue or
black ink. Please return
promptly in the enclosed
envelope which requires no
postage if mailed in the
U.S.A.
PLEASE MARK, DATE AND SIGN
THIS PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED
ENVELOPE SO AS TO ENSURE A
QUORUM AT THE MEETING. THIS IS
IMPORTANT WHETHER YOU OWN FEW
OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY
SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
