<PAGE>
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Summit Properties, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:(1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
<PAGE>
(SUMMIT PROPERTIES LOGO)
March 15, 1999
Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Summit Properties Inc. to be held on Tuesday, May 11, 1999 at 1:00 p.m. at
First Union National Bank, 12th Floor Auditorium, 301 South Tryon Street,
Charlotte, North Carolina. The business to be conducted at the meeting is
set forth in the formal notice that follows. At the meeting we will review
Summit's operations, report on 1998 financial results and discuss Summit's
plans for the future. Our directors and management team will be available
to answer any questions you may have from the floor.
Your vote is important to us. We hope that you will take the time to
complete, sign and return the enclosed proxy card in the return envelope
provided. Summit relies upon its stockholders to promptly complete, sign
and return the cards in order to minimize costs relating to proxy
solicitation. If you attend the meeting, as we hope you do, you may
continue to have your shares voted as instructed in the proxy or you may
withdraw your proxy at the meeting and vote your shares in person from the
floor.
Thank you for your continued support of and interest in Summit.
Sincerely,
Summit Properties Inc.
/s/ William F. Paulsen
William F. Paulsen
Chief Executive Officer
<PAGE>
SUMMIT PROPERTIES INC.
212 SOUTH TRYON STREET, SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Summit Properties Inc. (the "Company") will be held
Tuesday, May 11, 1999 at 1:00 p.m. at Two First Union Center, 301 South Tryon
Street, 12th Floor, Charlotte, North Carolina for the following purposes:
1. To elect two directors of the Company to serve until the 2002 annual
meeting of stockholders and until their respective successors are duly
elected and qualified.
2. To consider and act upon a proposal to approve the Company's amended
and restated 1994 Stock Option and Incentive Plan (the "1994 Stock Plan").
The full text of the amended and restated 1994 Stock Plan is attached to
the Company's 1999 Proxy Statement as Exhibit A thereto. The key features
of the amended and restated 1994 Stock Plan are highlighted below. The
amended and restated 1994 Stock Plan:
o increases the number of shares of Common Stock reserved for issuance
thereunder from 1,000,000 to 3,000,000 shares;
o authorizes the grant of the following additional types of awards:
dividend equivalent rights, deferred stock awards, performance share
awards and discretionary non-qualified stock options to non-employee
directors;
o prohibits the repricing of outstanding stock options;
o fixes the maximum term for exercising a non-qualified stock option at
10 years after the grant date; and
o limits the aggregate amount of shares available for grants of certain
stock awards to 500,000 of the additional 2,000,000 shares of common
stock issuable under the 1994 Stock Plan.
3. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on the
date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual
Meeting may be postponed.
The Board of Directors has fixed the close of business on March 1, 1999 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock, $.01 par value per
share, at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may
vote in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
/s/ Michael G. Malone
Michael G. Malone, Esq.
Secretary
Charlotte, North Carolina
March 15, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID
ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF
YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
SUMMIT PROPERTIES INC.
212 SOUTH TRYON STREET
SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
--------------------
PROXY STATEMENT
--------------------
FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
MARCH 15, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Summit Properties Inc. (the "Company") for
use at the 1999 Annual Meeting of Stockholders of the Company to be held on
Tuesday, May 11, 1999, and at any adjournments or postponements thereof (the
"Annual Meeting"). At the Annual Meeting, stockholders will be asked to vote
upon the election of two directors of the Company and the amendment and
restatement of the 1994 Stock Option and Incentive Plan (the "1994 Stock
Plan"), and to act upon any other matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are first being sent to stockholders on or about March 15, 1999. The
Board of Directors has fixed the close of business on March 1, 1999 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting (the "Record Date"). Only stockholders of record of
the Company's common stock, par value $.01 per s hare (the "Common Stock"), at
the close of business on the Record Date will be entitled to notice of and to
vote at the Annual Meeting. As of the Record Date, there were 28,444,222 shares
of Common Stock outstanding and entitled to vote at the Annual Meeting. Holders
of Common Stock outstanding as of the close of business on the Record Date will
be entitled to one vote for each share held by them.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Both abstentions and broker non-votes (as defined below) will be
counted in determining the presence of a quorum. The affirmative vote of a
plurality of votes cast at a meeting at which a quorum is present is sufficient
for the election of directors. Abstentions and broker non-votes will be
disregarded in determining the "votes cast" for purposes of electing directors.
The affirmative vote of a majority of the votes cast at a meeting at which a
quorum is present is sufficient for the approval of the amendment and
restatement of the 1994 Stock Plan. Abstentions and broker non-votes will be
disregarded in determining the "votes cast" for purposes of the approval of the
amendment and restatement of the 1994 Stock Plan. Notwithstanding this approval
requirement, the vote on the amendment and restatement of the 1994 Stock Plan
will not be effective unless, in accordance with the rules of the New York
Stock Exchange (the "NYSE"), a majority of the shares of Common Stock entitled
to vote with respect to the amendment and restatement of the 1994 Stock Plan
cast a vote on such proposal and a majority of the votes so cast are voted for
the approval of the amendment and restatement of the 1994 Stock Plan. For this
purpose, abstentions will count as votes cast and broker non-votes will not
count as votes cast. Broker "non-votes" are proxies from brokers or other
nominees indicating that
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such person has not received instructions from the beneficial owner or other
person entitled to vote the shares which are the subject of the proxy on a
particular matter with respect to which the broker or other nominee does not
have discretionary voting power.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED PRIOR TO
SUCH TIME AND NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE
ELECTION OF THE TWO NOMINEES FOR THE BOARD OF DIRECTORS OF THE COMPANY NAMED IN
THIS PROXY STATEMENT AND FOR THE APPROVAL OF THE 1994 STOCK PLAN. IT IS NOT
ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THIS PROXY STATEMENT
WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED,
PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1998 Annual Report, including financial statements for the
fiscal year ended December 31, 1998, is being mailed to stockholders
concurrently with this Proxy Statement. The Annual Report, however, is not part
of the proxy solicitation material. A COPY OF THE COMPANY'S ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, MAY BE OBTAINED WITHOUT
CHARGE BY WRITING TO THE SECRETARY OF THE COMPANY AT THE FOLLOWING ADDRESS: 212
SOUTH TRYON STREET, SUITE 500, CHARLOTTE, NC 28281, ATTN: MICHAEL G. MALONE.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven members.
At the Annual Meeting, two Class II directors will be elected to serve until
the 2002 annual meeting of stockholders or until their successors are duly
elected and qualified. John Crosland, Jr. has declined to be nominated for
re-election as a director. The Board of Directors has nominated Nelson Schwab
III and Steven R. LeBlanc (the "Nominees") for election as Class II directors
at the Annual Meeting. The Board of Directors anticipates that each of the
Nominees will serve, if elected, as a director. However, if any person
nominated by the Board of Directors is unable to accept election, the proxies
will be voted for the election of such other person or persons as the Board of
Directors may recommend. The Board of Directors will consider a nominee for
election to the Board of Directors recommended by a stockholder of record if
the stockholder submits the nomination in compliance with the requirements of
the Company's Bylaws. See "Other Matters -- Stockholder Proposals" for a
summary of these requirements.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THEIR NOMINEES, NELSON
SCHWAB, III AND STEVEN R. LEBLANC.
INFORMATION REGARDING NOMINEES, OTHER DIRECTORS AND EXECUTIVE OFFICERS
The following table and biographical descriptions set forth certain
information with respect to the two Nominees for re-election as Class II
directors at the Annual Meeting, the director whose term expires at the Annual
Meeting, the continuing directors whose terms expire at the annual meetings of
stockholders in 2000
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and 2001 and the executive officers of the Company who are not directors, based
on information furnished to the Company by such directors and executive
officers. There is no family relationship between any director or executive
officer of the Company. The following information is as of December 31, 1998,
unless otherwise specified.
<TABLE>
<CAPTION>
Number of Shares Percent of
Director and Units All Shares
Name Age Since Beneficially Owned and Units(1)
- --------------------------------------------- ----- ---------- -------------------- -------------
<S> <C> <C> <C> <C>
Class II Nominees for Election at 1999 Annual
Meeting
(Term to Expire in 2002)
- ----------------------------------------------
Nelson Schwab III .......................... 54 1994 31,000 (2) *
Steven R. LeBlanc .......................... 41 1998 94,512 (3) *
Class II Director
(Term to Expire at 1999 Annual Meeting)
- ----------------------------------------------
John Crosland, Jr. ......................... 70 1995 1,163,843 (4) 3.60%
Class III Continuing Directors
(Term to Expire in 2000)
- ----------------------------------------------
William B. McGuire, Jr ..................... 54 1994 920,873 (5) 2.86%
William F. Paulsen ......................... 52 1994 964,477 (6) 2.99%
Class I Continuing Directors
(Term to Expire in 2001)
- ----------------------------------------------
James H. Hance, Jr ......................... 54 1994 17,994 (7) *
Henry H. Fishkind .......................... 49 1994 22,645 (2) *
</TABLE>
- ----------
* Less than one percent
(1) Assumes that all units of limited partnership interest ("Units") of Summit
Properties Partnership, L.P., a Delaware limited partnership and the
Company's principal operating subsidiary (the "Operating Partnership"),
held by the person are presented to the Operating Partnership for
redemption and acquired by the Company for shares of Common Stock. The
total number of shares of Common Stock and Units used in calculating this
percentage assumes that all of the Units outstanding held by all persons
other than the Company are presented to the Operating Partnership for
redemption and acquired by the Company for shares of Common Stock.
(2) The indicated ownership includes 11,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(3) The indicated ownership includes 35,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(4) The indicated ownership includes 8,000 shares of Common Stock subject to
stock options exercisable within 60 days. The indicated ownership also
includes (a) 307,311 Units owned by JMJ Associates Limited Partnership, a
limited partnership in which Mr. Crosland owns an equity interest and
indirectly serves as the general partner, (b) 387,646 Units owned by The
Crosland Group, Inc., a corporation in which Mr. Crosland owns an equity
interest (the "Crosland Group"), (c) 51,101 Units owned by Crosland-Erwin
& Associates, No. VI, a general partnership in which the Crosland Group
owns an equity interest, (d) 108,554 Units, 86,125 Units and 91,162 Units
owned by Westbury Place Associates, Westbury Woods Associates and Westbury
Park Associates, respectively, each a limited partnership with respect to
which Mr. Crosland serves as co-general partner, (e) 2,381 Units owned by
Crosland Investors, Inc., a corporation in which
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Mr. Crosland owns an equity interest and (f) 11,566 shares owned by the John
Crosland, Sr. Trust, a trust with respect to which Mr. Crosland serves as
co-trustee, as to all of which Mr. Crosland disclaims beneficial interest.
Mr. Crosland owns 106,877 Units directly.
(5) The indicated ownership includes 620,313 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 5,900 shares of
restricted stock awarded under the Company's 1994 Stock Plan that vest in
five equal annual installments beginning in January 1996, 579 shares of
restricted stock awarded under the Company's 1994 Stock Option Plan that
vest in two equal annual installments beginning in January 1999 and
156,984 shares of Common Stock owned by certain related family trusts and
35,280 shares of Common Stock owned by a related family foundation with
respect to which shares of Common Stock Mr. McGuire disclaims beneficial
ownership.
(6) The indicated ownership includes 596,045 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 11,700 shares
of restricted stock awarded under the 1994 Stock Plan that vest in five
equal annual installments beginning in January 1996, 1,157 shares of
restricted stock awarded under the Company's 1994 Stock Plan that vest in
two equal annual installments beginning January 1999 and 39,535 shares of
Common Stock owned by Mr. Paulsen's spouse, 97,476 shares of Common Stock
owned by certain related family trusts and 50,000 shares of common stock
owned by a related family foundation with respect to which shares of
Common Stock Mr. Paulsen disclaims beneficial ownership.
(7) The indicated ownership includes 1,000 shares of Common Stock held jointly
by Mr. Hance and his spouse, and 11,000 shares of Common Stock subject to
stock options exercisable within 60 days.
NOMINEES FOR ELECTION AS DIRECTORS
NELSON SCHWAB III. Mr. Schwab has been a director of the Company since
1994. He has been a Managing Director of Carousel Capital, a merchant banking
firm based in Charlotte, North Carolina specializing in middle market
acquisitions since 1996. Mr. Schwab served as Chairman and Chief Executive
Officer of Paramount Parks from 1992 to 1995. Mr. Schwab is a Member of the
Board of Directors of First Union National Bank, Silver Dollar City, Inc.,
Griffin Corporation, MJD Communications Inc., Critical Care Concepts, Simpson
Performance Products and Burlington Industries. Mr. Schwab previously served as
the Chairman of the Carolinas Partnership and the Charlotte Chamber of
Commerce. Mr. Schwab is 54 years old.
STEVEN R. LEBLANC. Mr. LeBlanc is the President, Chief Operating Officer
and a director of the Company. Prior to joining the Company, Mr. LeBlanc served
as President of Urban Growth Trust from 1987 to 1988 where he developed the
company's strategic business plan, orchestrated the transition to REIT status
and initiated over $200 million in acquisitions and developments. From 1992 to
1997, Mr. LeBlanc served in a number of senior management positions with the
Security Capital Group where he implemented a fully integrated operating
company strategy focused on long-term sustainable cash flow growth. While at
these companies he was responsible for the acquisition and development of
11,000 apartment homes and the purchase of land for additional 10,000 apartment
homes. From 1984 to 1992, Mr. LeBlanc was a partner with Lincoln Property
Company where he was a member of the senior management team and was responsible
for the management of 17,000 apartments as well as the firm's acquisition and
development activities throughout Texas and the Northeast. Mr. LeBlanc is a
member of the Board of Directors of the National Multifamily Council and a
member of the Urban Land Institute. He has served on the Boards of Directors of
the Rio Grand School, the Santa Fe Pro-Musica and the Austin Apartment
Association. Mr. LeBlanc has taught various real estate courses at Austin
Community College in Austin, Texas. Mr. LeBlanc is 41 years old.
INCUMBENT DIRECTOR -- TERM EXPIRING IN 1999
JOHN CROSLAND, JR. Mr. Crosland has been a director of the Company since
1995; however, Mr. Crosland has declined to be nominated for re-election as a
director and his term will expire at the Annual Meeting. He has been Chairman
and Chief Executive Officer of The Crosland Group, Inc., a fully diversified
real estate
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development company, since 1971. Mr. Crosland is a member of the Board of
Directors of First Union National Bank, Turnberry Homes and Crosland Patton
Smith. He has been active in the home-building industry holding office at
local, state and national levels. From 1977 to 1989 he served as Chairman of
the North Carolina Housing Finance Agency. Among his diverse civic involvement,
Mr. Crosland was a founder and first Chairman of Charlotte's Habitat for
Humanity; currently serves on the Habitat for Humanity International Affiliates
Advisory Committee; was 1996 Chairman of the Davidson College Board of Visitors
and is a member of the Davidson Board of Trustees. Mr. Crosland was honored by
the home building industry by being named 1985 Builder of the Year by
PROFESSIONAL BUILDER MAGAZINE and has been inducted into both the National and
North Carolina Housing Halls of Fame. Mr. Crosland is 70 years old.
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 2000
WILLIAM B. MCGUIRE, JR. Mr. McGuire has served as the Chairman of the
Board of the Company since 1994. Prior to the formation of the Company, Mr.
McGuire served as a senior partner of the predecessor to the Company and as a
general partner of each of the partnerships which transferred multifamily
apartment communities to the Company when it was formed. Mr. McGuire founded
the predecessor to the Company in 1972. Mr. McGuire also founded McGuire
Properties, Inc., a real estate brokerage firm, in 1972. He has been active in
the following professional and community organizations: Residential,
Multifamily and Urban Development Mixed Use Councils of the Urban Land
Institute; Charlotte Advisory Board of NationsBank of North Carolina, N.A.; and
The Charlotte City Club, serving on its Board of Governors as President. He was
a Trustee of the North Carolina Nature Conservancy; a Founder and Director of
Habitat for Humanity of Charlotte; and the Founder and President of The
Neighborhood Medical Clinic. Mr. McGuire is 54 years old.
WILLIAM F. PAULSEN. Mr. Paulsen is the Chief Executive Officer and a
director of the Company. He has held this position since 1994. Prior to the
formation of the Company, Mr. Paulsen was a senior partner and the Chief
Executive Officer of the predecessor to the Company and a general partner of
each of the partnerships which transferred Communities to the Company when it
was formed. Mr. Paulsen joined the predecessor to the Company in 1981. He was
selected as North Carolina Entrepreneur of the Year in 1990. In addition to his
responsibilities with the Company, Mr. Paulsen is a full Member and Residential
Council Member of the Urban Land Institute. He is a Member of the Board of
Directors of The Beach Company, a real estate investment company specializing
primarily in commercial and resort development in the southeastern United
States and is a trustee of The Asheville School. Mr. Paulsen also served as a
Vice President of the Charlotte Apartment Association. He is 52 years old.
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 2001
JAMES H. HANCE, JR. Mr. Hance has been a director of the Company since
1994. Mr. Hance is vice chairman and chief financial officer of Bank of America
and is a member of such corporation's Policy Committee. He is also responsible
for the Finance Group, comprising the finance, accounting and control
functions, and for Treasury, including balance sheet management.
Additionally, he also is responsible for Technology & Operations, which
encompasses such corporation's operations and technology development functions;
Investor Relations; the Legal department, and Management Services, which
provides for such corporation's real estate needs. The global payment business,
which provides depository and treasury services to customers worldwide, also
reports to Mr. Hance.
Mr. Hance, a certified public accountant, spent 17 years with the Price
Waterhouse accounting firm in Philadelphia and Charlotte. For six years, he was
a partner in the Charlotte office and served as the audit partner responsible
for the firm's relationship with NCNB Corporation (predecessor to NationsBank
and Bank of America). From August 1985 until December 1986, he was chairman and
co-owner of Consolidation Coin Caterers Corp. in Charlotte. He joined
NationsBank (predecessor to Bank of America) in March 1987.
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Mr. Hance is chairman of the board of trustees of Novant Health Services
and is vice chairman of the board of trustees of Charlotte Country Day School.
He also is a member of the board of directors of Caraustar Industries Inc.,
Family Dollar Stores Inc. and Lance Inc. Mr. Hance is a trustee of Washington
University in St. Louis and is a member of Washington University's National
Council for the John M. Olin School of Business. He is a member of the board of
visitors of Duke University Fuqua School of Business, serves on the board of
trustees of the North Carolina Blumenthal Performing Arts Center, and the board
of directors of the Foundation for the Carolinas. In addition, he is the 1996
past chairman of the Charlotte Chamber of Commerce and a 1998 International
Business Fellow. Mr. Hance is 54 years old.
HENRY H. FISHKIND. Dr. Fishkind has been a director of the Company since
1994. He is the President of Fishkind & Associates, Inc., a private economic
and financial consulting firm based in Orlando, Florida that he founded in
1987. Dr. Fishkind is a member of the Board of Directors of Engle Homes. Dr.
Fishkind served on the Florida Governor's Economic Advisory Board from 1979 to
1981. He is 49 years old.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
MICHAEL L. SCHWARZ. Mr. Schwarz is an Executive Vice President and Chief
Financial Officer of the Company. Prior to joining the Company in 1994, Mr.
Schwarz was a co-founder and spent five years as the Senior Vice President and
Chief Financial Officer of Industrial Developments International, Inc., a
developer of industrial real estate. He is a certified public accountant. Mr.
Schwarz served as the Chairman of the Board of The Study Hall of Emmaus House,
a non-profit educational facility serving inner-city youths and is active in
Junior Achievement, Inc. Mr. Schwarz is 38 years old.
WILLIAM B. HAMILTON. Mr. Hamilton is an Executive Vice President of the
Company. Prior to joining the Company in December of 1996, Mr. Hamilton spent
one year as a Senior Vice President with Insignia Management Group in Atlanta,
Georgia where he was responsible for property and asset management for 50,000
multifamily apartments. For the four years immediately prior thereto, Mr.
Hamilton was the President of NPI Property Management Corporation, where his
management portfolio consisted of 31,000 multifamily apartments. Mr. Hamilton's
experience in the property and asset management field for multifamily
apartments has spanned more than 20 years. Mr. Hamilton has been designated a
certified property manager by the Institute of Real Estate Management and a
Certified Apartment Supervisor by the National Apartment Association. Mr.
Hamilton is 50 years old.
RAYMOND V. JONES. Mr. Jones served as Executive Vice President/Development
and Construction of the Company since 1994; however, he terminated his
employment with the Company on May 1, 1998.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS. The Company is managed by a seven member Board of
Directors, a majority of whom currently are independent of the Company's
management. In 1998, the Board of Directors increased its size to seven members
and elected Steven R. LeBlanc as a director. The Company's Board of Directors
is divided into three classes, and the members of each class serve for
staggered three year terms. The Board is composed of two Class I directors
(Messrs. Hance and Fishkind), three Class II directors (Messrs. Crosland,
LeBlanc and Schwab), and two Class III directors (Messrs. Paulsen and McGuire).
The Class II directors are up for election at the Annual Meeting. Mr. Crosland
has declined to be nominated for re-election to the Board of Directors. After
the Annual Meeting, the Board of Directors expects that it will decrease its
size to six members; however, the Board of Directors will commence a search for
a candidate to be elected to the Board of Directors who is independent of the
Company's management and, upon locating an acceptable candidate, will increase
the size of the Board of Directors and elect such director. The terms of the
Class III and I directors will expire upon the election and qualification of
directors at the annual meetings of stockholders in 2000 and 2001,
respectively. At each annual meeting of stockholders, directors will be
reelected or elected for a full term of three years to succeed those
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directors whose terms are expiring. The Board of Directors met four times in
regular meetings and once in a special meeting during 1998.
AUDIT COMMITTEE. The Board has established an Audit Committee currently
consisting of Henry H. Fishkind, James H. Hance, Jr., Nelson Schwab III and
John Crosland, Jr. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. The Audit Committee met two times during 1998.
COMPENSATION COMMITTEE. The Board of Directors has established a
Compensation Committee to determine compensation for the Company's executive
officers. The current members of the Compensation Committee are Henry H.
Fishkind, James H. Hance, Jr., Nelson Schwab III and John Crosland, Jr. The
Compensation Committee exercises all powers of the Board of Directors in
connection with compensation matters, including incentive compensation and
benefit plans. The Compensation Committee also has authority to grant awards
under the Company's 1994 Stock Option Plan to the employee directors,
management and other employees of the Company and its subsidiaries. The
Compensation Committee met two times during 1998.
As stated above, Mr. Crosland has declined a nomination for re-election to
the Board of Directors. Accordingly, after the Annual Meeting, he will cease to
be a member of the Audit Committee and the Compensation Committee.
Notwithstanding the absence of Mr. Crosland, both the Audit Committee and the
Compensation Committee will continue to be composed solely of directors
independent from the Company's management. After the Annual Meeting, the Board
of Directors will commence a search for a candidate to be elected to the Board
of Directors who is independent of the Company's management and, upon locating
an acceptable candidate will increase the size of the Board of Directors and
elect such director. Upon election to the Board of Directors, such director
will be invited to serve on the Audit Committee and Compensation Committee.
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the function of such a committee.
During 1998, the Board of Directors convened four regular meetings and one
special meeting. Each of the directors with the exception of Mr. Hance attended
100% of the total number of regular meetings of the Board of Directors and of
the committees of the Board of which they were eligible to attend during 1998.
Mr. Hance attended three of the four regular meetings of the Board of
Directors, one of the two meetings of the Audit Committee, and 100% of the
Compensation Committee meetings. Each of the directors with the exception of
Mr. Crosland attended the one special meeting of the Board of Directors.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Directors of the Company who are also employees receive no additional
compensation for their services as directors. Non-employee directors of the
Company (the "Independent Directors") received an annual director's fee of
$12,000 in 1998. Each Independent Director also receives $1,000 for each
regular meeting of the Board of Directors attended, $1,000 for each special
meeting of the Board of Directors attended, $250 for each committee meeting
attended if held concurrently with a Board of Directors regular or special
meeting and $500 for each committee meeting attended if not held concurrently
with a Board of Directors regular or special meeting. Under the 1994 Stock
Plan, following each annual meeting of stockholders, each Independent Director
also receives a non-qualified option to purchase 2,000 shares of Common Stock
at a price equal to the market price of the Common Stock on the date of grant.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the cash and
non-cash compensation awarded to the Chief Executive Officer, the three other
most highly compensated executive officers of the Company who were serving as
executive officers at the end of 1998 and an additional individual who held an
executive officer position during 1998 but who was not serving as an executive
officer following 1998, each of whose compensation exceeded $100,000 during the
fiscal year ended December 31, 1998 (collectively the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-----------------------------------------
Annual Long-Term
Compensation Restricted Securities Incentive
------------------- Stock Underlying Plan All Other
Salary Bonus Awards Options ("LTIP") Compensation
Name and Principal Position Year ($) (1) $ $ (#) Payouts ($) ($) (2)
- -------------------------------- ------ --------- --------- --------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
William F. Paulsen ............. 1998 252,370 126,185 68,013(3) 0 -- 5,000
Chief Executive 1997 244,500 122,250 24,443(3) 0 -- 4,750
Officer 1996 232,875 0 228,150(3) 0 -- 4,750
Steven R. LeBlanc(4) ........... 1998 113,462 96,250 0 175,000 -- 0
President and Chief
Operating Officer
Michael L. Schwarz ............. 1998 178,725 138,959 0 0 -- 5,000
Executive Vice President 1997 173,000 86,500 196,775(5) 0 -- 4,750
and Chief Financial 1996 155,250 38,812 0 30,000 -- 4,750
Officer
William B. Hamilton(6) ......... 1998 178,725 54,064 0 0 -- 5,000
Executive Vice President 1997 173,000 43,250 179,375(7) 0 -- 0
and President of Summit 1996 13,308 0 0 0 -- 0
Management Company
Raymond V. Jones ............... 1998 58,730 112,500 0 0 -- 4,750
Former Executive Vice 1997 173,000 86,000 0 0 -- 4,750
President/Development 1996 165,000 60,000 152,100(8) 0 -- 4,620
and Construction
</TABLE>
- ----------
(1) Includes amounts deferred under the Company's 401(k) plan. Under the plan,
employees generally are permitted to invest up to 17% of their salary on a
pre-tax basis, subject to a statutory maximum.
(2) Amounts represent matching contributions made by the Company to the Named
Executive Officer's account under the Company's 401(k) plan.
(3) Pursuant to a Company policy which requires any cash bonus earned in excess
of 50% of base salary to be paid in the form of Common Stock, Mr. Paulsen
received an (a) award of 4,122 shares of restricted stock on January 13,
1999 under the 1994 Stock Plan that vests in two equal annual installments
beginning in January 2000 (the value of vested and unvested shares of such
restricted stock as of December 31, 1998 was $71,104.50) and (b) award of
1,157 shares of restricted stock on January 1, 1998 under the 1994 Stock
Plan that vests in two equal annual installments beginning in January 1999
(the value of vested and unvested shares of such restricted stock as of
December 31, 1998 was $19,958.25). Moreover, Mr. Paulsen received an award
of 11,700 shares of restricted stock on January 12, 1996 under the 1994
Stock Plan that vests in five equal annual installments beginning in
January 1996. The value of vested and unvested
8
<PAGE>
shares of such restricted stock as of December 31, 1998 was $201,825.00.
Dividends will be paid on the shares of restricted stock.
(4) Mr. LeBlanc began employment on July 1, 1998.
(5) Mr. Schwarz received an award of 7,908 shares of restricted stock on
January 2, 1997 under the 1994 Stock Plan that vests in four equal annual
installments beginning in January 1998. The value of vested and unvested
shares of such restricted stock as of December 31, 1998 was $136,413.
Pursuant to a Company policy which requires any cash bonus earned in
excess of 50% of base salary to be paid in the form of Common Stock, Mr.
Schwarz received an award of 1,126 shares of restricted stock on January
1, 1998 under the 1994 Stock Plan that vests in two equal annual
installments beginning in January 1999. The value of vested and unvested
shares of such restricted stock as of December 31, 1998 was $19,423.50.
Dividends will be paid on the shares of restricted stock.
(6) Mr. Hamilton began employment on December 5, 1996.
(7) Mr. Hamilton received an award of 8,200 shares of restricted stock on
January 2, 1997 under the 1994 Stock Plan that vests in four equal annual
installments beginning in January 1998. The value of vested and unvested
shares of such restricted stock as of December 31, 1998 was $141,450.00.
Dividends will be paid on the shares of restricted stock.
(8) Mr. Jones received an award of 7,800 shares of restricted stock on January
12, 1996 under the 1994 Stock Plan that provided for vesting in five equal
annual installments beginning in January 1996. Mr. Jones terminated his
employment with the Company on May 1, 1998. Accordingly, the value of
vested and unvested shares of his restricted stock as of December 31, 1998
was zero.
OPTION GRANTS IN FISCAL YEAR 1998. The following table sets forth the
options granted with respect to the fiscal year ended December 31, 1998 to the
Company's Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
Annual Rates Of
Stock Price Appreciation
Individual Grants For Option Term
----------------------------------------------------------- ------------------------
Percent of
Total
Number of Options
Securities Granted To
Underlying Employees Exercise Of
Options In Fiscal Base Price Expiration
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
- ----------------------------- ---------------- ----------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
William F. Paulsen .......... 0 N/A N/A N/A N/A N/A
Steven R. LeBlanc ........... 175,000(1) 100 $ 19.125 7/1/08 2,104,832 5,334,057
Michael Schwarz ............. 0 N/A N/A N/A N/A N/A
William B. Hamilton ......... 0 N/A N/A N/A N/A N/A
Raymond V. Jones ............ 0 N/A N/A N/A N/A N/A
</TABLE>
- ----------
(1) These options, of which 150,000 are non-qualified options and 25,000 are
incentive stock options, vest in five equal annual installments beginning
on July 1, 1998, the date of grant of such options.
9
<PAGE>
OPTION EXERCISES AND YEAR-END HOLDINGS. The following table sets forth the
aggregated number of options to purchase shares of Common Stock exercised in
1998 and the value of options to purchase shares of Common Stock held on
December 31, 1998 by the Company's Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND
FISCAL YEAR-END 1998 OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexercised in-the-Money
Shares Options at Fiscal Options at Fiscal
Acquired On Year-End(#) Year-End($) (1)
Exercise Value Exercisable/ Exercisable/
Name (#) Realized($) Unexercisable Unexercisable
- ----------------------------- ------------- ------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
William F. Paulsen .......... 0 0 40,000/0 0/0
Steven R. LeBlanc ........... 0 0 35,000/140,000 0/0
Michael L. Schwarz .......... 0 0 45,000/12,000 2160/1440
William B. Hamilton ......... 0 0 0/0 0/0
Raymond V. Jones ............ 18,000 0 0/0 0/0
</TABLE>
- ----------
(1) Based on a closing price of $17.25 per share of Common Stock on December
31, 1998, the last 1998 trading day for the Company's Common Stock.
LONG-TERM INCENTIVE PLANS. The following table sets forth each award made
to the Company's Named Executive Officers in the last completed fiscal year
under any LTIP.
LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of
Shares Performance Or
Units Or Other Period Until
Other Rights Maturation Or
Name (#) Payout
- ----------------------------- -------------- -------------------
<S> <C> <C>
William F. Paulsen .......... 11,600 January 2, 2001
Steven R. LeBlanc ........... 11,500 January 2, 2001
Michael L. Schwarz .......... 8,350 January 2, 2001
William B. Hamilton ......... 8,350 January 2, 2001
Raymond V. Jones ............ 0 N/A
</TABLE>
This table identifies the target number of performance shares of Common
Stock ("Performance Shares"), if any, which is the subject of a Performance
Stock Award Agreement (the "Performance Stock Agreement") dated January 2, 1998
(with the exception of Mr. LeBlanc, whose Performance Stock Agreement is dated
July 2, 1998 and Mr. Jones, who terminated his employment with the Company on
May 1, 1998) issued under the 1994 Stock Plan to each Named Executive Officer.
Pursuant to the Performance Stock Agreement, an executive officer has the
opportunity to earn up to 225% of the target amount of Performance Shares;
however, the executive officer has no right to vote, receive dividends or
transfer the Performance Shares until shares of Common Stock are issued. The
number of shares of Common Stock that the executive officer receives on the
third anniversary of the date of the Performance Stock Agreement will be
calculated based upon the following schedule and are subject to vesting (as
described below):
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
If the Company's Average Annual Return (share
appreciation and distributions) from the date of the
award to the third anniversary is: ................. 0-11% 11% 12% 13% 14% 15%
The executive will receive shares of Common Stock
equal to the target number of Performance Shares
times the following payment percentage: ............ 0% 50% 100% 125% 155% 225%
</TABLE>
Under the Performance Stock Agreement, fifty percent of the shares of
Common Stock to which an executive officer may be entitled will vest on the
third anniversary of the date of the Performance Stock Agreement; 25% will vest
on the fourth anniversary and the remaining 25% will vest on the fifth
anniversary. The executive officer's rights to any shares of Common Stock to
which such executive may be entitled will also fully vest upon the employee's
death, disability or upon a change of control.
The stated price of the Company's Common Stock on January 2, 1998 (for
purposes of calculating share price appreciation for each Named Executive
Officer except Mr. LeBlanc) was $21.375 per share. Assuming that dividend
increases in fiscal years 1999 and 2000 follow the Company's historical
dividend increases of $.04 per year, the per share price of the Company's
Common Stock on January 2, 2001 would have to be $23.42, $24.06, $24.70, $25.34
or $25.98 to achieve the average annual total return thresholds of 11%, 12%,
13%, 14% or 15%, respectively. If the 11%, 12%, 13%, 14% or 15% threshold is
met 14,150; 28,300; 35,375; 43,865 or 63,675 shares of Common Stock would be
allocated among the Named Executive Officers (except for Mr. LeBlanc and Mr.
Jones), subject to vesting.
The stated price of the Company's Common Stock on May 12, 1998 (for
purposes of calculating share price appreciation for Mr. LeBlanc) was $19.87
per share. Assuming that dividend increases in fiscal years 1999 and 2000
follow the Company's historical dividend increases of $.04 per year, the per
share price of the Company's Common Stock on January 2, 2001 would have to be
$20.56, $21.07, $21.59, $22.11 or $22.62 to achieve the average annual total
return thresholds of 11%, 12%, 13%, 14% or 15%, respectively. If the 11%, 12%,
13%, 14% or 15% threshold is met 5,750; 11,500; 14,375; 17,825 or 25,875 shares
of Common Stock would be awarded to Mr. LeBlanc, subject to vesting.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with each of Messrs. Paulsen, LeBlanc, Jones, Schwarz and
Hamilton. The Agreement with Mr. Paulsen expired on February 15, 1999 and the
Company entered into a new Employment Agreement with him. The Agreement with
Mr. LeBlanc has an original term up to July 1, 2001. The Agreement with Mr.
Jones expired upon his termination of employment with the Company on May 1,
1998. The Employment Agreement with Mr. Schwarz had an original term through
February 16, 1996, and has been automatically extended until such time as
terminated pursuant to its terms. Mr. Hamilton's Employment Agreement provided
for an original term through December 5, 1998 and has been automatically
extended pursuant to its terms. The Employment Agreements provide that the
officers will be paid the base salaries set forth next to their names in the
Summary Compensation Table above, which amounts may be increased or decreased
(subject to certain limitations) at the Compensation Committee's discretion,
plus any other amounts the Compensation Committee, in its discretion,
determines to award. The Employment Agreements also provide for certain
severance benefits. If the employment of Mr. LeBlanc is terminated by either
the Company without "cause" or by Mr. LeBlanc for "cause" (as defined in his
Employment Agreement) during the original term or any extended term of the
Employment Agreement, Mr. LeBlanc will be entitled to receive as severance an
amount equal to his base salary, as in effect on the date of termination,
through the remainder of his original term of employment or the then current
extended term, as the case may be, under his Employment Agreement, payable over
time. If the employment of Mr. Hamilton is terminated by the Company without
"cause" or by Mr. Hamilton for "cause" (as defined in his Employment
Agreement), Mr. Hamilton will be entitled to receive as severance an amount
equal to his base salary as in effect on the date of termination
11
<PAGE>
for a period of six months, payable over time. Upon the termination of the
employment of Mr. LeBlanc by reason of death or disability, his estate or he,
as the case may be, will be entitled to receive a payment equal to his base
salary, as in effect on the date of termination, through the remainder of his
original term of employment under his Employment Agreement, except that in the
case of termination by reason of disability the amount of such benefit shall be
offset by the proceeds of any disability plan awards provided by the Company.
Upon the termination of the employment of Mr. Hamilton by reason of death or
disability, his estate or he, as the case may be, will be entitled to receive a
payment equal to his base salary, as in effect on the date of termination, for
a period of twelve months, except that in the case of termination by reason of
disability the amount of such benefit shall be offset by the proceeds of any
disability plan awards provided by the Company. The Employment Agreements
provide that if either of Messrs. LeBlanc or Hamilton are terminated by the
Company for "cause" or if they voluntarily terminate their employment other
than for "cause" (as defined in the Employment Agreements), no severance amount
will be payable. If the employment of either of Messrs. Paulsen or Schwarz is
terminated for any reason, no severance amount will be payable other than as
provided in the Severance Agreements (as defined below) of Messrs. Paulsen and
Schwarz.
Each of these officers also entered into noncompetition agreements (the
"Noncompetition Agreements") with the Company. Subject to certain limited
exceptions, these agreements (except for the agreements with Mr. LeBlanc, Mr.
Schwarz and Mr. Hamilton) prohibit such individuals from engaging, directly or
indirectly, during the noncompetition period (the "Noncompetition Period") in
any business which engages or attempts to engage in, directly or indirectly,
the acquisition, development, construction, operation, management or leasing of
any multifamily apartment residential real estate property within a 30 mile
radius of any property that the Company owns, operates or manages or that the
Company has undertaken to acquire, develop, construct, operate, manage or
lease. The Noncompetition Period is the period beginning on the date of
termination of employment and ending on the latest of (i) one year from the
termination of their employment with the Company or (ii) the date on which the
severance amounts described above cease. This non-competition provision will
expire on or about February 15, 2000. Subject to certain limited exceptions,
the Noncompetition Agreements prohibit all of the executive officers from
engaging in any businesses prior to their termination of employment, other than
those of the Company without the prior written consent of the Board of
Directors (or in the case of Mr. Schwarz and Mr. Hamilton, without the prior
written consent of the President of the Company). The Noncompetition Agreements
also prohibit the officers for certain periods after their termination from the
Company from hiring certain key employees of the Company or participating in
any efforts to persuade such employees to leave the Company and from engaging
in any manner, directly or indirectly, in any business which engages or
attempts to engage in the acquisition, development, construction, operation,
management or leasing of any of the Company's then existing communities or
development or acquisition opportunities. Under the Noncompetition Agreements,
such officers are prohibited from disclosing trade secrets and, for certain
periods, other confidential information of the Company. Mr. Jones terminated
his employment with the Company on May 1, 1998. Under the circumstances
pursuant to which he has elected to terminate his employment, Mr. Jones will
not be entitled to any payments or benefits under his Employment Agreement;
however, Mr. Jones will be subject to the terms of a Noncompetition Agreement.
SEVERANCE AGREEMENTS
The Company entered into Severance Agreements ("Severance Agreements")
with (a) each of Messrs. Paulsen, Jones, Schwarz and Hamilton on January 2,
1997 and (b) Mr. LeBlanc on July 1, 1998. The Severance Agreements provide for
the payment of severance benefits of up to three times such officer's annual
base salary and cash bonus in the event of the termination of the officer's
employment under certain circumstances following certain "change in control" or
"combination transactions" involving a consolidation or merger. The benefits
payable under the terms of the Severance Agreements are subject to reduction by
the amount of any severance benefits payable under applicable Employment
Agreements.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph provides a comparison, from the Company's Initial
Offering on February 15, 1994 through December 31, 1998, of the cumulative
total stockholder return (assuming reinvestment of any dividends) among the
Company, the Standard & Poor's 500 Index (the "S&P 500 Index") and the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT") Equity REIT Total
Return Index (the "NAREIT Index"), an industry index of 177 REITs (including
the Company). The NAREIT Index includes REITs with 75% or more of their gross
invested book value of assets invested directly or indirectly in the equity
ownership of real estate. Upon written request, the Company will provide any
stockholder with a list of the REITs included in the NAREIT Index. The
historical information set forth below is not necessarily indicative of future
performance. Data for the NAREIT Index and the S&P 500 Index were provided to
the Company by SNL Securities LC.
TOTAL RETURN PERFORMANCE
(The Performance Graph appears here. The plot points are listed in the table
below.)
<TABLE>
<CAPTION>
2/8/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Summit Properties Inc. 100.00 106.14 119.20 143.42 147.55 130.71
S&P 500 100.00 100.06 137.66 169.13 225.58 290.04
NAREIT All Equity REIT Index 100.00 98.81 113.76 154.40 185.68 162.78
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
RESPONSIBILITIES OF THE COMPANY'S COMPENSATION COMMITTEE. The Company's
Executive Compensation Program is administered under the direction of the
Compensation Committee of the Board of Directors of the Company, which is
composed of the Company's Independent Directors. The specific responsibilities
of the Compensation Committee are to:
1. Administer the Company's Executive Compensation Program.
2. Review and approve compensation awarded to the Company's executive
officers pursuant to the Executive Compensation Program.
3. Monitor the performance of the Company in comparison to performance by
executive officers in conjunction with executive officer compensation.
13
<PAGE>
4. Monitor compensation awarded to executive officers of the Company in
comparison to compensation received by executive officers of the Company's
Comparative Compensation Peer Group, as defined below.
Compensation determinations pursuant to the Executive Compensation Program
are generally made at or shortly after the end of the fiscal year. At the end
of the fiscal year, incentive cash bonuses are calculated pursuant to the funds
from operations ("FFO") growth criteria which was contained in the respective
Summit Properties Inc. Incentive Compensation Plan approved by the Compensation
Committee prior to or at the beginning of the fiscal year. Payment of a cash
bonus is subject to audited confirmation of Company financial performance,
which occurs immediately after the end of the fiscal year. Also at the end of
the fiscal year, base salaries and grants of long-term equity based
compensation under the 1994 Stock Plan are set for the following fiscal year.
In fulfilling its responsibilities, the Compensation Committee takes into
account recommendations from management as well as the specific factors
enumerated herein for specific elements of compensation. The Compensation
Committee periodically reviews comparative compensation data which includes
data on the Company's Comparative Compensation Peer Group as well as data from
other companies with attributes comparable to the Company.
THE PHILOSOPHY OF THE COMPENSATION COMMITTEE. The philosophy of the
Compensation Committee as reflected in the specific compensation plans included
in the Executive Compensation Program is to:
1. Attract, retain and reward experienced, highly motivated executive
officers who are capable of effectively leading and continuing the growth
of the Company.
2. Place more emphasis on short-term and long-term incentive compensation,
which is dependent upon both Company and individual performance, rather
than base salary.
3. Reward and encourage executive officer activity that results in enhanced
value for stockholders.
4. Link both short-term and long-term incentive compensation as much as
possible to the achievement of specific individual and Company goals.
ELEMENTS OF COMPENSATION. It is the belief of the Compensation Committee
that the above philosophy can best be implemented through three separate
components of executive compensation with each component designed to reward
different performance goals, yet with all three components working together to
satisfy the ultimate goal of enhancing stockholder value. The three elements of
executive compensation are:
1. Salary, which compensates the executive for performing the basic job
description through the performance of routine designated tasks.
2. Cash bonus, which rewards the executive for commendable performance of
specially designated tasks or outstanding performance of routine
designated tasks during the fiscal year.
3. Stock options and/or stock grants, which provide long-term rewards to
the executive in a manner directly related to the enhancement of
stockholder value through an appreciated stock price.
In administering each element of compensation, the Compensation Committee
considers the integration of that element not only with the other two elements
of compensation, but also with additional benefits available to the executive
such as the 1996 Non-Qualified Employee Stock Purchase Plan, Company provided
insurance benefits, and Company sponsored retirement savings plans.
14
<PAGE>
BASE SALARY. Base salaries for executive officers are set based on the
following factors:
1. Comparison to executive officer base salaries for the Comparative
Compensation Peer Group (as defined below) to the extent such data is
available.
2. Individual performance of the routine designated tasks assigned.
3. Overall experience of the executive officer.
4. Historical relationship with the Company.
As a result of the Compensation Committee's philosophy of focusing the
compensation of the Company's executive officers on performance-based rewards,
the base salaries of the executive officers are lower than the Comparative
Compensation Peer Group.
Base salary increases for executive officers are considered annually by
the Compensation Committee. The granting of salary increases is dependent upon:
1. The executive's performance in the following areas:
a. Accomplishing the routine designated tasks of the position.
b. Promoting Company values.
c. Development and training of subordinate Company employees.
d. Leadership abilities and team member abilities.
e. The satisfaction of the executive officer's respective internal or
external customers.
2. Increased or revised job responsibilities.
3. Comparison to the Comparative Compensation Peer Group.
Based upon the above criteria, Messrs. Paulsen, Schwarz and Hamilton were
each awarded an increase in their 1998 base salary (as set forth in the above
Summary Compensation Table).
CASH BONUSES. The Company's 1998 Incentive Compensation Plan rewards
Company executives with annual cash bonuses based on favorable performance by
both the Company and the individual executive. This plan was formulated to
foster a team performance among the executive officers in accomplishing goals
for growth in FFO per share of Common Stock ("per share FFO") while at the same
time aligning executive annual cash incentive goals with stockholder goals
through the translation of per share FFO growth into an appreciated share
price. For 1998, 100% of Mr. Paulsen's and Mr. LeBlanc's cash bonuses were
dependent upon growth in per share FFO over the previous fiscal year. Mr.
Schwarz's cash bonus was dependent in large part on per share FFO growth over
the prior fiscal year and a minority portion of his cash bonus was dependent
upon commendable performance of specially assigned tasks and outstanding
performance of routine duties. The majority of Mr. Hamilton's cash bonus for
1998 was dependent on the attainment of certain stabilized property operating
income goals compared to certain other multifamily real estate investment
trusts which the Compensation Committee considers to be in the Company's peer
group. The remainder of Mr. Hamilton's cash bonus was dependent upon
commendable performance of specially assigned tasks and outstanding performance
of routine duties. For 1998, the majority of Mr. Jones' cash bonus was
dependent upon the success of new development projects and the achievement of
targeted financial returns in excess of the Company's cost of capital. The
remainder of Mr. Jones' cash bonus was comprised of (i) an objective component
based on the achievement of certain property specific operating income and
leasing goals and (ii) a subjective component based on his performance in
promoting team building within the Company. Mr. Jones terminated his employment
with the Company on May 1, 1998.
The 1998 Incentive Compensation Plan was approved by the Compensation
Committee in September of 1997, thereby establishing the specific per share FFO
growth criteria and requisite financial returns on development
15
<PAGE>
communities upon which executive officers' cash bonuses were dependent. For
fiscal year 1998, the threshold per share FFO growth criteria was achieved. As
a result, Mr. Paulsen and Mr. LeBlanc received a cash bonus. Mr. Schwarz also
received a cash bonus, which was dependent on growth in per share FFO as well
as that portion of his cash bonus based upon commendable performance of
specially assigned tasks and outstanding fulfillment of routine duties. In
fiscal year 1998, the required operating income growth goals (compared to
certain other multifamily real estate investment trusts which the Compensation
Committee considers to be in the Company's peer group) for stabilized
properties was achieved during certain periods and therefore Mr. Hamilton did
receive a portion of his cash bonus dependent upon such goals. Moreover, Mr.
Hamilton did receive that portion of his cash bonus dependent upon commendable
performance of specially assigned tasks and outstanding performance of routine
duties. In fiscal year 1998, the required financial returns for certain
development projects were achieved and Mr. Jones did receive a bonus relative
to that performance. Furthermore, operating income growth and lease-up
thresholds for certain properties developed by Mr. Jones were achieved and
therefore he did receive that component of his cash bonus.
STOCK OPTIONS AND STOCK GRANTS. The Compensation Committee believes that
awards of stock options or stock grants provide long-term incentive
compensation to executive officers that is aligned most directly with the
achievement of enhanced value for stockholders through an appreciating stock
price. As such, the Compensation Committee believes that awards of stock
options or stock grants should be made to executive officers in meaningful
amounts on a regular basis. When granting stock, it is the intention of the
Compensation Committee to utilize restricted stock grants subject to a three to
five year vesting period, other than in instances where stock is granted in
lieu of cash compensation, in which case the Compensation Committee may award
unrestricted stock which is not subject to vesting.
The number of stock options or stock grants awarded to an executive
officer is based on the following criteria:
1. Overall responsibility of the executive officer.
2. Overall ability to contribute to an increase in FFO per share.
3. Level of base salary component of compensation.
4. Level of incentive cash bonus, in that any fiscal year cash bonus amounts
in excess of 50% of the respective executive officer's base salary will be
paid to that executive in restricted stock of comparable value.
The Compensation Committee considers the awards of stock options or
restricted stock grants on a current basis only. The existing stockholdings of
an individual executive are not taken into consideration when awarding stock
options or restricted stock grants.
In 1998, the Company granted Steven R. LeBlanc stock options to purchase
175,000 shares of the Company stock as part of his initial compensation
package. The 1998 cash bonus of each of Messrs. Paulsen and Schwarz exceeded
50% of their respective base salaries. Accordingly, Mr. Paulsen received
restricted stock awards of comparable value. The shares of such restricted
stock will vest 50% on January 13, 2000, and the remaining 50% will vest on
January 13, 2001. Mr. Schwarz, however, received 100% of his 1998 cash bonus in
cash (as the Company's policy to issue stock in lieu of that portion of cash
bonus in excess of 50% of base salary was waived for Mr. Schwarz in order to
facilitate the payment of taxes incurred by Mr. Schwarz, due to the vesting of
certain restricted stock grants, thereby enhancing Mr. Schwarz's ability to
retain ownership of a larger portion of such stock grants).
DEFINITION OF FUNDS FROM OPERATIONS (FFO). As noted above, certain
elements of executive compensation are based on achieving specific goals in per
share FFO growth. The White Paper on Funds from Operations approved by the
Board of Governors of the National Association of Real Estate Investment Trusts
in March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")), excluding
gains (or losses) from debt restructuring and sales of property, plus real
estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. The Company believes Funds from
Operations is helpful to investors as a measure of the performance of an equity
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REIT because, along with cash flows from operating activities, financing
activities and investing activities, it provides investors with an
understanding of the ability of the Company to incur and service debt and make
capital expenditures. The Company computes Funds from Operations in accordance
with the standards established by the White Paper, which may differ from the
methodology for calculating Funds from Operations utilized by other equity
REITs, and, accordingly, may not be comparable to such other REITs. Funds from
Operations does not represent amounts available for management's discretionary
use because of needed capital expenditures or expansion, debt service
obligations, property acquisitions, development, dividends and distributions or
other commitments and uncertainties. Funds from Operations should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make dividends/distributions.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Mr. Paulsen's total
compensation for fiscal year 1998 consisted of base salary and a cash bonus.
Based on per share FFO growth performance for fiscal year 1998, Mr. Paulsen
received a cash bonus. The Compensation Committee believes that compared to the
market, Mr. Paulsen's base salary and potential maximum cash bonus based on per
share FFO growth of the Company, are each respectively and when combined,
conservative in comparison to the Comparative Compensation Peer Group.
COMPARATIVE COMPENSATION PEER GROUP. The Compensation Committee compares
both the individual components as well as total compensation of executive
officers to compensation practices in the comparative market by periodically
reviewing data on the Comparative Compensation Peer Group provided by
management or outside consultants. The Comparative Compensation Peer Group is
primarily a sampling of REITs with similar characteristics to the Company as
well as some similar sized companies from other industries. Utilization of this
comparative data provides assurance to both executive officers and the
Company's stockholders that executive officers are being compensated adequately
yet reasonably in the context of the overall market. While comparative market
data is valuable in providing assurance of reasonable compensation for
executive officers, the Company's stated policy of emphasizing
performance-based compensation will result in base salaries for executive
officers being below the comparative norm.
A portion of the REITs that comprise the Comparative Compensation Peer
Group as defined above are also included in the NAREIT equity index that is the
basis for the Company Performance Graph contained elsewhere in this Proxy
Statement, however, not all of those REITs are included in the Comparative
Compensation Peer Group. The Compensation Committee believes that the equity
REITs that comprise the Comparative Compensation Peer Group are the most direct
comparisons for the Company and its Executive Compensation Program.
DEDUCTION LIMIT OF $1 MILLION PURSUANT TO SECTION 162(M). The Securities
and Exchange Commission (the "SEC") requires that this report comment upon the
Company's policy with respect to Section 162(m) of the Internal Revenue Code
which limits the deductibility on the Company's tax return of compensation over
$1 million to any of the Named Executive Officers of the Company unless, in
general, the compensation is paid pursuant to a plan which is performance
related, non-discretionary and has been approved by the Company's stockholders.
The Committee's policy with respect to Section 162(m) is to make every
reasonable effort to insure that compensation is deductible to the extent
permitted, while simultaneously providing Company executives with appropriate
awards for their performance. The Company did not pay any compensation during
1998 that would be subject to Section 162(m).
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SUBMITTED BY THE COMPENSATION COMMITTEE:
Henry H. Fishkind
James H. Hance, Jr.
Nelson Schwab III
John Crosland, Jr.
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 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, 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
The Compensation Committee consists of Messrs. Fishkind, Hance, Schwab and
Crosland. None of these individuals has served as an officer of the Company.
Messrs. Hance, Schwab and Crosland serve as officers and directors of lending
institutions that have provided financing and related services to the Company.
James H. Hance, Jr. is a Vice Chairman and the Chief Financial Officer of Bank
of America and Nelson Schwab III and John Crosland, Jr. are members of the
Board of Directors of First Union National Bank ("First Union"). Bank of
America and First Union have provided the Company with credit enhancements on
certain of the Company's communities financed with tax-exempt bonds and are
both members of a group of banks that provide the Company's $200 million
unsecured credit facility. As stated above, after the Annual Meeting, Mr.
Crosland will cease to be a member of the Compensation Committee.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock
for (i) directors and the Named Executive Officers, (ii) the directors
(including Independent Directors) and such executive officers of the Company as
a group, and (iii) each other person who is a stockholder of the Company
holding more than a 5% beneficial interest in the Company. Unless otherwise
indicated in the footnotes, all of such interests are owned directly, and the
indicated person or entity has sole voting and investment power. The number of
shares listed represents the number of shares of Common Stock the person holds
plus the number of shares for which Units held by the person are redeemable (if
the Company elects to issue Common Stock rather than pay cash upon such
redemption). The extent to which the persons hold shares of Common Stock as
opposed to Units is set forth in the footnotes.
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<TABLE>
<CAPTION>
Number of
Shares and Units Percent of Percent of
Name and Business Address Beneficially All All
of Beneficial owners* Owned (1) Shares (2) Shares/Units (3)
- ----------------------------------------------------- ------------------ ------------ -----------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
William B. McGuire, Jr.(4) .......................... 920,873 3.3% 2.86%
William F. Paulsen(5) ............................... 964,477 3.5% 2.99%
Steven R. LeBlanc(6) ................................ 94,512 ** **
Michael L. Schwarz(7) ............................... 86,582 ** **
William B. Hamilton ................................. 30,050 ** **
Henry H. Fishkind(8) ................................ 22,645 ** **
James H. Hance, Jr.(9) .............................. 17,994 ** **
Nelson Schwab III(8) ................................ 31,000 ** **
John Crosland, Jr.(10) .............................. 1,163,843 4.2% 3.60%
Raymond V. Jones(11) ................................ 390,955 1.4% 1.20%
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (10 PERSONS) ................... 3,721,881 13.4% 11.54%
5% HOLDERS
Franklin Resources, Inc.(12) ........................ 3,141,343 11.3% 9.74%
Grantham, Mayo, Van Otterloo & Co., LLC(13) ......... 1,493,300 5.4% 4.63%
</TABLE>
- ----------
* Unless otherwise indicated, the address is: c/o Summit Properties Inc.,
212 South Tryon Street, Suite 500, Charlotte, NC, 28281.
** Less than one percent.
(1) The information in the above chart was provided by the stockholders listed
and reflects their beneficial ownership known by the Company as of December
31, 1998.
(2) Assumes that all Units held by the person are presented to the Operating
Partnership for redemption and acquired by the Company for shares of Common
Stock. The total number of shares outstanding used in calculating this
percentage assumes that none of the Units held by other persons are
presented to the Operating Partnership for redemption and acquired by the
Company for shares of Common Stock.
(3) Assumes that all Units held by the person are presented to the Operating
Partnership for redemption and acquired by the Company for shares of Common
Stock. The total number of shares of Common Stock and Units used in
calculating this percentage assumes that all of the Units outstanding held
by all persons other than the Company are presented to the Operating
Partnership for redemption and acquired by the Company for shares of Common
Stock.
(4) The indicated ownership includes 620,313 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 5,900 shares of
restricted stock awarded under the Company's 1994 Stock Plan that vest in
five equal annual installments beginning in January 1996, 579 shares of
restricted stock awarded under the Company's 1994 Stock Option Plan that
vest in two equal annual installments beginning in January 1999 and 156,984
shares of Common Stock owned by certain related family trusts and 35,280
shares of Common Stock owned by a related family foundation with respect to
which shares of Common Stock Mr. McGuire disclaims beneficial ownership.
(5) The indicated ownership includes 596,045 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 11,700 shares of
restricted stock awarded under the 1994 Stock Plan that vest in five equal
annual installments beginning in January 1996, 1,157 shares of restricted
stock awarded under the Company's 1994 Stock Plan that vest in two equal
annual installments beginning in January 1999 and 39,535 shares of Common
Stock owned by Mr. Paulsen's spouse, 97,476 shares of Common Stock owned by
certain related family trusts and 50,000 shares of common stock owned by a
related family foundation with respect to which shares of Common Stock Mr.
Paulsen disclaims beneficial ownership.
(6) The indicated ownership includes 35,000 shares of Common Stock subject to
stock options exercisable within 60 days.
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<PAGE>
(7) The indicated ownership includes 51,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(8) The indicated ownership includes 11,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(9) The indicated ownership includes 1,000 shares of Common Stock held jointly
by Mr. Hance and his spouse, and 11,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(10) The indicated ownership includes 8,000 shares of Common Stock subject to
stock options exercisable within 60 days. The indicated ownership also
includes (a) 307,311 Units owned by JMJ Associates Limited Partnership, a
limited partnership in which Mr. Crosland owns an equity interest and
indirectly serves as the general partner, (b) 387,646 Units owned by The
Crosland Group, Inc., a corporation in which Mr. Crosland owns an equity
interest (the "Crosland Group"), (c) 51,101 Units owned by Crosland-Erwin &
Associates, No. VI, a general partnership in which the Crosland Group owns
an equity interest, (d) 108,554 Units, 86,125 Units and 91,162 Units owned
by Westbury Place Associates, Westbury Woods Associates and Westbury Park
Associates, respectively, each a limited partnership with respect to which
Mr. Crosland serves as co-general partner, (e) 2,381 Units owned by
Crosland Investors, Inc., a corporation in which Mr. Crosland owns an
equity interest and (f) 11,566 shares owned by the John Crosland, Sr.
Trust, a trust with respect to which Mr. Crosland serves as co-trustee, as
to all of which Mr. Crosland disclaims beneficial interest. Mr. Crosland
owns 106,877 Units directly.
(11) The indicated ownership includes 274,526 Units, and 38,652 shares of
Common Stock owned by certain related family trusts with respect to which
shares of Common Stock Mr. Jones disclaims beneficial ownership.
(12) The information reported is based upon an amended Schedule 13G filed with
the SEC on February 4, 1999 reporting beneficial ownership as of December
31, 1998. The amended Schedule 13G indicates that these shares are
beneficially owned as a group by Franklin Resources, Inc., Charles B.
Johnson, Rupert H. Johnson, Jr., Templeton Global Advisors Limited and
certain direct and indirect investment advisor subsidiaries of Franklin
Resources, Inc. (the "Advisor Subsidiaries"). Templeton Global Advisors
Limited has sole voting and dispositive power over 2,397,543 shares. The
following Advisor Subsidiaries have sole voting and dispositive power with
respect to the following numbers of shares: Templeton Investment Counsel,
Inc. (473,500 shares); Templeton Investment Management Limited (96,800
shares); and Templeton Management Limited ("TML") (173,500 shares).
Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr.
are deemed to be beneficial owners of 2,397,543 shares through their
direct or indirect ownership of Templeton Global Advisors Limited and the
Advisor Subsidiaries. The principal business address of Franklin
Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr. is 777
Mariners Island Boulevard, San Mateo, CA 94404. The principal business
address of Templeton Global Advisors Limited is Lyford Cay, P.O. Box
N-7759, Nassau, Bahamas.
(13) Information regarding Grantham, Mayo, Van Otterloo & Co., LLC ("GMV LLC")
is based upon Schedule 13G filed with the SEC on February 15, 1999
reporting beneficial ownership as of December 31, 1998. GMV LLC's
principal business address is 40 Rowes Wharf, Boston, Massachusetts 02110.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act, as amended (the "Exchange
Act") requires the Company's executive officers and directors, and persons who
are beneficial owners of more than 10% of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with
the Securities and Exchange Commission (the "SEC"). Officers, directors and
greater than 10% beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, the executive officers, directors and greater
than 10% beneficial owners, all Section 16(a) filing requirements were
satisfied, except that: (i) each of Messrs. McGuire and Paulsen inadvertently
filed a Form 4 one month late, (ii) Mr. Hamilton inadvertently failed to report
on Form 4 one sale of shares of Common Stock and (iii) Mr. Schwarz
inadvertently failed to report on Form 4 two acquisitions of shares of Common
Stock. Each of the above transactions was subsequently reported.
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<PAGE>
PROPOSAL 2
APPROVAL OF THE 1994 STOCK OPTION AND INCENTIVE PLAN,
AS AMENDED AND RESTATED
INTRODUCTION
In December 1998, the Board of Directors voted to amend and restate the
1994 Stock Plan effective as of December 14, 1998, and is recommending the
amended and restated Plan to stockholders for approval.
REASONS FOR AMENDMENTS
The Board of Directors believes that stock options and other stock-based
awards play an important role in the success of the Company and that this role
must increase if the Company is to continue to attract, motivate and retain the
caliber of directors, officers and other employees necessary for the Company's
future growth and success. The amended and restated 1994 Stock Plan is
necessary to provide for an adequate number of shares of Common Stock available
for grant under the 1994 Stock Plan.
The Board of Directors believes that adding more shares of Common Stock to
the 1994 Stock Plan will help the Company achieve its goals by keeping the
Company's incentive compensation program competitive with those of other
companies. Accordingly, the Board of Directors has voted, subject to
shareholder approval, to increase the number of shares of Common Stock
available under the 1994 Stock Plan by 2,000,000 shares.
The Board of Directors also believes that the grant of dividend equivalent
rights, deferred stock awards and performance share awards and the ability to
link certain awards under the 1994 Stock Plan to performance goals is an
important way to attract and compensate qualified employees for their efforts
on behalf of the Company and align their interests with those of the Company's
stockholders. The Board of Directors similarly believes that the grant of
non-qualified stock options to non-employee directors is an important way to
attract and compensate qualified non-employee directors for their efforts on
behalf of the Company and align their interests with those of the Company's
stockholders. The proposed amended and restated 1994 Stock Plan would
accordingly allow the Committee (as defined below) greater flexibility in
providing the employees and non-employee directors of the Company with
incentive compensation which is competitive with that awarded by comparable
companies.
Finally, Section 162(m) of the Code and the regulations thereunder
generally would disallow a federal income tax deduction to the Company for
compensation in excess of $1 million paid in any year to any of those Executive
Officers included in the Summary Compensation Table who are employed by the
Company on the last day of the taxable year ("Covered Employees"). However,
this limitation on compensation expense does not apply to payments of
"performance-based compensation," the material terms of which have been
approved by stockholders. Certain awards under the 1994 Stock Plan to Covered
Employees are intended to be "performance-based compensation" for this purpose,
and the 1994 Stock Plan has been amended accordingly.
PROPOSAL
The amended and restated 1994 Stock Plan would authorize the Company to
issue up to an additional 2,000,000 shares of Common Stock pursuant to various
stock incentive awards under the 1994 Stock Plan, bringing the total reserved
shares authorized to be issued under the 1994 Stock Plan (including previously
issued shares of restricted stock and shares issuable under outstanding
options) from 1,000,000 shares to 3,000,000 shares. Of the 2,000,000 additional
shares of Common Stock that may be issued under the Plan, no more than 500,000
shares of Common Stock will be available for grants in the form of restricted
stock, unrestricted stock, deferred stock awards or performance share awards.
The number of shares of Common Stock reserved for issuance under the 1994 Stock
Plan is subject to adjustment for stock splits, stock dividends and similar
events.
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<PAGE>
In addition, the amended and restated 1994 Stock Plan would authorize the
grant of the following types of awards under the 1994 Stock Plan, in addition
to the awards authorized in the original 1994 Stock Plan and previous
amendments thereto: dividend equivalent rights, deferred stock awards,
performance share awards and discretionary non-qualified stock options to
non-employee directors.
To ensure that certain awards (E.G., stock options, stock appreciation
rights, restricted stock, performance shares, and deferred stock) granted to
the top five Named Executive Officers under the amended and restated 1994 Stock
Plan qualify as "performance-based compensation" under Section 162(m) of the
Code, the amended and restated 1994 Stock Plan provides that a committee of not
less than two Independent Directors (the "Committee") may require that the
vesting of such awards be conditioned on the satisfaction of performance
criteria which may include any or all of the following: (i) the Company's
return on equity, assets, capital or investment; (ii) pre-tax or after-tax
profit levels of the Company or any subsidiary, division, operating unit or
business segment thereof, or any combination of the foregoing; (iii) cash flow,
FFO or similar measures; (iv) total stockholder return; (v) changes in the
market price of the Company's Common Stock; (vi) sales or market share; or
(vii) earnings per share. The Committee will select the particular performance
criteria within 90 days following the commencement of a performance cycle. To
satisfy the requirements of Section 162(m) of the Code, stock options and stock
appreciation rights with respect to no more than 250,000 shares of Common Stock
(subject to adjustment for stock splits and similar events) may be granted to
any one individual during any one-calendar year period. In addition, the
maximum award of restricted stock, performance shares or deferred stock (or
combination thereof) for any one individual that is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code will not
exceed 250,000 shares of Common Stock (subject to adjustment for stock splits
and similar events) for any performance cycle.
Based solely on the closing price of Common Stock as reported on the NYSE
on March 1, 1999 of $16.4375 per share, the maximum aggregate market value of
the additional 2,000,000 shares of Common Stock reserved for issuance under the
amended and restated 1994 Stock Plan would be $32,875,000.
The amended and restated 1994 Stock Plan will become effective only if
Proposal 2 is approved by the Company's stockholders.
SUMMARY OF THE 1994 STOCK PLAN
The following description of material terms of the amended and restated
1994 Stock Plan is intended to be a summary only. This summary is qualified in
its entirety by the full text of the amended and restated 1994 Stock Plan,
which is attached hereto as Exhibit A.
1994 STOCK PLAN ADMINISTRATION. The 1994 Stock Plan provides for
administration by a committee of not fewer than two non-employee directors, as
appointed by the Board of Directors from time to time.
The Committee has full power to select, from among the employees eligible
for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms and
conditions of each award, subject to the provisions of the 1994 Stock Plan. The
Committee may not reprice outstanding options, other than to appropriately
reflect changes in the capital structure of the Company. The Committee may
permit Common Stock, and other amounts payable pursuant to an award, to be
deferred. In such instances, the Committee may permit interest, dividend or
deemed dividends to be credited to the amount of deferrals.
ELIGIBILITY AND LIMITATIONS ON GRANTS. All officers, employees and
directors of the Company are eligible to participate in the 1994 Stock Plan,
subject to the discretion of the Committee. In no event may any one participant
receive options to purchase more than 250,000 shares of Common Stock (subject
to adjustment for stock splits and similar events) during any one-calendar year
period, as stated above. In addition, as stated above, the maximum award of
restricted stock, performance shares or deferred stock (or combination thereof)
for any one individual
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<PAGE>
that is intended to qualify as "performance-based compensation" under Section
162(m) of the Code will not exceed 250,000 shares of Common Stock (subject to
adjustment for stock splits and similar events) for any performance cycle.
STOCK OPTIONS. Options granted under the 1994 Stock Plan may be either
Incentive Stock Options ("Incentive Options") (within the definition of Section
422 of the Code) or Non-Qualified Stock Options ("Non-Qualified Options").
Options granted under the 1994 Stock Plan will be Non-Qualified Options if they
(i) fail to meet such definition of Incentive Options, (ii) are granted to a
person not eligible to receive Incentive Options under the Code, or (iii)
otherwise so provide. Incentive Options may be granted only to officers or
other employees of the Company. Non-Qualified Options may be granted to persons
eligible to receive Incentive Options and to non-employee directors and other
key persons.
OTHER OPTION TERMS. The Committee has authority to determine the terms of
options granted under the 1994 Stock Plan. Generally, Incentive Options and
Non-Qualified Options are granted with an exercise price that is not less than
the fair market value of the shares of Common Stock on the date of the option
grant. However, Non-Qualified Options which are granted in lieu of a
participant's cash bonus, at the participant's election with the consent of the
Committee, will have an exercise price that is not less than 50 percent of the
fair market value of the shares of Common Stock on the date of the option
grant. The 1994 Stock Plan provides that such fair market value will be deemed
to be the last reported sale price of the shares of common stock on the NYSE.
The exercise price of an option may not be reduced after the date of the option
grant, other than to appropriately reflect changes in the capital structure of
the Company.
The term of each option will be fixed by the Committee and may not exceed
ten years from date of grant. The Committee will determine at what time or
times each option may be exercised and, subject to the provisions of the 1994
Stock Plan, the period of time, if any, after retirement, death, disability or
termination of employment during which options may be exercised. Options may be
made exercisable in installments, and the exercisability of options may be
accelerated by the Committee. In general, unless otherwise permitted by the
Committee, no option granted under the 1994 Stock Plan is transferable by the
optionee other than by will or by the laws of descent and distribution, and
options may be exercised during the optionee's lifetime only by the optionee,
or by the optionee's legal representative or guardian in the case of the
optionee's incapacity.
Options granted under the 1994 Stock Plan may be exercised for cash or, if
permitted by the Committee, by transfer to the Company (either actually or by
attestation) of shares of Common Stock which are not then subject to
restrictions under any Company stock plan, which have been held by the optionee
for at least six months or were purchased on the open market, and which have a
fair market value equivalent to the option exercise price of the shares being
purchased, or by compliance with certain provisions pursuant to which a
securities broker delivers the purchase price for the shares to the Company.
At the discretion of the Committee, stock options granted under the 1994
Stock Plan may include a "re-load" feature pursuant to which an optionee
exercising an option by the delivery of shares of Common Stock would
automatically be granted an additional stock option (with an exercise price
equal to the fair market value of the Common Stock on the date the additional
stock option is granted) to purchase that number of shares of Common Stock
equal to the number delivered to exercise the original stock option. The
purpose of this feature is to enable participants to maintain any equity
interest in the Company without dilution.
To qualify as Incentive Options, options must meet additional Federal tax
requirements, including a $100,000 limit on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year, and
a shorter term and higher minimum exercise price in the case of certain large
stockholders.
STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS. The 1994 Stock Plan
provides for the automatic grant of Non-Qualified Options to non-employee
directors. Each non-employee director who is serving as a director of the
Company on the fifth business day after each annual meeting of stockholders,
commencing with the annual
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<PAGE>
meeting in 1995, will automatically be granted on such day a Non-Qualified
Option to acquire 2,000 shares of Common Stock. The exercise price of each such
Non-Qualified Option is the fair market value of Common Stock, as determined by
the last reported sale price of Common Stock on the NYSE on the date of grant.
Each such Non-Qualified Option is immediately exercisable as of the date of
grant. Such Non-Qualified Options will expire ten years from the date of grant,
except with respect to a non-employee director who is terminated for cause. In
the event a non-employee director is terminated for cause, his or her options
will expire immediately on the date he or she ceases to be a director. The
Committee may also make discretionary grants of Non-Qualified Options to
non-employee directors.
TAX WITHHOLDING. Participants under the 1994 Stock Plan are responsible
for the payment of any federal, state or local taxes which the Company is
required by law to withhold upon any option exercise or vesting of other
awards. Participants may elect to have such tax withholding obligations
satisfied either by authorizing the Company to withhold shares of Common Stock
to be issued pursuant to an option exercise or other award, or by transferring
to the Company shares of Common Stock having a value equal to the amount of
such taxes.
STOCK APPRECIATION RIGHTS. The Committee may award a stock appreciation
right ("SAR") either as a freestanding award or in tandem with a stock option.
Upon exercise of the SAR, the holder will be entitled to receive an amount
equal to the excess of the fair market value on the date of exercise of one
share of Common Stock over the exercise price per share specified in the
related stock option (or, in the case of freestanding SAR, the price per share
specified in such right, which price may not be less than the fair market value
of the Common Stock on the date of grant), multiplied by the number of shares
of Common Stock with respect to which the SAR is exercised. If the SAR is
granted in tandem with a stock option, exercise of the SAR cancels the related
option to the extent of such exercise.
RESTRICTED STOCK AWARDS. The Committee may grant shares (at par value or
for a higher purchase price determined by the Committee) of Common Stock to any
participant subject to such conditions and restrictions as the Committee may
determine. These conditions and restrictions may include the achievement of
pre-established performance goals (as summarized in the Proposal section,
above) and/or continued employment with the Company through a specified vesting
period. The vesting period shall be determined by the Committee. The purchase
price, if any, of shares of restricted stock will be determined by the
Committee. If the applicable performance goals and other restrictions are not
attained, the participant will forfeit his or her award of restricted stock.
UNRESTRICTED STOCK AWARDS. The Committee may also grant shares (at par
value or for a higher purchase price determined by the Committee) of Common
Stock which are free from any restrictions under the 1994 Stock Plan.
Unrestricted stock may be granted to any participant in recognition of past
services or other valid consideration, and may be issued in lieu of cash
compensation due to such participant.
STOCK LOAN RIGHTS. The Committee may grant stock loan rights to selected
key employees which entitle the recipient to receive a loan from the Company
which is to be used solely to purchase shares of Common Stock under the 1994
Stock Plan. The terms of the loan will be determined by the Committee, and each
loan will be secured by the shares of Common Stock purchased by the participant
with the proceeds of the loan.
DIVIDEND EQUIVALENT RIGHTS. The Committee may grant dividend equivalent
rights which entitle the recipient to receive credits for dividends that would
be paid if the recipient had held specified shares of Common Stock. Dividend
equivalent rights may be granted as a component of another award or as a
freestanding award. Dividend equivalent rights credited under the 1994 Stock
Plan may be paid currently or be deemed to be reinvested in additional shares
of Common Stock, which may thereafter accrue additional dividend equivalent
rights at fair market value at the time of deemed reinvestment or on the terms
then governing the reinvestment of dividends under the Company's dividend
reinvestment 1994 Stock Plan, if any. Dividend equivalent rights may be settled
in cash, shares of Common
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Stock or a combination thereof, in a single installment or installments, as
specified in the award. Awards under the 1994 Stock Plan that are payable in
cash on a deferred basis may provide for crediting and payment of interest
equivalents.
DEFERRED STOCK AWARDS. The Committee may also award phantom stock units as
deferred stock awards to participants. The deferred stock awards are ultimately
payable in the form of shares of Common Stock and may be subject to such
conditions and restrictions as the Committee may determine. These conditions
and restrictions may include the achievement of certain performance goals (as
summarized in the Proposal section, above) and/or continued employment with the
Company through a specified vesting period. During the deferral period, subject
to terms and conditions imposed by the Committee, the deferred stock awards may
be credited with dividend equivalent rights. Subject to the consent of the
Committee, a participant may make an advance election to receive a portion of
his or her compensation or restricted stock award otherwise due in the form of
a deferred stock award.
PERFORMANCE SHARE AWARDS. The Committee may grant performance share awards
to any participant which entitle the recipient to receive shares of Common
Stock upon the achievement of individual or company performance goals (as
summarized in the Proposal section, above) and such other conditions as the
Committee shall determine.
CHANGE OF CONTROL PROVISIONS. The 1994 Stock Plan provides that in the
event of a Change of Control as defined in the 1994 Stock Plan, all stock
options, stock appreciation rights and dividend equivalent rights will
automatically become fully exercisable. The restrictions and conditions on all
other awards will automatically be deemed waived, except as the Committee may
specify with respect to particular awards. In addition, at any time prior to or
after a Change of Control, the Committee may accelerate awards and waive
conditions and restrictions on any awards to the extent it may determine to be
appropriate.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, ETC. The 1994 Stock Plan
authorizes the Committee to make appropriate adjustments to the number of
shares of Common Stock that are subject to the 1994 Stock Plan and to any
outstanding stock options to reflect stock dividends, stock splits and similar
events. In the event of certain transactions, such as a merger, consolidation,
dissolution or liquidation of the Company, the Committee in its discretion may
provide for appropriate substitutions or adjustments of outstanding stock
options or SARs; alternatively, outstanding stock options and SARs will
terminate and the holder will receive a cash payment equal to the excess of the
fair market value per share over the applicable exercise price, multiplied by
the number of shares of Common Stock covered by the stock option or stock
appreciation right.
AMENDMENTS AND TERMINATION. The Board of Directors may at any time amend
or discontinue the 1994 Stock Plan and the Committee may at any time amend or
cancel any outstanding award for the purpose of satisfying changes in law or
for any other lawful purpose, but no such action shall adversely affect the
rights under any outstanding awards without the holder's consent. To the extent
required by the Code to ensure that options granted under the amended and
restated 1994 Stock Plan qualify as Incentive Options, 1994 Stock Plan
amendments shall be subject to approval by the Company's stockholders.
NEW 1994 STOCK PLAN BENEFITS
No grants have been made with respect to the additional shares of Common
Stock reserved for issuance under the amended and restated 1994 Stock Plan. The
number of shares of Common Stock that may be granted to executive officers and
non-executive officers is indeterminable at this time, as such grants are
subject to the discretion of the Committee.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal federal income tax
consequences of transactions under the 1994 Stock Plan. It does not describe
all federal tax consequences under the 1994 Stock Plan, nor does it describe
state or local tax consequences.
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INCENTIVE OPTIONS. No taxable income is generally realized by the optionee
upon the grant or exercise of an Incentive Option. If shares of Common Stock
issued to an optionee pursuant to the exercise of an Incentive Option are sold
or transferred after two years from the date of grant and after one year from
the date of exercise, then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will be taxed to
the optionee as a long-term capital gain, and any loss sustained will be a
long-term capital loss, and (ii) there will be no deduction for the Company for
federal income tax purposes. The exercise of an Incentive Option will give rise
to an item of tax preference that may result in alternative minimum tax
liability for the optionee.
If shares of Common Stock acquired upon the exercise of an Incentive
Option are disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"), generally (i)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares of
common stock at exercise (or, if less, the amount realized on a sale of such
shares of common stock) over the option price thereof, and (ii) the Company
will be entitled to deduct such amount. Special rules will apply where all or a
portion of the exercise price of the Incentive Option is paid by tendering
shares of common stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment (or one year in the case of termination of employment
by reason of disability). In the case of termination of employment by reason of
death, the three-month rule does not apply.
NON-QUALIFIED OPTIONS. With respect to Non-Qualified Options under the
1994 Stock Plan, no income is realized by the optionee at the time the option
is granted. Generally (i) at exercise, ordinary income is realized by the
optionee in an amount equal to the difference between the option price and the
fair market value of the shares of Common Stock on the date of exercise, and
the Company receives a tax deduction for the same amount, and (ii) at
disposition, appreciation or depreciation after the date of exercise is treated
as either short-term or long-term capital gain or loss depending on how long
the shares of common stock have been held. Special rules will apply where all
or a portion of the exercise price of the Non-Qualified Option is paid by
tendering shares of common stock.
PARACHUTE PAYMENTS. The vesting of any portion of any option or other
award that is accelerated due to the occurrence of a Change of Control may
cause a portion of the payments with respect to such accelerated awards to be
treated as "parachute payments" as defined in the Code. Any such parachute
payments may be non-deductible to the Company, in whole or in part, and may
subject the recipient to a non-deductible 20% federal excise tax on all or a
portion of such payment (in addition to other taxes ordinarily payable).
LIMITATION ON COMPANY'S DEDUCTIONS. As a result of Section 162(m) of the
Code, the Company's deduction for certain awards under the 1994 Stock Plan may
be limited to the extent that a Covered Employee (E.G., one of the Named
Executive Officers) receives compensation in excess of $1,000,000 in such
taxable year of the Company (other than performance-based compensation that
otherwise meets the requirements of Section 162(m) of the Code).
REQUIRED VOTE AND RECOMMENDATION
The amended and restated 1994 Stock Plan will become effective upon
approval by the holders of a majority of the votes cast at the Annual Meeting.
Proxies will be voted for Proposal 2 unless contrary instructions are set forth
on the proxy. Only stockholders of record of Common Stock are entitled to vote
on this proposal. Under Maryland law, this proposal requires the affirmative
vote of a majority of all of the votes cast on the matter, and for the purpose
of determining the number of votes cast, abstentions are treated under Maryland
law as not voting. In addition, the NYSE requires the affirmative vote of a
majority of all the votes cast on the
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proposal and further requires the total number of votes cast on the proposal to
represent more than 50% of all of the shares entitled to vote on the proposal.
The NYSE treats abstentions as shares entitled to vote and as votes cast.
Broker non-votes will be treated as votes not cast under both Maryland law and
NYSE rules for the purpose of determining the number of votes cast on this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE 1994 STOCK OPTION AND INCENTIVE 1994 STOCK PLAN, AS AMENDED AND RESTATED.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As discussed above, Messrs. Hance and Schwab serve as officers and
directors of lending institutions that have provided financing and related
services to the Company. James H. Hance, Jr. is a Vice Chairman and the Chief
Financial Officer of Bank of America, and Nelson Schwab III is a member of the
Board of Directors of First Union. Both Bank of America and First Union
provided the Company with credit enhancements on certain of its communities
financed with tax-exempt bonds and are both members of a group of banks that
provide the Company's $200 million unsecured credit facility.
LOANS TO OFFICERS AND EMPLOYEES
The Board of Directors of the Company, including the Compensation
Committee thereof, believes that ownership of the Company's Common Stock by
executive officers and certain other qualified employees of the Company and its
subsidiaries aligns the interests of such officers and employees with the
interests of the stockholders of the Company. To further such goal of aligning
the interests of such officers and employees with the interests of the
stockholder of the Company, the Board of Directors on September 8, 1997
approved and the Company instituted a loan program under which the Company may
lend amounts to or on behalf of certain of the Company's executive officers and
key employees (hereinafter, a "Loan") for one or more of the following
purposes: (i) to finance the purchase of Common Stock (A) by executive officers
on the open market at then-current market prices and (B) by other eligible
employees through the Company's 1996 Non-Qualified Employee Stock Purchase
Plan; (ii) to finance an employee's payment of the exercise price of one or
more stock options to purchase shares of Common Stock granted to such employee
under the Company's 1994 Stock Plan; or (iii) to finance the annual tax
liability or other expenses of Messrs. Schwarz and Hamilton related to the
vesting of shares of Common Stock which constitute a portion of a restricted
stock award granted to such employee under the 1994 Stock Plan. The maximum
aggregate amount the Company may loan to an executive officer is $500,000
(unless such limit is otherwise waived by the Board of Directors or the
Compensation Committee thereof), and the maximum aggregate amount the Company
may loan to a qualified employee is $100,000. The Board of Directors has
increased such limit to $2,000,000 and $1,000,000 for Messrs. LeBlanc and
Schwarz, respectively. Currently, Messrs. LeBlanc, Schwarz and Hamilton are the
only executive officers to whom Loans have been extended for the purpose of
financing the purchase of Common Stock or the payment of the annual tax
liability related to the vesting of shares of Common Stock which constitute a
portion of a restricted stock award.
The relevant employee shall execute a Promissory Note and Security
Agreement (the "Note") related to each Loan made by the Company. Each Note will
bear interest at the applicable federal rate, as established by the Internal
Revenue Service (the "Applicable Federal Rate"), in effect on the date of the
Note and such rate shall be fixed and the Note shall become due and payable in
full no later than the tenth anniversary of the Note (the "Maturity Date").
Shares of Common Stock which are the subject of a Loan serve as collateral (the
"Collateral Stock") for the Note until such time as the Note has been paid in
full. Until the Maturity Date, the employee to whom a Loan has been extended
will only be required to repay such Loan through the application to the
outstanding Loan balance of all dividends and distributions related to the
Collateral Stock, first to interest, and the remainder, if any, to outstanding
principal. Such employee may prepay the whole or any part of the principal
amount of the Loan from time to time without premium or penalty. The Company's
recourse against
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an employee under a Note for satisfaction of the Loan and all other amounts due
is limited to the Company's rights to the Collateral Stock and 25% or 10%, in
the case of Mr. LeBlanc, of the principal of the Note for which the employee is
personally liable in the event of any deficiency which may arise upon a
foreclosure and sale or other disposition of the Collateral Stock.
As of February 15, 1999, the Company had extended Loans totaling
$4,771,527.15 to its employees, including the amounts of $1,961,044.50,
$927,303.01 and $499,979.64 which were extended to Messrs. LeBlanc, Schwarz and
Hamilton, respectively. Loans to Mr. LeBlanc in the amount of (i) $960,577.50
bear interest at 5.56% per year (I.E. the Applicable Federal Rate for Loans
made in August, 1998) and (ii) $1,000,467 bear interest at 4.71% (I.E. the
Applicable Federal Rate for Loans made in February, 1999. Loans to Mr. Schwarz
in the amount of $404,043.51 bear interest at 6.13% per year (I.E., the
Applicable Federal Rate for Loans made in January, 1998), (ii) $55,837.50 bear
interest at 5.68% per year (I.E., the Applicable Federal Rate for Loans made in
July, 1998), (iii) $17,425.00 bear interest at 5.56% per year (I.E. the
Applicable Federal Rate for Loans made in August, 1998 and (iv) $449,997 bear
interest at 4.71% (I.E. the Applicable Federal Rate for Loans made in February,
1999). Loans to Mr. Hamilton in the amount of $499,979.64 bear interest at
6.13% per year (I.E., the Applicable Federal Rate for Loans made in January,
1998).
OTHER MATTERS
INDEPENDENT AUDITORS
The accounting firm of Deloitte & Touche LLP has served as the Company's
and its predecessors' independent auditors since August 15, 1993. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting,
will be given the opportunity to make a statement if he or she so desires and
will be available to respond to appropriate questions.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without additional compensation for such activities.
The Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
In addition, Corporate Investor Communications, Inc. has been engaged by the
Company to act as proxy solicitors and will receive a fee of approximately
$6,000 plus expenses.
STOCKHOLDER PROPOSALS
Stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for
inclusion in the Company's proxy statement and form of proxy for the 2000
annual meeting of stockholders must have been received in writing by the
Company by November 14, 1999. Such proposals must also comply with the
requirements as to form and substance established by the Securities and
Exchange Commission if such proposals are to be included in the proxy statement
and form of proxy. Any such proposals should be mailed to: Summit Properties
Inc., 212 South Tryon Street, Suite 500, Charlotte, NC 28281, Attn: Secretary.
Stockholder proposals to be presented at the 2000 annual meeting of
stockholders, other than stockholder proposals submitted pursuant to Exchange
Act Rule 14a-8, must be received in writing by the Company not earlier than
January 12, 2000 nor later than February 11, 2000, unless the 2000 annual
meeting of stockholders is scheduled to take place before March 10, 2000. The
Company's Bylaws provide that any stockholder wishing to nominate a director or
have a stockholder proposal, other than a stockholder proposal submitted
pursuant to Exchange Act Rule 14a-8, considered at an annual meeting must
provide written notice of such nomination
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or proposal and appropriate supporting documentation, as set forth in the
Bylaws, to the Company not less than 90 days nor more than 120 days prior to
the anniversary of the immediately preceding annual meeting of stockholders
(the "Anniversary Date"); provided, however, that in the event that the annual
meeting is scheduled to be held more than 60 calendar days prior to the
Anniversary Date, such nominations or proposals must be delivered to the
Company not earlier than 120 days or later than 90 days prior to the earlier
date or, if later, the tenth day following the date on which public
announcement of the date of such meeting is first made. Notwithstanding the
foregoing, in the event the number of directors of the Company is increased and
there is no public announcement made by the Company naming all of the nominees
for director or specifying the size of the increased Board of Directors at
least 70 days prior to the Anniversary Date, stockholder nominations for such
directors may be delivered to the Company not later than the tenth day
following the date on which such public announcement is first made by the
Company. Any such proposals should be mailed to: Summit Properties Inc., 212
South Tryon Street, Suite 500, Charlotte, NC 28281, Attn: Secretary.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD TODAY.
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EXHIBIT A
SUMMIT PROPERTIES INC.
1994 STOCK OPTION AND INCENTIVE PLAN,
AS AMENDED AND RESTATED
AS OF DECEMBER 14, 1998
1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Summit Properties Inc. 1994 Stock Option and
Incentive Plan, as Amended and Restated (the "Plan"). The Plan was originally
adopted on January 13, 1994, and has been amended and restated in its entirety
as set forth herein as of December 14, 1998. The purpose of the Plan is to
encourage and enable the officers, employees and Directors of Summit Properties
Inc. (the "Company") and its Subsidiaries upon whose judgment, initiative and
efforts the Company largely depends for the successful conduct of its business
to acquire a proprietary interest in the Company. It is anticipated that
providing such persons with a direct stake in the Company's welfare will assure
a closer identification of their interests with those of the Company, thereby
stimulating their efforts on the Company's behalf and strengthening their
desire to remain with the Company.
The following terms shall be defined as set forth below:
"ACT" means the Securities Exchange Act of 1934, as amended.
"AWARD" or "AWARDS," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Unrestricted
Stock Awards, Stock Loan Rights, Dividend Equivalent Rights, Deferred Stock
Awards and Performance Share Awards.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means the occurrence of one or more of the following: (i) employee
or Independent Director is convicted of, pleads guilty to, or confesses to any
felony or any act of fraud, misappropriation or embezzlement which has an
immediate and materially adverse effect on the Company or any Subsidiary, as
determined by the Board in good faith in its sole discretion, (ii) employee or
Independent Director engages in a fraudulent act to the material damage or
prejudice of the Company or any Subsidiary or in conduct or activities
materially damaging to the property, business or reputation of the Company or
any Subsidiary, all as determined by the Board in good faith in its sole
discretion, (iii) any material act or omission by employee or Independent
Director involving malfeasance or negligence in the performance of employee's
or Independent Director's duties to the Company or any Subsidiary to the
material detriment of the Company or any Subsidiary, as determined by the Board
in good faith in its sole discretion, which has not been corrected by employee
or Independent Director within 30 days after written notice from the Company of
any such act or omission, (iv) failure by employee to comply in any material
respect with the terms of his employment agreement, if any, or any written
policies or directives of the Board as determined by the Board in good faith in
its sole discretion, which has not been corrected by employee within 30 days
after written notice from the Company of such failure, or (v) material breach
by employee of his noncompetition agreement with the Company, if any, as
determined by the Board in good faith in its sole discretion.
"CHANGE OF CONTROL" is defined in Section 18.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"COMMITTEE" means the Committee of the Board referred to in Section 2.
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"COVERED EMPLOYEE" means an employee who is a "Covered Employee" within
the meaning of Section 162(m) of the Code.
"DISABILITY" means an employee's inability to perform his normal required
services for the Company and its Subsidiaries for a period of six consecutive
months by reason of the employee's mental or physical disability, as determined
by the Committee in good faith in its sole discretion.
"DIVIDEND EQUIVALENT RIGHT" means Awards granted pursuant to Section 10.
"EFFECTIVE DATE" means the date on which Plan is approved by stockholders
as set forth in Section 20.
"FAIR MARKET VALUE" on any given date means the last reported sale price
at which Stock is traded on such date or, if no Stock is traded on such date,
the most recent date on which Stock was traded, as reflected on the New York
Stock Exchange or, if applicable, any other national stock exchange on which
the Stock is traded. Notwithstanding the foregoing, the Fair Market Value on
the first day of the Company's initial public offering shall mean the initial
public price.
"INCENTIVE STOCK OPTION" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.
"INDEPENDENT DIRECTOR" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
"OPTION" or "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.
"PERFORMANCE CYCLE" means one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the
attainment of one or more performance criteria will be measured for the purpose
of determining a participant's right to and the payment of a Performance Share
Award, Restricted Stock Award or Deferred Stock Award.
"PERFORMANCE SHARE AWARD" means Awards granted pursuant to Section 12.
"RESTRICTED STOCK AWARD" means Awards granted pursuant to Section 7.
"RETIREMENT" means the employee's termination of employment with the
Company and its Subsidiaries after attainment of age 60 and completion of ten
(10) years of employment with the Company and/or any Subsidiary (and any
predecessor thereof).
"STOCK" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"STOCK APPRECIATION RIGHT" means Awards granted pursuant to Section 6.
"STOCK LOAN RIGHT" means a loan made by the Company to an employee
pursuant to Section 9 to be used towards the purchase of shares of Stock.
"SUBSIDIARY" means Summit Properties Partnership, L.P., Summit Management
Company, Summit Building Company and any corporation or other entity (other
than the Company) in any unbroken chain of corporations or other entities,
beginning with the Company if each of the corporations or entities (other than
the last corporation or entity in the unbroken chain) owns stock or other
interests possessing 50% or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
"UNRESTRICTED STOCK AWARD" means Awards granted pursuant to Section 8.
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2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS AND
DETERMINE AWARDS
1. COMMITTEE. The Plan shall be administered by a committee of not less
than two Independent Directors (the "Committee").
2. POWERS OF COMMITTEE. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
1. to select the officers, other employees and Directors of the Company
and its Subsidiaries to whom Awards may from time to time be granted;
2. to determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Unrestricted Stock Awards, Stock Loan
Rights, Dividend Equivalent Rights, Deferred Stock Awards, Performance
Share Awards, or any combination of the foregoing, granted to any one or
more participants;
3. to determine the number of shares of Stock to be covered by any Award;
4. to determine the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and
conditions may differ among individual Awards and participants, to modify
such terms and conditions to the extent permitted under Section 16, and to
approve the form of written instruments evidencing the Awards;
5. to accelerate the exercisability or vesting of all or any portion of
any Award;
6. subject to the provisions of Section 5(a)(iii), to extend the period
in which Stock Options may be exercised;
7. to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the participant and whether and
to what extent the Company shall pay or credit amounts constituting
interest (at rates determined by the Committee) or dividends or deemed
dividends on such deferrals; and
8. to adopt, alter and repeal such rules, guidelines and practices for
administration of the Plan and for its own acts and proceedings as it shall
deem advisable; to interpret the terms and provisions of the Plan and any
Award (including related written instruments); to make all determinations
it deems advisable for the administration of the Plan; to decide all
disputes arising in connection with the Plan; and to otherwise supervise
the administration of the Plan.
3. DELEGATION OF AUTHORITY TO GRANT AWARDS. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or Covered Employees.
Any such delegation by the Committee shall include a limitation as to the
amount of Awards that may be granted during the period of the delegation and
shall contain guidelines as to the determination of the exercise price of any
Stock Option or Stock Appreciation Right, the conversion ratio or price of
other Awards and the vesting criteria. The Committee may revoke or amend the
terms of a delegation at any time but such action shall not invalidate any
prior actions of the Committee's delegate or delegates that were consistent
with the terms of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
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3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
1. STOCK ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 3,000,000 shares. For purposes
of this limitation, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back
to the shares of Stock available for issuance under the Plan. Subject to such
overall limitation, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award, including Incentive Stock Options;
provided, however, that Stock Options or Stock Appreciation Rights with respect
to no more than 250,000 shares of Stock may be granted to any one individual
participant during any one-calendar-year period. In addition, of the additional
2,000,000 shares of Stock reserved for issuance under the Plan, no more than
500,000 of such shares of Stock shall be available for grants in the form of
Restricted Stock Awards, Unrestricted Stock Awards, Deferred Stock Awards
and/or Performance Share Awards. The shares available for issuance under the
Plan may be authorized but unissued shares of Stock or shares of Stock
reacquired by the Company and held in its treasury. Upon the exercise of a
Stock Appreciation Right settled in shares of Stock, the right to purchase an
equal number of shares of Stock covered by a related Stock Option, if any,
shall be deemed to have been surrendered and will no longer be exercisable, and
said number of shares of Stock shall no longer be available under the Plan.
2. CHANGES IN STOCK. If, as a result of any reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, the Committee shall make an appropriate or proportionate adjustment
in (i) the maximum number of shares reserved for issuance under the Plan, (ii)
the number of Stock Options or Stock Appreciation Rights that can be granted to
any one individual participant, (iii) the maximum number of shares that can be
granted as Restricted Stock Awards, Unrestricted Stock Awards, Deferred Stock
Awards and/or Performance Share Awards, (iv) the number and kind of shares or
other securities subject to any then outstanding Awards under the Plan, and (v)
the price for each share subject to any then outstanding Stock Options and
Stock Appreciation Rights under the Plan, without changing the aggregate
exercise price (I.E., the exercise price multiplied by the number of Stock
Options and Stock Appreciation Rights) as to which such Stock Options and Stock
Appreciation Rights remain exercisable. The adjustment by the Committee shall
be final, binding and conclusive. No fractional shares of Stock shall be issued
under the Plan resulting from any such adjustment, but the Committee in its
discretion may make a cash payment in lieu of fractional shares.
The Committee may also adjust the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding Awards to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Committee that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification,
extension or renewal of the Option within the meaning of Section 424(h) of the
Code.
3. MERGERS AND OTHER TRANSACTIONS. In the case of and subject to the
consummation of (i) the dissolution or liquidation of the Company, (ii) the
sale of all or substantially all of the assets of the Company on a consolidated
basis to an unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the holders of the Company's outstanding voting power
immediately prior to such transaction do not own 50% of the outstanding voting
power of the surviving or resulting entity immediately upon completion of such
transaction, (iv) the sale of all of the Stock of the Company to an unrelated
person or entity or (v) any other transaction in which the owners of the
Company's outstanding voting power prior to such transaction do not own at
least a majority
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of the outstanding voting power of the relevant entity after the transaction
(in each case, a "Covered Transaction"), all Options and Stock Appreciation
Rights and Dividend Equivalent Rights that are not exercisable shall become
fully exercisable and restrictions and conditions on all other Awards shall
automatically be deemed waived, except as the Committee may otherwise specify
with respect to particular Awards. Upon the consummation of the Covered
Transaction, the Plan and all outstanding Awards granted hereunder shall
terminate, unless provision is made in connection with the Covered Transaction
for the assumption of Awards heretofore granted, or the substitution of such
Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment as to the number and kind of shares and, if appropriate,
the per share exercise prices, as provided in Section 3(b) above. In the event
of such termination, each participant holding an outstanding Stock Option or
Stock Appreciation Right shall receive payment from the Company in cash in an
amount equal to the excess of the Fair Market Value per share over the
applicable exercise price multiplied by the number of shares of Stock covered
by the Stock Option or Stock Appreciation Right.
4. SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances. Any substitute Awards granted under
the Plan shall not count against the share limitation set forth in Section
3(a).
4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and other
employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Independent Directors are also eligible to participate in the
Plan but only to the extent provided in Section 5(c) below.
5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after December
14, 2008.
1. STOCK OPTIONS GRANTED TO EMPLOYEES. The Committee in its discretion may
grant Stock Options to eligible employees of the Company or any Subsidiary.
Stock Options granted to employees pursuant to this Section 5(a) shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
1. EXERCISE PRICE. The exercise price per share for the Stock covered by
a Stock Option granted pursuant to this Section 5(a) shall be determined by
the Committee at the time of grant but shall not be less than 100% of the
Fair Market Value on the date of grant. Notwithstanding the foregoing, with
respect to Non-Qualified Stock Options which are granted in lieu of cash
bonus, the exercise price per share shall not be less than 50% of the Fair
Market Value on the date of grant. If an employee owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive
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Stock Option is granted to such employee, the option price of such
Incentive Stock Option shall be not less than 110% of the Fair Market Value
on the grant date.
2. GRANT OF DISCOUNT OPTIONS IN LIEU OF CASH BONUS. Upon the request of
an eligible employee and with the consent of the Committee, such employee
may elect each calendar year to receive a Non-Qualified Stock Option in
lieu of cash bonus to which he may become entitled during the following
calendar year pursuant to any other plan of the Company, but only if such
employee makes an irrevocable election to waive receipt of all or a portion
of such cash bonus. Such election shall be made on or before the date set
by the Committee which date shall be no later than 15 days preceding
January 1 of the calendar year in which the cash bonus would otherwise be
paid. A Non-Qualified Stock Option shall be granted to each employee who
made such an irrevocable election on the date the waived cash bonus would
otherwise be paid. The exercise price per share shall be determined by the
Committee but shall not be less than 50% of the Fair Market Value of the
Stock on the date the Stock Option is granted. The number of shares of
Stock subject to the Stock Option shall be determined by dividing the
amount of the waived cash bonus by the difference between the Fair Market
Value of the Stock on the date the Stock Option is granted and the exercise
price per Stock Option. The Stock Option shall be granted for whole number
of shares so determined; the value of any fractional share shall be paid in
cash. An employee may revoke his election under this Section 5(a)(ii) on a
prospective basis at any time.
3. OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten years
after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
4. EXERCISABILITY; RIGHTS OF A STOCKHOLDER. Stock Options shall become
vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Stock Options granted in lieu of cash bonus
shall be exercisable immediately. The Committee may at any time accelerate
the exercisability of all or any portion of any Stock Option. An optionee
shall have the rights of a stockholder only as to shares acquired upon the
exercise of a Stock Option and not as to unexercised Stock Options.
5. METHOD OF EXERCISE. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods to the extent provided in the
Option Award agreement:
1. In cash, by certified or bank check or other instrument acceptable
to the Committee;
2. Through the delivery (or attestation to the ownership) of shares
of Stock that are not then subject to restrictions under any Company plan
and that have been purchased by the optionee on the open market or have
been beneficially owned by the optionee for at least six months, if
permitted by the Committee in its discretion. Such surrendered shares
shall be valued at Fair Market Value on the exercise date; or
3. By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to
the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures
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and enter into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection.
The delivery of certificates representing the shares of Stock to be
purchased pursuant to the exercise of a Stock Option will be contingent
upon receipt from the optionee (or a purchaser acting in his stead in
accordance with the provisions of the Stock Option) by the Company of the
full purchase price for such shares and the fulfillment of any other
requirements contained in the Stock Option or applicable provisions of
laws. In the event an optionee chooses to pay the purchase price by
previously-owned shares of Stock through the attestation method, the number
of shares of Stock transferred to the optionee upon the exercise of the
Stock Option shall be net of the number of shares attested to.
6. NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the optionee's legal
representative or guardian in the event of the optionee's incapacity.
Notwithstanding the foregoing, the Committee may provide in an option
agreement that the optionee may transfer, without consideration for the
transfer, his Non-Qualified Stock Options to members of his immediate
family (i.e., children, grandchildren, or spouse), to trusts for the
benefit of such immediate family members and to partnerships in which such
family members are the only partners, provided that the transferee agrees
in writing with the Company to be bound by all of the terms and conditions
of this Plan and the applicable Option.
7. TERMINATION BY REASON OF DEATH. If any optionee's employment by the
Company and its Subsidiaries terminates by reason of death, the Stock
Option shall become fully exercisable and may thereafter be exercised by
the legal representative or legatee of the optionee, for a period of six
months (or such longer period as the Committee shall specify at any time)
from the date of death, or until the expiration of the stated term of the
Option, if earlier.
8. TERMINATION BY REASON OF DISABILITY.
1. Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries has terminated by reason of Disability shall
become fully exercisable and may thereafter be exercised, for a period of
twelve months (or such longer period as the Committee shall specify at
any time) from the date of such termination of employment, or until the
expiration of the stated term of the Option, if earlier.
2. The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability.
3. Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during a period provided in this Section
5(a)(viii) for the exercise of a Stock Option shall extend such period
for six months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
9. TERMINATION BY REASON OF RETIREMENT.
1. Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries has terminated by reason of Retirement may
thereafter be exercised, to the extent it was exercisable at the time of
such termination, for a period of twelve months (or such longer period as
the Committee shall specify at any time) from the date of such
termination of employment, or until the expiration of the stated term of
the Option, if earlier.
2. Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during a period provided in this Section
5(a)(ix) for the exercise of a Stock Option shall extend such
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period for six months from the date of death, subject to termination on
the expiration of the stated term of the Option, if earlier.
10. TERMINATION FOR CAUSE. If any optionee's employment by the Company
and its Subsidiaries has been terminated for Cause, any Stock Option held
by such optionee, including any Stock Option that is immediately
exercisable at the time of such termination, shall immediately terminate
and be of no further force and effect; provided, however, that the
Committee may, in its sole discretion, provide that such Stock Option can
be exercised for a period of up to 30 days from the date of termination of
employment or until the expiration of the stated term of the Option, if
earlier.
11. OTHER TERMINATION. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and its Subsidiaries terminates for
any reason other than death, Disability, Retirement, or for Cause, any
Stock Option held by such optionee may thereafter be exercised, to the
extent it was exercisable on the date of termination of employment, for
three months (or such longer period as the Committee shall specify at any
time) from the date of termination of employment or until the expiration of
the stated term of the Option, if earlier.
12. ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. To the extent that any Stock Option exceeds this
limit, it shall constitute a Non-Qualified Stock Option.
13. FORM OF SETTLEMENT. Shares of Stock issued upon exercise of a Stock
Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
2. RELOAD OPTIONS. At the discretion of the Committee, Options granted
under Section 5(a) may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
sum of (i) the number delivered to exercise the original Option and (ii) the
number withheld to satisfy tax liabilities, with an Option term equal to the
remainder of the original Option term unless the Committee otherwise determines
in the Award agreement for the original Option grant.
3. STOCK OPTIONS GRANTED TO INDEPENDENT DIRECTORS.
1. AUTOMATIC GRANT OF OPTIONS. Promptly after the closing of the
Company's initial public offering and the appointment of Independent
Directors, each Independent Director shall automatically be granted a
Non-Qualified Stock Option to purchase 3,000 shares of Stock. Each
Independent Director who is serving as Director of the Company on the fifth
business day after each annual meeting of shareholders, beginning with the
1995 annual meeting, shall automatically be granted on such day a
Non-Qualified Stock Option to acquire 2,000 shares of Stock.
2. DISCRETIONARY GRANT OF OPTIONS. The Committee, in its discretion, may
grant additional Non-Qualified Stock Options to Independent Directors. Any
such grant may vary among individual Independent Directors.
3. EXERCISE PRICE. The exercise price per share for the Stock covered by
a Stock Option granted pursuant to the first sentence of Section 5(c)(i)
shall be equal to the greater of the initial public offering price or the
Fair Market Value of the Stock on the date the Stock Option is granted. The
exercise price per share for
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the Stock covered by a Stock Option granted under this Section 5(c), other
than pursuant to the first sentence of Section 5(c)(i), shall be equal to
the Fair Market Value of the Stock on the date the Stock Option is granted.
4. EXERCISE; TERMINATION; NON-TRANSFERABILITY.
1. All Options granted under this Section 5(c) shall be immediately
exercisable. No Option issued under this Section 5(c) shall be exercisable
after the expiration of ten years from the date upon which such Option is
granted.
2. The rights of an Independent Director in an Option granted under this
Section 5(c) shall terminate six months after such Director ceases to be a
Director of the Company or the specified expiration date, if earlier;
provided, however, that if the Independent Director ceases to be a Director
for Cause, the rights shall terminate immediately on the date on which he
ceases to be a Director.
3. No Stock Option granted under this Section 5(c) shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and such Options shall be exercisable during the optionee's
lifetime only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity. Any Option granted to
an Independent Director and outstanding on the date of his death may be
exercised by the legal representative or legatee of the optionee for a
period of six months from the date of death or until the expiration of the
stated term of the option, if earlier.
4. Options granted under this Section 5(c) may be exercised only by
written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be purchased
may be made by one or more of the methods specified in Section 5(a)(v). An
optionee shall have the rights of a stockholder only as to shares acquired
upon the exercise of a Stock Option and not as to unexercised Stock
Options.
5. LIMITED TO INDEPENDENT DIRECTORS. The provisions of this Section 5(c)
shall apply only to Options granted or to be granted to Independent Directors,
and shall not be deemed to modify, limit or otherwise apply to any other
provision of this Plan or to any Option issued under this Plan to a participant
who is not an Independent Director of the Company. To the extent inconsistent
with the provisions of any other Section of this Plan, the provisions of this
Section 5(c) shall govern the rights and obligations of the Company and
Independent Directors respecting Options granted or to be granted to
Independent Directors.
6. STOCK APPRECIATION RIGHTS
1. NATURE OF STOCK APPRECIATION RIGHT. A Stock Appreciation Right is an
Award entitling the recipient to receive an amount in cash or shares of Stock
or a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price per Stock
Appreciation Right set by the Committee at the time of grant, which price shall
not be less than Fair Market Value of the Stock on the date of grant (or over
the option exercise price per share, if the Stock Appreciation Right was
granted in tandem with a Stock Option) multiplied by the number of shares of
Stock with respect to which the Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of
payment.
2. GRANT AND EXERCISE OF STOCK APPRECIATION RIGHTS. Stock Appreciation
Rights may be granted to any eligible employee of the Company or any Subsidiary
by the Committee in tandem with, or independently of, any Stock Option granted
pursuant to Section 5 of the Plan. In the case of a Stock Appreciation Right
granted in tandem with a Non-Qualified Stock Option, such Stock Appreciation
Right may be granted either at or
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after the time of the grant of such Option. In the case of a Stock Appreciation
Right granted in tandem with an Incentive Stock Option, such Stock Appreciation
Right may be granted only at the time of the grant of the Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
3. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock Appreciation
Rights shall be subject to such terms and conditions as shall be determined
from time to time by the Committee, subject to the following:
1. Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.
2. Upon exercise of a Stock Appreciation Right, the applicable portion of
any related Option shall be surrendered.
3. Stock Appreciation Rights granted in tandem with an Option shall be
transferable only when and to the extent that the underlying Option would
be transferable. Stock Appreciation Rights not granted in tandem with a
Option shall not be transferable otherwise than by will or the laws of
descent or distribution. All Stock Appreciation Rights shall be exercisable
during the participant's lifetime only by the participant or the
participant's legal representative. Notwithstanding the foregoing, the
Committee may provide in the Stock Appreciation Right agreement that the
participant may transfer, without consideration for the transfer, his Stock
Appreciation Rights to members of his immediate family (i.e., children,
grandchildren, or spouse), to trusts for the benefit of such immediate
family members and to partnerships in which such family members are the
only partners, provided that the transferee agrees in writing the Company
to be bound by all of the terms and conditions of this Plan and the
applicable Stock Appreciation Right.
7. RESTRICTED STOCK AWARDS
1. NATURE OF RESTRICTED STOCK AWARD. The Committee may grant Restricted
Stock Awards to any employee of the Company or any Subsidiary. A Restricted
Stock Award is an Award entitling the recipient to acquire, at par value or
such other higher purchase price determined by the Committee, shares of Stock
subject to such restrictions and conditions as the Committee may determine at
the time of grant ("Restricted Stock"). Conditions may be based on continuing
employment and/or achievement of pre-established performance goals and
objectives.
2. ACCEPTANCE OF AWARD. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified
purchase price, if any, of the shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Stock Award in such form as the Committee shall
determine.
3. RIGHTS AS A STOCKHOLDER. Upon complying with Section 7(b) above, a
participant shall have all the rights of a stockholder with respect to the
Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 7 and subject to such other conditions contained in
the written instrument evidencing the Restricted Stock Award. Unless the
Committee shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Stock is vested
as provided in Section 7(e) below.
4. RESTRICTIONS. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the written instrument evidencing the Restricted Stock Award. In
the event of termination of employment by the Company and its Subsidiaries for
any reason
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other than death or Disability, the Company shall have the right, at the
discretion of the Committee, to repurchase Restricted Stock with respect to
which conditions have not lapsed at their purchase price, or to require
forfeiture of such shares to the Company if acquired at no cost, from the
participant or the participant's legal representative.
5. VESTING OF RESTRICTED STOCK. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have lapsed shall no longer be Restricted Stock and
shall be deemed "vested." A participant shall also become vested in his
Restricted Stock upon his termination of employment for reason of death or
Disability. Except as may otherwise be provided by the Committee either in the
written instrument evidencing the Restricted Stock Award or, subject to Section
16 below, in writing after such written instrument is issued, a participant's
rights in any shares of Restricted Stock that have not vested shall
automatically terminate upon the participant's termination of employment with
the Company and its Subsidiaries and such shares shall be subject to the
Company's right of repurchase as provided in Section 7(d) above.
6. WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
8. UNRESTRICTED STOCK AWARDS
The Committee may, in its sole discretion, grant (or sell at par value or
such other higher purchase price determined by the Committee) an Unrestricted
Stock Award to any employee of the Company or any Subsidiary pursuant to which
such employee may receive shares of Stock free of any restrictions under the
Plan in lieu of any cash compensation to such employee or in respect of past
services or other valid consideration.
9. STOCK LOAN RIGHTS
The Committee may, in its sole discretion, authorize the grant of Stock
Loan Rights to selected key employees. Each such Stock Loan Right shall entitle
the employee to receive a loan from the Company which shall be used solely for
the purchase of shares of Stock. The terms of such loans shall be determined at
the sole discretion of the Committee. Such loans shall be secured by the shares
of Stock purchased by the employee, and may be made with or without recourse
against the employee.
10. DIVIDEND EQUIVALENT RIGHTS
1. DIVIDEND EQUIVALENT RIGHTS. A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent
Right (or other award to which it relates) if such shares had been issued to
and held by the recipient. A Dividend Equivalent Right may be granted hereunder
to any participant as a component of another Award or as a freestanding award.
The terms and conditions of Dividend Equivalent Rights shall be specified in
the grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or
shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as
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such other award. A Dividend Equivalent Right granted as a component of another
Award may also contain terms and conditions different from such other award.
2. INTEREST EQUIVALENTS. Any Award under this Plan that is settled in
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
3. TERMINATION. Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 16 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend
Equivalent Rights or interest equivalents shall automatically terminate upon
the participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.
11. DEFERRED STOCK AWARDS
1. NATURE OF DEFERRED STOCK AWARDS. A Deferred Stock Award is an Award of
phantom stock units to a participant, subject to restrictions and conditions as
the Committee may determine at the time of grant. Conditions may be based on
continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the participant executing the Deferred Stock Award
agreement. The terms and conditions of each such agreement shall be determined
by the Committee, and such terms and conditions may differ among individual
Awards and participants. At the end of the deferral period, the Deferred Stock
Award, to the extent vested, shall be paid to the participant in the form of
shares of Stock.
2. ELECTION TO RECEIVE DEFERRED STOCK AWARDS IN LIEU OF COMPENSATION. The
Committee may, in its sole discretion, permit a participant to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such participant in the form of a Deferred Stock Award. Any such election shall
be made in writing and shall be delivered to the Company no later than the date
specified by the Committee and in accordance with rules and procedures
established by the Committee. The Committee shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the Committee
deems appropriate.
3. RIGHTS AS A STOCKHOLDER. During the deferral period, a participant
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Committee may determine.
4. RESTRICTIONS. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
5. TERMINATION. Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 16 below, in writing after
the Award agreement is issued, a participant's right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
12. PERFORMANCE SHARE AWARDS
1. NATURE OF PERFORMANCE SHARE AWARDS. A Performance Share Award is an
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Committee in its sole discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals, the periods
during which performance is to be measured, and all other limitations and
conditions.
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2. RIGHTS AS A STOCKHOLDER. A participant receiving a Performance Share
Award shall have the rights of a stockholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A
participant shall be entitled to receive a stock certificate evidencing the
acquisition of shares of Stock under a Performance Share Award only upon
satisfaction of all conditions specified in the Performance Share Award
agreement (or in a performance plan adopted by the Committee).
3. TERMINATION. Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 16 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment with the Company and its Subsidiaries for any reason.
4. ACCELERATION, WAIVER, ETC. At any time prior to the participant's
termination of employment by the Company and its Subsidiaries, the Committee
may in its sole discretion accelerate, waive or, subject to Section 16, amend
any or all of the goals, restrictions or conditions applicable to a Performance
Share Award.
13. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based
Compensation" under Section 162(m) of the Code and the regulations promulgated
thereunder (a "Performance-based Award"), such Award shall comply with the
provisions set forth below:
1. PERFORMANCE CRITERIA. The performance criteria used in performance
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity,
assets, capital or investment; (ii) pre-tax or after-tax profit levels of the
Company or any Subsidiary, a division, an operating unit or a business segment
of the Company, or any combination of the foregoing; (iii) cash flow, funds
from operations or similar measure; (iv) total shareholder return; (v) changes
in the market price of the Stock; (vi) sales or market share; or (vii) earnings
per share.
2. GRANT OF PERFORMANCE-BASED AWARDS. With respect to each
Performance-based Award granted to a Covered Employee, the Committee shall
select, within the first 90 days of a Performance Cycle (or, if shorter, within
the maximum period allowed under Section 162(m) of the Code) the performance
criteria for such grant, and the achievement targets with respect to each
performance criterion (including a threshold level of performance below which
no amount will become payable with respect to such Award). Each
Performance-based Award will specify the amount payable, or the formula for
determining the amount payable, upon achievement of the various applicable
performance targets. The performance criteria established by the Committee may
be (but need not be) different for each Performance Cycle and different goals
may be applicable to Performance-based Awards to different Covered Employees.
3. PAYMENT OF PERFORMANCE-BASED AWARDS. Following the completion of a
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Committee shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount
of the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.
4. MAXIMUM AWARD PAYABLE. The maximum Performance-based Award payable to
any one Covered Employee under the Plan for a Performance Cycle is 250,000
Shares (subject to adjustment as provided in Section 3(b) hereof).
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14. TAX WITHHOLDING
1. PAYMENT BY PARTICIPANT. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the participant. The Company's obligation to deliver stock certificates to
any participant is subject to and conditioned on tax obligations being
satisfied by the participant.
2. PAYMENT IN STOCK. With the approval of the Committee, a participant may
elect to have such tax withholding obligation satisfied, in whole or in part,
by (i) authorizing the Company to withhold from shares of Stock to be issued
pursuant to any Award a number of shares with an aggregate Fair Market Value
(as of the date the withholding is effected) that would satisfy the withholding
amount due, or (ii) transferring to the Company shares of Stock owned by the
participant with an aggregate Fair Market Value (as of the date the withholding
is effected) that would satisfy the withholding amount due.
15. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
1. a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
2. an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
16. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent or reduce the exercise price of any outstanding Stock
Option or Stock Appreciation Right except as provided in Section 3(b) or 3(c).
If and to the extent determined by the Committee to be required by the Code to
ensure that Options granted hereunder qualify as Incentive Stock Options under
Section 422 of the Code or to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the Code,
if and to the extent intended to so qualify, Plan amendments shall be subject
to approval by the Company's stockholders entitled to vote at a meeting of
stockholders at which a quorum is present. Nothing in this Section 16 shall
limit the Committee's authority to take any action permitted pursuant to
Section 3(c).
17. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet
the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the provision of the foregoing sentence.
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18. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 18:
1. Each outstanding Stock Option, Stock Appreciation Right and Dividend
Equivalent Right shall automatically become fully exercisable notwithstanding
any provision to the contrary herein.
2. Restrictions and conditions on all other Awards shall automatically be
deemed waived, and the recipients of such Awards shall become entitled to
receipt of the shares of Stock subject to such Awards, except as the Committee
may otherwise specify with respect to particular Awards.
3. "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following events:
1. any "PERSON," as such term is used in Sections 13(d) and 14(d) of the
Act (other than the Company, any of its Subsidiaries, any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan of the Company or any of its Subsidiaries), together with all
"affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 40% or more of either (A) the
combined voting power of the Company's then outstanding securities having
the right to vote in an election of the Company's Board of Directors
("Voting Securities") or (B) the then outstanding shares of Stock of the
Company (in either such case other than as a result of acquisition of
securities directly from the Company); or
2. persons who, as of the date of the closing of the Company's initial
public offering, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to the closing of
the Company's initial public offering whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent
Directors shall, for purposes of this Plan, be considered an Incumbent
Director; or
3. the stockholders of the Company shall approve (A) any consolidation or
merger of the Company or any Subsidiary where the shareholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate 50% of the voting shares of the
corporation issuing cash or securities in the consolidation or merger (or
of its ultimate parent corporation, if any), (B) any sale, lease, exchange
or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company or (C) any plan or proposal
for the liquidation or dissolution of the Company;
Notwithstanding the foregoing, a "Change of Control" shall not be deemed
to have occurred for purposes of the foregoing clause (i) solely as the result
of an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Stock beneficially owned by any person to 40%
or more of the shares of Stock then outstanding or (y) the proportionate voting
power represented by the Voting Securities beneficially owned by any person to
40% or more of the combined voting power of all then outstanding Voting
Securities; provided, however, that if any person referred to in clause (x) or
(y) of this sentence shall thereafter become the beneficial owner of any
additional Stocks or other Voting Securities (other than pursuant to a share
split, stock dividend, or similar transaction), then a "CHANGE OF CONTROL"
shall be deemed to have occurred for purposes of the foregoing clause (i).
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19. GENERAL PROVISIONS
1. NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
2. DELIVERY OF STOCK CERTIFICATES. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
3. OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this amended and restated Plan shall prevent the Board from
adopting other or additional compensation arrangements, including trusts; and
such arrangements may be either generally applicable or applicable only in
specific cases. The adoption of this amended and restated Plan and the grant of
Awards do not confer upon any employee any right to continued employment with
the Company or any Subsidiary.
4. TRADING POLICY RESTRICTIONS. Option exercises and other Awards under
the Plan shall be subject to the Company's insider trading policy, as in effect
from time to time.
20. EFFECTIVE DATE OF PLAN
This Plan, as amended and restated in its entirety as set forth herein,
shall become effective upon approval by the holders of a majority of the votes
cast at a meeting of stockholders at which a quorum is present. Subject to such
approval by the stockholders, and to the requirement that no Stock may be
issued hereunder prior to such approval, Stock Options and other Awards may be
granted hereunder on and after adoption of this amended and restated Plan by
the Board.
21. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, Maryland law, applied without regard to
conflict of law principles.
DATE ORIGINAL PLAN APPROVED BY
BOARD OF DIRECTORS AND STOCKHOLDERS:
January 13, 1994
DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: December 14, 1998
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APPENDIX
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS OF SUMMIT PROPERTIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby appoints Michael L. Schwarz and Michael G. Malone,
and each of them acting separately, proxies, each with full power of
substitution, for and in the name of the undersigned at the Annual Meeting of
Stockholders of Summit Properties Inc. to be held on May 11, 1999 and at any
and all adjournments and postponements thereof, to vote all shares of the
capital stock of Summit Properties Inc. held of record by the undersigned on
March 1, 1999, as if the undersigned were present and voting shares. The
undersigned hereby revokes any proxy previously given in connection with such
meeting and acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement and the 1998 Annual Report to Stockholders.
1. To elect two Class II directors to hold office until the 2002 annual meeting
of stockholders and until their successors are duly elected and qualified.
Nominees:
Nelson Schwab, III
[ ] FOR [ ] WITHHELD Steven R. LeBlanc [ ] FOR [ ] WITHHELD
2. Approval of the 1994 Stock Option and Incentive Plan (the "1994 Stock
Plan"), as amended and restated
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and act upon any matters incidental to the foregoing or any
matters which may properly come before the Annual Meeting or any adjournments
and postponements thereof.
(CONTINUED ON OTHER SIDE)
<PAGE>
The shares represented by this Proxy, when properly executed, will be voted in
the manner directed. IN THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED
FOR EACH NOMINEE NAMED IN PROPOSAL 1 ABOVE, FOR APPROVAL OF THE 1994 STOCK PLAN
(AS AMENDED AND RESTATED) AND IN ACCORDANCE WITH THE PROXIES' DISCRETION ON
SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
DATED ---------------------------- ,1999
-------------------------------------
(Signature)
-------------------------------------
(Signature if held jointly)
(Please date this Proxy and sign
exactly as your name appears hereon.
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If there
is more than one trustee, all should
sign. All joint owners should sign.)
I PLAN TO ATTEND THE MEETING [ ]
