1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Koger Equity, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
2
KOGER EQUITY, INC.
433 PLAZA REAL, SUITE 335
BOCA RATON, FLORIDA 33432
(561) 447-1890
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
Date: Wednesday, May 23, 2001
Time: 11:00 a.m.
Place: New York Marriott World Trade Center
Three World Trade Center
New York, New York
Dear Shareholder:
At our Annual Meeting, we will ask you:
1. To elect a board of nine (9) directors to serve for the ensuing
year or until their respective successors are elected and qualified; and
2. To transact any other business that may properly be presented at
the Annual Meeting.
If you were a shareholder of record at the close of business on March 16,
2001, you may vote at the Annual Meeting.
A copy of the Koger Equity, Inc. Annual Report for the year ended December
31, 2000, which reports financial and other information, is enclosed.
You are asked to mark, date, sign, and return the enclosed proxy. An
envelope is enclosed for your convenience. No postage is required if mailed in
the United States.
By order of the Board of Directors
James L. Stephens
Vice President
April 20, 2001
3
KOGER EQUITY, INC.
433 PLAZA REAL, SUITE 335
BOCA RATON, FLORIDA 33432
(561) 447-1890
---------------------
PROXY STATEMENT
APRIL 20, 2001
---------------------
INTRODUCTION
We sent you this Proxy Statement and the enclosed proxy card because Koger
Equity's Board of Directors is soliciting your proxy to vote at the 2001 Annual
Meeting of Shareholders. This Proxy Statement summarizes the information you
need to know to vote intelligently at the Annual Meeting. However, you do not
need to attend the Annual Meeting to vote your shares. Instead, you may simply
complete, sign, and return the enclosed proxy card. In this Proxy Statement,
Koger Equity, Inc., is generally referred to as either "Koger Equity" or the
"Company."
We will begin sending this Proxy Statement, the attached Notice of Annual
Meeting and the enclosed proxy card on April 20, 2001, to all shareholders
entitled to vote. Only those shareholders who owned Koger Equity common stock at
the close of business on March 16, 2001, are entitled to vote. On this record
date, there were 26,795,144 shares of Koger Equity common stock outstanding.
Koger Equity common stock is our only class of voting stock outstanding. We are
also sending along with this Proxy Statement, the Koger Equity 2000 Annual
Report, which includes our financial statements.
Each share of Koger Equity common stock that you own entitles you to one
vote. The proxy card indicates the number of shares of Koger Equity common stock
that you own. In this Proxy Statement, Koger Equity common stock is sometimes
referred to as the "Shares."
VOTE BY PROXY
Whether you plan to attend the Annual Meeting or not, we urge you to
complete, sign, and date the enclosed proxy card and to return it promptly in
the envelope provided. Returning the proxy card will not affect your right to
attend the Annual Meeting and vote.
If you properly fill in your proxy card and send it to us in time to vote,
your "proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make specific
choices, your proxy will vote your shares as recommended by the Board for the
election of all nine nominees for directors of the Company.
If any other matter is presented, your proxy will vote in accordance with
his best judgment. At the time this Proxy Statement went to press, we knew of no
other matters to be acted on at the Annual Meeting, other than those discussed
in this Proxy Statement.
TO REVOKE A PROXY
If you give a proxy, you may revoke it at any time before it is exercised.
You may revoke your proxy in any one of three ways:
(1) You may send in another proxy with a later date.
(2) You may notify the Company in writing before the Annual Meeting
that you have revoked your proxy.
(3) You may vote in person at the Annual Meeting.
4
TO VOTE IN PERSON
If you plan to attend the Annual Meeting and wish to vote in person, we
will give you a ballot when you arrive. You will complete the ballot at that
time and return it to the Inspectors of Election at the door. However, if your
shares are held in the name of your broker, bank or other nominee, you must
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares on March 16, 2001, the record date for
voting.
MATTERS TO BE CONSIDERED
ELECT NINE DIRECTORS
The nine nominees for director who receive the most votes will be elected.
So, if you do not vote for a particular nominee, or you indicate "withhold
authority to vote" for a particular nominee on your proxy card, your vote will
not count either "for" or "against" the nominee.
BROKER VOTES
Under the rules of the New York Stock Exchange, if your broker holds your
shares in its name, the broker will be entitled to vote your shares for the
election of directors even if it does not receive instructions from you. If your
broker received instructions from you, it must vote as instructed by you.
CONFIDENTIAL VOTING
We keep all the proxies, ballots and voting tabulations private as a matter
of practice. We only let our Inspectors of Election, representatives of Wells
Fargo Bank Minnesota, N.A., and certain employees of our independent tabulating
agent, Morrow & Company, examine these documents. The Inspectors of Election
will not disclose your vote to management unless it is necessary to meet legal
requirements. The Inspectors of Election will, however, forward to management
any written comments you make, on the proxy card or elsewhere.
ELECTION OF DIRECTORS
The Board has nominated nine directors for election at the Annual Meeting.
Each nominee is currently serving as one of our directors. If you re-elect them,
they will hold office until the next annual meeting and until their successors
have been elected and qualified.
We know of no reason why any nominee may be unable to serve as director. If
any nominee is unable to serve, your proxy may vote for another nominee proposed
by the Board, or the Board may reduce the number of directors to be elected. If
any director resigns, dies or is otherwise unable to serve out his term, or the
Board increases the number of directors, the Board may fill the vacancy until
the next Annual Meeting of Shareholders.
2
5
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES.
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 2000 DIRECTOR AGE
---- --------------------------- ---------- ---
D. Pike Aloian(2)............. Currently serves as a Director of Koger Equity. 1993 46
Mr. Aloian is also a Managing Director of
Rothschild Realty Inc. (a real estate
investment management and advisory service
firm); and a Director of Charter Oak Group,
Ltd. (a privately held owner and developer of
factory outlet and retail properties). Mr.
Aloian is also a Director of EastGroup
Properties, Inc. (an industrial real estate
investment trust ("REIT")); Brandywine Realty
Trust (an office REIT); Angeles Corporation (a
holder of loans to and equity investments in
residential real estate); and a Director of
Merritt Properties, LLC (a privately held owner
and developer of light industrial buildings).
Benjamin C. Bishop, Currently serves as a Director of Koger Equity. 1991 69
Jr.(1)(2)................... Mr. Bishop is the Chairman of the Board of
Allen C. Ewing & Co. (an investment banking
company). He is a former Director of Grubb &
Ellis Company (a national commercial real
estate brokerage company); a former Trustee of
GMR Properties (a REIT); and a former Director
of Cousins Properties, Inc. (a REIT).
Thomas J. Crocker............. Currently serves as the Chief Executive Officer 2000 47
(since March 1, 2000) and a Director of Koger
Equity. Mr. Crocker also serves as a Director
of Innkeepers USA Trust (a hotel REIT). Mr.
Crocker previously held the position of Chief
Executive Officer of Crocker Realty Trust, Inc.
(a private REIT), and Chief Executive Officer
of Crocker & Associates, L. P. (a private real
estate limited partnership). Mr. Crocker is the
former Chairman and Chief Executive Officer of
Crocker Realty Trust, Inc., (a public REIT) and
previously served as the Chairman and Chief
Executive Officer of Crocker Realty Investors,
Inc. (a public REIT). Mr. Crocker is the former
Chief Executive Officer of Crocker & Sons, Inc.
(a private real estate company).
3
6
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 2000 DIRECTOR AGE
---- --------------------------- ---------- ---
David B. Hiley................ Currently serves as a Director of Koger Equity. 1993 62
Mr. Hiley previously served as Executive Vice
President and Chief Financial Officer of Koger
Equity from April 1, 1998 to March 1, 2000. Mr.
Hiley is currently a financial consultant. He
was former Managing Director of Berkshire
Capital Corporation (an investment banking
services firm); a Director and former Senior
Executive Vice President of Thomson McKinnon
Securities, Inc. (a securities broker-dealer);
consultant, Director and former Executive Vice
President of Thomson McKinnon, Inc. (a
financial services holding company); and former
Director of Newcity Communications, Inc. (a
communications firm).
Victor A. Hughes, Jr.......... Currently serves as Chairman of the Board of 1992 65
Directors of Koger Equity, Inc. and previously
served as the Chief Executive Officer (until
March 1, 2000). Mr. Hughes is a former
President, Chief Financial Officer, Senior Vice
President and Assistant Secretary of Koger
Equity, Inc. Mr. Hughes is also a former
Chairman and Chief Executive Officer of Koger
Realty Services, Inc. (a Koger Equity, Inc.
related entity and manager of office properties
in five markets).
John R. S. Jacobsson(2)....... Currently serves as a Director of Koger Equity, 1997 32
and is the Partner responsible for investments
at Apollo Real Estate Funds (manager of four
real estate investment funds). Mr. Jacobsson is
also a Director of Metropolis Realty Trust,
Inc. (owner of high-rise office buildings) and
a Director of Roland International, Inc. (a
land development company); and a Director of
Oasis Car Wash, Inc. (a car care company).
Lee S. Neibart(1)............. Currently serves as a Director of Koger Equity. 1996 50
Mr. Neibart is also Partner in charge of the
day-to-day operation of the Apollo Real Estate
Funds (manager of four real estate investment
funds); and a Director of Wyndham International
(a major hotel company); former Executive Vice
President and Chief Operating Officer of the
Robert Martin Company (a real estate
development and management firm); Director of
Atlantic Gulf Communities Corporation (a land
development company); Director of Meadowbrook
Golf Group, Inc. (a golf management company);
Director and President of Metropolis Realty
Trust, Inc. (owner of high rise office
buildings); Director of NextHealth, Inc.
(operator of wellness and spa facilities) and
Director of Roland International, Inc. (a land
development company).
4
7
PRINCIPAL OCCUPATIONS YEAR FIRST
DURING THE FIVE-YEAR PERIOD BECAME A
NAME ENDED ON DECEMBER 31, 2000 DIRECTOR AGE
---- --------------------------- ---------- ---
George F. Staudter(1)(2)...... Currently serves as a Director of Koger Equity. 1993 69
Mr. Staudter is a managerial and financial
consultant; Director of T. D. Waterhouse Family
of Funds, Inc. (a family of mutual funds);
former Director of Waterhouse Investor
Services, Inc. (a securities broker-dealer);
former President, Chief Executive Officer and
Director of Family Steak Houses of Florida,
Inc. (a restaurant chain).
James C. Teagle............... Currently serves as a Director of Koger Equity, 1996 59
Inc. Mr. Teagle is a former President and Chief
Operating Officer of Koger Equity, and has also
served the Company as Senior Vice President and
Vice President. Mr. Teagle is also a former
Director, President and Chief Operating Officer
of Koger Realty Services, Inc. (a Koger Equity,
Inc. related entity and manager of office
properties in five markets).
---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Unless instructions are given to the contrary, it is the intention of the
persons named as proxies to vote the Shares to which the proxy is related FOR
the election of the management slate of nine directors.
5
8
INFORMATION ABOUT KOGER EQUITY COMMON STOCK OWNERSHIP
SHAREHOLDERS OWNING MORE THAN FIVE PERCENT OF KOGER EQUITY COMMON STOCK
The following table shows, as of December 31, 2000, all persons we know to
be "beneficial owners" of more than five percent of the Koger Equity common
stock(1). This information is based on Schedule 13D or Schedule 13G reports
filed with the Securities and Exchange Commission (the "SEC") by each of the
firms listed in the table below. If you wish, you may obtain these reports from
the SEC.
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENT OF CLASS OWNED BENEFICIALLY(1)
------------------------------------ ---------------- ---------------------
Apollo Real Estate
Investment Fund II, L. P.................................. 21.4% 5,733,772
1301 Avenue of the Americas
New York, NY 10019
Alliance Capital Management, Inc............................ 8.3% 2,235,215(2)
1290 Avenue of the Americas
New York, NY 10104
Public Employees Retirement System.......................... 7.5% 2,000,000
277 East Town Street
Columbus, Ohio 43215
EQSF Advisers Inc. et al.................................... 5.4% 1,462,136
767 Third Avenue
New York, New York 10017
---------------
(1) "Beneficial ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own Koger Equity common stock not only if you hold it
directly, but also if you indirectly (through a relationship, a position as
a director or trustee, or a contract or understanding), have (or share) the
power to vote the stock, or to sell it, or you have the right to acquire it
within 60 days.
(2) Sole voting power as to 268,004 Shares; shared voting power as to 1,957,410
Shares; sole dispositive power as to 2,230,376 Shares and shared dispositive
power as to 4,839 Shares.
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of February 28, 2001, the Koger Equity common
stock owned beneficially by Koger Equity directors and executive officers. All
directors and executive officers as a group own beneficially 6.54% of the shares
of Koger Equity common stock.
6
9
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------ ------------------ ----------------
Directors:
D. Pike Aloian............................................ 13,633 0.05%(1)
Benjamin C. Bishop, Jr.................................... 33,538 0.13%(1)
Thomas J. Crocker......................................... 545,172 2.02%(2)
David B. Hiley............................................ 148,538 0.55%(3)
Victor A. Hughes, Jr...................................... 510,707 1.89%(4)
John R. S. Jacobsson...................................... 9,484 0.04%(1)(5)
Lee S. Neibart............................................ 10,956 0.04%(1)(5)
George F. Staudter........................................ 16,431 0.06%(1)
James C. Teagle........................................... 263,950 0.98%(6)
Executive Officers:
Christopher L. Becker..................................... 0 0.00%
Thomas C. Brockwell....................................... 0 0.00%
Drew P. Cunningham........................................ 0 0.00%
Robert E. Onisko.......................................... 200,831 0.75%(7)
James L. Stephens......................................... 57,315 0.21%(8)
--------- ----
Total Shares Held by All Executive Officers and
Directors as a Group (14 persons)............... 1,810,555 6.54%(9)
========= ====
---------------
(1) Includes 4,000 Shares which are subject to presently exercisable options.
(2) Includes 233,333 Shares which are subject to presently exercisable options.
(3) Includes 129,000 Shares which are subject to presently exercisable options.
(4) Includes 180,000 Shares which are subject to presently exercisable options.
(5) Beneficial ownership excludes 5,733,772 Shares owned by Apollo Real Estate
Investment Fund II, L.P. ("AREIF II") and AREIF II Realty Trust, Inc.
("ARTI"), a subsidiary of AREIF II. The general partner of AREIF II is
Apollo Real Estate Advisors II, L.P. ("ARE Advisors II"). The general
partner of ARE Advisors II is Apollo Real Estate Capital Advisors II, Inc.
("ARECA II"). Messrs. Jacobsson and Neibart are officers of ARECA II and
limited partners of ARE Advisors II. Each of Messrs. Jacobsson and Neibart
disclaim beneficial ownership of all securities owned by ARTI, AREIF II and
any of their affiliates.
(6) Includes 196,250 Shares which are subject to presently exercisable options.
Also includes 13,950 Shares owned by spouse.
(7) Includes 100,000 Shares which are subject to presently exercisable options.
(8) Includes 30,000 Shares which are subject to presently exercisable options.
(9) Sole voting and dispositive power as to 891,482 Shares, and 13,950 Shares
with shared voting and dispositive power. Includes 888,583 Shares which are
subject to presently exercisable options, or options which are exercisable
within 60 days.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers, and greater-than-10% stockholders to file reports
with the SEC and the New York Stock Exchange on changes in their beneficial
ownership of Koger Equity common stock and to provide Koger Equity with copies
of the reports. Based on our review of these reports and of certifications
furnished to us, we believe that all of these reporting persons complied with
their filing requirements for 2000.
7
10
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of Koger Equity
and monitors the performance of management. In accordance with corporate
governance principles, the Board does not involve itself in day-to-day
operations. The directors keep themselves informed through discussions with the
Chairman, key executive officers and our principal external advisers (legal
counsel, auditors, investment bankers and other consultants), by reading reports
and other materials that we send them and by participating in Board and
committee meetings.
Each of the directors attended at least 75% of the Board of Directors
meetings and meetings held by committees of the Board of Directors of which they
were members.
THE COMMITTEES OF THE BOARD
The Audit Committee. The Audit Committee recommends the selection of the
independent auditors to the Board, approves the scope of the annual audit by the
independent auditors, reviews audit findings, accounting policies and quarterly
and annual financial statements. As required by the SEC, the committee reports
to you concerning its activities during the last year. The Report of the Audit
Committee is on pages 19 and 20 of this Proxy Statement. The committee meets
privately, outside the presence of Koger Equity management, with both the
independent auditors and the Company's internal auditors. The Audit Committee
met four times in 2000 and members of the Audit Committee consulted with the
officers of the Company, the Company's internal auditors and the independent
auditors at various times throughout the year.
The Compensation Committee. The Compensation Committee establishes and
approves all elements of compensation for certain executive officers. Each year,
as the SEC requires, the committee reports to you on executive compensation. The
Report on Executive Compensation for 2000 by the Compensation Committee is on
pages 15 through 17 of this Proxy Statement. The committee administers the
Company's Stock Option Plans and 1998 Equity and Cash Incentive Plan, as Amended
and Restated, and has sole authority for awards under the Plans, including
timing, pricing and amount. The committee also makes recommendations to the
Board of Directors in regard to the grant of bonuses and supplemental
contributions to the Company's 401(k) Plan. The committee met six times during
2000.
HOW WE COMPENSATE DIRECTORS
Annual Retainer Fee. We compensate directors (except for the Chairman) who
are not employees of Koger Equity or our subsidiaries with an annual retainer of
$20,000. Effective February 17, 2000, following his retirement as Chief
Executive Officer, the Board authorized the payment of an annual retainer of
$50,000 to the Chairman of the Board.
Meeting Fees. We pay non-employee directors a fee of:
- $2,000 for attendance at each Board meeting; and
- $500 for attendance at each committee meeting.
Expenses and Benefits. We reimburse all directors for travel and other
related expenses incurred in attending shareholder, Board and committee
meetings.
Special Fee Paid to a Director. At its meeting held on February 17, 2000,
the Board of Directors authorized the payment of $100,000 to D. Pike Aloian, in
consideration of extraordinary services he provided to the Company during 1999
as a member of the Finance Committee of the Board of Directors in connection
with transactions considered by the Company. In addition, the Board of Directors
authorized the payment of $55,000 to Mr. Aloian, setting his compensation for
acting as the Chairman of a special committee of the Board of Directors, which
committee was established in October 2000 and pro rated through January 31,
2001.
8
11
Directors Who are Koger Equity Employees. We do not compensate our
employees for service as a director. We do, however, reimburse them for travel
and other related expenses.
Stock Options Held by Board Members. Each member of the Board of Directors
who is not also an employee of the Company currently holds an option to purchase
4,000 Shares other than Messrs. Hughes and Teagle who were employees of the
Company at the time of grant. These options were granted on August 19, 1997, and
are fully exercisable at a per share price of $19.8125. For information
concerning options held by Messrs. Hughes and Teagle, see the table "Aggregated
Option Exercises During 2000 and Year-End Option Values" on page 12 of this
Proxy Statement.
The Stock Investment Plan. Directors may elect to receive payment of part
or all of their monthly retainer in Shares by participating in the Company's
Stock Investment Plan. Additional information concerning the Stock Investment
Plan is printed on pages 14 and 15 of this Proxy Statement.
9
12
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows annual compensation and long-term compensation of
the Chief Executive Officer and certain other named executive officers whose
salary and bonus for the fiscal year ended December 31, 2000, exceeded $100,000.
Throughout the remainder of this Proxy Statement, these seven persons will be
referred to as the "Named Officers."
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
-----------------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION RESTRICTED OPTIONS/ ALL OTHER
-------------------- STOCK SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARD(S) (2) (3)
--------------------------- ---- --------- -------- ---------- ---------- ------------
Thomas J. Crocker.................. 2000 $250,000 $204,806(4) -- 700,000 $ 8,400(7)
Chief Executive Officer 1999 -- -- -- -- --
1998 -- -- -- -- --
Robert E. Onisko................... 2000 $166,667 $128,204(4) -- 300,000 $ 6,131(7)
Chief Financial Officer 1999 -- -- -- -- --
1998 -- -- -- -- --
Christopher L. Becker.............. 2000 $107,693 $ 26,923(4) -- 200,000 $ 3,328(7)
Senior Vice President 1999 -- -- -- -- --
1998 -- -- -- -- --
Bryan F. Howell.................... 2000 $161,200 $ 3,100 -- 25,000 $ 204,235(7)
Senior Vice President(5) 1999 158,617 63,551 $13,500 -- 9,845
1998 150,833 39,544 -- 20,000 7,118
James L. Stephens.................. 2000 $130,000 $ 22,500(4) -- -- $ 16,048(7)
Vice President 1999 127,917 51,250 $13,500 -- 211,490
1998 121,667 25,842 -- 20,000 319,178
Victor A. Hughes, Jr............... 2000 $ 95,674 $ 1,480 -- -- $1,753,704(7)(8)
Chairman of the Board and 1999 315,000 156,058 $67,500 -- 10,026
Former Chief Executive 1998 308,750 156,058 -- 180,000 10,711
Officer(6)
James C. Teagle.................... 2000 $177,039 $ 78,957 -- -- $2,832,633(7)(9)
Former President and 1999 241,500 104,645 $67,500 -- 8,441
Chief Operating Officer(6) 1998 236,708 104,645 -- 100,000 8,850
---------------
(1) Includes an amount of salary paid by Koger Realty Services, Inc. for the
2000 salary of Mr. Crocker, $6,346; Mr. Hughes, $35,689; Mr. Teagle,
$55,162; Mr. Onisko, $4,231; Mr. Becker, $5,800; Mr. Howell, $24,521; and
Mr. Stephens, $27,187.
(2) For information concerning the number and market value of Shares subject to
the Company's stock option plans as to the Named Officers, reference is made
to the "Aggregated Option Exercises During 2000 and Year-End Option Values"
table and the note thereto on page 12 of this Proxy Statement.
The options granted to the Chief Executive Officer and the other Named
Officers during the fiscal year ended December 31, 2000, are described as
follows:
As to Mr. Crocker, includes option to purchase 700,000 Shares granted at an
exercise price of $16.0625 per share, which option becomes one-third
exercisable each year commencing on February 17, 2001, and will expire on
February 17, 2010.
As to Mr. Onisko, includes option to purchase 300,000 Shares granted at an
exercise price of $16.0625 per share, which option becomes one-third
exercisable each year commencing on February 17, 2001, and will expire on
February 17, 2010.
10
13
As to Mr. Becker, includes option to purchase 200,000 Shares granted at an
exercise price of $17.5625 per share, which option becomes one-third
exercisable each year commencing on June 14, 2001, and will expire on June
14, 2010.
As to Mr. Howell, includes option to purchase 25,000 Shares granted under
the 1998 Equity and Cash Incentive Plan at an exercise price of $15.875 per
share, which option vests at a cumulative annual rate of 20% per year,
commencing on February 16, 2001, and will expire on February 16, 2010.
(3) Includes the taxable portion of certain excess life insurance premiums (as
defined by the Internal Revenue Code) paid by the Company on behalf of each
qualifying employee, including the Named Officers (the "Life Insurance
Premiums") and 401(k) Plan contributions, each of which were Company
benefits which did not discriminate in scope, terms or operation in favor of
the Named Officers and were available generally to all salaried employees of
the Company.
(4) Includes a cash bonus which was earned for calendar year 2000, but was paid
in 2001: as to Mr. Crocker, $200,000; as to Mr. Onisko, $125,000; as to Mr.
Becker, $25,000; and as to Mr. Stephens, $20,000.
(5) Mr. Howell resigned from his position effective January 12, 2001.
(6) Mr. Hughes retired on February 29, 2000, and Mr. Teagle retired on July 31,
2000.
(7) For 2000, includes a matching cash contribution made by the Company to the
account of each qualifying employee, including each Named Officer, under the
401(k) Plan, which contribution was equal to 50% of such employee's
contributions to his or her account under the 401(k) Plan, subject to a
maximum employee contribution of 6% of eligible compensation.
- As to Mr. Crocker, for 2000, includes Life Insurance Premiums in the
amount of $675 and a 401(k) Contribution in the amount of $5,100. Also
includes a Stock Investment Plan contribution in the amount of $2,625.
- As to Mr. Onisko, for 2000, includes Life Insurance Premiums in the
amount of $1,035, and a 401(k) Contribution in the amount of $5,096.
- As to Mr. Becker, for 2000, includes Life Insurance Premiums in the
amount of $270, and a 401(k) Contribution in the amount of $3,058.
- As to Mr. Howell, for 2000, includes Life Insurance Premiums in the
amount of $1,203, and a 401(k) Contribution in the amount of $5,100. Also
includes $197,932 of income associated with the exercise of options on
(i) 21,447 shares at an exercise price of $7.625, (ii) 1,072 shares at an
exercise price of $11.50 and (iii) 6,100 shares at an exercise price of
$15.375.
- As to Mr. Stephens, for 2000, includes Life Insurance Premiums in the
amount of $408, and a 401(k) Contribution in the amount of $5,100. Also
includes $10,540 of income associated with the exercise of options on
1,916 shares, all at an exercise price of $11.50.
- As to Mr. Hughes, for 2000, includes Life Insurance Premiums in the
amount of $1,143. Also includes $22,917 of income associated with the
exercise of options on 33,334 shares, all at an exercise price of
$15.375.
- As to Mr. Teagle, for 2000, includes Life Insurance Premiums in the
amount of $1,355. Also includes $453,516 of income associated with the
exercise of options on 53,750 shares, all at an exercise price of $7.625.
(8) Includes one-time severance payment to Mr. Hughes of $1,617,361 and annual
retirement payments of $112,283 pursuant to the Company's Supplemental
Executive Retirement Plan ("SERP").
(9) Includes a one-time severance payment to Mr. Teagle of $1,207,158 and a lump
sum payment of $1,170,604 in settlement of benefits due under the SERP.
11
14
OPTIONS GRANTED DURING 2000
During the fiscal year ended December 31, 2000, the Company granted the
following options to its Named Officers. Messrs. Hughes, Stephens and Teagle
received no option grants in 2000. The Company has no outstanding stock
appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT
TOTAL ASSUMED ANNUAL RATES
NUMBER OF OPTIONS/SARS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ------------------------
NAME GRANTED(1) YEAR ($/SHARE) DATE 5% 10%
---- ------------ ------------ ----------- ---------- ---------- -----------
Mr. Crocker.................... 700,000 40.09% $16.0625 2/17/10 $7,071,120 $17,919,790
Mr. Onisko..................... 300,000 17.18% $16.0625 2/17/10 $3,030,480 $ 7,679,910
Mr. Becker..................... 200,000 11.45% $17.5625 6/14/10 $2,208,980 $ 5,598,080
Mr. Howell..................... 25,000 1.43% $15.8750 2/16/10 $ 249,595 $ 632,525
---------------
(1) These options were granted at an exercise price equal to the closing market
price of the Shares on the date of grant, have a term of 10 years and, in
the case of Messrs. Crocker, Onisko and Becker, vest at an annual rate of
33 1/3% over three years and, in the case of Mr. Howell, vest at an annual
rate of 20% over five years, except in the case of a change of control (as
described in the option agreements), when all stock options would become
vested.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The table below provides the following information: (1) the aggregate
number of options exercised and the value realized by the Named Officers during
the year ended December 31, 2000, and (2) the aggregate number of options and
the value of the in-the-money options in each case held by the Named Officer as
of December 31, 2000. The Company has no outstanding stock appreciation rights.
In the event of a change of control (as defined in the option agreements), all
stock options become vested.
AGGREGATED OPTION EXERCISES DURING 2000 AND YEAR-END OPTION VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- --------------- --------------------
Thomas J. Crocker...................... -0- $ 0 0/700,000 $ 0/$ 0
Robert E. Onisko....................... -0- $ 0 0/300,000 $ 0/$ 0
Christopher L. Becker.................. -0- $ 0 0/200,000 $ 0/$ 0
Bryan F. Howell........................ 28,619 $197,932 23,900/ 42,500 $ 2,981/$1,031
James L. Stephens...................... 1,916 $ 10,540 30,000/ 17,500 $ 4,125/$1,031
Victor A. Hughes, Jr................... 33,334 $ 22,917 180,000/ 0 $ 0/$ 0
James C. Teagle........................ 53,750 $453,516 196,250/ 0 $197,266/$ 0
---------------
(1) This valuation represents the difference between $15.5625, the closing price
of the Koger Equity common stock on the New York Stock Exchange on December
31, 2000, and the exercise price of the stock options. "In-the-money" stock
options are options for which the exercise price is less than the market
price of the underlying stock on a particular date.
12
15
LONG-TERM INCENTIVE PLAN AWARDS
The Company made no long-term incentive plan awards to any Named Officer
during the fiscal year ended December 31, 2000.
EXECUTIVE EMPLOYMENT AND RETIREMENT AGREEMENTS
On June 21, 1996, the Company entered into three-year employment agreements
with both Messrs. Hughes and Teagle. Effective April 1, 1998, the Company
entered into new employment agreements with these executives. Also, effective
April 1, 1998, Mr. Hiley, a Director of the Company, was engaged as the
Company's Executive Vice President and Chief Financial Officer. In this
connection, the Company entered into a three-year employment agreement with Mr.
Hiley commencing April 1, 1998.
Effective February 29, 2000, Messrs. Hughes and Hiley retired from their
respective positions as Chief Executive Officer and Executive Vice President and
Chief Financial Officer. At that time the Company entered into severance
agreements with Messrs. Hughes, Teagle and Hiley. Pursuant to these agreements,
Mr. Hughes was paid a lump sum severance benefit of $1,617,361 and Mr. Hiley was
paid a lump sum severance benefit of $911,538. Mr. Teagle, who retired effective
July 31, 2000, received a lump sum severance benefit of $1,207,158 and
$1,170,604 as a lump sum settlement of his SERP benefit. Messrs. Hughes, Hiley
and Teagle, (1) continue to participate in the Company's medical insurance
arrangements for employees, (2) were deemed to have satisfied the vesting
requirements for benefits under the SERP for executives of Koger Equity and (3)
were vested in all stock options which will continue to be exercisable for their
original term. Messrs. Hughes, Teagle and Hiley continue to serve on the Board
with Mr. Hughes continuing as Chairman.
On February 17, 2000, Thomas J. Crocker was elected to the Company's Board
of Directors, and effective March 1, 2000, he was appointed the Company's Chief
Executive Officer. Also, effective March 1, 2000, Robert E. Onisko was appointed
the Company's Chief Financial Officer. The Company has entered into a three-year
employment contract with both Messrs. Crocker and Onisko with Mr. Crocker to
receive an annual base salary of $300,000 with a targeted annual bonus
opportunity of $200,000, and Mr. Onisko to receive an annual base salary of
$200,000 with a targeted annual bonus opportunity of $125,000. These contracts
provide for the grant of options to purchase up to 700,000 Shares to Mr. Crocker
and up to 300,000 Shares to Mr. Onisko at a per share exercise price of
$16.0625, the closing market price of the Shares on the date of grant. These
contracts also contain certain change of control provisions. The Company also
entered into stock purchase agreements whereby it would finance the purchase of
up to 500,000 Shares by Mr. Crocker and up to 150,000 Shares by Mr. Onisko.
During 2000, the Company loaned to Mr. Crocker $3,799,774 (of which $3,172,694
is non-recourse) and to Mr. Onisko $1,266,583 (of which $1,057,556 is non-
recourse) in connection with their purchase of Shares pursuant to the stock
purchase agreements. The above indebtedness is secured with Shares and bears an
annual interest rate of 150 basis points over the applicable LIBOR rate, which
is five basis points above the Company's cost of funds under its secured
revolving credit facility. Interest is paid quarterly and is current under this
indebtedness.
THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The SERP generally provided a gross benefit for life to Messrs. Hughes and
Teagle equal to 50% of final three-year average annual base salary, and a gross
benefit for life to Mr. Hiley equal to 35% of final three-year average annual
base salary, with the surviving spouse of these three executive officers
receiving a lifetime benefit of 50% of the executive officer's benefit. The SERP
provides a gross benefit for 15 years certain to the other executive officers
(reduced in any case in which such executive officer has less than 20 years of
service) equal to 50% of final three-year average annual base salary. The
benefits will be reduced by:
(i) 50% of social security benefits received by the applicable
executive officer and
(ii) the annuitized equivalent of profit sharing contributions made by
the Company to the account of such executive officer under the 401(k) Plan.
At retirement, benefits under the SERP are paid in annuity form.
13
16
With their retirements on February 29, 2000, Mr. Hughes commenced receiving
an annual benefit under the SERP of $134,739, and Mr. Hiley commenced receiving
an annual benefit under the SERP of $60,250.
The SERP also provides Messrs. Hughes, Teagle and Hiley and their spouses
with lifetime medical coverage (which is intended to be roughly equivalent to
that provided by the Company for certain executive officers).
Benefits under the SERP generally vest only if the applicable executive
officer remains in the Company's employ for a period ranging from two to five
years after commencement of his participation in the SERP (depending upon such
executive officer's age at the commencement of his participation in the SERP).
However, if a change of control of the Company (as defined in the SERP) occurs
and a covered executive officer leaves the employ of the Company under certain
circumstances, then (a) in the case of Messrs. Hughes, Teagle and Hiley, each
was entitled to his benefits, commencing immediately and without regard to the
vesting requirement, and (b) in the case of each other covered executive
officer, such executive officer, at his option, was entitled to: (i) continue to
receive his or her base salary for a period of 18 months, or (ii) immediately
become fully vested in his or her retirement benefits, receive one year of
annual base salary, in lump sum payment, and continue to be provided all medical
and other insurance benefits for one year following termination. The only
executive officer that participates in the SERP is James L. Stephens.
The table below illustrates the annual pension benefits payable to
executive officers under the SERP. Since benefits shown in the table reflect a
straight life form of annuity benefit, if payment is made in the form of a joint
and survivor annuity, the annual amounts of benefit could be substantially below
those illustrated.
PENSION PLAN TABLE
YEARS OF SERVICE
----------------------------------------------------
FINAL AVERAGE ANNUAL REMUNERATION 15 20 25 30 35
--------------------------------- -------- -------- -------- -------- --------
$125,000.................................... $ 46,875 $ 62,500 $ 62,500 $ 62,500 $ 62,500
150,000.................................... 56,250 75,000 75,000 75,000 75,000
175,000.................................... 65,625 87,500 87,500 87,500 87,500
200,000.................................... 100,000 100,000 100,000 100,000 100,000
225,000.................................... 112,500 112,500 112,500 112,500 112,500
250,000.................................... 125,000 125,000 125,000 125,000 125,000
300,000.................................... 150,000 150,000 150,000 150,000 150,000
350,000.................................... 175,000 175,000 175,000 175,000 175,000
The compensation base used by the SERP is average base salary for the final
three years of employment. As of December 31, 2000, the base salary and
estimated years of service credit for Mr. Stephens was $130,000, and 14 years,
respectively.
STOCK INVESTMENT PLAN
The Company has a Stock Investment Plan (the "SIP") pursuant to which
participating employees and directors of the Company may purchase Shares. Under
the SIP, the Company is authorized to purchase up to an aggregate of 200,000
Shares on behalf of such participating employees and directors. Each
participating employee pays for his or her Shares pursuant to a monthly payroll
deduction plan established by the participating employee, and each participating
director pays for his Shares pursuant to a deduction from such director's
retainer.
Under the SIP, the Company contributes a portion of the purchase price of
such Shares, which contribution equals the following percentage of the total
monthly deduction from such employee's pay or such director's retainer:
- 25% of each monthly deduction less than or equal to $50;
- 20% of each monthly deduction greater than $50 but less than or equal to
$100; and
- 15% of each monthly deduction greater than $100 but less than or equal to
$1,700.
14
17
The Company also pays all commissions and related expenses of the SIP. The
Company's contribution and expenses incurred in administering the SIP totaled
approximately $50,500 for the year ended December 31, 2000.
During 2000 the Company paid the following amounts on behalf of the
following directors:
COMPANY
DIRECTOR NAME CONTRIBUTION
------------- ------------
D. Pike Aloian.............................................. $ 3,090
Benjamin C. Bishop, Jr...................................... 3,090
Thomas J. Crocker........................................... 2,625
David B. Hiley.............................................. 2,318
John R. S. Jacobsson........................................ 3,090
Lee S. Neibart.............................................. 3,090
George F. Staudter.......................................... 3,090
-------
Total Company Contribution on behalf of
Directors....................................... $20,393
=======
REPORT ON EXECUTIVE COMPENSATION FOR 2000
BY THE COMPENSATION COMMITTEE
The Compensation Committee of the Board administers Koger Equity's
executive compensation program. The committee has furnished the following report
on executive compensation for 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee includes Messrs. Aloian, Bishop, Staudter and
Jacobsson, none of whom serve as officers or employees of the Company or any of
its subsidiaries. In addition, none of the members of this Committee is an
executive officer of a company for which an executive officer of Koger Equity
determined compensation matters.
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee is responsible for setting the total
compensation of the Chief Executive Officer (the "CEO"), Chief Financial Officer
(the "CFO") and the Senior Vice Presidents. It also reviews the compensation,
including year-end bonuses, proposed by management for other executive officers
of the Company. The Compensation Committee is also responsible for:
(i) making grants under the Company's stock option and other incentive
plans;
(ii) making contributions, subject to approval by the Board of
Directors, under the 401(k) Plan and any other plan or plans as may be
determined by the Board of Directors; and
(iii) approving participation in the Supplemental Executive Retirement
Plan.
The committee has designed Koger Equity's executive compensation program to
support what we believe to be an appropriate relationship between executive pay
and the creation of shareholder value. To emphasize equity incentives, we link a
significant portion of executive compensation to the market performance of the
Koger Equity common stock. The objectives of our program are:
- To support a pay-for-performance policy among all executives based on
both their individual performance and the performance of Koger Equity;
- To align the interests of executives with the long-term interests of
shareholders through awards whose value over time depends upon the market
value of Koger Equity's common stock;
- To provide compensation comparable to that offered by other leading
companies in our industry, enabling Koger Equity to compete for and
retain talented executives who are critical to our long-term success; and
15
18
- To motivate key executives to achieve strategic business initiatives and
to reward them for their achievement.
We compensate our executives through base salary, bonus paid in cash (or a
combination of cash and shares or restricted stock awards), and long-term
incentive awards (usually grants of stock options).
We also provide our executives with employee benefits, such as retirement
and health benefits. Koger Equity has entered into employment agreements
containing change of control provisions with certain of our executive officers
to provide for certain payments and other benefits if they are terminated
following a change in control of Koger Equity.
GENERAL
The committee annually reviews the base salaries of our executives to
determine if adjustments are appropriate to ensure that their salaries are
competitive and that they reflect the executive's increased responsibilities as
Koger Equity grows.
In determining the compensation paid to the executive officers in 2000, the
Compensation Committee took into consideration a number of factors, including
among others, the development program and the improvement in the Company's
operations, including increases in rental revenues and lease terms.
During 2000 the Company accomplished the following:
(i) The overall percent leased rate of its buildings at December 31,
2000, was maintained at 90%.
(ii) Its average rental rate per square foot increased from $16.79 to
$18.07, or 7.6% over the prior year.
(iii) Its rental and other rental services revenues increased from
$156,153,000 to $164,733,000, or 5.5% over the prior year.
(iv) But for a one-time charge as the result of a corporate
restructuring and reorganization in 2000, the Company would have had an
increase in Funds From Operations of 6.0% to $68.9 million compared to
1999. This successful restructuring and reorganization of the Company
resulted in a one-time charge of $12.8 million causing a decrease in Funds
From Operations of 13.7% to $56.1 million for 2000 compared to the prior
year.
(v) Dividends paid increased 7.7%, to $1.40 per outstanding share.
(vi) Koger Equity completed construction of six new buildings
containing approximately 579,200 square feet.
(vii) Consistent with its policy of recycling capital by selling of
assets that no longer fit its portfolio standards, the Company sold two of
its office centers, reducing the number of its operating properties to 194
buildings from 218 and reducing the size of its portfolio by approximately
386,000 square feet.
(viii) At December 31, 2000, the Company had two new office buildings
under construction on some of its existing land, which buildings will
contain approximately 180,900 square feet.
While the Compensation Committee considered all of these accomplishments
and although the committee has from time to time reviewed the executive
compensation levels of other REITs and referred to other available information
concerning the salaries of executive officers in peer group companies, it did
not, and has not as yet, set any specific criteria in arriving at any particular
executive officer's compensation. Therefore, the Compensation Committee made a
subjective determination in setting the compensation of the CEO, CFO and the
Senior Vice Presidents.
In arriving at the compensation paid Thomas J. Crocker, the CEO, during
2000, the Compensation Committee considered the outstanding performance of the
Company under his leadership as CEO, as well as his experience in corporate
finance.
16
19
BASE SALARIES AND BONUSES OF EXECUTIVES
Although there was no increase in the base salaries of the Company's
executive officers for 2000, the base salaries of our executives approximate the
medium for salaries of executives in the Comparison Group. The committee awarded
bonus compensation for 2000 to each executive based on the executives scope of
responsibility, the specific contributions made by the executive to Koger
Equity's performance over all and to the performance within the executive's area
of responsibility and the CEO's recommendation.
BASE SALARY AND BONUS OF THE CEO
Pursuant to an employment contract with the Company, Mr. Crocker was
appointed CEO of the Company effective March 1, 2000, and is paid a base salary
at the annual rate of $300,000. For 2000 the Committee determined that Mr.
Crocker's contribution to Koger Equity's performance warranted a bonus of
$200,000, payable in cash on February 22, 2001, the date the bonus was granted.
LONG-TERM INCENTIVE AWARDS IN 2000
We provide long-term incentive awards for executives by granting stock
options. The committee believes that the granting of stock options helps align
the interests of its top executives with shareholders because these executives
receive value only if the market value of the common stock increases.
SECTION 162(M) LIMITATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a federal income tax deduction to public companies
for certain compensation over $1,000,000 paid to Named Officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. Having considered the requirements of Section
162(m) of the Code, the Compensation Committee believes that stock option grants
and other awards made pursuant to its various plans meet such requirements and
are, therefore, exempt from the limitations on deductibility. Historically, the
compensation of each Named Officer has been well below the $1,000,000 limit.
Although the Compensation Committee intends to structure most awards under its
equity plans to comply with Section 162(m), it has reserved and will continue to
reserve the right to structure awards that do not comply with that Section where
it believes doing so is in the best interests of the Company and its
shareholders.
CONCLUSION
The Compensation Committee believes that the compensation packages of the
Company's executive officers have been generally commensurate with the Company's
financial performance and the total value received by its shareholders. The
Compensation Committee intends to continue the review of executive officers'
compensation with the assistance of an outside compensation consultant and will
make such modifications in its approach to executive compensation as it
determines to be appropriate in light of the Company's financial condition, the
performance of its officers and peer group analysis.
This report has been furnished by the Compensation Committee.
D. Pike Aloian
Benjamin C. Bishop, Jr.
George F. Staudter
John R. S. Jacobsson, Chairman
17
20
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graph below sets forth the cumulative total shareholder return on
the Shares as compared with the cumulative total return of each of the New York
Stock Exchange Composite Index and the NAREIT Total Return Index, in each case
(i) on an annual basis for the period commencing December 31, 1995 and ending
December 31, 2000 and (ii) assuming that $100 was invested on December 31, 1995
and that all dividends were reinvested.
KE NYSE NAREIT
-- ---- ------
1995 100 100 100
1996 176 119 136
1997 210 155 161
1998 174 181 131
1999 186 197 123
2000 186 199 154
The Company has used a different industry group for compensation
comparisons from that used for its shareholder return performance presentation.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In 1995 certain entities which are wholly owned subsidiaries of a
co-mingled pension trust for which Morgan Guaranty Trust Company of New York is
the Trustee and J. P. Morgan Investment Management, Inc. is the investment
manager (the "Morgan Entities"), acquired certain properties from the Company
and from a partnership of which a subsidiary of the Company was the corporate
general partner. In connection
18
21
with this acquisition, the Morgan Entities entered into a Management Agreement
with Koger Realty Services, Inc., a Delaware corporation ("KRSI"), in which the
Company had a significant economic interest, pursuant to which KRSI managed such
properties for a five-year period. The Management Agreement was amended
effective January 1, 2000, and the term of the agreement was extended to
December 31, 2002.
KRSI was incorporated to provide, among other things, leasing and property
management services to owners of commercial office buildings. At December 31,
2000, the Company owned all of the preferred stock of KRSI, which represented in
excess of 95% (by value) of the economic benefits of KRSI. Such preferred stock
was nonvoting stock and not convertible into the common stock of KRSI while held
by the Company. All of the outstanding common stock of KRSI was acquired by
officers and employees of KRSI, including: Victor A. Hughes, Jr., James C.
Teagle, and James L. Stephens, all of whom were officers of the Company, and
certain other employees of KRSI who were not employed by the Company. In the
event that any of the forgoing persons left the employ of KRSI, KRSI had the
right to reacquire any Shares of common stock of KRSI held by such officer or
employee. In addition to serving as officers of KRSI, Messrs. Hughes, Teagle,
and Hiley served on the Board of Directors of KRSI. In February, 2001, KRSI was
merged with and into a wholly owned Florida subsidiary of the Company. In
connection with that merger, Messrs. Hughes, Teagle, and Stephens were paid
$20,555, $15,416, and $10,277, respectively, to redeem their shares of common
stock of KRSI in which they had a basis of $19,840, $14,880 and $9,920,
respectively.
Through December 31, 2000, the Company accounted for its investment in the
preferred stock of KRSI using the equity method. During 2000, KRSI earned
approximately $6.5 million in management and leasing fees from the Morgan
Entities and other entities for which it performs services.
Messrs. Neibart and Jacobsson, Directors of the Company, are partners of
Apollo Real Estate Advisors II, L. P., which is the general partner of Apollo
Real Estate Investment Fund II, L. P. ("Apollo") which owned at December 31,
2000, 5,733,772 Shares or 21.4% of the Koger Equity common stock. Pursuant to
agreements between the Company and Apollo, Apollo has been granted registration
rights and a conditional exemption from certain of the Company's takeover
defenses so long as Apollo does not acquire more than 25% of the Company's
outstanding stock.
During 2000 the Company loaned Mr. Teagle $546,293 in connection with his
exercise of stock options. This indebtedness is secured with Shares and bears an
annual interest rate of 150 basis points over the applicable LIBOR rate which
was five basis points above the Company's costs of funds under its secured
revolving credit facility. Interest is paid quarterly and is current on this
indebtedness, which had an outstanding balance of $523,754 at December 31, 2000.
Also, during 2000 the Company entered into a management agreement with
Crocker Realty Trust ("CRT") of which Mr. Crocker is the Chairman of the Board
and Chief Executive Officer owning 2.8% of the outstanding CRT shares, Mr.
Onisko is the Treasurer and Chief Financial Officer owning .2% of the
outstanding CRT shares and Apollo is a principal shareholder owning 49% of the
outstanding CRT shares. This agreement provides that the Company be paid a
management fee for managing the properties of CRT based on the value of its
assets. This agreement is terminable by either party upon 90 days written
notice. Under this agreement during 2000, the Company received fees totaling
$296,000. The terms of this agreement were approved by a committee of the
Company's Board of Directors whose members were not affiliated with CRT, and who
determined that such terms were similar to those that could be obtained from an
unaffiliated third party.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee includes Messrs. Bishop, Neibart and Staudter. The
functions of the Audit Committee are focused on three areas:
- The adequacy of the Company's internal controls and financial reporting
process and the reliability of the Company's financial statements.
- The independence and performance of the Company's internal auditors and
independent auditors.
19
22
- The Company's compliance with legal and regulatory requirements.
The Audit Committee meets with management periodically to consider the
adequacy of the Company's internal controls and the objectivity of its financial
reporting. The committee discusses these matters with the Company's independent
auditors and with appropriate Company financial personnel and internal auditors.
The Audit Committee regularly meets privately with both the independent
auditors and the internal auditors, each of whom has unrestricted access to the
committee.
The Audit Committee also recommends to the Board the appointment of the
independent auditors and reviews periodically their performance and independence
from the Company.
The Directors who serve on the Audit Committee are all "Independent" for
purposes of the New York Stock Exchange listing standards. The Board of
Directors has determined that none of its members has a relationship to the
Company that may interfere with the committee's independence from the Company
and its management.
The Board has adopted a charter setting out the functions the Audit
Committee is to perform. A copy of that charter is attached to this Proxy
Statement as Exhibit A.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls.
The independent auditors audit the annual financial statements prepared by
management, express an opinion as to whether those financial statements fairly
present in all material respects the financial position, results of operations
and cash flows of the Company in conformity with accounting principles generally
accepted in the United States of America.
This year, the Audit Committee reviewed the Company's audited financial
statements and met with both management and Deloitte & Touche LLP, the Company's
independent auditors, to discuss those financial statements. Management and
Deloitte & Touche LLP have represented to the Audit Committee that the financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America.
The Audit Committee has received from and discussed with Deloitte & Touche
LLP the letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). These items relate to that
firm's independence from the Company. The committee also discussed with Deloitte
& Touche LLP any matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
Based on these reviews and discussions, the Audit Committee recommended to
the Board that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
This report is furnished by the Audit Committee.
Benjamin C. Bishop, Jr.
Lee S. Neibart
George F. Staudter, Chairman
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
GENERAL
During the year ended December 31, 2000, the Company engaged Deloitte &
Touche LLP to provide certain audit services. The services included the audit of
the annual financial statements, a review of the quarterly data furnished by the
Company to the SEC for the quarters ended March 31, June 30, and September 30,
2000, services performed in connection with filing of this Proxy Statement and
the Annual
20
23
Report on Form 10-K by the Company with the SEC, attendance at meetings with the
Audit Committee and consultation on matters relating to accounting, tax and
financial reporting. The Audit Committee approved all services performed by
Deloitte & Touche LLP in advance of their performance. Deloitte & Touche LLP has
acted as independent certified public accountants for the Company since its
organization on June 21, 1988. Neither Deloitte & Touche LLP nor any of its
associates have any relationship to the Company or any of its subsidiaries
except in its capacity as independent certified public accountants.
It is expected that representatives of the independent public accountants
will attend the Annual Meeting and be available to respond to appropriate
questions and be permitted to make a statement concerning the Company should
they desire.
As of the date hereof, the Board of Directors has not selected independent
public accountants to audit the books and accounts of the Company for the fiscal
year ending December 31, 2001. It is anticipated that auditors will be selected
later in the fiscal year.
PRINCIPAL ACCOUNTING FIRM FEES
Aggregate fees billed to the Company for the year ending December 31, 2000
by the Company's principal accounting firm, Deloitte & Touche LLP, were:
Audit Fees.................................................. $124,750
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees.............................................. $118,406(a)(b)
---------------
(a) Includes fees for tax consulting and other non-audit services.
(b) The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.
OTHER BUSINESS
It is not anticipated that there will be presented to the Annual Meeting
any business other than the election of directors. At the time this Proxy
Statement went to press, we knew of no other matters to be acted on at the
Annual Meeting, other than those discussed in this Proxy Statement. If any other
business should properly come before the Annual Meeting or any adjournment
thereof, the persons named on the enclosed proxy will have discretionary
authority to vote such proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS AND NOMINATIONS TO THE BOARD
If a shareholder intends to present a proposal for action at the 2002
Annual Meeting and wishes to have such proposal considered for inclusion in the
Company's proxy materials in reliance on Rule 14a-8 under the Securities
Exchange Act of 1934, the proposal must be submitted in writing and received by
the Company by December 21, 2001. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating to
shareholder proposals.
In addition, the Bylaws of the Company establish an advance notice
procedure with regard to certain matters, including shareholder proposals and
nominations of individuals for election to the Board of Directors. In general,
notice of a shareholder proposal or a director nomination for a shareholders
meeting must be received by the Company not less than 70 days, nor more than 90
days before the date of the annual meeting and must contain specified
information and conform to certain requirements, as set forth in the Bylaws in
order for the proposal or nomination to be considered at a shareholder meeting.
If the presiding officer at any meeting of shareholders determines that a
shareholder proposal or director nomination was not made in accordance with the
Bylaws, the Company may disregard such proposal or nomination.
In addition, if a shareholder submits a proposal outside of Rule 14a-8 for
the 2002 Annual Meeting, and the proposal fails to comply with the advance
notice procedure prescribed by the Bylaws, then the Company's proxy may confer
discretionary authority on the persons who have been appointed as proxies on
behalf of
21
24
management to vote on the proposal. Proposals and nominations should be
addressed to Koger Equity, Inc., 433 Plaza Real, Suite 335, Boca Raton, Florida
33432.
GENERAL
The Company will bear the costs of solicitation of proxies. In addition to
the use of the mails, proxies may be solicited by personal interview, telephone
and telegram by directors, officers and employees of the Company, and no
additional compensation will be paid to such individuals. The Company also has
retained Morrow & Co., Inc., 445 Park Avenue, New York, New York 10022 to
solicit proxies by mail, personal interview, telephone, or telegraph, for which
service the Company anticipates a cost not in excess of $5,000 plus reasonable
out-of-pocket expenses. Arrangements may also be made with the stock transfer
agent and with brokerage houses and other custodians, nominees, and fiduciaries
who are record holders of Shares for the forwarding of solicitation material to
the beneficial owners of Shares. The Company will, upon the request of any such
entity, pay such entity's reasonable expenses for completing the mailing of such
material to such beneficial owners.
Consistent with state law and pursuant to the Company's Bylaws, a majority
of the Shares entitled to vote on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter.
The Company's Annual Report to Shareholders, which includes the Company's
Form 10-K, for the fiscal year ended December 31, 2000, which contains financial
statements and other information, is being mailed to shareholders with this
Proxy Statement, but it is not to be regarded as proxy soliciting material.
AN ADDITIONAL COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH
THE SEC MAY BE OBTAINED, WITHOUT CHARGE, BY ANY SHAREHOLDER UPON WRITTEN REQUEST
TO KOGER EQUITY, INC., 8880 FREEDOM CROSSING TRAIL, SUITE 101, JACKSONVILLE,
FLORIDA 32256-8280; PROVIDED HOWEVER, THAT A COPY OF THE EXHIBITS TO SUCH ANNUAL
REPORT ON FORM 10-K FOR WHICH THERE MAY BE A REASONABLE CHARGE, WILL NOT BE
SUPPLIED TO SUCH SHAREHOLDER UNLESS SPECIFICALLY REQUESTED.
By order of the Board of Directors
James L. Stephens
Vice President
22
25
EXHIBIT A
AUDIT COMMITTEE CHARTER
This Audit Committee Charter ("Charter") has been approved by the Board of
Directors (the "Board") of Koger Equity, Inc. (the "Company") to govern the
actions of its Audit Committee (the "Committee"), and the Board in doing so was
familiar with the restrictions in Section 303.01(B)(3) of the New York Stock
Exchange's Listed Company Manual and has made the determinations with respect to
the members of the Committee as to independence, financial literacy and
financial management expertise as are required by Section 303 and, by its
appointment of successors to such members, shall have made such determinations
as to such successors.
The number of members of the Committee, each of whom shall be a member of
the Board, shall meet the requirements of the New York Stock Exchange and shall
meet the independence and experience requirements of the New York Stock
Exchange.
The Committee is appointed by the Board to assist the Board in fulfilling
its responsibility with respect to the financial reports of the Company. The
Committee is to assist the Board:
1. in its oversight of the Company's accounting and financial
reporting principles and policies and internal controls and
procedures;
2. in its oversight of the Company's financial statements and the
independent audit thereof;
3. in selecting, evaluating and, where deemed appropriate, replacing
the outside auditors;
4. in evaluating the independence of the outside auditors and
5. in its oversight of the Company's internal audit function.
The function of the Committee is oversight. The management of the Company
is responsible for the preparation, presentation and integrity of the Company's
financial statements. Management and the internal auditing department are
responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
outside auditors are responsible for planning and carrying out a proper audit
and reviews, including reviews of the Company's quarterly financial statements
prior to the filing of each quarterly report on Form 10-Q, and other procedures
as required. In fulfilling their responsibilities hereunder, it is recognized
that members of the Committee are not full-time employees of the Company and may
not be accountants or auditors by profession or experts in the fields of
accounting or auditing but must have some level of financial literacy. However,
at least one member of the Audit Committee must have accounting or related
financial management expertise, as the Board of Directors interprets such
qualification in its business judgment. It is not the duty or responsibility of
the Committee or its members to conduct auditing or accounting reviews or
procedures or to determine that the Company's financial statements are complete
and accurate or are in accordance with accounting principles generally accepted
in the United States of America. Nor is it the duty of the Committee to conduct
investigations, to resolve disagreements, if any, between management and the
outside auditors or to assure compliance with laws and regulations or the
Company's internal procedures. Each member of the Committee shall be entitled to
rely on (i) the integrity of those persons and organizations within and outside
the Company that it receives information from and (ii) the accuracy of the
financial and other-information provided to the Committee by such persons or
organizations absent actual knowledge to the contrary (which shall be reported
to the Board).
The outside auditors for the Company are ultimately accountable to the
Board (as assisted by the Committee). The Board, with the assistance of the
Committee, has the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the outside auditors.
The outside auditors shall be required to submit to the Committee annually
formal written statements delineating all relationships between the outside
auditors and the Company, addressing the matters set forth in Independence
Standards Board Standard No. 1. The Committee shall discuss such statements with
the
A-1
26
outside auditors and, if so determined by the Committee, recommend that the
Board take appropriate action to satisfy itself of the independence of the
outside auditors.
The Committee shall meet twice annually, or more frequently if
circumstances dictate. Its proceedings shall include review of the planning for,
and scope and staffing of, the annual audit of the Company's financial
statements and of the results of the annual audit process. Its proceedings shall
also include meeting separately, if deemed necessary, annually with management
and the outside auditors to discuss any matters that the Committee or any of
these persons or firms believe should be discussed privately.
The Committee has reviewed and assessed the adequacy of this Charter and
shall annually review and reassess its adequacy.
The Committee shall make regular reports to the Board.
The Committee shall have the authority to retain consultants to advise the
Committee. The Committee may request any officer or employee of the Company or
the Company's outside counsel or outside auditors to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.
A-2
27
KOGER EQUITY, INC.
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, May 23, 2001
11:00 A.M.
New York Marriott World Trade Center
Three World Trade Center
New York, New York
[LOGO] KOGER EQUITY, INC.
433 PLAZA REAL, SUITE 335 PROXY
BOCA RATON, FLORIDA 33432
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 23, 2001, OR ANY ADJOURNMENTS THEREOF.
The shares of stock you hold in your account will be voted as you specify on the
reverse side.
If no choice is specified, the proxy will be voted "FOR" Item 1.
By signing the proxy, you revoke all prior proxies and appoint Victor A. Hughes,
Jr., Thomas J. Crocker and Robert E. Onisko, and each of them, with full power
of substitution, to vote your shares on the matters shown on the reverse side
and any other matters which may come before the Annual Meeting and all
adjournments.
See reverse for voting instructions.
28
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Koger Equity, Inc., c/o Shareowner Services (SM),
P. O. Box 64873, St. Paul, MN 55164-0873.
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
1. Election of directors:
01 D. Pike Aloian 06 John R. S. Jacobsson [ ] Vote FOR all nominees
(except as marked)
02 Benjamin C. Bishop, Jr. 07 Lee S. Neibart
03 Thomas J. Crocker 08 George F. Staudter [ ] Vote WITHHELD from all
nominees.
04 David B. Hiley 09 James C. Teagle
05 Victor A. Hughes, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ALL NOMINEES IN ITEM 1.
Address Change? Mark Box [ ]
Indicate changes below: Date:
Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc., should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.