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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
[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
14-a6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HOMEFED CORPORATION
(Name of Registrant as Specified in Its Charter)
(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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction: $
5) Total fee paid: $
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
HOMEFED CORPORATION
1903 WRIGHT PLACE
SUITE 220
CARLSBAD, CALIFORNIA 92008
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 12, 2000
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June 20, 2000
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Meeting") of HomeFed Corporation (the "Company") to be held
on July 12, 2000, at 1:30 p.m., at Grand Pacific Palisades Resort and Hotel,
5805 Armada Drive, Carlsbad, California 92008, Ballroom A:
1. To elect six Directors.
2. To consider and vote upon a proposal to approve the Company's 2000
Stock Incentive Plan.
3. To ratify the selection of PricewaterhouseCoopers LLP as
independent auditors to audit the Consolidated Financial Statements of the
Company and its subsidiaries for the year ended December 31, 2000.
4. To transact such other business as may properly come before the
Meeting or any adjournments of the Meeting.
We will be giving a tour of our San Elijo Hills project for
interested Stockholders. The tour will begin at 11:00 a.m. on the morning of the
Annual Meeting and will last approximately two hours. If you would like to take
this tour, please call Hale Yahyapour at (760) 602-3787, before July 5, 2000 to
reserve a place on the tour for you and one invited guest. The tour will depart
from the Grand Pacific Palisades Resort and Hotel. For directions to the hotel,
please call Hale Yahyapour at (760) 602-3787.
Only holders of record of the Company's common stock at the close of
business on June 14, 2000 will be entitled to notice of and to vote at the
Meeting. Please vote your shares, either (i) by signing, dating and mailing the
enclosed proxy card in the accompanying postage prepaid envelope, (ii) by
telephone using the toll-free telephone number printed on the proxy card, or
(iii) by voting on the Internet, using the instructions printed on the proxy
card. This will assure that your shares are represented at the Meeting.
By Order of the Board of Directors.
CORINNE A. MAKI
Secretary
NY2:\912861\08\JKD908!.DOC\64909.0001
HOMEFED CORPORATION
1903 WRIGHT PLACE
SUITE 220
CARLSBAD, CALIFORNIA 92008
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
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June 20, 2000
This Proxy Statement is being furnished to the Stockholders (the
"Stockholders") of HomeFed Corporation, a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors for use
at the Annual Meeting of Stockholders (the "Meeting") of the Company to be held
on July 12, 2000 and at any adjournments thereof.
At the Meeting, Stockholders will be asked:
1. To elect six Directors;
2. To consider and vote upon a proposal to approve the Company's 2000
Stock Incentive Plan;
3. To ratify the selection of PricewaterhouseCoopers LLP as
independent auditors to audit the Consolidated Financial Statements of the
Company and its subsidiaries for the year ended December 31, 2000; and
4. To transact such other business as may properly come before the
Meeting or any adjournments of the Meeting.
The Board of Directors has fixed the close of business on June 14,
2000 as the record date (the "Record Date") for the determination of the holders
of the Company's common stock, par value $.01 per share (the "Common Stock"),
entitled to notice of and to vote at the Meeting. Each such Stockholder will be
entitled to one vote for each share of Common Stock held on all matters to come
before the Meeting and may vote in person or by proxy by completing the enclosed
proxy card and returning it in the enclosed postage prepaid envelope or, as
indicated on the proxy card, by voting on the Internet or by voting by
telephone. At the close of business on June 14, 2000, there were 56,807,826
shares of Common Stock entitled to vote.
This Proxy Statement and the accompanying form of proxy are first
being sent to holders of the Common Stock on or about June 20, 2000.
THE MEETING
DATE, TIME AND PLACE
The Meeting will be held on July 12, 2000, at 1:30 p.m., local time,
at Grand Pacific Palisades Resort and Hotel, 5805 Armada Drive, Carlsbad,
California 92008, Ballroom A.
MATTERS TO BE CONSIDERED
At the Meeting, Stockholders will be asked to consider and vote to
elect six Directors, to approve the 2000 Stock Incentive Plan and to ratify the
selection of independent auditors. See "ELECTION OF DIRECTORS," "PROPOSED 2000
STOCK OPTION PLAN" and "RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS." The
Board of Directors knows of no matters that are to be brought before the Meeting
other than as set forth in the Notice of Meeting. If any other matters properly
come before the Meeting, the persons named in the enclosed form of proxy or
their substitutes will vote in accordance with their best judgment on such
matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Stockholders as of the Record Date (i.e., the close of business on
June 14, 2000) are entitled to notice of and to vote at the Meeting. As of the
Record Date, there were 56,807,826 shares of Common Stock outstanding and
entitled to vote, with each share entitled to one vote.
REQUIRED VOTES
Election of Directors. Under Delaware law, the affirmative vote of
the holders of a plurality of the Common Stock present and entitled to vote on
the election of Directors at the Meeting is required to elect each Director.
Consequently, only shares that are voted in favor of a particular nominee will
be counted toward such nominee's achievement of a plurality. For purposes of the
election of Directors, abstentions will not be counted as votes cast and will
have no effect on the result of the vote, although they will be counted toward
the presence of a quorum.
2000 Stock Incentive Plan. Under Delaware law, the affirmative vote
of the holders of a majority of the Common Stock present and entitled to vote on
this matter is required to approve the 2000 Stock Incentive Plan. Broker
non-votes (which occur when brokers submit proxies that do not indicate votes
for proposals because they lack discretionary authority and have not received
voting instructions) are not counted in determining the stock entitled to vote
on the matter in connection with the approval of the 2000 Stock Incentive Plan,
but do have the effect of reducing the number of affirmative votes required to
achieve a majority for such matter by reducing the total number of shares in
respect of which the majority is calculated. Abstentions are counted as shares
"entitled to vote" at the Meeting in determining both the presence of a quorum
and the existence of a majority and, consequently, have the effect of a vote
"against" any matter as to which they are specified.
Other Matters. The ratification of the selection of
PricewaterhouseCoopers LLP as independent auditors is being submitted to
Stockholders because the Board of Directors believes that such action follows
sound corporate practice and is in the best interests of the Stockholders. If
the Stockholders do not ratify the selection by the affirmative vote of the
holders of a majority of the Common Stock present and entitled to vote on the
matter, the selection of independent auditors will be reconsidered by the Board.
If the Stockholders ratify the selection, the Board, in its discretion, may
still direct the appointment of new independent auditors at any time during the
year if the Board believes that such a change would be in the best interests of
the Company and its Stockholders. Broker non-votes are not counted in
determining the stock entitled to vote on the matter in connection with the
ratification of auditors, but do have the effect of reducing the number of
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affirmative votes required to achieve a majority for such matter by reducing the
total number of shares from which the majority is calculated. Abstentions are
counted as shares "entitled to vote" at the Meeting in determining the presence
of a quorum and have the effect of a vote "against" any matter as to which they
are specified.
Joseph S. Steinberg, Chairman of the Board of Directors, beneficially
owns 7,199,280 shares of Common Stock or approximately 12.7% of the Common Stock
outstanding at the Record Date; and two trusts for the benefit of Mr.
Steinberg's children (the "Steinberg Children Trusts") beneficially own 893,258
shares of Common Stock or approximately 1.6% of the Common Stock outstanding at
the Record Date. Mr. Steinberg disclaims beneficial ownership of the Common
Stock held by the Steinberg Children Trusts. Ian M. Cumming, a Director,
beneficially owns 7,847,609 shares of Common Stock or approximately 13.8% of the
Common Stock outstanding at the Record Date. The Cumming Foundation and the
Joseph S. and Diane H. Steinberg 1992 Charitable Trust, private charitable
foundations independently established by Messrs. Cumming and Steinberg,
respectively, beneficially own 73,297 shares of Common Stock or approximately
0.1% and 23,815 (less than 0.1%) of the Common Stock outstanding at the Record
Date, respectively. Mr. Cumming and Mr. Steinberg each disclaims beneficial
ownership of the Common Stock held by their respective private charitable
foundations. Messrs. Cumming and Steinberg have advised the Company that they
intend to cause all Common Stock that they beneficially own and all Common Stock
beneficially owned by their charitable foundations to be voted in favor of each
nominee named herein, in favor of approval of the 2000 Stock Incentive Plan and
in favor of ratification of the selection of independent auditors. In addition
to Messrs. Cumming and Steinberg, all other Directors and officers of the
Company beneficially own less then 0.1% of the Common Stock outstanding at the
Record Date.
VOTING AND REVOCATION OF PROXIES
Stockholders are requested to vote by proxy in one of three ways:
o Use the toll-free telephone number shown on your proxy card;
o Visit the Internet website at www.voteproxy.com and follow the
on-screen instructions; or
o Mail, date, sign and promptly return your proxy card in the
enclosed postage prepaid envelope.
Shares of Common Stock represented by properly executed proxies
received by the Company or voted by telephone or via the Internet, which are not
revoked will be voted at the Meeting in accordance with the instructions
contained therein. If instructions are not given, proxies will be voted FOR
election of each nominee for director named herein, FOR approval of the 2000
Stock Incentive Plan and FOR ratification of the selection of independent
auditors.
Voting instructions (including instructions for both telephonic and
Internet voting) are provided on the proxy card. The Internet and telephone
voting procedures are designed to authenticate Stockholder identities, to allow
Stockholders to give voting instructions and to confirm that Stockholders'
instructions have been recorded properly. A Control Number, located on the proxy
card, will identify Stockholders and allow them to vote their shares and confirm
that their voting instructions have been properly recorded. Stockholders voting
via the Internet should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that must be borne by the Stockholder. If you do vote by
Internet or telephone, it will not be necessary to return your proxy card.
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If your shares are held in the name of a bank or broker, follow the
voting instructions on the form you receive from your record holder. The
availability of Internet and telephone voting will depend on their voting
procedures.
If a Stockholder neither returns a signed proxy card, votes by the
Internet or by telephone, nor attends the Meeting and votes in person, his or
her shares will not be voted.
Any proxy signed and returned by a Stockholder or voted by telephone
or via the Internet may be revoked at any time before it is exercised by giving
written notice of revocation to the Secretary of the Company, at the address of
the Company set forth herein, by executing and delivering a later-dated proxy
(either in writing, by telephone or via the Internet) or by voting in person at
the Meeting. Attendance at the Meeting will not in and of itself constitute
revocation of a proxy.
PROXY SOLICITATION
The Company will bear the costs of solicitation of proxies for the
Meeting. In addition to solicitation by mail, Directors, officers and regular
employees of the Company may solicit proxies from Stockholders by telephone,
telegram, personal interview or otherwise. Such Directors, officers and
employees will not receive additional compensation, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. Brokers, nominees,
fiduciaries and other custodians have been requested to forward soliciting
material to the beneficial owners of Common Stock held of record by them, and
such custodians will be reimbursed for their reasonable expenses.
INDEPENDENT AUDITORS
The Company has been advised that representatives of
PricewaterhouseCoopers LLP, the Company's independent auditors for 1999, will
attend the Meeting, will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
ELECTION OF DIRECTORS
At the Meeting, six Directors are to be elected to serve until the
next Meeting or until their successors are elected and qualified. The persons
named in the enclosed form of proxy have advised that, unless contrary
instructions are received, they intend to vote FOR the six nominees named by the
Board of Directors and listed on the following table. The Board of Directors
does not expect that any of the nominees will be unavailable for election as a
Director. However, if by reason of an unexpected occurrence one or more of the
nominees is not available for election, the persons named in the form of proxy
have advised that they will vote for such substitute nominees as the Board of
Directors of the Company may propose. The following information is as of June 5,
2000.
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Age, period served as Director, other
Name and present business experience during the last five
position with the Company years and family relationships
- ---------------------------- --------------------------------------------
Paul J. Borden,
President................ Mr. Borden, 51, has served as a director and
President of the Company since May 1998. Mr.
Borden has been a Vice President of Leucadia
National Corporation, a diversified
financial services holding company
("Leucadia"), from August 1988 through May
2000, responsible for overseeing many of
Leucadia's real estate investments. Mr.
Borden is also a Vice President of various
subsidiaries of Leucadia.
Patrick D. Bienvenue........ Mr. Bienvenue, 45, has served as a director
of the Company since 1998 and has been
President of Leucadia Financial Corporation
("Leucadia Financial"), a subsidiary of
Leucadia, since June 1998. Since January
1996, Mr. Bienvenue has been President of
Rosemary Beach Land Company, a subsidiary of
Leucadia and, from 1992 until December 1995,
he was President and Chief Executive Officer
of Torwest Inc., a property development and
investment company.
Timothy M. Considine........ Mr. Considine, 59, has served as a director
of the Company since 1992, serving as
Chairman of the Board from 1992 to December
1999, and has been Managing Partner of
Considine and Considine, an accounting firm
in San Diego, California, since 1969.
Ian M. Cumming.............. Mr. Cumming, 59, has served as a director of
the Company since May 1999. Mr. Cumming has
been a director and Chairman of the Board of
Leucadia since June 1978. He is also a
director of Allcity Insurance Company
("Allcity"), a property and casualty insurer
that is approximately 90% owned by Leucadia,
MK Gold Company ("MKGold"), an international
mining company that is approximately 73%
owned by Leucadia, and Skywest, Inc., a
Utah-based regional air carrier.
Michael A. Lobatz........... Dr. Lobatz, 51, has served as a director of
the Company since February 1995 and has been
a practicing physician in San Diego,
California since 1981.
Joseph S. Steinberg......... Mr. Steinberg, 56, has served as a director
of the Company since August 1998 and as
Chairman of the Board since December 1999.
Mr. Steinberg has been President of Leucadia
since December 1978 and a director of
Leucadia since January 1979. He is also a
director of Allcity, MK Gold and Jordan
Industries, Inc., a company that owns and
manages manufacturing companies and is
approximately 10% owned by Leucadia.
The Board of Directors recommends a vote FOR the above-named nominees.
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INFORMATION CONCERNING
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
MEETINGS AND COMMITTEES
During 1999, the Board of Directors held five meetings and took
action by unanimous written consent on two other occasions.
The Board of Directors has a standing Audit Committee. The functions
of the Audit Committee are to assist the Board of Directors in fulfilling its
responsibility to oversee management's conduct of the Company's financial
reporting process, including by overviewing (i) the financial reports and other
financial information provided by the Company to governmental or regulatory
bodies, the public or other users, (ii) the Company's systems of internal
accounting and financial controls and (iii) the annual independent audit of the
Company's financial statements and to recommend to the Board independent
auditors for the Company. The Audit Committee was formed in March 2000 and
consists of Mr. Considine (Chairman) and Dr. Lobatz, each of whom is
"independent" as "independence" is defined under the New York Stock Exchange,
Inc.'s listing standards. A copy of the Audit Committee Charter, as adopted by
the Board of Directors on March 8, 2000, is included in this Proxy Statement as
Annex A.
During 1999, all Directors attended at least 75% of the meetings of
the Board.
PRESENT BENEFICIAL OWNERSHIP OF COMMON STOCK
Set forth below is certain information as of June 5, 2000 with
respect to the beneficial ownership of Common Stock by (i) each person who, to
the knowledge of the Company, is the beneficial owner of more than 5% of the
outstanding Common Stock (the Company's only class of voting securities), (ii)
each Director, (iii) the executive officers named in the Summary Compensation
Table under "Executive Compensation," (iv) the Steinberg Children Trusts and
private charitable foundations established by Mr. Cumming and Mr. Steinberg and
(v) all executive officers and Directors of the Company as a group.
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Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership Of Class
- ------------------- -------------------- --------
Patrick D. Bienvenue............................ 10,000 *
Paul J. Borden.................................. 15,783 *
Timothy M. Considine............................ 14,859 (a) *
Ian M. Cumming.................................. 7,847,609 (b)(c) 13.8%
Michael A. Lobatz............................... 10,000 *
Curt R. Noland.................................. 25,000 *
Joseph S. Steinberg............................. 7,197,380 (c)(d) 12.7%
The Steinberg Children Trusts................... 893,258 (e) 1.6%
Cumming Foundation.............................. 73,297 (f) 0.1%
The Joseph S. and Diane H. Steinberg
1992 Charitable Trust...................... 23,815 (g) *
All Directors and executive officers
as a group (11 persons)...................... 15,512,475 27.3%
- -------------------
* Less than 0.1%.
(a) Includes 4,859 shares held by the Considine and Considine Retirement
Plan. Mr. Considine is the Managing Partner of Considine and Considine,
an accounting firm in San Diego, California.
(b) Includes 211,319 shares of Common Stock (0.4%) beneficially owned by
Mr. Cumming's wife (directly and through trusts for the benefit of Mr.
Cumming's children of which Mr. Cumming's wife is trustee) as to which
Mr. Cumming may be deemed to be the beneficial owner.
(c) Messrs. Cumming and Steinberg have an oral agreement pursuant to which
they will consult with each other as to the election of a mutually
acceptable Board of Directors of the Company.
The business address for Messrs. Cumming and Steinberg is c/o Leucadia
National Corporation, 315 Park Avenue South, New York, New York 10010.
(d) Includes 34,861 shares of Common Stock (less than 0.1%) beneficially
owned by Mr. Steinberg's wife as to which Mr. Steinberg may be deemed
to be the beneficial owner.
(e) Mr. Steinberg disclaims beneficial ownership of the Common Stock held
by the Steinberg Children Trusts.
(f) Mr. Cumming is a trustee and President of the foundation and disclaims
beneficial ownership of the Common Stock held by the foundation.
(g) Mr. Steinberg and his wife are trustees of the trust. Mr. Steinberg
disclaims beneficial ownership of the Common Stock held by the trust.
As of June 5, 2000, Cede & Co. held of record 44,605,445 shares of
Common Stock (approximately 78.5% of the total Common Stock outstanding). Cede &
Co. held such shares as a nominee for broker-dealer members of The Depository
Trust Company, which conducts clearing and settlement operations for securities
transactions involving its members.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Set forth below is certain information with respect to the
compensation paid by the Company for services in all capacities to the Company
and its subsidiaries during the years ended 1999 and 1998 to (i) the Company's
President and chief executive officer, Paul J. Borden, and (ii) the one other
executive officer of the Company whose total annual salary and bonus exceeded
$100,000 during these periods. The services of the Company's President and chief
executive officer are provided pursuant to an Administrative Services Agreement
with Leucadia Financial. As a result, Mr. Borden receives compensation from
Leucadia and does not receive any compensation from the Company. See "Certain
Relationships and Related Transactions."
Annual Compensation
------------------------------------------------------
Name and Principal
Position Year Salary Bonus
-------- ---- ------ -----
Paul J. Borden, 1999 - -
President (1) 1998 - -
Curt R. Noland, 1999 $100,000 $103,000
Vice President (2) 1998 $ 23,846 $ 53,000
- -------------
(1) Mr. Borden became President of the Company in May 1998. Mr. Borden is
an officer of various Leucadia subsidiaries and receives compensation
from Leucadia. See "Certain Relationships and Related Transactions"
below.
(2) Mr. Noland began his employment with the Company on October 1, 1998.
In March 2000, options to purchase an aggregate of 180,000 shares of
Common Stock at an exercise price of $.75 per share were granted and 250,000
shares of restricted stock were issued to eligible participants pursuant to the
Company's 1999 Stock Incentive Plan. Of such amounts, options to purchase an
aggregate of 50,000 shares of Common Stock and 10,000 shares of restricted stock
were issued to Mr. Borden, options to purchase an aggregate of 25,000 shares of
Common Stock and 25,000 shares of restricted stock were issued to Mr. Noland and
each director (in addition to Mr. Borden) received 10,000 shares of restricted
stock. For additional information, see "Report of the Compensation Committee of
the Board of Directors."
COMPENSATION OF DIRECTORS
In 1999, Directors who are also employees of the Company, Leucadia or
Leucadia Financial received no remuneration for services as a member of the
Board or any committee of the Board. In 1999, each Director who was not an
employee of the Company, Leucadia or Leucadia Financial was paid $3,000 for
attendance at each regular meeting of the Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since emerging from bankruptcy in 1995, administrative and managerial
support have been provided to the Company by Leucadia. Leucadia funded the
Company's bankruptcy plan by purchasing stock and debt of the Company. All stock
of the Company that had been owned by Leucadia was distributed to Leucadia's
shareholders in a transaction that was completed in 1999.
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Set forth below is information concerning agreements or relationships
between the Company and Leucadia and its subsidiaries.
DEVELOPMENT AGREEMENT
In August 1998, upon approval of the Board of Directors, with Mr.
Borden, then a Leucadia Vice President as well as a Director of the Company, not
voting, the Company entered into a development management agreement with an
indirect subsidiary of Leucadia to become development manager of the San Elijo
Hills project, a master planned community in San Diego County, California, of
approximately 3,400 homes and apartments as well as commercial properties. As
development manager, the Company is responsible for the overall management of
the project, including arranging financing, coordinating marketing and sales
activity, and acting as construction manager. The development agreement provides
that the Company will receive certain fees in connection with the project. These
fees consist of marketing, field overhead and management service fees, which are
based on a fixed percentage of gross revenues received by the project and are
expected to cover the Company's cost of providing these services. The
development agreement also provides for a success fee to the Company out of the
net cash flow, if any, from the project, as determined in accordance with the
development agreement, subject to a maximum success fee. Whether a success fee,
if it is earned, will be paid to the Company prior to the conclusion of the
project will be at the discretion of the project owner. From January 1, 1999
through March 31, 2000, the Company has received $878,000 in marketing, field
overhead and management services fees under the development agreement.
AMENDED LOAN AGREEMENT
The Company's chapter 11 plan of reorganization was funded
principally by the issuance of a $20,000,000 convertible note to Leucadia
Financial. As of August 14, 1998, in connection with the development agreement,
the Company and Leucadia Financial entered into an Amended and Restated Loan
Agreement, pursuant to which the original convertible note and the related loan
agreement were restructured. The restructured note, dated August 14, 1998, has a
principal amount of approximately $26,500,000 including the principal amount of
the original note and additions to principal resulting from accrued and unpaid
interest, as allowed under the terms of the original note. The restructured note
extended the maturity date from July 3, 2003 to December 31, 2004, reduced the
interest rate from 12% to 6% and eliminated the convertibility feature of the
original note. Interest only on the restructured note is paid quarterly and all
unpaid principal is due on the date of maturity. From January 1, 1999 through
March 31, 2000, the Company has paid approximately $1,983,000 in interest on the
original note and the restructured note.
STOCK PURCHASE AGREEMENTS
In August and October 1998, the Company entered into two stock
purchase agreements with Leucadia that were subsequently assigned to a trust for
the benefit of Leucadia shareholders. Under these agreements, in July 1999, the
Company sold a total of 46,557,826 additional shares of Common Stock to the
trust for a total purchase price of $8,380,000. In October 1999, the trust
distributed its HomeFed Common Stock to shareholders of Leucadia. As a result,
as of June 5, 2000, Mr. Joseph S. Steinberg, Chairman of the Board of Directors
of the Company and a director and President of Leucadia, together with certain
family members (excluding trusts for the benefit of Mr. Steinberg's children),
and Mr. Ian M. Cumming, a director of the Company and Chairman of the Board of
Leucadia, together with certain family members, became stockholders of the
Company. See "Present Beneficial Ownership of Common Stock."
OTAY LAND COMPANY, LLC
In October 1998, the Company and Leucadia formed Otay Land Company,
LLC ("Otay Land Company"). Through March, 2000, the Company invested $11,300,000
as capital and Leucadia invested $10,000,000 as a preferred capital interest.
The Company is the manager of Otay Land Company. In 1998, Otay Land Company
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purchased approximately 4,800 acres of land that is part of a 22,900-acre
project located south of San Diego, California, known as Otay Ranch, for
approximately $19,500,000. Net income, if any, from this investment first will
be paid to Leucadia until it has received an annual cumulative preferred return
of 12% on, and repayment of, its preferred investment. Any remaining funds are
to be paid to the Company. No amounts have been paid to Leucadia under this
agreement.
ADMINISTRATIVE SERVICES AGREEMENT
Since emerging from bankruptcy in 1995, administrative services and
managerial support have been provided to the Company by Leucadia Financial.
Under the current administrative services agreement, which extends through
February 28, 2002, Leucadia Financial provides the services of Mr. Paul J.
Borden, the Company's President, and Ms. Corinne A. Maki, the Company's
Treasurer and Secretary. Each of Mr. Borden and Ms. Maki is an officer of
Leucadia Financial. Under the administrative services agreement, the initial
annual fee paid to Leucadia Financial for the period ending February 29, 2000
was $296,101, with the fee for subsequent annual periods to be negotiated. The
parties are currently negotiating the fee for the annual period beginning March
1, 2000. A portion of the fee paid to Leucadia Financial is allocable to
Leucadia's cost of providing the services of Mr. Borden. No specific allocation
has been made for providing the services of Ms. Maki. From January 1, 1999
through March 31, 2000, the Company paid Leucadia Financial $450,126 for the
provision of administrative services, of which $380,000 is attributable to
Leucadia's cost of providing Mr. Borden's services. Of the foregoing amounts,
$80,000 was for services rendered to the Company in 1998.
OFFICE SPACE
The Company rents office space and furnishings from a subsidiary of
Leucadia for a monthly amount equal to its share of the Leucadia subsidiary's
cost for the space and furnishings. The agreement pursuant to which the space
and furnishings are provided extends for a 6-year period, which coincides with
the Leucadia subsidiary's occupancy of the space, and provides for a monthly
rental of $15,890 effective March 1, 2000. From January 1, 1999 through March
31, 2000, the Company has paid $227,838 in rent to the Leucadia subsidiary.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS*
The Board of Directors does not have a compensation committee. The
President of the Company, in consultation with certain directors, determined the
compensation to be paid to the one executive officer of the Company in 1999 who
is a Company employee. A number of factors are considered in establishing
compensation for executive officers, including whether such executive officers
receive compensation from any company engaged by the Company to perform
administrative services for the Company. During 1999, other than Curt Noland,
all of the executive officers of the Company were also officers of Leucadia
Financial, which provides administrative services for the Company pursuant to
the Administrative Services Agreement referred to under "--Certain Relationship
and Related Transactions" above. Mr. Noland's responsibilities as an officer of
the Company and the services rendered by him to the Company were considered in
determining his 1999 compensation, . Mr. Borden, the President of the Company,
and Ms. Maki, the Secretary/Treasurer of the Company, each received compensation
from Leucadia and did not receive any direct compensation from the Company in
1999.
- --------------------------
* The disclosure contained in this section of this Proxy Statement is not
incorporated by reference into any filings by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934 that incorporate filings or
portions thereof (including this Proxy Statement or the "Executive Compensation"
section of this Proxy Statement) without specific reference to the incorporation
of this section of this Proxy Statement.
10
At the 1999 Annual Meeting of Stockholders, the Stockholders approved
the 1999 Stock Incentive Plan. The Board of Directors believes that awarding
stock options under the 1999 Stock Incentive Plan will provide a strong
incentive for superior long-term future performance. By means of the 1999 Stock
Incentive Plan, the Company seeks to retain the services of persons now holding
key positions and to secure the services of persons capable of filling such
positions. From time to time, stock options may be awarded which, under the
terms of the 1999 Stock Incentive Plan, permit the executive officer or other
employee to purchase shares of Common Stock at not less than the fair market
value of the shares of Common Stock at the date of grant. The extent to which
the employee realizes any gain is, therefore, directly related to increases in
the price of the Company's Common Stock and, therefore, stockholder value,
during the period of the option. In certain circumstances, options having an
exercise price below the fair market value of the Common Stock on the date of
grant may be issued (although none have been granted to date). Options granted
to executive officers generally become exercisable at the rate of 20% per year,
commencing one year after the date of grant. The number of stock options awarded
to an executive officer is not based on any specific formula, but rather on a
subjective assessment of the executive's performance and the Company's
performance. In March 2000, options to purchase an aggregate of 165,000 shares
of Common Stock were granted under the 1999 Stock Incentive Plan to current
executive officers and employees of the Company at an exercise price of $.75 per
share. In addition, also in March 2000, an aggregate of 180,000 shares of
restricted stock were granted under the 1999 Stock Incentive Plan to directors,
current executive officers and employees of the Company. These shares of
restricted stock were issued to reward such grantees for their past service to
the Company during the period from the Company's chapter 11 reorganization to
the date of grant as an incentive to future service to the Company.
Under the provisions of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), the Company would not be able to deduct
compensation to its executive officers whose compensation is required to be
disclosed in the Company's proxy statement for such year in excess of $1 million
per year unless such compensation was within the definition of
"performance-based compensation" or meets certain other criteria. To qualify as
"performance-based compensation," in addition to certain other requirements,
compensation generally must be based on achieving certain pre-established
objective performance criteria. The Board believes that, while it is in the best
interest of the Company to retain maximum flexibility in its compensation
programs to enable it to appropriately reward, retain and attract the executive
talent necessary to the Company's success, the Board does not currently
anticipate that it will pay compensation in amounts that would not be deductible
under Section 162(m). However, the Board recognizes that in appropriate
circumstances that could develop in the future, compensation that is not
deductible under Section 162(m) may be warranted and could be paid in the
Board's discretion.
The foregoing report is submitted by Paul J. Borden, Patrick D.
Bienvenue, Timothy M. Considine, Ian M. Cumming, Michael A. Lobatz and Joseph S.
Steinberg.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and Directors, and persons who beneficially own
more than ten percent 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. Based solely upon a review of the copies of such forms
furnished to the Company and written representations from the Company's
executive officers, Directors and greater than 10% beneficial shareholders, the
Company believes that during the year ended December 31, 1999, all persons
subject to the reporting requirements of Section 16(a) filed the required
reports on a timely basis.
11
STOCKHOLDER RETURN PERFORMANCE GRAPH**
Set forth below is a graph comparing the cumulative total stockholder
return on Common Stock against cumulative total return of the Standard & Poor's
500 Stock Index (the "S&P 500 Index") and the Standard & Poor's Homebuilding-500
Index (the "S&P Homebuilding Index") for the period commencing July 27, 1995 to
December 31, 1999. Index data was furnished by Standard & Poor's Compustat
Services, Inc. From October 1992 to July 1995, the Company was in bankruptcy and
no information is available concerning the market price of the Common Stock
during such period prior to July 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF THE COMPANY, S&P 500 INDEX
AND S&P HOMEBUILDING INDEX
The following graph assumes that $100 was invested on July 27, 1995
in each of the Common Stock, the S&P 500 Index and the S&P Homebuilding Index
and that all dividends were reinvested.
INDEXED RETURNS
YEARS ENDING
-------------------------------------------------
BASE
PERIOD
COMPANY/INDEX 27-JUL-95 DEC 95 DEC 96 DEC 97 DEC 98 DEC 99
- --------------------------------------------------------------------------------
HOMEFED CORP 100 200.00 100.00 50.00 100.00 700.00
HOMEBUILDING-500 100 119.32 108.81 174.10 212.43 143.33
S&P 500 INDEX 100 110.15 135.44 180.63 232.25 281.12
- ------------------------------
** The disclosure contained in this section of the Proxy Statement is not
incorporated by reference into any prior filings by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934 that incorporated
future filings or portions thereof (including this Proxy Statement or the
"Executive Compensation" section of this Proxy Statement).
12
PROPOSED 2000 STOCK INCENTIVE PLAN
The Board of Directors recommends that the Stockholders approve the
2000 Stock Incentive Plan (the "Plan"). The Plan was adopted by the Board of
Directors on April 27, 2000 in connection with the employment by the Company of
Randy Goodson and Simon Malk (collectively, the "Eligible Persons"), as Vice
Presidents of the Company in April 2000. Prior to their employment by the
Company, Mr. Goodson and Mr. Malk had been employed by Accretive Investments
LLC, a consultant to the Company. The Plan is intended to provide the Eligible
Employees with the opportunity to acquire a proprietary interest in the Company,
thereby creating in such persons an increased interest in and a greater concern
for the welfare of the Company. As described below under "New Plan Benefits
under the Plan," on April 27, 2000, the Board of Directors of the Company issued
all of the options available for grant under the Plan to the Eligible Employees,
subject to Stockholder approval. In the event Stockholder approval is not
obtained, these options will be void.
The Options are intended to qualify as incentive stock options
("Incentive Options") within the meaning of Section 422(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). See "Federal Income Tax
Consequences" below.
The following summary of the Plan is not intended to be complete and
is qualified in its entirety by reference to the Plan, a copy of which is
attached as Annex B to this Proxy Statement.
The Plan provides for the granting of Options to purchase, in the
aggregate, up to 1,000,000 shares of Common Stock (subject to adjustment in the
event of stock dividends, stock splits and other contingencies) (collectively,
the "Shares") from either authorized and unissued shares or treasury shares. The
Plan will become effective only upon stockholder approval as described under
"THE MEETING - Required Votes" above. Assuming such approval is received, the
effective date of the Plan will be April 27, 2000. Messrs. Cumming and Steinberg
have indicated that they intend to vote all of the Common Stock beneficially
owned by them in favor of approval of the Plan.
The Plan is being administered by the Board of Directors which has
the authority, in its discretion and subject to the express provisions of the
Plan, to determine, among other things, whether the Eligible Employees receive
Options, the date of grant of such Options, the number of Shares covered by each
grant, the purchase price of each Share subject to any Options, and the terms
and provisions of the respective Options described below. The Company will
receive no monetary consideration for the granting of Options under the Plan.
Each Option and any Shares issued upon exercise of an Option will be
subject to forfeiture unless within three years from the date of grant (the
"Performance Period"), the Board of Directors of the Company has determined that
the following performance threshold (the "Performance Threshold") has been
satisfied with respect to the Eligible Employee and with respect to a specified
number of Shares: (i) the Company has consummated a Qualified Transaction (as
defined) that was first brought to the attention of the Company by Randy Goodson
and/or Simon Malk, (ii) Randy Goodson and/or Simon Malk have identified a
Qualified Transaction to the Board of Directors, or (iii) the Eligible Employee
has satisfactorily completed responsibilities with respect to a Qualified
Transaction or a material aspect of the Company's business. For purposes of the
Option, a "Qualified Transaction" will mean any transaction or investment that
the Board of Directors determines is an appropriate transaction or investment
for the Company to make, in view of the Company's operations and financial
condition, as well as the resources and opportunities available to the Company
at the time, and is identified by the Board of Directors as a Qualified
Transaction. The Board will specify the number of Shares as to which the
Performance Threshold has been met and the determination of whether an Eligible
Employee has satisfied a Performance Threshold will be made by the Board of
Directors in the exercise of its business judgment. The Board of Directors may
waive the Performance Threshold with respect to all or any part of the Option at
any time during the Performance Period.
13
If the Board of Directors does not determine that the Performance
Threshold has been met with respect to all Shares that are subject to an Option
within the Performance Period, the Option will terminate at the end of the
Performance Period, with respect to the number of Shares as to which the
Performance Threshold has not been met.
If an Option is exercised prior to the Board's determination that the
Performance Threshold as to such Shares has been satisfied, the Shares issued
pursuant to that Option will be restricted stock that is non-transferable and
that is subject to forfeiture. If the Performance Threshold for such shares of
restricted stock is not met within the Performance Period, the Company will
repurchase the shares of restricted stock at a price equal to the lower of (A)
the Option exercise price or (B) the Fair Market Value of the shares of
restricted stock on the date of repurchase (the "forfeiture purchase price").
Any dividends paid on the restricted stock will be deducted from the forfeiture
purchase price. If and to the extent the Performance Threshold is met during the
Performance Period with respect to any shares of restricted stock, the
forfeiture provision as to those shares of restricted stock will expire.
Any Option granted under the Plan may be exercised upon the terms and
conditions determined by the Committee, except that (i) no Incentive Option may
be exercisable more than ten years after the date on which it is granted, and
(ii) at the time of grant, the purchase price of Shares issuable upon exercise
of an Incentive Option granted pursuant to the Plan may not be less than 100% of
the fair market value of such Shares on the date the Incentive Option is
granted, as determined by the Committee in accordance with the Plan. The
Committee has the right to accelerate, in whole or in part, rights to exercise
any Option granted under the Plan. The Committee may prescribe additional terms
and conditions to Options, subject to the provisions and limitations contained
in the Plan.
The Plan permits, in certain circumstances, the exercise of Options
for a limited period following termination of employment due to death,
retirement, disability or dismissal other than for cause.
Options granted under the Plan are non-transferable, except by will
or the laws of descent and distribution.
It is intended that the cash proceeds to be received by the Company
from the exercise of an Option pursuant to the Plan will be used by the Company
for general corporate purposes.
The Plan may be amended from time to time by the Board of Directors,
provided that no amendment will be made without the approval of the Stockholders
that will increase the total number of Shares reserved for Options under the
Plan or the maximum number of Shares with respect to which Options may be
granted under the Plan to any one employee in any one taxable year (other than
an increase resulting from an adjustment for changes in capitalization such as a
stock dividend or stock split), or alter the class of eligible participants. The
Board of Directors may at any time suspend or terminate the Plan, provided that
rights and obligations under any Option granted while the Plan is in effect may
not be altered or impaired by suspension, termination or amendment of the Plan,
except upon the consent of the person to whom the Option was granted.
In the event of any change in the outstanding Common Stock through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, reverse stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, dividend in kind or other like change in capital
structure or distribution to the Stockholders of the Company (other than normal
cash dividends), in order to prevent dilution or enlargement of participants'
rights under the Plan, the Committee shall adjust, in an equitable manner, the
number and kind of Shares that may be issued under the Plan, the number and kind
of Shares subject to outstanding Options, the consideration to be received upon
exercise of Options, the exercise price applicable to outstanding Options,
and/or the fair market value of the Shares and other value determinations
applicable to outstanding Options.
14
In the event of an "Extraordinary Event" with respect to the Company
(including a change in control of the Company, a sale of all or substantially
all of the assets of the Company, certain mergers or like business combinations,
and any other extraordinary transaction that is determined by the Board of
Directors to be appropriate and in the best interests of the Company and which
by its terms precludes the existence of securities convertible into Shares), as
described in the Plan, all then outstanding Options and any restricted stock
issued on exercise of an Option will no longer be subject to forfeiture. The
Committee, in its sole discretion, may determine that, upon the occurrence of an
Extraordinary Event, each Option then outstanding will terminate within a
specified number of days after notice to the holder, and such holder will
receive, with respect to each Share subject to such Option, cash (or other
property) in an amount not less than the excess of the fair market value of such
Share (as determined in accordance with the Plan) over the exercise price per
Share of such Option. The provisions contained in the preceding sentence will be
inapplicable to an Option granted within six (6) months before the occurrence of
an Extraordinary Event if the holder of such Option is subject to the reporting
requirements of Section 16(a) of the Exchange Act and no exception from
liability under Section 16(b) of the Exchange Act is otherwise available to such
holder. Notwithstanding the foregoing, any of the events described above that
the Board of Directors determines not to be an Extraordinary Event with respect
to the Company shall not constitute an Extraordinary Event with respect to the
Company.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Options. Incentive Options granted under the Plan are
intended to meet the definitional requirements of Section 422(b) of the Code for
"incentive stock options."
Under the Code, the grantee of an Incentive Option generally is not
required to recognize income for purposes of the regular income tax, upon the
receipt or exercise of the Incentive Option. For purposes of computing any
alternative minimum tax liability, an employee who exercises an Incentive Option
generally would be required to increase his or her "alternative minimum taxable
income" by an amount equal to the excess of the fair market value of a Share at
the time the Option is exercised over the exercise price, and, for alternative
minimum tax purposes, must compute his or her tax basis in the acquired Share as
if such Share had been acquired through the exercise of a Non-Qualified Option
(as described below). The amount of any minimum tax liability attributable to
the exercise of an Incentive Option generally will be allowed as a credit
offsetting regular tax liability in subsequent years.
If, subsequent to the exercise of an Incentive Option (whether paid
for in cash or in shares), the optionee holds the Shares received upon exercise
for a period that exceeds the longer of two years from the date of grant or one
year from the date of transfer pursuant to the exercise of such Option (the
"applicable holding period"), the difference (if any) between the amount
realized from the sale of such Shares and the holder's tax basis in the Shares
will be taxed as long-term capital gain or loss (provided that such Shares were
held by the optionee as a capital asset). If the holder is subject to the
alternative minimum tax in the year of disposition, his or her tax basis in the
Shares will be determined, for alternative minimum tax purposes, as described in
the preceding paragraph. If, however, an optionee does not hold the Shares so
acquired for the applicable holding period, thereby making a "disqualifying
disposition," the optionee would realize ordinary income in the year of the
disqualifying disposition equal to the excess of the fair market value of the
Shares at the date the Incentive Option was exercised over the exercise price,
and the balance, if any, of income would be long-term capital gain, provided the
holding period for the Shares exceeded one year and the optionee held the Shares
as a capital asset at such time. If the disqualifying disposition is a sale or
exchange that would permit loss to be recognized under the Code (were a loss in
fact to be realized), and the sale proceeds are less than the fair market value
of the Shares on the date of exercise, the employee's ordinary income therefrom
would be limited to the gain (if any) realized on the sale.
A deduction will not be allowed to the Company (or any parent or
subsidiary corporation of the Company) for federal income tax purposes with
respect to the grant or exercise of an Incentive Option, or with respect to the
disposition (assuming satisfaction of the applicable holding period) of Shares
15
acquired upon exercise of an Incentive Option. In the event of a disqualifying
disposition, a federal income tax deduction will be allowed to the Company (or
its parent or subsidiary corporation if such corporation is the employer of the
individual) in an amount equal to the ordinary income included by the optionee,
provided that such amount constitutes an ordinary and necessary business expense
to such corporation and is reasonable, and provided that the limitations of
Section 280G of the Code (as described below) do not apply.
Special rules apply to an employee who exercises an Incentive Option
by delivering other shares of Common Stock owned by the individual, including
Shares previously acquired pursuant to the exercise of an Incentive Option or a
Non-Qualified Option.
Non-Qualified Options. Although the Plan permits the granting of
Options that are not intended to qualify as an incentive stock option under
Section 422(b) of the Code, no such Options were granted to the Eligible
Employees.
Change in Control. As described above, upon an "Extraordinary Event"
affecting the Company (as defined in the Plan), all the then outstanding Options
and restricted stock issued upon exercise of an Option that is subject to
forfeiture at that time will become free of the risk of forfeiture. In general,
if the total amount of payments to certain individuals in the nature of
compensation that are contingent upon a "change in control" of the Company (as
defined in Section 280G of the Code) equals or exceeds three times the
recipient's "base amount" (which is generally defined to mean the recipient's
average annual compensation for the five years preceding the change in control),
then, subject to certain exceptions, the payments may be treated as "parachute
payments" under the Code, in which case a portion of such payments to the extent
otherwise deductible would be nondeductible to the Company (or its parent or
subsidiary) and the recipient would be subject to a 20% excise tax on such
portion of the payments.
REGULATION
The Plan is neither qualified under the provisions of Section 401(a)
of the Code, nor subject to any of the provisions of ERISA.
NEW PLAN BENEFITS UNDER THE PLAN
The following table shows the aggregate number of options granted
subject to Stockholder approval under the Plan to the individuals and groups set
forth below through the record date and the dollar value of such grants.
Name and Position 2000 Stock Incentive Plan (1)
----------------- -----------------------------
Dollar Value ($) Number of Units
---------------- ---------------
Paul J. Borden,
President........................................... 0 0
Curt R. Noland,
Vice President...................................... 0 0
Executive Group....................................... $610,000 1,000,000
Non-Executive Officer Director Group.................. 0 0
Non-Executive Officer Employee Group.................. 0 0
- -------------
(1) The information in this table is for Options that were granted to Mr.
Goodson (650,000 Options) and Mr. Malk (350,000 Options) under the Plan on
April 27, 2000, subject to approval of the Plan by the Company's
Stockholders. The dollar value shown is based on the fair market value of
16
the Common Stock on April 27, 2000, which was $.61 per share (the exercise
price for all of the Options). These Options vest over a four year period
beginning on July 12, 2000 (assuming Stockholder approval is received) and
expire on April 27, 2006 (unless earlier terminated in accordance with
their terms). As of June 5, 2000, the market value of the Company's Common
Stock was $.61 per share.
The Board of Directors recommends a vote FOR this proposal.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors recommends that the Stockholders ratify the
selection of PricewaterhouseCoopers LLP, certified public accountants, as
independent auditors to audit the accounts of the Company and its subsidiaries
for 2000. PricewaterhouseCoopers LLP are currently independent auditors for the
Company.
The Board of Directors recommends a vote FOR this proposal.
ANNUAL REPORT
A copy of the Company's 1999 Annual Report to Stockholders on Form
10-K, as amended (the "Annual Report"), is being furnished to Stockholders
concurrently herewith. Exhibits to the Annual Report will be furnished to
Stockholders upon payment of photocopying charges.
PROPOSALS BY STOCKHOLDERS
Proposals that Stockholders wish to include in the Company's Proxy
Statement and form of proxy for presentation at the Company's 2001 Annual
Meeting of Stockholders must be received by the Company at 1903 Wright Place,
Suite 200, Carlsbad, California 92008, Attention of Corinne A. Maki, Secretary,
no later than February 21, 2001. Any such proposal must be in accordance with
the rules and regulations of the Securities and Exchange Commission. With
respect to proposals submitted by a Stockholder other than for inclusion in the
Company's 2001 Proxy Statement and related form of proxy, timely notice of any
such proposal must be received by the Company in accordance with the By-Laws and
the rules and regulations of the Company no later than February 21, 2001. Any
proxies solicited by the Board of Directors for the 2001 Annual Meeting may
confer discretionary authority to vote on any proposals notice of which is not
timely received.
17
IT IS IMPORTANT THAT YOUR PROXY BE RETURNED PROMPTLY, WHETHER BY
MAIL, BY THE INTERNET OR BY TELEPHONE. THE PROXY MAY BE REVOKED AT ANY TIME BY
YOU BEFORE IT IS EXERCISED. IF YOU ATTEND THE MEETING IN PERSON, YOU MAY
WITHDRAW ANY PROXY (INCLUDING AN INTERNET OR TELEPHONIC PROXY) AND VOTE YOUR OWN
SHARES.
By Order of the Board of Directors.
CORINNE A. MAKI
Secretary
18
ANNEX A
HOMEFED CORPORATION
AUDIT COMMITTEE CHARTER
HOMEFED CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") in fulfilling its responsibility to
oversee management's conduct of the Company's financial reporting process,
including by overviewing (i) the financial reports and other financial
information provided by the Company to governmental or regulatory bodies, the
public or other users, (ii) the Company's systems of internal accounting and
financial controls and (iii) 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. The Committee shall have full
access to all books, records, facilities and personnel of the Company and shall
have the power to retain outside counsel, auditors or other experts when
necessary. The Board and the Committee are in place to represent the Company's
stockholders; accordingly, the outside auditor is ultimately accountable to the
Board and the Committee.
While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations.
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 the Audit
Committee Policy of the New York Stock Exchange.
Accordingly, all 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 (except as
permitted by New York Stock Exchange rules); and
2. 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 have accounting or related
financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight. The Company's management is
responsible for preparing the Company's financial statements and the outside
auditors are responsible for auditing those financial statements. The Committee
recognizes that financial management and the outside auditors have more time,
knowledge and detailed information regarding the Company than do Committee
members. Accordingly, in carrying out its oversight responsibilities, the
Committee will not provide any expert or special assurance as to the Company's
financial statements or any professional certification as to the outside
auditor's work.
A-1
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.
o The Committee shall review with management and the outside
auditors the audited financial statements to be included in
the Company's Annual Report on Form 10-K (or the Annual Report
to Stockholders if distributed prior to the filing of Form
10-K) and review and consider with the outside auditors the
matters required to be discussed by Statement of Auditing
Standards ("SAS") No. 61, as such statement may be amended
from time to time, including, without limitation, the
amendments contained in SAS No. 90.
o As a whole, or through the Committee chair, the Committee
shall review with the outside auditors the Company's interim
financial results to be included in the Company's quarterly
reports to be filed with the Securities and Exchange
Commission and the matters required to be discussed by SAS No.
61 and 90; this review will occur prior to the Company's
filing of the Form 10-Q.
o The Committee shall discuss with management and the outside
auditors the quality and adequacy of the Company's internal
controls.
o The Committee shall:
o request from the outside auditors annually, a formal
written statement delineating all relationships
between the auditor and the Company consistent with
Independence Standards Board Standard Number 1;
o discuss with the outside auditors any such disclosed
relationships and their impact on the outside
auditor's independence; and
o recommend that the Board take appropriate action in
response to the outside auditor's report to satisfy
itself of the auditor's independence.
o The Committee, subject to any action that may be taken by the
full Board, shall have the ultimate authority and
responsibility to select (or nominate for shareholder
approval), evaluate and, where appropriate, replace the
outside auditor.
A-2
ANNEX B
HOMEFED CORPORATION
2000 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
I. Purposes..........................................................1
II. Amount of Stock Subject to the Plan...............................1
III. Administration....................................................1
IV. Eligibility.......................................................2
V. Performance Threshold.............................................3
VI. Forfeiture of Options.............................................3
VII. Forfeiture of Shares..............................................3
VIII. Option Price and Payment..........................................3
IX. Terms of Options and Limitations on the Right of Exercise.........4
X. Termination of Employment.........................................5
XI. Exercise of Options...............................................7
XII. Use of Proceeds...................................................7
XIII. Non-Transferability of Options....................................7
XIV. Adjustment Provisions; Effect of Transactions.....................7
XV. Right to Terminate Employment.....................................8
XVI. Purchase for Investment...........................................8
XVII. Issuance of Stock Certificates; Legends; Payment of Expenses......9
XVIII. Withholding Taxes.................................................9
XIX. Listing of Shares and Related Matters............................10
XX. Amendment of the Plan............................................10
XXI. Duration; Termination or Suspension of the Plan..................11
XXII. Savings Provision................................................11
XXIII. Governing Law....................................................11
XXIV. Partial Invalidity...............................................11
XXV. Effective Date...................................................11
i
HOMEFED CORPORATION
2000 STOCK INCENTIVE PLAN
I. PURPOSES
HomeFed Corporation (the "Company") desires to afford two of its key employees,
Randy Goodson and Simon Malk (collectively, "Eligible Persons"), an opportunity
to acquire a proprietary interest in the Company, and thus to create in such
persons an increased interest in and a greater concern for the welfare of the
Company and its subsidiaries.
The stock options ("Options") offered pursuant to this 2000 Stock Incentive Plan
(the "Plan") are a matter of separate inducement and are not in lieu of any
salary or other compensation for the services of such persons. The Company will
receive no monetary consideration for the grant of any Options.
The Options granted under the Plan are intended to be either incentive stock
options ("Incentive Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that do not meet the
requirements for Incentive Options ("Non-Qualified Options"), but the Company
makes no warranty as to the qualification of any Option as an Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of Common Stock, par value $.01 per share (the
"Shares"), of the Company that may be purchased pursuant to the exercise of
Options granted under the Plan shall not exceed, in the aggregate, one million
(1,000,000) Shares.
Shares which may be acquired under the Plan may be either authorized but
unissued Shares, Shares of issued stock held in the Company's treasury, or both,
at the discretion of the Company.
Except as provided in Articles IV, XXI and XXV hereof, the Committee (as defined
in Article III) may, from time to time beginning on April 27, 2000 (the
"Effective Date"), grant Incentive Options and/or Non Qualified Options to the
Eligible Employees under the terms hereinafter set forth.
As used in the Plan, the term "parent corporation" and "subsidiary corporation"
shall mean a corporation coming within the definition of such terms contained in
Sections 424(e) and 424(f) of the Code, respectively.
III. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company or by a
committee (the "Committee") appointed by the Board of Directors of the Company
from among its members that is comprised, unless otherwise determined by the
Board of Directors, of not less than two members who shall be "Non-Employee
Directors" within the meaning of Rule 16b-3(b)(3) (or any successor rule)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). If the Board of Directors of the Company administers the Plan rather than
a committee of the Board of Directors, then all references to "Committee" in the
Plan shall be deemed to mean a reference to the Board of Directors of the
Company.
The Committee is authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it deems necessary for the proper administration
of the Plan and to make such determinations and interpretations and to take such
action in connection with the Plan and any benefits granted hereunder as it
deems necessary or advisable. Subject to the express provisions of the Plan, the
Committee also shall have authority to construe the Plan and the Options granted
thereunder, to amend the Options granted thereunder, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the Options and to make all other determinations necessary or
advisable for administering the Plan.
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The Committee also shall have the authority to require, in its discretion, as a
condition of the granting of any Option, that the Eligible Employee agree (a)
not to sell or otherwise dispose of Shares acquired pursuant to the exercise of
such Option for a period of six (6) months following the date of the acquisition
of such Option and (b) that in the event of termination of employment of such
Eligible Employee, other than as a result of dismissal without cause, such
employee will not, for a period to be fixed at the time of the grant of the
Option, enter into any other employment or participate directly or indirectly in
any other business or enterprise that is competitive with the business of the
Company or any subsidiary corporation or parent corporation of the Company, or
enter into any employment in which such Eligible Employee will be called upon to
utilize special knowledge obtained through employment with the Company.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants and their legal representatives. No member of
the Committee and no employee of the Company shall be liable for any act or
failure to act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated. The Company
shall indemnify members of the Committee and any agent of the Committee who is
an employee of the Company or a subsidiary against any and all liabilities or
expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan, except in circumstances
involving such person's bad faith, gross negligence or willful misconduct.
The Committee may delegate to one or more of its members, or to one or more
agents, such administrative duties as it may deem advisable, and the Committee,
or any person to whom it has delegated duties as aforesaid, may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. The Committee may employ such legal or
other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company.
IV. ELIGIBILITY
Options may only be granted to Eligible Employees
The Plan does not create a right in any Eligible Employee to participate in the
Plan, nor does it create a right in any Eligible Employee to have any Options
granted to him.
The aggregate number of Shares with respect to which Options may be granted
under the Plan to any grantee in any one taxable year is 650,000.
Notwithstanding any other provision of this Plan, if the grant of an Option
would cause any person (whether the grantee or any other person) to become a "5
percent stockholder" of the Company within the meaning of Section 382 of the
Code and the regulations promulgated thereunder as a result of the grant of the
Option to the grantee, such grant shall only be effective to acquire the number
of Shares of the Company as could be acquired without causing such person to
become a "5 percent stockholder," and if the exercise of an Option would cause
any person (whether the grantee or any other person) to become a "5 percent
stockholder" of the Company as a result of the exercise of such Option, such
exercise shall be effective only for the number of Shares that such grantee can
acquire without causing such person to become a "5 percent stockholder" and the
issuance of any Shares in excess of such amount shall be null and void. Upon the
grant or exercise of an Option, the Committee may, at its discretion, request
that the grantee submit any appropriate certifications or affidavits to satisfy
the Committee that such grant, exercise, and/or vesting will not cause any
person to become a "5 percent stockholder" of the Company as a result of such
grant, exercise, and/or vesting.
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V. PERFORMANCE THRESHOLD
Each Option and any Shares issued upon exercise of an Option will be subject to
forfeiture unless within three years from the date of grant (the "Performance
Period"), the Board of Directors of the Company has determined that the
following performance threshold (the "Performance Threshold") has been satisfied
with respect to the Eligible Employee and with respect to a specified number of
Shares: (i) the Company has consummated a Qualified Transaction (as defined)
that was first brought to the attention of the Company by Randy Goodson and/or
Simon Malk, (ii) Randy Goodson and/or Simon Malk have identified a Qualified
Transaction to the Board of Directors, or (iii) the Eligible Employee has
satisfactorily completed responsibilities with respect to a Qualified
Transaction or a material aspect of the Company's business. For purposes of the
Option, a "Qualified Transaction" will mean any transaction or investment that
the Board of Directors determines is an appropriate transaction or investment
for the Company to make, in view of the Company's operations and financial
condition, as well as the resources and opportunities available to the Company
at the time and is identified by the Board of Directors as a Qualified
Transaction. The Board will specify the number of Shares as to which the
Performance Threshold has been met. The determination of whether an Eligible
Employee has satisfied a Performance Threshold will be made by the Board of
Directors in the exercise of its business judgment. The Board of Directors may
waive the Performance Threshold with respect to all or any part of the Option at
any time during the Performance Period.
If and to the extent the Board certifies satisfaction of a Performance
Threshold, restrictions (including the risk of forfeiture) on any Shares issued
pursuant to previously exercised Options will be eliminated prior to the
elimination of the risk of forfeiture on any unexercised portion of an Option.
With respect to any unexercised portion of an Option, the risk of forfeiture
shall first be eliminated with respect to the exercisable portion of an Option,
and thereafter, with respect to any unexercisable portion of an Option.
VI. FORFEITURE OF OPTIONS
If the Board of Directors does not determine that the Performance Threshold has
been met with respect to all Shares that are subject to an Option within the
Performance Period, the Option will terminate at the end of the Performance
Period, with respect to the number of Shares as to which the Performance
Threshold has not been met.
VII. FORFEITURE OF SHARES
If an Option is exercised prior to the Board's determination that the
Performance Threshold as to such Shares has been satisfied, the Shares issued
pursuant to that Option will be restricted stock that is non-transferable and
that is subject to forfeiture.
If the Performance Threshold for such Shares is not met within the Performance
Period, the Company will repurchase the Shares of restricted stock issued at a
price equal to the lower of (A) the Option exercise price or (B) the Fair Market
Value of the Shares on the date of repurchase (the "forfeiture purchase price").
Any dividends paid on the restricted stock will be deducted from the forfeiture
purchase price. If and to the extent the Performance Threshold is met during the
Performance Period with respect to any Shares of restricted stock, the
forfeiture provision as to those shares of restricted stock will be eliminated.
VIII. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option granted hereunder shall be
such amount as the Committee may determine; provided, however, that the exercise
price of an Incentive Option shall not be less than one hundred percent (100%)
of the Fair Market Value (as defined below) of the Shares on the date the Option
is granted; provided, further, that in the case of an Incentive Option granted
to a person who, at the time such Option is granted, owns shares of the Company
or any subsidiary corporation or parent corporation of the Company possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any subsidiary corporation or parent corporation of
the Company, the purchase price for each Share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per Share at the date the
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Option is granted. In determining the stock ownership of an employee for any
purpose under the Plan, the rules of Section 424(d) of the Code shall be
applied, and the Committee may rely on representations of fact made to it by the
employee and believed by it to be true.
Except as set forth in Article XIV, for purposes of this Plan and any Options
awarded hereunder, Fair Market Value shall be the closing price of the Shares on
the date of calculation (or on the last preceding trading date if Shares were
not traded on such date) if the Shares are readily tradable on a national
securities exchange or other market system, and if the Shares are not readily
tradable, Fair Market Value shall mean the amount determined in good faith by
the Committee as the fair market value of the Shares of the Company.
Upon the exercise of an Option granted hereunder, the Company shall cause the
purchased Shares to be issued only when it shall have received the full purchase
price for the Shares in cash; provided, however, that in lieu of cash, the
holder of an Option may, if the terms of such Option so provide and to the
extent permitted by applicable law, exercise an Option (a) in whole or in part,
by delivering to the Company Shares (in proper form for transfer and accompanied
by all requisite stock transfer tax stamps or cash in lieu thereof) owned by
such holder having a Fair Market Value equal to the cash exercise price
applicable to that portion of the Option being exercised by the delivery of such
Shares, the Fair Market Value of the Shares so delivered to be determined as of
the date immediately preceding the date on which the Option is exercised, or as
may be required in order to comply with or to conform to the requirements of any
applicable laws or regulations, or (b) in part, by delivering to the Company an
executed promissory note on such terms and conditions as the Committee shall
determine, at the time of grant, in its sole discretion; provided, however, that
(i) the principal amount of such note shall not exceed ninety percent (90%) (or
such lesser percentage as would be permitted by applicable margin regulations)
of the aggregate purchase price of the Shares then being purchased pursuant to
the exercise of such Option and (ii) payment for Shares with a promissory note
is permissible under applicable law. The Committee may prescribe any other
method of paying the exercise price that it determines to be consistent with
applicable law and the purpose of the Plan.
IX. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
All Options granted hereunder shall be exercisable at such times, in such
amounts and during such period or periods as the Committee may determine at the
date of grant of such Option; provided, however, that an Incentive Option shall
not be exercisable after the expiration of ten (10) years from the date such
Incentive Option is granted; provided, further, that in the case of an Incentive
Option granted to a person who, at the time such Option is granted, owns stock
of the Company or any subsidiary corporation or parent corporation of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any subsidiary corporation or
parent corporation of the Company, such Incentive Option shall not be
exercisable after the expiration of five (5) years from the date such Incentive
Option is granted. Notwithstanding anything herein to the contrary, Options may
not be granted on or after the tenth anniversary of the Effective Date.
Each Option shall be subject to such additional terms and conditions as may from
time to time be prescribed by the Committee (which terms and conditions may be
subsequently waived by the Committee), subject to the limitations contained in
the Plan. The Committee shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, rights to exercise any
Option granted hereunder.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
Except to the extent otherwise provided under the Code, to the extent that the
aggregate Fair Market Value of stock for which Incentive Options (under all
stock option plans of the Company and of any parent corporation or subsidiary
corporation of the Company) are exercisable for the first time by an employee
during any calendar year exceeds one hundred thousand dollars ($100,000), such
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Options shall be treated as Non-Qualified Options. For purposes of this
limitation, (a) the Fair Market Value of stock is determined as of the time the
Option is granted and (b) the limitation will be applied by taking into account
Options in the order in which they were granted.
In no event shall an Option granted hereunder be exercised for a fraction of a
Share.
A person entitled to receive Shares upon the exercise of an Option shall not
have the rights of a stockholder with respect to such Shares until the date of
issuance of a stock certificate to him for such Shares; provided, however, that
until such stock certificate is issued, any holder of an Option using previously
acquired Shares in payment of an option exercise price shall continue to have
the rights of a stockholder with respect to such previously acquired Shares.
X. TERMINATION OF EMPLOYMENT
Upon an Eligible Employee's termination of employment with the Company and all
subsidiary corporations and parent corporations, any Option previously granted
to the employee, unless otherwise specified by the Committee shall, to the
extent not theretofore exercised, automatically terminate and become null and
void and, unless otherwise specified by the Committee, each Share of Restricted
Stock issued upon the exercise of an Option and as to which the Performance
Threshold has not been satisfied at the time of termination of employment shall
be forfeited in accordance with Article VII hereof; provided, however, that:
(a) if the employee shall die while in the employ of such
corporation or during either the three (3) month or one (1)
year period, whichever is applicable, specified in clause (b)
below and at a time when such employee was entitled to
exercise an Option as herein provided and only to the extent
the Board has determined the Performance Threshold has been
met with respect to any unexercised portion of the Option, the
legal representative of such employee, or such person who
acquired such Option by bequest or inheritance or by reason of
the death of the employee, may, not later than one (1) year
from the date of death, exercise such Option, to the extent
not theretofore exercised, in respect of any or all of such
number of Shares as specified by the Committee in such Option;
and
(b) if the employment of any employee to whom such Option shall
have been granted shall terminate by reason of the employee's
retirement (at such age or upon such conditions as shall be
specified by the Committee), disability (as described in
Section 22(e)(3) of the Code) or dismissal by the employer
other than for cause (as defined below), and while such
employee is entitled to exercise such Option as herein
provided and only to the extent the Board has determined the
Performance Threshold has been met with respect to any
unexercised portion of the Option, such employee shall have
the right to exercise such Option so granted in respect of any
or all of such number of Shares as specified by the Committee
in such Option, at any time up to and including (i) three (3)
months after the date of such termination of employment in the
case of termination by reason of retirement or dismissal other
than for cause, and (ii) one (1) year after the date of
termination of employment in the case of termination by reason
of disability.
In no event, however, shall any person be entitled to exercise any Option after
the expiration of the period of exercisability of such Option, as specified
therein.
If an employee voluntarily terminates his or her employment, or is discharged
for cause, any Option granted hereunder shall, unless otherwise specified by the
Committee, forthwith terminate with respect to any unexercised portion thereof
and any Shares of restricted stock previously issued to the employee shall be
forfeited to the extent the Board has not determined that the Performance
Threshold has been met with respect to such Shares during the Performance
Period.
B-5
Notwithstanding any other provision of this Plan, in determining the extent to
which the Option may be exercised in the event of a termination of employment,
any Shares that are subject to forfeiture under the terms of the Option will
reduce the extent to which an Option granted to the Employee may be exercised.
If an Option granted hereunder shall be exercised by the legal representative of
a deceased grantee or by a person who acquired an Option granted hereunder by
bequest or inheritance or by reason of the death of an Eligible Employee,
written notice of such exercise shall be accompanied by a certified copy of
letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Option.
For the purposes of the Plan, the term "for cause" shall mean (a) with respect
to an employee who is a party to a written employment agreement with, or
alternatively participates in a compensation or benefit plan of the Company or a
subsidiary corporation or parent corporation of the Company, which agreement or
plan contains a definition of "for cause" or "cause" (or words of like import)
for purposes of termination of employment thereunder by the Company or such
subsidiary corporation or parent corporation of the Company, "for cause" or
"cause" as defined therein; or (b) in all other cases, as determined by the
Committee or the Board of Directors, in its sole discretion, (i) the willful
commission by an employee of an act that causes or may cause substantial damage
to the Company or a subsidiary corporation or parent corporation of the Company;
(ii) the commission by an employee of an act of fraud in the performance of such
employee's duties on behalf of the Company or a subsidiary corporation or parent
corporation of the Company; (iii) conviction of the employee for commission of a
felony in connection with the performance of his duties on behalf of the Company
or a subsidiary corporation or parent corporation of the Company, or (iv) the
continuing failure of an employee to perform the duties of such employee to the
Company or a subsidiary corporation or parent corporation of the Company after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the employee by the Committee.
For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code. If an individual is on leave of absence taken
with the consent of the corporation by which such individual was employed, or is
on active military service, and is determined to be an "employee" for purposes
of the exercise of an Option, such individual shall not be entitled to exercise
such Option during such period and while the employment is treated as continuing
intact unless (a) such individual shall have obtained the prior written consent
of such corporation, which consent shall be signed by the chairman of the board
of directors, the president, a senior vice-president or other duly authorized
officer of such corporation or (b) such exercise is otherwise authorized by the
Committee.
A termination of employment shall not be deemed to occur by reason of (i) the
transfer of an employee from employment by the Company to employment by a
subsidiary corporation or a parent corporation of the Company, or (ii) the
transfer of an employee from employment by a subsidiary corporation or a parent
corporation of the Company to employment by the Company or by another subsidiary
corporation or parent corporation of the Company. In the event of the complete
liquidation or dissolution of a subsidiary corporation, or if ownership of 50%
or more of such corporation ceases to be held by the Company or another
subsidiary corporation, any unexercised Options theretofore granted to any
person employed by such subsidiary corporation will be deemed cancelled unless
such person is employed by the Company or by any parent corporation or another
subsidiary corporation after the occurrence of such event or unless otherwise
provided by the Committee. If an Option is to be cancelled pursuant to the
provisions of the previous sentence, notice of such cancellation will be given
to each employee holding unexercised Options, and, subject to Article IV, such
holder will have the right to exercise such Options, subject (unless otherwise
provided by the Committee, to any limitation set forth or imposed pursuant to
Article IX during the thirty (30) day period following notice of such
cancellation.
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XI. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to all or
part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and accompanied by payment of the purchase price. Subject to the terms of
Articles XVI through XIX hereof, the Company shall cause certificates for the
Shares so purchased to be delivered at the principal business office of the
Company, against payment of the full purchase price, on the date specified in
the notice of exercise.
XII. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the Options granted hereunder
are to be added to the general funds of the Company and used for its general
corporate purposes as the Board of Directors shall determine.
XIII. NON-TRANSFERABILITY OF OPTIONS
No Option granted hereunder shall be transferable, whether by operation of law
or otherwise, other than by will or the laws of descent and distribution, and
any Option granted hereunder shall be exercisable, during the lifetime of the
holder, only by such holder. Except to the extent provided above, Options may
not be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Notwithstanding the foregoing, at the
discretion of the Committee, an award of an Option (other than an Incentive
Option) may permit the transferability of such Option by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons or partnerships, corporations, limited
liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the award of the
Option.
XIV. ADJUSTMENT PROVISIONS; EFFECT OF TRANSACTIONS
(a) If there shall be any change in the Shares of the Company, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse stock split, split-up, split-off, spin-off, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution to Stockholders of the Company (other than normal cash
dividends), in order to prevent dilution or enlargement of participants' rights
under the Plan, the Committee shall adjust, in an equitable manner, the number
and kind of shares that may be issued under the Plan, the number and kind of
shares subject to outstanding Options, the consideration to be received upon
exercise of Options, the exercise price applicable to outstanding Options,
and/or the fair market value of the Shares and other value determinations
applicable to outstanding Options. Appropriate adjustments may also be made by
the Committee in the terms of any Options under the Plan to reflect such changes
or distributions and to modify any other terms of outstanding Options on an
equitable basis. In addition, the Committee is authorized to make adjustments to
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles.
(b) Subject to the provisions of Article IV, but notwithstanding any other
provision of this Plan, if there is an Extraordinary Event with respect to the
Company, all then outstanding Options that have not vested or become exercisable
at the time of such Extraordinary Event shall immediately vest and become
exercisable and the Performance Threshold shall be deemed satisfied with respect
to all outstanding Options and restricted shares issued upon the exercise of an
Option. For purposes of this Article XIV(b), an "Extraordinary Event" with
respect to the Company shall be deemed to have occurred upon any of the
following events:
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(i) A change in control of the direction and administration of the
Company's business of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A (or any successor rule or regulation) of Regulation
14A promulgated under the Exchange Act whether or not the Company is then
subject to such reporting requirement; or
(ii) The Company's Board of Directors shall approve a sale of all or
substantially all of the assets of the Company, a partial liquidation of the
Company under Section 302(b)(4) of the Code or other extraordinary corporate
contraction or distribution or other extraordinary transaction that is
determined by the Board of Directors to be appropriate and in the best interests
of the Company and which by its terms precludes the existence of Company
securities convertible into Shares; or
(iii) The Company's Board of Directors shall approve any merger,
consolidation, or like business combination or reorganization of the Company,
the consummation of which would result in the occurrence of any event described
in Article XIV(b)(i) or (ii) above.
Notwithstanding the foregoing, (A) any spin-off of a division or subsidiary of
the Company to its stockholders and (B) any event listed in (i) through (iii)
above that the Board of Directors determines not to be an Extraordinary Event
with respect to the Company, shall not constitute an Extraordinary Event with
respect to the Company.
The Committee, in its discretion, may determine that, upon the occurrence of an
Extraordinary Event with respect to the Company, each Option outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and, subject to the provisions of Article IV, such holder shall receive
with respect to each Share that is subject to an Option (assuming no exercise)
an amount equal to the excess of the "fair market value" of such Share over the
exercise price per share of such Option; such amount to be payable in cash, in
one or more kinds of property (including the property, if any, payable in the
transaction, if any) or in a combination thereof, as the Committee, in its
discretion, shall determine. For purposes of this provision, the "fair market
value" of the Shares shall be determined by the Board of Directors in good faith
and shall be not less than the Fair Market Value determined in accordance with
Article VIII as of the date of the occurrence of the Extraordinary Event. The
provisions contained in the preceding sentence shall be inapplicable to an
Option granted within six (6) months before the occurrence of an Extraordinary
Event if the holder of such Option is subject to the reporting requirements of
Section 16(a) of the Exchange Act and no exception from liability under Section
16(b) of the Exchange Act is otherwise available to such holder.
XV. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or any subsidiary
corporation or parent corporation to continue the employment of any holder of an
Option and it shall not impose any obligation on the part of any holder of an
Option to remain in the employ of the Company or of any subsidiary corporation
or parent corporation.
XVI. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Committee may require the holder of any
Option granted hereunder, as a condition of exercise of such Option, to execute
and deliver to the Company a written statement, in form satisfactory to the
Committee, in which such holder represents and warrants that such holder is
purchasing or acquiring the Shares pursuant to any Option for such holder's own
account, for investment only and not with a view to the resale or distribution
thereof, and agrees that any subsequent resale or distribution of any Shares
acquired under the Plan shall be made only pursuant to either (i) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being sold, or (ii) a specific exemption from
the registration requirements of the Securities Act, but in claiming such
exemption the holder shall, prior to any offer of sale or sale of such Shares,
obtain a prior favorable written opinion of counsel, in form and substance
satisfactory to counsel for the Company, as to the application of such exemption
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thereto. The foregoing restriction shall not apply to (x) issuances by the
Company so long as the Shares being issued are registered under the Securities
Act and a prospectus in respect thereof is current or (y) reofferings of Shares
by affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) if the Shares being reoffered
are registered under the Securities Act and a prospectus in respect thereof is
current.
Nothing herein shall be construed as requiring the Company to register Shares
subject to any Option under the Securities Act. In addition, if at any time the
Committee shall determine that the listing or qualification of the Shares
subject to such Option on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with the issuance of Shares
granted pursuant to Option, such Option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Committee.
XVII. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon exercise of any portion of an Option prior to the Board's determination
that the Performance Threshold has been satisfied with respect to such portion
of the Option, and payment of the purchase price, a certificate or certificates
for Shares of restricted stock shall be issued by the Company in the name of the
person exercising the Option and shall bear a legend indicating that it is
subject to the restrictions contained in the Plan, in addition to any other
legends or instructions that the Committee shall deem appropriate, and shall be
held by the Company (together with a proxy in favor of the Board of Directors)
until satisfaction of the applicable Performance Threshold.
Upon exercise of any portion of an Option after the Board's determination that
the Performance Threshold has been satisfied with respect to such portion of the
Option, and payment of the purchase price, a certificate or certificates for the
Shares shall be issued by the Company in the name of the person exercising the
Option and shall be delivered to or upon the order of such person.
The Company may endorse such legend or legends upon the certificates for Shares
issued pursuant to the Plan and may issue such "stop transfer" instructions to
its transfer agent in respect of such Shares as the Committee, in its
discretion, determines to be necessary or appropriate to (a) prevent a violation
of, or to perfect an exemption from, the registration requirements of the
Securities Act, (b) implement the provisions of the Plan and any agreement
between the Company and the optionee with respect to such Shares, or (c) permit
the Company to determine the occurrence of a disqualifying disposition, as
described in Section 421(b) of the Code, of Shares transferred upon exercise of
an Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the issuance
or transfer of Shares to the grantee, as well as all fees and expenses
necessarily incurred by the Company in connection with such issuance or
transfer, except fees and expenses which may be necessitated by the filing or
amending of a Registration Statement under the Securities Act, which fees and
expenses shall be borne by the recipient of the Shares unless such Registration
Statement has been filed by the Company for its own corporate purposes (and the
Company so states) in which event the recipient of the Shares shall bear only
such fees and expenses as are attributable solely to the inclusion of the Shares
he or she receives in the Registration Statement.
All Shares issued as provided herein shall be fully paid and nonassessable to
the extent permitted by law.
XVIII. WITHHOLDING TAXES
All benefits granted pursuant to this Stock Incentive Plan shall be net of any
amounts required to be withheld pursuant to any government withholding
requirements. The Company may require a holder of a Non-Qualified Option who
exercises the Non-Qualified Option, or the holder of an Incentive Option who
disposes of Shares acquired pursuant to the exercise of the Incentive Option in
a disqualifying disposition (within the meaning of Section 421(b) of the Code),
to reimburse the Company (or its parent or subsidiary) for any taxes required by
B-9
any government to be withheld or otherwise deducted and paid by such corporation
in respect of the issuance or disposition of such Shares. In lieu of any of the
above, the Company (or its parent or subsidiary) shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation upon such terms and conditions as the Committee shall
prescribe. The Company may, in its discretion, hold the stock certificate to
which such individual is entitled upon the exercise of an Option as security for
the payment of such withholding tax liability, until cash sufficient to pay that
liability has been accumulated. In addition, at any time that the Company
becomes subject to a withholding obligation under applicable law with respect to
the exercise of a Non-Qualified Option (the "Tax Date"), except as set forth
below, a holder of a Non-Qualified Option may elect to satisfy, in whole or in
part, the holder's related personal tax liabilities (an "Election") by (a)
directing the Company (or its parent or subsidiary), in the case of a
Non-Qualified Option, to withhold from Shares issuable in the related exercise
either a specified number of Shares or Shares having a specified value (in each
case not in excess of the related personal tax liabilities), (b) tendering, in
the case of a Non-Qualified Option, Shares previously issued pursuant to the
exercise of an Option or other Shares owned by the holder or (c) combining, in
the case of a Non-Qualified Option, any or all of the foregoing options in any
fashion. Once made, an Election shall be irrevocable. The withheld Shares and
other Shares tendered in payment should be valued at their Fair Market Value on
the Tax Date. The Committee may disapprove of any Election, suspend or terminate
the right to make Elections or provide that the right to make Elections shall
not apply to particular Shares or exercises. The Committee may impose any
additional conditions or restrictions on the right to make an Election as it
shall deem appropriate. In addition, the Company shall be authorized to effect
any such withholding upon exercise of a Non-Qualified Option by retention of
Shares issuable upon such exercise having a Fair Market Value at the date of
exercise which is equal to the amount to be withheld; provided, however, that
the Company shall not be authorized to effect such withholding without the prior
written consent of the employee if such withholding would subject such employee
to liability under Section 16(b) of the Exchange Act. The Committee may
prescribe such rules as it determines with respect to employees subject to the
reporting requirements of Section 16(a) of the Exchange Act to effect such tax
withholding in compliance with the Rules established by the Securities and
Exchange Commission (the "Commission") under Section 16 of the Exchange Act and
the positions of the staff of the Commission thereunder expressed in no-action
letters exempting such tax withholding from liability under Section 16(b) of the
Exchange Act.
XIX. LISTING OF SHARES AND RELATED MATTERS
The Board of Directors may delay any issuance or delivery of Shares if it
determines that listing, registration or qualification of Shares covered by the
Plan upon any national securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
Shares under the Plan, until such listing, registration, qualification, consent
or approval shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to the Board of Directors.
XX. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan, provided that no
amendment shall be made, without the approval of the stockholders of the
Company, that will increase the total number of Shares reserved for Options
under the Plan or the maximum number of Shares with respect to which Options may
be granted under the Plan to any one employee in any one taxable year (other
than an increase resulting from an adjustment provided for in Article XIII
hereof) or to alter the class of eligible participants in the Plan. The
Committee shall be authorized to amend the Plan and the Options granted
hereunder to permit the Incentive Options granted hereunder to continue to
qualify as incentive stock options within the meaning of Section 422 of the Code
and the Treasury Regulations promulgated thereunder. Except to the extent and in
the circumstances expressly permitted under Article XIV, the rights and
obligations under any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or the Option without the consent of the holder of such Option.
B-10
XXI. DURATION; TERMINATION OR SUSPENSION OF THE PLAN
The Plan shall continue indefinitely until terminated by the Board of Directors
or terminated pursuant to Article XXV. The Board of Directors may at any time
suspend or terminate the Plan. Options may not be granted while the Plan is
suspended or after it is terminated. Rights and obligations under any Option
granted while the Plan is in effect shall not be altered or impaired by
suspension or termination of the Plan, except upon the consent of the person to
whom the Option was granted. The power of the Committee to construe and
administer any Options, prior to the termination or suspension of the Plan under
Article III nevertheless shall continue after such termination or during such
suspension.
XXII. SAVINGS PROVISION
With respect to persons subject to Section 16 of the Exchange Act, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
XXIII. GOVERNING LAW
The Plan, such Options as may be granted hereunder and all related matters shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.
XXIV. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be deemed to
affect the validity of any other provision.
XXV. EFFECTIVE DATE
The Plan shall become effective at 9:00 a.m., New York City time, on the
Effective Date; provided, however, that if the Plan is not approved by a vote of
the Stockholders of the Company at an Annual Meeting or any special meeting or
by unanimous written consent within twelve (12) months after the Effective Date,
the Plan and any Options granted thereunder shall terminate.
B-11
ANNUAL MEETING OF STOCKHOLDERS OF
HOMEFED CORPORATION
JULY 12, 2000
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY INTERNET.
- --------------------
PLEASE ACCESS THE WEB PAGE AT www.voteproxy.com AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
------------------------
YOUR CONTROL NUMBER IS [graphic]
------------------------
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
PROXY
HOMEFED CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS, JULY 12, 2000 AT 1:30 P.M.
The undersigned stockholder of HomeFed Corporation (the
"Company") hereby appoints Paul J. Borden, Erin Ruhe and Corinne A. Maki and
each of them, as attorneys and proxies (the "Proxies"), with power of
substitution and revocation, to represent the undersigned at the Annual Meeting
of Stockholders of the Company to be held at Grand Pacific Palisades Resort and
Hotel, 5805 Armada Drive, Carlsbad, California 92008, Ballroom A, on July 12,
2000 at 1:30 p.m., and at any adjournment or postponement thereof, with
authority to vote all shares held or owned by the undersigned in accordance with
the directions indicated herein.
Receipt of the Notice of Annual Meeting of Stockholders,
dated June 14, 2000, the Proxy Statement furnished therewith, and a copy of the
Annual Report to Stockholders for the year ended December 31, 1999 is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3 AND PURSUANT TO ITEM 4.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
NY2:\924033\01\JSZL01!.DOC\76830.0244
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Stockholders
HOMEFED CORPORATION
July 12, 2000
[Graphic] PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED [Graphic]
- --------------------------------------------------------------------------------
[X] Please mark your votes as in this example
Item 1. Election of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES LISTED BELOW.
FOR all nominees listed on the right WITHHOLD AUTHORITY to vote for all NOMINEES:
(except as marked to the contrary nominees listed to the right.
below). PATRICK D. BIENVENUE
PAUL J. BORDEN
[ ] [ ] TIMOTHY M. CONSIDINE
IAN M. CUMMING
MICHAEL A. LOBATZ
JOSEPH S. STEINBERG
(Instructions: To withhold authority to vote for any
individual nominee, write that nominee's name in the
space provided below.)
- ----------------------------------------------------
ITEM 2. Approval of the 2000 Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH APPROVAL.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 3. Ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors of the Company for 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH RATIFICATION.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly be presented to the meeting or any adjournments
thereof.
Please sign and date this Proxy where shown below and return it promptly. No
postage is required if this proxy is returned in the enclosed envelope and
mailed in the United States.
2
(Signature) (Signature if held jointly) Date: , 2000
------------ ------------
NOTE: THE SIGNATURE SHOULD AGREE WITH THE NAME ON YOUR STOCK CERTIFICATE. IF
ACTING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC., YOU SHOULD
SO INDICATE WHEN SIGNING. IF THE SIGNER IS A CORPORATION, PLEASE SIGN THE FULL
CORPORATE NAME BY DULY AUTHORIZED OFFICER. IF SHARES ARE HELD JOINTLY, EACH
STOCKHOLDER SHOULD SIGN.
3