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 Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Homestore.com, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
[LOGO OF homestore.com]
Notice of Annual Meeting of Stockholders
To Be Held May 10, 2001
----------------
To Our Stockholders:
The annual meeting of stockholders (the "Annual Meeting") of Homestore.com,
Inc., a Delaware corporation (the "Company" or "Homestore"), will be held on
May 10, 2001 at 2:00 p.m. at the offices of Homestore located at 30700 Russell
Ranch Road, Westlake Village, California 91362, for the following purposes:
1. To elect two Class II directors to serve for a term of three years and
until their respective successors are duly elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the year ending December 31, 2001; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on March 28, 2001 are
entitled to receive notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if he or she
previously returned a proxy.
By Order of the Board of Directors,
/s/ JOSEPH J. SHEW
Joseph J. Shew
Senior Vice President, Chief
Financial Officer and Assistant
Secretary
Westlake Village, California
April 16, 2001
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED
TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
[LOGO OF HOMESTORE.COM]
30700 Russell Ranch Road
Westlake Village, California 91362
----------------
PROXY STATEMENT
----------------
This proxy statement is furnished on behalf of the Board of Directors (the
"Board") of Homestore.com, Inc., a Delaware corporation (the "Company" or
"Homestore"), for use at Homestore's Annual Meeting of Stockholders (the
"Annual Meeting") to be held on May 10, 2001 at 2:00 p.m., and at any
postponements or adjournments thereof. The Annual Meeting will be held at the
offices of Homestore located at 30700 Russell Ranch Road, Westlake Village,
California 91362.
These proxy solicitation materials were mailed on or about April 18, 2001
to all stockholders entitled to vote at the Annual Meeting.
ABOUT THE MEETING
What is the purpose of the Annual Meeting?
At the Annual Meeting, stockholders will vote on the matters outlined in
the accompanying Notice of Meeting of stockholders on the cover page of this
proxy statement, including election of the Class II directors and ratification
of the Company's independent accountants.
Who is entitled to vote?
Only stockholders of record at the close of business on the record date,
March 28, 2001 (the "Record Date"), are entitled to vote at the Annual
Meeting, or any postponements or adjournments of the meeting.
What are the Board's recommendations on the proposals?
The Board recommends a vote FOR each of the nominees and FOR the
ratification of PricewaterhouseCoopers LLP as independent accountants for the
year ending December 31, 2001.
How do I vote?
Sign and date each proxy card you receive and return it in the postage-
prepaid envelope enclosed with your proxy materials. If you are a registered
stockholder and attend the meeting, you may deliver your completed proxy card
in person.
If your shares are held by your broker or bank, in "street name," you will
receive a form from your broker or bank seeking instructions as to how your
shares should be voted. If you do not instruct your broker or bank how to
vote, your broker or bank will vote your shares if it has discretionary power
to vote on a particular matter.
Can I change my vote after I return my proxy card?
Yes, you have the right to revoke your proxy at any time before the Annual
Meeting by notifying the Secretary of the Company in writing, voting in person
or returning a later-dated proxy card.
1
Who will count the vote?
Mellon Investor Services will count the votes and act as the inspector of
election.
What shares are included on the proxy card(s)?
The shares on your proxy card(s) represent ALL of your shares. If you do
not return your proxy card(s), your shares will not be voted.
What does it mean if I get more than one proxy card?
If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. Sign and return all proxy cards to
ensure that all your shares are voted. We encourage you to have all accounts
registered in the same name and address (whenever possible). You can
accomplish this by contacting our transfer agent, Mellon Investor Services
(800-356-2017), or, if your shares are held in "street name," by contacting
the broker or bank who holds your shares.
How many shares can vote?
As of the Record Date, 107,178,238 shares of common stock, the only voting
securities of the Company, were issued and outstanding. Every stockholder is
entitled to one vote for each share of common stock held.
What is a "quorum"?
A "quorum" is a majority of the outstanding shares entitled to vote. They
may be present in person or represented by proxy. For the purposes of
determining a quorum, shares held by brokers or nominees for which the Company
receives a signed proxy will be treated as present even if the broker or
nominee does not have discretionary power to vote on a particular matter or if
instructions were never received from the beneficial owner. These shares are
called "broker non-votes." Abstentions will be counted as present for quorum
purposes.
What is required to approve each proposal?
For the election of the Class II directors, once a quorum has been
established, the nominees for director who receive the most votes will become
Class II directors of the Company. To ratify the appointment of the
independent accountants, a majority of the shares represented at the Annual
Meeting, either in person or by proxy, must be voted in favor of the proposal.
If a broker indicates on its proxy that it does not have discretionary
authority to vote on a particular matter, the affected shares will be treated
as not present and not entitled to vote with respect to that matter, even
though the same shares may be considered present for quorum purposes and may
be entitled to vote on other matters.
What happens if I abstain?
Proxies marked "abstain" will be counted as shares present for the purpose
of determining the presence of a quorum, but for purposes of determining the
outcome of a proposal, shares represented by such proxies will not be treated
as affirmative votes. For proposals requiring an affirmative vote of a
majority of the shares present, an abstention is equivalent to a "no" vote.
How will the Company solicit proxies?
Mellon Investor Services was retained by the Company to assist in the
distribution of proxy materials and solicitation of votes. The cost of
soliciting proxies, which will be conducted by mail, will be borne by the
Company. These costs will include the expense of preparing and mailing proxy
solicitation materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their reasonable out-of-pocket expenses for
forwarding proxy solicitation materials to stockholders. Proxies may also be
solicited in person, by telephone, or by facsimile by directors, officers and
employees of the Company without additional compensation.
2
ITEM 1--ELECTION OF DIRECTORS
The Bylaws of the Company presently provide that the authorized number of
directors may be fixed by resolution of the Board from time to time. The Board
has fixed the authorized number of directors at eight. The Bylaws of the
Company also provide for the Board to be divided into three classes as nearly
equal in size as possible with staggered three-year terms. The term of office
for Class II, Class III and Class I directors will expire at the annual meeting
of stockholders to be held in 2001, 2002 and 2003, respectively. The term of
office for the Class II directors elected at this Annual Meeting will expire at
the annual meeting of stockholders to be held in 2004 or until his earlier
death, resignation or removal.
Unless otherwise instructed, the proxyholders will vote the proxies received
by them for the two nominees named below. If any nominee of the Company is
unable or declines to serve as a Class II director at the time of the Annual
Meeting, the proxies will be voted for any nominee designated by the present
Board of Directors to fill the vacancy. Each director has agreed to serve as
director, if elected.
The nominees for election as Class II directors are:
Kenneth K. Klein Director since August 1998
Mr. Klein, 57, has served as a director of Homestore since August 1998. He
is President and Chief Executive Officer of a privately held group of
companies, which are involved in diversified residential and light commercial
construction and land development, including Kleinco Construction Services,
Inc., which Mr. Klein has served as President and Chief Executive Officer since
1980. Mr. Klein was the National Vice President of the National Association of
Home Builders and is currently a member of its Executive Committee. Mr. Klein
received a B.S. in accounting from Oklahoma State University.
William E. Kelvie Director since August 1998
Mr. Kelvie, 53, has served as a director of Homestore since August 1998. He
currently serves as Chief Executive Officer of Overture Corporation, an
information technology company, since July 2000. Prior to his tenure at
Overture Corporation, Mr. Kelvie was the Chief Information Officer responsible
for information technology systems at Federal National Mortgage Association, or
Fannie Mae, including its technology business and internal systems, and has
served as special adviser to the Chief Executive Officer of Fannie Mae since
July 2000. Mr. Kelvie joined Fannie Mae in 1990 as Senior Vice President and
Chief Information Officer. Prior to his tenure at Fannie Mae, Mr. Kelvie was a
partner with Nolan, Norton & Co., a management consulting company specializing
in information technology strategies and plans. He also served in various
capacities with The Dexter Corporation, a specialized manufacturing company,
and The Travelers Insurance Company, an insurance and financial services
company. Mr. Kelvie serves on the board of directors of Viant Corporation. Mr.
Kelvie received a B.A. in English literature from Tufts University and an M.A.
in English literature from Trinity College.
Recommendation of the Board
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE CLASS
II NOMINEES LISTED ABOVE.
Board Meetings and Committees
The Board held a total of 10 meetings during the fiscal year ended
December 31, 2000. During that period, no incumbent director attended fewer
than 75% of the total number of meetings of the Board of Directors, or the
total number of meetings of all committees of the Board of Directors on which
that director served. The Board of Directors has an Audit Committee, a
Compensation Committee and a Nominations Committee.
The Audit Committee consists of William E. Kelvie and Kenneth K. Klein. The
Compensation Committee consists of L. John Doerr and Joe F. Hanauer and the
Nominations Committee consists of L. John Doerr, Joe F. Hanauer and Stuart H.
Wolff. The Audit Committee reviews the Company's financial statements and
accounting
3
practices, makes recommendations to the Board regarding the selection of
independent auditors and reviews the results and scope of the audit and other
services provided by the Company's independent auditors. The Audit Committee
held six meetings during 2000. The Compensation Committee makes
recommendations to the Board concerning salaries and incentive compensation
for our officers and employees, and administers the Company's stock plans and
employee benefit plans. The Compensation Committee held sixteen meetings
during 2000. The Nominations Committee makes recommendations to the Board
concerning Board composition and recruiting of new members. The Nominations
Committee held two meetings during 2000. There are currently no nominee
recommendations from security holders that have been presented to the
Nominations Committee for consideration.
Director Compensation
Directors do not receive cash compensation for their services as directors,
but are reimbursed for their reasonable and necessary expenses in attending
Board and committee meetings.
During 2000, each new non-employee director was entitled to receive an
option to purchase 15,000 shares of the Company's common stock and each non-
employee director who has served continuously as a member of the Board for a
period of at least one year was granted an option to purchase 7,500 shares of
the Company's common stock under the 1999 Stock Incentive Plan, with the
exception of Messrs. Hanauer and Klein, who each received options to purchase
50,000 and 20,000 shares of the Company's common stock, respectively, and
Mr. McDermott, who declined the options available to him. Mr. Kelvie declined
the stock option granted to him and such stock option was cancelled by the
Company. The Board may, in its discretion, grant additional options depending
on the level of additional services performed by any particular member of the
Board. Each option has an exercise price equal to the fair market value of the
Company's common stock on the date of grant and a ten-year term, but will
terminate within a specified time, as defined in the 1999 Stock Incentive
Plan, following the date the option holder ceases to be a director or
consultant. Each option vests monthly over three years.
Effective in 2001, each new non-employee director will be granted an option
to purchase 30,000 shares of the Company's common stock and each non-employee
director who has served continuously as a member of the Board for at least one
year will be granted an option to purchase 20,000 shares of the Company's
common stock under the stock incentive plan. Each non-employee director who
serves as chairman of a board committee will be granted an option to purchase
up to an additional 20,000 shares of the Company's common stock, but not to
exceed an aggregate of 40,000 shares in any given year. Except as otherwise
provided by the Board of Directors, each of these options will vest on a
monthly basis over three years.
ITEM 2--RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, the Company's independent
accountants for the year ended December 31, 2000, was recommended by the Audit
Committee, whose selection was approved by the Board to act in such capacity
for the fiscal year ending December 31, 2001, subject to ratification by the
stockholders. If the stockholders of the Company do not ratify the selection
of PricewaterhouseCoopers LLP, the Board, on the recommendation of the Audit
Committee, will appoint substitute independent accountants.
A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting, will be given the opportunity to make a statement if he or she
so desires, and will be available to respond to appropriate questions.
Recommendation of the Board
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL
TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001.
4
MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive
officers, our Class II nominees and our Class I and III directors.
Name Age Position
---- --- --------
Chairman of the Board and Chief Executive
Stuart H. Wolff, Ph.D.(3)...... 37 Officer
Executive Vice President, Chief Operating
John M. Giesecke, Jr........... 39 Officer and Secretary
Executive Vice President, Business
Peter B. Tafeen................ 31 Development and Sales
Joseph J. Shew................. 35 Senior Vice President, Chief Financial
Officer and Assistant Secretary
Michael A. Buckman............. 53 Senior Vice President, New Verticals
Senior Vice President, Corporate
M. Jeffrey Charney............. 41 Marketing and Communications
Senior Vice President, Human Resources
Catherine Kwong Giffen......... 35 and Administration
David M. Rosenblatt............ 36 Senior Vice President, Corporate
Development and General Counsel
Barbara T. Alexander........... 52 Director
L. John Doerr(2)(3)............ 49 Director
Joe F. Hanauer(2)(3)........... 62 Director
William E. Kelvie(1)........... 53 Director
Kenneth K. Klein(1)............ 57 Director
Terrence M. McDermott.......... 58 Director
Richard A. Smith............... 47 Director
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Nominations Committee.
The Company's executive officers and directors are also executive officers
and directors of its subsidiary, RealSelect, Inc. ("RealSelect"), with the
exception of Barbara T. Alexander and Richard A. Smith, and Messrs. Buckman,
Giesecke and Shew are also directors of RealSelect. Under the terms of the
Company's stockholders agreement relating to RealSelect, the National
Association of REALTORS (the "NAR") has the right to appoint two members to
the RealSelect board of directors. See "Related Party Transactions." The
directors of RealSelect appointed by the NAR are Mr. Terrence M. McDermott,
Executive Vice President of the NAR, and Mr. Alan Yassky. By virtue of its
ownership of the sole outstanding share of Series A preferred stock of the
Company, the NAR has the right to elect one director of the Company, and the
NAR has exercised that right to elect Mr. McDermott as a director.
Stuart H. Wolff, Ph.D. joined Homestore in November 1996 as Chairman and
Chief Executive Officer. Dr. Wolff is a Class III director. From September
1994 to September 1996, Dr. Wolff was Vice President of Business Services at
TCI Interactive and at AND Interactive, subsidiaries of TCI Communications,
Inc., a cable company. Prior to his tenure at TCI Communications, Inc., Dr.
Wolff was an engineer at IBM and a research scientist at AT&T Bell Labs. In
1986, he was recognized by the Japanese Ministry of Education and awarded the
Monbushu Fellowship at the Tokyo Institute of Technology. Dr. Wolff received a
B.S. in electrical engineering from Brown University and an M.E.E. and Ph.D.
in electrical engineering from Princeton University.
John M. Giesecke, Jr. joined Homestore in June 1998 as Vice President of
Finance, was appointed as Secretary in August 1998 and was promoted to
Executive Vice President and Chief Financial Officer in December 1998. In
February 2001, Mr. Giesecke was promoted to Executive Vice President, Chief
Operating Officer and Secretary. From March 1994 to March 1998, Mr. Giesecke
was Vice President of Corporate Controllership in charge of worldwide
controllership activities for The Walt Disney Company. Prior to his tenure at
The Walt Disney Company, Mr. Giesecke spent eight years as a certified public
accountant with Price Waterhouse LLP, most recently as Senior Manager. Mr.
Giesecke received a B.S. in business and public administration from the
University of Arizona.
5
Peter B. Tafeen joined Homestore in September 1997 as Executive Vice
President of Business Development. In February 2001, Mr. Tafeen was promoted
to Executive Vice President, Business Development and Sales. From June 1995 to
September 1997, Mr. Tafeen served as Director of Business Development for
PointCast Incorporated, an Internet software company. Prior to his tenure at
PointCast, from March 1993 to June 1995, Mr. Tafeen served as an Area Director
for the Gartner Group, Inc., a technology consulting company. Mr. Tafeen
received a B.S. in political science from the University of Massachusetts at
Amherst.
Joseph J. Shew joined Homestore in August 1998 as Controller, was promoted
to Vice President of Finance in January 1999, and was promoted to Senior Vice
President, Chief Financial Officer and Assistant Secretary in February 2001.
From October 1994 to August 1998, Mr. Shew was Director of Corporate
Controllership for The Walt Disney Company. Prior to his tenure at Disney, Mr.
Shew spent six years as a certified public accountant with Price Waterhouse
LLP, most recently as Manager. Mr. Shew received a B.S. in accounting from
Villanova University.
Michael A. Buckman joined Homestore in February 1999 as President and Chief
Operating Officer and currently holds the title of Senior Vice President, New
Verticals. Prior to joining Homestore, Mr. Buckman served as Chief Executive
Officer for Worldspan Travel Information Services, a worldwide travel
reservation and airline support services organization, since June 1995. From
January 1992 to June 1995, Mr. Buckman was Executive Vice President of
American Express Company. Prior to his tenure at American Express, he was
Chief Operating Officer of Lifeco Services Corporation, a travel services
company, and President of the Sabre Travel Information Network, a travel
distribution company. Mr. Buckman received a B.B.A. from the University of
Texas and an M.B.A. from the University of Missouri.
M. Jeffrey Charney joined Homestore in June 1999 as Senior Vice President
of Marketing and Communications. From June 1994 to June 1999, Mr. Charney
served as Senior Vice President of Marketing and Communications for Kaufman
and Broad Home Corporation, a real estate development company. Prior to
joining Kaufman and Broad, Mr. Charney served as Director of Advertising and
Employee Communications for Rockwell International from 1988 through 1994.
Earlier, from 1982 through 1988, he managed public relations at Raytheon
Corporation. Mr. Charney received his B.A. in journalism from the University
of South Carolina and his M.A. in Journalism from Ohio State University.
Catherine Kwong Giffen joined Homestore in April 1998 as Senior Vice
President of Human Resources and Administration. Prior to joining Homestore,
Ms. Giffen served from April 1994 to April 1998 as Vice President of Human
Resources and Administration of Iwerks Entertainment, Inc., an entertainment
company. Earlier, from January 1990 to April 1994, Ms. Giffen served as Vice
President of Human Resources for the Real Estate Industries Division of
BankAmerica Corporation and Vice President of Human Resources for the
Securities Lending and Mortgage-Backed Securities Division of Security Pacific
National Bank. Ms. Giffen received a B.A. in political science from the
University of California at Los Angeles.
David M. Rosenblatt joined Homestore in October 1998 as Senior Vice
President, Corporate Development and General Counsel. Prior to joining
Homestore, Mr. Rosenblatt was Senior Product Manager for Intuit Inc.'s
QuickenMortgage from August 1997 to October 1998. Prior to his tenure at
Intuit, Mr. Rosenblatt founded and served as President of CyberSports, Inc., a
software company, from January 1995 to February 1999. He practiced corporate
law for Weil, Gotshal & Manges LLP and for Chadbourne & Parke LLP from 1990 to
January 1996. Mr. Rosenblatt received an M.B.A. from the Harvard University
Graduate School of Business, a J.D. from Northwestern University School of Law
and a B.A. in accounting from Pennsylvania State University.
Barbara T. Alexander has served as a director of Homestore since April
2001. Ms. Alexander is a Class I director. She currently serves as a Senior
Advisor to UBS Warburg. Prior to becoming an advisor in October 1999, Ms.
Alexander was a Managing Director, and founded and managed the Construction
and Furnishings Group (North America), in the Corporate Finance Department of
UBS Warburg. Ms. Alexander joined Dillon Read & Co., a predecessor firm, from
Salomon Brothers in January 1992, where she was also a Managing Director in
the Corporate Finance Department. Ms. Alexander is a member of the Board of
Directors of Centex Corporation and CRH plc, a worldwide leader in
construction products. Ms. Alexander received a B.S. and M.S. in theoretical
mathematics from the University of Arkansas.
6
L. John Doerr has served as a director of Homestore since August 1998. Mr.
Doerr is a Class III director. He has been a general partner of Kleiner
Perkins Caufield & Byers since September 1980. Prior to his tenure at Kleiner
Perkins, Mr. Doerr was employed by Intel Corporation for five years. He serves
on the boards of directors of Amazon.com, Inc., Intuit Inc., Drugstore.com,
Inc., Martha Stewart Living, Omnimedia, Inc., Handspring, Inc., FreeMarkets,
Inc. and Sun Microsystems, Inc. Mr. Doerr received a B.S.E.E and an M.E.E from
Rice University and an M.B.A. from the Harvard University Graduate School of
Business.
Joe F. Hanauer has served as a director of Homestore since November 1996.
Mr. Hanauer is a Class III director. Since 1988, Mr. Hanauer, through Combined
Investments, L.P., has directed investments in companies primarily involved in
real estate and financial services. Mr. Hanauer is former Chairman of Grubb &
Ellis Company and former Chairman of Coldwell Banker Residential Group, Inc.
Mr. Hanauer is a director of Grubb & Ellis Company and MAF Bancorp, Inc. Mr.
Hanauer received a B.S. in business administration from Roosevelt University.
William E. Kelvie: See "Item 1--Election of Directors."
Kenneth K. Klein: See "Item 1--Election of Directors."
Terrence M. McDermott has served as a director of Homestore since December
2000. Mr. McDermott is a Class I director. He has served as Executive Vice
President of the National Association of REALTORS(R) since July 1997. From
January 1993 to July 1997, Mr. McDermott served as Executive Vice President
and Chief Executive Officer of the American Institute of Architects. Mr.
McDermott received a B.A. in organizational development from the National
College of Education.
Richard A. Smith has served as a director of Homestore since April 2001.
Mr. Smith is a Class I director. He has been Chairman and Chief Executive
Officer of the Real Estate Division of Cendant Corporation since December
1997. Prior to this, Mr. Smith was President of the Real Estate Division of
HFS Incorporated from October 1996 to December 1997 and Executive Vice
President of Operations for HFS Incorporated from February 1992 to October
1996. Mr. Smith is a Director of NRT Incorporated. Mr. Smith received a B.S.
in criminal justice from Columbus State University and a M.S. in criminal
justice from Troy State University.
7
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to beneficial ownership
of the Company's common stock as of February 28, 2001, by (1) each stockholder
known by the Company to be the beneficial owner of 5% or more of the Company's
common stock, (2) each of the Company's directors, (3) each executive officer
listed in the summary compensation table and (4) all directors and executive
officers as a group.
Beneficial ownership is determined under rules of the Securities and
Exchange Commission (the "SEC") and generally includes voting or investment
power with respect to securities. The information is not necessarily
indicative of beneficial ownership for any other purpose. Unless otherwise
indicated below, to the Company's knowledge, the persons and entities named in
the table have sole investment power with respect to all shares beneficially
owned, subject to community property laws where applicable. Shares of common
stock subject to options that are currently exercisable or exercisable within
60 days of February 28, 2001 are deemed to be outstanding and to be
beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person. Unless otherwise noted, the address for each stockholder listed is
c/o Homestore.com, Inc., 30700 Russell Ranch Road, Westlake Village,
California 91362.
Shares
Beneficially
Owned
------------------
Name of Beneficial Owner Number Percent
- ------------------------ ---------- -------
Richard A. Smith(1)....................................... 21,614,105 20.2%
Cendant Corporation
L. John Doerr(2).......................................... 6,021,053 5.6
Kleiner Perkins Caufield & Byers
Capital Research and Management Company(3)................ 5,327,300 5.0
Terrence M. McDermott(4).................................. 4,025,640 3.8
National Association of REALTORS(R)
Stuart H. Wolff, Ph.D.(5)................................. 3,214,991 3.0
Michael A. Buckman(6)..................................... 599,054 *
Joe F. Hanauer(7)......................................... 456,347 *
Ingleside Interests, L.P.
John M. Giesecke, Jr.(8).................................. 358,821 *
Peter B. Tafeen(9)........................................ 263,722 *
David M. Rosenblatt(10)................................... 183,448 *
Kenneth K. Klein(11)...................................... 42,666 *
Barbara T. Alexander...................................... -- *
William E. Kelvie......................................... -- *
All 15 directors and executive officers as a group(12).... 37,245,708 34.3
- --------
* Represents beneficial ownership of less than 1%.
(1) Includes the shares held by Cendant, of which Mr. Smith is the Chairman
and Chief Executive Officer of the Real Estate Division of Cendant. As
part of the acquisition of Move.com, Inc. and Welcome Wagon
International, Inc., Cendant has agreed that for the periods of time and
in the circumstances described in the agreements relating to the
acquisition, Cendant will vote the Homestore shares that it holds in the
same manner and proportion as the votes cast by the holders of our
voting stock other than Cendant or its affiliates. Mr. Smith disclaims
beneficial ownership of shares held by Cendant. Also includes 2,500
shares held by Mr. Smith. The address of Cendant is 9 West 57th Street,
7th Floor, New York, NY 10019.
(2) Includes 5,486,697 shares held by Kleiner Perkins Caufield & Byers VIII,
317,405 shares held by KPCB VIII Founders Fund, and 1,615 shares held by
KPCB Information Sciences Zaibatsu Fund II. L. John Doerr is a general
partner of the general partner of these funds. Mr. Doerr disclaims
beneficial ownership of shares held by these entities except to the
extent of his pecuniary interest in these entities. Also includes
8
197,837 shares held by Mr. Doerr and 17,499 shares subject to options that
are held by Mr. Doerr that are vested and exercisable as of April 29,
2001. The address of Kleiner Perkins Caufield & Byers is 2750 Sand Hill
Road, Menlo Park, CA 94025.
(3) Based upon the information contained in a Form 13G, dated February 12,
2001, by Capital Research and Management Company, a registered
investment advisor, Capital Research and Management Company beneficially
owned 5,327,300 shares of Homestore's common stock at December 29, 2000
with no power to vote any of such shares and sole power to dispose all
of such shares. The percentage beneficially owned at February 28, 2001
has been calculated based upon the share ownership information included
in the Form 13G. The address of Capital Research and Management Company
is 333 South Hope Street, Los Angeles, CA 90071.
(4) Includes the shares held by the NAR, of which Mr. McDermott is the
Executive Vice President. Mr. McDermott disclaims beneficial ownership
of shares held by this association. The address of the NAR is 430 North
Michigan Avenue, Chicago, IL 60611.
(5) Includes 2,639,990 shares held in trust by Dr. Wolff, of which 459,380
are subject to our right to repurchase these shares. This right of
repurchase lapses with respect to 30,728 shares per month. Also includes
575,001 shares subject to options that are exercisable as of April 29,
2001.
(6) Includes 599,054 shares held by Mr. Buckman, of which 375,000 are
subject to our right to repurchase these shares. This right of
repurchase lapses with respect to 15,625 shares per month.
(7) Includes 406,348 shares held by Ingleside Interests, L.P. Mr. Hanauer is
a general partner of this entity. Mr. Hanauer disclaims beneficial
ownership of shares held by this entity except to the extent of his
pecuniary interest in this entity. Also includes 49,999 shares subject
to options that are held by Mr. Hanauer that are vested and exercisable
as of April 29, 2001.
(8) Includes 67,990 shares held by Mr. Giesecke, of which 49,994 are subject
to our right to repurchase these shares. This right of repurchase lapses
with respect to 3,645 shares per month. Also includes 290,831 shares
subject to options that are exercisable as of April 29, 2001.
(9) Includes 149,498 shares held by Mr. Tafeen, of which 30,208 are subject
to our right to repurchase these shares. This right of repurchase lapses
with respect to 7,811 shares per month. Included in the shares held are
12,195 shares held in trust. Also includes 114,224 shares subject to
options that are exercisable as of April 29, 2001.
(10) Includes 97,994 shares held by Mr. Rosenblatt, of which 4,834 are
subject to our right to repurchase these shares. This right lapses with
respect to 4,834 shares per month. Also includes 85,454 shares subject
to options that are exercisable as of April 29, 2001.
(11) Includes 25,000 shares held by Mr. Klein. Also includes 17,666 shares
subject to options that are held by Mr. Klein that are vested and
exercisable as of April 29, 2001.
(12) Includes the shares beneficially owned by the persons and entities
described in footnotes (1), (2) and (4)-(11). Also includes an
additional 123,691 shares held by other officers, of which 15,103 are
subject to our right to repurchase these shares. This right of
repurchase lapses with respect to 4,166 to 6,770 shares per month.
Included in the shares held are 2,200 shares held in trust. Also
includes 342,170 shares subject to options held by those other officers
that are exercisable as of April 29, 2001.
9
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid or accrued during
2000, 1999 and 1998 to the Company's Chief Executive Officer and the four
other most highly compensated executive officers whose salary and bonus for
2000, 1999 and 1998 was more than $100,000.
Long Term
Compensation
------------
Annual Compensation Securities
-------------------- Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
- --------------------------- ---- ---------- --------- ------------
Stuart H. Wolff, Ph.D................... 2000 212,115 275,000 400,000
Chairman of the Board and Chief 1999 197,308 250,000 500,000
Executive Officer 1998 185,538 100,000 1,475,000
John M. Giesecke, Jr.................... 2000 172,691 100,320 200,000
Executive Vice President, Chief 1999 157,846 100,000 100,000
Operating Officer and Secretary 1998 71,417 29,000 375,000
Peter B. Tafeen......................... 2000 174,538 100,320 100,000
Executive Vice President, Business 1999 157,846 100,000 134,375
Development and Sales 1998 156,442 52,500 125,000
Michael A. Buckman...................... 2000 199,051 62,500 --
Senior Vice President, New Verticals 1999 127,019 250,000 750,000
1998 -- -- --
David M. Rosenblatt..................... 2000 163,231 79,500 --
Senior Vice President, Corporate 1999 152,077 48,000 175,000
Development and General Counsel 1998 31,124 14,000 175,000
Mr. Buckman commenced his employment in February 1999. Mr. Giesecke
commenced his employment in June 1998. Mr. Rosenblatt commenced his employment
in October 1998.
Employment-Related Agreements
Dr. Wolff
In August 1998, the Company entered into a three-year employment agreement
with Stuart H. Wolff, Ph.D. Under this agreement:
Compensation. Dr. Wolff initially received a base salary equal to $200,000
per year for the first year of the agreement. His salary can be increased by
the board in subsequent years. Dr. Wolff's current base salary is $225,000.
Dr. Wolff is also eligible to receive a target bonus of 100% of his base
salary for that year. He also receives an automobile and cellular phone
allowance of up to $4,800 per year.
Acceleration of stock option vesting. If the Company is acquired or if a
change in control of Homestore occurs, 50% of his then unvested options will
immediately become vested.
Termination of employment. If Dr. Wolff's employment is terminated without
cause or if Dr. Wolff resigns for "good reason," he will be entitled to
receive an amount equal to his annual base salary and his stock options will
continue to vest for another 12 months. Good reason includes a material
reduction in his duties or responsibilities or a reduction in his salary.
"Cause" is defined as: (a) the executive's material breach of the agreement,
(b) conviction of the executive for any crime constituting a felony or moral
turpitude, or any other criminal act against Homestore, or (c) willful
misconduct which damages Homestore.
10
Mr. Giesecke
In June 1998, the Company entered into an at-will employment agreement with
John M. Giesecke, Jr. Under this agreement:
Compensation. Mr. Giesecke initially received a base salary of $130,000 per
year. Mr. Giesecke's current base salary is $190,000 per year. He is also
eligible to receive a target bonus of 40% of his base salary.
Mr. Tafeen
In September 1997, the Company entered into an at-will employment agreement
with Peter B. Tafeen. Under this agreement:
Compensation. Mr. Tafeen initially received a base salary of $140,000 per
year. Mr. Tafeen's current base salary is $190,000 per year. He is also
eligible to receive a target bonus of 40% of his base salary.
Mr. Buckman
In February 1999, the Company entered into an at-will employment agreement
with Michael A. Buckman. Under this agreement:
Compensation. Mr. Buckman initially received a base salary equal to
$200,000 per year. Mr. Buckman's current base salary is $200,000 per year. Mr.
Buckman may also be eligible to receive an annual bonus in an amount up to 35%
of his base salary. Mr. Buckman will also be entitled to receive a
supplemental cash bonus based upon the market price of our common stock during
(1) the eight week period following the anniversary of his employment
agreement and (2) the year following the anniversary of his employment
agreement. The total amount of this supplemental cash bonus will in no event
exceed $450,000 for the first year or $700,000 for the second year and is
subject to downward adjustment for the first year based on specified events
occurring during the second year. Mr. Buckman will also receive customary
employee benefits and reimbursement of relocation and travel expenses.
Change in Control. In the event of a change in control of Homestore, an
additional 25% of the then unvested shares subject to Mr. Buckman's stock
option will immediately become vested.
Mr. Rosenblatt
In September 1998, the Company entered into an at-will employment agreement
with David M. Rosenblatt. Under this agreement:
Compensation. Mr. Rosenblatt initially received a base salary of $140,000
per year. Mr. Rosenblatt's current base salary is $190,000 per year. He is
also eligible to receive a target bonus of 35% of his base salary.
Mr. Charney
In June 1999, the Company entered into an at-will employment agreement with
M. Jeffrey Charney. Under this agreement:
Compensation. Mr. Charney initially received a base salary of $160,000 per
year. Mr. Charney's current base salary is $170,000 per year. Mr. Charney may
also be eligible to receive a target bonus of 35% of his base salary.
11
Ms. Giffen
In March 1998, the Company entered into an at-will employment agreement
with Catherine Kwong Giffen. Under this agreement:
Compensation. Ms. Giffen initially received a base salary equal to $120,000
per year. Ms. Giffen's current salary is $170,000. She is also eligible to
receive a target bonus of 35% of her base salary.
Stock Option Grants in 2000
The following table sets forth grants of stock options to our Chief
Executive Officer and our four other most highly compensated executive
officers in 2000.
All options granted to these executive officers in 2000 are either
incentive stock options or nonqualified stock options. Generally, 20% of these
options vest and become exercisable one year after the date of grant; then
vesting is on a monthly basis for 48 months. Subsequent grants normally vest
and become exercisable monthly over 60 months. Some of these options are
subject to acceleration upon a change of control of Homestore or termination
of the optionee's employment. See "--Employment-Related Agreements." The
options expire ten years from the date of grant and were granted at an
exercise price equal to the fair market value of our common stock on the date
of grant, as determined by the Board of Directors.
Potential realizable values are computed by (a) multiplying the number of
shares of common stock subject to a given option by the exercise price per
share, (b) assuming that the aggregate stock value derived from that
calculation compounds at the annual 5% or 10% rates shown in the table for the
entire ten year term of the option and (c) subtracting from that result the
aggregate option exercise price. The 5% and 10% assumed annual rates of stock
price appreciation are mandated by the rules of the SEC and do not represent
our estimate or projection of future common stock prices.
Percentage Potential Realizable
Number of of Total Value at Assumed
Securities Options Annual Rates of Stock Price
Underlying Granted to Exercise Appreciation for Option Term
Options Employees Price Expiration ----------------------------
Name Granted(#) in 2000 ($/Shr) Date 5% 10%
- ---- ---------- ---------- -------- ---------- ------------- --------------
Stuart H. Wolff, Ph.D... 400,000 5.35% 26.56 6/29/10 $ 6,682,005 $ 16,933,514
John M. Giesecke, Jr.... 200,000 2.67% 26.56 6/29/10 3,341,003 8,466,757
Peter B. Tafeen......... 100,000 1.34% 26.56 6/29/10 1,670,501 4,233,378
There were no option grants to Michael A. Buckman and David M. Rosenblatt
during 2000.
The percentage of total options granted to employees is based on options to
purchase a total of 7,483,464 shares of common stock of Homestore granted
during 2000.
Dr. Wolff's option vests monthly over four years commencing on June 30,
2000. Mr. Giesecke's option vests monthly over four years commencing on June
30, 2000. Mr. Tafeen's option vests monthly over four years commencing on June
30, 2001.
12
Aggregated Option Exercises in 2000 and Option Values at December 31, 2000
The following table sets forth the number of shares acquired and the value
realized upon exercise of stock options during 2000, and the number of shares
of common stock subject to exercisable and unexercisable stock options held as
of December 31, 2000, by our Chief Executive Officer and each of our four most
highly compensated executive officers. Also reported are values of "in-the-
money" options, which represent the positive spread between the exercise
prices of outstanding stock options and the fair market value of $20.13 per
share, based on the closing price of our common stock on December 31, 2000.
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at In-the-Money Options at
Shares December 31, 2000 December 31, 2000
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
Stuart H. Wolff, Ph.D... -- $ -- 549,999 350,001 $5,562,500 $ --
John M. Giesecke, Jr.... 23,750 2,799,136 217,906 266,684 2,873,905 1,698,460
Peter B. Tafeen......... 20,151 2,277,378 114,224 100,000 1,384,966 --
David M. Rosenblatt..... -- -- 82,121 38,334 1,306,161 --
RELATED PARTY TRANSACTIONS
Other than compensation agreements and other arrangements, which are
described under the heading in "Management," and the transactions described
below, since January 1, 2000, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we were
or will be a party:
. in which the amount involved exceeded or will exceed $60,000, and
. in which any director, executive officer, holder of more than 5% of our
common stock on an as-converted basis or any member of their immediate
family had or will have a direct or indirect material interest.
Operating Agreement with the National Association of REALTORS(R)
In November 1996, we entered into an operating agreement with the NAR which
governs how our subsidiary, RealSelect, operates the REALTOR.com(R) web site
on behalf of the NAR. For a description of the operating agreement, please see
our Annual Report on Form 10-K for 2000, filed with the SEC.
Beginning in 1999, we are required to make quarterly payments to the NAR
based on RealSelect's operating revenues.
In 2000 and each year after 2000, RealSelect must pay the NAR annually the
lesser of:
. 5% of RealSelect's operating revenues; or
. 15% of RealSelect's operating revenues less the percentage of our
operating revenues paid to parties that provide us with real estate
listings.
This royalty payment is reduced by 2% to the extent earnings before
interest and taxes are less than 10% of revenue, for that quarter.
We paid the NAR $99,288 and approximately $1.8 million for 1999 and 2000,
respectively, in royalties based on RealSelect's consolidated gross revenues
as defined under this agreement, less sales commissions paid to third parties
related to those revenues, less any costs from permitted marketing of
information or data.
13
Loans to Executive Officers
In August 1998, Dr. Wolff exercised options to acquire shares of the
Company's common stock in exchange for a promissory note. In April 1999, Dr.
Wolff, Mr. Giesecke, Mr. Tafeen, Mr. Buckman, Mr. Charney, Mr. Rosenblatt and
Ms. Giffen exercised options to acquire shares of the Company's common stock
in exchange for promissory notes due to the Company and, in the case of Dr.
Wolff, which also includes related expenses. Additional information with
respect to the outstanding balance of these promissory notes are as follows:
Largest
Shares Aggregate
Acquired Amount of
Upon the Balance Indebtness
Exercise Outstanding at Outstanding
of Interest March 31, 2001 During 2000
Name Options Rate (%) ($) ($)
- ---- --------- ---------- -------------- -----------
Stuart H. Wolff, Ph.D. ........ 2,345,590 5.21--5.49 3,236,302 3,202,426
John M. Giesecke, Jr. ......... 166,660 5.21 95,592 211,052
Peter B. Tafeen................ 375,000 5.21 146,610 239,271
Michael A. Buckman............. 750,000 4.66 1,325,596 1,566,051
M. Jeffrey Charney............. 65,000 5.25 179,392 800,640
David M. Rosenblatt............ 229,545 5.21 162,804 362,863
Catherine Kwong Giffen......... 150,000 5.21 93,689 208,401
These notes are full recourse and collateralized by common stock of the
Company and are due in 2003 with respect to Dr. Wolff and 2004 with respect to
the other officers shown in the table.
Cendant Corporation
In February 2001, pursuant to an Agreement and Plan of Reorganization dated
as of October 26, 2000 (the "Merger Agreement"), the Company acquired
Move.com, Inc. ("Move.com") and Welcome Wagon International, Inc. ("Welcome
Wagon"), which were subsidiaries of Cendant Corporation ("Cendant"). Pursuant
to the terms of the Merger Agreement, the Company issued approximately 21.4
million shares of common stock to Cendant in exchange for all of the
outstanding shares of Move.com and Welcome Wagon and assumed approximately
3.2 million outstanding stock options of Move.com. In connection with the
Merger Agreement, the Company entered into a series of agreements with
Cendant.
Commercial Agreements. In connection with the Merger Agreement, the Company
entered into a Master Operating Agreement with Cendant under which the Company
agreed to display on the Company's web sites listing data provided by Cendant
or its affiliates under an exclusive license. Cendant also gave the Company a
non-exclusive license to use other related data. The term of this agreement is
40 years. Other commercial agreements included: a web marketing agreement
under which the Company agreed to display Cendant advertisements on the
Company's web sites over a three year period; a Transaction Platform Marketing
Agreement which provides that the parties will promote the Company's real
estate transaction management platform technologies and use of the platform
and key system components; and a Marketplace Agreement giving the Company the
right to act as the exclusive advertising agent for Cendant web sites, the
option to include a marketplace on Cendant web sites, an option to host these
web sites and the exclusive right to sell some types of advertising on these
web sites.
Registration Rights. The Company also entered into a registration rights
agreement with Cendant. Under the Merger Agreement and the registration rights
agreement, the Company agreed to file a registration statement on Form S-3 and
to keep it effective for up to one year in order to register the distribution
from Cendant to certain of its security holders of some of the shares that
Cendant received in the acquisition transaction (the "Distributable Shares").
In addition, commencing on the third anniversary of the closing date of the
acquisition of Move.com and Welcome Wagon (the "Closing Date"), Cendant can
request that the Company file a registration statement on up to three
occasions covering the public resale of no more than 10% of the shares it
14
received in the acquisition. The Company is required to effect only one
registration statement in any 12 month period, and the Company does not have
to keep it effective for more than 120 days. Cendant will also have piggyback
registration rights after the first anniversary of the closing of the
acquisition. The registration rights agreement terminates on the earlier of
ten years or when all shares received in the acquisition may be resold in any
90 day period under Rule 144 of the Securities Act.
Stockholder Agreement. The Company entered into a Stockholder Agreement
with Cendant. Cendant has agreed to a ten-year standstill agreement that, in
most circumstances, prevents Cendant from acquiring additional Homestore
common stock. Cendant is also restricted in certain circumstances from seeking
to control the Company's management, Board of Directors or policies during
those ten years. Cendant is also subject to various restrictions on the
transfer of its shares. The agreement contains voting restrictions lasting at
least five years, including the obligation to vote shares in the same manner
and proportion as cast by holders other than Cendant or its affiliates, and
Cendant will be required to be present in person or by proxy at all meetings
of stockholders. Cendant will not be able to exercise dissenter's rights. As
part of the agreement, Cendant has the right to designate one person for
election as a member of the Company's Board and to designate one non-voting
observer, and pursuant to this right, Richard A. Smith was appointed as a
director.
15
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee (the "Committee") with
respect to the Company's audited financial statements for 2000. The material
in this report is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by reference
in any of our filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934, whether made before or after the date of this proxy
statement and irrespective of any general incorporation language in any
filings.
The Committee's purpose is to assist the Board of Directors (the "Board")
in its oversight of the Company's financial accounting, reporting and
controls. The Board, in its business judgment, has determined that all members
of the Committee are "independent" as required by listing standards of the
Nasdaq National Market. The Committee operates under a charter approved by the
Board in July 2000. A copy of the current charter is included as Appendix A to
this proxy statement.
Management is responsible for the preparation, presentation and integrity
of the Company's financial statements, accounting and financial reporting
principles and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors, PricewaterhouseCoopers LLP, are responsible for performing an
independent audit of the consolidated financial statements in accordance with
generally accepted auditing standards. The Committee discussed with our
independent auditors the overall scope and plans for the audit. The Committee
meets with the independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls and the overall quality of the Company's financial
reporting.
In performing its oversight role, the Committee considered and discussed
the audited financial statements with management and the independent auditors.
The Committee also discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees. The Committee received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees. The Committee also considered whether the provision of non-
audit services by the independent auditors is compatible with maintaining the
auditors' independence and has discussed with the auditors the auditors'
independence. Based on the reports and discussions described in this report,
and subject to the limitations on the role and responsibilities of the
Committee referred to below and in its charter, the Committee recommended to
the Board that the audited financial statements be included in the Annual
Report on Form 10-K for 2000. The Committee and the Board also recommended,
subject to stockholder approval, the selection of PricewaterhouseCoopers LLP
as independent auditors.
The members of the Committee are not professionally engaged in the practice
of auditing or accounting and are not experts in the fields of accounting or
auditing, including in respect of auditor independence. Members of the
Committee rely without independent verification on the information provided to
them and on the representations made by management and the independent
auditors. Accordingly, the Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Committee's considerations
and discussions referred to above do not assure that the audit of the
Company's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
PricewaterhouseCoopers LLP is in fact "independent" as required by the Nasdaq
National Market.
By the Audit Committee
of the Board of Directors
William E. Kelvie
Kenneth K. Klein
16
Fees Billed For Services Rendered By Independent Auditors
For the fiscal year ended December 31, 2000, PricewaterhouseCoopers LLP,
our independent auditors, billed approximately:
Audit and reviews of Form 10-Q............................... $ 249,000
Other non audit services..................................... 2,652,000
REPORT OF THE COMPENSATION COMMITTEE
To The Board of Directors
This Report of the Compensation Committee shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed soliciting material or filed
under such acts.
The Compensation Committee of the Board of Directors (the "Committee")
makes final decisions regarding compensation and stock option grants to
executive officers. The Committee is composed of two non-employee directors,
none of whom have any interlocking relationships as defined by the Securities
and Exchange Commission.
General Compensation Policy
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company. The Committee reviews base salary levels
and target bonuses for the Chief Executive Officer ("CEO") and other executive
officers of the Company each year. The Committee also administers the
Company's incentive and equity plans, including the 1999 Stock Incentive Plan
and the 1999 Employee Stock Purchase Plan. The Committee believes that in this
highly competitive emerging marketplace, equity compensation provides the best
incentive to encourage outstanding performance and align management and
stockholder interests.
The Committee's philosophy in compensating executive officers and certain
other key employees of the Company is to relate compensation to corporate,
business unit and individual performance, and increases in shareholder value,
while providing a total compensation package that is competitive and enables
the Company to attract, motivate, reward and retain key executives and
employees. Consistent with this philosophy, annual salary adjustments and the
incentive component of executive officer compensation is determined after a
review of the Company's and individual's performance for the previous year.
The long-term equity incentives for executive officers are stock options
granted under the option plan. During 2000, to ensure the compensation program
is competitive and appropriate, the Committee retained an independent
consulting firm to review the compensation policy for its executives compared
to other companies considered comparable to the Company in terms of size, type
of business, performance, position and compensation philosophy. The Committee
also uses salary surveys obtained annually for reference purposes, but its
salaries are not targeted to a specific level of comparable compensation. In
preparing the performance graph for this Proxy Statement, the Company used the
JPMorgan H&Q Technology Index as a business index. Certain companies included
in the JPMorgan H&Q Technology Index were excluded because they were
determined not to be competitive with the Company for executive talent, or
because compensation information was not available.
2000 Executive Compensation
Executive compensation for 2000 included base salary, cash bonuses and
stock option grants. Base salaries for the Company's executive officers are
evaluated annually and are based on the executive's contribution to
17
Company performance, level of responsibility, experience and breadth of
knowledge. In January 2001, the Committee approved a bonus plan for the
Company's executives for 2000 performance based on the following measures:
Company revenue, Company earnings, and personal "Characteristics of
Excellence." The Committee did not assign specific weightings to these
individual measures. These bonuses ranged from approximately 25% to 125% of
base salary.
The Company has in the past relied heavily on long-term equity-based
compensation to compensate and incentivize its executive officers. In 2000,
stock options were granted to executive officers to aid in retaining them and
to align their interests with those of the stockholders. Stock options
typically have been granted to executive officers when the executive first
joined the Company, in connection with the significant change in
responsibilities and, occasionally, to achieve equity within the executive's
peer group and comparable companies. The number of shares granted is within
the discretion of the Committee and is based on anticipated future
contribution to corporate and/or business unit results, past performance, and
work consistency within the executive's peer group. Generally, 20% of these
options vest and become exercisable one year after the date of grant; then
vesting is on a monthly basis for 48 months. Subsequent grants normally vest
and become exercisable monthly over 60 months.
2000 CEO Compensation
Dr. Stuart Wolff was hired by the Company pursuant to an employment
agreement dated August 1998 with a base salary of $200,000 and a target bonus
of up to 100% of his base salary for that year, and thereafter, at a rate
mutually agreed to by the Committee and which reflects the executive's level
of contribution to the Company. For the year ended December 31, 2000, Dr.
Wolff's salary compensation was $225,000. The Committee solicited input from
all of the Company's Board members concerning Dr. Wolff's performance as part
of the process of determining Dr. Wolff's total compensation for 2000. Based
on this input, and (i) the Company meeting its financial and operational goals
for 2000, such as reaching cash profitability in the third quarter of 2000,
(ii) the Company's successful follow-on public offering, which raised over
$400 million for the Company, (iii) Dr. Wolff's leadership while the Company
sustained 213% year-over-year revenue growth, (iv) the number of vested and
unvested options held by Dr. Wolff, and (v) the Company's strategic alliances
and acquisitions completed in 2000, the Committee awarded Dr. Wolff a bonus of
$275,000 and granted him stock options to purchase a total of 400,000 shares
of the Company's common stock.
Compliance with Section 162(m) of the Internal Revenue Code of 1986
The Company intends to comply with the requirements of Section 162(m) of
the Internal Revenue Code of 1986. The 1999 Stock Incentive Plan is already in
compliance with Section 162(m) by limiting stock awards to named executive
officers. The Company does not expect cash compensation for 2001 for any
executive officer to exceed $1,000,000.
By the Compensation Committee
of the Board of Directors
L. John Doerr
Joe F. Hanauer
18
STOCK PERFORMANCE GRAPH
The stock price performance graph below is required by the Securities and
Exchange Commission. It shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such acts.
The following graph compares, for the period that the Company's common
stock has been registered under Section 12 of the Exchange Act (which
commenced on August 4, 1999), the cumulative total stockholder return for (i)
the Company, (ii) the Composite Index for The Nasdaq Stock Market (U.S.
Companies) (the "Nasdaq Index"), and (iii) the JPMorgan H&Q Technology Index.
This graph assumes the investment of $100 on August 5, 1999 (the first trading
day) in the Company's common stock, the Nasdaq Index and the JPMorgan H&Q
Technology Index, and further assumes no payment or reinvestment of dividends.
[PERFORMANCE GRAPH APPEARS HERE]
Measurement Period H&Q NASDAQ MARKET
(Fiscal Year Covered) HOMESTORE.COM INC. INTERNET INDEX INDEX-U.S.
- --------------------- ------------------ -------------- ------------
- -
Measurement Pt- 8/5/99 $100 $100 $100
FYE 8/31/99 $263.13 $105.28 $107.07
FYE 9/30/99 $208.44 $116.54 $107.2
FYE 10/29/99 $234.69 $128.86 $115.79
FYE 11/30/99 $326.25 $162.4 $129.87
FYE 12/31/99 $371.25 $225.6 $158.44
FYE 1/31/2000 $487.81 $211.52 $152.57
FYE 2/29/2000 $341.56 $268.91 $181.58
FYE 3/31/2000 $243.75 $235.64 $177.84
FYE 4/28/2000 $ 91.25 $177.58 $149.58
FYE 5/31/2000 $117.81 $149.4 $131.54
FYE 6/30/2000 $145.94 $174.81 $154.62
FYE 7/31/2000 $175 $163.89 $146.24
FYE 8/31/2000 $270.94 $190.15 $163.52
FYE 9/29/2000 $233.75 $168.16 $142.27
FYE 10/31/2000 $170 $142.47 $130.55
FYE 11/30/2000 $122.5 $ 95.01 $100.65
FYE 12/29/2000 $100.63 $ 86.8 $ 92.25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's common stock
(collectively, "Reporting Persons") to file with the SEC initial reports of
ownership and reports of changes in ownership of the Company's common stock.
Reporting Persons are required by SEC regulation to furnish the Company with
copies of all Section 16(a) reports they file.
Based solely on its review of the copies of Section 16(a) reports received
or written representations from certain Reporting Persons, the Company
believes that all reporting requirements under Section 16(a) for the fiscal
year ended December 31, 2000 were met in a timely manner by the reporting
persons.
19
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Proposals of stockholders which are intended to be presented by such
stockholders at the Company's 2001 annual meeting must be received by the
Company no later than December 13, 2001 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
ADVANCE NOTICE PROCEDURES FOR NEXT YEAR'S ANNUAL MEETING
The Company hereby advises stockholders that, until further notice, notice
of a stockholder-sponsored proposal submitted outside of the process of Rule
14a-8 under the Securities Exchange Act of 1934 (i.e., a proposal to be
presented at the next annual meeting of stockholders but not submitted for
inclusion in the Company's proxy statement) will be considered untimely under
the Company's bylaws unless it is received between February 9, 2002 and March
11, 2002.
OTHER MATTERS
The Company knows of no other matters to be submitted to the stockholders
at the Annual Meeting. If any other matters properly come before the
stockholders at the Annual Meeting, it is the intention of the persons named
on the enclosed proxy card to vote the shares they represent as the Board of
Directors may recommend.
Westlake Village, CA
April 16, 2001
By Order of the Board of Directors,
/s/ JOSEPH J. SHEW
Joseph J. Shew
Senior Vice President, Chief
Financial Officer and Assistant
Secretary
20
APPENDIX A
HOMESTORE.COM, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. Purpose
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Homestore.com, Inc. (the "Company") is to assist
the Board in fulfilling its statutory and fiduciary oversight responsibilities
relating to the Company's financial accounting, reporting and controls. The
Committee's principal functions are to:
. Monitor the periodic reviews of the adequacy of the accounting and
financial reporting processes and systems of internal control that are
conducted by the Company's independent auditors and the Company's
financial and senior management;
. Review and evaluate the independence and performance of the Company's
independent auditors; and
. Facilitate communication among the Company's independent auditors, the
Company's financial and senior management and the Board.
The Committee will fulfill these functions primarily by carrying out the
activities enumerated in Part IV of this Charter of the Audit Committee of the
Board of Directors ("Charter"). In order to serve these functions, the
Committee shall have unrestricted access to Company personnel and documents,
and shall have authority to direct and supervise an investigation into any
matters within the scope of its duties, including the power to retain outside
counsel in connection with any such investigation.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is
the responsibility of management and the Company's independent auditors. Nor
is it the duty of the Committee to conduct investigations, to resolve
disagreements, if any, between management and its independent auditors or to
assure compliance with laws and regulations and the Company's policies and
procedures.
II. Membership
All members of the Committee will be appointed by, and shall serve at the
discretion of, the Board. Unless a chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the
Committee membership.
As of the date this Charter is adopted and until June 13, 2001, the
Committee shall consist of at least three members of the Board. At least a
majority of the members shall be persons who are not officers, employees or
consultants of the Company or any subsidiary and who do not have any other
relationship which, in the opinion of the Board of Directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director. As of June 14, 2001, the Committee shall consist of three or
more members of the Board, with the exact number being determined by the
Board. Each member of the Committee shall be "independent" as defined by the
rules of The Nasdaq Stock Market, as they may be amended from time to time
(the "Rules"), except as otherwise permitted by such Rules. Each member of the
Committee shall have the ability to read and understand fundamental financial
statements (or become able to do so within a reasonable time after joining the
Committee) and at least one member shall have prior experience in accounting,
financial management or financial oversight, as required by the Rules.
III. Meetings
Meetings of the Committee shall be held from time to time as determined by
the Board and/or the members of the Committee. The Committee should
periodically meet with the independent auditors out of the presence of
management about internal controls, the fullness and accuracy of the Company's
financial statements and any
A-1
other matters that the Committee or these groups believe should be discussed
privately with the Committee. The Committee members, or the Chairman of the
Committee on behalf of all of the Committee members, should communicate with
management and the independent auditors on a quarterly basis in connection
with their review of the Company's financial statements.
IV. Responsibilities and Duties
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. These processes are set forth
as a guide with the understanding that the Committee may supplement them as
appropriate and may establish policies and procedures from time to time that
it deems necessary or advisable in fulfilling its responsibilities.
1. Review the Company's quarterly and annual financial statements, including
any report or opinion by the independent auditors, prior to distribution to
the public or filing with the Securities and Exchange Commission.
2. In connection with the Committee's review of the annual financial
statements:
. Discuss with the independent auditors and management the financial
statements and the results of the independent auditors' audit of the
financial statements.
. Discuss any items required to be communicated by the independent
auditors in accordance with SAS 61, as amended. These discussions should
include the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles, the
reasonableness of significant judgments, the clarity of the disclosures
in the Company's financial statements and any significant difficulties
encountered during the course of the audit, including any restrictions
on the scope of work or access to required information.
3. In connection with the Committee's review of the quarterly financial
statements:
. Discuss with the independent auditors and management the results of the
independent auditors' SAS 71 review of the quarterly financial
statements.
. Discuss significant issues, events and transactions and any significant
changes regarding accounting principles, practices, judgments or
estimates with management and the independent auditors, including any
significant disagreements among management and the independent auditors.
The Chairman of the Committee on behalf of the full Committee may undertake
this discussion.
4. Discuss any comments or recommendations of the independent auditors
outlined in their annual management letter. Approve a schedule for
implementing any recommended changes and monitor compliance with the
schedule.
5. Discuss with the independent auditors and management their periodic reviews
of the adequacy of the Company's accounting and financial reporting
processes and systems of internal control, including the adequacy of the
systems of reporting to the audit committee by each group.
6. Periodically consult with the independent auditors out of the presence of
management about internal controls, the fullness and accuracy of the
Company's financial statements and any other matters that the Committee or
these groups believe should be discussed privately with the Committee.
7. Review the independence and performance of the independent auditors.
Recommend to the Board of Directors the appointment or discharge of the
independent auditors.
8. Communicate with the Company's independent auditors about the Company's
expectations regarding its relationship with the auditors, including the
following: (i) the independent auditors' ultimate accountability to the
Board and the Committee, as representatives of the Company's stockholders;
and (ii) the ultimate authority and responsibility of the Board and the
Committee to select, evaluate and, where appropriate, replace the
independent auditors.
A-2
9. Review and approve processes and procedures to ensure the continuing
independence of the Company's independent auditors. These processes shall
include obtaining and reviewing, on an annual basis, a letter from the
independent auditors describing all relationships between the independent
auditors and the Company required to be disclosed by Independence
Standards Board Standard No. 1, reviewing the nature and scope of such
relationships and discontinuing any relationships that the Committee
believes could compromise the independence of the auditors.
10. Review the independent auditors' audit plan.
11. Approve the fees and other significant compensation to be paid to the
independent auditors.
12. Periodically review the status of any legal matters that could have a
significant impact on the Company's financial statements.
13. Annually prepare a report to the Company's stockholders for inclusion in
the Company's annual proxy statement as required by the rules and
regulations of the Securities and Exchange Commission, as they may be
amended from time to time.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant matters related to the Committee's
responsibilities.
15. Review and reassess the adequacy of the Committee's Charter at least
annually. Submit the Charter to the Company's Board of Directors for
review and include a copy of the Charter as an appendix to the Company's
proxy statement as required by the rules and regulations of the
Securities and Exchange Commission, as they may be amended from time to
time.
16. Perform any other activities required by applicable law, rules or
regulations, including the rules of the Securities and Exchange
Commission and any stock exchange or market on which the Company's Common
Stock is listed, and perform other activities that are consistent with
this Charter, the Company's Bylaws and governing laws, as the Committee
or the Board deems necessary or appropriate.
A-3
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Please mark [X]
your votes as
indicated in
this example
1. ELECTION OF DIRECTORS. NOMINEES: William E. Kelvie and Kenneth K. Klein 2. RATIFICATION OF APPOINTMENT OF
(INSTRUCTIONS: To withhold authority to vote for any PRICEWATERHOUSECOOPERS LLP AS
individual nominee with the name of that nominee in ACCOUNTANTS.
the space below.)
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_]
3. OTHER BUSINESS. In their discretion, the Proxy Holders I WILL ATTEND [_] The undersigned hereby ratifies and confirms
are authorized to vote upon such other business as may all that the Proxy Holders, or any of them, or
properly come before the Annual Meeting or any their substitutes, shall lawfully do or cause
postponements or adjournments thereof. The Board of to be done by virtue hereof, and hereby revokes
Directors at present knows of no other business to be any and all proxies heretofore given to the
presented by or on behalf of the Company or the Board undersigned to vote at the Meeting. The
of Directors at the Annual Meeting. undersigned acknowledges receipt of the Notice
of Annual Meeting of Stockholders, the Proxy
Statement accompanying said Notice and the
audited Financial Statement delivered with or
prior to said Notice.
Dated___________________________________, 2001
______________________________________________
(Please Print Name)
______________________________________________
(Signature of Holder of common stock)
(Please date this Proxy and sign above as
your name(s) appear(s) on this card. Joint
owners each should sign personally. Corporate
proxies should be signed by an authorized
officer. Executors, administrators, trustees,
etc. should give their full titles).
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.FOLD AND DETACH HERE.
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Homestore.com, Inc.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of Homestore.com, Inc. (the "Company") common stock
hereby nominate(s), constitute(s) and appoint(s) Stuart H. Wolff and John M.
Giesecke and each of them, the attorneys, agents and proxies of the undersigned,
with full power of substitution to each, to attend and act as proxy or proxies
of the undersigned at the annual meeting of stockholders (the "Annual Meeting")
of the Company to be held at the offices of the Company located at 30700 Russell
Ranch Road, Westlake Village, California on May 10, 2001 at 2:00 p.m., local
time, or any postponements or adjournments thereof, and to vote as specified
herein the number of shares which the undersigned, if personally present would
be entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSAL 2. THE PROXY WHEN
PROPERLY EXECUTED SHALL BE VOTED IN ACCORDANCE AS DIRECTED. IF NO DIRECTION IS
MADE FOR A GIVEN PROPOSAL, THE PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSAL 2.
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.FOLD AND DETACH HERE.
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