SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential For Use of
the Commission Only (as
[X] Definitive Proxy Statement Permitted by Rule 14a-6(e)(2)
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE INTERGROUP CORPORATION
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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)
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(1) Amount Previously Paid:
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THE INTERGROUP CORPORATION
820 MORAGA DRIVE
LOS ANGELES, CALIFORNIA 90049
(310) 889-2500
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 26, 2003
To the Shareholders of The InterGroup Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The
InterGroup Corporation ("InterGroup" or the "Company") for the fiscal year
ended June 30, 2002, will be held in the Luxe Summit Hotel Bel-Air, 11461
Sunset Boulevard, Los Angeles, California 90049 on February 26, 2003 at 2:30
P.M. for the following purposes:
(1) to elect two Class C Directors to serve until the fiscal 2005
Annual Meeting and until their successors shall have been duly
elected and qualified;
(2) to ratify the retention of PricewaterhouseCoopers LLP as independent
accountants for the Company for the fiscal year ending June 30,
2003; and
(3) to transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on January 10, 2003
as the record date for determining the shareholders having the right to vote at
the meeting or any adjournments thereof.
Your proxy is important whether you own a few or many shares. Please
complete, sign, date and promptly return the enclosed proxy in the self-
addressed, postage-paid envelope provided. Return the proxy even if you plan
to attend the meeting. You may always revoke your proxy and vote in person.
Dated: January 28, 2003
By Order of the Board of Directors,
/S/ Gary N. Jacobs
Gary N. Jacobs
Secretary
THE INTERGROUP CORPORATION
820 MORAGA DRIVE
LOS ANGELES, CALIFORNIA 90049
(310) 889-2500
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 26, 2003
The Board of Directors of The InterGroup Corporation ("InterGroup" or the
"Company") is soliciting proxies in the form enclosed with this statement in
connection with its fiscal 2002 Annual Meeting of Shareholders to be held on
February 26, 2003 or at any adjournments thereof. Only shareholders of record
at the close of business on January 10, 2003 are entitled to notice of, and to
vote at, the Annual Meeting.
Each shareholder is entitled to cast, in person or by proxy, one vote for each
share held of record at the close of business on January 10, 2003. As of
January 10, 2003 there were outstanding 1,808,047 shares of common stock, par
value $.01 per share (the "Common Stock"), the only outstanding voting security
of the Company. Of the total 1,808,047 shares outstanding, a majority, or
904,024 voting shares will constitute a quorum for the transaction of business
at the meeting. The affirmative vote of the holders of the majority of the
shares of the Common Stock present and represented at the meeting and entitled
to vote is required to elect directors and ratify the selection of the
Company's independent accountants.
The proxies named in the accompanying Form of Proxy will vote the shares
represented thereby if the proxy appears to be valid on its face, and where
specification is indicated as provided in such proxy, the shares represented
will be voted in accordance with such specification. If no specification is
made, the shares represented by the proxies will be voted (1) to elect two
Board nominees for Class C Directors for a three-year term expiring at the
fiscal 2005 Annual Meeting of Shareholders; and (2) for the ratification of the
retention of PricewaterhouseCoopers LLP as the Company's independent public
accountants for the fiscal year ending June 30, 2003.
If you give us a proxy, you can revoke it at any time before it is used. To
revoke it, you may file a written notice revoking it with the Secretary of the
Company, execute a proxy with a later date or attend the meeting and vote in
person.
This Proxy Statement and the accompanying Form of Proxy are first being sent to
shareholders on or about January 31, 2003. In addition to mailing this
material to shareholders, the Company has asked banks and brokers to forward
copies to persons for whom they hold stock of the Company and to request
authority for the execution of proxies. The Company will reimburse banks and
brokers for their reasonable out-of-pocket expenses in doing so. Officers of
the Company may, without being additionally compensated, solicit proxies by
mail, telephone, telegram or personal contact. All proxy soliciting expenses
will be paid by the Company. The Company does not expect to employ anyone else
to assist in the solicitation of proxies.
1
PROPOSAL I
Election of Class C Directors
The Company's Certificate of Incorporation provides that the Board of Directors
shall consist of not more than nine nor less than five members. The exact
number of Directors, presently six, is fixed by the Board prior to each year's
Annual Meeting of Shareholders. The Board is divided into three staggered
classes, each class having not less than one nor more than three members. Each
Director is elected to serve for a three-year term, and until the election and
qualification of his or her successor. When vacancies on the Board occur, due
to resignation or otherwise, the Directors then in office may continue to
exercise the powers of the Directors and a majority of such directors may
select a new Director to fill the vacancy. Any Director may resign at any
time. Any Director may be removed by the vote of, or written consent of, the
holders of a majority of the shares of Common Stock outstanding at a special
meeting called for the purpose of removal or to ratify the recommendation of a
majority of the Directors that such Director be removed.
The term of the Class C Directors expires at the fiscal 2002 Annual Meeting to
be held on February 26, 2003. The Board proposes Mildred Bond Roxborough and
John C. Love as Class C Directors to serve until the fiscal 2005 Annual Meeting
and until the election and qualification of their successors. The Board of
Directors has been informed that the nominees have consented to being named as
nominees and are willing to serve as Directors if elected. However, if any
nominee should be unable, or declines to serve, it is intended that the proxies
will be voted for such other person as the proxies shall, in their discretion,
designate. Unless otherwise directed in the accompanying Proxy, the person's
name therein will vote FOR the election of this nominee. Election requires the
affirmative vote of a majority of the shares represented and voted at the
Annual Meeting.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company:
Position with
Name the Company Age Term to Expire
- ------------------ ------------------ --- -----------------
Class A Directors:
John V. Winfield Chairman of the Board; 56 Fiscal 2003 Annual Meeting
(1)(4)(6)(7)(8) President and Chief
Executive Officer
Josef A.
Grunwald (2)(7) Director and Vice 54 Fiscal 2003 Annual Meeting
Chairman of the Board
Class B Directors:
Gary N. Jacobs (1)
(2)(5)(6)(7)(8)(9) Secretary; Director 57 Fiscal 2004 Annual Meeting
William J. Nance (1)
(2)(3)(4)(5)(6)(7)(9) Director 58 Fiscal 2004 Annual Meeting
Class C Directors:
Mildred Bond
Roxborough Director 75 Fiscal 2002 Annual Meeting
John C. Love Director 62 Fiscal 2002 Annual Meeting
(3)(4)(8)(9)
Other Executive
Officers:
Gregory C. McPherson Executive Vice 44 N/A
President;
Assistant Treasurer
2
David C. Gonzalez Vice President 35 N/A
Real Estate
Michael G. Zybala Assistant Secretary 50 N/A
- -----------------------
(1) Member of the Executive Committee
(2) Member of the Administrative and Compensation Committee
(3) Member of the Audit and Finance Committee
(4) Member of the Real Estate Investment Committee
(5) Member of the Nominating Committee
(6) Member of the Securities Investment Committee
(7) Member of the Special Strategic Options Committee
(8) Member of the Stock Option Administrative Committee (Non-employee
Director Plan)
(9) Member of the Stock option Administrative Committee (Key Officer,
Employee Plan)
Business Experience:
The principal occupation and business experience during the last five years for
each of the Directors and Executive Officers of the Company are as follows:
John V. Winfield -- Mr. Winfield was first appointed to the Board in 1982. He
currently serves as the Company's Chairman of the Board, President and Chief
Executive Officer, having first been appointed as such in 1987. Mr. Winfield
also serves as President, Chairman and Chief Executive Officer of Santa Fe
Financial Corporation ("Santa Fe") and Portsmouth Square, Inc. ("Portsmouth")
and a Director of Healthy Planet Products, Inc. ("Healthy Planet") and Etz
Lavud, Ltd., all public companies.
Josef A. Grunwald -- Mr. Grunwald is an industrial, commercial and residential
real estate developer. He serves as Chairman of PDG N.V. (Belgium), a hotel
management company, and President of I.B.E. Services S.A. (Belgium), an
international trading company. Mr. Grunwald was first elected to the Board in
1987 and named Vice Chairman on January 30, 2002. Mr. Grunwald is also a
Director of Portsmouth and Etz Lavud, Ltd., both public companies.
William J. Nance -- Mr. Nance is a Certified Public Accountant and private
consultant to the real estate and banking industries. He also serves as
President of Century Plaza Printer, Inc. Mr. Nance was first elected to the
Board in 1984. He was appointed Treasurer in 1987 and held that title until
June 30, 2002. Mr. Nance is also a Director of Santa Fe, Portsmouth and
Healthy Planet.
Mildred Bond Roxborough -- Ms. Roxborough was Director of Development and
Special Programs of the National Association for the Advancement of Colored
People (NAACP) from 1986 to 1997. She also served as Vice Chairman of the Board
of Directors of America's Charities Federation, Chairman of its Membership and
Personnel Committees and member of its Long Range Planning Committee; and
Member of the Board of Directors of Morningside Health and Retirement Service
and Member of Personnel Committee of Morningside Heights Housing Corporation.
Since 1997 Ms. Roxborough has served as a consultant to the NAACP. Ms.
Roxborough was first appointed to the Company's Board in 1984 and served as
Vice Chairman from 1987 through 1994.
Gary N. Jacobs -- Mr. Jacobs was appointed to the Board and as Secretary in
1998. Mr. Jacobs is Executive Vice President, General Counsel, Secretary and a
Director of MGM MIRAGE (NYSE: MGG) and Of Counsel to the law firm of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP. Through May
31, 2000, he was a partner of said firm and the head of the corporate
department.
3
John C. Love -- Dr. Love was appointed to the Board in 1998. He is an
independent consultant to the hospitality and tourism industries and was
formerly a general partner in the national CPA and consulting firm of Pannell
Kerr Forster. He is Chairman Emeritus of the Board of Trustees of Golden Gate
University in San Francisco. Dr. Love is also a Director of Santa Fe and
Portsmouth.
Gregory C. McPherson -- Mr. McPherson joined the Company in 1993. Prior to
joining the Company, Mr. McPherson was a private financial and strategic
advisor, served as Vice President in the Investment Banking and Corporate
Finance Department of Kemper Securities Group, Inc., was with Prudential Bache
Capital Funding in their Mergers and Acquisitions and Financial Restructuring
Group and was a manager at the public accounting firm of PricewaterhouseCoopers
LLP. Mr. McPherson received an M.B.A. from the Harvard Business School and is
a Certified Public Accountant. Effective March 23, 2000, Mr. McPherson was
named as Interim President of Healthy Planet and its Chairman of the Board on
August 8, 2002. Mr. McPherson also serves as a special consultant to
Portsmouth and serves as an officer or consultant to other non-public
InterGroup investments.
David C. Gonzalez -- Mr. Gonzalez was appointed Vice President Real Estate of
the Company on January 31, 2001. Over the past 12 years, Mr. Gonzalez has
served in numerous capacities with the Company, including Controller and
Director of Real Estate.
Michael G. Zybala -- Mr. Zybala was appointed Vice President Operations and
Assistant Secretary of the Company on January 27, 1999. Mr. Zybala
relinquished his position as Vice President Operations on July 15, 2002, but
remains as Assistant Secretary of the Company. Mr. Zybala is an attorney at
law and has served as a special legal consultant to the Company. Mr. Zybala is
also the Vice President, Secretary and Treasurer of Santa Fe and Portsmouth and
has served as their General Counsel since 1995. Mr. Zybala is also a Director
of Healthy Planet and has served as its Secretary since August 1998.
Family Relationships and Involvement in Certain Legal Proceedings: There are
no family relationships among directors, executive officers, or persons
nominated or chosen by the Company to become directors or executive officers,
nor was anyone involved in any legal proceeding requiring disclosure.
Board Meetings and Committees
The Board of Directors held four meetings during the 2002 Fiscal Year. No
Director attended (whether in person, telephonically, or by written consent)
less than 75% of all meetings held during the period of time he or she served
as Director during the 2002 Fiscal Year.
The Company has an Executive Committee that meets in lieu of the Board upon the
request of the Chairman of the Committee. Mr. Winfield is Chairman of the
Executive Committee. The Committee held three meetings (in person,
telephonically or by written consent) during the 2002 Fiscal Year.
The Company's Administrative and Compensation Committee, reviews executive
salaries and any stock based compensation plans. Mr. Nance is Chairman of the
Administrative and Compensation Committee. This committee held one meeting
during the 2002 Fiscal Year. This Committee also oversees the Company's two
Stock Option Plans.
The Company has a Real Estate Investment Committee, which is chaired by Mr.
Nance. This committee held three meetings (in person, telephonically or by
written consent) during the 2002 Fiscal Year. The Real Estate Investment
Committee reviews and considers potential acquisitions and dispositions of
property.
The Company's Nominating Committee selects nominees for election or re-election
of directors and officers. Mr. Jacobs is the Chairman of the Nominating
Committee. The Committee held one meeting during the 2002 Fiscal Year.
The Company's Securities Investment Committee oversees and establishes certain
investment procedures and reports to the Board of Directors. The Committee's
Chairman is Mr. Winfield. This committee held ten meetings (in person,
telephonically or by written consent) during the 2002 Fiscal Year.
4
The Company's Special Strategic Options Committee is chaired by Mr. Winfield.
This committee held no formal meetings during the 2002 Fiscal Year, but its
members consult with each other frequently on an informal basis. The Special
Strategic Options Committee reviews and considers the Company's strategic
options and provides guidance to accomplish its goals considering both current
and prospective investment opportunities.
The Company is a Small Business Filer under SEC rules. The Company's Audit
Committee is comprised of Messrs. Nance (Chairperson) and Love, each of who
meet the independence requirements of the Securities and Exchange Commission
and the National Association of Securities Dealers' ("NASD") Manual as modified
or supplemented from time to time. Each of these directors also meets the
financial management expertise test as defined by the Securities and Exchange
Commission. The primary function of the Audit Committee is to assist the Board
of Directors in fulfilling its responsibility of overseeing management's
conduct of the financial reporting process, the annual independent audit of the
Company's financial statements, reviewing the financial reports provided by the
Company to any governmental body or the public; the Company's system of
internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established; and the Company's auditing,
accounting and financial processes generally. The Audit Committee held five
meetings during the 2002 Fiscal Year. On June 8, 2000, the Company's Board of
Directors adopted a written charter for the Audit Committee, which was amended
in January 2003. A copy of that written charter, as amended, is attached as
Appendix A to this proxy statement.
AUDIT COMMITTEE REPORT
The Audit Committee's responsibilities are described in a written charter
adopted by the Board of Directors, which is attached as Appendix A to this
Proxy Statement. The Audit Committee primary duties and responsibilities are
to: serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system; appoint and approve
the compensation of the Company's independent accountants; review and appraise
the audit efforts of the Company's independent accountants; and provide an open
avenue of communications among the independent accountants, financial and
senior management, and the Board of Directors. During fiscal year ended June
30, 2002, the Company retained its independent accountants,
PricewaterhouseCoopers LLP, to provide audit and audit related services.
During the fiscal year ended June 30, 2002, the Company and its subsidiaries
paid PricewaterhouseCoopers a total of $156,780 related to such audit services.
There were no fees paid for non-audit services.
The Audit Committee reviewed and discussed the audited financial statements
with management and PricewaterhouseCoopers LLP and management represented to
the Audit Committee that the consolidated financial statements were prepared in
accordance with generally accepted accounting principals. The discussions with
PricewaterhouseCoopers LLP also included the matters required by Statement on
Auditing Standards No. 61 (Communication with Audit Committees), as amended by
FAS No. 90 with respect to quarterly financial statements. The Audit Committee
has also received the written disclosures and the letter from
PricewaterhouseCoopers LLP regarding its independence as required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), which was discussed with PricewaterhouseCoopers LLP.
Based on the Audit Committee's review of the audited financial statements, and
the review and discussions with management and PricewaterhouseCoopers LLP
referred to above, the Audit Committee recommended to the Company's Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2002 for filing
with the Securities and Exchange Commission.
THE AUDIT COMMITTEE:
WILLIAM J. NANCE, CHAIRPERSON
JOHN C. LOVE
5
EXECUTIVE COMPENSATION
Executive Officers Compensation
The following table provides certain summary information concerning
compensation awarded to, earned by, or paid to the named Executive Officers of
the Company who earned more than $100,000 (salary and bonus) for all services
rendered to the Company and its subsidiaries for fiscal years 2002, 2001 and
2000. There are currently no employment contracts with the Executive Officers.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Awards
------
Securities
Name and Principal Other Annual Underlying
Position Year Salary Bonus Compensation Options/SARs
- ------------------- ------ ------- ------ ------------- ------------
John V. Winfield
Chairman; President 2002 $500,000(1) - $80,359(2) -
and Chief Executive 2001 $522,000(1) - $69,322(2) -
Officer 2000 $522,000(1) - $61,700(2) -
Gregory C. McPherson 2002 $126,974(3) $ 4,000 - -
Executive Vice President; 2001 $140,383(3) $ 20,000 - -
and Assistant Treasurer 2000 $158,006(3) $ 25,000 - -
Michael G. Zybala 2002 $117,400(4) $ 4,000 - -
Vice President Operations 2001 $131,028(4) $ 15,000 - -
and Assistant Secretary 2000 $127,465(4) $ 20,000 - -
David C. Gonzalez 2002 $186,672 $100,000 - -
Director of Real Estate 2001 $141,608 $ 75,000 - 10,000(6)
2000 $120,000 $100,000 $32,071(5) -
- ---------------------
(1) Mr. Winfield also serves as President and Chairman of the Board of the
Company's subsidiary, Santa Fe, and Santa Fe's subsidiary, Portsmouth. Mr.
Winfield received salary and directors fees of $242,000, $252,000 and $252,000
from those entities during fiscal years 2002, 2001 and 2000, respectively,
which amounts are included in this item.
(2) Amounts include an auto allowance and compensation for a portion of the
salary of an assistant. The auto allowance was $33,607, $34,322, $29,700 during
fiscal years 2002, 2001 and 2000, respectively. The amount of compensation
related to the assistant was approximately $46,752, $35,000 and $32,000 during
fiscal years 2002, 2001 and 2000 respectively. During fiscal 2002, 2001 and
2000, the Company also paid annual premiums in the amount of $42,577 for a
split dollar whole life insurance policy owned by, and the beneficiary of which
is, a trust for the benefit of Mr. Winfield's family. The Company has a
secured right to receive, from any proceeds of the policy, reimbursement of all
premiums paid prior to any payment to the beneficiary. During the fiscal years
2002, 2001 and 2000, Santa Fe and Portsmouth also paid annual premiums on split
dollar policies in the total amount of $42,500.
(3) Mr. McPherson is a consultant of Portsmouth and received annual consulting
fees of $86,363 during fiscal year ended June 30, 2002 and $88,200 during
fiscal years 2001 and 2000, which are included in this item. Also includes
amounts for an auto allowance.
6
(4) Mr. Zybala became Vice President Operations in January 1999. He
relinquished that position on July 15, 2002. He remains as Assistant Secretary
and Counsel to the Company. His salary and bonuses are allocated 30% to the
Company and 70% to Santa Fe and Portsmouth.
(5) Amounts shown relate to forgiveness of unpaid balance on promissory note
due the Company.
(6) On January 31, 2001, Mr. Gonzalez was granted options to purchase up to
10,000 shares of the Common Stock of the Company at an exercise price of $19.75
per share, which was the closing price of the Common Stock on the date of
grant. The term of the options is for the period beginning January 31, 2001
and ending on January 30, 2011. No options may be exercised prior to January
31, 2003 and vest at a rate of 1,000 shares per year between January 31, 2003
and January 31, 2006, and at a rate of 1,500 shares per year between January
31, 2007 and January 31, 2010.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The Company did not have any individual grants of stock options or Stock
Appreciation Rights ("SARs") during the fiscal year ended June 30, 2002 to any
named executive officer.
AGGREGATE OPTIONS/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table contains information concerning each exercise of stock
options (or tandem SARs) and freestanding SARs during the last completed fiscal
year by each of the named executive officers and the fiscal year-end value of
unexercised options and SARs.
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Options/SARs as of In-the-Money Options/
Name Exercise (#) Realized ($) June 30, 2002 at June 30, 2002
- ---- ------------ ----------- ----------------------- --------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
John V.
Winfield - $ - 150,000/0 $ 542,250/0(1)
David C.
Gonzalez - $ - 0/10,000 $ 0/0(1)
- --------------
(1) Based on the closing price of the Company's Common Stock on June 30, 2002
of $15.49 per share.
1998 Stock Option Plan for Non-Employee Directors
On December 8, 1998, the Board of Directors of the Company adopted, subject to
stockholder approval and ratification, a 1998 Stock Option Plan for Non-
employee Directors (the "Plan"). The stockholders ratified that Plan on
January 27, 1999.
The stock to be offered under the Plan shall be shares of the Company's Common
Stock, par value $.01 per share, which may be unissued shares or treasury
shares. Subject to certain adjustments upon changes in capitalization, the
aggregate number of shares to be delivered upon exercise of all options granted
under the Plan shall not exceed 100,000 shares. The Plan shall terminate on
the earliest to occur of (i) the dates when all of the Common Stock available
under the Plan shall have been acquired through the exercise of options granted
under the Plan; (ii) 10 years after the date of adoption of the Plan by the
Board; or (iii) such other date that the Board may determine.
Pursuant to the Plan, each non-employee director as of the adoption date of the
Plan shall be granted on the date thereof: (i) if he or she became a non-
employee director prior to January 1, 1998, an option to purchase 8,000 shares
of Common Stock; and (ii) if he or she became a non-employee director on or
after January 1, 1998, an option to purchase 4,000 shares of Common Stock.
Each new non-employee director who is elected to the Board shall
7
automatically be granted an option to purchase 4,000 shares of Common Stock
upon the initial date of election to the Board. On each July 1 following the
adoption date, each non-employee director shall be granted an option to
purchase 2,000 shares of Common Stock provided he or she holds such position on
that date and the number of Common Shares available for grant under the Plan is
sufficient to permit such automatic grant.
The exercise price of the option shall be determined at the time of grant and
shall not be less than 100% of the fair market value of the Common Stock at the
time of the grant of the option. The term of the option shall be for ten
years. Options granted to any non-employee director will not vest 100% until
such person has been a member of the Board for four (4) years or more. Non-
employee directors who have been a member of Board less than four (4) years,
shall be vested with respect to 20% of the options on the date of grant and 20%
on each anniversary of such person having become a member of the Board,
provided that the optionee is on each such date serving as a member of the
Board or as an employee or consultant to the Company.
Pursuant to the Plan, the following non-employee directors of the Company were
granted options during fiscal 2002 to purchase 2,000 shares each of the Common
Stock of the Company: Josef A. Grunwald; William J. Nance; Mildred Bond
Roxborough; Gary N. Jacobs; and John C. Love. The exercise price for the
options is $19.25 per share, which was the closing price of the Company's
Common Stock on the Nasdaq National Market System as of the date of grant on
July 1, 2001. On July 1, 2002, each of the non-employee directors received a
grant of options to purchase 2,000 shares of Common Stock at an exercise price
of $16.85 per share, which was the closing price of the Company's Common Stock
on the date of grant.
1998 Stock Option Plan for Selected Key Officers, Employees and Consultants
On December 8, 1998, the Board of Directors of the Company adopted, subject to
shareholder approval and ratification, a 1998 Stock Option Plan for selected
key officers, employees and consultants (the "Key Employee Plan"). The Key
Employee Plan was ratified by the stockholders on January 27, 1999.
The stock to be offered under the Key Employee Plan shall be shares of the
Company's Common Stock, par value $.01 per share, which may be unissued shares
or treasury shares. Subject to certain adjustments upon changes in
capitalization, the aggregate number of shares to be delivered upon exercise of
all options granted under the Key Employee Plan shall not exceed 200,000
shares. The Key Employee Plan shall terminate on the earliest to occur of (i)
the dates when all of the Common Stock available under the Key Employee Plan
shall have been acquired through the exercise of options granted under the Key
Employee Plan; (ii) 10 years after the date of adoption of the Key Employee
Plan by the Board; or (iii) such other date that the Board may determine.
The Key Employee Plan is administered by a Committee appointed by the Board of
Directors, which consists of two or more disinterested persons within the
meaning of Rule 16b-3 promulgated pursuant to the Securities Exchange Act of
1934 (the "Exchange Act"). Persons eligible to receive options under the Key
Employee Plan shall be employees who are selected by the Committee. In
determining the Employees to whom options shall be granted and the number of
shares to be covered by each option, the Committee shall take into account the
duties of the respective employee, their present and potential contribution to
the success of the Company, their anticipated number of years of active service
remaining and other factors as it deems relevant in connection with
accomplishing the purposes of the Key Employee Plan. An employee who has been
granted an option may be granted an additional option or options as the
Committee shall so determine.
The exercise price of the option shall be determined at the time of grant and
shall not be less than 100% of the fair market value of the Common Stock at the
time of the grant of the option. The term of the option shall not exceed 10
years from the date on which the option is granted. The vesting schedule for
the options and the method or time when the option may be exercised in whole or
in part shall be determined by the Committee. However, in no event shall an
option be exercisable within six months of the date of grant in the case of an
optionee subject to Section 16(b) of the Exchange Act. Subject to certain
exceptions, the option shall terminate six months after the optionee's
employment with the Company terminates. As discussed above, options to
purchase 10,000 shares were granted to the Company's Vice President Real Estate
during fiscal 2001 pursuant to the Key Employee Plan.
8
Compensation of Directors
Each director is paid a fee of $1,500 per quarter for a total annual
compensation of $6,000. The Chairman of the Board of Directors is eligible to
receive $9,000 per annum. Directors also are eligible to receive $500 for each
committee meeting attended and $600 for each committee meeting chaired.
Members of the Audit Committee receive a fee of $500 per quarter. Directors
who are also Executive Officers do not receive any fee for attending Board or
Committee meetings. As an Executive Officer, the Company's Chairman has also
elected to forego his annual board fee. The Directors are also eligible for
grants of options to purchase shares of the Company's Common Stock pursuant to
the 1998 Stock Option Plan for Non-Employee Directors.
Except for the foregoing, there are no other arrangements for compensation of
Directors and there are no employment contracts between the Company and its
Directors.
Securities Authorized For Issuance Under Equity Compensation Plans.
The following table sets forth information as of January 10, 2003, with respect
to compensation plans (including individual compensation arrangements) under
which equity securities of the Company are authorized for issuance, aggregated
as follows:
Plan Category Number of Weighted-average Number of securities
securities to exercise price remaining available
be issued of outstanding for future issuance
upon exercise options, under equity
of outstanding warrants and compensation plans
options, rights (excluding
warrants and securities
rights reflected in
column (a))
_____________________________________________________________________________
(a) (b) (c)
_____________________________________________________________________________
Equity compensation
plans approved by
security holders 232,000 $13.04 68,000
_____________________________________________________________________________
Equity compensation
plans not approved
by security holders None N/A None
_____________________________________________________________________________
Total 232,000 $13.04 68,000
_____________________________________________________________________________
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 10, 2003, certain information
with respect to the beneficial ownership of Common Stock owned by (i) those
persons or groups known by the Company to own more than five percent of the
outstanding shares of Common Stock, (ii) each Director and Executive Officer,
and (iii) all Directors and Executive Officers as a group.
Name and Address of Amount and Nature
Beneficial Owner (1) of Beneficial Owner(2) Percentage(3)
- -------------------- ---------------------- -------------
John V. Winfield 1,075,938(4) 54.9%
Josef A. Grunwald 89,045(3) 4.9%
William J. Nance 52,318(3) 2.9%
Mildred Bond Roxborough 18,350(3) 1.0%
Gary N. Jacobs 14,250(2)(5) *
John C. Love 12,000(2) *
Gregory C. McPherson 8,993 *
Michael G. Zybala 0 *
David C. Gonzalez 11,500(6) *
All Directors and
Executive Officers as a
Group (9 persons) 1,282,394 63.2%
- ------------------
* Ownership does not exceed 1%.
(1) Unless otherwise indicated, the address for the persons listed is
820 Moraga Drive, Los Angeles, CA 90049.
(2) Unless otherwise indicated and subject to applicable community property
laws, each person has sole voting and investment power with respect to the
shares beneficially owned.
(3) Percentages are calculated on the basis of 1,808,047 shares of Common
Stock outstanding at January 10, 2003 plus any securities that person has the
right to acquire within 60 days pursuant to options, warrants, conversion
privileges or other rights. The following options are included in directors
shares: Josef A. Grunwald - 16,000; William J. Nance - 14,000; Mildred Bond
Roxborough - 16,000; Gary N. Jacobs - 12,000; John C. Love - 12,000.
(4) Includes 150,000 shares of which Mr. Winfield has the right to acquire
pursuant to options.
(5) Other than his options, all shares of Mr. Jacobs are held by the Gary and
Robin Jacobs Family Trust.
(6) Includes 1,000 shares of which Mr. Gonzalez has a right to acquire
pursuant to options.
10
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and each beneficial owner of more than ten
percent of the Common Stock of the Company, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based upon a review of the copies of such reports received by it,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that during fiscal 2002 all
filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 4, 1998, the Administrative and Compensation Committee authorized
the Company to obtain whole life and split dollar insurance policies covering
the Company's President and Chief Executive Officer, Mr. Winfield. During
fiscal 2002 and 2001, the Company paid annual premiums in the amount of
approximately $43,000 for the split dollar insurance policy owned by, and the
beneficiary of which is, a trust for the benefit of Mr. Winfield's family. The
Company has a secured right to receive, from any proceeds of the policy,
reimbursement of all premiums paid prior to any payments to the beneficiary.
On June 30, 1998, the Company's Chairman and President entered into a voting
trust agreement with the Company giving the Company the power to vote his 4.2%
interest in the outstanding shares of the Santa Fe common stock.
In May 1996, the Company's Chairman and President exercised options to purchase
187,500 shares of Common Stock at a price of $7.67 per share through a full
recourse note due to the Company on demand with an original due date of May 16,
2001. On May 2, 2001, the Company extended the due date to May 16, 2003. The
note bears interest floating at the lower of 10% or the prime rate (4.75% at
June 30, 2002) with interest payable quarterly. The balance of the note
receivable of $1,437,500 is reflected as a reduction of shareholders' equity at
June 30, 2002. During the fiscal years ended June 30, 2002 and 2001, the
President of the Company made interest payments of approximately $76,650 and
$127,000 respectively in connection with the note relating to his 1996 exercise
of stock options.
As Chairman of the Securities Investment Committee, the Company's President and
Chief Executive officer, John V. Winfield, oversees the investment activity of
the Company in public and private markets pursuant to authority granted by the
Board of Directors. Mr. Winfield also serves as Chief Executive Officer and
Chairman of Santa Fe and Portsmouth and oversees the investment activity of
those companies. Depending on certain market conditions and various risk
factors, the Chief Executive Officer, his family, Santa Fe and Portsmouth may,
at times, invest in the same companies in which the Company invests. The
Company encourages such investments because it places personal resources of the
Chief Executive Officer and his family members, and the resources of Santa Fe
and Portsmouth, at risk in connection with investment decisions made on behalf
of the Company. Under the direction of the Securities Investment Committee,
the Company has instituted certain modifications to its procedures to reduce
the potential for conflicts of interest.
Gary N. Jacobs, a Director of the Company, is Of Counsel to the law firm of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP. Through May
31, 2000 he was a senior partner of said firm, which provided legal services to
the Company during the years ended June 30, 2002 and 2001. During the years
ended June 30, 2002 and 2001, the Company made payments of approximately
$484,000 and $165,000, respectively to Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MILDRED BOND
ROXBOROUGH AND JOHN C. LOVE AS CLASS C DIRECTORS OF THE COMPANY.
11
PROPOSAL II
Ratification of Appointment of Independent Accountants
The Audit Committee of the Board of Directors has selected the firm of
PricewaterhouseCoopers LLP, certified public accountants, to continue as the
Company's independent accountants for the fiscal year ending June 30, 2003 and
recommends to the shareholders that they vote for the ratification of this
selection. Ratification requires the affirmative vote of a majority of the
shares represented and voted at the Annual Meeting. The Board expects that
representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting to respond to appropriate questions from Shareholders, and the Board
will provide these representatives with an opportunity to make a statement if
they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENSENT ACCOUNTANTS FOR
THE COMPANY.
OTHER BUSINESS
As of the date of this statement, management knows of no business to be
presented at the meeting that is not referred to in the accompanying notice,
other than the approval of the minutes of the last shareholders' meeting, which
action will not amount to ratification of the actions taken at that meeting.
As to other business that may properly come before the meeting, it is intended
that the proxies properly executed and returned will be voted in respect
thereof at the discretion of the person voting the proxies in accordance with
the best judgment of that person.
SHAREHOLDER PROPOSALS
It is presently anticipated that the fiscal 2003 Annual Meeting of Shareholders
will be held on or around January 28, 2004. Any shareholder proposals intended
to be considered for inclusion in the proxy statement for presentation at the
fiscal 2003 Annual Meeting must be received by the Company no later than
September 28, 2003. The proposal must be in accordance with the provisions of
Rule 14a-8 promulgated by the Securities and Exchange Commission under the
Securities Act of 1934. It is suggested that the proposal be submitted by
certified mail - return receipt requested.
FORM 10-KSB and ANNUAL REPORT
The Annual Report to Shareholders for the 2002 fiscal year accompanies this
proxy statement, but is not deemed a part of the proxy solicitation material.
A copy of the Company's Form 10-KSB for the fiscal year ended June 30, 2002, as
required to be filed with the Securities and Exchange Commission, excluding
exhibits, will be mailed to shareholders without charge upon written request
to: John V. Winfield, President, The InterGroup Corporation, 820 Moraga Drive,
Los Angeles, CA 90049. Such requests must set forth a good-faith
representation that the requesting party was either a holder of record or
beneficial owner of the common stock of the Company on January 10, 2003. The
Company's Form 10-KSB and other public filings are also available through the
Securities and Exchange Commission's world-wide-web site (http://www.sec.gov).
By Resolution of the Board of Directors
THE INTERGROUP CORPORATION
Gary N. Jacobs
Secretary
Dated: Los Angeles, California
January 28, 2003
12
APPENDIX A
THE INTERGROUP CORPORATION
AUDIT COMMITTEE CHARTER
Purpose:
- -------
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its responsibility of overseeing management's conduct of the
Company's financial reporting process, the Company's systems of internal
accounting and financial controls, and the annual independent audit of the
Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate
any matter brought to its attention and shall have full access to all books,
records, facilities and personnel of the Company and the power to retain
outside counsel, auditors or other experts for this purpose. The Board and the
Committee are in place to represent the Company's shareholders, and the outside
auditor is ultimately accountable to the Board and the Committee as such
representatives of shareholders. It is the responsibility of the Committee to
maintain free and open means of communication between the Board, the outside
auditor and the financial management and internal auditors of the Company.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership:
- ----------
The Committee shall be comprised of not less than two members of the Board, and
the Committee's composition will meet the requirements of (i) the Audit
Committee policy of the Nasdaq Stock Market as set forth in Rule 4460(d) of the
NASD Manual as modified or supplemented from time to time and (ii) meet
the independence requirements of Section 10A(m)(3) of the Securities and
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission. Accordingly, all of the members of the Committee will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company;
2. Are not affiliates of the Company;
3. Do not receive any compensation from the Company other than in the
capacity as director; and
4. Who are financially literate or who become financially literate within
a reasonable period of time after appointment to the Committee.
In addition, at least one member of the Committee will be a financial expert as
defined by the Securities and Exchange Commission.
The members of the Committee shall be elected by the Board at the annual
meeting of the Board and shall serve until their successors shall be duly
elected and qualified. Unless a Chairman of the Committee is elected by the
full Board, the members of the Committee may designate a Chairman of the
Committee by majority vote of the full Committee Membership.
13
Meetings:
- --------
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. A majority of the members of the Committee shall
constitute a quorum for the transaction of business. Minutes of each meeting of
the Committee should be recorded by the Secretary to the Committee. Approval by
a majority of the members present at a meeting at which a quorum is present
shall constitute approval by the Committee. The Committee may also act by
unanimous written consent without a meeting. As part of its job to foster open
communication, the Committee should meet at least annually with management and
the independent accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee or at least its Chairman should meet with
the independent accountants and management quarterly to review the Company's
financials consistent with #2 below. The Committee may request any officer or
employee of the Company or the Company's outside counsel or independent auditor
to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
Key Responsibilities:
- --------------------
The Committee's job is one of oversight, and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside auditor is responsible for auditing those financial statements
pursuant to professional standards. Additionally, the Committee recognizes that
financial management has more time, knowledge and detailed information about
the Company than do Committee members. Consequently, in carrying out its
oversight responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or any professional
certification as to the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this
guide as appropriate given the circumstances.
1. The Committee shall review with management and the outside auditor the
audited financial statements to be included in the Company's Annual Report on
Form 10-KSB (or the Annual Report to Shareholders if distributed prior to the
filing of the Form 10-KSB) prior to the filing of the Form 10-KSB or, if deemed
appropriate, prior to any year-end earnings release. The Committee shall review
and consider with the outside auditors all matters required to be discussed by
Statement of Auditing Standards ("SAS") No. 61, as amended by FAS No.90, by
auditors with audit committees.
2. As a whole, or through the Committee chair, the Committee shall review
with the outside auditor the Company's interim financial results to be included
in the Company's quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61, as amended
by SAS No. 90 with respect to quarterly financial statements. Such review will
occur prior to the Company's filing of the Form 10-QSB or, if deemed
appropriate, prior to any quarterly earnings releases.
3. Review disclosures made to the Committee by the Company's CEO and CFO
during their certification process for the Form 10-KSB and Form 10-QSB about
any significant deficiencies in the design or operation of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
14
4. The Committee shall:
(a) request from the outside auditor annually a formal
written statement delineating all relationships between the
auditor and the Company consistent with Independence Standards
Board Standard No. 1;
(b) discuss with the outside auditor any disclosed
relationships or services which may impact the outside
auditor's objectivity or independence; and
(c) recommend that the Board take appropriate action in
response to the outside auditor's report to satisfy itself of
the auditor's independence.
5. The Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to shareholder ratification). The
Committee shall be directly responsible for the compensation and oversight of
the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Committee.
6. The Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the company by its independent auditor, subject to the de minimus exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Committee prior to the completion of the audit. The
Committee may form and delegate authority to subcommittees consisting of one or
more members when appropriate, including the authority to grant preapprovals of
audit and permitted nonaudit services, provided that decisions of such
subcommittee to grant preapprovals shall be presented to the full Committee at
its next scheduled meeting.
7. Review and discuss quarterly reports from the independent auditors
on:
(a) All critical accounting policies and practices to be
used.
(b) All alternative treatments of financial information
within generally accepted accounting principles that have
been discussed with management, ramifications of the use of
such alternative disclosures and treatments, and the
treatment preferred by the independent auditor.
(c) Other material written communications between the
independent auditor and management, such as any management
letter or schedule of unadjusted differences.
8. Periodically consult with the independent accountants, out of the
presence of management, about internal controls and the fullness and accuracy
of the organization's financial statements.
9. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law. Consider whether, in order to assure
continuing auditor independence, it is appropriate to adopt a policy of
rotating the independent auditing firm itself on a regular basis.
10. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent auditor who participated in any capacity
in the audit of the Company.
15
11. Discuss with management the Company's use of "pro forma" or
"adjusted" non-GAAP information, as well as financial information and earnings
guidance provided to analysts and rating agencies. Such discussion may be done
generally (consisting of discussing the types of information to be disclosed
and the types of presentations to be made).
12. Establish regular and separate systems of reporting to the Committee
by each of management, the independent accountants, and the internal
accountants regarding any significant judgments made in management's
preparation of the financial statements, and the view of each as to
appropriateness of such judgments.
13. Following completion of the annual audit, review separately with each
of management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of work or access to required information.
14. Review any significant disagreement among management and the
independent accountants in connection with the preparation of the financial
statements.
15. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
16. Establish, review, and update periodically a Code of Ethical Conduct,
and ensure that management has established a system to enforce this Code.
17. Review and approve any transactions between the Company and its
officers, directors or 5% shareholders.
18. The Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Committee, for payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Committee.
Reporting Responsibilities:
- --------------------------
The Committee shall prepare the report required by the rules of the Securities
and Exchange Commission to be included in the Company's annual proxy statement.
The Committee shall prepare such other reports for the full Board of Directors
and others as it shall deem necessary to discharge its responsibilities under
this Charter.
16
FORM OF PROXY
This Proxy is Solicited on Behalf of the Board of Directors of
THE INTERGROUP CORPORATION
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Shareholders of The InterGroup Corporation to be held on February
26, 2003 at 2:30 P.M. at the Luxe Summit Hotel Bel-Air, 11461 Sunset Boulevard,
Los Angeles, California 90049 and the Proxy Statement in connection therewith
each dated January 28, 2003; (b) appoints John V. Winfield and Gary N. Jacobs,
as proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side of
this Form of Proxy, all of the shares of Common Stock of The InterGroup
Corporation held of record by the undersigned on January 10, 2003 at the Annual
Meeting of Shareholders to be held on February 26, 2003 or at any adjournment
thereof.
(To be Signed on Reverse Side)
Please date, sign and mail your
Proxy card back as soon as possible!
Annual Meeting of Shareholders
THE INTERGROUP CORPORATION
FEBRUARY 26, 2003
Please Detach and Mail in the Envelope Provided
- ----------------------------------------------------------------------------
[X] Please mark your
votes as in this
example.
WITHHOLD AUTHORITY
FOR NOMINEE TO VOTE FOR NOMINEES
LISTED AT RIGHT LISTED AT RIGHT
Nominees:
1. Election
of Class c [ ] [ ] Mildred Bond Roxborough
Directors John C. Love
To withhold authority to vote for any individual
nominee, strike a line through that nominee's
name in line at right.
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE RETENTION
OF PRICEWATERHOUSECOOPERS LLP AS
AS THE INDEPENDENT PUBLIC ACCOUNTANTS [ ] [ ] [ ]
OF THE INTERGROUP CORPORATION.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy
will be voted FOR Proposals 1, 2 and 3.
Please date, sign, and return this proxy in the enclosed envelope.
SIGNATURE_________________ DATE ______ ______________________ DATE _____
Signature if held jointly
NOTE: When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian please give
full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.