<PAGE> 1
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:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
BAY APARTMENT COMMUNITIES, INC.
(Name of Registrant as Specified In Its Charter)
BAY APARTMENT COMMUNITIES, INC.
(Name of Person(s) Filing Proxy Statement)
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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
BAY APARTMENT COMMUNITIES, INC.
4340 STEVENS CREEK BOULEVARD, SUITE 275
SAN JOSE, CALIFORNIA 95129
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1998
----------------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Bay Apartment Communities, Inc. (the "Company") will be
held on Friday, May 8, 1998 at 10:00 a.m. at the offices of the Company, 4340
Stevens Creek Boulevard, Suite 275, San Jose, California, for the following
purposes:
1. To elect the following directors to serve until the 1999 Annual
Meeting of Stockholders and until their respective successors are
duly elected and qualified: Gilbert M. Meyer, Max L. Gardner, Bruce
A. Choate, John J. Healy, Jr., Brenda J. Mixson and Thomas H.
Nielsen.
2. To ratify the 1994 Stock Incentive Plan, as amended and restated.
3. To approve certain amendments to the Company's Articles of
Incorporation relating to the Series A Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock"), of the Company.
4. To ratify the appointment of Coopers & Lybrand L.L.P. to serve as
independent accountants for the Company for the fiscal year ending
December 31, 1998.
5. To transact such other business that may be properly brought before
the Annual Meeting and at any adjournments 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.
The Board of Directors has fixed the close of business on March 26, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments thereof. Only stockholders of
record of the Company's common stock, par value $0.01 per share (the "Common
Stock"), and, with respect to Proposal 3 only, the Series A Preferred Stock, 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 thereof.
You are requested to fill in and sign the enclosed Proxy Card, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy delivered by a holder of Common
Stock may be revoked by a writing delivered to the Company stating that the
proxy is revoked or by delivery of a later dated proxy. Stockholders of record
of the Company's Common Stock 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
Jeffrey B. Van Horn
Secretary
San Jose, California
March 30, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE 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 YOUR SHARES OF COMMON
STOCK IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY
CARD.
<PAGE> 3
BAY APARTMENT COMMUNITIES, INC.
4340 STEVENS CREEK BOULEVARD, SUITE 275
SAN JOSE, CALIFORNIA 95129
---------------
PROXY STATEMENT
---------------
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1998
March 30, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bay Apartment Communities, Inc. (the
"Company") for use at the 1998 Annual Meeting of Stockholders of the Company to
be held on Friday, May 8, 1998 and at any adjournments thereof (the "Annual
Meeting"). At the Annual Meeting, stockholders will be asked to (i) vote upon
the election of six directors of the Company, (ii) ratify the 1994 Stock
Incentive Plan, as amended and restated (the "Stock Incentive Plan"), (iii)
approve certain amendments to the Company's Articles of Incorporation (the
"Charter") relating to the Series A Preferred Stock, par value $.01 per share
(the "Series A Preferred Stock"), of the Company, (iv) ratify the appointment of
Coopers & Lybrand L.L.P. to serve as independent accountants for the Company for
the fiscal year ending December 31, 1998, and (v) 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 30, 1998. The
Board of Directors has fixed the close of business on March 26, 1998 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 share (the "Common Stock"), and,
with respect to Proposal 3 only, the Series A Preferred 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 shares of Common
Stock and 2,308,800 shares of Series A Preferred Stock outstanding and entitled
to vote at the Annual Meeting. Holders of Common Stock, and, with respect to
Proposal 3 only, Series A Preferred Stock, outstanding as of the close of
business on the Record Date will be entitled to one vote for each share held.
The presence, in person or by proxy, of holders of a majority of all of the
votes entitled to be cast is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. The Company will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as not voting for purposes of
determining the approval of any matter submitted to the stockholders for a vote.
If a broker indicates on the enclosed proxy or its substitute that it does not
have discretionary voting authority as to certain shares to vote on a particular
matter ("broker non-votes"), those shares will be treated as abstentions with
respect to that matter.
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 BUT NOT
MARKED AS TO A PARTICULAR ITEM, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE
SIX NOMINEES FOR DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT, FOR THE
RATIFICATION OF THE STOCK INCENTIVE PLAN, FOR THE AMENDMENTS TO THE CHARTER
RELATING TO THE SERIES A PREFERRED STOCK, AND FOR THE APPOINTMENT OF THE
DESIGNATED INDEPENDENT ACCOUNTANTS. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER
THAN THOSE SET FORTH IN THE 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.
<PAGE> 4
A stockholder of record of the Company's Common Stock 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 of the
Company's Common Stock 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 1997 Annual Report, including financial statements for the
fiscal year ended December 31, 1997, 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 filed
with the Securities and Exchange Commission on Form 10-K may be obtained by
writing to Bay Apartment Communities, Inc., 4340 Stevens Creek Boulevard, Suite
275, San Jose, California 95129, Attention: Chief Financial Officer.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of six members. At the
Annual Meeting, six directors will be elected to serve until the 1999 Annual
Meeting and until their successors are duly elected and qualified. The Board of
Directors has nominated Gilbert M. Meyer, Max L. Gardner, Bruce A. Choate, John
J. Healy, Jr., Brenda J. Mixson and Thomas H. Nielsen to serve as directors (the
"Nominees"). Each of the Nominees currently serves as a director of the Company.
The Board of Directors anticipates that each of the Nominees, if elected, will
serve 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 Annual Meetings" for a summary of these
requirements.
REQUIRED VOTE AND RECOMMENDATION
Only stockholders of record of the Company's Common Stock are entitled to
vote on this proposal. Proxies will be voted for Proposal 1 unless contrary
instructions are set forth on the proxy. This proposal requires the affirmative
vote of a majority of all of the votes cast on the matter. Accordingly,
abstentions and broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL OF THE
NOMINEES.
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<PAGE> 5
INFORMATION REGARDING NOMINEES AND EXECUTIVE OFFICERS
The following table and biographical descriptions set forth certain
information with respect to the six Nominees for election as directors at the
Annual Meeting and the executive officers who are not directors, based on
information furnished to the Company by each director and executive officer.
There is no family relationship between any director or executive officer of the
Company. The following information is as of February 23, 1998, unless otherwise
specified.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
DIRECTOR OWNERSHIP OF OF
NAME OF NOMINEE AGE SINCE COMMON STOCK (1) CLASS
- --------------- --- -------- ----------------- -------
<S> <C> <C> <C> <C>
Gilbert M. Meyer................................ 53 1978 1,112,605(2) 4.22%
Max L. Gardner.................................. 46 1996 35,579(3) *
Bruce A. Choate................................. 50 1994 11,000(4) *
John J. Healy, Jr............................... 51 1996 8,000(5) *
Brenda J. Mixson................................ 45 1994 12,000(4) *
Thomas H. Nielsen............................... 67 1994 21,697(4)(6) *
</TABLE>
- ---------------
* Less than one percent.
(1) Except as otherwise noted, each individual in this table has sole voting
and investment power over the shares listed.
(2) Includes (i) 190,000 shares issuable upon the exercise of stock options
that have vested or will vest by April 24, 1998 and (ii) 14,492 shares
issuable upon Mr. Meyer's termination of employment with the Company
pursuant to an election to defer compensation in accordance with the terms
of the Stock Incentive Plan.
(3) Includes (i) 25,000 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998 and (ii) 320 shares issuable
upon Mr. Gardner's termination of employment with the Company pursuant to
an election to defer compensation in accordance with the terms of the Stock
Incentive Plan.
(4) Includes 11,000 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998.
(5) Includes 5,000 shares issuable upon the exercise of stock options that have
vested or will vest by April 24, 1998.
(6) Includes 697 shares issuable upon Mr. Nielsen's cessation as a director of
the Company pursuant to an election to defer the receipt of directors fees
in accordance with the terms of the Stock Incentive Plan. Mr. Nielsen is a
co-trustee of a trust that holds 2,000 shares of Common Stock. He shares
voting and investment power over the shares held by the trust with his wife
and with the U.S. Trust Company of California pursuant to an investment
management agreement.
Nominees for Election as Directors
Gilbert M. Meyer is the founder, Chairman of the Board of Directors,
President and Chief Executive Officer of the Company and, since 1978, has been
continuously involved with the Company as an executive officer, director and
stockholder. Mr. Meyer also was the founder and stockholder of certain
affiliates of the Company. Prior to founding the Company, Mr. Meyer was Chief
Financial Officer for BAS Homes and prior to that was a Vice President
responsible for real estate workouts for Boise Cascade Credit Corporation. Mr.
Meyer is a licensed Certified Public Accountant and General Contractor, and
holds a B.A. degree from St. Mary's College of California and an M.B.A. degree
from the University of California, Berkeley.
Max L. Gardner has been Executive Vice President and Chief Operating
Officer of the Company since December 1995 and has served as a director of the
Company since May 1996. From 1988 to 1995, Mr. Gardner served as President and
Chief Executive Officer of West RS, Inc. (d/b/a Trammell Crow
3
<PAGE> 6
Residential Services), a company which specializes in the development,
construction, finance and management of residential apartment properties. Mr.
Gardner graduated from Duke University with a degree in Political Science, and
he received a Master of Professional Accountancy degree from Georgia State
University.
Bruce A. Choate is a Director of the Company and has been Chief Financial
Officer of Watson Land Company, a privately-held real estate investment trust
("REIT") in Carson, California since 1991. Prior to joining Watson Land Company,
Mr. Choate was employed by Bixby Ranch Company, a privately-held real estate
investment company in Seal Beach, California as Senior Vice President and Chief
Financial Officer. Mr. Choate graduated from the University of California, Los
Angeles and attended the Graduate School of Business at the University of
Southern California.
John J. Healy, Jr. has been a Director of the Company since May 1996, and
is the founder and President of Hyde Street Holdings, Inc. From 1988 to 1996,
Mr. Healy was a founder and a managing principal of the Hanford/Healy Companies,
a national commercial real estate services company acquired by General Motors
Acceptance Corporation--CM in September 1996. Mr. Healy was also a managing
principal of Hanford/Healy Appraisal Company, a national real estate appraisal
and consulting firm, and a principal of Hanford/Healy Asset Management Company,
a national real estate asset management firm. Mr. Healy graduated from Hofstra
University with a B.B.A. in Finance, Investment and Banking and a Master of
Business Administration.
Brenda J. Mixson is a Director of the Company and has been Chief Investment
Officer and Managing Director of Prime Capital Holding since December 1997. From
February 1996 until December 1997, Ms. Mixson was a Managing Director of the
Emerging Markets, Fixed Income Department for ING Barings (U.S.) Securities,
Inc., a member of the ING Group. Ms. Mixson previously served as Vice
President--Real Estate Finance of ING Capital Corporation from March 1995 to
February 1996. She served as an Executive Vice President and Chief Operating
Officer of Reichmann International from April 1994 to March 1995. From 1989 to
1994, she was an Executive Vice President and Managing Director and a Regional
Manager, Northeast Region, of Travelers Realty Investment Company. Prior to
joining Travelers Realty Investment Company, Ms. Mixson was employed by Chemical
Bank as a Vice President and Regional Manager. Ms. Mixson graduated from the
University of Minnesota with a B.S. degree in Economics.
Thomas H. Nielsen is a Director of the Company and has been a self-employed
consultant for large-scale real estate development projects since 1991. In 1993,
Mr. Nielsen was named a Managing Director of the Orange County Office of U.S.
Trust of California, N.A., and he held that position until July 1995, at which
time he was named Consulting Director. He also served as Chief Executive Officer
of the Orange County Performing Arts Center from 1993 to 1995. From 1978 to
1990, Mr. Nielsen served in various positions for The Irvine Company, a
privately-held real estate development company, including President and Vice
Chairman, and he presently serves as a Director. Mr. Nielsen holds a B.S. degree
in Civil Engineering from the University of Washington and an M.B.A. degree from
Stanford University.
Executive Officers
Jeffrey B. Van Horn has been Vice President, Chief Financial Officer and
Treasurer of the Company since June 1996, and Secretary of the Company since
September, 1997. Prior to joining the Company, Mr. Van Horn was a partner in the
real estate services group with the accounting firm Arthur Andersen LLP. Mr. Van
Horn joined Arthur Andersen in June 1982, was admitted as a partner in September
1995 and has worked with a wide variety of west coast REITs and real estate
companies. He has been involved in a number of initial public offerings, mergers
and acquisitions and other audit, business and tax advisory services. In
addition, Mr. Van Horn was a member of Arthur Andersen's national REIT tax
specialty team. Mr. Van Horn earned a B.A. degree in Accounting from California
State University--Stanislaus and is a licensed Certified Public Accountant.
Morton L. Newman has been Vice President--Construction of the Company since
1985. In that capacity, Mr. Newman has managed the design, construction, and
warranty services for the apartments and single-family homes that the Company
and its affiliates have built during that period. Previously, Mr. Newman
4
<PAGE> 7
was President of Newman Construction Company and has over 30 years experience in
all aspects of residential and commercial construction. Mr. Newman is a graduate
of the University of Pennsylvania and is a registered Civil Engineer in
Pennsylvania and California.
Daniel E. Murphy has been Vice President--Northern California of the
Company since December 1997. In that capacity, Mr. Murphy is responsible for the
acquisition, development and construction activities of the Company for the
Northern California region. From January 1996 to December 1997, Mr. Murphy
served as Vice President--Development of the Company, and from October 1994
through January 1996 he served as the Company's Director of Development. From
1992 to 1994, Mr. Murphy worked for Landtech Investment Corporation and provided
real estate consulting services. Between 1990 and 1991, Mr. Murphy served as
Vice President--Development of Rosewood Property Company. Mr. Murphy also
previously completed various development projects with Prometheus Development
Company as Project Manager. Mr. Murphy received a B.S. degree in Civil
Engineering from Cleveland State University and an M.S. degree in Civil
Engineering/Construction Management from Stanford University.
John H. Pringle has been Vice President--Property Operations since April
1997. From March 1987 through March 1997, Mr. Pringle was employed by Maxim
Property Management (formerly known as Prometheus Development Company) and
served as Senior Vice President, General Manager. Mr. Pringle graduated from
Colorado State University with a B.S. degree in Economics.
Debra Lynn Shotwell has been Vice President--Human Resources of the Company
since July 1995. From July 1990 to June 1995, she was the Director--Corporate
Human Resources of PacifiCare Health Systems, Inc. Ms. Shotwell graduated from
California State University--Sacramento with a degree in Business
Administration.
BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors. The Company is currently managed by a six-member Board
of Directors, a majority of whom are independent of the Company's management.
The Board of Directors met six times in person and held 13 telephonic meetings
during 1997. Each of the directors attended at least 75% of the total number of
meetings of the Board of Directors and meetings of the committees of the Board
of Directors that he or she was eligible to attend.
Audit Committee. The Board of Directors has established an Audit Committee
consisting of Bruce A. Choate, Brenda J. Mixson, Thomas H. Nielsen and John J.
Healy, Jr. The Audit Committee makes recommendations concerning the engagement
of independent public accountants, reviews the plans and results of the audit
engagement with the independent public accountants, 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 1997.
Compensation Committee. The Company's 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 Bruce A. Choate,
Brenda J. Mixson, Thomas H. Nielsen and John J. Healy, 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 Stock
Incentive Plan to the employee directors, management and other employees of the
Company and its subsidiaries. The Compensation Committee met two times during
1997.
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the function of such a committee.
DIRECTOR COMPENSATION
Directors of the Company who are also employees receive no additional
compensation for their services as directors. Each non-employee director of the
Company received an annual director's fee of $18,000 in fiscal year 1997. During
1998, each non-employee director of the Company will receive an annual
director's fee of
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<PAGE> 8
$18,000. Each non-employee director also receives $1,000 for each regular
quarterly meeting of the Board of Directors attended, $1,000 for each special
meeting of the Board of Directors attended, $500 for participating in each
special telephonic meeting of the Board of Directors and $1,000 for each
committee meeting attended, other than committee meetings that are held on the
same date as a regular or special meeting for which a fee is already paid. Under
the Stock Incentive Plan, on the fifth business day following each annual
meeting of stockholders, each of the Company's non-employee directors
automatically receives options to purchase 5,000 shares of Common Stock at the
last reported sale price of the Common Stock on the New York Stock Exchange (the
"NYSE") on the date of grant. In addition, on January 30, 1998 the Board of
Directors approved a discretionary grant of options to purchase 5,000 shares of
Common Stock to each non-employee director. These options are subject to the
same conditions and vesting provisions, and shall be granted on the same date,
as those options that will be granted automatically to the non-employee
directors on the fifth business day following the Annual Meeting. All of such
stock options granted to non-employee directors become exercisable one year
after the date of grant.
EXECUTIVE COMPENSATION
The following table sets forth, for each of the Company's last three fiscal
years, the annual compensation awarded to the Company's chief executive officer,
six of its other executive officers, and one former executive officer during
1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------------------
ANNUAL SECURITIES
COMPENSATION UNDER- RESTRICTED
------------------------------ LYING STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS(#)(3) AWARDS($)(4) COMPENSATION($)(5)
- -------------------------------------- ---- ------------ -------- ------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Gilbert M. Meyer...................... 1997 $294,455(6) $250,287 100,000 $379,375(7) $ 1,000
Chairman of the Board, President 1996 244,231 183,173 100,000 727,500(8) 1,000
and Chief Executive Officer 1995 194,900 97,400 40,000 0 1,000
Max L. Gardner(9)..................... 1997 216,047(10) 83,539 10,000 37,938(11) 1,250
Executive Vice President and 1996 209,427 150,000 20,000 36,375(12) 1,250
Chief Operating Officer 1995 11,500 5,800 100,000 110,000(13) 0
Jeffrey B. Van Horn(14)............... 1997 192,246 83,811 50,000 379,375(7) 31,939(15)
Vice President and 1996 83,823 36,190 45,000 61,750(16) 25,099(17)
Chief Financial Officer
Geoffrey L. Baker(18)................. 1997 119,250 0 0 0 48,827(19)
Vice President and Chief 1996 149,846 86,308 20,000 163,250(20) 1,000
Development and Acquisitions 1995 134,000 46,900 10,000 0 1,000
Officer
Morton L. Newman...................... 1997 150,794 50,893 15,000 37,938(11) 1,000
Vice President -- Construction 1996 141,365 87,788 10,000 36,375(12) 1,000
1995 135,800 61,100 5,000 0 1,000
Daniel E. Murphy...................... 1997 152,193(21) 48,244 20,000 37,938(11) 1,250
Vice President -- Development 1996 128,346 74,321 30,000 36,375(12) 1,250
1995 93,998 45,000 10,000 0 0
John H. Pringle(22)................... 1997 120,435 37,262 50,000(23) 34,250(24) 0
Vice President --
Property Operations
Debra Lynn Shotwell(9)................ 1997 126,316 42,111 10,000 37,938(11) 937
Vice President -- 1996 118,919 48,273 5,000 18,188(25) 936
Human Resources 1995 52,300 14,900 25,000 0 0
</TABLE>
6
<PAGE> 9
- ------------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Bonuses may be paid under the Company's Incentive Bonus Plan in the
discretion of the Compensation Committee to executive officers, subject to
certain performance-based criteria. For a general description of the
Incentive Bonus Plan, see "Compensation Committee Report on Executive
Compensation."
(3) Unless otherwise noted, the Compensation Committee authorized the grant of
all of the options to purchase Common Stock listed for 1997 on January 30,
1998.
(4) During the period from March 1994 through December 31, 1997, 37,500 shares
of Restricted Stock were granted by the Company to the Named Executive
Officers. Based on the last reported sale price of the Company's Common
Stock on the NYSE on December 31, 1997 of $39 per share, the aggregate
dollar value of these 37,500 shares of Restricted Stock was $1,462,500.
(5) Unless otherwise noted, consists of amounts contributed by the Company to
the Named Executive Officer's 401(k) account.
(6) Includes $265,493 of compensation deferred pursuant to the Stock Incentive
Plan. Under the terms of the Stock Incentive Plan, such deferred
compensation will be payable in the form of Common Stock upon Mr. Meyer's
termination of employment. See "Summary of Stock Incentive
Plan--Unrestricted Stock."
(7) Consists of 10,000 shares of Restricted Stock awarded as of January 30,
1998, valued at $37.9375 per share. These shares vest in five equal annual
installments beginning on January 30, 1999. Dividends are payable on these
shares.
(8) Consists of 20,000 shares of Restricted Stock awarded as of February 3,
1997, valued at $36.375 per share. These shares vest in five equal annual
installments beginning on February 3, 1998. Dividends are payable on these
shares.
(9) The following Named Executive Officers began employment in 1995: Max L.
Gardner, December 4, 1995; Debra Lynn Shotwell, July 13, 1995.
(10) Includes $10,058 of compensation deferred pursuant to the Stock Incentive
Plan. Under the terms of the Stock Incentive Plan, such deferred
compensation will be payable in the form of Common Stock upon Mr. Gardner's
termination of employment. See "Summary of Stock Incentive
Plan--Unrestricted Stock."
(11) Consists of 1,000 shares of Restricted Stock awarded as of January 30,
1998, valued at $37.9375 per share. These shares vest in five equal annual
installments beginning on January 30, 1999. Dividends are payable on these
shares.
(12) Consists of 1,000 shares of Restricted Stock awarded as of February 3,
1997, valued at $36.375 per share. These shares vest in five equal annual
installments beginning on February 3, 1998. Dividends are payable on these
shares.
(13) Consists of 5,000 shares of Restricted Stock awarded on December 4, 1995,
valued at $22.00 per share. These shares vest in five equal annual
installments beginning on December 4, 1996. Dividends are payable on these
shares.
(14) Mr. Van Horn began employment on June 19, 1996.
(15) Includes $7,539 of imputed interest income derived from Mr. Van Horn's
interest-free loan from the Company and $24,400 of imputed income resulting
from the forgiveness by the Company of one-fifth of the outstanding
principal amount of such loan. For a more detailed discussion of the loan,
see "Certain Relationships and Related Transactions--Indebtedness of
Management."
(16) Consists of (i) 1,000 shares of Restricted Stock awarded on August 6, 1996,
valued at $25.375 per share, which vest in five equal annual installments
beginning on June 19, 1997, and (ii) 1,000 shares of Restricted Stock
awarded as of February 3, 1997, valued at $36.375 per share, which vest in
five equal annual installments beginning on February 3, 1998. Dividends are
payable on these shares.
(17) Includes $20,682 reimbursed to Mr. Van Horn for all moving-related expenses
incurred in connection with his hiring in June 1996 and $3,578 of imputed
interest income derived from Mr. Van Horn's
7
<PAGE> 10
interest-free loan from the Company. For a more detailed discussion of the
loan, see "Certain Relationships and Related Transactions--Indebtedness of
Management."
(18) Mr. Baker resigned from all of his positions with the Company, including
director, effective as of September 5, 1997.
(19) Includes $47,827 of severance payments made pursuant to a Severance
Agreement and Mutual General Release between Mr. Baker and the Company
dated as July 31, 1997 (the "Baker Severance Agreement").
(20) Consists of (i) 5,000 shares of Restricted Stock awarded on August 6, 1996,
valued at $25.375 per share, which vest in five equal annual installments
beginning on January 26, 1997, and (ii) 1,000 shares of Restricted Stock
awarded as of February 3, 1997, valued at $36.375 per share, which vest in
five equal annual installments beginning on February 3, 1998. Pursuant to
the terms of the Baker Severance Agreement, all of these shares of
Restricted Stock shall continue to vest in accordance with the foregoing
schedules through and including March 10, 1998 and shall cease vesting
thereafter. Dividends are payable on these shares.
(21) Includes $21,121 of compensation deferred pursuant to the Stock Incentive
Plan. Under the terms of the Stock Incentive Plan, such deferred
compensation will be payable in the form of Common Stock upon Mr. Murphy's
termination of employment. See "Summary of Stock Incentive
Plan--Unrestricted Stock."
(22) Mr. Pringle began employment on April 16, 1997.
(23) These options to purchase Common Stock were granted on April 16, 1997.
(24) Consists of 1,000 shares of Restricted Stock awarded as of May 1, 1997,
valued at $34.25 per share. These shares vest in five equal annual
installments beginning on May 1, 1997. Dividends are payable on these
shares.
(25) Consists of 500 shares of Restricted Stock awarded as of February 3, 1997,
valued at $36.375 per share. These shares vest in five equal annual
installments beginning on February 3, 1998. Dividends are payable on these
shares.
OPTION GRANTS WITH RESPECT TO FISCAL YEAR 1997
Option Grants with respect to Fiscal Year 1997. The following table sets
forth the options granted with respect to the fiscal year ended December 31,
1997 to the Company's Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF
SHARES TOTAL OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES FOR EXERCISE FOR OPTION TERM
GRANTED FISCAL YEAR PRICE EXPIRATION -----------------------
(#)(1) 1997(2) ($/SH) DATE 5%($) 10%($)
---------- ------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gilbert M. Meyer.............. 100,000 29.20% $37.9375 1/30/08 $2,385,871 $6,046,261
Max L. Gardner................ 10,000 2.92% 37.9375 1/30/08 238,588 604,627
Jeffrey B. Van Horn........... 50,000 14.60% 37.9375 1/30/08 1,192,936 3,023,131
Geoffrey L. Baker............. 0 0% N/A N/A 0 0
Morton L. Newman.............. 15,000 4.38% 37.9375 1/30/08 357,881 906,940
Daniel E. Murphy.............. 20,000 5.84% 37.9375 1/30/08 477,175 1,209,253
John H. Pringle............... 50,000(3) 14.60% 36.1250 4/16/07 1,135,942 2,878,698
Debra Lynn Shotwell........... 10,000 2.92% 37.9375 1/30/08 238,588 604,627
</TABLE>
- ---------------
(1) All of these options will vest in four equal installments on the first,
second, third and fourth anniversaries of the date of grant. Unless
otherwise noted, the date of grant of all of these options was January 30,
1998. This chart excludes options granted on January 24, 1997 with respect
to the fiscal year ended December 31, 1996 in the following amounts: Mr.
Meyer, 100,000; Mr. Gardner, 20,000; Mr. Van Horn,
8
<PAGE> 11
20,000; Mr. Baker, 20,000; Mr. Newman, 10,000; Mr. Murphy, 10,000; and Ms.
Shotwell, 5,000. The grant of those options was disclosed in the Company's 1997
Proxy Statement.
(2) A total of 342,500 options were granted to employees of the Company with
respect to the fiscal year ended December 31, 1997.
(3) These options were granted to Mr. Pringle on April 16, 1997.
Option Exercises and Year-End Holdings. The following table sets forth the
aggregate number of options exercised in 1997 and the value of options held as
of December 31, 1997 by the Company's Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND
FISCAL YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED ON YEAR-END YEAR-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED($) UNEXERCISABLE(#) UNEXERCISABLE($)(1)
- -------------------------------- ----------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Gilbert M. Meyer................ 0 0 115,000/185,000 $2,200,000/1,800,000
Max L. Gardner.................. 0 0 50,000/70,000 950,000/997,500
Jeffrey B. Van Horn............. 0 0 6,250/38,750 85,157/302,969
Geoffrey L. Baker............... 0 0 50,000/50,000 957,813/608,438
Morton L. Newman................ 1,311 22,287(2) 23,689/25,000 453,998/304,219
Daniel E. Murphy................ 0 0 12,500/27,500 159,063/283,438
John H. Pringle................. 0 0 0/50,000 0/143,750
Debra Lynn Shotwell............. 0 0 6,250/17,500 121,094/254,063
</TABLE>
- ---------------
(1) Based on the last reported sale price of the Company's Common Stock on the
NYSE on December 31, 1997 of $39 per share.
(2) Based on the last reported sale price of the Company's Common Stock on the
NYSE on June 30, 1997, the date of exercise, of $37 per share.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement (each an "Employment
Agreement") with each of Messrs. Meyer, Gardner, Van Horn and Newman. The
Employment Agreements of Messrs. Meyer and Newman are automatically renewed on
each anniversary of the closing of the Company's initial public offering unless
otherwise terminated by the Company or the respective employee, and the
Employment Agreements of Messrs. Gardner and Van Horn terminate on the third
anniversary of the date of such agreement. Pursuant to their respective
Employment Agreements, as amended, Mr. Meyer serves as President of the Company,
Mr. Gardner serves as Executive Vice President and Chief Operating Officer, Mr.
Van Horn serves as Vice President and Chief Financial Officer and Mr. Newman
serves as Vice President--Construction. The Employment Agreements provide for
base salaries in the amounts of $350,000, $225,000, $250,000 and $175,000,
respectively. The Employment Agreements of Messrs. Meyer and Newman provide for
base salary increases based on increases in the consumer price index, and all of
the Employment Agreements provide for base salary increases in the discretion of
the Compensation Committee. In addition, Messrs. Meyer, Gardner, Van Horn and
Newman are eligible for additional compensation in the form of bonuses under the
Company's Incentive Bonus Plan (the "Incentive Bonus Plan").
Under the Employment Agreements, each of the officers has agreed to devote
substantially all of his working time to the business and affairs of the
Company. Mr. Meyer's Employment Agreement provides that during the term of
employment, and for two years thereafter in the event that he is terminated for
cause or voluntarily terminates his employment other than for cause, he will be
prohibited from competing directly or indirectly with the Company with respect
to any development or acquisition project undertaken or being
9
<PAGE> 12
considered by the Company at the time of termination or actively engaging in the
development, construction or management of multifamily real estate property,
without the prior written consent of the Board of Directors.
If the employment of Mr. Meyer is terminated without cause after a "change
in control," or upon the occurrence of certain other events, Mr. Meyer will be
entitled to receive a severance amount (the "Meyer Severance Amount") equal to
three times the sum of his base salary and his bonus for the preceding year. In
the event that the Meyer Severance Amount payable exceeds three times his
average total annual compensation during the preceding five years, the excess of
such payment would constitute an "excess golden parachute payment" under the
Internal Revenue Code of 1986, as amended (the "Code"), and would not be
deductible by the Company. If the employment of either Mr. Gardner or Mr. Van
Horn is terminated without cause within one year after a "change in control" or
upon the occurrence of certain other events, such officer will be entitled to
receive a severance amount equal to his base salary for the preceding year.
BAKER SEVERANCE AGREEMENT
On July 31, 1997, the Company entered into a Severance Agreement and Mutual
General Release with Geoffrey L. Baker (the "Baker Severance Agreement"), which
provides for certain severance benefits upon the termination of his employment
effective as of September 5, 1997. Under the Baker Severance Agreement, the
Company agreed to continue to pay Mr. Baker as severance his base salary at the
rate of $165,000 per year (prorated) through and including March 10, 1998 in
accordance with the usual and customary payroll practices of the Company. Mr.
Baker is not entitled to any additional monetary compensation, including any
bonus compensation, but is entitled to continued coverage under the Company's
existing health, dental, life and disability insurance plans, the Company's
401(k) plan and all other benefit plans maintained by the Company through and
including March 10, 1998. In addition, for purposes of the Stock Incentive Plan,
Mr. Baker's employment will be treated as terminated on March 10, 1998.
Accordingly, all outstanding stock options and shares of restricted stock
granted to Mr. Baker will continue to vest through and including March 10, 1998.
Finally, Mr. Baker has agreed to cooperate with the Company through March 10,
1998 in transitioning his duties to other Company employees. In connection with
these duties, Mr. Baker has agreed to devote approximately 80 hours per month
and has agreed to travel to the Company's offices upon reasonable notice at the
Company's request.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Objectives of Executive Compensation. The Company's executive compensation
program is intended to attract, retain and reward experienced, highly motivated
executives who are capable of leading the Company effectively and continuing its
growth and profitability. The Company's objective is to utilize a combination of
cash and equity-based compensation to provide appropriate incentives for
executives while aligning their interests with those of the Company's
stockholders.
The Company compensates its executive officers through a combination of
annual base salary, annual cash bonuses and awards under the Stock Incentive
Plan. The Company's goal is to provide total compensation to its executive
officers which is competitive with those levels of total compensation paid in
the REIT industry for companies with similar property portfolios and of similar
size, makeup and performance. For purposes of evaluating relative executive
compensation amounts, the Compensation Committee reviewed the total compensation
paid by comparable REITs that were selected based primarily on financial
performance, property type, geographical location and market capitalization.
The Company's compensation program has three principal elements: base
salary, performance incentive bonuses under the Incentive Bonus Plan and awards
under the Stock Incentive Plan.
Base Salary. The Company establishes base salary levels for its key
executives relative to base salary levels for key executives of comparable
REITs. For fiscal year 1997, base salaries of the Company's President,
Chief Operating Officer and Chief Financial Officer were set at rates that
the Company believes were generally lower than the median base salaries
earned by officers holding similar positions within other comparable REITs.
This is consistent with the Company's policy to place greater emphasis on
performance-related incentive compensation, such as bonuses and stock
options.
10
<PAGE> 13
Performance Incentive Bonus. Under the Company's Incentive Bonus Plan,
the Compensation Committee, which is composed of the four non-employee
directors whose names appear below this report, may award annual cash
bonuses to executive officers and certain other members of management for
the achievement of specified performance goals for the Company and the
individual. The Incentive Bonus Plan rewards executives for their
performance during the past fiscal year based on increases in Funds from
Operations ("FFO") per share, as well as officer-specific performance
objectives, such as involvement in property acquisitions and developments
and assisting in efforts to raise debt or equity financing for the Company.
Stock Incentive Plan Awards. Stock options and restricted stock
granted under the Company's Stock Incentive Plan are designed to provide
long-term performance incentives and rewards tied to the price of the
Company's Common Stock and, generally, will vest ratably over a period of
four years. Stock options are granted primarily based on the performance
criteria established for granting performance incentive bonuses under the
Incentive Bonus Plan. The Compensation Committee views stock options and
restricted stock as a means of aligning management and stockholder
interests and expanding management's long-term perspective.
Compensation Committee Procedures. The Company's executive compensation
program is administered under the direction of the Company's Compensation
Committee. Final compensation determinations for each fiscal year are generally
made after the end of the fiscal year after financial statements for such year
become available. At that time, bonuses, if any, are determined for the past
year's performance, base salaries for the following fiscal year are set and
grants of stock options and restricted stock, if any, are generally made. At a
meeting on January 30, 1998 the Compensation Committee determined annual cash
bonuses under the Incentive Bonus Plan and awards of stock options and
restricted stock under the Stock Incentive Plan for its officers and certain key
employees, as described in the Summary Compensation Table included in this Proxy
Statement.
Compensation of the Chief Executive Officer. The Compensation Committee
considers the Company's financial performance to be the principal determinant in
the overall compensation package of the Chief Executive Officer. The
Compensation Committee considers the Company's growth in FFO per share to be the
best indicator of the Company's financial performance when establishing the
compensation for Mr. Meyer. In addition to the overall increase in FFO during
1997 of approximately 63%, the Compensation Committee particularly noted that
the Company was able to increase FFO per share (calculated in accordance with
the revised National Association of Real Estate Investment Trusts, Inc.
("NAREIT") definition) by approximately 14% to maintain an annualized increase
in FFO per share of approximately 14.1% since the Company's initial public
offering in March 1994, even with an increase of 32.5% in the number of
outstanding shares of Common Stock and Series A and Series B Preferred Stock.
The Compensation Committee also considers the market performance of the
Company's Common Stock to be a factor in determining executive compensation,
although it does not consider the Company's stock price alone to be as important
as the Company's underlying earnings performance. In 1997, the Company's price
per share of Common Stock increased by approximately 8.3% from $36 on December
31, 1996 to $39 on December 31, 1997.
In determining Mr. Meyer's compensation, the Compensation Committee also
noted that in 1997 the Company successfully completed the acquisition of 19
apartment home communities, completed reconstruction programs at nine
communities and had ongoing or planned reconstruction programs at 19 communities
at the end of 1997. In addition, the Compensation Committee viewed favorably the
Company's development activity during 1997, including the completion of
construction of one community, continued construction at another community and
initiation of development or construction at five additional apartment home
communities. The Compensation Committee also noted Mr. Meyer's leadership of the
Company's initial expansion into the Pacific Northwest apartment home market. As
of December 31, 1997, the Company's portfolio of apartment home communities had
increased to a total of 54 communities, and the portfolio has subsequently been
complemented by the acquisition of four additional communities in 1998.
Along with the Company's implementation of its acquisition and development
strategy, the Compensation Committee considered, among other things,
- the increase in "same store" EBITDA by 12.6% over 1996;
11
<PAGE> 14
- the reduction in the payout ratio from 72.7% at the end of 1996 to
66.2% at the end of 1997;
- amendments to the Company's unsecured credit facility resulting in an
increase in the acquisition and construction line of credit from $200
million to $350 million, a one year extension of the date of maturity
to May 2000 and a reduction in the interest rate from LIBOR plus 1.55%
to LIBOR plus .90%;
- the refinancing of approximately $28.4 million of tax-exempt bond
indebtedness with a weighted average interest rate of approximately
5.7%;
- the attainment of BBB and Baa2 corporate credit ratings from Standard &
Poor's and Moody's Investors Service;
- the successful completion of underwritten public offerings of Series C
Preferred Stock and Series D Preferred Stock, two direct placements of
Common Stock and three underwritten public offerings of Common Stock,
which raised an aggregate of approximately $393.7 million in gross
proceeds for the Company; and
- the strengthening of the management team and the enhancement of
employee development programs.
Based upon its evaluation of factors such as the foregoing, the Compensation
Committee makes subjective determinations of base salary and bonus compensation
levels.
Mr. Meyer's annual base salary for 1997 was $300,000, and the Compensation
Committee believes that this rate, when considered together with Mr. Meyer's
incentive compensation, is consistent with the Company's performance and his
contribution to such performance and is in accord with industry practices. In
addition, the Compensation Committee determined to increase Mr. Meyer's 1997
base salary under his Employment Agreement to be more consistent with industry
compensation rates. Under the Incentive Bonus Plan, the Compensation Committee
approved an incentive bonus for Mr. Meyer for fiscal year 1997 in the amount of
$250,287. The Compensation Committee also awarded Mr. Meyer options to purchase
100,000 shares of Common Stock based upon his 1997 performance. These options
will vest in equal installments over a four-year period and will be exercisable
at $37.9375 per share, the last reported sale price of the Common Stock on the
NYSE on the date of grant, January 30, 1998. This grant of options is intended
to enhance Mr. Meyer's long-term incentive to contribute to the Company's
success, and was made without regard for his current share ownership. Finally,
the Compensation Committee approved an award for Mr. Meyer of 10,000 shares of
restricted stock in consideration for his presiding over the Company's
performance in 1997. These shares vest in five equal annual installments
beginning on January 30, 1999 provided that, among other factors, Mr. Meyer
continues his employment with the Company.
Compensation of Other Executive Officers. The Company's executive
compensation program for other executive officers is based on the same
performance goals and other factors described above for the Chief Executive
Officer, although the corporate, business unit and individual performance goals
and the relative weighting of the quantitative performance factors described
above varies, depending on the responsibilities of particular officers. The
Compensation Committee seriously considers the Chief Executive Officer's
evaluations and recommendations with respect to the other executive officers of
the Company. In recognition of the Company's achievements as described above,
the Compensation Committee approved the Named Executive Officers' incentive
bonuses described in the Summary Compensation Table for the Company's fiscal
year 1997 pursuant to the Incentive Bonus Plan.
For all of the Named Executive Officers, the Compensation Committee also
considers stock options to be an important component of total compensation.
Based on the factors described above, the Compensation Committee authorized the
grant to (i) Mr. Van Horn of options to purchase 50,000 shares of Common Stock,
(ii) Mr. Murphy of options to purchase 20,000 shares of Common Stock, (iii) Mr.
Newman of options to purchase 15,000 shares of Common Stock and (iv) each of Mr.
Gardner and Ms. Shotwell of options to purchase 10,000 shares of Common Stock.
All of these options will vest in four equal annual installments and will be
exercisable at $37.9375 per share, the last reported sale price of the Common
Stock on the NYSE on the date of grant, January 30, 1998. In addition, the
Compensation Committee approved the grant to Mr. Van Horn of 10,000 shares of
restricted stock and the grant to each of Messrs. Gardner, Newman, Murphy and
Ms. Shotwell of 1,000 shares of restricted stock. All of these shares of
restricted stock vest in five equal annual
12
<PAGE> 15
installments beginning on January 30, 1999. These Named Executive Officers and
the Company's stockholders will therefore benefit from an appreciation in the
Company's stock price.
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
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 Compensation Committee's policy with respect to Section 162(m)
is to make every reasonable effort to ensure that compensation is deductible to
the extent permitted, while simultaneously providing Company executives with
appropriate rewards for their performance. The Company did not pay any
compensation with respect to 1997 that would be subject to Section 162(m).
Submitted by the Compensation Committee:
Bruce A. Choate
Brenda J. Mixson
Thomas H. Nielsen
John J. Healy, Jr.
13
<PAGE> 16
STOCK PERFORMANCE GRAPH
The following graph provides a comparison, from the Company's initial
public offering in March 1994 through December 1997, of the cumulative total
shareholder return (assuming reinvestment of any dividends) among the Company,
the Standard & Poor's ("S&P") 500 Index and the NAREIT Equity REIT Total Return
Index (the "NAREIT Equity Index"), an industry index of 176 real estate
investment trusts, including the Company. The NAREIT Equity 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
Index. The historical information set forth below is not necessarily indicative
of future performance. Data for the NAREIT Equity Index and the S&P 500 Index
were provided to the Company by NAREIT.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/94 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97
- ---------------------------------------------------------------------------------------------------------
Bay Apartment 100.00 99.39 101.61 100.34 129.63 142.82 204.53 215.21 231.72
- ---------------------------------------------------------------------------------------------------------
Equity REITs 100.00 101.84 99.77 105.46 115.01 122.85 155.57 164.46 187.11
- ---------------------------------------------------------------------------------------------------------
S&P 500 100.00 100.41 105.33 126.55 144.75 159.36 177.98 214.66 237.37
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[Performance Graph]
14
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Mr. Bruce A. Choate, Ms. Brenda J.
Mixson, Mr. Thomas H. Nielsen and Mr. John J. Healy, Jr. None of them has served
as an officer of the Company or has any other business relationship or
affiliation with the Company, except his or her service as a director.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as to (i) each person or entity who is known by the Company to have
beneficially owned more than five percent of the Company's Common Stock as of
December 31, 1997, (ii) each of the Company's directors, (iii) each of the Named
Executive Officers, and (iv) all directors and Named Executive Officers as a
group, based on representations of officers and directors of the Company as of
February 23, 1998 (unless otherwise indicated) and filings as of February 13,
1998 received by the Company on Schedules 13G under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All such information was provided by
the stockholders listed (unless otherwise indicated) and reflects their
beneficial ownership known by the Company. All percentages have been calculated
as of February 23, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
NAME AND BUSINESS BENEFICIAL OWNED OF
ADDRESS OF BENEFICIAL OWNER (1) CLASS
- ---------------------------------------------------------------- ----------------- ------
<S> <C> <C>
Gilbert M. Meyer................................................ 1,112,605(2) 4.22%
Max L. Gardner.................................................. 35,579(3) *
Jeffrey B. Van Horn............................................. 23,250(4) *
Geoffrey L. Baker............................................... 85,784(5) *
Bruce A. Choate................................................. 11,000(6) *
John J. Healy, Jr............................................... 8,000(7) *
Brenda J. Mixson................................................ 12,000(6) *
Thomas H. Nielsen............................................... 21,697(6)(8) *
Morton L. Newman................................................ 42,892(9) *
Daniel E. Murphy................................................ 16,514(10) *
John H. Pringle................................................. 1,000 *
Debra Lynn Shotwell............................................. 9,334(11) *
All directors and Named Executive Officers as a group (12
persons)...................................................... 1,379,655 5.19
FMR Corp.(12)................................................... 2,997,020 11.45
82 Devonshire Street, Boston, MA 02109
LaSalle Advisors Capital Management, Inc.(13)................... 2,220,723 8.49
200 East Randolph Drive, Chicago, IL 60601
Morgan Stanley, Dean Witter, Discover & Co.(14)................. 1,639,277 6.26
1585 Broadway, New York, NY 10036
</TABLE>
- ---------------
* Less than one percent.
(1) Except as otherwise noted, each individual in the table above has the sole
voting and investment power over the shares listed.
(2) Includes (i) 190,000 shares issuable upon the exercise of stock options
that have vested or will vest by April 24, 1998 and (ii) 14,492 shares
issuable upon Mr. Meyer's termination of employment with the Company
pursuant to an election to defer compensation in accordance with the terms
of the Stock Incentive Plan.
(3) Includes (i) 25,000 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998 and (ii) 320 shares issuable
upon Mr. Gardner's termination of employment with the Company pursuant to
an election to defer compensation in accordance with the terms of the Stock
Incentive Plan.
(4) Includes 11,250 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998.
15
<PAGE> 18
(5) Includes 70,000 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998.
(6) Includes 11,000 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998.
(7) Includes 5,000 shares issuable upon the exercise of stock options that have
vested or will vest by April 24, 1998.
(8) Includes 697 shares issuable upon Mr. Nielsen's cessation as a director of
the Company pursuant to an election to defer the receipt of directors fees
in accordance with the terms of the Stock Incentive Plan. Mr. Nielsen is a
co-trustee of a trust that holds 2,000 shares of Common Stock. He shares
voting and investment power over the shares held by the trust with his wife
and with the U.S. Trust Company of California pursuant to an investment
management agreement.
(9) Includes 36,189 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998.
(10) Includes 12,500 shares issuable upon the exercise of stock options that
have vested or will vest by April 24, 1998 and (ii) 677 shares issuable
upon termination of employment with the Company pursuant to Mr. Murphy's
election to defer compensation in accordance with the terms of the Stock
Incentive Plan.
(11) Includes 7,500 shares issuable upon the exercise of stock options that have
vested or will vest by April 24, 1998.
(12) Information reported is based upon a Schedule 13G/A filed with the SEC on
February 9, 1998 reporting beneficial ownership as of December 31, 1997.
This Schedule 13G/A indicates that the reporting entity is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940. The Schedule 13G also indicates that the reporting entity has sole
dispositive power with respect to all of the shares and sole voting power
with respect to 530,900 of the shares.
(13) The information reported in the table above includes 1,893,873 shares
beneficially owned by ABKB/LaSalle Securities Limited Partnership
("ABKB/LaSalle"), a Maryland limited partnership, the limited partner of
which is LaSalle Advisors Capital Management, Inc. ("LaSalle"). Information
reported is based upon a Schedule 13G/A filed with the SEC on February 13,
1998 reporting beneficial ownership as of December 31, 1997. The Schedule
13G/A indicates that the reporting entities are investment advisers
registered under Section 203 of the Investment Advisers Act of 1940. The
Schedule 13G/A also indicates that LaSalle has shared dispositive power
with respect to 326,850 shares, while ABKB/LaSalle has shared dispositive
power with respect to 1,590,373 of the shares and shared voting power with
respect to 1,542,868 shares.
(14) Information reported is based upon a Schedule 13G filed with the SEC on
February 12, 1998 reporting beneficial ownership as of December 31, 1997.
The Schedule 13G indicates that the reporting entity is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940. The Schedule 13G also indicates that the reporting entity has shared
dispositive power with respect to all of the shares and shared voting power
with respect to 1,495,090 of the shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities (collectively, "Insiders"), to file reports of
ownership and changes in ownership with the SEC and one national securities
exchange on which such securities are registered. In accordance with Rule
16a-3(c) under the Exchange Act, the Company has designated the NYSE as the one
national securities exchange with which reports pursuant to Section 16(a) of the
Exchange Act need be filed. Insiders are required by SEC regulation 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 copies of such reports and written
representations that no other reports were required during the fiscal year ended
December 31, 1997, all transactions in the Company's securities that were
engaged in by Insiders, and therefore required to be disclosed pursuant to
Section 16(a) of the Exchange Act, were timely reported.
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PROPOSAL 2
RATIFICATION OF THE 1994 STOCK INCENTIVE PLAN,
AS AMENDED AND RESTATED
PROPOSED AMENDMENTS
On February 26, 1998, the Board of Directors voted to amend and restate the
Company's Stock Incentive Plan, which originally provided for the issuance of up
to 663,000 shares of Common Stock of the Company pursuant to various stock
incentive awards, including stock options, and which was amended in August 1996
to authorize the Company to issue up to an additional 857,000 shares of Common
Stock. The February 1998 amendments to the Stock Incentive Plan authorize the
Company to issue up to an additional 480,000 shares of Common Stock pursuant to
such awards. In addition, the February 1998 amendments will have the effect of
(i) prohibiting the Compensation Committee from accelerating the exercisability
or vesting of any award except in circumstances involving a "Change of Control"
(as defined in the Stock Incentive Plan) or upon the death, disability or
termination of employment of a participant, (ii) with respect to awards of
Restricted Stock, requiring a vesting period of at least three years (or at
least one year if vesting is contingent upon performance-based criteria), and
(iii) permitting the Compensation Committee to reduce the exercise or purchase
price of an outstanding award only in order to fulfill a legitimate corporate
purpose or to maintain the value of an outstanding award under circumstances
beyond the control of management, provided that no such amendments shall be made
to outstanding awards representing greater than 10% of the total number of
shares of Common Stock authorized for issuance pursuant to the Stock Incentive
Plan.
A summary of the principal features of the Stock Incentive Plan is set
forth below. This summary is qualified in its entirety by the full text of the
Stock Incentive Plan, which has been filed with the SEC.
SUMMARY OF THE STOCK INCENTIVE PLAN
The following description of certain features of the Stock Incentive Plan
is intended to be a summary only.
Number of Shares Subject to Stock Incentive Plan. The total number of
shares of Common Stock that may be issued under the Stock Incentive Plan is
2,000,000 shares. The proceeds received by the Company from option exercises
under the Stock Incentive Plan will be used for the general corporate purposes
of the Company. On February 23, 1998, the closing price of the Company's Common
Stock, as reported on the NYSE, was $37 15/16 per share.
Plan Administration. The Stock Incentive Plan provides for administration
by the non-employee members of the Compensation Committee of the Board of
Directors, or a committee of not less than two non-employee directors performing
similar functions as appointed by the Board of Directors from time to time.
Eligibility. The Compensation Committee has full power to select the
individuals to whom awards will be granted and to determine the terms of each
grant under the Stock Incentive Plan. All officers, employees and directors of
the Company are eligible to participate in the Stock Incentive Plan, subject to
the discretion of the Compensation Committee. In no event may one participant
receive more than 300,000 options to purchase Common Stock during any one
calendar year.
Nature of Options. Options granted under the Stock Incentive 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 Stock Incentive 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 (including employees and directors of any
subsidiary who are also employees of the Company). Non-Qualified Options may be
granted to persons eligible to receive Incentive Options and to non-employee
directors.
Other Option Terms. The Compensation Committee has authority to determine
the terms of options granted under the Stock Incentive Plan; provided, however,
that no Incentive Option or Non-Qualified Option may be granted with an exercise
price that is less than the fair market value of the shares of Common Stock on
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<PAGE> 20
the date of the option grant. The Stock Incentive 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. Options may be exercised subject to such vesting
schedule as the Compensation Committee determines, except that no Incentive
Option shall be exercisable after the tenth anniversary of the date of grant. In
general, no option granted under the Stock Incentive 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.
Options granted under the Stock Incentive Plan may be exercised for cash
or, if permitted by the Compensation Committee, by transfer to the Company of
shares of Common Stock not then subject to restrictions under any Company plan,
that have been held by the optionee for at least six months, and that 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. To
qualify as Incentive Options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares of Common Stock
subject to Incentive Options which first become exercisable in any one year.
Stock Options Granted to Independent Directors. The Stock Incentive 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
shall automatically be granted on such day a Non-Qualified Option to acquire
5,000 shares of Common Stock. The exercise price of each such Non-Qualified
Option is the fair market value of the Common Stock as determined by the last
reported sale price of the Common Stock on the NYSE on the date of grant. Such
Non-Qualified Option may not be exercised before the first anniversary of the
date of grant, except in the case of death or disability, nor after the
expiration of ten years from the date of grant. In addition, the Compensation
Committee, in its discretion, may grant additional Non-Qualified Options, which
shall be subject to the same conditions and vesting provisions as those
Non-Qualified Options automatically granted to the non-employee directors each
year.
Tax Withholdings. Optionees under the Stock Incentive 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. Optionees 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 by transferring to the Company shares of Common Stock having a value
equal to the amount of such taxes. Such an election is subject to certain
limitations for participants who are subject to the requirements of Section
16(b) of the Exchange Act.
Restricted Stock. The Compensation Committee may grant shares (at no cost
or for a purchase price determined by the Compensation Committee) of Common
Stock to any participant subject to such conditions and restrictions as the
Compensation Committee may determine ("Restricted Stock"). These conditions and
restrictions may include the achievement of pre-established performance goals
and/or continued employment with the Company through a specified vesting period.
The vesting period shall be at least three years, except that in the case of
Restricted Stock that becomes transferable and no longer subject to forfeiture
upon the attainment of such pre-established performance goals, objectives and
other conditions, the vesting period shall be at least one year. The purchase
price of shares of Restricted Stock will be determined by the Compensation
Committee. If the performance goals and other restrictions are not attained, the
participant will forfeit their awards of Restricted Stock. In addition,
Restricted Stock may be granted to an employee by the Compensation Committee in
lieu of a cash bonus due to such employee pursuant to any other plan of the
Company.
Unrestricted Stock. The Compensation Committee may also grant shares (at
no cost or for a purchase price determined by the Compensation Committee) of
Common Stock which are free from any restrictions under the Stock Incentive Plan
("Unrestricted Stock"). 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.
Subject to the consent of the Compensation Committee, a participant may
make an irrevocable election to receive a portion of his compensation otherwise
due in Unrestricted Stock (valued at fair market value on the date the cash
compensation would otherwise be paid) either currently or on a deferred basis.
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<PAGE> 21
Performance Share Awards. The Compensation Committee may grant performance
share awards to any participants entitling the recipient to receive shares of
Common Stock upon the achievement of individual or Company performance goals and
such other conditions as the Compensation Committee shall determine.
Change of Control Provisions. The Stock Incentive Plan provides that in
the event of a Change of Control of the Company, all stock options shall
automatically become fully exercisable. In addition, at any time prior to or
after a Change of Control, the Compensation Committee may accelerate awards and
waive conditions and restrictions on any awards to the extent it may determine
appropriate.
EFFECTIVE DATE OF STOCK INCENTIVE PLAN
The Stock Incentive Plan, as amended and restated, became effective when
approved by the Board of Directors on February 26, 1998. In order for the
Company to be able to issue Incentive Options, and to ensure that the cost of
certain awards issued under the Stock Incentive Plan will be deductible by the
Company for federal income tax purposes, the Company is seeking ratification of
the Stock Incentive Plan by the affirmative vote of the holders of a majority of
the votes cast on the proposal at the Annual Meeting, provided that the total
number of votes cast on the proposal must represent greater than 50% of all
shares entitled to vote on the proposal. Awards of Incentive Options may be
granted under the Stock Incentive Plan until February 26, 2008.
NEW PLAN BENEFITS
Approximately 629 employees and non-employee directors are currently
eligible to participate in the Stock Incentive Plan. There have been no
discretionary grants of awards to the Company's employee's with respect to the
additional 480,000 shares for which approval is being sought under this
proposal. However, pursuant to the terms of the Stock Incentive Plan, each
non-employee director automatically receives options to purchase 5,000 shares of
Common Stock on the fifth business day following each Annual Meeting of
Stockholders. In addition, on January 30, 1998, the Board of Directors approved
a discretionary grant of options to purchase 5,000 shares of common stock to
each non-employee director. These options are subject to the same conditions and
vesting provisions, and shall be granted on the same date, as those options that
will be granted automatically to the non-employee directors on the fifth
business day following the Annual Meeting. Accordingly, the table below shows
the aggregate number of stock options that have been allocated to such
non-employee directors under the Stock Incentive Plan after giving effect to the
proposed amendments:
NEW PLAN BENEFITS
1994 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED
<TABLE>
<CAPTION>
STOCK OPTIONS
-------------------------------------------------------
NUMBER OF
SHARES UNDERLYING GRANT EXERCISE MARKET
NAME AND POSITION STOCK OPTIONS DATE(1) PRICE(2) VALUE(3)
- -------------------------------------------- ----------------- ------- -------- --------
<S> <C> <C> <C> <C>
Bruce A. Choate(4).......................... 10,000(5) 5/15/98 N/A N/A
Director
John J. Healy, Jr.(4)....................... 10,000(5) 5/15/98 N/A N/A
Director
Brenda J. Mixson(4)......................... 10,000(5) 5/15/98 N/A N/A
Director
Thomas H. Nielsen(4)........................ 10,000(5) 5/15/98 N/A N/A
Director
All Non-Employee Directors.................. 40,000 5/15/98 N/A N/A
as a group (4 persons)
</TABLE>
- ---------------
(1) All options expire ten years from the date of grant.
(2) The exercise price of the stock options will be the last reported sale
price of the Common Stock on the NYSE on the date of grant. Such exercise
price is therefore not determinable.
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<PAGE> 22
(3) The market value of these stock options is not determinable.
(4) Nominees for election as Directors.
(5) Pursuant to the terms of the Stock Incentive Plan, each non-employee
director automatically receives options to purchase 5,000 shares of Common
Stock on the fifth business day following each Annual Meeting of
Stockholders. The remaining 5,000 options were awarded pursuant to a
discretionary award by the Board of Directors and shall be granted on the
same date as those that will be automatically granted on the fifth business
day following the Annual Meeting. Accordingly, these options have been
allocated, but not yet granted.
Adjustments for Stock Dividends, Mergers, etc. The Stock Incentive Plan
authorizes the Compensation Committee to make appropriate adjustments to the
number of shares of Common Stock that are subject to the Stock Incentive Plan
and of any outstanding options to reflect stock dividends, stock splits and
similar events. In the event of a merger, consolidation, dissolution or
liquidation of the Company, the Compensation Committee in its discretion may
provide for appropriate substitutions or adjustments.
Amendments and Termination. The Board of Directors may at any time amend or
discontinue the Stock Incentive Plan and the Compensation 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. In
addition, the Committee may amend any outstanding award to reduce the exercise
or purchase price in order to fulfill a legitimate corporate purpose (e.g., to
retain a key employee) or to maintain the value of such outstanding award under
circumstances beyond the control of the Company's management, but in no event
shall such amendments be made to outstanding awards representing greater than
10% of the total number of shares of Common Stock authorized for issuance
pursuant to the Plan. To the extent required by the Code to ensure that options
that have been granted under the Stock Incentive Plan qualify as Incentive
Options, plan amendments shall be subject to approval by the Company's
stockholders.
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 Stock Incentive Plan. It does not describe all federal
tax consequences under the Stock Incentive Plan, nor does it describe state or
local tax consequences.
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 the optionee is
subject to Section 16(b) of the Exchange Act or 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
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<PAGE> 23
employment (or six months or one year in the case of termination of employment
by reason of death or disability, respectively).
Non-Qualified Options. With respect to Non-Qualified Options under the
Stock Incentive 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 the optionee is
subject to Section 16(b) of the Exchange Act or 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 exercise of any portion of any option that is
accelerated due to the occurrence of a Change of Control may cause a portion of
the payments with respect to such accelerated options 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 Stock Incentive Plan
may be limited to the extent that a Named Executive Officer receives
compensation in excess of $1,000,000 in such taxable year.
REQUIRED VOTE AND RECOMMENDATION
Only stockholders of record of the Company's Common Stock are entitled to
vote on this proposal. Proxies will be voted for Proposal 2 unless contrary
instructions are set forth on the proxy. This proposal requires the affirmative
vote of a majority of all of the votes cast on the matter, provided that the
total number of votes cast on the proposal must represent greater than 50% of
all of the shares entitled to vote on the proposal. The Company will treat
abstentions and broker non-votes as not voting for the purpose of determining
the number of votes cast on this proposal. Accordingly, in the event that
greater than 50% of the shares entitled to vote are cast on this proposal,
abstentions and broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE 1994 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED.
PROPOSAL 3
PROPOSED AMENDMENTS TO THE CHARTER
RELATING TO THE SERIES A PREFERRED STOCK
The Board of Directors has deemed advisable and unanimously approved
amendments to the Company's Charter which will have the effect of (i)
eliminating the right of the holders of the Series A Preferred Stock to vote on
and approve the creation of new classes of capital stock of the Company having
rights, preferences or privileges senior to or in parity with the Series A
Preferred Stock and (ii) correcting the description of the liquidation
preferences of the Series A Preferred Stock. The following are brief
descriptions of the amendments:
1. Article SECOND, Section (3)(a) of the Articles Supplementary to the
Company's Articles of Incorporation, which were filed with the State Department
of Assessments and Taxation of the State of Maryland on September 29, 1995 in
order to designate the rights, preferences and privileges of the Series A
Preferred Stock, would be deleted and the following inserted in lieu thereof:
"(3) LIQUIDATION RIGHTS.
(a) Subject to any prior rights of any class or series of stock, in
the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, the holders of Series A
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<PAGE> 24
Preferred Stock shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation
to the holders of Common Stock by reason of their ownership of such stock,
an amount equal to all accrued but unpaid dividends for each share of
Series A Preferred Stock then held by them. If upon the occurrence of such
event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to
such holders of the full amounts to which they are entitled under the
preceding sentence, then, subject to any prior rights of any classes or
series of stock, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably to the holders of
the Series A Preferred Stock and the holders of any other shares of Stock
on a parity for liquidation purposes with the Series A Preferred Stock in
proportion to the aggregate amounts owed to each such holder."
REASONS FOR THE AMENDMENT
Currently the holders of Series A Preferred Stock are entitled to receive
any accrued and unpaid dividends in the priority set forth in the first sentence
of Section 3(a) above. The second sentence of Section 3(a) is the only portion
of that section that will be modified by the proposed amendment. The amendment
to the second sentence of Section 3(a) clarifies that if upon the liquidation of
the Company the assets of the Company are insufficient to pay the full amount of
any accrued and unpaid dividends on the Series A Preferred Stock, then, subject
to any prior rights of other classes or series of stock, the available assets of
the Company will be used to pay such dividends. The Board of Directors has
agreed to this clarification to Section 3(a) as an inducement for the holders of
Series A Preferred Stock to vote in favor of the proposed amendment to the
Company's Charter discussed below.
2. Article SECOND, Section (5) of the Articles Supplementary to the
Company's Articles of Incorporation, which were filed with the State Department
of Assessments and Taxation of the State of Maryland on September 29, 1995 in
order to designate the rights, preferences and privileges of the Series A
Preferred Stock, would be deleted and the following inserted in lieu thereof:
"(5) VOTING RIGHTS.
Except as indicated in this Section 5, or except as otherwise from
time to time required by applicable law, the holders of shares of Series A
Preferred Stock shall not be entitled to vote on any matter on which the
holders of shares of Common Stock are entitled to vote, except that the
holders of a majority of the outstanding shares of Series A Preferred
Stock, voting as a separate class, shall be required to vote on and approve
any material adverse change in the rights, preferences or privileges of the
Series A Preferred Stock. For purposes of the foregoing, the creation of a
new class of stock having rights, preferences or privileges senior to, in
parity with or junior to the rights, preferences or privileges of the
Series A Preferred Stock shall not be treated as a material adverse change
in the rights, preferences or privileges of the Series A Preferred Stock,
and the holders of Series A Preferred Stock shall not have any right to
vote on the creation of such new class of stock. Except as provided above
and as required by law, the holders of Series A Preferred Stock are not
entitled to vote on any merger or consolidation involving the Corporation,
on any share exchange or on a sale of all or substantially all of the
assets of the Corporation."
REASONS FOR THE AMENDMENT
Under the Company's Charter as currently in effect, the Company must obtain
the approval of the holders of a majority of the outstanding shares of Series A
Preferred Stock in order to create any new class of stock having rights,
preferences or privileges senior to or in parity with the rights, preferences or
privileges of the Series A Preferred Stock. The Board of Directors believes that
the current Series A Preferred Stock approval requirement restricts the
Company's flexibility and could impede the Company in its efforts to quickly
access equity markets at opportune times.
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<PAGE> 25
REQUIRED VOTE AND RECOMMENDATION
Proxies will be voted for Proposal 3 unless contrary instructions are set
forth on the proxy. Under applicable law and the Company's Charter, this
proposal requires (i) the affirmative vote of the holders of record of
two-thirds of all of the issued and outstanding shares of Common Stock and (ii)
the affirmative vote of the holders of record of a majority of the issued and
outstanding shares of Series A Preferred Stock, voting as a separate class.
Accordingly, abstentions and broker non-votes will have the effect of votes
against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENTS TO
THE CHARTER.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors has selected Coopers &
Lybrand L.L.P., independent accountants, to serve as independent accountants for
the Company for the fiscal year ending December 31, 1998 and recommends that the
stockholders vote for ratification of such appointment. Coopers & Lybrand L.L.P.
has audited the financial statements of the Company since fiscal year 1991.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
meeting and will have the opportunity to make a statement if they desire to do
so. They are also expected to be available to respond to appropriate questions.
REQUIRED VOTE AND RECOMMENDATION
Only stockholders of record of the Company's Common Stock are entitled to
vote on this proposal. Proxies will be voted for Proposal 4 unless contrary
instructions are set forth on the proxy. This proposal requires the affirmative
vote of a majority of all of the votes cast on the matter. Accordingly,
abstentions and broker non-votes will have no effect on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS FOR
THE COMPANY.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Business Relationships.
Greenbriar Homes Company and its affiliates (collectively "GHC") are
corporations wholly-owned by Mr. Meyer and his wife, Carol M. Meyer, that
develop and sell single-family residential properties. Mr. Meyer does not
provide any significant management services to GHC and he devotes substantially
all of his business time and attention to the affairs of the Company. Since the
consummation of the Company's initial public offering in March 1994, the Company
has shared certain office and warehouse space and computer training facilities
with GHC, and each of the Company and GHC are obligated for the rent payments
with respect to the portion of the space it leases. Such shared office space
amounts to less than five percent of the total office space leased by each
entity. In addition, pursuant to an administrative services agreement, the
Company and GHC share certain administrative and office facility services.
During fiscal year 1997, GHC paid in the aggregate approximately $291,000 to the
Company to cover the cost of such services. This amount is calculated on a basis
intended to approximate the cost of the use of these services and not to
generate a profit. The non-employee directors of the Company periodically review
and approve the terms of this agreement including amounts payable thereunder.
The Company believes that such administrative services agreement is upon terms
that are fair to the Company and as favorable as the terms that the Company
could have obtained from unaffiliated third parties.
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<PAGE> 26
Indebtedness of Management.
In connection with the hiring of Mr. Van Horn as Vice President and Chief
Financial Officer of the Company in June 1996, Mr. Van Horn entered into an
employment agreement (the "CFO Agreement") with the Company pursuant to which
Mr. Van Horn received a loan from the Company in the amount of $140,000 (the
"Loan"), which, during the term of employment, shall not bear interest. Under
the terms of the promissory note executed by Mr. Van Horn in connection with the
Loan, the Loan shall be repaid in installments equal to 90% of any bonus
compensation (after the deduction of taxes) received by Mr. Van Horn
concurrently with the receipt of any such bonus. On January 30, 1998 the
Compensation Committee determined to extend the maturity date for the Loan by
one year and to forgive the outstanding principal amount under the Loan (i.e.,
$122,000 as of January 30, 1998) ratably over the remaining five year period of
the Loan. This decision was based upon Mr. Van Horn's performance on behalf of
the Company during fiscal year 1997. Accordingly, on January 30, 1998 the
Company forgave $24,400 of the outstanding principal amount under the Loan owed
by Mr. Van Horn to the Company.
In the event Mr. Van Horn's employment with the Company is terminated by
the Company without Good Reason (as defined in the CFO Agreement) or within one
year following a Change-in-Control (as defined in the CFO Agreement), any
outstanding balance under the Loan shall be forgiven by the Company. In the
event Mr. Van Horn's employment is terminated for any other reason, the Loan
shall be converted to a fifteen-year amortization schedule with a five-year
balloon payment and shall bear interest at the lower of: (i) the average of the
rates (assuming no points) quoted on the employment termination date for a
fifteen-year fully amortized conventional fixed-rate residential mortgage by the
main headquarters of each of Citibank, N.A., BankBoston and Chase Bank (or their
successors), and (ii) ten percent per annum. As of February 23, 1998, the
outstanding principal amount of the Loan was $97,600.
OTHER MATTERS
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.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETINGS
Stockholder proposals (including director nominations) submitted pursuant
to Exchange Act Rule 14a-8 for inclusion in the Company's proxy statement and
form of proxy for the 1999 Annual Meeting of Stockholders must be received by
the Company by December 26, 1998. Such a proposal must also comply with the
requirements as to form and substance established by the SEC for such a proposal
to be included in the proxy statement and form of proxy.
For a proposal of a stockholder (including director nominations) to be
presented at the Company's 1999 Annual Meeting of Stockholders, other than a
stockholder proposal submitted pursuant to Rule 14a-8 of the Exchange Act, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company, together with all supporting
documentation required by the Company's Bylaws, (A) not less than seventy-five
(75) days nor more than one hundred eighty (180) days prior to the anniversary
date of the Annual Meeting (the "Anniversary Date") or (B) in the event that the
1999 Annual Meeting of Stockholders is called for a date more than seven (7)
calendar days prior to the Anniversary Date, not later than the close of
business on (1) the twentieth (20th) calendar day (or if that day is not a
business day for the Company, on the next succeeding business day) following the
earlier of (x) the date on which notice of the date of such meeting was mailed
to stockholders, or (y) the date on which the date of such meeting was publicly
disclosed, or (2) if such date of notice or public disclosure occurs more than
seventy-five
24
<PAGE> 27
(75) calendar days prior to the scheduled date of such meeting, then the later
of (x) the twentieth (20th) calendar day (or if that day is not a business day
for the Company, on the next succeeding business day) following the date of the
first to occur of such notice or public disclosure or (y) the seventy-fifth
(75th) calendar day prior to such scheduled date of such meeting (or if that day
is not a business day for the Company, on the next succeeding business day).
Any such proposals should be mailed to: Bay Apartment Communities, Inc.,
4340 Stevens Creek Boulevard, Suite 275, San Jose, California 95129, Attention:
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.
25
<PAGE> 28
APPENDIX I
BAY APARTMENT COMMUNITIES, INC.
1994 STOCK INCENTIVE PLAN
As Amended and Restated on February 26, 1998
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Bay Apartment Communities, Inc. 1994 Stock
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Directors and other key persons of Bay Apartment
Communities, 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, Restricted Stock Awards, Unrestricted Stock Awards and Performance
Share Awards.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means and shall be limited to a vote of the Board of Directors
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or any Subsidiary or on the participant's ability to perform
services for the Company or any Subsidiary, including, without limitation, the
commission of any crime (other than ordinary traffic violations), or (iii) any
material misconduct or neglect of duties by the participant in connection with
the business or affairs of the Company or any Subsidiary.
"CHANGE OF CONTROL" is defined in Section 13.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"COMMITTEE" means the Board or any Committee of the Board referred to in
Section 2.
<PAGE> 29
"DISABILITY" means disability as set forth in Section 22(e)(3) of the Code.
"EFFECTIVE DATE" means the date on which the Plan is approved by
shareholders as set forth in Section 15.
"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.
"INCENTIVE STOCK OPTION" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"NON-EMPLOYEE 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 SHARE AWARD" means Awards granted pursuant to Section 8.
"RESTRICTED STOCK AWARD" mean Awards granted pursuant to Section 6.
"STOCK" means the Common Stock, $.01 par value per share, of the Company,
subject to adjustments pursuant to Section 3.
"SUBSIDIARY" means 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 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 7.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) COMMITTEE. The Plan shall be administered by all of the Non-Employee
Director members of the Compensation Committee of the Board, or a committee of
not less than two Non-Employee Directors performing similar functions, as
appointed by the Board from time to time. Each member of the Committee shall be
an "outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder and a "non-employee director" within the
meaning of Rule 16b-3(b)(3)(i) promulgated under the Act, or any successor
definition under said rule.
<PAGE> 30
(b) 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:
(i) to select the officers and other employees of the Company and its
Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Unrestricted Stock Awards and Performance Shares, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine and modify 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, and to approve the form of written instruments evidencing the
Awards;
(v) to accelerate the exercisability or vesting of all or any portion
of any Award in circumstances involving a Change of Control or the death,
disability or termination of employment of a Plan participant;
(vi) subject to the provisions of Section 5(a)(ii), to extend the
period in which Stock Options may be exercised;
(vii) 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
(viii) 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.
All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.
<PAGE> 31
(c) 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 Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or Acovered employees' within the
meaning of Section 162(m) of the Code. 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.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) SHARES ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 2,000,000. 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 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 with respect to no more than 300,000 shares of Stock may be
granted to any one individual participant during any one calendar year period.
Shares issued under the Plan may be authorized but unissued shares or shares
reacquired by the Company.
(b) RECAPITALIZATIONS. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, 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 that can be granted to any one individual participant, (iii)
the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, and (iv) the price for each share subject to
any then outstanding Stock Options under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options) as to which such Stock Options 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.
(c) MERGERS. Upon consummation of a consolidation or merger or sale of all
or substantially all of the assets of the Company in which outstanding shares of
Stock are exchanged for securities, cash or other property of an unrelated
corporation or business entity or in the event of a liquidation of the Company
(in each case, a "Transaction"), the Board, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding Stock Options:
(i) provide that such Stock Options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), (ii) upon written notice to the optionees, provide that all
unexercised Stock Options will terminate immediately prior to the consummation
of the Transaction unless exercised by the optionee within a specified period
following the date of such notice, and/or (iii) in the event of a business
combination under the terms of which holders of the Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the business combination, make or provide for a cash payment to the optionees
equal to the difference between (A) the value (as determined by the Committee)
of the consideration payable per share of Stock pursuant to the business
combination (the "Merger Price") times the number of shares of Stock subject
to such outstanding Stock Options (to the extent then exercisable at prices not
in excess of the Merger Price) and (B) the aggregate exercise price of all such
outstanding Stock Options in exchange for the termination of such Stock Options.
In the event Stock Options will terminate upon the consummation of the
Transaction, each optionee shall be permitted, within a specified period
determined by the Committee, to exercise all non-vested Stock Options, subject
to the consummation of the Transaction.
<PAGE> 32
(d) 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.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers, other
employees, Non-Employee Directors and key persons 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.
SECTION 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 February
26, 2008.
<PAGE> 33
(a) STOCK OPTIONS GRANTED TO EMPLOYEES AND KEY PERSONS. The Committee in
its discretion may grant Stock Options to employees and key persons of the
Company or any Subsidiary. Stock Options granted to employees and key persons
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:
(i) 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 be not less than 100% of
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 Stock Option is granted to such employee, the option price shall
be not less than 110% of Fair Market Value on the grant date.
(ii) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive 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.
(iii) EXERCISABILITY; RIGHTS OF A SHAREHOLDER. 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. 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
shareholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.
(iv) 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:
(A) In cash, by certified bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held 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
<PAGE> 34
(C) 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 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 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.
(v) TERMINATION BY REASON OF DEATH. If any optionee's employment (or
other business relationship) by the Company and its Subsidiaries terminates
by reason of death, the Stock Option may thereafter be exercised, to the
extent exercisable at the date of death, 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.
(vi) TERMINATION BY REASON OF DISABILITY.
(A) Any Stock Option held by an optionee whose employment (or
other business relationship) by the Company and its Subsidiaries has
terminated by reason of Disability 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 other
business relationship), or until the expiration of the stated term of
the Option, if earlier.
(B) The Committee shall have sole authority and discretion to
determine whether a participant's employment (or other business
relationship) has been terminated by reason of Disability.
(C) 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)(vi) for the exercise of a Non-Qualified 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.
(vii) TERMINATION FOR CAUSE. If any optionee's employment (or other
business relationship) by the Company and its Subsidiaries has been
terminated for Cause, any Stock Option held by such optionee 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 other business relationship) or until the
expiration of the stated term of the Option, if earlier.
<PAGE> 35
(viii) OTHER TERMINATION. Unless otherwise determined by the Committee,
if an optionee's employment (or other business relationship) by the Company
and its Subsidiaries terminates for any reason other than death,
Disability, 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 (or other business relationship), for three
months (or such longer period as the Committee shall specify at any time)
from the date of termination of employment (or other business relationship)
or until the expiration of the stated term of the Option, if earlier.
(ix) 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
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.
(x) 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.
(b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under the Plan may include a so-called "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)(iv)(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
number delivered to exercise the original Option.
(c) STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS.
(i) AUTOMATIC GRANT OF OPTIONS.
(A) Each Non-Employee Director who is serving as a Director of the
Company on the fifth business day after each annual meeting of
stockholders, beginning with the 1996 annual meeting of stockholders,
shall automatically be granted on such day a Non-Qualified Stock Option
to acquire 5,000 shares of Stock.
<PAGE> 36
(B) The exercise price per share for the Stock covered by a Stock
Option granted under this Section 5(c) shall be equal to the Fair
Market Value of the Stock on the date the Stock Option is granted.
(C) The Committee, in its discretion, may grant additional Non-
Qualified Stock Options to Non-Employee Directors.
(ii) EXERCISE; TERMINATION; NON-TRANSFERABILITY.
(A) Except as provided in Section 13, no Option granted under
Section 5(c) may be exercised before the first anniversary of the date
upon which it was granted; provided, however, that any Option so
granted shall become exercisable upon the termination of service of the
Non-Employee Director because of Disability or death. 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.
(B) The rights of a Non-Employee Director in an Option granted
under 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 Non-Employee Director
ceases to be a Director for Cause, the rights shall terminate
immediately on the date on which he ceases to be a Director.
(C) Any Option granted to a Non-Employee 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.
(D) 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)(iv). An optionee shall have the rights of a shareholder
only as to shares acquired upon the exercise of a Stock Option and not
as to unexercised Stock Options.
(iii) LIMITED TO NON-EMPLOYEE DIRECTORS. The provisions of this
Section 5(c) shall apply only to Options granted or to be granted to
Non-Employee 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 a Non-Employee 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 Non-Employee Directors respecting
Options granted or to be granted to Non-Employee Directors.
<PAGE> 37
(d) 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. Notwithstanding the foregoing, the Committee may
permit the optionee to transfer, without consideration for the transfer, his
Non-Qualified Stock Options to members of his immediate family, to trusts for
the benefit of such family members, to partnerships in which such family members
are the only partners, or to charitable organizations, 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 agreement.
SECTION 6. RESTRICTED STOCK AWARDS
(a) NATURE OF RESTRICTED STOCK AWARD. The Committee may grant Restricted
Stock Awards to any participant. A Restricted Stock Award is an Award entitling
the recipient to acquire, at no cost or for a 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 (or other business relationship) and/or
achievement of pre-established performance goals and objectives. In addition,
a Restricted Stock Award may be granted to an employee by the Committee in lieu
of a cash bonus due to such employee pursuant to any other plan of the Company.
(b) 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 time period as the
Committee may specify) following the award date by making payment to the
Company, if required, in cash, 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 in such form as the Committee shall
determine.
(c) RIGHTS AS A SHAREHOLDER. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder 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 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Stock Award. Unless the
Committee shall otherwise determine, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares
are vested as provided in Section 6(e) below.
(d) RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment (or
other business relationship) by the Company and its Subsidiaries for any reason
(including death, retirement, Disability, and for Cause), the Company shall have
the right, at the discretion of the Committee, to repurchase shares of
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. The Company must exercise such right of repurchase or forfeiture
not later than the 90th day following such termination of employment (or other
business relationship), unless otherwise specified in the written instrument
evidencing the Restricted Stock Award.
<PAGE> 38
(e) 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. The vesting period for Restricted Stock shall be at least three years,
except that in the case of Restricted Stock that becomes transferable and no
longer subject to forfeiture upon the attainment of such pre-established
performance goals, objectives and other conditions, the vesting period shall be
at least one year. 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."
(f) 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.
SECTION 7. UNRESTRICTED STOCK AWARDS
(a) GRANT OR SALE OF UNRESTRICTED STOCK. The Committee may, in its sole
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Stock Award to any participant which will entitle such participant
to receive shares of Stock free of any restrictions under the Plan
("Unrestricted Stock"). Unrestricted Stock Awards may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such participant.
(b) ELECTIONS TO RECEIVE UNRESTRICTED STOCK IN LIEU OF COMPENSATION. Upon
the request of a participant and with the consent of the Committee, each such
participant may, pursuant to an advance written election delivered to the
Company no later than the date or dates specified by the Committee, receive a
portion of the cash compensation otherwise due to such participant in
Unrestricted Stock either currently or on a deferred basis.
(c) RESTRICTIONS ON TRANSFERS. The right to receive Unrestricted Stock
on a deferred basis may not be sold, assigned, transferred, pledged or otherwise
encumbered, other than by will or the laws of descent and distribution.
SECTION 8. PERFORMANCE SHARE AWARDS
(a) NATURE OF PERFORMANCE SHARES. 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. Performance Share Awards may be granted under the Plan to any
participants, including those who qualify for awards under other performance
plans of the Company. The Committee in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals applicable under each such Award, the periods during which performance is
to be measured, and all other limitations and conditions applicable to the
awarded Performance Shares; provided, however, that the Committee may rely on
the performance goals and other standards applicable to other performance unit
plans of the Company in setting the standards for Performance Share Awards under
the Plan.
<PAGE> 39
(b) RESTRICTIONS ON TRANSFER. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) RIGHTS AS A SHAREHOLDER. A participant receiving a Performance Share
Award shall have the rights of a shareholder 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 written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) TERMINATION. Except as may otherwise be provided by the Committee at
any time prior to termination of employment (or other business relationship),
a participant's rights in all Performance Share Awards shall automatically
terminate upon the participant's termination of employment (or other business
relationship) by the Company and its Subsidiaries for any reason (including
death, Disability and for Cause).
(e) ACCELERATION, WAIVER, ETC. At any time prior to the participant's
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Committee may in its sole discretion accelerate, waive or,
subject to Section 11, amend any or all of the goals, restrictions or conditions
imposed under any Performance Share Award.
SECTION 9. TAX WITHHOLDING
(a) 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.
(b) PAYMENT IN SHARES. Subject to approval by 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.
<PAGE> 40
SECTION 10. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment (or other business relationship):
(a) a transfer to the employment (or other business relationship) of the
Company from a Subsidiary or from the Company to a Subsidiary, or from one
Subsidiary to another Subsidiary; or
(b) 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 (or other business relationship) 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.
SECTION 11. 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. In addition, the Committee may amend any outstanding Award to reduce
the exercise or purchase price in order to fulfill a legitimate corporate
purpose (e.g., to retain a key employee) or to maintain the value of such
outstanding Award under circumstances beyond the control of the Company's
management, but in no event shall such amendments be made to outstanding Awards
representing greater than 10% of the total number of shares of Stock authorized
for issuance pursuant to the Plan. To the extent required by the Code to ensure
that Options that have been granted hereunder qualify as Incentive Stock
Options, Plan amendments shall be subject to approval by the Company's
stockholders.
SECTION 12. 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.
<PAGE> 41
SECTION 13. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 13:
(a) Each Stock Option shall automatically become fully exercisable
notwithstanding any provision to the contrary herein.
(b) Restrictions and conditions on Restricted Stock Awards and
Performance Share Awards shall automatically be deemed waived, and the
recipients of such Awards shall become entitled to receipt of the Stock subject
to such Awards unless the Committee shall otherwise expressly provide at the
time of grant.
(c) "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following events:
(i) 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 the acquisition of
securities directly from the Company); or
(ii) 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
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders 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 stock 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;
<PAGE> 42
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 shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "CHANGE OF CONTROL"
shall be deemed to have occurred for purposes of the foregoing clause (i).
SECTION 14. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee may
require each person acquiring shares 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 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.
(b) 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 delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 15. EFFECTIVE DATE OF PLAN
This Plan has been amended and restated as of February 26, 1998 to
reflect, in addition to other changes, an increase of 480,000 shares reserved
and available for issuance under the Plan.
<PAGE> 43
SECTION 16. GOVERNING LAW
This Plan shall be governed by Maryland law except to the extent such law
is preempted by federal law.
DATE OF APPROVAL OF INITIAL PLAN BY
SHAREHOLDERS: February 15, 1994
DATE OF APPROVAL OF FIRST AMENDED AND
RESTATED PLAN BY BOARD OF DIRECTORS: August 28, 1996
DATE OF APPROVAL OF FIRST AMENDED AND
RESTATED PLAN BY SHAREHOLDERS: April 25, 1997
DATE OF APPROVAL OF SECOND AMENDED AND
RESTATED PLAN BY BOARD OF DIRECTORS: February 26, 1998
DATE OF APPROVAL OF SECOND AMENDED AND
RESTATED PLAN BY SHAREHOLDERS: ________________
16
<PAGE> 44
APPENDIX II
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS OF
BAY APARTMENT COMMUNITIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
The undersigned stockholder(s) of Bay Apartment Communities, Inc. (the
"Company") hereby appoints Messrs. Gilbert M. Meyer and Jeffrey B. Van Horn,
and each of them singly, as proxies, each with full power of substitution, for
and in the name of the undersigned at the Annual Meeting of Stockholders of the
Company to be held on May 8, 1998, and at any and all adjournments thereof, to
vote all shares of common stock of said Company held of record by the
undersigned on March 26, 1998, as if the undersigned were present and voting
the shares.
(To be Signed on Reverse Side)
<PAGE> 45
<TABLE>
<S> <C> <C> <C> <C>
A [X] PLEASE MARK YOUR NOMINEES: Gilbert M. Meyer
VOTES AS IN THIS EXAMPLE. Max L. Gardner
Bruce A. Choate
John J. Healy, Jr.
Brenda J. Mixson
Thomas H. Nielsen
</TABLE>
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD AUTHORITY
(except as indicated to vote for the
to the contrary). nominees listed at right.
1. ELECTION
OF [ ] [ ]
DIRECTORS
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any nominee write the
nominee's name on the space provided below.)
_______________________________________________________________________
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Ratification of the 1994 Stock Incentive
Plan, as amended and restated. [ ] [ ] [ ]
3. Approval of amendments to the Articles
of Incorporation relating to the Series A [ ] [ ] [ ]
Preferred Stock.
4. Ratification of the appointment of the
accounting firm of Coopers & Lybrand L.L.P.
to serve as independent accountants for [ ] [ ] [ ]
the Company for the fiscal year ending
December 31, 1998.
</TABLE>
5. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY 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, FOR PROPOSAL 2, FOR PROPOSAL 3 AND FOR PROPOSAL 4, AND IN
ACCORDANCE WITH THE PROXIES' DISCRETION ON SUCH OTHER BUSINESS THAT MAY PROPERLY
COME BEFORE THE MEETING.
I PLAN TO ATTEND THE MEETING [ ]
SIGNATURE______________________ SIGNATURE______________________ DATE_______1998
SIGNATURE IF HELD JOINTLY
NOTE: (Please date this Proxy and sign exactly as your name appears herein. 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.)
