SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under 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)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant to
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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NY2:\1408364\16\%6P816!.DOC\64909.0001
HOMEFED CORPORATION
1903 WRIGHT PLACE
SUITE 220
CARLSBAD, CALIFORNIA 92008
_______________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 24, 2004
________________________
July 30, 2004
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders of HomeFed Corporation to be held on August 24, 2004, at 1:30 p.m.,
at Grand Pacific Palisades Resort and Hotel, 5805 Armada Drive, Carlsbad,
California 92008, in the Terrace Room:
1. To consider and vote on a proposal to elect six directors;
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent auditors to audit the Consolidated Financial Statements of our
company and our subsidiaries for the year ended December 31, 2004;
3. To consider and vote on a proposal to amend our 1999 stock
incentive plan to increase the number of shares of our common stock available
for issuance under the plan by 300,000 shares; and
4. To transact such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
We will be conducting a tour of our San Elijo Hills project, for
interested stockholders. The tour will begin at 10:30 a.m. on the morning of the
meeting and will last approximately two hours. The tour will depart from the
Grand Pacific Palisades Resort and Hotel. If you would like to reserve a place
on the tour for you and one invited guest, or need directions to the hotel,
please call Alison Donley at (760) 918-8200, extension 241, before August 17,
2004.
Only holders of record of our common stock at the close of business
on July 7, 2004 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 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
HOMEFED CORPORATION
1903 WRIGHT PLACE
SUITE 220
CARLSBAD, CALIFORNIA 92008
_______________________
PROXY STATEMENT
_______________________
ANNUAL MEETING OF STOCKHOLDERS
_______________________
July 30, 2004
This proxy statement is being furnished to the stockholders of
HomeFed Corporation, a Delaware corporation, in connection with the solicitation
of proxies by the Board of Directors for use at the Annual Meeting of
Stockholders of our company to be held on August 24, 2004 and at any
adjournments or postponements thereof.
At the meeting, stockholders will be asked:
1. To consider and vote on a proposal to elect six directors;
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent auditors to audit the Consolidated Financial Statements of our
company and our subsidiaries for the year ended December 31, 2004;
3. To consider and vote on a proposal to amend our 1999 stock
incentive plan to increase the number of shares of our common stock available
for issuance under the plan by 300,000 shares; and
4. To transact such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
The Board of Directors has fixed the close of business on July 7,
2004 as the record date for the determination of the holders of our 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 Internet or telephone voting. At the close of
business on July 7, 2004, there were 8,257,959 shares of common stock entitled
to vote.
This proxy statement and the accompanying form of proxy are first
being sent to holders of our common stock on or about July 30, 2004.
THE MEETING
DATE, TIME, PLACE
The annual meeting will be held on August 24, 2004, at 1:30 p.m., local
time, at Grand Pacific Palisades Resort and Hotel, 5805 Armada Drive, Carlsbad,
California 92008, in the Terrace Room.
MATTERS TO BE CONSIDERED
At the meeting, stockholders will be asked to consider and vote to
elect six directors, to ratify the selection of independent auditors and to
consider and vote on a proposal to amend our company's 1999 stock incentive
plan. See "ELECTION OF DIRECTORS," "RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS," and "PROPOSED AMENDMENT TO THE 1999 STOCK INCENTIVE PLAN." 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 July
7, 2004, are entitled to notice of and to vote at the meeting. As of the record
date, there were 8,257,959 shares of our 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 shares of common stock voting on this matter 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 and
broker non-votes will each be included in the determination of the number of
shares present for purposes of constituting a quorum, but will not be counted as
shares voting on the matter (and will have no effect on the result of the vote).
Ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors. 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 a
majority of the votes cast by the holders of our common stock present at the
meeting and entitled to vote on this matter, the selection of independent
auditors will be reconsidered by the Audit Committee of the Board of Directors.
If the stockholders ratify the selection, the Audit Committee, in its
discretion, may still direct the appointment of new independent auditors at any
time during the year if the Audit Committee believes that such a change would be
in our and our stockholders' best interests. For purposes of ratifying the
selection of PricewaterhouseCoopers LLP as independent auditors, abstentions and
broker non-votes will each be included in the determination of the number of
shares present for purposes of constituting a quorum, but will not be counted as
votes cast (and will have no effect on the result of the vote).
Amendment of the 1999 Stock Incentive Plan. The affirmative vote of the
holders of a majority of the shares of our common stock present at the meeting
and entitled to vote on this matter will be required to approve the amendment of
our 1999 stock incentive plan. For purposes of amending our 1999 stock incentive
plan, abstentions and broker non-votes will have the same effect as a vote
against amending the 1999 stock incentive plan.
Other Matters. If any other matters are properly presented at the
meeting for action, including a question of adjourning or postponing the meeting
from time to time, the persons named in the proxies and acting thereunder will
have discretion to vote on such matters in accordance with their best judgment.
Joseph S. Steinberg, Chairman of our Board of Directors, beneficially
owns 720,077 shares of our common stock or approximately 8.7% of our common
stock outstanding at the record date; and trusts for the benefit of Mr.
Steinberg's children collectively beneficially own 89,325 shares of our common
stock or approximately 1.1% of our common stock outstanding at the record date.
Mr. Steinberg disclaims beneficial ownership of our common stock held by this
trust. Ian M. Cumming, a director of our company, beneficially owns 773,409
shares of our common stock or approximately 9.4% of our common stock outstanding
at the record date. Leucadia National Corporation (together with its
subsidiaries, "Leucadia") is the beneficial owner of 2,474,226 shares of our
common stock or approximately 30.0% of our common stock outstanding at the
record date. Mr. Steinberg is also a director, President and significant
stockholder of Leucadia. Mr. Cumming is Chairman of the Board and a significant
stockholder of Leucadia. In addition, 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 7,329 (less than 0.1%) shares of our common stock and 2,381
(less than 0.1%) shares of our common stock outstanding at the record date,
respectively. Mr. Cumming and Mr. Steinberg each disclaim beneficial ownership
of our common stock held by their respective private charitable foundations.
Leucadia has advised us that it intends, and Messrs. Cumming and Steinberg have
advised us that they intend, to cause all of our common stock beneficially
owned, and all of our common stock beneficially owned by charitable foundations
established, by Mr. Cumming and Mr. Steinberg, to be voted in favor of each
nominee named herein, in favor of amending the 1999 stock incentive plan, and
for the ratification of the selection of independent auditors. In addition to
Messrs. Cumming and Steinberg, all of our other directors and officers
beneficially own 0.2% of our 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 our common stock represented by properly executed proxies
received by us or proxies submitted 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 the approval of the 1999
stock incentive plan, and FOR ratification of the selection of independent
auditors.
Voting instructions (including instructions for both telephonic and
Internet proxies) are provided on the proxy card. The Internet and telephone
proxy 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 submit their proxies and
confirm that their voting instructions have been properly recorded. Costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, must be borne by the stockholder. If you
submit your proxy 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 proxies will depend on their voting
procedures.
If a stockholder does not return a signed proxy card or submit a proxy
by the Internet or by telephone, and does not attend the meeting and vote in
person, his or her shares will not be voted.
Any proxy signed and returned by a stockholder or submitted 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 our company, at our
address 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
We will bear the costs of solicitation of proxies for the meeting. In
addition to solicitation by mail, directors, officers and our regular employees
may solicit proxies from stockholders by telephone, telegram, in person or
otherwise. These 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 our
common stock held of record by them, and such custodians will be reimbursed for
their reasonable expenses.
INDEPENDENT AUDITORS
We have been advised that representatives of PricewaterhouseCoopers
LLP, our independent auditors for 2003, 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. All of the
following nominees are currently serving as directors. 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 expects that
each of the nominees will be available 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 may
propose. The following information is as of July 7, 2004.
Age, period served as a director, other
Name and present position, business experience during the last five
if any, with our company years and family relationships, if any
- -------------------------- --------------------------------------
Patrick D. Bienvenue.................. Mr. Bienvenue, 49, has served as a
director since August 1998. Since
January 1996, Mr. Bienvenue has served
in a variety of executive capacities
with real estate related subsidiaries of
Leucadia and, from 1992 until December
1995, was President and Chief Executive
Officer of Torwest Inc., a privately
held property development and investment
company.
3
Age, period served as a director, other
Name and present position, business experience during the last five
if any, with our company years and family relationships, if any
- -------------------------- --------------------------------------
Paul J. Borden, President............. Mr. Borden, 55, has served as a director
and our President since May 1998. Mr.
Borden was a Vice President of Leucadia
from August 1988 through October 2000,
responsible for overseeing many of
Leucadia's real estate investments.
Timothy M. Considine.................. Mr. Considine, 63, has served as a
director since January 1992, serving as
Chairman of the Board from 1992 to
December 1999, and is employed on a
part-time basis by Considine and
Considine, an accounting firm in San
Diego, California, where he was a
partner from 1969 to 2002.
Ian M. Cumming........................ Mr. Cumming, 63, has served as a
director since May 1999. He has been a
director and Chairman of the Board of
Leucadia since June 1978 and a director
and Chairman of the Board of The FINOVA
Group Inc., a middle market lender in
which Leucadia has an indirect 25%
equity interest, since August 2001. Mr.
Cumming has also been a director of
Skywest, Inc., a Utah-based regional air
carrier, since June 1986.
Michael A. Lobatz..................... Dr. Lobatz, 55, Dr. Lobatz has served as
a director since February 1995 and has
been a practicing physician in San
Diego, California since 1981.
Joseph S. Steinberg,
Chairman of the Board................. Mr. Steinberg, 60, has served as a
director since August 1998 and as
Chairman of the Board since December
1999. Mr. Steinberg has been President
of Leucadia since January 1979 and a
director of Leucadia since December
1978. In addition, he has served as a
director of Jordan Industries Inc., a
public company that owns and manages
manufacturing companies, of which
approximately 10.1% of the common stock
is beneficially owned by Leucadia, since
June 1988, FINOVA since August 2001 and
White Mountains Insurance Group, Ltd., a
publicly traded insurance holding
company in which Leucadia has a less
than 5% equity interest, since June
2001.
The Board of Directors recommends a vote FOR the above-named nominees.
INFORMATION CONCERNING
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
MEETINGS AND COMMITTEES
During 2003, the Board of Directors held four meetings and took action
by unanimous written consent on three 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 the quality and integrity
of our financial statements, our compliance with legal and regulatory
requirements, the qualifications and independence of our independent
accountants, the performance of our independent accountants and significant
financial matters. In discharging its duties, the Audit Committee is expected
to:
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o have the sole authority to select (subject to stockholder
ratification, which ratification is not binding on the Audit
Committee), compensate, evaluate and replace the independent
accountants;
o review and approve the scope of the annual audit;
o review and pre-approve the engagement of our independent
accountants to perform audit and non-audit services and the
related fees;
o meet independently with our independent accountants and senior
management;
o review the integrity of our financial reporting process; and
o review our financial statements and disclosures and certain
Securities and Exchange Commission filings.
During 2003, the Audit Committee met eight times, including meetings
with the independent auditors without management present, and took action by
unanimous written consent on one other occasion. The Board of Directors has
adopted a charter for the Audit Committee which was filed as an Exhibit to our
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2003 and is
included in this proxy statement as Annex B. The Audit Committee consists of Mr.
Considine (Chairman) and Dr. Lobatz. Our Board has determined that each of Mr.
Considine and Dr. Lobatz is independent, applying the National Association of
Securities Dealers' listing standards for independence and that Mr. Considine is
qualified as an audit committee financial expert within the meaning of
regulations of the Securities and Exchange Commission.
The Board of Directors does not have a nominating committee or a policy
concerning stockholder nominations. As our common stock is traded on the OTC
Bulletin Board Service, we are not subject to listing standards that would
require director nominees to be selected or recommended by a majority of
independent directors or a nominating committee comprised solely of independent
directors. Because Mr. Steinberg, Mr. Cumming and Leucadia together beneficially
own nearly 50% of the outstanding common stock of our company, the Board
believes it is appropriate to have all directors involved in the process of
nominating directors rather than delegate this responsibility to a smaller group
of directors. As indicated above, under the listing standards of the National
Association of Securities Dealers, Mr. Considine and Dr. Lobatz are independent
directors serving on the Board. All current members of the Board of Directors
have been re-nominated to serve as our directors.
The Board does not believe that it is in our company's best interests
to establish rigid criteria for the selection of prospective nominees inasmuch
as the needs of our company change over time. Accordingly, the selection of
prospective nominees would be based on skills relevant to the issues our company
faces at the time of nomination. Nominees would be selected on the basis of
their experience and qualifications, availability to devote sufficient time to
the Board and the needs of the Company at that time. Candidates who may also
become members of our Audit Committee would be required to have the financial
experience necessary to perform the duties of a member of the Audit Committee
and to satisfy the requirements of the SEC for membership on the Audit
Committee. In 2003, the Board did not pay a fee to any third party to identify
candidates.
ATTENDANCE
All directors attended at least 75% of the meetings of the Board of
Directors and committees of the Board of Directors on which they served. It is
our company's policy that directors are expected to dedicate sufficient time to
the performance of his duties as a director, including by attending meetings of
the stockholders, the Board of Directors and committees of which he is a member.
All directors attended the annual meeting of stockholders in July 2003.
5
COMMUNICATING WITH THE BOARD
Stockholders and other parties interested in communicating directly
with the Board of Directors as a group may do so by writing to the Board of
Directors, c/o Corporate Secretary, HomeFed Corporation, 1903 Wright Place,
Suite 220, Carlsbad, California 92008. The Corporate Secretary will review all
correspondence and regularly forward to the Board of Directors a summary of all
such correspondence that, in the opinion of the Corporate Secretary, deals with
the functions of the Board or committees thereof or that the Corporate Secretary
otherwise determines requires attention. Directors may at any time review a log
of all correspondence received by the company that is addressed to members of
the Board and request copies of all such correspondence. Concerns relating to
accounting, internal controls or auditing matters will immediately be brought to
the attention of the Chairman of the Audit Committee.
CODE OF PRACTICE
We have a Code of Business Practice, which is applicable to all of our
directors, officers and employees, and includes a Code of Practice applicable to
our principal executive officers and senior financial officers. Both the Code of
Business Practice and the Code of Practice are available without charge upon
request. Requests should be addressed to Corporate Secretary, HomeFed
Corporation, 1903 Wright Place, Suite 220, Carlsbad, California 92008. We intend
to file with the Securities and Exchange Commission amendments to or waivers
from our Code of Practice applicable to our principal executive officers and
senior financial officers.
The information contained in this proxy statement with respect to the
Audit Committee charter and the independence of the non-management members of
the Board of Directors shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that our
company specifically incorporates it by reference in a filing.
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PRESENT BENEFICIAL OWNERSHIP OF OUR COMMON STOCK
Set forth below is certain information as of July 7, 2004, with respect
to the beneficial ownership determined in accordance with Rule 13d-3 under the
Securities Exchange act of 1934, as amended, of our common stock by (1) each
person who, to our knowledge, is the beneficial owner of more than 5% of our
outstanding common stock, which is our only class of voting securities, (2) each
director and nominee for director, (3) each of the executive officers named in
the Summary Compensation Table under "Executive Compensation," (4) the trust for
the benefit of Mr. Steinberg's children and private charitable foundations
established by Mr. Cumming and Mr. Steinberg and (5) all of our executive
officers and directors as a group. Unless otherwise stated, the business address
of each person listed is c/o HomeFed Corporation, 1903 Wright Place, Suite 220,
Carlsbad, California 92008.
Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Leucadia National Corporation (a).................................. 2,474,226 30.0%
Patrick D. Bienvenue............................................... 1,250 (b) *
Paul J. Borden..................................................... 5,828 (c) *
Timothy M. Considine............................................... 1,750 (d) *
Ian M. Cumming..................................................... 773,409 (e)(f) 9.4%
Michael A. Lobatz.................................................. 1,250 (b) *
Curt R. Noland..................................................... 4,500 (g) *
Erin N. Ruhe....................................................... 4,500 (g) *
Joseph S. Steinberg................................................ 720,077 (f)(h) 8.7%
The Steinberg Children Trusts...................................... 89,325 (i) 1.1%
Cumming Foundation................................................. 7,329 (j) *
The Joseph S. and Diane H. Steinberg
1992 Charitable Trust......................................... 2,381 (k) *
All Directors and executive officers
as a group (8 persons).......................................... 1,512,564 (l) 18.3%
___________________
* Less than .1%.
(a) The business address of this beneficial owner is 315 Park Avenue South, New
York, New York 10010.
(b) Includes 250 shares that may be acquired upon the exercise of currently
exercisable stock options.
(c) Includes 4,250 shares that may be acquired upon the exercise of currently
exercisable stock options.
(d) Includes (i) 500 shares held by the Seeseeanoh Inc. Retirement Plan. Mr.
Considine and his wife are the sole owners of Seeseeanoh, a real estate
company in San Diego, California, (ii) 1,150 shares held by The Considine
Family 1981 Trust, of which Mr. Considine and his wife are trustees and
(iii) 100 shares that may be acquired upon the exercise of currently
exercisable options.
(e) Includes (i) 9,530 shares (.1%) 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 and (ii) 250 shares that may be acquired upon
the exercise of currently exercisable stock options. Does not include
2,474,226 shares held by Leucadia which Mr. Cumming may be deemed to
beneficially own as a result of his beneficial ownership of Leucadia common
shares. See "Certain Relationships and Related Transactions" in this proxy
statement.
(f) 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 our company. The business address for Messrs. Cumming
and Steinberg is c/o Leucadia National Corporation, 315 Park Avenue South,
New York, New York 10010.
7
(g) Includes 2,000 shares that may be acquired upon the exercise of currently
exercisable stock options.
(h) Includes (i) 3,676 shares (less than .1%) beneficially owned by Mr.
Steinberg's wife and daughter as to which Mr. Steinberg may be deemed to be
the beneficial owner and (ii) 250 shares that may be acquired upon the
exercise of currently exercisable stock options. Does not include 2,474,226
shares held by Leucadia which Mr. Steinberg may be deemed to beneficially
own as a result of his beneficial ownership of Leucadia common shares. See
"Certain Relationships and Related Transactions" in this proxy statement.
(i) Represents a collective amount of our common stock owned by four trusts for
the benefit of Mr. Steinberg's children. Mr. Steinberg disclaims beneficial
ownership of all of our common stock held by these trusts.
(j) Mr. Cumming is a trustee and President of the foundation and disclaims
beneficial ownership of our common stock held by the foundation.
(k) Mr. Steinberg and his wife are trustees of the trust. Mr. Steinberg
disclaims beneficial ownership of our common stock held by the trust.
(l) Includes 9,350 shares that may be acquired upon the exercise of currently
exercisable stock options.
As of July 7, 2004, Cede & Co. held of record 4,708,890 shares of our
common stock (approximately 57.0% of our 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.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information regarding our equity
compensation plans as of December 31, 2003. All outstanding awards relate to our
common stock.
Number of securities
remaining available
for future issuance
Number of Securities Weighted-average under equity
to be issued upon exercise price of compensation plans
exercise of outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))
- ------------- --------------------------------- ------------------- ------------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders 120,250 $ 6.45 199,400
Equity compensation
plans not approved
by security holders - - -
-------- -------- --------
Total 120,250 $ 6.45 199,400
======== ======== ========
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information in respect of the
compensation of our President and Chief Executive Officer and each of our other
four most highly compensated executive officers in 2003 for services in all
capacities to us and our subsidiaries during the years ended 2003, 2002 and
2001.
Long-Term
Annual Compensation Compensation
Name and Principal Restricted Options All Other
Position(s) Year Salary Bonus Stock Awards (# of shares) Compensation(2)
- ------------------ ------ ------------ ---------- -------------- ------------- ---------------
Paul J. Borden, 2003 $ 232,635(1) $1,006,619 $ -- 100 $8,000
President 2002 226,189(1) 231,426 -- 100 8,000
2001 222,000(1) 330,265 -- 100 6,800
Curt R. Noland, 2003 $ 113,620 $603,409 $ -- -- $8,000
Vice President 2002 110,318 153,309 -- -- 7,545
2001 108,159 78,245 -- -- 6,800
Erin N. Ruhe, 2003 $ 78,805 $302,364 $ -- -- $6,247
Vice President and 2002 76,493 77,295 -- -- 5,552
Controller 2001 75,009 62,250 -- -- 5,490
R. Randy Goodson, 2003 $ 187,278 $305,618 $ -- -- $8,000
Vice President (3) 2002 183,611 80,508 -- -- 8,000
2001 180,000 80,400 -- -- --
Simon G. Malk, 2003 $ 113,308 $303,399 $ -- -- $7,668
Vice President (3) 2002 110,005 78,300 -- -- 7,532
2001 90,000 77,700 -- -- 3,708
_________________
(1) Included for each of 2003, 2002 and 2001 are directors fees Mr. Borden
received from our company.
(2) Represents the contribution made by our company to a defined contribution
401(k) plan on behalf of the named person.
(3) In March 2004, Messrs. Goodson and Malk resigned their positions with our
company.
9
OPTION GRANTS IN 2003
The following table shows all grants of options to the named executive
officers in 2003.
Potential Realizable Value
At Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (3)
------------------------------------------------------ ---------------------------
Securities % of Total
Underlying Options
Options Granted to Exercise
Granted Employees Price Expiration
Name (# of shares) in 2003 ($/share) Date 5%($) 10%($)
- ---- ------------- ------- --------- ----------- ----- ------
Paul J. Borden 100 (1) (2) 100.0% $27.40 (2) 7/9/08 $757 $1,673
______________
(1) The options were granted pursuant to our 1999 stock incentive plan to all
directors at an exercise price equal to the fair market value of the shares
of common stock on the date of grant. The grant date of the options is July
9, 2003. These options become exercisable at the rate of 25% per year
commencing one year after the date of grant.
(2) Reflect result of a reverse/forward stock split of our common stock.
(3) The potential realizable values represent future opportunity and have not
been reduced to reflect the time value of money. The amounts shown under
these columns are the result of calculations at the 5% and 10% rates
required by the Securities and Exchange Commission, and are not intended to
forecast future appreciation of the shares of common stock and are not
necessarily indicative of the values that may be realized by the named
executive officer.
10
AGGREGATE OPTION EXERCISES IN 2003 AND
OPTION VALUES AT YEAR END 2003
The following table provides information as to options exercised by
each of the named executives in 2003 and the value of options held by the
executives at year end measured in terms of the last reported sale price for our
common stock on December 31, 2003 ($29.00, as reported on the OTC Bulletin Board
Service).
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 2003 December 31, 2003
----------------- -----------------
Number of shares
Underlying Options Value Exercisable/ Exercisable/
Name Exercised Realized Unexercisable Unexercisable
- ---- --------- -------- ------------- -------------
Paul J. Borden -- -- 3,150/2,250 $67,623/$46,158
Curt R. Noland -- -- 1,500/1,000 $32,250/$21,500
Erin N. Ruhe -- -- 1,500/1,000 $32,250/$21,500
R. Randy Goodson (a) -- -- 65,975/650 $1,509,463/$13,975
Simon G. Malk (a) -- -- 35,525/350 $812,788/$7,525
(a) In March 2004, Messrs. Goodson and Malk resigned. Prior to their
resignations, Mr. Goodson exercised 66,300 options and 325 options were
forfeited and Mr. Malk exercised 35,700 options and 175 options were forfeited.
COMPENSATION OF DIRECTORS
In 2003, each director received a retainer of $12,000 for serving on
the Board of Directors. Mr. Considine was also paid $16,000 for serving as
Chairman of the Audit Committee, and Mr. Lobatz was also paid $12,000 for
serving on the Audit Committee. In addition, under the terms of our 1999 stock
incentive plan, each director is automatically granted options to purchase 1,000
shares on the date on which the annual meeting of our stockholders is held each
year. The purchase price of the shares covered by such options is the fair
market value of such shares on the date of grant. After giving effect to a
reverse/forward stock split of our common stock in 2003, options to purchase 100
shares of common stock at an exercise price of $27.40 per share were awarded to
each director on July 9, 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1999, Leucadia distributed all of our common stock that it owned to
stockholders of Leucadia. As a result, at July 7, 2004, Joseph S. Steinberg,
Chairman of our Board and Ian M. Cumming, a director of our company, together
with their respective family members (excluding trusts for the benefit of Mr.
Steinberg's children) beneficially owned approximately 8.7% and 9.4%,
respectively, of our outstanding common stock, without considering the common
stock owned by Leucadia. Mr. Steinberg is also President and a director of
Leucadia and Mr. Cumming is Chairman of the Board of Leucadia. At July 7, 2004,
Mr. Steinberg and Mr. Cumming beneficially owned (together with their respective
family members but excluding trusts for the benefit of Mr. Steinberg's children)
approximately 13.9% and 13.2%, respectively, of Leucadia's outstanding common
shares. In addition to their ownership of our common stock (directly and through
family members), as a result of their beneficial ownership of Leucadia common
shares, Messrs. Cumming and Steinberg each may be deemed to be the beneficial
owner of the shares of our common stock beneficially owned by Leucadia.
Set forth below is information concerning agreements or relationships
between us and Leucadia and its subsidiaries.
11
ACQUISITION OF CDS HOLDING CORPORATION
On October 21, 2002, we purchased from Leucadia all of the issued and
outstanding shares of capital stock of CDS Holding Corporation ("CDS"), which
through its majority-owned subsidiaries is the owner of the San Elijo Hills
project. The $25,000,000 purchase price consisted of $1,000,000 in cash and
2,474,226 shares of common stock (after giving effect to a reverse/forward stock
split of our common stock), representing approximately 30.3% of our outstanding
shares. The acquisition of CDS was reviewed by a special committee of the Board
of Directors consisting of Mr. Considine and Dr. Lobatz, who recommended that
the Board of Directors approve the acquisition, after which the Board of
Directors unanimously approved the acquisition.
Pursuant to an agreement with CDS and its subsidiaries, Leucadia has
historically provided project improvement bonds which were required prior to the
commencement of any project development. This agreement was not affected by our
acquisition of CDS, and Leucadia will continue to obtain these bonds on behalf
of the project. Should these bonds be drawn upon, we would be obligated to
reimburse Leucadia for the amount drawn. As of June 30, 2004, the amount of
outstanding bonds was approximately $27,700,000.
LOAN AGREEMENTS
As of December 31, 2003, Leucadia held our promissory note with a
principal amount outstanding of $26,462,000. The note was payable on December
31, 2007 and bore interest at 6% per year through 2004, increasing to 11% by its
maturity date. We paid Leucadia $1,588,000 in interest on the note in 2003 and
$373,000 in interest in 2004. In March, 2004, the Leucadia note was paid in full
and is no longer outstanding.
In March 2001, we entered into an unsecured $3,000,000 line of credit
agreement with Leucadia. Loans outstanding under this line of credit bear
interest at 10% per year. Effective March 1, 2002, this agreement was amended to
extend the maturity to February 28, 2007, although Leucadia had the right to
terminate the line of credit on an annual basis. In October 2002, the line of
credit was increased to $10,000,000 and Leucadia's ability to terminate the line
of credit prior to maturity was removed, unless we are in default. We have made
no borrowings under this facility during 2003 or 2004 (through June 30, 2004).
In 2003, we paid commitment fees of $38,000 in 2003 and $19,000 in 2004 (through
June 30, 2004).
OTAY LAND COMPANY, LLC
In October 1998, we and Leucadia formed Otay Land Company to purchase
approximately 4,850 non-adjoining acres of land located within the larger 22,900
acre Otay Ranch master-planned community south of San Diego, California. Otay
Land Company acquired this land for $19,500,000. When Otay Land Company was
formed, Leucadia contributed $10,000,000 as a preferred capital interest. In
2003, we paid approximately $12,900,000 in redemption of Leucadia's preferred
capital interest in Otay Land Company and in full satisfaction of the preferred
return related thereto.
ADMINISTRATIVE SERVICES AGREEMENT
Since 1995, administrative services and accounting services have been
provided to us by Leucadia. Under the current administrative services agreement,
which extends through December 31, 2004, Leucadia provides services to us for a
monthly fee of $10,000. Pursuant to this agreement, Leucadia provides the
services of Ms. Corinne A. Maki, our Secretary, in addition to various
administrative functions. Ms. Maki is an officer of subsidiaries of Leucadia.
The cost of services provided by Leucadia aggregated $180,000 from January 2003
through June 30, 2004.
12
OFFICE SPACE
We rent furnishings and office space at our corporate headquarters to
Leucadia for a monthly rental equal to Leucadia's pro rata share of our original
cost for such furnishings and space. From January 2003 through June 30, 2004,
the rent paid by Leucadia to us totaled $34,000.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS*
The Board of Directors does not have a compensation or option
committee. The Board has delegated to our President, in consultation with
certain directors, the authority to determine the compensation to be paid to our
executive officers who are company employees, while the Board of Directors
awards stock options.
Our compensation package for executive officers consists of three basic
elements: (1) base salary; (2) annual bonus compensation; and (3) long-term
incentives in the form of stock options granted pursuant to our 1999 stock
incentive. Other elements of compensation include medical and life insurance
benefits available to employees generally.
These elements of compensation serve different purposes. Salary and
bonus payments are designed mainly to reward current and past performance, while
stock options are designed to provide strong incentive for superior long-term
future performance and are directly linked to stockholders' interests because
the value of the awards will increase or decrease based upon the future price of
our common stock.
A number of factors are considered in establishing compensation for
executive officers. An executive officer's responsibilities, as well as the
services rendered by the executive officer to us are considered in determining
compensation levels. Neither base compensation nor bonus compensation is based
on any specific formula.
The Board of Directors believes that awarding stock options provides a
strong incentive for long-term future performance. By means of our 1999 stock
incentive plan , we seek 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 our 1999 stock incentive plan, permit the executive officer or other
employee to purchase shares of our common stock at not less than the fair market
value of the shares of common sock at the date of grant. The extent to which the
employee realizes any gain is, therefore, directly related to increases in the
price of our 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 our 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 generally not based on any specific formula, but rather on a
subjective assessment of the executive's performance and our company's
performance. In addition, under the terms of our 1999 stock incentive plan, each
director is automatically granted options to purchase 1,000 shares on the date
on which the annual meeting of our stockholders is held each year. In July 2003,
pursuant to this automatic grant, Paul J. Borden was granted options to purchase
100 shares of our common stock with an exercise price of $27.40 per share (after
giving effect to a reverse/forward stock split of our common stock), which
become exercisable at the rate of 25% per year, commencing one year after the
date of grant.
- ----------------------
* The disclosure contained in this section of this Proxy Statement is not
incorporated by reference into any of our filings 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.
13
The 1999 stock incentive plan was amended in 2003 following approval of
the Board and stockholders to increase to 200,000 the number of shares of common
stock that would be available under the plan for issuance pursuant to stock
options, restricted stock or stock appreciation rights.
Under the provisions of Section 162(m) of the Internal Revenue Code of
1986, we would not be able to deduct compensation to our executive officers
whose compensation is required to be disclosed in our 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 of Directors believes
that compensation at such levels is not likely to be a recurring event and that
it is in our best interest to retain maximum flexibility in our compensation
programs to enable us to appropriately reward, retain and attract the executive
talent necessary to our company's success. The Board recognizes that in
appropriate circumstances, as was the case in 2003 with respect to Paul J.
Borden, the company's president, compensation that is not deductible under
Section 162(m) may be warranted and could be paid in the Board of Directors'
discretion, especially in light of the availability to our company of tax loss
carryforwards.
Compensation of the Chief Executive Officer. Mr. Borden's annual salary
was $210,000 beginning in 2001 and was increased to $214,189in 2002 and to
$220,635 in 2003. Mr. Borden's 2003 performance bonus was $1,006,619. Of this
amount, $1,000,000 was determined by the Board of Director's (without Mr.
Borden's participation) based on its subjective evaluation of Mr. Borden's
contribution over the past years to the company especially in view of its
successful attainment of financial goals and cumulative milestones with respect
to the San Elijo Hills Project; the balance of the bonus was a year-end bonus
based on a percentage of salary, paid to all employees.
The foregoing report is submitted by Patrick D. Bienvenue, Paul J.
Borden, 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 our
executive officers and directors, and persons who beneficially own more than 10
percent of a registered class of our 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 us and
written representations from our executive officers, directors and greater than
10% beneficial stockholders, we believe that during the year ended December 31,
2003, all persons subject to the reporting requirements of Section 16(a) filed
the required reports on a timely basis.
14
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 and the Standard & Poor's Homebuilding-500 Index for the period
commencing December 31, 1998 to December 31, 2003. Index data was furnished by
Standard & Poor's Compustat Services, Inc.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF OUR COMPANY, S&P 500 INDEX
AND S&P HOMEBUILDING INDEX
The following graph assumes that $100 was invested on December 31, 1998
in each of our common stock, the S&P 500 Index and the S&P Homebuilding Index
and that all dividends were reinvested.
YEAR 1998 1999 2000 2001 2002 2003
- ---- ---- ---- ---- ---- ---- ----
HomeFed Corp 100 700 680 760 1160 2320
S&P 500 Index 100 119.526 107.4071 93.39831 71.57489 90.45663
S&P Homebuilding 100 66.51293 92.79001 127.3046 108.0507 225.9268
- ----------------------
** The disclosure contained in this section of the Proxy Statement is not
incorporated by reference into any of our prior filings 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).
15
AUDIT COMMITTEE REPORT
The following is the report of our Audit Committee with respect to our
audited financial statements for the fiscal year ended December 31, 2003.
REVIEW WITH MANAGEMENT
The Audit Committee reviewed and discussed our audited financial
statements with management.
REVIEW AND DISCUSSIONS WITH INDEPENDENT AUDITORS
The Audit Committee discussed with PricewaterhouseCoopers LLP, our
company's independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees)
regarding the auditor's judgments about the quality of our company's accounting
principles as applied in its financial reporting.
The Audit Committee also received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has
discussed with PricewaterhouseCoopers LLP their independence.
CONCLUSION
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that its audited consolidated
financial statements be included in our Annual Report on Form 10-K for the year
ended December 31, 2003 for filing with the Securities and Exchange Commission
and selected Pricewaterhouse Coopers LLP as the independent auditor for 2004.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Timothy M. Considine
Michael A. Lobatz
The information contained in the foregoing report shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that our company specifically incorporates it by
reference in a filing.
INDEPENDENT ACCOUNTING FIRM FEES
The Audit Committee has adopted policies and procedures effective May
2003 for pre-approving all audit and non-audit work performed by our company's
independent auditor, PricewaterhouseCoopers LLP. Specifically, the Audit
Committee has pre-approved certain specific categories of audit work and
assistance in complying with the Sarbanes Oxley Act of 2002 and an annual amount
for each category. For additional services or services in an amount above the
annual amount that has been pre-approved, additional authorization from the
audit committee is required. The Audit Committee has delegated to the Committee
chair the ability to pre-approve both general pre-approvals (where no specific,
case-by-case approval is necessary) and specific pre-approvals. Any pre-approval
decisions made by the Committee chair under this delegated authority will be
reported to the full Audit Committee. All requests for services to be provided
by PricewaterhouseCoopers LLP that do not require specific approval by the audit
committee must be submitted to the Controller of our company, who determines
that such services are in fact within the scope of those services that have been
pre-approved by the Audit Committee. The Committee chair receives continual
updates from the independent auditor on its work related to compliance with the
Sarbanes Oxley Act of 2002 and the Controller reports to the entire Audit
Committee periodically, including as to visits and plans of the independent
auditor.
16
The following table sets forth the aggregate fees incurred by us for
the following periods relating to our independent accounting firm,
PricewaterhouseCoopers LLP:
Fiscal Year Ended December 31,
2003 2002
---- ----
Audit Fees.................... $87,500 $76,100
Audit Related Fees............ 4,000 --
------- -------
$91,500 $76,100
======= =======
In the table above, in accordance with the SEC's definitions and rules,
"audit fees" are fees paid to PricewaterhouseCoopers LLP for professional
services for the audit of our company's consolidated financial statements
included in our Form 10-K and review of financial statements included in our
Form 10-Qs, and for services that are normally provided by the accountants in
connection with statutory and regulatory filings or engagements; and
"audit-related fees" are fees for assurance and related services that are
reasonably related to the performance of the audit or review of our financial
statements and in 2003 consist of compliance with regulatory matters, including
the Sarbanes-Oxley Act, and consulting with respect to technical accounting and
disclosure rules. All such services were approved by the Audit Committee.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors recommends that the stockholders ratify the
selection of PricewaterhouseCoopers LLP, certified public auditors, as
independent auditors to audit our accounts and those of our subsidiaries for
2004. The Audit Committee approved the selection of PricewaterhouseCoopers LLP
as our independent auditors for 2004. PricewaterhouseCoopers LLP are currently
our independent auditors.
The Board of Directors recommends a vote FOR this proposal.
PROPOSED AMENDMENT TO THE 1999 STOCK INCENTIVE PLAN
SUMMARY
Our Board of Directors has authorized and recommends for your approval,
the amendment of our 1999 stock incentive plan to make an additional 300,000
shares of our common stock available for issuance under our 1999 stock incentive
plan pursuant to stock options, restricted stock or stock appreciation rights.
BACKGROUND AND PURPOSE
The 1999 Stock Incentive Plan, as previously amended, authorizes the
issuance of up to 200,000 shares of our common stock pursuant to options
(through October 24, 2009), restricted stock or stock appreciation rights to the
company's non-employee directors, certain other non-employees and employees. Of
that amount, 199,400 shares of our common stock currently remain available under
the plan. Our Board of Directors believes that having only 199,400 shares
available for issuance under our 1999 stock incentive plan will not provide a
sufficient inducement to retain, motivate and attract the best available
personnel for the successful conduct of our business. The Board of Directors
believes that adding 300,000 to the number of shares of our common stock that
would be available under our 1999 stock incentive plan will provide a sufficient
inducement for this purpose. Consequently, the Board has approved, subject to
stockholders' approval, the amendment to our 1999 stock incentive plan.
17
SUMMARY OF THE AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN
Set forth below is a summary of the principal terms and provisions of
our amended and restated 1999 stock incentive plan, after giving effect to the
amendments to increase by 300,000 shares the number of shares of our common
stock available for issuance under the plan (the "Amended Plan"). This summary
is not intended to be a complete description of the terms of the Amended Plan,
and is qualified in its entirety by the terms of the Amended Plan itself. A copy
of the Amended Plan is attached hereto as Annex A.
The Amended Plan is intended to afford our directors and certain of our
officers and key employees, as well as certain officers and key employees of any
of our subsidiary, parent, or affiliated corporations who are responsible for
the continued growth of our company (collectively, "Eligible Persons"), an
opportunity to acquire a proprietary interest in us, which will give them an
increased interest in and a greater concern for our welfare. Under the Amended
Plan, an affiliated corporation includes any entity providing managerial,
administrative, consulting or advisory services to us, or any parent or
subsidiary corporations of that entity. Only those employees of an affiliated
corporation who provide or have provided services to us will be considered
eligible to receive grants under the Amended Plan.
Two types of options ("Options") may be granted pursuant to the Amended
Plan: those 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") and those not intended to satisfy the requirements for
Incentive Options ("Non-Qualified Options"). See "Federal Income Tax
Consequences" below. Stock appreciation rights ("Rights") may be granted alone
or in conjunction with or in the alternative to Options. Subject to the overall
limitations on the issuance of shares of our common stock under the Amended
Plan, the Amended Plan limits the aggregate number of Shares with respect to
which Restricted Stock, Options or Rights may be granted to any grantee in any
one taxable year to 30,000.
The Amended Plan covers an aggregate of 500,000 shares of our common
stock (of which 499,400 remain available for issuance) (the "Shares"). It
provides for the issuance of these Shares pursuant to stock options, restricted
stock or stock appreciation rights (subject in each case to adjustment in the
event of stock dividends, stock splits and other contingencies). Options may be
granted until October 24, 2009. The Shares with respect to which Options, Rights
or Restricted Stock may be granted may be made available from either authorized
and unissued shares or treasury shares.
The Amended Plan will continue to be administered by our Board of
Directors or a committee of our Board (the "Committee") which has the authority,
in its discretion and subject to the express provisions of the Amended Plan
(including the provisions regarding automatic grants of Options to our
directors), to determine, among other things, the persons to receive Options,
Rights or Restricted Stock, the date of each grant of Options, Rights or
Restricted Stock, the number of Shares covered by each grant, the purchase price
of each Share subject to any Options or Rights, and the terms and provisions of
the respective Options, Rights or Restricted Stock (which need not be
identical). In determining the persons to whom Options, Rights or Restricted
Stock are to be granted under the Amended Plan, the Committee will consider the
grantee's length of service, the amount of each grantee's earnings and each
grantee's responsibilities and duties. Our company will receive no monetary
consideration for the granting of Options, Rights or Restricted Stock under the
Amended Plan.
Incentive Options may be granted only to salaried key employees of our
company or any of our subsidiary or parent corporations now existing or formed
or acquired at any time in the future. Non-Qualified Options and Rights may be
granted to our officers and key employees, as well as officers and key employees
of any of our subsidiary, parent or affiliated corporations. Non-Qualified
Options may be granted to our directors. The aggregate number of Shares with
respect to which Options, Rights and Restricted Stock may be granted under the
Amended Plan to any one grantee in any one taxable year is 30,000. The Amended
Plan provides for an automatic annual grant of Non-Qualified Options covering
1,000 Shares to our directors. Directors are also eligible to receive additional
grants of Options, Rights, and/or, Restricted Stock under the Amended Plan if
they provide us services in addition to their service as a member of the Board
of Directors.
18
Any Option granted under the Amended Plan may be exercised upon the
terms and conditions as may be 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 Amended
Plan may not be less than 100% of the fair market value of the Shares on the
date the Incentive Option is granted, as determined by the Committee in
accordance with the Amended Plan. The Committee may set the purchase price of
Shares issuable upon exercise of a Non-Qualified Option (or a Right issued in
conjunction or in the alternative to that Option) at any price including a price
that is less than the fair market value of the Shares on the date of grant of
any Non-Qualified Option or Right. The Committee has the right to accelerate, in
whole or in part, rights to exercise any Option granted under the Amended Plan.
At the discretion of the Committee, a Right may be granted (i) alone, (ii)
simultaneously with the grant of an Option (either Incentive or Non-Qualified)
and in conjunction therewith or (iii) subsequent to the grant of a Non-Qualified
Option and in conjunction therewith or in the alternative thereto. The Committee
may prescribe additional terms and conditions to Options and/or Rights, subject
to the provisions and limitations contained in the Amended Plan.
Each of our directors is automatically granted a Non-Qualified Option
to purchase 1,000 Shares in their capacity as a director (a "Director
Participant") each year on the date on which the annual meeting of our
stockholders is held (taking account of any adjournments thereof). The purchase
price of the Shares covered by the Non-Qualified Options issued to Director
Participants is the fair market value of the Shares at the date of the grant.
Non-Qualified Options granted to Director Participants may not be exercised for
the twelve-month period immediately following the grant of the Non-Qualified
Option. Thereafter, the Non-Qualified Option is exercisable for a period ending
five years from the date of grant of the Non-Qualified Option, subject to
limitations or restrictions pursuant to the terms of the Amended Plan.
The Amended Plan permits, in certain circumstances, the exercise of
Options and Rights for a limited period following termination of employment due
to death, retirement, disability or dismissal other than for cause.
Options or Rights granted under the Amended Plan are non-transferable,
except by will or the laws of descent and distribution. Notwithstanding the
foregoing, at the discretion of the Committee, an award of an Option (other than
an Incentive Option) and/or a Right may permit the transferability of an Option
and/or Right by a participant solely to the participant's spouse, siblings,
parents, children, grandchildren, or trusts for the benefit of those persons or
partnerships, corporations, limited liability companies or other entities they
solely own, including trusts for those persons, subject to any restriction
included in the award of the Option and/or Right.
Shares of Restricted Stock will be subject to forfeiture upon the
termination of the grantee's service to us for any reason other than death or
disability, according to the following schedule:
Termination Prior To Percentage Forfeited
-------------------- --------------------
First anniversary of award date 100%
Second anniversary of award date 50%
Third anniversary of award date 25%
19
The Committee will have the ability to waive these forfeitures in its
discretion. During the period when Restricted Stock is subject to forfeiture
(the "Restricted Period"), the grantee will not be permitted to sell, transfer,
pledge or assign the Restricted Stock. Stock certificates for Restricted Stock
will be issued upon the grant of the Restricted Stock and registered under the
name of the grantee, but will be appropriately legended and returned to us by
the grantee pending termination of the Restricted Period, together with a stock
power executed in blank. The grantee will be entitled to vote shares of
Restricted Stock and will be entitled to all dividends paid on these shares of
Restricted Stock. However, any dividends paid in shares of our common stock will
be subject to the restrictions applicable to the relevant Restricted Stock.
Restricted Stock will also be subject to any other restrictions as the
Committee determines at the time of grant.
It is intended that the cash proceeds to be received by us from the
exercise of an Option pursuant to the Amended Plan will be used for our general
corporate purposes.
The Amended Plan may be amended from time to time by our Board of
Directors, provided that no amendment will be made without the approval of our
stockholders that will increase the total number of Shares reserved for Options,
Rights and Restricted Stock under the Amended Plan or the maximum number of
Shares with respect to which Options, Rights and Restricted Stock may be granted
under the Amended 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 Amended Plan,
provided that rights and obligations under any Option, Right or Restricted Stock
granted while the Amended Plan is in effect may not be altered or impaired by
suspension, termination or amendment of the Amended Plan, except upon the
consent of the person to whom the Option, Right or Restricted Stock was granted.
In the event of any change in our 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 our stockholders (other than normal cash
dividends), in order to prevent dilution or enlargement of participants' rights
under the Amended Plan, the Committee is required to adjust, in an equitable
manner, the number and kind of Shares that may be issued under the Amended Plan,
the number and kind of Shares subject to outstanding Options and Rights, the
consideration to be received upon exercise of Options or in respect of Rights,
the exercise price applicable to outstanding Options and Rights, and/or the fair
market value of the Shares and other value determinations applicable to
outstanding Options and Rights.
In the event of an "Extraordinary Event" with respect to our company
(including a change in control of our company, a sale of all or substantially
all of the assets of our company, certain mergers or like business combinations,
and any other extraordinary transaction that is determined by our Board of
Directors to be appropriate and in our best interests and which by its terms
precludes the existence of securities convertible into Shares), as described in
the Amended Plan, all then outstanding Options and Rights that have not vested
or become exercisable at the time of the Extraordinary Event will immediately
become exercisable and all shares of Restricted Stock still subject to
forfeiture will become free of their restrictions. The Committee, in its sole
discretion, may determine that, upon the occurrence of an Extraordinary Event,
each Option or Right then outstanding will terminate within a specified number
of days after notice to the holder, and that holder will receive, with respect
to each Share subject to that Option or Right, cash (or other property) in an
amount not less than the excess (which may be zero) of the fair market value of
that Share (as determined in accordance with the Amended Plan) over the exercise
price per Share of that Option or Right. The provisions contained in the
preceding sentence will be inapplicable to an Option or Right granted within six
(6) months before the occurrence of an Extraordinary Event if the holder of that
Option or Right 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 that 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 our company will not constitute an
Extraordinary Event with respect to our company.
20
The Amended Plan contains provisions to protect our significant tax
loss carryforwards and to prevent the imposition and limitations on our ability
to use those losses under Section 382 of the Code. If, as a result of the grant
of an Option or Right, the grantee (or any person) would become an owner (taking
into account the attribution and indirect ownership rules under Section 382 of
the Code) of 5% or more of our "stock" (a "Five Percent Stockholder"), that
grant will only be effective to acquire the number of our Shares (or, in the
case of a Right, Shares and/or cash) as could be acquired without causing that
person to become a Five Percent Stockholder. If the exercise of an Option or
Right would cause the grantee (or any person) to become a Five Percent
Stockholder as a result of the exercise of that Option or Right, that exercise
will be effective only for the number of Shares (or, in the case of a Right,
Shares and/or cash) that the grantee could acquire without causing that person
to become a Five Percent Stockholder, and the issuance of any Shares (or, in the
case of a Right, any Shares and/or cash) in excess of that amount will be null
and void. Also, if the grant and/or vesting (whether by lapse or termination of
the Restricted Period or the filing of an election under Section 83(b) of the
Code (as discussed below)) of Restricted Stock would cause any person (whether
the grantee or any other person) to become a Five Percent Stockholder, that
grant will only be effective for the number of shares of Restricted Stock that
the grantee can acquire without causing that person to become a Five Percent
Stockholder, and any grant in excess of that amount will be void. The above
limitations do not prevent the grant, exercise and/or vesting of an Option,
Right or Share of Restricted Stock to or by any person that is a Five Percent
Stockholder, such as Messrs. Cumming and Steinberg, prior to the time of the
grant, exercise and/or vesting.
Also, in order to protect our significant tax loss carryforwards, the
Shares issuable upon exercise of an Option or Right and Restricted Stock granted
under the Amended Plan will be subject to certain transfer restrictions
contained in our Restated Certificate of Incorporation designed to regulate
transfers to a person or group or persons who are or would become as a result of
that transfer a Five Percent Stockholder. Transfers of our common stock or our
other securities would generally be subject to these restrictions and may be
restricted if, as a result of the transfer, any person or group of persons would
become a Five Percent Stockholder or the ownership interest of any Five Percent
Stockholder would be increased. The Board of Directors has the authority to
exempt transfers from the operation of this restriction.
PLAN BENEFITS
As of July 7, 2004, approximately 20 persons were eligible to receive
awards under the Amended Plan, including our directors and executive officers (8
persons). A new plan benefits table is not provided because the granting of
Awards under the Amended Plan is discretionary, and we cannot now determine the
number or type of awards to be granted in the future to any particular person or
group.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Options.
Incentive Options granted under the Amended 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 the 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.
21
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 the Option (the
"applicable holding period"), the difference (if any) between the amount
realized from the sale of the Shares and the holder's tax basis in the Shares
will be taxed as long-term capital gain or loss (provided that the 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 that 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 us (or any of our parent or
subsidiary corporations) 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 acquired upon
exercise of an Incentive Option. In the event of a disqualifying disposition, a
federal income tax deduction will be allowed to us (or any of our parent or
subsidiary corporations if any of those corporations is the employer of the
individual) in an amount equal to the ordinary income included by the optionee,
provided that this amount constitutes an ordinary and necessary business expense
to the respective corporation and is reasonable, and provided that the
limitations of Sections 162(m) (as described below) and 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 our 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 and Stock Appreciation Rights.
A Non-Qualified Option granted under the Amended Plan is one that is
not intended to qualify as an incentive stock option under Section 422(b) of the
Code. An individual who receives a Non-Qualified Option generally will not
recognize any taxable income upon the grant of the Non-Qualified Option. In
general, upon exercise of a Non-Qualified Option, an individual will be treated
as having received ordinary income in an amount equal to the excess of (i) the
fair market value of the Shares acquired pursuant to the exercise, determined at
the time of exercise, over (ii) the exercise price for those Shares.
An individual who receives a Right generally will not recognize any
taxable income upon the grant of the Right. Generally, upon the receipt of cash
or the transfer of Shares pursuant to the exercise of a Right, an individual
will recognize ordinary income in an amount equal to the sum of the cash and the
fair market value of the Shares received. In certain cases, a Right may be
deemed for federal income tax purposes to have been exercised prior to actual
exercise.
As a result of Section 16(b) of the Exchange Act, the timing of income
recognition for a holder upon exercise of a Non-Qualified Option or Right may be
deferred in the case of any optionee who is our officer or director or a
beneficial owner of more than ten percent (10%) of any class of our equity
securities following the exercise of a Non-Qualified Option or Right. Absent a
properly filed election pursuant to Section 83(b) of the Code (a "Section 83(b)
election"), recognition of income by the individual will be deferred (the
"Deferral Period") until the expiration of the period, if any, during which that
individual would be subject to suit under Section 16(b) with respect to the sale
of the Shares acquired upon the exercise, in which case the individual's income
will equal the excess of the fair market value of the Shares at that time over
the exercise price. A holder's tax basis in any Shares received upon the
exercise of an Option or Right will equal the amount of ordinary income included
by the holder plus any amounts paid by the holder for the Shares. The holder's
holding period will begin on the day the Option or Right is exercised.
22
The ordinary income recognized in the case of an employee (as opposed
to an independent contractor or consultant) as a result of the exercise of a
Non-Qualified Option or Right under the Amended Plan will be subject to both
wage withholding and employment taxes. Among the methods provided in the Amended
Plan to enable us (or our parent or subsidiary) to satisfy our withholding tax
obligation, we may permit the employee to (i) direct us (or our parent or
subsidiary) to satisfy all or a portion of the withholding obligation through
the withholding of Shares from those that would otherwise be issuable to the
individual, or (ii) tender to us (or our parent or subsidiary) other shares of
our common stock owned by the individual, valued at their fair market value as
of the date that the tax withholding obligation arises, with which to satisfy
the withholding obligation. A deduction for federal income tax purposes will be
allowed to us (or our parent or subsidiary if the services were provided to that
corporation) in an amount equal to the ordinary income included by the
individual, provided that this amount constitutes an ordinary and necessary
business expense to the respective corporation, and the limitations of Sections
162(m) and 280G of the Code do not apply.
Special rules apply to an individual who exercises a Non-Qualified
Option or Right by delivering other shares of our common stock owned by the
individual, including Shares previously acquired pursuant to the exercise of an
Incentive Option or a Non-Qualified Option. Additionally, this discussion
assumes that (i) the exercise price with respect to a Non-Qualified Option or
Right does not represent a substantial discount from the fair market value, as
of the date of grant, of the Shares subject to the Option or Right and (ii)
that, except for those restrictions arising as a result of Section 16(b) of the
Exchange Act, any Shares issued under the Option or Right are unrestricted.
Restricted Stock.
Assuming that a grant of Restricted Stock is subject only to those
restrictions discussed above, absent a Section 83(b) election, an individual
will recognize ordinary income for federal income tax purposes (and we, or our
parent or subsidiary, will take any corresponding deduction to which we or they
may be entitled) at the end of the Restricted Period for those shares (or, if
later, at the end of the Deferral Period) in an amount equal to the fair market
value of the Restricted Stock (on that date). Alternatively, an individual may
make a Section 83(b) election to recognize ordinary income at the time the
Restricted Stock is transferred to the individual pursuant to the grant equal to
the fair market value (determined without regard to the transferability and
forfeiture restrictions) of the Restricted Stock as of the date of transfer. An
individual's tax basis in any Restricted Stock will equal the amount of ordinary
income included by that individual pursuant that individual making a Section
83(b) election or, if no election is made, at the end of the Restricted Period.
An individual's holding period will begin on the day the individual makes a
Section 83(b) election, or, if no election is made, immediately after the
Restricted Period ends.
The ordinary income recognized by an employee with respect to the
receipt of Restricted Stock will be subject to both wage withholding and other
employment taxes. Among the methods provided in the Amended Plan to enable us
(or our parent or subsidiary) to satisfy our withholding tax obligation, we may
permit the employee to tender to us (or our parent or subsidiary) other shares
of our common stock owned by the individual, valued at their fair market value
as of the date that the tax withholding obligation arises, with which to satisfy
the withholding obligation.
23
We (or our parent or subsidiary if the services were provided to that
corporation) will receive a federal income tax deduction in an amount equal to
the ordinary income included by the individual, provided that the amount
constitutes an ordinary and necessary business expense and is reasonable, and
provided that the limitations of Sections 162(m) and 280G of the Code do not
apply.
The tax treatment of distributions, if any, received by an individual
with respect to Restricted Stock prior to expiration of the Restricted Period
will vary depending upon several factors including whether a Section 83(b)
election is made and the form of the distribution. Depending upon the
circumstances, the tax consequences of distributions received with respect to
Restricted Stock will vary from being treated as taxable as ordinary income, a
return of capital or a tax-free stock dividend. Whether, and when, we (or our
parent or subsidiary) are entitled to a deduction with respect to any
distributions paid with respect to Restricted Stock will depend upon the
required tax treatment of the distribution by the recipient thereof.
Gift Tax.
If the Committee permits an individual to transfer a Non-Qualified
Option to a member or members of the individual's immediate family or to a trust
for the benefit of these persons or other entity owned by these persons, the
individual makes the transfer, and the transfer constitutes a completed gift for
gift tax purposes (which determination may depend on a variety of factors
including whether the Non-Qualified Option or a portion thereof has vested) then
that transfer will be subject to federal gift tax except, generally, to the
extent protected by the individual's annual exclusion, by his or her lifetime
unified credit or by the marital deduction. The amount of the individual's gift
is the value of the Non-Qualified Option at the time of the gift. If the
transfer of the Non-Qualified Option constitutes a completed gift and the
individual retains no interest or power over the Non-Qualified Option after the
transfer, the Non-Qualified Option generally will not be included in his or her
gross estate for federal income tax purposes. The transfer of the Non-Qualified
Option will not cause the transferee to recognize taxable income at the time of
the transfer. If the transferee exercises the Non-Qualified Option while the
transferor is alive, the transferor will recognize ordinary income as described
above as if the transferor had exercised the Non-Qualified Option. If the
transferee exercises the Non-Qualified Option after the death of the transferor,
it is uncertain whether the transferor's estate or the transferee will recognize
ordinary income for federal income tax purposes.
Change in Control.
As described above, upon an "Extraordinary Event" affecting our company
(as defined in the Amended Plan), all the then outstanding Options and Rights
will immediately become exercisable and all Shares of Restricted Stock still
subject to restrictions will become free of those restrictions. 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 our 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 the payments would be
nondeductible by us (or our parent or subsidiary) and the recipient would be
subject to a 20% excise tax on that portion of the payments.
Certain Limitations on Deductibility of Executive Compensation.
With certain exceptions, Section 162(m) of the Code denies a deduction
to publicly held corporations for compensation paid to certain executive
officers in excess of $1 million per executive per taxable year (including any
deduction with respect to the exercise of an Option or Right or grant of
Restricted Stock). One of these exceptions applies to certain performance-based
compensation that has, among other things, been approved by stockholders in a
separate vote. If we were to form a Committee that satisfies the requirements of
Section 162(m) of the Code and Treasury Regulation 1.162-27(e)(3) to administer
the Amended Plan, certain awards of Options and Rights under the Amended Plan
may qualify for the performance-based compensation exception to Section 162(m)
of the Code.
24
REGULATION
The Amended Plan is neither qualified under the provisions of Section
401(a) of the Code, nor subject to any of the provisions of ERISA.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the proposal to amend our
1999 stock incentive plan to increase by 300,000 shares the number of shares of
our common stock available for issuance under the plan. In assessing the
recommendation of the Board of Directors, stockholders should consider that each
of our directors will continue to receive an automatic grant of options to
purchase 1,000 shares of our common stock immediately following each annual
meeting of stockholders under the Amended Plan.
ANNUAL REPORT AND COMPANY INFORMATION
A copy of our 2003 Annual Report to stockholders on Form 10-K, as
amended, 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 our proxy statement and
form of proxy for presentation at our 2005 annual meeting of stockholders must
be received by us at 1903 Wright Place, Suite 220, Carlsbad, California 92008,
Attention of Corinne A. Maki, Secretary, no later than April 1, 2005.
Any stockholder 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 our 2005 proxy statement
and related form of proxy, timely notice of any stockholder proposal must be
received by us in accordance with our by-laws and our rules and regulations no
later than April 1, 2005. Any proxies solicited by the Board of Directors for
the 2005 annual meeting may confer discretionary authority to vote on any
proposals notice of which is not timely received.
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
ANNEX A
HOMEFED CORPORATION
AMENDED AND RESTATED
1999 STOCK INCENTIVE PLAN
AMENDED AS OF JULY 14, 2004
HOMEFED CORPORATION
AMENDED AND RESTATED
1999 STOCK INCENTIVE PLAN
I. Purposes.......................................................................................1
II. Amount of Stock Subject to the Amended and Restated Plan.......................................1
III. Administration.................................................................................2
IV. Eligibility....................................................................................3
V. Option Price and Payment.......................................................................4
VI. Terms of Options and Limitations on the Right of Exercise......................................5
VII. Stock Appreciation Rights......................................................................5
VIII. Termination of Employment......................................................................6
IX. Exercise of Options............................................................................8
X. Stock Option Grants to Director Participants...................................................8
XI. Director Participant's Exercise of Options.....................................................8
XII. Director Participant's Termination.............................................................9
XIII. Director Participant's Eligibility for Other Grants............................................9
XIV. Termination of Service to the Company of an Affiliated Participant.............................9
XV. Restricted Stock..............................................................................11
XVI. Use of Proceeds...............................................................................11
XVII. Non-Transferability of Options and Stock Appreciation Rights..................................11
XVIII. Adjustment Provisions; Effect of Certain Transactions.........................................12
XIX. Right to Terminate Employment.................................................................13
XX. Purchase for Investment.......................................................................13
XXI. Issuance of Stock Certificates; Legends; Payment of Expenses..................................14
XXII. Withholding Taxes.............................................................................14
XXIII. Listing of Shares and Related Matters.........................................................15
XXIV. Foreign Laws..................................................................................15
XXV. Amendment of the Amended and Restated Plan....................................................15
XXVI. Duration; Termination or Suspension of the Amended and Restated Plan..........................16
XXVII. Savings Provision.............................................................................16
XXVIII. Governing Law.................................................................................16
XXIX. Partial Invalidity............................................................................16
XXX. Amendment Effective Date......................................................................16
A-i
ANNEX A
HOMEFED CORPORATION
AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN
I. PURPOSES
HomeFed Corporation (the "Company") desires to afford its directors and certain
of its officers, key employees and certain officers and key employees of any
subsidiary corporation, parent corporation or affiliated corporation of the
Company now existing or hereafter formed or acquired who are responsible for the
continued growth of the Company (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 1999 Stock Incentive Plan became effective on October 25, 1999, and was
subsequently amended on July 14, 2003 (the "1999 Plan"). This Amended and
Restated 1999 Stock Incentive Plan (the "Amended and Restated Plan") is, subject
to Article XXX, effective on July 14, 2004 (the "Amendment Effective Date").
Under the Amended and Restated Plan the number of shares of Company Common
Stock, par value $.01 per share (the "Shares") available for issuance is 500,000
shares, of which 499,400 shares remain available for issuance on the Amendment
Effective Date. The Options, Rights and Restricted Stock offered pursuant to the
Amended and Restated 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
and/or Rights or the issuance of any Restricted Stock.
The Company, by means of the Amended and Restated Plan, seeks to retain the
services of persons now holding directorships and key positions and to secure
and retain the services of persons capable of filling such positions. In
addition, with respect to Restricted Stock granted during 2000 only, the Company
rewarded Eligible Persons for their past service to the Company during the
period from the Company's Chapter 11 bankruptcy reorganization to the date of
grant.
The Options granted under the Amended and Restated 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 AMENDED AND RESTATED PLAN
The total number of Shares that may be purchased pursuant to the exercise of
Options granted under the Amended and Restated Plan, acquired pursuant to the
exercise of Rights granted under the Amended and Restated Plan or issued as
Restricted Stock under the Amended and Restated Plan shall not exceed, in the
aggregate, five hundred thousand (500,000) Shares, such number to be subject to
adjustment in accordance with Article XVIII. As of the Amendment Effective Date,
499,400 shares remain available for issuance under the plan. Shares that are the
subject of Rights and/or related Options shall be counted only once in
determining whether the maximum number of Shares that may be purchased or
awarded under the Amended and Restated Plan has been exceeded.
Shares which may be acquired under the Amended and Restated 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. If and to the extent that
Options and/or Rights granted under the Amended and Restated Plan expire or
terminate without having been exercised or shares of Restricted Stock awarded
under the Amended and Restated Plan are forfeited, the Shares covered by such
expired or terminated Options or Rights or such forfeited shares of Restricted
Stock may again be subject to an Option, Right or share of Restricted Stock
under the Amended and Restated Plan.
A-1
Except as provided in Articles IV, X through XIII, XXVI, and XXX hereof, the
Committee (as defined in Article III) may, from time to time beginning on the
Amendment Effective Date, grant to certain officers and key employees and
directors of the Company, or certain officers, key employees of any subsidiary
corporation, parent corporation or affiliated corporation of the Company now
existing or hereafter formed or acquired, Incentive Options, Non-Qualified
Options, Rights and/or shares of Restricted Stock under the terms hereinafter
set forth.
Provisions of the Amended and Restated Plan that pertain to Options, Rights or
Restricted Stock granted to an Eligible Person shall apply to Options, Rights,
Restricted Stock or any combination thereof.
As used in the Amended and Restated 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.
As used in this Plan, the term "affiliated corporation" shall mean any entity
providing managerial, administrative, consulting or advisory services to the
Company, or any parent corporation or subsidiary corporation of such affiliated
corporation.
III. ADMINISTRATION
The Amended and Restated 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, solely 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 Amended and Restated Plan rather than a committee of the
Board of Directors, then all references to "Committee" in the Amended and
Restated 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 Amended and
Restated Plan, to establish such rules and regulations as it deems necessary for
the proper administration of the Amended and Restated Plan and to make such
determinations and interpretations and to take such action in connection with
the Amended and Restated Plan and any benefits granted hereunder as it deems
necessary or advisable. Subject to the express provisions of the Amended and
Restated Plan, including, without limitation, Articles X through XIII hereof,
the Committee also shall have authority to construe the Amended and Restated
Plan and the Options, Rights or Restricted Stock granted thereunder, to amend
the Options, Rights or Restricted Stock granted hereunder, to prescribe, amend
and rescind rules and regulations relating to the Amended and Restated Plan, to
determine the terms and provisions of the Options, Rights and Restricted Stock
(none of which need be identical) and to make all other determinations necessary
or advisable for administering the Amended and Restated Plan.
The Committee also shall have the authority to require, in its discretion, as a
condition of the granting of any such Option or Right, that the employee agree
(a) not to sell or otherwise dispose of Shares acquired pursuant to the exercise
of such Option or Right for a period of six (6) months following the date of the
acquisition of such Option or Right and (b) that in the event of termination of
employment of such 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 or Right, enter into any other employment or participate directly or
indirectly in any other business or enterprise which 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 employee will be called
upon to utilize special knowledge obtained through employment with the Company
or any subsidiary corporation or parent corporation thereof.
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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 Amended and Restated 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, a subsidiary or an affiliate
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 Amended and Restated 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 Amended and Restated Plan. The Committee may
employ such legal or other counsel, consultants and agents as it may deem
desirable for the administration of the Amended and Restated 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, or the subsidiary or affiliate
whose employees have benefited from the Amended and Restated Plan, as determined
by the Committee.
IV. ELIGIBILITY
Incentive Options may be granted only to salaried key employees of the Company
or any subsidiary corporation or parent corporation of the Company now existing
or hereafter formed or acquired, except as hereinafter provided. Non-Qualified
Options, Rights may be granted to officers or key employees of the Company or
any subsidiary corporation, parent corporation or affiliated corporation,
provided, however, that only those employees of an affiliated corporation who
provide or have provided service to the Company and who are responsible for the
continued growth of the Company are eligible to receive grants of Options or
Rights under the Amended and Restated Plan. Non-Qualified Options may be granted
to directors of the Company (including former officers or key employees), solely
in their capacity as directors ("Director Participants"), but only pursuant to
and in accordance with the provisions of Articles X through XIII hereof.
Restricted Stock may be awarded to persons now serving as directors of the
Company or employed as officers or key employees of the Company or any
subsidiary corporation, parent corporation or affiliated corporation, provided,
however, that only those employees of an affiliated corporation who provide or
have provided service to the Company and who are responsible for the continued
growth of the Company are eligible to receive grants of Restricted Stock under
the Amended and Restated Plan.
The Amended and Restated Plan does not create a right in any person to
participate in the Amended and Restated Plan, nor does it create a right in any
person to have any Options, Rights or Restricted Stock granted to him or her.
The aggregate number of Shares with respect to which Options, Rights or shares
of Restricted Stock may be granted under the Amended and Restated Plan to any
grantee in any one taxable year is 30,000.
Notwithstanding any other provision of this Amended and Restated Plan, if the
grant of an Option or Right 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 or Right to the grantee, such grant shall
only be effective to acquire the number of Shares (or, in the case of a Right,
Shares and/or cash) of the Company as could be acquired without causing such
person to become a "5 percent stockholder," and if the exercise of an Option or
Right 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 or Right, such exercise shall be effective only for the number of Shares
(or, in the case of a Right, Shares and/or cash) that such grantee can acquire
without causing such person to become a "5 percent stockholder" and the issuance
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of any Shares (or, in the case of a Right, any Shares and/or cash) in excess of
such amount shall be null and void. Furthermore, notwithstanding any other
provision of this Plan, if the grant of (i) Restricted Stock, (ii) the lapse or
termination of the Restricted Period and/or (iii) the filing by a grantee of an
election under Section 83(b) of the Code with respect to such Restricted Stock
(hereinafter (ii) and (iii) are referred to collectively as "vesting") 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 such grant and/or
vesting of the Restricted Stock, such grant of Restricted Stock shall only be
effective as to the number of shares of the Company as could be acquired without
causing such person to become a "5 percent stockholder." Upon the (i) grant or
exercise of an Option or Right or (ii) upon the grant or vesting of Restricted
Stock, the Committee may, at the Committee's 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.
V. 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
Option is granted. In determining the stock ownership of an employee for any
purpose under the Amended and Restated 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 XVIII, for purposes of this Amended and Restated
Plan and any Options, Rights and/or Restricted Stock 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 Amended and Restated Plan.
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VI. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option granted hereunder shall be exercisable at such times, in such amounts
and during such period or periods as the Committee shall determine at the date
of the 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
Option is granted; provided, further, that in the case of an Incentive Option
granted to a person who, at the time such Incentive 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 October 25, 2009.
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 Amended and Restated 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
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 in accordance with applicable law 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.
VII. STOCK APPRECIATION RIGHTS
At the discretion of the Committee, a Right may be granted (a) alone, (b)
simultaneously with the grant of an Option (either Incentive or Non-Qualified)
and in conjunction therewith or in the alternative thereto or (c) subsequent to
the grant of a Non-Qualified Option and in conjunction therewith or in the
alternative thereto.
The exercise price of a Right granted alone shall be determined by the Committee
but shall not be less than one hundred percent (100%) of the Fair Market Value
of one Share on the date of grant of such Right. A Right granted simultaneously
with or subsequent to the grant of an Option and in conjunction therewith or in
the alternative thereto shall have the same exercise price as the related
Option, shall be transferable only upon the same terms and conditions as the
related Option, and shall be exercisable only to the same extent as the related
Option; provided, however, that a Right, by its terms, shall be exercisable only
when the Fair Market Value of the Shares subject to the Right and related Option
exceeds the exercise price thereof.
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Upon exercise of a Right granted simultaneously with or subsequent to an Option
and in the alternative thereto, the number of Shares for which the related
Option shall be exercisable shall be reduced by the number of Shares for which
the Right shall have been exercised. The number of Shares for which a Right
shall be exercisable shall be reduced upon any exercise of a related Option by
the number of Shares for which such Option shall have been exercised.
Any Right shall be exercisable upon such additional terms and conditions as may
from time to time be prescribed by the Committee.
A Right shall entitle the holder upon exercise thereof to receive from the
Company, upon a written request filed with the Secretary of the Company at its
principal offices (the "Request"), a number of Shares (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Shares and cash, as specified in the Request (but subject to the
approval of the Committee, in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having an
aggregate Fair Market Value equal to the product of (a) the excess of the Fair
Market Value, on the day of such Request, of one Share over the exercise price
per Share specified in such Right or its related Option, multiplied by (b) the
number of Shares for which such Right shall be exercised; provided, however,
that the Committee, in its discretion, may impose a maximum limitation on the
amount of cash, the Fair Market Value of Shares, or a combination thereof, which
may be received by a holder upon exercise of a Right.
Any election by a holder of a Right to receive cash in full or partial
settlement of such Right, and any exercise of such Right for cash, may be made
only by a Request filed with the Corporate Secretary of the Company during the
period beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of earnings
and ending on the twelfth business day following such date. Within thirty (30)
days after the receipt by the Company of a Request to receive cash in full or
partial settlement of a Right or to exercise such Right for cash, the Committee
shall, in its sole discretion, either consent to or disapprove, in whole or in
part, such Request.
If the Committee disapproves in whole or in part any election by a holder to
receive cash in full or partial settlement of a Right or to exercise such Right
for cash, such disapproval shall not affect such holder's right to exercise such
Right at a later date, to the extent that such Right shall be otherwise
exercisable, or to elect the form of payment at a later date, provided that an
election to receive cash upon such later exercise shall be subject to the
approval of the Committee. Additionally, such disapproval shall not affect such
holder's right to exercise any related Option or Options granted to such holder
under the Amended and Restated Plan.
A holder of a Right shall not be entitled to request or receive cash in full or
partial payment of such Right during the first six (6) months of its term;
provided, however, that such prohibition shall not apply if the holder of such
Right is not subject to the reporting requirements of Section 16(a) of the
Exchange Act.
For all purposes of this Article VII, the fair market value of Shares shall be
determined in accordance with the principles set forth in Article V hereof.
VIII. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee with the Company and all
subsidiary corporations and parent corporations of the Company, any Option or
Right previously granted to the employee, unless otherwise specified by the
Committee in the Option or Right, shall, to the extent not theretofore
exercised, terminate and become null and void; 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 or Right as herein provided, the legal representative of such
employee, or such person who acquired such Option or Right 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 or Right, 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 or Right; and
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(b) if the employment of any employee to whom such Option or Right 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 or Right as herein provided, such employee shall have the
right to exercise such Option or Right so granted in respect of any or all of
such number of Shares as specified by the Committee in such Option or Right, 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 or
Right after the expiration of the period of exercisability of such Option or
Right, as specified therein.
If an employee voluntarily terminates his or her employment, or is discharged
for cause, any Option or Right granted hereunder shall, unless otherwise
specified by the Committee, forthwith terminate with respect to any unexercised
portion thereof.
If an Option or Right granted hereunder shall be exercised by the legal
representative of a deceased grantee or by a person who acquired an Option or
Right granted hereunder by bequest or inheritance or by reason of the death of
any employee or former 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
or Right.
For the purposes of the Amended and Restated 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 Amended and Restated 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 or Right, such individual shall not be
entitled to exercise such Option or Right 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.
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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, (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, or (iii) the transfer of an
employee from employment by the Company or any subsidiary corporation or parent
corporation of the Company to employment by any affiliated corporation, provided
that such employee continues to provide services to 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
or Rights 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. If an Option or Right 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 or Rights in full
(without regard to any limitation set forth or imposed pursuant to Article VI)
during the thirty (30) day period following notice of such cancellation.
IX. EXERCISE OF OPTIONS
Options granted under the Amended and Restated 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 XX through XXIII 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.
X. STOCK OPTION GRANTS TO DIRECTOR PARTICIPANTS
Subject to the terms and conditions of Articles X through XIII hereof,
commencing with the Annual Meeting of Stockholders of the Company held in 2000,
each Director Participant shall automatically be granted a grant of
Non-Qualified Option to purchase 1,000 Shares on the date on which the annual
meeting of the Company's stockholders (including any adjournments thereof) is
held in each year. The purchase price of the Shares covered by the Non-Qualified
Options granted pursuant to this Article X shall be the Fair Market Value of
such Shares on the date of grant.
XI. DIRECTOR PARTICIPANT'S EXERCISE OF OPTIONS
A Non-Qualified Option granted to any Director Participant of the Company shall
not be exercisable for the twelve-month period immediately following the grant
of such Non-Qualified Option. Thereafter, the Non-Qualified Option shall be
exercisable for the period ending five years from the date of grant of such
Non-Qualified Option, except to the extent such exercise is further limited or
restricted pursuant to the provisions hereof.
If, in any year of the Non-Qualified Option, such Non-Qualified Option shall not
be exercised for the total number of Shares available for purchase during that
year, the Non-Qualified Option shall not thereby terminate as to such
unexercised portion, but shall be cumulative. As used herein, the term "year of
the Non-Qualified Option" shall mean a one (1) year period commencing with the
date of, or the anniversary of the date of, the granting of such Non-Qualified
Option.
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XII. DIRECTOR PARTICIPANT'S TERMINATION
If a Director Participant's service as a director of the Company is terminated,
any Non-Qualified Option previously granted to such Director Participant shall,
to the extent not theretofore exercised, terminate and become null and void;
provided, however, that:
(a) if a Director Participant holding an outstanding Non-Qualified Option dies,
such Non-Qualified Option shall, to the extent not theretofore exercised, remain
exercisable for one (1) year after such Director Participant's death, by such
Director Participant's legatee, distributee, guardian or legal or personal
representative; and
(b) if the service of a Director Participant to whom such Non-Qualified Option
shall have been granted shall terminate by reason of (i) such Director
Participant's disability (as described in Section 22(e)(3) of the Code), (ii)
voluntary retirement from service as a director of the Company, or (iii) failure
of the Company to retain or nominate for re-election such Director Participant
who is otherwise eligible, unless due to any act of (A) fraud or intentional
misrepresentation, or (B) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any direct or indirect subsidiary of the
Company, while such Director Participant is entitled to exercise such
Non-Qualified Option as herein provided, such Director Participant shall have
the right to exercise such Non-Qualified Option so granted in respect of any or
all of such number of Shares subject to such Non-Qualified Option at any time up
to and including (X) three (3) months after the date of such termination of
service in the case of termination by reason of voluntary retirement or failure
of the Company to retain or nominate for re-election such Director Participant
who is otherwise eligible, unless due to any act of (1) fraud or intentional
misrepresentation, or (2) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any direct or indirect subsidiary of the
Company, and (Y) one (1) year after the date of termination of service in the
case of termination by reason of disability; and
(c) if the Director Participant shall die during either the three (3) month or
one (1) year period, whichever is applicable, specified in clause (b) above and
at a time when such Director Participant was entitled to exercise a
Non-Qualified Option as herein provided, the legal representative of such
Director Participant, or such person who acquired such Non-Qualified Option by
bequest or inheritance or by reason of the death of the Director Participant
may, not later than one (1) year from the date of death, exercise such
Non-Qualified Option, to the extent not theretofore exercised, in respect of any
or all of such number of Shares subject to such Non-Qualified Option.
In no event, however, shall a Director Participant be entitled to exercise any
Option after the expiration of the period of exercisability of such Option, as
specified therein.
XIII. DIRECTOR PARTICIPANT'S ELIGIBILITY FOR OTHER GRANTS
Any Director Participant eligible to receive an Option pursuant to Article X
hereof shall also be eligible to receive any other grant or award under any
other Article of this Plan.
XIV. TERMINATION OF SERVICE TO THE COMPANY OF AN AFFILIATED PARTICIPANT
If an Affiliated Participant's service to the Company is terminated, any
Non-Qualified Option and/or Right previously granted to such Affiliated
Participant, unless otherwise specified by the Committee, shall to the extent
not theretofore exercised, terminate and become null and void; provided, however
that:
(a) if the Affiliated Participant shall die while in the service of the Company,
any parent corporation, subsidiary corporation or affiliated 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 Affiliated
Participant was entitled to exercise an Option or Right as herein provided, the
legal representative of such Affiliated Participant, or such person who acquired
such Option or Right by bequest or inheritance or by reason of the death of the
Affiliated Participant, may, not later than one (1) year from the date of death,
exercise such Option or Right, 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 or Right; and
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(b) if the service of any Affiliated Participant to whom such Option or Right
shall have been granted shall terminate by reason of the Affiliated
Participant's retirement (at such age or upon such conditions as shall be
specified by his or her 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 Affiliated Participant is entitled to exercise such
Option or Right as herein provided, such Affiliated Participant shall have the
right to exercise such Option or Right so granted in respect of any or all of
such number of Shares as specified by the Committee in such Option or Right, 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 or
Right after the expiration of the period of exercisability of such Option or
Right, as specified therein.
If an Affiliated Participant voluntarily terminates his or her service to the
Company and all parent corporations, subsidiary corporations and affiliated
corporations or such service is terminated for cause, any Option or Right
granted hereunder shall, unless otherwise specified by the Committee, forthwith
terminate with respect to any unexercised portion thereof.
If an Option or Right granted hereunder shall be exercised by the legal
representative of a deceased grantee or by a person who acquired an Option or
Right granted hereunder by bequest or inheritance or by reason of the death of
any Affiliated Participant or former Affiliated Participant, 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 or Right.
For the purposes of the Amended and Restated 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 an affiliated 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 such an affiliated
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 Affiliated Participant of
an act that causes or may cause substantial damage to the Company or a
subsidiary corporation, parent corporation or affiliated corporation of the
Company; (ii) the commission by an Affiliated Participant of an act of fraud in
the performance of such Affiliated Participant's duties on behalf of the Company
or a subsidiary corporation, parent corporation or affiliated corporation of the
Company; (iii) conviction of the Affiliated Participant for commission of a
felony in connection with the performance of his duties on behalf of the Company
or a subsidiary corporation, parent corporation or affiliated corporation of the
Company, or (iv) the continuing failure of an Affiliated Participant to perform
the duties of such Affiliated Participant to the Company or a subsidiary
corporation, parent corporation or affiliated corporation of the Company after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the Affiliated Participant by the Committee.
For purposes of the Amended and Restated Plan, an "Affiliated Participant" is a
grantee who is neither an "employee" of the Company or any subsidiary
corporation or parent corporation of the Company for purposes of the Amended and
Restated Plan nor a director of the Company.
A termination of services shall not be deemed to have occurred by reason of the
transfer of an Affiliated Person from employment by an affiliated company to
employment by the Company or any subsidiary or parent corporation of the
Company.
A-10
XV. RESTRICTED STOCK
Subject to the express provisions of the Amended and Restated Plan, the
Committee shall determine to whom Restricted Stock shall be granted, the number
of Shares subject to each grant of Restricted Stock and the date of any grant of
Restricted Stock.
Shares of Restricted Stock shall be forfeited and revert to the Company upon the
grantee's termination of service to the Company determined in accordance with
the provisions of Articles VIII, XII, and XIV of the Amended and Restated Plan
for any reason other than death or permanent disability, according to the
following schedule:
Termination Prior To Percentage Forfeited
-------------------- --------------------
First anniversary of award date 100%
Second anniversary of award date 50%
Third anniversary of award date 25%
Shares of Restricted Stock shall not be forfeited as a result of the grantee's
death or his or her termination of service to the Company by reason of permanent
disability, as determined by the Committee. The Committee may require medical
evidence of permanent disability, including medical examinations by physicians
selected by it. The Committee shall have the authority to waive forfeiture for
any other reason in its discretion.
The period during which any Restricted Stock is subject to forfeiture is the
"Restricted Period" with respect to such shares of Restricted Stock. During the
Restricted Period, the grantee shall not be permitted to sell, transfer, pledge
or assign the shares of Restricted Stock. Stock certificates for Restricted
Stock shall be issued upon grant of the Restricted Stock and registered in the
name of the grantee, but shall be appropriately legended and returned to the
Company by the grantee, together with a stock power, endorsed in blank by the
grantee. The grantee shall be entitled to vote shares of Restricted Stock and
shall be entitled to all dividends paid thereon, except that dividends paid in
the Company's stock shall also be subject to the same restrictions.
Restricted Stock shall become free of the foregoing restrictions upon the
expiration of the Restricted Period (or otherwise in accordance with the terms
of the Amended and Restated Plan) and the Company shall deliver new certificates
with the restrictive legend deleted evidencing such stock.
Restricted Stock will also be subject to such other restrictions as the
Committee shall determine at the time of the grant.
XVI. 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.
XVII. NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Neither an Option nor a Right 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 or Right granted hereunder shall be exercisable,
during the lifetime of the holder, only by such holder. Except to the extent
provided above, Options and Rights 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) and/or a Right may permit the
transferability of such Option and/or Right 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
and/or Right.
A-11
XVIII. ADJUSTMENT PROVISIONS; EFFECT OF CERTAIN 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, 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
Amended and Restated Plan, the Committee shall adjust, in an equitable manner,
the number and kind of shares that may be issued under the Amended and Restated
Plan, the number and kind of shares subject to outstanding Options and Rights,
the consideration to be received upon exercise of Options or in respect of
Rights, the exercise price applicable to outstanding Options and Rights, and/or
the fair market value of the Shares and other value determinations applicable to
outstanding Options and Rights. Appropriate adjustments may also be made by the
Committee in the terms of any Options and Rights under the Amended and Restated
Plan to reflect such changes or distributions and to modify any other terms of
outstanding Options and Rights 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 and Rights 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 and Rights that have not vested or become
exercisable at the time of such Extraordinary Event shall immediately vest and
become exercisable and all restrictions on outstanding Restricted Stock shall
immediately terminate. For purposes of this Article XVIII(b), an "Extraordinary
Event" with respect to the Company shall be deemed to have occurred upon any of
the following events:
(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 XVIII(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.
A-12
The Committee, in its discretion, may determine that, upon the occurrence of an
Extraordinary Event with respect to the Company, each Option and Right
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 or a Right
(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 or Right (as the
case may be); 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 V as of the date of
the occurrence of the Extraordinary Event. The provisions contained in the
preceding sentence shall be inapplicable to an Option or Right granted within
six (6) months before the occurrence of an Extraordinary Event if the holder of
such Option or Right 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.
XIX. RIGHT TO TERMINATE EMPLOYMENT
The Amended and Restated Plan shall not impose any obligation on the Company or
on any subsidiary corporation or parent corporation or affiliated corporation
thereof to continue the employment or directorship of any holder of an Option,
Right or Restricted Stock and it shall not impose any obligation on the part of
any holder of an Option, Right or Restricted Stock to remain in the employ of
the Company or of any subsidiary corporation or parent corporation or affiliated
corporation thereof. Termination of service of a Director Participant shall be
governed by the provisions of Article XII hereof and termination of service of
an Affiliated Participant shall be governed by the provisions of Article XIV
hereof.
XX. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Committee may require the holder of any
Option, Right or Restricted Stock granted hereunder, as a condition of exercise
of such Option or Right or grant of Restricted Stock, 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 acquiring the shares of
Restricted Stock or purchasing or acquiring the Shares pursuant to any Option or
Right 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 Amended and Restated 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 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, Right or Restricted Stock 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, Right or Restricted Stock 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 granting of an Option or Right, or the issuance
of Shares thereunder, such Option or Right 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.
A-13
XXI. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an Option or Right which may be granted hereunder and, in
the case of an Option, 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 or Right and shall be delivered to or upon the
order of such person. Any shares of Restricted Stock shall be issued in the name
of the grantee and shall bear a legend indicating that it is subject to the
restrictions contained in the Amended and Restated Plan, in addition to any
other legends or instructions that the Committee shall deem appropriate.
The Company may endorse such legend or legends upon the certificates for Shares
issued pursuant to the Amended and Restated 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 Amended
and Restated Plan and any agreement between the Company and the optionee or
grantee 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 Incentive Option granted under
the Amended and Restated 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.
XXII. 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 Right or Nonqualified Option
granted hereunder who exercises the Right, or a 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 any government to be withheld or otherwise deducted and paid by such
corporation in respect of the issuance or disposition of such Shares. The
Company may require an individual receiving a grant of Restricted Stock to
reimburse the Company (or its parent or subsidiary) for any taxes required by
any government to be withheld or otherwise deducted and paid by such corporation
in respect of the grant or vesting of such Restricted Stock. 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 or the grant or
vesting of Restricted Stock 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 (or its parent or subsidiary) becomes
subject to a withholding obligation under applicable law with respect to the
exercise of a Right or Non-Qualified Option or the grant or vesting of
Restricted Stock (the "Tax Date"), except as set forth below, a holder of a
Right, Non-Qualified Option or of Restricted Stock 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
Right or Nonqualified 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 Right, Nonqualified Option or Restricted Stock,
A-14
Shares previously issued pursuant to the exercise of an Option or Right or other
Shares owned by the holder or (c) combining, in the case of a Right or
Nonqualified 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 or Right 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.
XXIII. 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
Amended and Restated 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 Amended and Restated 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.
XXIV. FOREIGN LAWS
The Committee may grant Options, Rights and Restricted Stock to individual
participants who are subject to the tax laws of nations other than the United
States, which Options, Rights and Restricted Stock may have terms and conditions
as determined by the Committee as necessary to comply with applicable foreign
laws. The Committee may take any action which it deems advisable to obtain
approval of such Options, Rights and Restricted Stock by the appropriate foreign
governmental entity; provided, however, that no such Options, Rights or
Restricted Stock may be granted pursuant to this Article XXIV and no action may
be taken which would result in a violation of the Exchange Act, the Code or any
other applicable law.
XXV. AMENDMENT OF THE AMENDED AND RESTATED PLAN
The Board of Directors may, from time to time, amend the Amended and Restated
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, Rights and Restricted Stock under the Amended and Restated
Plan or the maximum number of Shares with respect to which Options, Rights
and/or Restricted Stock may be granted under the Amended and Restated Plan to
any one employee in any one taxable year (other than an increase resulting from
an adjustment provided for in Article XVIII hereof) or to alter the class of
eligible participants in the Amended and Restated Plan. The Committee shall be
authorized to amend the Amended and Restated 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 XVIII, the rights and
obligations under any Option, Right or Restricted Stock granted before amendment
of the Amended and Restated Plan or any unexercised portion of such Option,
Right or Restricted Stock shall not be adversely affected by amendment of the
Amended and Restated Plan or the Option, Right or terms of Restricted Stock
without the consent of the holder of such Option, Right or Restricted Stock.
A-15
XXVI. DURATION; TERMINATION OR SUSPENSION OF THE AMENDED AND RESTATED PLAN
The Amended and Restated Plan shall continue indefinitely until terminated by
the Board of Directors or terminated pursuant to Article XXX. The Board of
Directors may at any time suspend or terminate the Amended and Restated Plan.
Options, Rights and Restricted Stock may not be granted while the Amended and
Restated Plan is suspended or after it is terminated. Rights and obligations
under any Option, Right or Restricted Stock granted while the Amended and
Restated Plan is in effect shall not be altered or impaired by suspension or
termination of the Amended and Restated Plan, except upon the consent of the
person to whom the Option, Right or Restricted Stock was granted. The power of
the Committee to construe and administer any Options, Rights or Restricted Stock
granted prior to the termination or suspension of the Amended and Restated Plan
under Article III nevertheless shall continue after such termination or during
such suspension.
XXVII. SAVINGS PROVISION
With respect to persons subject to Section 16 of the Exchange Act, transactions
under the Amended and Restated 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 Amended and Restated 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.
XXVIII. GOVERNING LAW
The Amended and Restated Plan, such Options, Rights and Restricted Stock 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.
XXIX. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be deemed to
affect the validity of any other provision.
XXX. AMENDMENT EFFECTIVE DATE
The Amended and Restated Plan shall become effective at 9:00 A.M., New York City
time, on the Amendment Effective Date; provided, however, if the Amended and
Restated Plan has not been approved by a vote of stockholders of the Company at
an annual meeting or any special meeting within 12 months after the Amendment
Effective Date, the Amended and Restated Plan shall terminate and the plan as in
effect prior to the Amendment Effective Date shall be in effect and any Options,
Restricted Stock or Rights granted under the Amended and Restated Plan shall
terminate, but only to the extent that such Options, Restricted Stock or Rights
could not have been granted under the plan prior to the Amendment Effective
Date.
A-16
ANNEX B
HOMEFED CORPORATION
AUDIT COMMITTEE CHARTER
This Charter is intended as a component of the flexible framework within which
the Board of Directors of the Company (the "Board"), assisted by its committees,
directs the affairs of the Company. While it should be interpreted in the
context of all applicable laws, regulations and listing requirements, as well as
in the context of the Company's Certificate of Incorporation and Bylaws, it is
not intended to establish by its own force any legally binding obligations.
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board in overseeing (i) the conduct and integrity of 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 and disclosure controls, (iii) compensation of the
Company's independent auditor, its independence, its conduct of the annual audit
and its engagement for any other services, and (v) the preparation of the audit
committee report required by SEC rules to be included in the Company's annual
proxy statement.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention or deemed appropriate by it. 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, independent auditors and
other experts and advisers. The Board and the Committee are in place to
represent the Company's stockholders; accordingly, the independent auditor is
ultimately accountable to the Board and the Committee.
The Committee's job is one of oversight. The Company's management is responsible
for preparing the Company's financial statements and the independent auditors
are responsible for auditing those financial statements. The Committee
recognizes that financial management and the independent 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 independent
auditor's work.
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.
KEY RESPONSIBILITIES
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 perform any other
duties deemed necessary or appropriate by the Committee or the Board or as are
imposed by law, accounting standards or similar requirements.
o The Committee shall review and discuss with management and the
independent auditor the Company's financial statements, including, prior to
public release, annual 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 interim financial statements
to be included in the Company's quarterly reports, to be filed with the
Securities and Exchange Commission (the "SEC") (including (a) any certification
regarding the financial statements or the Company's internal accounting and
financial controls and procedures and disclosure controls or procedures filed
with SEC by the Company's senior executive and financial officers; and (b) the
matters required to be discussed with the independent auditor 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, and
by SAS 100).
B-1
o The Committee shall review and discuss with management and the
independent auditor (i) all critical accounting policies and practices used by
the Company; (ii) any material alternative accounting treatments of financial
information within GAAP that have been discussed with management, including the
ramifications of the use of the alternative treatments and the treatment
preferred by the accounting firm; and (iii) material written communications
between the independent auditor and the management, such as any management
letter or schedule of unadjusted differences.
o The Committee shall prepare a report to be included in the
Company's annual proxy statement stating whether or not the Committee: (i) has
reviewed and discussed the audited financial statements with management; (ii)
has discussed with the independent auditor the matters required to be discussed
by SAS No. 61 and 90; (iii) has received the written disclosures and the letter
from the independent auditor required by Independence Standards Board Standard
No. 1, as may be modified and supplemented, and has discussed with it its
independence; and (iv) based on the review and discussions referred to above,
the members of the Committee recommended to the Board that the audited financial
statements be included in the Company's Annual Report on Form 10-K for filing
with the SEC.
o The Committee shall discuss with management and the independent
auditor significant issues regarding accounting principles and policies, as well
as the quality and adequacy of the Company's internal controls.
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
independent auditor.
o The Committee shall:
o approve the fees to be paid to the independent auditor;
o review and pre-approve any audit and permitted non-audit services
(including the fees and terms thereof) provided by the Company's independent
auditor (with pre-approvals disclosed as required in the Company's periodic
public filings);
o request from the independent auditor annually, and review, a formal
written statement delineating all relationships between the independent auditor
and the Company consistent with Independence Standards Board Standard Number 1
(as modified or supplemented);
o discuss with the independent auditor any such disclosed
relationships and their impact on the independent auditor's independence, and
recommend that the Board take appropriate action in response to the independent
auditor's report to satisfy itself of the auditor's independence; and
o evaluate, and assure the regular rotation of, the lead audit
partner of the independent auditor as required by law.
B-2
PROXY
HOMEFED CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, AUGUST 24, 2004 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, each with power of substitution and revocation, to
represent the undersigned at the Annual Meeting of Stockholders of HomeFed
Corporation to be held at Grand Pacific Palisades Resort and Hotel, 5805 Armada
Drive, Carlsbad, California 92008, the Terrace Room on August 24, 2004 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 July 30,
2004, the Proxy Statement furnished herewith, and a copy of the Annual Report to
Stockholders for the year ended December 31, 2003 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)
ANNUAL MEETING OF STOCKHOLDERS OF
HOMEFED CORPORATION
AUGUST 24, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
| Please detach along perforated line and mail in the envelope provided. |
| |
\|/ \|/
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW
AND "FOR" PROPOSALS 2 AND 3 AND PURSUANT TO ITEM 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
- --------------------------------------------------------------------------------
- ----------------------------- ---------------------- ------ --------------------------------------------- ------ ---------- --------
FOR AGAINST ABSTAIN
- ----------------------------- ----------------------------- --------------------------------------------- ------ ---------- --------
ITEM 1. Election of Directors ITEM 2. Ratification of the selection of
PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
NOMINEES: auditors of the Company for 2004.
[ ] FOR ALL NOMINEES ( ) PATRICK D. BIENVENUE
( ) PAUL J. BORDEN ITEM 3. Amendment to the Company's 1999 stock
WITHHOLD AUTHORITY ( ) TIMOTHY M. CONSIDINE incentive plan to increase the number of
[ ] FOR ALL NOMINEES ( ) IAN M. CUMMING shares of our common stock available for [ ] [ ] [ ]
( ) MICHAEL A. LOBATZ issuance under the plan by 300,000 shares.
FOR ALL EXCEPT ( ) JOSEPH S. STEINBERG
[ ] (See instructions below) 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 adjournment of the Meeting.
INSTRUCTION: To withhold authority to vote for any
- ----------- individual nominee(s), mark "FOR ALL EXCEPT"
and fill in the circle next to each nominee
you wish to withhold, as shown here: O
- ----------------------------------------------------------- ------------------------------------------------------------------------
- ---------------------------------------------------- ------ --------------------
To change the address on your account, please check the box at right and
indicate your next address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via
this method. [ ]
- ---------------------------------------------------- ------ --------------------
- ------------------------ ------------------------ ----- -------------- --------------------- ---------------------- ------- --------
Signature of Date: Signature of Date:
Stockholder Stockholder
- ------------------------ ------------------------ ----- -------------- --------------------- ---------------------- ------- --------
- ----- -----------------------------------------------------------------------------------------------------------------------------
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
- ----- -----------------------------------------------------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS OF
HOMEFED CORPORATION
AUGUST 24, 2004
---------------------------------------------------
PROXY VOTING INSTRUCTIONS
---------------------------------------------------
MAIL - Date, sign and mail your proxy card
in the envelope provided as soon as possible.
------------------------------ ------------------------------
COMPANY NUMBER
------------------------------ ------------------------------
ACCOUNT NUMBER
------------------------------ ------------------------------
CONTROL NUMBER
------------------------------ ------------------------------
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone
telephone and follow the instructions.
Have your proxy card available when you call.
-OR -
INTERNET - Access "WWW.VOTEPROXY.COM" and
follow the on-screen instructions.
Have your proxy card available when
you access the web page.
- --------------------------------------------------------------------------------
You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com
up until 11:59 PM Eastern Time the day before the cut-off or meeting date.
- --------------------------------------------------------------------------------
| Please detach along perforated line and mail in the envelope provided |
| IF you are not voting via telephone or the Internet. |
\|/ \|/
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW
AND "FOR" PROPOSALS 2 AND 3 AND PURSUANT TO ITEM 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
- --------------------------------------------------------------------------------
- ----------------------------- ---------------------- ------ --------------------------------------------- ------ ---------- --------
FOR AGAINST ABSTAIN
- ----------------------------- ----------------------------- --------------------------------------------- ------ ---------- --------
ITEM 1. Election of Directors ITEM 2. Ratification of the selection of
PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
NOMINEES: auditors of the Company for 2004.
[ ] FOR ALL NOMINEES ( ) PATRICK D. BIENVENUE
( ) PAUL J. BORDEN ITEM 3. Amendment to the Company's 1999 stock
WITHHOLD AUTHORITY ( ) TIMOTHY M. CONSIDINE incentive plan to increase the number of
[ ] FOR ALL NOMINEES ( ) IAN M. CUMMING shares of our common stock available for [ ] [ ] [ ]
( ) MICHAEL A. LOBATZ issuance under the plan by 300,000 shares.
FOR ALL EXCEPT ( ) JOSEPH S. STEINBERG
[ ] (See instructions below) 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 adjournment of the Meeting.
INSTRUCTION: To withhold authority to vote for any
- ----------- individual nominee(s), mark "FOR ALL EXCEPT"
and fill in the circle next to each nominee
you wish to withhold, as shown here: O
- ----------------------------------------------------------- ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your next address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method. [ ]
- ---------------------------------------------------- ------ --------------------
- ------------------------ ------------------------ ----- -------------- --------------------- ---------------------- ------- --------
Signature of Date: Signature of Date:
Stockholder Stockholder
- ------------------------ ------------------------ ----- -------------- --------------------- ---------------------- ------- --------
- ----- -----------------------------------------------------------------------------------------------------------------------------
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
- ----- -----------------------------------------------------------------------------------------------------------------------------