DEF 14A: Definitive proxy statements
Published on April 9, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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AvalonBay Communities, Inc.
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(Name of Registrant as Specified In Its Charter)
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[FPO-HIGH RES LOGO ALREADY AT PRINTING PLANT]
2900 Eisenhower Avenue, Suite 300
Alexandria, Virginia 22314
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1999
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NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of AvalonBay Communities, Inc. (the "Company") will be held on
Wednesday, May 5, 1999 at 9:30 a.m. local time at the Hyatt Regency Reston,
Reston Town Center, 1800 Presidents Street, Reston, Virginia, for the following
purposes:
1. To elect the following nine (9) directors to serve until the 2000
Annual Meeting of Stockholders and until their respective successors
are elected and qualified: Gilbert M. Meyer, Richard L. Michaux, Bruce
A. Choate, Michael A. Futterman, John J. Healy, Jr., Richard W.
Miller, Brenda J. Mixson, Lance R. Primis and Allan D. Schuster.
2. 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 22, 1999 as
the record date for determining the stockholders entitled to receive 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"), 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
Edward M. Schulman
Secretary
Alexandria, Virginia
April 8, 1999
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.
AvalonBay Communities, Inc.
2900 Eisenhower Avenue, Suite 300
Alexandria, Virginia 22314
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PROXY STATEMENT
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FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 5, 1999
April 8, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of AvalonBay Communities, Inc. (the "Company")
for use at the 1999 Annual Meeting of Stockholders of the Company to be held on
Wednesday, May 5, 1999 and at any adjournments thereof (the "Annual Meeting").
At the Annual Meeting, stockholders will be asked to vote upon the election of
nine (9) directors of the Company and 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 April 8, 1999. The
Board of Directors has fixed the close of business on March 22, 1999 as the
record date for the determination of stockholders entitled to receive 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"), at the close of business on the Record Date will be entitled to receive
notice of and to vote at the Annual Meeting. As of the Record Date, there were
64,104,679 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting. Holders of Common Stock outstanding as of the close of business on the
Record Date will be entitled to one vote for each share held.
The presence, in person or by proxy, of holders of a majority of all of the
shares of Common Stock entitled to be cast is necessary to constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and "broker
non-votes" (i.e., shares represented at the Annual Meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and, with respect to one or more
but not all proposals, such brokers or nominees do not have discretionary voting
power to vote such shares) will be counted for purposes of determining whether a
quorum is present for the transaction of business at the Annual Meeting.
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
nine (9) nominees for directors of the Company named in this Proxy Statement. 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.
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 delivered proxy.
The Company's 1998 Annual Report, including financial statements for the
fiscal year ended December 31, 1998, is being mailed to stockholders
concurrently with this Proxy Statement. The Annual Report, however, is not part
of the proxy solicitation material. A copy of the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission may be obtained by
writing to AvalonBay Communities, Inc., 2900 Eisenhower Avenue, Suite 300,
Alexandria, Virginia 22314, Attention: Chief Financial Officer.
PROPOSAL 1
ELECTION OF DIRECTORS
Upon consummation of the merger (the "Merger") of Avalon Properties, Inc.
("Avalon Properties") with and into the Company in June 1998, the Board of
Directors of the Company consisted of twelve members. However, since the
departure of Charles H. Berman in February 1999, the Board of Directors has
consisted of eleven members. Two current members of the Board of Directors,
Christopher B. Leinberger and Thomas H. Nielsen, have determined not to stand
for re-election. Accordingly, nine directors will be elected at the Annual
Meeting to serve until the 2000 Annual Meeting and until their successors are
elected and qualified, and prior to or following the Annual Meeting the Board of
Directors will fix the number of directors of the Company at nine, effective as
of May 5, 1999.
The following persons who have chosen to stand for re-election as directors
of the Company have been nominated by the Board of Directors: Gilbert M. Meyer,
Richard L. Michaux, Bruce A. Choate, Michael A. Futterman, John J. Healy, Jr.,
Richard W. Miller, Brenda J. Mixson, Lance R. Primis and Allan D. Schuster (the
"Nominees"). 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 enclosed Proxy Card. A plurality of the votes
cast for the election of a Nominee for director shall elect such Nominee.
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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Information Regarding Nominees, Directors and Executive Officers
The following table sets forth certain information with respect to the
Nominees for election as directors at the Annual Meeting based on information
furnished to the Company by each Nominee. Unless otherwise specified, the
following information is as of January 25, 1999 and is based upon 64,095,626
shares of Common Stock outstanding at the close of business on such date.
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* 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) 250,000 shares issuable upon the exercise of stock options
that vested on or before March 26, 1999, (ii) 23,463 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 1994
Stock Incentive Plan, as amended and restated (the "Stock Incentive Plan"),
and (iii) 908,113 shares held jointly with spouse.
(3) Includes (i) 179,270 shares issuable upon the exercise of stock options
that vested on or before March 26, 1999, (ii) 2,173 shares owned indirectly
by Mr. Michaux's spouse, (iii) 52,244 shares owned indirectly by The
Michaux Family LLC and (iv) 374,337 shares held jointly with spouse.
(4) Includes 21,000 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(5) Does not include 3,000 shares issuable in the future under a deferred stock
award granted to the Nominee pursuant to an election under the Stock
Incentive Plan.
(6) Includes 7,683 shares owned indirectly by Mr. Futterman's wife.
(7) Includes 29,195 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(8) Includes 15,000 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(9) Includes 7,683 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(10) Does not include 2,000 shares issuable in the future under a deferred stock
award granted to the Nominee pursuant to an election under the Stock
Incentive Plan.
The following biographical descriptions set forth certain information with
respect to the Nominees, the directors of the Company who are not standing for
re-election and the executive officers of the Company who are not directors,
based on information furnished to the Company by each Nominee, director and
executive officer. There is no family relationship between any director or
executive officer of the Company. The executive officers of the Company are
elected annually at the first meeting of the Board of Directors following each
annual meeting of stockholders. Each officer holds office until the first
meeting of the Board of Directors following the next annual meeting of
stockholders and until his or her successor is duly elected and qualified or
until his or her death, resignation or removal in the manner provided in the
Company's Bylaws.
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Nominees for Election as Directors
Gilbert M. Meyer is the founder and Executive Chairman of the Company and,
since 1978, has been continuously involved with the Company as an executive
officer, director and stockholder. Prior to the completion of the Merger in June
1998, Mr. Meyer served as the Company's Chairman, President and Chief Executive
Officer. 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 at Berkeley. In addition, he currently serves as a
member of the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") and of the Policy Advisory Board of the Fisher
Center for Real Estate and Urban Economics, University of California at
Berkeley.
Richard L. Michaux has been a director and Chief Executive Officer of the
Company since the Merger, and he assumed the office of President following Mr.
Berman's departure in February 1999. He had previously been a director and the
Chief Executive Officer of Avalon Properties from its formation in August 1993
through the consummation of the Merger in June 1998. He had previously been a
partner of Trammell Crow Residential ("TCR"), which he joined in 1980, and
served as one of the three Group Managing Partners of TCR from 1986 to 1993. In
that capacity, he was responsible for residential development in the
Mid-Atlantic, Northeastern and Midwestern states. In previous positions, Mr.
Michaux was in finance and general management with Sea Pines Company on Hilton
Head Island, South Carolina from 1973 to 1975, a Division Manager of Ryan Homes
in Virginia from 1975 to 1978 and Marketing Director for the Burke Centre, a
6,000 unit development in Fairfax, Virginia from 1978 to 1980. Mr. Michaux
graduated from the United States Naval Academy with distinction and holds an
M.B.A. degree from the University of North Carolina at Chapel Hill where he was
a Morehead Fellow and a Dean's Scholar. Mr. Michaux's professional affiliations
include: past Chairman of the National Multi Housing Council; member of the Gold
Flight Council of Urban Land Institute (the "ULI"); Vice President/Treasurer of
the United States Naval Academy Class of 1966 Foundation; and founding Board
member of the D.C. Early Child Care Collaborative.
Bruce A. Choate has been a director of the Company since April 1994. Since
1991, Mr. Choate has served as Chief Financial Officer of Watson Land Company, a
privately-held real estate investment trust ("REIT") in Carson, California.
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.
Michael A. Futterman has been a director of the Company since June 1998 and
was a director of Avalon Properties from December 1993 through the consummation
of the Merger in June 1998. Since 1983, Mr. Futterman has been Chairman of
American Realty Capital, a closely held real estate company which has arranged
investments for its partners and stockholders in approximately $1.6 billion of
property. From 1988 to 1992, Mr. Futterman also held the position of President
of Elders American Realty Capital, Inc., a participating mortgage lender
subsidiary of Elders IXL, an Australian public company. Prior to joining
American Realty Capital, Inc., Mr. Futterman was employed by Eastdil Realty,
Inc. from 1969 to 1983, where he was most recently Executive Vice President and
a director. Mr. Futterman also served as a director of Dollar Dry Dock Savings
Bank from July 1989 to March 1990, and Trustee of the International Center of
Photography from 1986 to 1992. Mr. Futterman graduated from the Carnegie
Institute of Technology and the Georgetown University Law School.
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.
Richard W. Miller has been a director of the Company since June 1998 and
was a director of Avalon Properties from May 1997 through the consummation of
the Merger in June 1998. From 1993 through 1997, he served as
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Senior Executive Vice President and Chief Financial Officer of AT&T and as a
member of AT&T's Chairman's Office. For the three years prior to joining AT&T,
Mr. Miller led a reorganization of Wang Laboratories, Inc., where he was
Chairman, President and Chief Executive Officer. Wang Laboratories, Inc. emerged
from Chapter 11 bankruptcy in September 1993. From 1982 through 1988, he was
with RCA Corporation and the General Electric Company which acquired RCA in
1986, first as RCA's Executive Vice President and Chief Financial Officer, then
as RCA's Executive Vice President Consumer Products and Entertainment,
overseeing what was then the largest consumer electronics business in the U.S.,
and finally as GE's Senior Vice President--Consumer Electronics. From 1970 to
1982, Mr. Miller was with Penn Central Corporation, including positions as the
Chief Financial Officer of the parent company and Executive Vice President of
its principal real estate subsidiary, Arvida Corporation. Mr. Miller holds a
B.B.A. degree in economics from Case Western Reserve University and an M.B.A. in
finance from Harvard Business School. Mr. Miller also serves as a director of
Closure Medical Corporation.
Brenda J. Mixson has been a director of the Company since April 1994. In
March 1999, Ms. Mixson joined First Union Real Estate Equity and Mortgage
Investments as interim Chief Financial Officer. From December 1997 until March
1999, Ms. Mixson worked at Prime Capital Holding, LLC, where she most recently
served as Chief Financial and Investment Officer and Managing Director. 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. Ms. Mixson
graduated from the University of Minnesota with a B.S. degree in Economics.
Lance R. Primis has been a director of the Company since June 1998. Since
1997, Mr. Primis has been the managing partner of Lance R. Primis & Partners,
LLC, a management consulting firm with clients in the media industry. From 1969
to 1996, Mr. Primis was employed in various positions by The New York Times
Company, including the positions of President and Chief Operating Officer which
he held from 1992 to 1996. In addition, Mr. Primis was the President and General
Manager of The New York Times from 1988 to 1992. Mr. Primis currently serves as
Chairman of PressPoint, Inc., a recently organized company that enables the
transmission of newspapers through a digital satellite network to readers
anywhere in the world upon demand. In addition, Mr. Primis is the Chairman of
Duke University's DeWitt Center for Communications and Journalism and a member
of the Board of Directors of The Torstar Corporation, Plum Holdings, LLC and the
Partnership for a Drug Free America. Mr. Primis received a B.A. degree from the
University of Wisconsin, and he completed the Marketing Management Program at
Harvard Business School and the Stanford Executive Program at Stanford
University.
Allan D. Schuster has been a director of the Company since June 1998 and
was a director of Avalon Properties from December 1993 through June 1998. He has
been a private investor since June 1993. From April 1988 until June 1993, he was
Chairman and Chief Executive Officer of the Travelers Realty Investment Company,
where he directed that company's investment activities in commercial and
agricultural real estate. During Mr. Schuster's tenure, Travelers' portfolio of
mortgages, equities and joint ventures ranged between $12 billion and $20
billion. During this same period, Mr. Schuster was Chairman and Chief Executive
Officer of Prospect Company, a $2 billion real estate development company. From
December 1972 to September 1987, Mr. Schuster was with Citibank, N.A., where
during the last five years he was Managing Director of Citicorp Real Estate,
Inc. He is a Member of the Appraisal Institute and the ULI.
Directors Who Are Not Standing For Re-election
Christopher B. Leinberger, 48, has been a director of the Company since
June 1998 and was a Director of Avalon Properties from December 1993 through the
consummation of the Merger in June 1998. He has been Managing Director and
co-owner of Robert Charles Lesser & Co. since 1982, where he specializes in
metropolitan development trends and strategic planning for cities and real
estate companies. Robert Charles Lesser & Co. is one of the largest independent
real estate advisory firms in the country, working on over 400 projects a year
throughout North America. Mr. Leinberger is also a partner in Arcadia Land
Company, a "New Urbanist" development firm, and a director and member of the
compensation committee of Amresco Capital Trust. Mr. Leinberger has written many
articles on strategic planning for real estate which have appeared in trade
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magazines such as Builder, Urban Land and National Real Estate Investor. He is
also the author of Strategy for Real Estate Companies; Marketing, Finance,
Organization, jointly published by the ULI and NAIOP. Mr. Leinberger is Chairman
of the Board of Trustees of the College of Santa Fe. He is a graduate of
Swarthmore College and the Harvard Business School.
Thomas H. Nielsen, 68, has been a director of the Company since April 1994
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 in 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. He is also a director of Candlewood Hotel Company, Inc. 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 Who Are Not Directors
Bryce Blair, 40, was promoted to Chief Operating Officer of the Company in
February 1999. From the consummation of the Merger in June 1998 through the date
of such promotion, Mr. Blair served as the Company's Senior Vice
President--Development/Acquisitions, the same position he held with Avalon
Properties from its formation in August 1993 through June 1998. Mr. Blair
oversees development, construction, property operations and acquisition activity
throughout the Company's markets. Mr. Blair joined the Northeast Group of TCR in
1985 and was the partner responsible for overseeing development and acquisition
of multifamily opportunities throughout Massachusetts, Rhode Island and Long
Island, New York. Prior to joining the Northeast Group of TCR in 1985, he was a
Project Manager with the Exxon Corporation responsible for managing the design,
development and construction of capital improvement properties. Mr. Blair is a
1985 graduate of the Harvard Business School. He graduated magna cum laude with
an undergraduate degree in Civil Engineering from the University of New
Hampshire. He is a member of the ULI, the Real Estate Finance Association of
Greater Boston Real Estate Board, and the Real Estate Investment Advisory
Council.
Robert H. Slater, 45, was promoted to Executive Vice President of the
Company in February 1999. From the consummation of the Merger in June 1998
through the date of such promotion, Mr. Slater served as the Company's Senior
Vice President--Property Operations, the same position he held with Avalon
Properties from its formation in August 1993 through June 1998. He served
previously as Chief Operating Officer of Trammell Crow Residential Services for
the Mid-Atlantic region. Mr. Slater was responsible for opening and managing the
Raleigh, North Carolina TCR office and was responsible for the development of
several multifamily apartment communities. His responsibilities included all
aspects of property management including property operations, marketing,
training, human resources, risk management, resident services, engineering
services and business development. Prior to joining TCR in 1988, Mr. Slater
served as law clerk to (now Chief) Justice James G. Exum, Jr. of the Supreme
Court of North Carolina and, thereafter, engaged in the private practice of law.
Mr. Slater is a 1980 graduate of the University of Virginia School of Law with
an undergraduate degree, cum laude, from Vanderbilt University.
Thomas J. Sargeant, 40, has been Senior Vice President--Chief Financial
Officer and Treasurer of the Company since the completion of the Merger in June
1998. From March 1995 through June 1998, Mr. Sargeant served as the Chief
Financial Officer and Secretary of Avalon Properties, and he was Treasurer of
Avalon Properties from its formation in August 1993 through June 1998. He is
responsible for all of the financial operations of the Company, including
capital markets/finance, financial reporting and financial services, as well as
information technologies. He previously served as Group Financial Officer for
the Northeast Group of TCR, the Mid-Atlantic Group of TCR and the Midwest Group
of TCR and oversaw the financial services operations (including accounting and
financial reporting, cash management, payroll, information systems and internal
audit) as well as project finance for the Midwest Group of TCR. Mr. Sargeant
joined TCR in 1986 as Controller and was promoted to Chief Financial Officer in
1989 and to Group Financial Officer in 1992. Prior to joining TCR, Mr. Sargeant
was with Arthur Andersen & Co., where he specialized in the construction and
real estate industries, serving both private and publicly held clients. Mr.
Sargeant, a certified public accountant, is a magna cum laude graduate of the
University of South Carolina where he was elected to Phi Beta Kappa and the
Honors College.
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Henry G. Irwig, 55, has been Senior Vice President--Construction since the
completion of the Merger in June 1998. From January 1998 through June 1998, Dr.
Irwig held the same position with Avalon Properties. Before joining Avalon
Properties in January 1998, Dr. Irwig spent thirteen years with the Beacon group
of companies, most recently as Executive Vice President for Management for
Beacon Properties Corporation. During his tenure with Beacon, Dr. Irwig also
served as an executive at Beacon Construction Company, where he was responsible
for developing and implementing company-wide procedures and systems for improved
planning, control and monitoring of projects. Before joining Beacon, Dr. Irwig
was Winslow Associate Professor of Civil Engineering at the Massachusetts
Institute of Technology, where he pursued teaching and research in the fields of
construction management and organization. Dr. Irwig received Bachelor of
Architecture as well as Doctor of Philosophy degrees from the University of the
Witwatersrand, South Africa, and is a member of the American Institute of
Architects and the American Society of Civil Engineers.
Debra L. Shotwell, 37, has been Senior Vice President--Administration since
the completion of the Merger in June 1998. From July 1995 through June 1998, Ms.
Shotwell was the Vice President--Human Resources of the Company. From July 1987
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. Ms. Shotwell is
a Certified Compensation Professional.
Board of Directors and its Committees
Board of Directors. The Board of Directors was expanded from six members to
twelve members concurrently with the effectiveness of the Merger in June 1998,
and such twelve member Board of Directors managed the Company throughout the
remainder of 1998. Nine of such directors were independent of the Company's
management. The Board of Directors met six times in person and held eight
telephonic meetings during 1998. 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 (Chair), Richard W. Miller, Thomas H. Nielsen and
Lance R. Primis, all of whom are independent of the Company's management. The
Audit Committee, among other things, 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, reviews the adequacy of the Company's internal
accounting controls and performs such other oversight functions as may be
requested from time to time by the Board of Directors. The Audit Committee met
two times during 1998.
Compensation Committee. The Board of Directors has established a
Compensation Committee to determine compensation for the Company's executive
officers. The current members of the Compensation Committee are Lance R. Primis
(Chair), Michael A. Futterman, Christopher B. Leinberger and Thomas H. Nielsen,
all of whom are independent of the Company's management. 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 1994 Stock
Incentive Plan, as amended and restated (the "Stock Incentive Plan"), to the
employee directors, management and other employees of the Company and its
subsidiaries. The Compensation Committee met three times during 1998.
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the function of such a committee.
7
Director Compensation
Directors of the Company who are also employees receive no additional
compensation for their services as directors. Prior to the Merger in June 1998,
each non-employee director of the Company received a quarterly director's fee of
$4,500 plus $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 were held on the same date as a regular or special meeting for
which a fee was already paid. In accordance with this payment schedule, during
1998 Messrs. Choate, Healy and Nielsen and Ms. Mixson received $25,500, $18,500,
$21,000 and $22,500, respectively. In addition, pursuant to the Stock Incentive
Plan, on the fifth business day following the 1998 Annual Meeting of
Stockholders (i.e., June 11, 1998), each non-employee director received options
to purchase 10,000 shares of Common Stock at the last reported sale price of the
Common Stock on the New York Stock Exchange ("NYSE") on such date (i.e.,
$36.125). Following the Merger, the Company ceased paying non-employee directors
cash compensation for their services as directors.
In connection with the Merger, each non-employee director who had served as
a director of the Company or Avalon Properties prior to the Merger also received
an additional one-time restricted stock (or deferred stock award) grant of 3,000
shares of Common Stock and each non-employee director of the Company who had not
so served received a one-time restricted stock (or deferred stock award) grant
of 2,000 shares of Common Stock.
In 1999, directors will receive no cash fees, but will instead receive the
following equity-based awards. 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
10,000 shares of Common Stock at the last reported sale price of the Common
Stock on the NYSE on such date and a restricted stock (or a deferred stock
award) grant for 2,000 shares of Common Stock. Subject to accelerated vesting
under certain limited circumstances, all of such stock options become
exercisable one year after the date of grant and such shares of restricted stock
(or deferred stock awards) granted to non-employee directors vest at the rate of
20% on the date of issuance and on each of the first four anniversaries of the
date of issuance. If a director elects to receive a deferred stock award in lieu
of restricted stock, at the time of such election the director also elects at
what time in the future he or she will receive shares of stock in respect of the
vested portion of the deferred stock award.
8
Executive Compensation
The following table sets forth, for each of the Company's last three fiscal
years, the annual compensation awarded to each of the two persons who served as
the Company's chief executive officer during 1998 and the four most highly
compensated executive officers of the Company during 1998 other than the
aforementioned chief executive officers (collectively, the "Named Executive
Officers").
Summary Compensation Table
- ----------
(1) Cash bonuses may be paid under the Company's corporate bonus program in the
discretion of the Compensation Committee to executive officers, subject to
certain performance-based criteria. For a general description of the
program, see "Compensation Committee Report on Executive Compensation."
(2) The options to purchase Common Stock that are listed for 1998 consist of
(A) 70,000 options granted on March 8, 1998 to Mr. Van Horn and (B) options
granted on February 17, 1999 in the following amounts: Mr. Meyer--62,000;
Mr. Michaux--62,000; Mr. Blair--46,500; Mr. Slater--46,500; Mr.
Berman--62,000; and Mr. Van Horn--37,200. All options granted to Messrs.
Berman and Van Horn became exercisable upon termination of their
employment. The Summary Compensation Table does not include options to
purchase common stock of Avalon Properties that were converted into the
right to purchase Common Stock of the Company in connection with the
Merger. On March 8, 1998, Avalon Properties granted options to purchase
common stock of Avalon Properties to Messrs. Blair, Slater and Berman; upon
consummation of the Merger, these options converted into options to
purchase 80,000, 80,000 and 125,000 shares of Common Stock of the Company,
respectively.
(3) During the period from March 1994 through December 31, 1998, 42,000 shares
of restricted stock were granted by the Company to the Named Executive
Officers, of which 29,000 shares had not yet vested. Based on the last
reported sale price of the Company's Common Stock on the NYSE on December
31, 1998 of $34.25 per share, the aggregate dollar value of these 29,000
shares of restricted stock was $993,250. This does not include shares of
restricted stock of Avalon Properties that were granted to officers of
Avalon Properties prior to the Merger.
(4) For 1998, includes amounts contributed by the Company to the Named
Executive Officers' 401(k) accounts in the following amounts: Mr.
Michaux--$4,800; Mr. Berman--$4,800; Mr. Blair--$4,800; Mr. Slater--$4,800;
and Mr. Van Horn--$1,000.
9
(5) For 1998, includes premiums paid by the Company for the Named Executive
Officers' split dollar life insurance policies in the following amounts:
Mr. Meyer--$73,846; Mr. Michaux--$115,468; Mr. Berman--$61,080; Mr.
Blair--$27,488; Mr. Slater--$36,350; and Mr. Van Horn--$22,012.
(6) Prior to the Merger, Mr. Meyer was the Company's Chairman, President and
Chief Executive Officer.
(7) An aggregate of $315,028 of Mr. Meyer's salary and bonus compensation was
deferred pursuant to an election under the Stock Incentive Plan. Such
deferred compensation will be payable in the form of Common Stock upon Mr.
Meyer's termination of employment.
(8) Consists of 6,200 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares. All such shares awarded to
Mr. Berman vested upon termination of his employment.
(9) An aggregate of $265,493 of Mr. Meyer's salary and bonus compensation was
deferred pursuant to an election under the Stock Incentive Plan. Such
deferred compensation will be payable in the form of Common Stock upon Mr.
Meyer's termination of employment.
(10) 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. All such shares awarded to Mr. Van Horn vested upon termination of
his employment.
(11) 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.
(12) These Named Executive Officers began employment on June 4, 1998. The
salaries indicated for 1998 consist of salary payments from June 4, 1998
through December 31, 1998 based on the following annual base salaries: Mr.
Michaux--$350,000; Mr. Berman--$350,000; Mr. Blair--$300,000; and Mr.
Slater--$300,000.
(13) Consists of 4,710 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(14) Consists of 4,960 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(15) Mr. Berman's employment with the Company terminated after the end of 1998.
(16) Mr. Van Horn's employment with the Company terminated after the end of
1998.
(17) Consists of 4,030 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares. All such shares awarded to
Mr. Van Horn vested upon termination of his employment.
(18) Includes $5,807 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."
(19) 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."
(20) Mr. Van Horn began employment on June 19, 1996.
(21) 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. All such shares awarded to Mr. Van Horn vested
upon termination of his employment.
10
(22) 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 interest-free loan from the
Company. For a more detailed discussion of the loan, see "Certain
Relationships and Related Transactions--Indebtedness of Management."
Option Grants with respect to Fiscal Year 1998
The following table sets forth the options granted with respect to the
fiscal year ended December 31, 1998 to the Company's Named Executive Officers.
- ----------
(1) A total of 1,610,122 options to purchase Common Stock of the Company were
granted to employees of the Company with respect to the fiscal year ended
December 31, 1998. This chart excludes options granted on January 30, 1998
with respect to the fiscal year ended December 31, 1997 in the following
amounts: Mr. Meyer--100,000 and Mr. Van Horn--50,000. The grant of those
options was disclosed in the Company's 1998 Proxy Statement. In addition,
this chart excludes options to purchase 2,626,863 shares of Avalon
Properties that were converted into options to purchase 2,018,219 shares of
Common Stock of the Company in connection with the Merger. The options
granted to Messrs. Berman and Van Horn became exercisable upon the
termination of their employment.
(2) These options were granted on February 17, 1999 and become exercisable in
three equal installments on the first, second and third anniversaries of
the date of grant.
(3) These options were granted on March 8, 1998 and become exercisable in three
equal installments on the first, second and third anniversaries of the date
of grant.
Option Exercises and Year-End Holdings
The following table sets forth the aggregate number of options to purchase
Common Stock that were exercised in 1998 and the value of options held as of
December 31, 1998 by the Company's Named Executive Officers.
Aggregated Option Exercises in Fiscal Year 1998 and
Fiscal Year-End 1998 Option Values
- ----------
(1) Based on the last reported sale price of the Company's Common Stock on the
NYSE on December 31, 1998 of $34.25 per share.
11
Employment Agreements
On March 9, 1998, the Company entered into new three-year employment
agreements (collectively, the "Employment Agreements") with the Named Executive
Officers, all of which became effective upon completion of the Merger. The
employment of two of these officers (i.e., Messrs. Berman and Van Horn) was
terminated without cause in February 1999. The Company believed that the new
Employment Agreements, as well as similar employment agreements the Company
entered into with other senior executives of the Company and Avalon Properties,
would provide the appropriate incentives for the senior executives of the
Company and Avalon Properties to remain with their respective companies despite
the uncertainties associated with a pending merger and that it would be
advantageous for the Company to have similar agreements with all of its
executive officers following the Merger. The uniformity in the agreements with
respect to, among other things, employment periods, employee benefits, severance
and change in control benefits, ethics policies and nondisclosure was intended
to enhance administrative efficiency and foster an environment that is conducive
to a successful merger integration process.
In consideration of the new employment agreements and option grants made by
their respective companies in connection with the Merger, all of the Named
Executive Officers waived any change in control benefits (such as severance
payments or acceleration of option or restricted stock vesting) that could have
become payable to them as a result of the Merger pursuant to any prior
agreements with the Company or Avalon Properties, as the case may be. The
Employment Agreements provide for automatic one year renewals after the third
year, unless an advance notice of non-renewal is provided by either party to the
other at least six months prior to the expiration of the employment term, and an
automatic extension of three years upon a change in control of the Company.
The Employment Agreements also provide for (i) base salary and (ii)
incentive compensation in the form of cash awards, stock options and stock
grants subject to the discretion of, and attainment of performance goals
established by, the Compensation Committee. Mr. Berman's agreement provided for
him to relocate from the Company's Wilton, Connecticut office to its office in
San Jose, California. In connection with such relocation, the Company agreed to
provide Mr. Berman with housing and to reimburse Mr. Berman for certain
additional expenses and costs he suffered as a result of such relocation. The
initial base salaries for the Named Executive Officers under the Employment
Agreements are as follows: Gilbert M. Meyer--$350,000; Richard L.
Michaux--$350,000; Charles H. Berman--$350,000; Bryce Blair--$300,000; Robert H.
Slater--$300,000; and Jeffrey B. Van Horn--$270,000.
Each Employment Agreement provides that the base salary will be reviewed by
the Company as of the first anniversary of its effective date (i.e., June 4,
1999) and may be increased but not decreased. Beginning on January 1, 2000, the
base salaries will be reviewed no less frequently than annually and may be
increased but not decreased. During any renewal term, base salary increases will
be equal to the greater of 5% of the prior year's base salary, a factor based on
increases in the consumer price index, or an amount agreed upon by the parties.
In the event the Company terminates the executive without cause, the
executive resigns for good reason (including a material adverse change in duties
and/or position, involuntary relocation, and material breach of the agreement by
the Company), or if the executive resigns for any reason within twelve (12)
months following a change in control, then the executive is entitled to
severance benefits equal to: (A) three times the sum of a three year average of
(i) base salary, (ii) cash bonus earned and (iii) the value of stock and
equity-based compensation awards granted (which value is to be determined by the
Compensation Committee) (in each case, (i), (ii) and (iii), collectively,
comprise the executive's "Covered Average Compensation"); (B) 36 months of
welfare insurance benefits; (C) the vesting of equity awards; and (D) payment of
premiums due on the split-dollar insurance policy for so long as such payments
are due. In addition, if the Company elects not to renew the term of any of the
Employment Agreements still in effect, it will be required to provide the
executive with the following severance benefits: (i) twelve (12) months of
Covered Average Compensation; (ii) 24 months of welfare insurance benefits;
(iii) vesting of equity awards; and (iv) payment of premiums due on the
split-dollar insurance policy for so long as such payments are due. In the event
any of the payments made in connection with a change in control exceeds three
times the executive's average total annual compensation includable in income
during the preceding five years ("base amount"), the excess over the executive's
base amount would constitute an "excess parachute payment" under the Code and
would subject the executive to a 20% excise tax and not be deductible by the
Company. The Employment Agreements provide for a partial gross-up payment to the
executive so that the executive is made whole for such excise tax, other than
the income tax liability resulting from such gross-up payment.
12
Each of the Employment Agreements provides that, in general, for one year
following termination by the Company for cause or termination by the executive
(other than in the event of a constructive termination without cause) prior to a
change in control, each executive will not, without the prior consent of the
Board of Directors, become associated with, or engage in any executive,
managerial, directorial, administrative, strategic, business development or
supervisory responsibilities and activities relating to all aspects of
residential real estate ownership, management, residential real estate
franchising and residential real estate joint venturing with respect to any
person, corporation, partnership, venture or other entity which (A) is a
publicly traded real estate investment trust, or (B) is engaged in the business
of managing, owning, leasing, or joint venturing residential real estate within
30 miles of residential real estate owned or under management by the Company or
its affiliates. In addition, the Employment Agreements provide that for one year
following termination, each executive will not, without the prior written
consent of the Company, solicit or attempt to solicit for employment, with or on
behalf of any corporation, partnership, venture or other business entity, any
employees of the Company or any of its affiliates or any person who was formerly
employed by the Company or any of its affiliates within the preceding six months
unless such person's employment was terminated by the Company or any of such
affiliates.
In February 1999, the Company announced certain management changes. The
management changes included the departures of Charles H. Berman, the Company's
President, Chief Operating Officer and a director; Jeffrey B. Van Horn, Senior
Vice President--Investments; and Max L. Gardner, Senior Vice
President--Development/Acquisitions. Other announced management changes included
the promotion of Bryce Blair, then Senior Vice
President--Development/Acquisitions, to Chief Operating Officer, and the
promotion of Robert H. Slater, then Senior Vice President--Property Operations,
to Executive Vice President. Messrs. Berman, Gardner and Van Horn are entitled
to severance benefits in accordance with the terms of their employment
agreements with the Company dated as of March 9, 1998. Because a complete plan
of management realignment was not in existence on June 4, 1998, the date of the
Merger, the expenses associated with this management realignment are not
considered a part of the Company's purchase price for Avalon and, accordingly,
these expenses will be treated as a non-recurring charge. Management and the
terminated officers are currently determining the amount of severance that each
terminated officer is entitled to receive pursuant to their employment
agreements and the valuations, if any, that must be performed pursuant to the
terms of their employment agreements.
Compensation Committee Report on Executive Compensation
Changes in Composition of Compensation Committee. From January 1998 through
July 1998, the Compensation Committee consisted of Bruce A. Choate, John J.
Healy, Jr., Brenda J. Mixson and Thomas H. Nielsen. Following the Merger, the
Board of Directors determined to reconstitute its existing board committees and
form various new committees such that each committee would consist of those
members of the expanded Board of Directors whose experience and qualifications
were most closely aligned with the responsibilities of such committee.
Accordingly, since July 1998, the Compensation Committee has consisted of Lance
R. Primis (Chair), Michael A. Futterman, Christopher B. Leinberger and Thomas H.
Nielsen.
As a result of the Merger, the Compensation Committee undertook a review of
the compensation policies of each of the Company and Avalon Properties in effect
prior to the Merger in order to formulate a compensation policy that is
appropriate for the resulting corporation. Many of the factors that led the
Company and Avalon Properties to engage in a "merger of equals" transaction
(e.g., comparable asset size, market capitalizations, operating philosophies and
apartment portfolios) also contributed to the companies having similar
compensation policies prior to the Merger. However, the Merger resulted in a
corporation of increased size, market capitalization, geographic market
diversity and management depth and experience, all of which were considered in
formulating the compensation policies of the Company. The following is a summary
of such policies.
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 contributing
to its long-term 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 that is competitive with those levels of total compensation paid in the
REIT industry for
13
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 and other real estate companies that were selected based primarily on
financial performance, property type, market capitalization and geographic
market diversity.
The Company's compensation program has three principal elements: base
salary, a "corporate bonus program" under which an annual cash bonus is paid,
and a "long-term incentive goal program" under which stock options and
restricted shares are granted.
Base Salary. The Company establishes base salary levels for its key
executives relative to base salary levels for key executives of comparable
REITs. Under the Employment Agreements, for fiscal year 1998, base salaries
of the Company's Executive Chairman, Chief Executive Officer, President and
its Senior Vice Presidents 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.
Cash Bonus. Under the Company's corporate bonus program, the
Compensation Committee 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. Each year, the
Compensation Committee sets for each officer the maximum cash bonus that
may be awarded that officer if maximum goals are achieved. For bonuses in
respect of 1998, the goals for determining the percentage of such maximum
cash bonus that were actually awarded were (i) the achievement of targeted
growth in FFO per share, (ii) the achievement of a targeted ranking of the
multiple that the Company's stock price at year end represented to FFO per
share as compared to other apartment REITs, and (iii) subjective goals
based on an individual officer's performance, with the weighting between
these three goals set in advance. For 1999, the goals will be (i) the
achievement of a targeted level of FFO per share and (ii) an evaluation of
management performance. For the management performance factor in
determining the cash bonus to be paid to officers, the Committee will make
a subjective evaluation of the performance of management, as a whole, in
accomplishing certain goals of the Company, including maintaining balance
sheet discipline, transitioning and developing the management team, and
implementing the Company's strategic plans.
Long-Term Incentive 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 over a period of three to four
years. Each year, the Compensation Committee sets for each officer the
maximum number of options and restricted shares that may be granted that
officer if maximum goals are achieved. The goals for determining the
percentage of such maximum number of options and shares that were actually
awarded in respect of 1998 included (i) the achievement of a targeted level
of FFO per share, (ii) the achievement of a targeted ranking of the
multiple that the Company's stock price at year end represented to FFO per
share as compared to other apartment REITs, and (iii) the change in stock
price during the year. For 1999, the goals will include total shareholder
return on the Company's common stock, growth in FFO per share, and the
multiple that the price of the Company's common stock represents to the
Company's FFO per share; in each case, achievement of these goals will be
determined by measuring the Company's performance against a peer group of
apartment REITs. A portion of an officer's long-term incentive awards are
determined on a discretionary basis. 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, none of whom are employed by the Company. 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, cash bonuses and grants of stock options and restricted stock, if any, are
determined based on the past year's performance, and base salaries and maximum
cash bonuses and long term incentive awards for the following fiscal year are
set. At meetings held on February 10, 1999 and March 11, 1999, the Compensation
Committee determined annual cash bonuses under the corporate bonus program and
awards of stock options and restricted stock under the long-term incentive goal
program for its officers and certain key employees, as described in the Summary
Compensation Table included in this Proxy
14
Statement. The Committee also set financial targets to be used, along with areas
for subjective evaluations of management and individual performance, in
determining 1999 bonuses.
Compensation of the Executive Chairman and 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 Executive
Chairman and the Chief Executive Officer. In determining the cash bonuses and
long-term incentive awards that should be provided these officers, the
Compensation Committee considers the same financial criteria that are used for
other officers. The Committee also considers individual performance of these
officers.
The annual base salary of Messrs. Meyer and Michaux for 1998 was $350,000,
and the Compensation Committee believes that this rate, when considered together
with their cash bonuses and long-term equity incentive compensation, is
consistent with the Company's performance and their contributions to such
performance and is in accord with industry practices. Under their Employment
Agreements, the base salary for each officer will be reviewed as of June 4, 1999
and may be increased but not decreased. Under the corporate bonus program, the
Compensation Committee approved a $252,000 cash bonus for each of Messrs. Meyer
and Michaux with respect to 1998. The Compensation Committee also awarded each
officer options to purchase 62,000 shares of Common Stock based upon 1998
performance. These options will become exercisable in equal installments over a
three-year period at an exercise price of $32.00 per share, the last reported
sale price of the Common Stock on the NYSE on the date of grant, February 17,
1999. This grant of options is intended to enhance each officer's long-term
incentive to contribute to the Company's success, and was made without regard
for their current share ownership. Finally, the Compensation Committee approved
an award to each officer of 6,200 shares of restricted stock based upon 1998
performance. One-fifth of these shares vested on February 17, 1999, and the
remaining shares vest in four equal annual installments. These cash bonuses and
long term incentive awards were made following a review by the Committee of the
financial performance of the Company and the individual performance of these
officers, as described above.
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 Executive Chairman
and 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 considers the evaluations and
recommendations of the Executive Chairman and Chief Executive Officer with
respect to the other executive officers of the Company. In recognition of the
Company's achievements during 1998, including the successful completion of the
Merger, the Compensation Committee approved the Named Executive Officers' cash
bonuses described in the Summary Compensation Table for the Company's fiscal
year 1998 pursuant to the corporate bonus program.
For all of the Named Executive Officers, the Compensation Committee also
considers stock options and restricted stock grants to be an important component
of total compensation. As a result of such grants, the Named Executive Officers
will, like the Company's other stockholders, benefit from an appreciation in the
Company's stock price. Based on 1998 performance, following the end of 1998 the
Compensation Committee authorized the grant to Messrs. Berman, Blair, and
Slater, of options to purchase 62,000, 46,500 and 46,500 shares of Common Stock,
respectively. All of these options become exercisable in three equal annual
installments at an exercise price of $32.00 per share, the last reported sale
price of the Common Stock on the NYSE on the date of grant, February 17, 1999.
In addition, the Compensation Committee approved the grant to each of Messrs.
Berman, Blair, and Slater of 6,200, 4,710 and 4,960 shares of restricted stock,
respectively. In each case, one-fifth of the shares granted vested on February
17, 1999, and the remaining four-fifths vest in four equal annual installments.
During 1998, Avalon Properties also granted these officers options to purchase
common stock in connection with the Merger. Specifically, as of March 8, 1998,
Messrs. Berman, Blair, and Slater received options, which become exercisable in
three equal annual installments, to purchase 125,000, 80,000 and 80,000 shares,
respectively, at an exercise price of $37.50 per share (after taking into
account the conversion of shares of Avalon Properties' stock into stock of the
Company). Upon termination of Mr. Berman's employment, all of the options and
restricted shares granted to him in respect of 1998 performance vested.
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
15
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 Company believes that, because it qualifies as a REIT under
the Code and because all distribution requirements under the Code were
satisfied, the Company is not subject to federal income taxes, and the payment
of compensation that does not satisfy the requirements of Section 162(m) will
not affect the Company's net income. To the extent that compensation does not
qualify for deduction under Section 162(m) a larger portion of stockholder
distributions may be subject to federal income taxation as dividend income
rather than return of capital. The Company does not believe that Section 162(m)
will materially affect the taxability of stockholder distributions, although no
assurance can be given in this regard due to the variety of factors that affect
the tax position of each stockholder. For these reasons, the Compensation
Committee's compensation policy and practices are not directly guided by
considerations relating to Section 162(m).
Submitted by the Compensation Committee:
Lance R. Primis (Chair)
Michael A. Futterman
Christopher B. Leinberger
Thomas H. Nielsen
16
Stock Performance Graph
The following graph provides a comparison, from the Company's initial
public offering in March 1994 through December 1998, of the cumulative total
stockholder return (assuming reinvestment of any dividends) among the Company,
the Standard & Poor's ("S&P") 500 Index, the NAREIT Equity REIT Total Return
Index (the "NAREIT Equity Index"), an industry index of 173 real estate
investment trusts, including the Company, and a peer group index composed of 27
publicly-traded apartment REITs, including the Company (the "NAREIT Apartment
Index"). 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. The NAREIT Apartment Index includes only REITs that
invest directly or indirectly solely in the equity ownership of multifamily
residential apartment communities. The Company has adopted the NAREIT Apartment
Index as a replacement for the NAREIT Equity Index because it believes that the
NAREIT Apartment Index, which is limited to REITs engaged in the same market
sector as the Company, provides a comparison that is more appropriate for
assessing the Company's relative performance. Upon written request to the
Company's Secretary, the Company will provide any stockholder with a list of the
REITs included in the NAREIT Equity Index and the NAREIT Apartment Index.
[THE ABOVE TABLE WAS ALSO REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
The historical information set forth above is not necessarily indicative of
future performance. Data for the NAREIT Equity Index, the NAREIT Apartment Index
and the S&P 500 Index were provided to the Company by NAREIT.
17
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Lance R. Primis, Michael A.
Futterman, Christopher B. Leinberger and Thomas H. Nielsen. None of them has
served as an officer of the Company or any of its subsidiaries or has any other
business relationship or affiliation with the Company or any of its
subsidiaries, except his 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, 1998, (ii) each of the Company's directors, (iii) each of the Named
Executive Officers, and (iv) all directors and executive officers as a group,
based on representations of officers and directors of the Company as of January
25, 1999 (unless otherwise indicated) and filings through February 17, 1999
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
January 25, 1999 and are based upon 64,095,626 shares of Common Stock
outstanding at the close of business on such date.
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* 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) 250,000 shares issuable upon the exercise of stock options
that vested on or before March 26, 1999, (ii) 23,463 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 and (iii) 908,113 shares held jointly with spouse.
(3) Includes (i) 179,270 shares issuable upon the exercise of stock options
that vested on or before March 26, 1999, (ii) 2,173 shares owned indirectly
by Mr. Michaux's spouse, (iii) 52,244 shares owned indirectly by The
Michaux Family LLC and (iv) 374,337 shares held jointly with spouse.
(4) Includes (i) 220,937 shares issuable upon the exercise of stock options
that vested on or before March 26, 1999 and (ii) 1,382 shares owned
indirectly for minor children.
18
(5) Includes 21,000 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(6) Does not include 3,000 shares issuable in the future under a deferred stock
award granted pursuant to an election under the Stock Incentive Plan.
(7) Includes 7,683 shares owned indirectly by Mr. Futterman's wife.
(8) Includes 29,195 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(9) Includes 15,000 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(10) Includes 7,683 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(11) Does not include 3,697 shares issuable in the future under deferred stock
awards granted to Mr. Nielsen pursuant to elections under 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.
(12) Does not include 2,000 shares issuable in the future under a deferred stock
award granted pursuant to an election under the Stock Incentive Plan.
(13) Includes 104,778 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(14) Includes 1,152 shares owned indirectly for minor children and 83,131 shares
owned jointly with spouse.
(15) Includes 58,334 shares issuable upon the exercise of stock options that
vested on or before March 26, 1999.
(16) Does not include the beneficial ownership of executive officers whose
employment with the Company terminated prior to the date of this Proxy
Statement.
(17) The information reported includes 3,831,695 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 17, 1999 reporting beneficial
ownership as of December 31, 1998. The Schedule 13G/A indicates that the
reporting entities are investment advisers registered under Section 203 of
the Investment Advisers Act of 1940 and that they have different advisory
clients. The Schedule 13G/A also indicates that (i) LaSalle has sole
dispositive and sole voting power with respect to 2,151,220 shares, shared
dispositive power with respect to 669,696 shares and shared voting power
with respect to 56,272 shares, and (ii) ABKB/LaSalle has sole dispositive
power with respect to 608,729 shares, shared dispositive power with respect
to 3,222,966 shares, sole voting power with respect to 668,023 shares and
shared voting power with respect to 3,013,333 shares.
(18) Information reported is based upon a Schedule 13G filed with the SEC on
February 9, 1999 reporting beneficial ownership as of December 31, 1998.
This 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 sole
dispositive power with respect to all of the shares and sole voting power
with respect to 3,817,301 of the shares. The reporting entity has no shared
dispositive or voting power with respect to 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
national securities exchange with which reports pursuant to Section 16(a) of the
Exchange Act need be filed. Insiders are required by the 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, 1998, all filing requirements applicable to the Insiders
were timely satisfied, except that (i) Ms. Shotwell inadvertently reported late
the sale of 750 shares of Common Stock, as well as the related exercise of a
like number of options and (ii) in connection with accepting officer and/or
director positions with the Company following the Merger, Form 3 reports were
filed one to two weeks late by Messrs. Berman, Blair, Leinberger, Michaux,
Miller, Sargeant, Schuster and Slater.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Business Relationships.
Purchase of Mortgage Loan. Messrs. Michaux, Berman and Blair are partners
of an entity that is the general partner of Arbor Commons Associates Limited
Partnership ("Arbor Commons Associates"). Concurrently with Avalon Properties'
initial public offering in November 1993 (the "Avalon Properties Offering"),
Avalon Properties purchased an existing participating mortgage loan made to
Arbor Commons Associates that was originated by CIGNA Investments, Inc. The
mortgage loan is secured by the borrower's interests in the Avalon Arbor
community. Avalon Properties purchased the mortgage loan, rather than the Avalon
Arbor community, to avoid the current recapture of certain low income housing
tax credits by certain unaffiliated third party investors. This loan has an
outstanding principal amount of $28.9 million and accrues interest at a fixed
rate of 10.2% per annum, payable at 9% per annum. Under the terms of the loan,
the Company (as successor to Avalon Properties) receives (as contingent
interest) 50% of the cash flow after the 10.2% accrual rate is paid and 50% of
the residual profits upon the sale of the community.
Option to Acquire Property. The Company holds a right of first refusal with
respect to approximately three and one-half acres of land in Gaithersburg,
Maryland that is owned by an entity in which Mr. Michaux has an ownership
interest. This arrangement was described under "Reorganization Transactions" on
page 86 of Avalon Properties' prospectus dated November 11, 1993 relating to the
Avalon Properties Offering.
Indebtedness of Management.
Loan to Mr. Van Horn. In connection with the hiring of Mr. Van Horn in June
1996, Mr. Van Horn entered into an employment agreement with the Company
pursuant to which he received a loan from the Company in the amount of $140,000
(the "Van Horn Loan"), which did not bear interest during the term of
employment. Under the terms of the promissory note executed by Mr. Van Horn in
connection with the Van Horn Loan, the Van Horn Loan was to 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 Van Horn Loan by one year and to forgive the outstanding principal
amount under the Van Horn Loan (i.e., $122,000 as of January 30, 1998) ratably
over the remaining five year period of the Van Horn Loan. Accordingly, on
January 30, 1998 the Company forgave $24,400 of the outstanding principal amount
under the Van Horn Loan owed by Mr. Van Horn to the Company.
Mr. Van Horn entered into a new employment agreement with the Company,
dated as of March 9, 1998 (the "Van Horn Agreement"), in connection with the
Merger. Pursuant to the Van Horn Agreement, on January 1 of each year during the
employment period, 25% of the Van Horn Loan (which had an outstanding principal
balance of $97,600 as of March 9, 1998) was to be forgiven, except that if Mr.
Van Horn was terminated by the Company without Cause (as defined in the Van Horn
Agreement), any outstanding balance under the Loan would be forgiven by the
Company. Accordingly, upon the termination of Mr. Van Horn's employment with the
Company in February 1999, the outstanding balance under this loan was forgiven.
Avalon Properties Loan Program. On January 22, 1997, the Board of Directors
of Avalon Properties instituted a loan program under which Avalon Properties
would lend amounts to or on behalf of Avalon Properties' employees (a "Stock
Loan") equivalent to the employees' tax liabilities related to grants of
restricted stock to the employees under Avalon Properties' 1995 Equity Incentive
Plan (the "Grant Award"). The amount of each advance extended to an employee of
Avalon Properties under a Stock Loan was determined on the date or dates on
which the Grant Award vests and equals the amount of the tax liability related
to the portion of the Grant Award then vesting, calculated using the employee's
actual blended state, local and federal tax rate up to a maximum rate of 40%
plus the tax liability related to the then current projected annual dividend
income generated by the Grant Award calculated at a 40% tax rate (federal, state
and local combined). Each employee who received such a Stock Loan has executed a
promissory note (a "Note") payable to Avalon Properties. In connection with the
Merger, the Company has assumed all rights and obligations of Avalon Properties
under such Notes and the 1995 Equity Incentive Plan.
Each Note bears interest at the Short Term Applicable Federal Rate (6.43%
for Stock Loans made by Avalon Properties in 1998) in effect on the date of the
Note (the "Interest Rate") and such rate is fixed until the fifth anniversary of
the Note, on or after which date the Note becomes immediately due and payable
upon demand by
20
the Company (the "Maturity Date"). After the fifth anniversary of the Note and
until the Maturity Date, interest continues to accrue at either the Interest
Rate or, if the prevailing Short Term Applicable Federal Rate is greater or less
than the Interest Rate by an increment of 4.0%, then interest accrues at the
prevailing Short Term Applicable Federal Rate. Vested shares of the Grant Award
serve as collateral (the "Pledged Stock") for each Note until such time as the
Note has been paid in full. All dividends related to the employee's Grant Award
(including dividends on unvested shares) are applied to the outstanding Stock
Loan balance, first to interest, then to outstanding principal. If the market
value of the Pledged Stock declines such that the Stock Loan exceeds 50% of the
value of the Pledged Stock (the "LTV ratio"), then the Company may require the
employee to make a cash payment sufficient to bring the LTV ratio below 50%, or
the Company may sell or otherwise dispose of the amount of Pledged Stock needed
to bring the LTV ratio below 50%. The Company's recourse against an employee
under the Notes for satisfaction of the Stock Loans and all other amounts due is
limited to the Company's rights in the Pledged Stock.
As of March 23, 1999, the Company (as successor to Avalon Properties) had
extended Stock Loans totaling $465,828 to its employees, including the amounts
of $115,179, $107,569 and $61,554 which were extended to Messrs. Michaux, Berman
and Blair, respectively.
INDEPENDENT PUBLIC ACCOUNTANTS
On November 11, 1998, PricewaterhouseCoopers LLP was dismissed and Arthur
Andersen LLP was engaged as the principal independent public accountant for the
Company. The decision to change accountants was unanimously approved by the
Company's Board of Directors.
The reports of PricewaterhouseCoopers LLP on the financial statements of
the Company for the years ended December 31, 1996 and 1997 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope, or accounting principles. During the Company's
fiscal years ended December 31, 1996 and 1997, and the subsequent interim period
through November 11, 1998, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused them to make reference thereto in their reports on the
financial statements for such years.
During the Company's fiscal years ended December 31, 1996 and 1997, and the
subsequent interim period through November 11, 1998, Arthur Andersen LLP was not
engaged as an independent accountant to audit either the Company's financial
statements or the financial statements of any of its subsidiaries, nor was it
consulted regarding the application of the Company's accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual 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. Representatives of PricewaterhouseCoopers LLP are not expected to be
present at the Annual Meeting.
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 2000 Annual Meeting of Stockholders must
21
be received by the Company by December 9, 1999. 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 2000 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 prior to November 7,
1999 nor later than February 20, 2000 or (B) in the event that the 2000 Annual
Meeting of Stockholders is called for a date prior to April 28, 2000, 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 (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: AvalonBay Communities, Inc., 2900
Eisenhower Avenue, Suite 300, Alexandria, Virginia 22314, Attention: Secretary.
Other Matters to be Presented
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.
22
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
AVALONBAY 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 AvalonBay Communities, Inc. (the
"Company"), hereby appoints Messrs. Gilbert M. Meyer and Richard L. Michaux, 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 at the Hyatt Regency Reston, Reston Town Center, 1800
Presidents Street, Reston, Virginia on May 5, 1999 at 9:30 a.m. local time, 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 22, 1999, as if the
undersigned were present and voting the shares.
[X] Please mark vote as in this example.
1. To elect nine directors to hold office until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
Nominees: Gilbert M. Meyer, Richard L. Michaux, Bruce A. Choate, Michael A.
Futterman, John J. Healy, Jr., Richard W. Miller, Brenda J. Mixson, Lance R.
Primis and Allan D. Schuster
[_] FOR all nominees
listed above (except as indicated to the contrary).
[_] WITHHOLD AUTHORITY to vote for the nominees
listed above.
(INSTRUCTIONS: To withhold authority to vote for any nominee, write the
nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
(To Be Signed on Reverse Side)
(continued from other side)
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, and in accordance with the proxies' discretion on such other
business that may properly come before the meeting.
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW:
[_] I PLAN TO ATTEND THE MEETING
Date:__________, 1999
__________________________
Signature
__________________________
Signature if held jointly
NOTE: (Please date this Proxy and sign exactly as your name appears hereon. When
signing as attorney, executor, administrator, trustee or guardian, please give
your full title. If there is more than one trustee, all should sign. All joint
owners should sign.)