UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(C) or
Section 240.14a-12
Home Properties of New York, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate Number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[GRAPHIC OMITTED]
HOME PROPERTIES
April 1, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Home Properties of New York, Inc. The Annual Meeting will be held on Tuesday,
May 7, 2002 at 2:30 p.m. at the Dryden Theatre of the International Museum of
Photography at the George Eastman House, 900 East Avenue, Rochester, New York
14607.
A Notice of Annual Meeting and a Proxy Statement are attached. They
describe the matters to be acted upon at the Annual Meeting. Your vote on these
matters is very important. Please sign, date and return the enclosed proxy card
in the envelope provided. Alternatively, you may choose to vote by telephone or
internet. Voting by any of these methods before the meeting will insure that
your shares are represented at the meeting, whether or not you plan to attend in
person.
We look forward to seeing you at the meeting.
/s/Norman P. Leenhouts
-----------------------
Norman P. Leenhouts
CHAIRMAN AND CO-CHIEF EXECUTIVE
OFFICER
/s/Nelson B. Leenhouts
-----------------------
Nelson B. Leenhouts
PRESIDENT AND CO-CHIEF EXECUTIVE
OFFICER
HOME PROPERTIES OF NEW YORK, INC.
Suite 850
Clinton Square
Rochester, New York 14604
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2002
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NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders of
Home Properties of New York, Inc. (the "Company") will be held on Tuesday, May
7, 2002 at 2:30 p.m. at the Dryden Theatre of the International Museum of
Photography at George Eastman House, 900 East Avenue, Rochester, New York 14607
for the following purposes:
1. To elect twelve directors of the Company to serve until the
2003 Annual Meeting of Stockholders and until their respective
successors are elected;
2. To ratify the Board of Director's appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for
2002; and
3. To consider and act upon any other matters that are
properly brought before the Annual Meeting and at any adjournments or
postponements thereof.
The Board of Directors set the close of business on March 14, 2002 as
the record date. Only stockholders whose names appear on the stock register of
the Company at the close of business on the record date will be entitled to
notice of and to vote at the Annual Meeting and at any adjournments or
postponements. (If you hold your stock in the name of a brokerage firm, bank or
other nominee, only that entity can vote your shares. Please give instructions
for your shares to be voted to the person responsible for your account.)
There are four ways to vote:
- by completing the enclosed proxy card and returning it in the
enclosed postage prepaid envelope;
- by internet at http://www.eproxy.com/hme;
- by toll-free telephone at 1-800-435-6710; or
- by written ballot at the meeting.
If you vote by internet or telephone, your vote must be received before
4:00 p.m. on the day before the Annual Meeting. You may change your vote or
revoke your proxy at any time before the Annual Meeting:
- by returning a later dated proxy card;
- by sending written notice to Ann M. McCormick, Secretary of the
Company at 850 Clinton Square, Rochester, New York 14604;
- by entering a new vote by internet or telephone; or
- by completing a written ballot at the Annual Meeting.
Rochester, New York By Order of the Board of Directors
April 1, 2002
/s/ Ann M. McCormick
-------------------------
Ann M. McCormick
Secretary
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY ONE OF THE ABOVE METHODS.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY VOTED.
HOME PROPERTIES OF NEW YORK, INC.
Suite 850
Clinton Square
Rochester, New York 14604
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PROXY STATEMENT
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FOR 2002 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 7, 2002
April 1, 2002
GENERAL INFORMATION
This Proxy Statement is delivered to you in connection with the solicitation of
proxies by the Board of Directors of Home Properties of New York, Inc. (the
"Company") for use at the 2002 Annual Meeting of Stockholders of the Company
(the "Annual Meeting"). The Annual Meeting will be held on Tuesday, May 7, 2002
at 2:30 p.m. at the Dryden Theatre at the International Museum of Photography at
George Eastman House, 900 East Avenue, Rochester, New York 14607. The
approximate date on which the enclosed form of proxy and this Proxy Statement
are first being sent to stockholders is April 1, 2002.
WHO MAY VOTE
Stockholders of the Company as of the Company's record date, March 14, 2002, may
vote.
OUTSTANDING SHARES
On March 14, 2002, 25,909,284 shares of the Company's Common Stock were
outstanding. Each share of common stock has one vote.
HOW TO VOTE There are four ways to vote:
1. internet at http://www.eproxy.com/hme;
2. toll-free telephone at (800) 435-6710;
3. completing and mailing your proxy card; or
4. written ballot at the Annual Meeting.
HOW PROXIES WORK
The Company's Board of Directors is asking for your proxy. By giving us your
proxy, you authorize the proxy holders (Nelson B. Leenhouts and Norman P.
Leenhouts, the Company's Co-Chief Executive Officers) to vote your shares at the
Annual Meeting in the manner you direct.
If you vote by any of the above methods but do not specify how you wish to vote
your shares, your shares will be voted "for" all director candidates and "for"
the ratification of the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for 2002. Proxy holders will also vote shares
according to their discretion on any other matter properly brought before the
meeting.
You may receive more than one proxy card depending on how you hold your shares.
For example, if you hold shares through someone else, such as a stock broker,
you may get proxy material from them.
QUORUM
In order to carry out the business of the Annual Meeting, we must have a quorum.
This means that at least a majority of the outstanding shares eligible to vote
must be represented at the meeting, either by proxy or in person.
VOTES NEEDED
A majority of the votes cast at the Annual Meeting is necessary to elect each of
the nominees for directors named in this Proxy Statement and to ratify the
appointment of PricewaterhouseCoopers LLP as independent accountants for 2002.
Any other matter properly brought before the meeting also requires the favorable
vote of a majority of the votes cast. Under Maryland law, if a stockholder
abstains on a vote, the abstention does not constitute a vote "for" or "against"
a matter. Thus, abstentions are disregarded in determining the "votes cast".
CHANGING YOUR VOTE
You may revoke your proxy before it is voted by entering a new vote by internet
or telephone, by submitting a new proxy with a later date, by voting in person
at the Annual Meeting or by notifying the Company's Secretary in writing prior
to the Annual Meeting as follows: Ann M. McCormick, 850 Clinton Square,
Rochester, New York 14604.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, twelve individuals will be elected to serve as
directors until the 2003 Annual Meeting and until their successors are elected.
The Board of Directors has nominated Norman P. Leenhouts, Nelson B.
Leenhouts, Edward J. Pettinella, Burton S. August, Sr., William Balderston, III,
Alan L. Gosule, Leonard F. Helbig, III, Roger W. Kober, Albert H. Small,
Clifford W. Smith, Jr., Paul L. Smith and Amy L. Tait to serve as directors (the
"Nominees"). Each of the Nominees is currently serving as a director of the
Company. The Board of Directors anticipates that each of the Nominees will serve
as a director if elected.
The favorable vote of the holders of a majority of the shares of Common
Stock cast at the Annual Meeting is required for the election of the Nominees as
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
INFORMATION REGARDING NOMINEES FOR DIRECTOR
Brief biographical descriptions of the Nominees follow. The information
was furnished to the Company by the Nominees. The information is up to date
through March 14, 2002.
2
Norman P. Leenhouts, 66, has served as Chairman of the Board of
Directors, Co-Chief Executive Officer and a director of the Company since its
inception in 1993. He has also served as Chairman of the Board of Home
Properties Management, Inc. ("HP Management") since its formation. He has been a
director of Home Properties Resident Services, Inc. ("HPRS") since its formation
and Chairman since 2000. Norman Leenhouts is a co-owner, together with Nelson
Leenhouts, of Home Leasing Corporation, the Company's predecessor ("Home
Leasing"), and served as Chairman of Home Leasing since 1971. He is a director
of Hauser Corporation and Rochester Downtown Development Corporation and is a
member of the Board of Trustees of Roberts Wesleyan College. Mr. Leenhouts is
also a Life Trustee of the University of Rochester. He is a graduate of the
University of Rochester and is a certified public accountant. He is the twin
brother of Nelson Leenhouts and the father of Amy Tait.
Nelson B. Leenhouts, 66, has served as President, Co-Chief Executive
Officer and a director of the Company since its inception in 1993. He has also
served as President and Chief Executive Officer and director of HP Management
and as a director since its formation. He has been a director of HPRS since its
formation, President since 2000 and a Vice President since 1998. Nelson
Leenhouts was the founder, and a co-owner, together with Norman Leenhouts, of
Home Leasing, and served as President of Home Leasing since 1967. He is a
director of Hauser Corporation and a member of the Board of Directors of the
National Multi Housing Council. Nelson Leenhouts is a graduate of the University
of Rochester. He is the twin brother of Norman Leenhouts and the uncle of Amy
Tait.
Edward J. Pettinella, 50, has served as Executive Vice President and a
director of the Company since February, 2001 when he joined the Company. From
1997 until February, 2001, Mr. Pettinella served as President, Charter One Bank
(N.Y. Division) and Executive Vice President of Charter One Financial, Inc. From
1980 through 1997, Mr. Pettinella served in several managerial capacities for
Rochester Community Savings Bank, Rochester, NY, including the positions of
Chief Operating Officer and Chief Financial Officer. Mr. Pettinella serves on
the Boards of Directors of the United Way of Greater Rochester, State University
at Geneseo, Geneseo Foundation, Syracuse University School of Business,
Rochester Chamber of Commerce, Rochester Economic Development Corporation and
the Memorial Art Gallery. Mr. Pettinella is a graduate of the State University
at Geneseo and holds an MBA from Syracuse University.
Burton S. August, Sr., 86, has been a director of the Company since
August, 1994. Mr. August is currently a director of Monro Muffler Brake, Inc., a
publicly traded company where Mr. August served as Vice President from 1969
until he retired in 1980. Mr. August is Honorary Vice Chairman of the Board of
Trustees of Rochester Institute of Technology, on the Board of Directors of Park
Ridge Health Systems and Hillside Children's Center Foundation, on the cabinet
of the Al Sigl Center, on the Finance Committee of the United Way of Greater
Rochester and a Trustee of the Otetiana Council Boy Scouts of America.
William Balderston, III, 74, has been a director of the Company since
August, 1994. From 1991 to the end of 1992, he was an Executive Vice President
of The Chase Manhattan Bank, N.A. From 1986 to 1991, he was President and Chief
Executive Officer of Chase Lincoln First Bank, N.A., which was merged into The
Chase Manhattan Bank, N.A. He is a Life Trustee of the University of Rochester
and a member of the Board of Governors of the University of Rochester Medical
Center. Mr. Balderston is also a Trustee of the Genesee Country Village and
Museum, as well as a member of the board of the Genesee Valley Conservancy. He
is a graduate of Dartmouth College.
3
Alan L. Gosule, 61, has been a director of the Company since December,
1996. Mr. Gosule has been a partner in the law firm of Clifford Chance Rogers &
Wells LLP, New York, New York, since August, 1991 and prior to that time was a
partner in the law firm of Gaston & Snow. He serves as Chairman of the Clifford
Chance Rogers & Wells LLP Tax Department and Real Estate Securities practice
group. Mr. Gosule is a graduate of Boston University and its Law School and
received a LL.M. from Georgetown University. Mr. Gosule also serves on the
Boards of Directors of the Simpson Housing Limited Partnership, F.L. Putnam
Investment Management Company, Colonnade Partners and America First Mortgage
Investments, Inc. Clifford Chance Rogers & Wells LLP acted as counsel to
PricewaterhouseCoopers LLP in its capacity as advisor to the State Treasurer of
the State of Michigan in connection with its investment of retirement funds in
Home Properties of New York, L.P. (the "Operating Partnership"). Mr. Gosule was
the nominee of the State Treasurer under the terms of the investment agreements
relating to that transaction. Those retirement funds divested their interest in
Home Properties in 2001 and no longer have the right to nominate a board member.
The Board of Directors has concluded that it is desirable for Mr. Gosule to
continue to serve as a director and has therefore nominated him for re-election.
Leonard F. Helbig, III, 56, has been a director of the Company since
August, 1994. From 1999 until March, 2002, Mr. Helbig was President, Financial
Services for Cushman & Wakefield, Inc. Prior to that, Mr. Helbig served as
Executive Managing Director of the Asset Services and Financial Services Groups
at Cushman & Wakefield since 1984. Mr. Helbig is a member of the Urban Land
Institute, the Pension Real Estate Association and the International Council of
Shopping Centers. Mr. Helbig is a graduate of LaSalle University and holds the
MAI designation of the American Institute of Real Estate Appraisers.
Roger W. Kober, 68, has been a director of the Company since August,
1994. Mr. Kober is currently a director of RGS Energy Corporation and its wholly
owned subsidiary, Rochester Gas and Electric Corporation. He was employed by
Rochester Gas and Electric Corporation from 1965 until his retirement on January
1, 1998. From March, 1996 until January 1, 1998, Mr. Kober served as Chairman
and Chief Executive Officer of Rochester Gas and Electric Corporation. He is
also a member of the Board of Trustees of Rochester Institute of Technology. Mr.
Kober is a graduate of Clarkson College and holds a Masters Degree in
Engineering from Rochester Institute of Technology.
Albert H. Small, 76, has been a director of the Company since July,
1999. Mr. Small, who has been active in the construction industry for 50 years,
is President of Southern Engineering Corporation. He is a member of the Urban
Land Institute, National Association of Home Builders and currently serves on
the Board of Directors of the National Symphony Orchestra, National Advisory
Board Music Associates of Aspen, Department of State Diplomatic Rooms Endowment
Fund, James Madison Council of the Library of Congress, Tudor Place Foundation,
The Life Guard of Mount Vernon, Historical Society of Washington, DC and the
National Archives Foundation. Mr. Small is a graduate of the University of
Virginia. In connection with the acquisition of a portfolio of properties
located in the suburban markets surrounding Washington, D.C., Mr. Small and
others received approximately 4,086,000 operating partnership units in the
Operating Partnership. Mr. Small is a Vice President, shareholder and a director
of Community Realty Company, Inc. ("CRC"), the general partner of the entities
that owned the portfolio and he is the nominee of the former owners under the
terms of the acquisition documents.
Clifford W. Smith, Jr., 55, has been a director of the Company since
August, 1994. Mr. Smith is the Epstein Professor of Finance of the William E.
Simon Graduate School of Business Administration of the University of Rochester,
where he has been on the faculty since 1974. He has written numerous books and
articles on a variety of financial, capital markets and risk management topics
and has held
4
editorial positions for a variety of journals. Mr. Smith is a graduate of Emory
University and holds a PhD from the University of North Carolina at Chapel Hill.
Paul L. Smith, 66, has been a director of the Company since August,
1994. Mr. Smith was a director, Senior Vice President and the Chief Financial
Officer of the Eastman Kodak Company from 1983 until he retired in 1993. He is
currently a director of Performance Technologies, Incorporated and Constellation
Brands, Inc. He is also a member of the Board of Trustees of the George Eastman
House and Ohio Wesleyan University. Mr. Smith is a graduate of Ohio Wesleyan
University and holds an MBA Degree in finance from Northwestern University.
Amy L. Tait, 43, has served as a director of the Company since its
inception in 1993. Effective February 15, 2001, Mrs. Tait resigned her full-time
position as Executive Vice President of the Company and as a director of HP
Management. She is currently the principal of Tait Realty Advisors, LLC ("Tait
Realty") and continued as a consultant to the Company pursuant to a consulting
agreement that expired February 15, 2002. Mrs. Tait joined Home Leasing in 1983
and held several positions with the Company, including Senior and Executive Vice
President and Chief Operating Officer. She currently serves on the M & T Bank
Advisory Board and the boards of the United Way of Rochester, Princeton Club of
Rochester, the Al Sigl Center and The Commission Project. Mrs. Tait is a
graduate of Princeton University and holds an MBA Degree from the William E.
Simon Graduate School of Business Administration of the University of Rochester.
She is the daughter of Norman Leenhouts and the niece of Nelson Leenhouts.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors. The Company is managed by a Board of Directors
composed of twelve members, a majority of whom are independent of the Company's
management (the "Independent Directors"). The Board of Directors met four times
in 2001. There was 100% attendance at the meetings held in 2001 except one
director did not attend one meeting.
Audit Committee. Alan Gosule, Leonard Helbig, Roger Kober and Paul
Smith form the Audit Committee of the Board of Directors. Paul Smith chairs this
Committee. The Audit Committee recommends the engagement of independent public
accountants, reviews the scope of the audit engagement and any other services,
reviews the independent public accountants' letter of comments and management's
responses to those comments, approves other professional services provided by
the independent public accountants, reviews the independence of the independent
public accountants, reviews any major accounting changes made or contemplated
and reviews the adequacy of the Company's internal accounting controls. The
Audit Committee consists solely of Independent Directors. It met three times
during 2001. There was 100% attendance at the Audit Committee meetings in 2001
except one member did not attend one meeting.
Management and Directors Committee. Burton August, William Balderston,
and Clifford Smith currently form the Management and Directors Committee of the
Board of Directors. Clifford Smith chairs this Committee. Among its other
responsibilities, the Management and Directors Committee performs the
traditional functions of a compensation committee, including establishing
remuneration levels for officers and directors of the Company, reviewing
significant employee benefit programs and establishing and administering
executive compensation programs, including bonus plans, stock option and other
equity-based programs, deferred compensation plans and any other cash or stock
incentive programs. It also oversees matters pertaining to succession planning.
The Management and Directors Committee consists solely of Independent Directors.
Alan Gosule was a member of the Committee from the time of his election to the
Board of Directors in 1996 until January, 2002 when he resigned from the
Committee. As the nominee of the State Treasurer of the State of Michigan, Mr.
Gosule had the right to
5
serve on all of the standing committees of the Board of Directors. He was the
only director to serve on both the Audit and Management and Directors
Committees. Mr. Gosule submitted his resignation from the Management and
Directors Committee in conjunction with the divesting by the State Treasurer of
its interest in the Company. Mr. Gosule will continue to serve as a member of
the Audit Committee. The Management and Directors Committee met three times
during 2001 and there was 100% attendance at the meetings.
Nominating Committee. In 2001, the Board established a Nominating
Committee to consider and make proposals to the full Board regarding Board
composition as well as nominees to the Board when openings occur and otherwise.
Burton August, William Balderston, Alan Gosule and Clifford Smith form the
Nominating Committee. Clifford Smith chairs this Committee. The Nominating
Committee did not meet in 2001.
Mandatory Retirement Policy. Pursuant to the Company's retirement age
policy, the retirement age for directors is 75, subject to exceptions if a
determination is made, after confidential discussion among other Board members,
that a specific director over age 75 is expected to make a significant
contribution to the Company during the following year. Such a determination was
made with respect to Burton S. August, Sr. and Albert H. Small, both of whom are
nominated herein to serve as directors.
COMPENSATION OF DIRECTORS
In 2001, the Company paid its Independent Directors an annual stipend
of $20,000. An additional annual stipend in the amount of $3,000 was paid to the
Chairman of each of the Audit and the Management and Directors Committees.
Independent Directors are also paid $1,000 per day for attendance (in person or
by telephone) at Board and committee meetings. No change to the Independent
Directors' compensation package was made in 2001 and none is planned for 2002.
Pursuant to the 2000 Stock Benefit Plan, each of the Directors is to be
granted options to purchase 7,000 shares of the Company's Common Stock
immediately following the annual meeting of stockholders in 2000, 2001 and 2002.
The options are to have an exercise price equal to the fair market value of a
share of the Company's Common Stock on the date of grant. Following the May 2001
annual stockholders meeting, 7,000 options were issued to each of the
Independent Directors at an exercise price of $28.34, which was the closing
price of a share of the Company's Common Stock on that date.
Under the Director Deferred Compensation Plan, the Independent
Directors can defer up to 100% of their total annual cash compensation
(including meeting fees) for three, five or ten years. The Company contributes
10% of the deferred amount, which amount vests after three years. A "phantom"
stock account is established for both amounts. Each deferral and the Company
contribution is reflected by crediting those accounts with the number of shares
of the Company's Common Stock that could be purchased with the amounts deferred
and contributed at the Common Stock's fair market value. Participant's accounts
are also credited with the number of shares of the Company's Common Stock that
could be purchased with hypothetical dividends that would be paid with respect
to shares previously allocated to the accounts on the same date and at the same
price that shares are purchased for participants in the dividend reinvestment
feature of the Company's Dividend Reinvestment and Direct Stock Purchase Plan
(the "DRIP"). The Director Deferred Compensation Plan is designed to provide
substantially the same benefits to the Independent Directors as is provided to
eligible employees under the Company's Deferred Bonus Plan. Under the Plan, six
of the nine Independent Directors elected to defer some or all of the
compensation earned by them in 2001.
6
Directors of the Company who are employees of the Company do not
receive any compensation for their services as directors. All directors are
reimbursed for their expenses incurred in attending directors' meetings.
Following her resignation as an officer of the Company, effective
February 15, 2001, Mrs. Tait was paid a pro-rated stipend for the first quarter
of 2001. Mrs. Tait also entered into a consulting agreement with the Company
which is described below on page 23 under the heading "Certain Relationships and
Transactions."
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid during 1999,
2000 and 2001 to the Company's two Co-Chief Executive Officers, the Executive
Vice President and the five Senior Vice Presidents, which group includes the
other four most highly compensated executive officers (collectively the "Named
Executives").
SUMMARY COMPENSATION TABLE
------------------------------ --------- ------------------------------ -------------------------------- --------------
Long-Term
Annual Compensation Compensation Awards
------------------------------ --------- ------------------------------ -------------------------------- --------------
Name and Principal Position Year Salary Bonus Securities Restricted All Other
Underlying Stock Awards Compensation
Options (25)
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
Norman P. Leenhouts, 1999 $230,000 $185,969 (1) 50,000 sh. (17) 426 sh. (21) $4,800
Chairman and Co-Chief 2000 276,000 62,044 (2) 50,000 sh. (18) 128 sh. (21) 5,100
Executive Officer 2001 325,000 98,866 (3) 50,000 sh. (19) 151 sh. (21) 5,100
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
Nelson B. Leenhouts, 1999 230,000 185,969 (1) 50,000 sh. (17) 426 sh. (21) 4,800
President and Co-Chief 2000 276,000 62,044 (2) 50,000 sh. (18) 128 sh. (21) 5,100
Executive Officer 2001 325,000 98,866 (3) 50,000 sh. (19) 0 5,100
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
Edward J. Pettinella (4), 1999 0 0 0 0 0
Executive Vice President 2000 0 0 0 0 0
2001 272,692 54,534 150,000 sh. (20) 2,000 sh. (22) 0
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
David P. Gardner, 1999 127,500 59,168 (5) 15,000 sh. (17) 54 sh. (21) 4,800
Senior Vice President and 2000 153,000 18,380 (6) 15,000 sh. (18) 15 sh. (21) 5,100
Chief Financial Officer 2001 176,000 28,060 (7) 15,000 sh. (19) 1,017 sh. (23) 5,100
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
Ann M. McCormick, 1999 127,500 59,168 (5) 15,000 sh. (17) 54 sh. (21) 4,800
Senior Vice President, 2000 153,000 18,380 (6) 15,000 sh. (18) 15 sh. (21) 5,100
General Counsel and 2001 176,000 28,060 (7) 15,000 sh. (19) 1,017 sh. (23) 5,100
Secretary
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
John E. Smith, 1999 78,250 18,622 (8) 5,000 sh. (17) 0 2,866
Senior Vice President 2000 95,000 6,900 (9) 5,000 sh. (18) 0 3,559
2001 133,565 15,449(10) 10,000 sh. (19) 800 sh. (22) 4,256
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
Scott A. Doyle, 1999 85,021 25,127(11) 7,500 sh. (17) 0 3,028
Senior Vice President 2000 100,000 11,750(12) 10,000 sh. (18) 0 3,904
2001 131,000 17,499(13) 10,000 sh. (19) 800 sh. (22) 4,188
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
Johanna A. Falk, 1999 82,500 25,385(14) 10,000 sh. (17) 38 sh. (21) 3,270
Senior Vice President 2000 100,000 8,671(15) 10,000 sh. (18) 4 sh. (21) 3,912
2001 121,000 15,894(16) 10,000 sh. (19) 806 sh. (24) 3,946
------------------------------ --------- -------------- --------------- ---------------- --------------- --------------
(1) Includes $19,969, which represents 50% of the amount of the 1998 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in that plan.
(2) Includes $21,099 and $19,748 which represents 50% of the amount of the 1998 bonus and 1999
bonus, respectively, that was subject to mandatory deferral under the Company's Incentive
Compensation Plan plus interest as provided in that plan.
(3) Includes $20,866 which represents 50% of the amount of the 1999 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan.
7
(4) Mr. Pettinella became an employee of the Company on February 5, 2001. His annualized salary
for 2001 was $300,000.
(5) Includes $5,618, which represents 50% of the amount of the 1998 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in that plan.
(6) Includes $5,936 and $6,569, which represents 50% of the amount of the 1998 bonus and 1999
bonus, respectively, that was subject to mandatory deferral under the Company's Incentive
Compensation Plan plus interest as provided in that plan.
(7) Includes $6,940, which represents 50% of the amount of the 1999 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in that plan.
(8) Includes $2,200, which represents 50% of the amount of the 1998 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in the plan.
(9) Includes $2,326 and $2,015 which represents 50% of the amount of the 1998 bonus and 1999
bonus, respectively, that was subject to mandatory deferral under the Company's Incentive
Compensation Plan plus interest as provided in the plan.
(10) Includes $2,129, which represents 50% of the amount of the 1999 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in the plan.
(11) Includes $4,113, which represents 50% of the amount of the 1998 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in the plan.
(12) Includes $4,347 and $4,635 which represents 50% of the amount of the 1998 bonus and 1999
bonus, respectively, that was subject to mandatory deferral under the Company's Incentive
Compensation Plan plus interest as provided in the plan.
(13) Includes $4,897 which represents 50% of the amount of the 1999 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in the plan.
(14) Includes $2,264 which represents 50% of the amount of the 1998 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in the plan.
(15) Includes $2,392 and $3,590 which represents 50% of the amount of the 1998 bonus and 1999
bonus, respectively, that was subject to mandatory deferral under the Company's Incentive
Compensation Plan plus interest as provided in the plan.
(16) Includes $3,794 which represents 50% of the amount of the 1999 bonus that was subject to
mandatory deferral under the Company's Incentive Compensation Plan plus interest as
provided in the plan.
(17) Represents options granted under the Company's 1994 Stock Benefit Plan. They are
exercisable for ten years at $27.125 per share and vest over five years.
(18) Represents options granted under the Company's 2000 Stock Benefit Plan. They are
exercisable for ten years at $31.3750 per share and vest over five years.
(19) Represents options granted under the Company's 2000 Stock Benefit Plan. They are
exercisable at $30.15 per share and vest over five years.
(20) Represents options granted under the Company's 2000 Stock Benefit Plan. 100,000 of the
options were granted in February, 2001 when Mr. Pettinella became an officer of the
Company. These options vested immediately and are exercisable at $27.01 per share. 50,000
of the options were granted in August, 2001 and vest 25,000 in August, 2002 and 25,000 in
August 2003. These options are exercisable at $30.15 per share.
(21) Represents shares of common stock issuable pursuant to the Company's Deferred Company's
Incentive Compensation Plan that constitute the Company's contribution of 10% of the amount
of the bonus deferred by the Named Executive for the applicable year plus dividends on
those shares as provided under the Deferred Company's Incentive Compensation Plan. These
shares vest on the three year anniversary of the date they were first credited to the Named
Executive's account.
(22) Represents shares of restricted stock granted under the Company's 2000 Stock Benefit Plan.
The restrictions on these shares lapse in February, 2006.
(23) Includes 1,000 shares of restricted stock granted under the Company's 2000 Stock Benefit
Plan. The restrictions on these shares lapse in February, 2006. The remaining shares are
issuable to the Named Executive as described in footnote (21).
(24) Includes 800 shares of restricted stock granted under the Company's 2000 Stock Benefit
Plan. The restrictions on these shares lapse in February, 2006. The remaining shares are
issuable to the Named Executive as described in footnote (21).
(25) Represents contributions made by the Company to the Named Executive's account under the
Company's Retirement Savings Plan.
8
STOCK BENEFIT PLANS
The Company's 1994 Stock Benefit Plan was adopted by the Company at the
time of its initial public offering. As of March 14, 2002, options to purchase
1,542,981 shares have been granted to employees and options to purchase 153,654
shares have been granted to Independent Directors under the 1994 Stock Benefit
Plan. Of the options granted under the 1994 Stock Benefit Plan, 567,972 issued
to employees and 74,100 issued to Independent Directors were outstanding on
March 14, 2002.
At the annual stockholders meeting held in 2000, the stockholders
approved the Company's 2000 Stock Benefit Plan. As of March 14, 2002, options to
purchase 1,485,970 shares have been granted to employees and options to purchase
100,760 shares have been granted to Independent Directors under the 2000 Stock
Benefit Plan. Of the options granted under the 2000 Stock Benefit Plan,
1,246,692 issued to employees and 100,760 issued to Independent Directors were
outstanding on March 14, 2002.
In addition, 42,750 shares of restricted stock have been issued under
the 2000 Stock Benefit Plan to certain executive officers and key employees. The
restrictions on these shares terminate five years after their grant date with
dividend and voting rights effective on the grant date.
OPTION GRANTS IN FISCAL YEAR 2001
The following table sets forth certain information relating to the
options granted to the Named Executives under the 2000 Stock Benefit Plan with
respect to fiscal year ended December 31, 2001. The columns labeled "Potential
Realizable Value" are based on hypothetical 5% and 10% growth assumptions in
accordance with the rules of the Securities and Exchange Commission. The Company
cannot predict the actual growth rate of the Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR(1)
Individual Grants
------------------------------------------------------------------------
Percent of Potential Realizable Value
Number of Total Options at Assumed Annual Rates of
Shares Granted to Stock Price Appreciation
Underlying Employees in Exercise or for Option Term
Options Fiscal Base Price Expiration ----------------
Name Granted Year ($/sh.) Date 5% 10%
---- ------- ---- ------- ---- -- ---
Norman P. Leenhouts 50,000 6.29% $30.15 7/31/2011 $948,059 $2,402,567
Nelson B. Leenhouts 50,000 6.29% 30.15 7/31/2011 948,059 2,402,567
Edward J. Pettinella 100,000 12.59% 27.01 2/07/2011 1,698,644 4,304,698
50,000 6.29% 30.15 7/31/2011 948,059 2,402,567
David P. Gardner 15,000 1.89% 30.15 7/31/2011 284,418 720,770
Ann M. McCormick 15,000 1.89% 30.15 7/31/2011 284,418 720,770
John E. Smith 10,000 1.26% 30.15 7/31/2011 189,612 480,513
Scott A. Doyle 10,000 1.26% 30.15 7/31/2011 189,612 480,513
Johanna A. Falk 10,000 1.26% 30.15 7/31/2011 189,612 480,513
-------------------------
(1) Stock Appreciation rights were not granted in 2001.
9
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth the value of options held at the end of
2001 by the Company's Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
Number of Number of Shares Value of Unexercised
Shares Underlying Unexercised in-the-Money Options at
Acquired on Value Options at Fiscal Year End Fiscal Year End (2)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Norman P. Leenhouts 14,338 $89,391 44,000(3) 129,000 $165,900 $269,900
Nelson B. Leenhouts 52,870 395,333 43,468 129,000 169,245 269,900
Edward J. Pettinella 0 0 100,000 50,000 459,000 72,500
David P. Gardner 0 0 28,234(4) 39,000 218,237 82,775
Ann M. McCormick 0 0 29,873(5) 39,000 238,965 82,775
John E. Smith 0 0 4,400 17,600 17,140 32,435
Scott A. Doyle 0 0 6,400 23,100 21,840 40,048
Johanna A. Falk 0 0 9,623 24,600 50,465 46,760
(1) Stock appreciation rights were not granted in 2001.
(2) Based on the closing price of the Common Stock on the NYSE on December 31, 2001 of $31.60 less the
per Share exercise price of the options.
(3) Subsequent to December 31, 2001, Norman Leenhouts exercised 3,814 options.
(4) Subsequent to December 31, 2001, Mr. Gardner exercised 12,660 options.
(5) Subsequent to December 31, 2001, Mrs. McCormick exercised 14,750 options.
EMPLOYMENT AGREEMENTS
Norman and Nelson Leenhouts entered into employment agreements with the
Company prior to its initial public offering providing for an initial term of
five years commencing August 4, 1994 with automatic one year extensions (the
"Employment Agreements"). Certain of the terms of the original Employment
Agreements have been amended. The second extension term of the Employment
Agreements expired on August 4, 2001 and the agreements automatically renewed to
August 4, 2002. The agreements provide for the employment of Norman Leenhouts as
Chairman of the Board and Co-Chief Executive Officer of the Company and Nelson
Leenhouts as President and Co-Chief Executive Officer of the Company and
President and Chief Executive Officer of HP Management. The Employment
Agreements also provide that if employment is terminated by the Company or not
renewed without cause, or terminated by the executive for good reason at any
time each of the Leenhouts is entitled to receive an amount equal to twice his
base salary and incentive compensation for the year preceding termination plus,
in the year following termination, the amount of incentive compensation that he
would have earned if he had been an employee on December 31 of the year of
termination. The Employment Agreements also entitle the Leenhoutses to receive
incentive compensation pursuant to the Company's Incentive Compensation Plan, as
such plan may be amended from time to time. Pursuant to the Employment
Agreements each of Norman and Nelson Leenhouts are subject to a covenant not to
compete with the Company during the term of his employment and, if either is
terminated by the Company for cause or resigns without good reason, for two
years thereafter. The covenants prohibit Norman and Nelson Leenhouts from
participating in the management, operation or control of any multifamily
residential business which is competitive with the business of the Company,
except that they,
10
individually and through Home Leasing and its affiliates, may
continue to own and develop the properties managed by HP Management. The
Leenhoutses have also agreed that any commercial property which may be developed
by them will be managed by HP Management subject to the approval of the outside
members of the Board of Directors. The Employment Agreements may be terminated
by either party on written notice given sixty days prior to the expiration of
the then current term.
Edward Pettinella also entered into an employment agreement with the
Company providing for a term that commenced on February 5, 2001 and expires on
December 31, 2003. The agreement provides for the employment of Mr. Pettinella
as an Executive Vice President of the Company at a base salary for 2001 at an
annual rate of $300,000, increasing to $350,000 for 2002 and $400,000 for 2003.
In addition, the agreement provides that Mr. Pettinella will receive incentive
compensation under the Company's Incentive Compensation Plan. The factor to be
applied to his base salary for purposes of determining his share of the bonus
pool was set at 10% for 2001, 11% for 2002 and 12% for 2003. In addition, Mr.
Pettinella was granted options to purchase 100,000 shares of the Company's
Common Stock that vested immediately and have a ten year term. According to his
employment agreement he was also granted options to purchase an additional
50,000 shares in August, 2001 and will be granted options to purchase an
additional 50,000 shares in August, 2002. The options granted in August, 2001
vest 25,000 in August, 2002 and 25,000 in August, 2003. The options to be
granted in August, 2002 will vest 25,000 in August, 2003 and 25,000 in August,
2004. The Company also loaned Mr. Pettinella funds sufficient to purchase 75,000
shares of its Common Stock under the Company's Director, Officer and Employee
Stock Purchase Plan. Mr. Pettinella subsequently refinanced and paid off that
loan. If Mr. Pettinella's employment is terminated by the Company without cause
or terminated by the executive for good reason, he is entitled to receive an
amount equal to not less than twice his base salary and incentive compensation
for the year preceding termination and the continuation of other fringe
benefits. If Mr. Pettinella is not appointed Chief Executive Officer of the
Company on or prior to December 31, 2003 and he elects to terminate his
employment on or before March 31, 2004, he will be entitled to receive a lump
sum payment of $800,000 plus two times his 2003 incentive compensation.
INCENTIVE COMPENSATION PLAN
Under the Company's Incentive Compensation Plan eligible officers and
key employees may earn a cash bonus once a certain targeted level of performance
in terms of the Company's Funds from Operations ("FFO") per share/unit (computed
on a diluted basis) is achieved. The Incentive Compensation Plan provides for a
bonus unit to be awarded for each percent of per share/unit FFO growth in excess
of the target. For 2001, the target was originally set at 4% growth in FFO.
Pursuant to the plan, a factor is applied to each eligible
participant's salary, ranging from 1% to 12%, which is multiplied by the
resulting bonus units, to determine the split of the bonus pool. The factor
applied to the salaries of Norman and Nelson Leenhouts was 12% for services
rendered in 2001. For services rendered in 2001, the factor applied to the
salary of Mr. Pettinella was 10%. The factor in 2001 applied to the salaries of
David Gardner and Ann McCormick was 6% with a factor of 5% applicable to the
other Named Executives. So, for example, if the Company had achieved 6% FFO
growth in 2001, each of Norman and Nelson Leenhouts would have been entitled to
a bonus equal to 24% of their 2001 salary. (6% growth minus the 4% target times
their 12% factor.)
Incentive Plan participants in the 1% and 2% bonus categories are
limited to bonuses equal to ten and twenty percent, respectively, of their
salaries. There is no limit for participants in the 3% bonus category or above,
except there is a deferral component if the number of bonus units earned (based
on the Company's performance) exceeds 5 bonus units. The deferred amount plus
interest at 6% will be paid out at the rate of 50% in each of the following two
years, provided the Company achieves a 5% floor in per share/unit growth each
year.
11
The target of 4% FFO growth set for 2001 was not achieved. This would
have resulted in no bonus paid for services rendered in 2001 and a forfeiture of
the portion of the 1999 bonus subject to mandatory deferral in 2000. After
considering various factors which are discussed in its Report included later in
this Proxy Statement, the Management and Directors Committee recommended and the
full Board approved payment of a bonus for services rendered in 2001 at the rate
of two bonus units, as well as payment of the portion of the 1999 bonus deferred
in 2000.
DIRECTOR, OFFICER AND EMPLOYEE STOCK PURCHASE AND LOAN PROGRAM
The Company has made various loans to its officers and directors
pursuant to its Director, Officer and Employee Stock Purchase and Loan Program,
which the Board approved in 1996 (the "Stock Purchase Program"). The loans were
used by the recipients to purchase the Company's Common Stock. The Stock
Purchase Program approved by the stockholders at the 1998 Annual Meeting of the
Stockholders provided that the Company can loan approximately 50% of the
purchase price to the Independent Directors and arrange for loans from a
commercial bank for the balance. The Company can loan other participating
employee directors and officers 100% of the purchase price. Seven of the
Independent Directors and thirty of the Company's current or former officers,
including the employee directors, have participated in some or all of the
various phases of the Stock Purchase Program. To date, 690,864 shares of the
Company's Common Stock have been purchased by those officers and directors under
the Stock Purchase Program and a total of $11,734,837 has been loaned by the
Company to participants. Interest rates on the existing loans range from 6.7% to
7.13%. Of the total amount loaned, approximately $4.01 million remains
outstanding to the Named Executives. All dividends from the shares issued under
the Stock Purchase Program are applied toward interest and principal payments on
the Company or commercial bank loans. The loans are fully recourse to the
participants and there is no provision for debt forgiveness. The only loan made
under the Stock Purchase Program during the fiscal year ended December, 31, 2001
was a loan of $1,965,000 to Edward Pettinella for the purchase of 75,000 shares
of the Company's Common Stock. Mr. Pettinella subsequently refinanced and paid
off that loan.
DEFERRED BONUS PLAN
Previously under the Company's Deferred Bonus Plan, eligible employees
can elect to defer up to 50% of their bonus under the Incentive Compensation
Plan for three, five or ten years. Commencing with the bonus to be paid for
services rendered in 2002, eligible employees can elect to defer up to 100% of
their bonus. The Company contributes 10% of the amount deferred, which amount
vests after three years. A "phantom" stock account is established for both
amounts. Each deferral and Company contribution is reflected by crediting those
accounts with the number of shares of the Company's Common Stock that could be
purchased with the amounts deferred and contributed at the Common Stock's fair
market value. The equivalent of dividends on those shares is also credited to
the accounts at the time dividends are paid on the Company's Common Stock.
Shares that could be purchased with the hypothetical dividends are credited to
accounts at the same price that shares are purchased for participants under the
dividend reinvestment feature of the Company's DRIP. Under the Deferred Bonus
Plan, Norman Leenhouts deferred $49,433 of his 2001 bonus and the other Named
Executives collectively deferred approximately $13,000 of their 2001 bonuses.
12
EXECUTIVE RETENTION PLAN
The Company's Executive Retention Plan provides for severance benefits
and other compensation to be received by certain employees, including the
executive officers, in the event of a change of control of the Company and a
subsequent termination of their employment without cause or voluntarily with
good cause. Under this Plan, the executive officers, in the event of a
termination covered by the Plan, would receive a lump sum payment equal to two
times their current base salary, two times their last paid bonus under the
Incentive Compensation Plan plus a "gross-up" amount necessary to pay any excise
tax due on the payment. In addition, all accrued or deferred bonuses under the
Incentive Compensation Plan would be paid and all stock options granted under
the 1994 Stock Benefit Plan and the 2000 Stock Benefit Plan would vest.
PERFORMANCE GRAPH
The following graph compares the cumulative return on the Company's
Common Stock during the five year period ended December 31, 2001 to the
cumulative return of the NAREIT All Equity REIT Index and the Standard and
Poor's 500 Index for the same period. The total return assumes that dividends
were reinvested quarterly at the same discounted price as provided under the
Company's DRIP and is based on a $100 investment on December 31, 1996.
Stockholders should note that past performance does not predict future results.
GRAPH APPEARS HERE
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
HME $100.00 $130.16 $132.64 $152.94 $168.73 $206.53
NAREIT 100.00 120.26 99.21 94.63 119.58 136.24
S&P 500 100.00 122.36 119.25 144.60 140.89 144.40
13
MANAGEMENT AND DIRECTORS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As part of its responsibilities, the Management and Directors Committee
recommends to the Board compensation policies applicable to the Company's
executive officers and the members of its Board of Directors, as well as
broad-based compensation plans for the Company's other officers and employees
generally. The Committee also makes specific annual compensation recommendations
to the Board relating to the Company's executive officers. On an ongoing basis,
the Committee also considers the structure of the Company's compensation program
as it applies to all employees and, when appropriate, recommends changes to the
full Board. The Management and Directors Committee consists only of Independent
Directors.
The Committee believes that the success of the Company is, in large
part, attributable to the performance and dedication of its employees and, in
particular, to the leadership efforts of its executive officers. In establishing
the Company's compensation program, the Management and Directors Committee's
goal therefore is to: (1) attract and retain highly capable employees; (2)
motivate those employees to maximize the Company's operating and financial
performance; and (3) link compensation to the performance of the Company in
order to closely align the interests of executives and other employees with
those of its stockholders. To achieve these ends, the Company's executive
compensation package consists of three components: base salary, annual incentive
compensation in the form of a bonus under the Incentive Compensation Plan, and
awards of restricted stock and stock options under the Company's Stock Benefit
Plan. The Committee annually considers the appropriate level and combination of
these three components in the executive officers' compensation packages and,
among other things, weighs the competitiveness of the Company's overall
compensation arrangements in relation to comparable companies.
To determine whether the compensation of its senior executives was
market competitive, the Committee most recently reviewed industry peer group
companies using information from each company's 2001 proxy statement. The
Committee considered base salary, incentive compensation and restricted stock
and option grants to senior executives at each of the peer group companies. The
comparison demonstrated to the Committee that total compensation to the
Company's senior executives continues to be below the peer group average.
The Committee expects to make an annual review of total compensation to
the executive and other key officers of the Company.
Salary. Based on the above review, an assessment of overall corporate
performance, including a comparison to peer group performance, and consideration
of individual responsibilities and contributions, the Committee recommended to
the Board of Directors and the Board approved a 23% salary increase to $400,000
for 2002 for each of the two Co-Chief Executive Officers. Mr. Pettinella's
employment agreement provided for a 16.7% increase to $350,000 for 2002, which,
it was determined, was consistent with an appraisal of his contribution to the
Company. The six other executive officers received increases averaging 9.0%.
Based on a similar review of peer group compensation to independent directors,
the Committee recommended no adjustments for 2002 in the Company's Independent
Director compensation package.
Incentive Compensation. The Incentive Plan also is designed to closely
align the interests of the Company's employees with the interests of its
stockholders. It provides for a cash bonus pool to be established once a certain
targeted level of performance in terms of the Company's Funds from Operations is
achieved. A factor is then applied to the salary of each participant to
determine their share of the bonus pool. For 2001, the factor applied to Nelson
and Norman Leenhouts' salaries was 12%. The factor applied to Edward
Pettinella's salary was fixed in his employment agreement at 10% for 2001. The
14
factor applied to David Gardner's and Ann McCormick's salaries was 6% and the
factor applied to the salaries of the other executive officers was 5%. Payment
of the bonus is entirely in the discretion of the Committee. For 2001, the
targeted level of growth in the Company's Funds from Operations above which a
bonus would be paid was established during the fourth quarter of 2000 based on
then current projected peer group performance for 2001.
During 2001, that targeted level of growth was not achieved. This would
have resulted in no bonus payment for 2001 services as well as a forfeiture of
the portion of the 1999 bonus deferred in 2000. The Committee considered the
reasons for the shortfall, in particular the unexpected increase in utility
costs during the first half of 2001 as well as the downturn in the economy after
September 11th. The Committee also considered the individual performances of the
executives as well as the revised projected 2001 financial results for the
Company which compared favorably to the revised lower projections for its peer
group. Based on this and in the exercise of its discretion, the Committee
recommended to the full Board and the Board approved the establishment of a
bonus pool for 2001 of two bonus units and approved payment of the portion of
the 1999 bonus deferred in 2000. In light of their contributions to the Company
and their overall high level of performance, the Committee recommended and the
full Board approved payment to each of the Co-Chief Executive Officers as well
as the other executive officers of their full share of this bonus pool .
Historically, during the fourth quarter of the prior year the
Committee has recommended and the full Board has approved the targeted level of
performance above which a bonus would be paid for the services rendered in the
following year. This target was typically based on the published anticipated
performance levels for the Company's peer group for the following year. In light
of the uncertain economic climate expected for 2002, the published anticipated
performance levels for the Company and its peer group includes a much wider
range than has been typical in the past. As a result, the Committee recommended
to the full Board and the full Board approved that the targeted level of the
Company's performance for 2002, for purposes of determining the bonus payout,
would not be set until final 2002 financial results are available for the
Company and its peer group. The bonus pool will then be established based on a
comparison of the actual performance of the Company as compared to its peer
group's actual performance.
The Committee expects to regularly review the Incentive Plan to assure
its appropriateness.
Stock Compensation. The purpose of option grants is to offer employees
an incentive to maximize their efforts to promote the Company's economic
performance and thereby advance the interests of the Company's stockholders. To
encourage the employees to seek long term appreciation in the value of the
Company's Common Stock, options are typically not immediately exercisable but
vest over a specified period of time, usually five years.
In 2001, the Management and Directors Committee again reviewed the
number of options granted to the Co-Chief Executive Officers and other executive
officers in light of the other elements of their compensation and their overall
equity interest in the Company's business, including their ownership of units of
limited partnership interest in the Operating Partnership. The Committee
determined to encourage officers to acquire additional Common Stock by making
option awards under the 2000 Stock Option Plan.
The Management and Directors Committee therefore recommended and the
Board of Directors approved the issuance of approximately 725,000 additional
options to purchase Common Stock to certain officers and employees of the
Company at an option price equal to the closing price on the New York Stock
Exchange for a share of the Company's Common Stock on the date of the grant. In
August 2001, each of the Named Executives therefore received additional options
which vest 20% per year and expire
15
in ten years. Each of the Co-Chief Executive Officers received 50,000 additional
options. Pursuant to his employment agreement, Mr. Pettinella received 100,000
options upon the commencement of his employment and an additional 50,000 options
in August, 2001. Each of David Gardner and Ann McCormick received 15,000
additional options. Each of the other four executive officers received 10,000
additional options.
In addition, for 2002, the Committee recommended and the Board of
Directors approved the issuance of 22,150 shares of restricted stock to
executive officers and key employees under the 2000 Stock Benefit Plan. In 2000,
restricted stock grants were primarily used for sign-on bonuses and as special
awards for key employees. After reviewing the higher granting levels of the
Company's peer group, the Committee made a determination to use restricted stock
grants as a more regular component of compensation to executives and other key
employees. The Committee concluded that the grant of restricted shares was a
favorable method for moving compensation levels of this group of employees
closer to that of the Company's peer group while maintaining the motivational
advantages of cliff vesting and stock appreciation. The Co-Chief Executive
Officers were each awarded 3,000 shares of restricted stock. Edward Pettinella
received 2,000 shares of restricted stock and David Gardner and Ann McCormick
each received 1,000 shares of restricted stock. The other executive officers
received an aggregate of 3,000 shares of restricted stock. The restrictions on
all of these awards lapse at the end of five years.
The Committee expects to recommend periodic awards under the 2000 Stock
Benefit Plan, including the issuance of additional shares of restricted stock.
Co-Chief Executive Officer Compensation. The Committee considers and
develops recommendations to the full Board on matters pertaining to the
compensation of Nelson and Norman Leenhouts substantially in conformity with the
policies described above for all other executive officers of the Company. The
Committee meets in executive session to determine compensation levels for all
inside directors, including the Co-Chief Executive Officers, for the next year
as well as to evaluate their performance.
Section 162(m). It is the Committee's policy that executive
compensation should be deductible to the Company for federal income tax
purposes. The Committee will annually consider compensation decisions in light
of the limit on deductibility under Section 162(m) of the Internal Revenue Code
and related regulations.
Submitted by the Management and Directors Committee,
Clifford W. Smith, Jr., Chairman
Burton S. August, Sr.
William Balderston, III
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors of Home Properties of New
York, Inc. ("Home Properties") is composed of independent directors as required
by the rules of the New York Stock Exchange and operates under a written charter
adopted by the Committee and the Board.
During 2001, the Committee met three times. The members of the
Committee are identified at the end of this report.
16
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the system of internal controls.
The independent accountants are responsible for performing an independent audit
of the Company's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Committee's
responsibility is to monitor and oversee these processes.
In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated financial statements with management and
the independent accountants. The Committee discussed with the independent
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication With Audit Committees).
The independent accountants provided to the Committee the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussion With Audit Committees). The Committee discussed with
the independent accountants their independence. All audit and non-audit services
provided by PricewaterhouseCoopers LLP and the fees paid by the Company with
respect to such services are reviewed by the Audit Committee, which has also
considered whether the provision of non-audit services is compatible with
maintaining the independent accountants' independence.
The Committee discussed with the Company's internal auditors and the
independent accountants the scope and plans for their respective audits. The
Committee met with the independent accountants, with and without management
present, and discussed the results of their examinations, their evaluations of
the Company's internal controls, and the quality of the Company's financial
reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors, and the Board has approved,
that the Company's audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, for filing with
the Securities and Exchange Commission.
Submitted by the Audit Committee,
Paul L. Smith, Chairman
Alan L. Gosule
Leonard F. Helbig, III
Roger W. Kober
FEES TO INDEPENDENT ACCOUNTANTS
Audit Fee. The Company paid to PricewaterhouseCoopers LLP, the
independent accountants, audit fees (inclusive of expenses) of $113,700 for
professional services rendered for the audit of the Company's annual financial
statements for the year ended December 31, 2001 and the reviews of the financial
statements included in the Company's quarterly reports on Form 10-Q for such
year.
Financial Information Systems Design and Implementation Fees. The
Company did not engage PricewaterhouseCoopers LLP to provide advice regarding
its financial information systems design and implementation during the fiscal
year ended December 31, 2001.
17
All Other Fees. Fees billed to the Company by PricewaterhouseCoopers
LLP during the Company's 2001 fiscal year for all other non-audit services
rendered to the Company, including tax related services, totaled $224,750. These
other fees are further broken down as follows:
SEC Rule 3-14 audits including review of related
Form 8-K's relative to property acquisitions $88,955
Review of filing and documents relative to Registration
Statements and Prospectus Supplements filed with the SEC $28,900
Preparation of Home Properties' and subsidiary companies'
federal and state tax returns $63,895
Other tax consulting services $43,000
MANAGEMENT AND DIRECTORS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
During the fiscal year 2001, the Management and Directors Committee was
comprised of Burton S. August, Sr., William Balderston, III, Alan L. Gosule and
Clifford W. Smith, Jr. None of them have ever been an officer of the Company or
any of its subsidiaries. Mr. Gosule is a partner in the law firm of Clifford
Chance Rogers & Wells, LLP. In 2000, the Company paid fees to Clifford Chance
Rogers & Wells, LLP in connection with certain services rendered by the firm to
the State of Michigan Retirement Systems in connection with their investment in
the Company as well as fees for certain limited services rendered by Clifford
Chance Rogers & Wells, LLP to the Company. The Company paid no fees to Clifford,
Chance, Rogers & Wells in 2001.
18
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 14, 2002
regarding the beneficial ownership of shares of Common Stock by (i) directors,
nominees and Named Executives of Home Properties, and (ii) directors, Nominees
and executive officers of Home Properties as a group, and (iii) each person
known by the Company to be the beneficial owner of more than a 5% interest in
the Company. The table also includes information relating to the number and
percentage of shares of Common Stock and partnership units of the Operating
Partnership ("Units") beneficially owned by the persons included in (i) and (ii)
above (such Units are exchangeable into shares, or cash at the election of the
Independent Directors of the Company). In preparing this table, the Company has
relied on information supplied by its officers, directors, Nominees and certain
stockholders, and upon information contained in filings with the SEC.
Number of Shares Percentage of Number of
Name and Address of Beneficially Shares Shares/Units Percentage of
Beneficial Owner Owned (1) Outstanding (1) Owned (2) Shares/Units (2)
---------------- --------- --------------- --------- ----------------
Norman P. Leenhouts 207,814 (3) * 476,974 (3) (5) 1.81%
Nelson B. Leenhouts 156,766 (4) * 425,678 (4) (5) 1.62%
Edward J. Pettinella 202,000 (6) * 202,000 (6)
Burton S. August, Sr. 61,141 (7) * 65,387 (7) *
William Balderston, III 37,102 (8) * 37,102 (8) *
Alan L. Gosule 24,898 (9) * 24,898 (9) *
Leonard F. Helbig, III 51,685 (10) * 51,685 (10) *
Roger W. Kober 39,186 (11) * 39,186 (11) *
Albert H. Small 16,812 (12) * 1,055,720 (12) 3.91%
Clifford W. Smith, Jr. 53,312 (13) * 53,312 (15) *
Paul L. Smith 28,752 (14) * 28,752 (16) *
Amy L. Tait 132,154 (15) * 145,967 (15) *
David P. Gardner 50,375 (16) * 53,881 (16) *
Ann M. McCormick 48,418 (17) * 50,720 (17) *
John E. Smith 9,492 (18) * 9,492 (18) *
Scott A. Doyle 12,642 (19) * 12,642 (19) *
Johanna A. Falk 27,942 (20) * 27,942 (20) *
All executive officers
and directors as a group
(18 persons) 1,187,095 (21) 4.49% (22) 2,787,942 (21) (23) 9.72%(23)
----------
* Less than 1%
19
Percentage of Outstanding
Number of Shares Shares As of
Name and Address of Beneficial Owner Beneficially Owned December 31, 2001
------------------------------------ ------------------ -----------------
Perkins Wolf McDonnell & Company
53 W. Jackson Blvd., Suite 722
Chicago, IL 60604 2,772,500 (24) 10.70%
FMR Corp.
82 Devonshire St.
Boston, MA 02109 2,459,111 (25) 9.49%
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, NY 10017 2,330,608 (26) 9.00%
Ohio PERS
277 East Town Street
Columbus, OH 43215 1,642,251 (27) 6.34%
(1) Assumes that all vested shares issuable to the person pursuant to the Director Deferred
Compensation Plan and the Company's Deferred Bonus Plan (the "Deferred Plans") have been
issued, that all currently exercisable options issued to the person have been exercised,
that restrictions on all restricted stock issued to the person have lapsed and that all
unvested shares issuable to such person pursuant to the Deferred Plans have vested. The
total number of shares outstanding used in calculating the percentage assumes that all of
the vested shares issuable to any person pursuant to the Deferred Plans have been issued
but that none of the options held by any other person have been exercised, that none of the
restrictions on restricted stock issued to any other person have lapsed and that none of
the unvested shares issuable to any other person pursuant to the Deferred Plans have
vested.
(2) Same assumptions as footnote (1) plus assumes that all Units issued to the person have been
exchanged for shares of Common Stock and that for purposes of calculating the percentage
the total number of shares assumes that none of the Units issued to any other person have
been exchanged for shares of Common Stock.
(3) Includes 40,186 shares which may be acquired upon the exercise of currently exercisable
options, 10,102 shares in custodial accounts for the benefit of Mr. Leenhouts'
grandchildren as to which he disclaims beneficial ownership and 9,092 shares of common
stock issuable pursuant to the Company's Deferred Bonus Plan. The shares issuable under the
Deferred Bonus Plan are fully vested, except for 630 shares accrued to the beneficial
owner's account as the Company's contribution which shall vest on the third anniversary of
the date first credited to the account. Also includes grant of 3,000 shares of restricted
stock under the 2000 Stock Benefit Plan, the restrictions on which will lapse in 2007.
(4) Includes 43,468 shares which may be acquired upon the exercise of currently exercisable
options and 8,260 shares of common stock issuable pursuant to the Company's Deferred Bonus
Plan. The shares issuable under the Deferred Bonus Plan are fully vested, except for 554
shares accrued to the beneficial owner's account as the Company's contribution which shall
vest on the third anniversary of the date first credited to the account. Also includes
grant of 3,000 shares of restricted stock under the 2000 Stock Benefit Plan the
restrictions on which will lapse in 2007.
(5) Includes Units owned by Home Leasing and Leenhouts Ventures. Norman Leenhouts and Nelson
Leenhouts are each directors, officers and 50% stockholders of Home Leasing and each owns
50% of Leenhouts Ventures. Includes 50,000 Units owned by the respective spouses of each of
Norman and Nelson Leenhouts as to which they disclaim beneficial ownership.
20
(6) Includes 100,000 shares which may be acquired upon the exercise of currently exercisable
options and a grant of 4,000 shares of restricted stock under the 2000 Stock Benefit Plan,
the restrictions on which will lapse 50% in 2006 and 50% in 2007.
(7) Includes 24,920 shares which may be acquired upon the exercise of currently exercisable
options, 1,302 shares of common stock issuable pursuant to the Director Deferred
Compensation Plan and 9,100 shares held in a trust of which Mr. August is the lifetime
beneficiary. The shares issuable under the Director Deferred Compensation Plan are fully
vested, except for 119 shares accrued to the beneficial owner's account as the Company's
contribution which shall vest on the third anniversary of the date first credited to the
account.
(8) Includes 24,920 shares which may be acquired upon the exercise of currently exercisable
options.
(9) Includes 21,420 shares which may be acquired upon the exercise of currently exercisable
options and 2,704 shares issuable pursuant to the Director Deferred Compensation Plan. The
shares issuable under the Director Deferred Compensation Plan are fully vested, except for
246 shares accrued to the beneficial owner's account as the Company's contribution which
shall vest on the third anniversary of the date first credited to the account.
(10) Includes 21,420 shares which may be acquired upon the exercise of currently exercisable
options and 2,655 shares issuable pursuant to the Director Deferred Compensation Plan. The
shares issuable under the Director Deferred Compensation Plan are fully vested, except for
241 shares accrued to the beneficial owner's account as the Company's contribution which
shall vest on the third anniversary of the date first credited to the account.
(11) Includes 24,920 shares which may be acquired upon the exercise of currently exercisable
options and 1,483 shares issuable pursuant to the Director Deferred Compensation Plan. The
shares issuable under the Director Deferred Compensation Plan are fully vested, except for
135 shares accrued to the beneficial owner's account as the Company's contribution which
shall vest on the third anniversary of the date first credited to the account.
(12) Includes 14,420 shares which may be acquired upon the exercise of currently exercisable
options and 2,392 shares issuable pursuant to the Director Deferred Compensation Plan. The
shares issuable under the Director Deferred Compensation Plan are fully vested, except for
217 shares accrued to the beneficial owner's account as the Company's contribution which
shall vest on the third anniversary of the date first credited to the account. Also
includes Mr. Small's proportionate share of Units owned by Community Realty Company, Inc.
(13) Includes 17,920 shares which may be acquired upon the exercise of currently exercisable
options and 2,767 shares issuable pursuant to the Director Deferred Compensation Plan. Also
includes 1,400 shares owned by Mr. Smith's spouse as custodian for their minor children and
700 shares held in a trust for the benefit of one of Mr. Smith's minor children. The shares
issuable under the Director Deferred Compensation Plan are fully vested, except for 252
shares accrued to the beneficial owner's account as the Company contribution which will
vest on the third anniversary of the date first credited to the account.
(14) Includes 17,920 shares which may be acquired upon the exercise of currently exercisable
options and 947 shares issuable pursuant to the Director Deferred Compensation Plan. The
shares issuable under the Director Deferred Compensation Plan are fully vested, except for
86 shares accrued to the beneficial owner's account as the Company contribution which will
vest on the third anniversary of the date first credited to the account.
(15) Includes 47,206 shares which may be acquired by Mrs. Tait upon the exercise of currently
exercisable options. Also includes 3,612 shares which may be acquired upon the exercise of
currently exercisable options and 70 Units owned by Mrs. Tait's spouse as to which she
disclaims beneficial ownership. Mrs. Tait shares voting and dispositive power with respect
to 15,000 shares and 2,548 Units with her spouse.
(16) Includes 15,749 shares which may be acquired upon the exercise of currently exercisable
options and 1,440 shares of common stock issuable pursuant to the Company's Deferred Bonus
Plan. The shares issuable under the Deferred Bonus Plan are fully vested, except for 87
shares accrued to the beneficial owner's account as the Company contribution which will
vest on the third anniversary of the date first credited to the account. Also includes
grant of 2,000 shares of restricted stock under the 2000 Stock Benefit Plan, the
restrictions on which will lapse 50% in 2006 and 50% in 2007.
(17) Includes 15,123 shares which may be acquired upon the exercise of currently exercisable
options and 1,440 shares of common stock issuable pursuant to the Company's Deferred Bonus
Plan. The shares issuable under the Deferred Bonus Plan are fully vested, except for 87
shares accrued to the beneficial owner's account as the Company contribution which will
vest on the third anniversary of the date first credited to
21
the account. Mrs. McCormick shares voting and dispositive power with respect to 565 Units
with her spouse. Also includes grant of 2,000 shares of restricted stock under the 2000
Stock Benefit Plan, the restrictions on which will lapse 50% in 2006 and 50% in 2007.
(18) Includes 4,400 shares which may be acquired upon exercise of immediately exercisable
options. Also includes 1,600 shares of restricted stock under the 2000 Stock Benefit Plan,
the restrictions on which will lapse 50% in 2006 and 50% in 2007.
(19) Includes 6,400 shares which may be acquired upon exercise of immediately exercisable
options. Also includes 1,600 shares of restricted stock under the 2000 Stock Benefit Plan,
the restrictions on which will lapse 50% in 2006 and 50% in 2007.
(20) Includes 9,623 shares which may be acquired upon exercise of immediately exercisable
options and 863 shares of common stock issuable pursuant to the Company's Deferred Bonus
Plan. The shares issuable under the Deferred Bonus Plan are fully vested, except for 43
shares which will vest on the third anniversary of the date first credited to the account.
Also includes 1,600 shares of restricted stock under the 2000 Stock Benefit Plan, the
restrictions on which will lapse 50% in 2006 and 50% in 2007, as well as 4,079 shares held
by Mrs. Falk's spouse as custodian for their minor children.
(21) Includes 466,543 shares which may be acquired upon the exercise of immediately exercisable
options, 7,200 shares of restricted stock, the restrictions on which will lapse in 2006 and
13,000 shares of restricted stock the restrictions on which will lapse in 2007 and 35,844
shares of common stock issuable pursuant to the Deferred Plans which are fully vested,
except for 2,722 shares accrued as the Company contribution which will vest on the third
anniversary of the date first credited to the accounts.
(22) Assumes that all vested shares issuable to any person pursuant to the Deferred Plans have
been issued, that all exercisable options issued to all listed persons have been exercised,
that restrictions on all restricted stock issued to such persons have lapsed and that all
unvested shares issuable to such persons pursuant to the Deferred Plans have vested.
(23) Same assumptions as footnote (22) plus assumes that all Units issued to all listed persons
have been exchanged for shares of Common Stock.
(24) Based on a report on Schedule 13G, filed February 15, 2001, reflecting that Perkins Wolf
McDonnell & Company has sole voting and dispositive power with respect to 9,850 shares and
shared dispositive and voting power with respect to 2,772,500 shares, including Berger
Small Cap Value Fund, which filed a Schedule 13G on February 14, 2002 reflecting shared
voting and dispositive power with Perkins, Wolf, McDonnell & Company with respect to
1,800,000 shares.
(25) Based on a report on Schedule 13G, filed February 14, 2002 reflecting that FMR Corp. has
sole dispositive power with respect to all of such shares and sole voting power with
respect to 1,923,847 of such shares.
(26) Based on a Schedule 13G filed February 14, 2002 reflecting that Teachers Insurance and
Annuity Association of America has sole voting and dispositive power with respect to the
shares.
(27) Based on a report on Schedule 13G, filed January 29, 2002, reflecting that the Ohio PERS
has sole voting and dispositive power with respect to the shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (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, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange. Officers,
directors and greater than 10% stockholders are required to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 2001, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were satisfied.
22
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Directors and executive officers of the Company received loans from the
Company for some portion of the purchase price of shares of Common Stock
purchased by them in connection with the Stock Purchase Program described above.
The only new loan made under the Stock Purchase Program in 2001 was a $1,965,000
loan to Edward Pettinella to finance the purchase by him of 75,000 shares of
Common Stock. Mr. Pettinella subsequently refinanced and paid off this loan.
Approximately $4.01 million is outstanding to the other Named Executives
pursuant to the Stock Purchase Program.
Home Leasing, in consideration of a portion of the Units and cash
received by it in connection with the formation of the Company, assigned to HP
Management certain management contracts between it and certain entities of which
it is a general partner. As a general partner of those entities, Home Leasing
Corporation (and, indirectly, Norman and Nelson Leenhouts) has an ongoing
interest in such management contracts.
The Company's corporate headquarters are located in a building that is
owned by an entity in which Norman and Nelson Leenhouts indirectly have a 56%
interest. The Operating Partnership and the building owner have entered into
various leases for approximately 75,000 square feet. The base rent payable by
the Operating Partnership under the lease for 2001 was approximately $475,000,
which amount will increase to approximately $663,000 for 2002. The lease also
requires the Operating Partnership to pay its pro-rata portion of property
improvements, real estate taxes and common area maintenance.
In 1997, in connection with the acquisition of a multi-family property
that was owned indirectly by Nelson and Norman Leenhouts, that entity entered
into an agreement with the Operating Partnership providing for a contingent fee
based on the performance of the underlying property. Based on the performance of
the property, it was determined in 2001 that a payment was due from the prior
owner to the Operating Partnership under that agreement in the amount of
$350,000, which payment has been made.
Amy L. Tait entered into a one year Consulting Agreement with the
Company for the period from February 15, 2001 to February 15, 2002. Pursuant to
the Agreement, Mrs. Tait agreed during that period to assist the Company as a
general advisor as well as to assist on special projects as requested by the
Company's executive officers or the Board of Directors. In addition, Mrs. Tait
agreed not to compete with the Company during the term of the Agreement. The
compensation paid to Mrs. Tait under the Consulting Agreement was $198,000 in
equal monthly payments. In addition, she received a payment in the amount of
$127,000 at the time the Consulting Agreement was signed.
In November, 2001, HP Management and Tait Realty entered into a
Property Management Agreement with Midtown Rochester Properties, LLC whereby HP
Management and Tait Realty agreed to provide certain management services with
respect to a certain commercial property located in Rochester, New York. Amy L.
Tait is the principal of Tait Realty. The agreement has a one year term that
automatically renews for one year periods unless terminated as provided therein.
Pursuant to the Property Management Agreement, the monthly management fee is to
be paid 80% to HP Management and 20% to Tait Realty. The monthly management fee
is equal to the greater of 4% of gross revenues or $20,000. For services
rendered in 2001, Tait Realty was paid approximately $4,000 under the Property
Management Agreement.
23
Albert H. Small is a Vice President, Director and 20% shareholder in
CRC, which owns 160,360 limited partnership units in Home Properties of New
York, L.P. CRC provided some financial services to the Operating Partnership,
primarily in the form of bookkeeping, accounting and payroll services, during
1999, 2000 and 2001 relating to the communities located in Home Properties'
Mid-Atlantic region that were acquired from entities that CRC served as general
partner. The fees paid by the Operating Partnership to CRC were $72,000 in 1999;
$130,500 in 2000; and $6,000 in 2001.
At the time of that acquisition the Company also entered into an
employment agreement with Douglas Erdman, the President of CRC, to serve as the
Company's Vice President, Regional Leader in Washington, DC. Mr. Erdman plans to
leave the employment of the Company at the end of the term of his employment
agreement on June 30, 2002 and to thereafter return to serve as the President of
CRC. The Company will retain the management of certain multifamily properties
with respect to which it feels it will be beneficial to retain Mr. Erdman's
assistance for a one year period. The Company has therefore agreed to pay CRC
$5,833 per month for the twelve months commencing July 1, 2002 in order to
reimburse CRC for Mr. Erdman's time.
The Company has also recently entered into an agreement to assign to
CRC all of the Company's interest as manager under certain third party
management agreements in consideration for the payment by CRC to the Company of
the value of those contracts as reflected on the Company's financial statements
(approximately $170,000). That payment is to be made within one year from the
date of the assignment of the management rights to CRC. Unpaid amounts will bear
interest at six percent per annum.
Mr. Small is a general partner and six percent owner of a partnership
that owns the office building in which the Company has its Mid-Atlantic regional
offices. The Operating Partnership and the building owner have entered into a
lease for 6,250 square feet. The base rent payable by the Operating Partnership
under the lease for 2001 was $141,000. In addition, the lease also requires the
Operating Partnership to pay its pro-rata portion of increases in operating
expenses and taxes.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee,
has appointed the accounting firm of PricewaterhouseCoopers LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
2002. PricewaterhouseCoopers LLP (and its predecessor, Coopers & Lybrand,
L.L.P.) has served as the Company's independent auditors since its commencement
of operations and is considered by the management of the Company to be well
qualified. A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting, will be given the opportunity to make a statement if he or she
so desires and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS OF THE COMPANY
FOR THE 2002 FISCAL YEAR.
24
ADDITIONAL INFORMATION
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
A stockholder proposal submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, for inclusion in the Company's
proxy statement and form of proxy for the 2003 annual meeting of stockholders
must be received by the Company by December 1, 2002. Any proposal received after
February 15, 2003 will not, under the rules of the Securities and Exchange
Commission, be considered timely for presentation at the 2003 annual meeting.
Such a proposal must comply with the requirements as to form and substance
established by the Securities and Exchange Commission for such a proposal to be
included in the proxy statement and form of proxy, and the proponent or a
representative of the proponent must attend the Annual Meeting to present the
proposal.
INCORPORATION BY REFERENCE
The Company's financial statements for the years ended December 31,
2001 and 2000, the supplemental financial information and management's
discussion and analysis of financial condition and results of operations
contained in the Company's Annual Report on Form 10-K (File No. 1-13136) filed
with the Securities and Exchange Commission are incorporated herein by
reference. COPIES OF THE FORM 10-K MAY BE OBTAINED WITHOUT CHARGE FROM YVONNE
WHEELER, HOME PROPERTIES OF NEW YORK, INC., 850 CLINTON SQUARE, ROCHESTER, NEW
YORK 14604 OR FROM THE SECURITIES AND EXCHANGE COMMISSION OVER THE INTERNET AT
ITS WEB SITE (HTTP:\\WWW.SEC.GOV).
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE VOTE BY INTERNET, TELEPHONE OR COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY CARD TODAY.
25
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED THEREON. Please mark
IF NO DIRECTION IS MADE, IT WILL BE VOTED "FOR" PROPOSALS 1 AND 2. IN THEIR DISCRETION, your votes as / X /
THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE indicated in
THE MEETING OR ANY ADJOURNMENT THEREOF. this example
PROPOSAL ONE - To elect the following persons NOMINEES 05 William Balderston, III 10 Clifford W. Smith, Jr.
to serveas directors until the next annual 01 Norman P. Leenhouts 06 Alan L. Gosule 11 Paul L. Smith
meeting of stockholders and until their 02 Norman B. Leenhouts 07 Leonard F. Helbig, III 12 Amy L. Tait
successors have been elected and have qualified. 03 Edward J. Pettinella 08 Roger W. Kober
04 Burton S. August, Sr. 09 Albert H. Small
FOR WITHHOLD (Instruction: To withhold authority to
all nominees listed AUTHORITY vote for any individual nominee, write
(except as marked to vote for all that nominee's name in the space
to the contrary) nominees listed provided below.)
/ / / / __________________________ Please disregard the following if you have
previously provided your consent decision.
__________________________
By checking the box to the right, I consent to future / /
PROPOSAL TWO - To ratify FOR AGAINST ABSTAIN delivery of annual reports, proxy statements, prospectuses
the appointment of / / / / / / and other materials and shareholder communications,
PricewaterhouseCoopers LLP electronically via the Internet at a webpage which will be
as independentauditors for 2002. disclosed to me. I understand that the Company may no
longer distribute printed materials to me for any future
shareholder meeting until such consent is revoked. I
Mark here PLEASE MARK, SIGN, DATE AND RETURN THIS understand that I may revoke my consent at any time by
if address / / PROXY CARD USING THE ENCLOSED ENVELOPE. contacting the Company's transfer agent, Mellon Investor
change is Services LLC, Ridgefield Park, NJ and that costs normally
noted on associated with electronic delivery, such as usage and
reverse telephone charges as well as any costs I may incur in
printing documents, will be my responsibility.
Signature________________________________________Signature_______________________________________________________Date_______________
NOTE: (Please sign above exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.)
.....................................................................................................................................
FOLD AND DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 4PM EASTERN TIME THE
BUSINESS DAY PRIOR TO ANNUAL MEETING DAY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/HME 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web OR card in hand when you call. You will OR and
site. You will be prompted to enter be prompted to enter your control return it in the
your control number, located in number, located in the box below, enclosed postage-paid
the box below, to create and and then follow the directions given. envelope.
submit an electronic ballot.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
HOME PROPERTIES OF NEW YORK, INC.
REVOCABLE PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS MAY 7, 2002
The undersigned hereby appoints Norman P. Leenhouts and Nelson B.
Leenhouts or each of them, as Proxies with full power of substitution to
represent the undersigned and to vote all Common Stock of Home Properties of New
York, Inc. which the undersigned would be entitled to vote at the 2002 Annual
Meeting of Stockholders of the Company to be held on May 7, 2002 and any
adjournment thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
PLEASE NOTE ANY ADDRESS CORRECTION HERE AND CHECK THE BOX ON THE
REVERSE SIDE OF THIS CARD.
.................................................................................
FOLD AND DETACH HERE