UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )Filed by the Registrant
[X]xFiled by a Party other than the Registrant
[ ]oCheck 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 Materials Pursuant to Section 240.14a-12
| ¨ | Preliminary Proxy Statement | |
| o | Confidential For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| x | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material Pursuant to §240.14a-12 |
THE INTERGROUP CORPORATION
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(Name
(Name of Registrant as Specified In Its Charter)
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THE INTERGROUP CORPORATION
10940 WILSHIRE BLVD.Wilshire Blvd., Suite 2150
LOS ANGELES, CALIFORNIA
los angeles, California 90024
(310) 889-2500
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 23, 2011
Notice of annual meeting of shareholders
to be held on february 19, 2014
To the Shareholders of The InterGroup Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The InterGroup Corporation ("InterGroup"(“InterGroup” or the "Company"“Company”) for the fiscal year ended June 30, 2010,2013, will be held at the Hilton San Francisco Financial District, 750 Kearny Street, San Francisco, CA 94108 on February 23, 201119, 2014 at 2:30 P.M. for the following purposes:
(1) To elect two Class B Directors to serve until the fiscal 2013
Annual Meeting and until his or her successor shall have been duly
elected and qualified;
(2) To ratify the retention of Burr Pilger Mayer, Inc. as the Company's
independent registered public accounting firm for the fiscal year
ending June 30, 2011;
(3) To approve, in a non-binding vote, the compensation of our named
executive officers;
(4) To determine, in a non-binding vote, whether a shareholder vote to
approve the compensation of our named executive officers should occur
every one, two or three years; and
(5) To transact such other business as may properly come before the
meeting, or any postponements or adjournments thereof.
| (1) | To elect Directors as follows: (a) one Class A Director (to fill a vacancy resulting from the resignation of a Class A Director elected at the fiscal 2012 Annual Meeting) to serve until the fiscal 2015 Annual Meeting; and (b) two Class B Directors to serve until the fiscal 2016 Annual Meeting, in each case, until their successors shall have been duly elected and qualified; |
| (2) | To ratify the retention of Burr Pilger Mayer, Inc. as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2014; |
| (3) | To approve, in a non-binding vote, the compensation of our named executive officers; |
| (4) | To approve amendments to the Company’s Omnibus Employee Incentive Plan of 2010 and an option grant pursuant thereto; and |
| (5) | To transact such other business as may properly come before the meeting, or any postponements or adjournments thereof. |
The Board of Directors has fixed the close of business on January 11, 201113, 2014 as the record date for determining the shareholders entitled to notice of, and to vote at, the Annual Meeting or any postponements or adjournments thereof.
The Company'sCompany’s Annual Report for the fiscal year ended June 30, 20102013 accompanies this Notice of Annual Meeting of Shareholders and Proxy Statement.
| By Order of the Board of Directors, | |
| January 27, 2014 | Gary N. Jacobs |
| Los Angeles, California | Secretary |
Your vote is important whether you own a few or many shares. Please complete, sign, date and promptly return the Board of Directors,
/s/ Gary N. Jacobs
Gary N. Jacobs
Secretary
Los Angeles, California
January 21, 2011
YOUR PROXY IS IMPORTANT WHETHER YOU OWN A FEW OR MANY SHARES. PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE PROVIDED. RETURN THE PROXY EVEN IF YOU PLAN TO ATTEND
THE MEETING. YOU MAY ALWAYS REVOKE YOUR PROXY AND VOTE IN PERSON.
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enclosed proxy in the self-addressed, postage-paid envelope provided. Please return your proxy even if you plan to attend the meeting. You may always revoke your proxy and vote in person.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Heldheld on February 23, 2011.19, 2013. The Company'sCompany’s Proxy, Proxy Statement and Annual Report for the fiscal year ended June 30, 20102013 are also available on the Company'sCompany’s website at: www.intergroupcorporation.com.
THE INTERGROUP CORPORATION
10940 WILSHIRE BLVD.Wilshire Blvd., SUITESuite 2150
LOS ANGELES, CALIFORNIA
los angeles, California 90024
(310) 889-2500
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 2011
annual meeting of shareholders
to be held on february 19, 2014
The Board of Directors of The InterGroup Corporation ("InterGroup"(“InterGroup” or the "Company"“Company”) is soliciting proxies in the form enclosed with this statement in connection with its fiscal 20102013 Annual Meeting of Shareholders to be held on February 23, 201119, 2014 or at any adjournments thereof. Only shareholders of record at the close of business on January 11, 201113, 2014 are entitled to notice of, and to vote at, the Annual Meeting.
Each shareholder is entitled to cast, in person or by proxy, one vote for each share held of record at the close of business on January 11, 2011.13, 2014. As of January 11, 2011,13, 2014, there were outstanding 2,424,1642,369,927 shares of common stock, par value $.01 per share (the "Common Stock"“Common Stock”). Of the total 2,424,1642,369,927 shares outstanding, a majority, or 1,212,0831,184,964 voting shares will constitute a quorum for the transaction of business at the meeting. The affirmative vote of the holders of the majority of the shares of the Common Stock present and represented at the meeting and entitled to vote is required to elect directors and to ratify the selection of the Company'sCompany’s independent registered public accounting firm, and approve the other matters submitted for a non-binding vote.
firm.
The proxies named in the accompanying Form of Proxy will vote the shares represented thereby if the proxy appears to be valid on its face, and where specification is indicated as provided in such proxy, the shares represented will be voted in accordance with such specification. If no specification is made, the shares represented by the proxies will be votedvoted: (1) FOR the election of the BoardBoard’s nominees for the (a) Class A vacancy to complete the Class A term expiring at the fiscal 2015 Annual Meeting of Shareholders and (b) Class B Directors for a three-year term expiring at the fiscal 20132016 Annual Meeting of Shareholders; (2) FOR ratification of the appointment of Burr Pilger Mayer, Inc. as the Company'sCompany’s independent registered public accounting firm for the fiscal year ending June 30, 2011;2014; (3) FOR approval, in a non-binding vote, of the compensation of our named executive officers; and (4) FOR 3 Years asapproval of amendments to the periodCompany’s Omnibus Employee Incentive Plan of time that non-binding shareholder votes should occur to approve
compensation of executive officers.
2010 and an option grant pursuant thereto.
If you give us a proxy, you can revoke it at any time before it is used. To revoke it, you may file a written notice revoking it with the Secretary of the Company, execute a proxy with a later date or attend the meeting and vote in person.
This Proxy Statement and the accompanying Form of Proxy are first being sent to shareholders on or about January 26, 2011.27, 2014. In addition to mailing this material to shareholders, the Company has asked banks and brokers to forward copies to persons for whom they hold stock of the Company and to request authority for the execution of proxies. The Company will reimburse banks and brokers for their reasonable out-of-pocket expenses in doing so. Officers of the Company may, without being additionally compensated, solicit proxies by mail, telephone, telegram or personal contact. All proxy soliciting expenses will be paid by the Company. The Company does not expect to employ anyone else to assist in the solicitation of proxies.
PROPOSAL NO. 1
Proposal No. 1
ELECTION OF CLASS B DIRECTORS
The Company'sCompany’s Certificate of Incorporation provides that the Board of Directors shall consist of not more than nine nor less than five members. The exact number of Directors is fixed by the Board prior to each year'syear’s Annual Meeting of Shareholders. The Board is divided into three staggered classes, each class having not less than one or more than three members. Each Director is elected to serve for a three-year term, and until the election and qualification of his or her successor. When vacancies on the Board occur, due to resignation or otherwise, the Directors then in office may continue to exercise the powers of the Directors and a majority of such directors may select a new Director to fill the vacancy. Any Director may resign at any time. Any Director may be removed by the vote of, or written consent of, the holders of a majority of the shares of Common Stock outstanding at a special meeting called for the purpose of removal or to ratify the recommendation of a majority of the Directors that such Director be removed.
The Board has nominated Jerold R. Babin to serve as a Class A Director, in place of Josef A. Grunwald, who resigned from the Board effective September 1, 2013, to serve until the fiscal 2015 Annual Meeting and until the election and qualification of his successor. The term of the Class B Directors expireexpires at the fiscal 20102013 Annual Meeting to be held on February 23, 2011.19, 2014. The Board has proposed Gary N. Jacobs and William J. Nance as Class B Directors to serve until the fiscal 20132016 Annual Meeting and until the election and qualification of their successors. The Board of Directors has been informed that the nominees have consented to being named as nominees and are willing to serve as directors if elected. However, if the nominees should be unable, or decline to serve, it is intended that the proxies will be voted for such other persons as the proxies shall, in their discretion, designate. Unless otherwise directed in the accompanying Proxy, the persons named therein will vote FOR the election of thesethe nominees. Election requires the affirmative vote of a majority of the shares represented and voted at the Annual Meeting.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the Directors (including nominees) and Executive Officers of the Company:
Position with
Name the Company Age Term to Expire
- ------------------ ------------------ --- -----------------
Class A Directors:
John V. Winfield Chairman of the Board; 64 Fiscal 2012 Annual Meeting
| Name | Position with the Company | Age | Term to Expire | |||
| Class A Directors: | ||||||
| John V. Winfield(1)(4)(6)(7) | Chairman of the Board; President and Chief Executive Officer | 67 | Fiscal 2015 Annual Meeting | |||
| Jerold R. Babin | Nominee | 80 | Fiscal 2015 Annual Meeting | |||
| Class B Directors: | ||||||
| Gary N. Jacobs(1)(2)(5)(6)(7) | Secretary; Director | 68 | Fiscal 2013 Annual Meeting | |||
| William J. Nance(1)(2)(3)(4)(6)(7) | Director | 70 | Fiscal 2013 Annual Meeting | |||
| Class C Director: | ||||||
| John C. Love(3)(4)(5) | Director | 73 | Fiscal 2014 Annual Meeting |
| Name | Position with the Company | Age | Term to Expire | |||
| Other Executive Officers: | ||||||
| David C. Gonzalez | Vice President Real Estate | 46 | N/A | |||
| David T. Nguyen | Treasurer and Controller | 40 | N/A | |||
| Michael G. Zybala | Asst. Secretary and Counsel | 61 | N/A |
(1)(4)(6)(7) President and Chief
Executive Officer
Josef A. Grunwald
(2)(3)(7) Director and Vice 62 Fiscal 2012 Annual Meeting
Chairman of the Board
Class B Directors:
Gary N. Jacobs
(1)(2)(6)(7) Secretary; Director 65 Fiscal 2010 Annual Meeting
William J. Nance (1)
(2)(3)(4)(6)(7) Director 66 Fiscal 2010 Annual Meeting
Class C Director:
John C. Love Director 70 Fiscal 2011 Annual Meeting
(3)(4)(5)
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Other Executive
Officers:
David C. Gonzalez Vice President 43 N/A
Real Estate
David T. Nguyen Treasurer and 37 N/A
Controller
Michael G. Zybala Assistant Secretary 58 N/A
And Counsel
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(1)
(2) Member of the Administrative and Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Real Estate Investment Committee
(5) Member of the Nominating Committee
(6) Member of the Securities Investment Committee
(7) Member of the Special Strategic Options Committee
Business Experience:
Experience
The principal occupation and business experience during the last five years for each of the Directors and Executive Officers of the Company are as follows:
John V. Winfield -- — Mr. Winfield was first appointed to the Board in 1982. He currently serves as the Company'sCompany’s Chairman of the Board, President and Chief Executive Officer, having first been appointed as such in 1987. Mr. Winfield also serves as President, Chairman and Chief Executive Officer of the Company'sCompany’s subsidiaries, Santa Fe Financial Corporation ("(“Santa Fe"Fe”) and Portsmouth Square, Inc. ("Portsmouth"(“Portsmouth”), both public companies. Mr. Winfield'sWinfield also serves as Chairman of the Board of Comstock Mining, Inc. (NYSE MKT: LODE), a public company in which he was elected a director on June 23, 2011. Mr. Winfield’s extensive experience as an entrepreneur and investor, as well as his managerial and leadership experience from serving as a chief executive officer and director of public companies, led to the Board'sBoard’s conclusion that he should serve as a director of the Company.
Jerold R. Babin — Mr. Babin has been nominated by the Board to serve as a Class A Director to fill the vacancy created by the resignation of Josef A. Grunwald --as a Director on September 1, 2013. Mr. GrunwaldBabin is a retail securities broker. From 1989 to June 30, 2010, he worked for Prudential Securities (later Wachovia Securities and now Wells Fargo Advisors) where he held the title of First Vice-President. Mr. Babin retired from his position at Wells Fargo advisors in June 2010. For the past 20 years, until present, Mr. Babin has also served as an industrial, commercial and residential
real estate developer. He serves as Chairman of PDG N.V. (Belgium), a hotel
management company, and President of I.B.E. Services S.A. (Belgium), an
international trading company.arbitrator for FINRA (formerly NASD). Mr. Grunwald was first elected to the Board in
1987 and named Vice Chairman on January 30, 2002. Mr. GrunwaldBabin is also a Director of Portsmouth. Mr. Grunwald'sBabin’s extensive experience in businessthe securities and finance in the real estate industry,financial markets as well has his experience in hotel management, as
well as his experience as an entrepreneurthe securities and manager of his own companies,public company regulatory industry led to the Board'sBoard’s conclusion that he should serve as a director of the Company. Mr. Babin is expected to be named as a member of the Company’s Audit Committee at the Company’s Annual Meeting.
Gary N. Jacobs — Mr. Jacobs is an attorney at law and a partner in the law firm of Glaser Weil Fink Jacobs Howard Avchen & Shapiro, LLP. He was appointed to the Board and as Secretary of the Company in 1998. Mr. Jacobs also served as a Director and General Counsel of MGM MIRAGE (now MGM Resorts International, NYSE: MGM) from 2000, as Secretary of MGM from 2002 and as Executive Vice President from 2000 to August 2009, when he became President Corporate Strategy. Mr. Jacobs retired from all of his positions with MGM effective, December 15, 2009. Mr. Jacob’s extensive experience as an attorney and as an executive officer and director of a large public company, and his knowledge and understanding of business transactions, finance, public company reporting and corporate governance, led to the Board’s conclusion that he should serve as a director of the Company.
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William J. Nance -- — Mr. Nance is a Certified Public Accountant and private consultant to the real estate and banking industries. He is also President of Century Plaza Printers, Inc. Mr. Nance was first elected to the Board in 1984. He served as the Company'sCompany’s Chief Financial Officer from 1987 to 1990 and as Treasurer from 1987 to June 2002. Mr. Nance is also a Director of Santa Fe and Portsmouth. Mr. Nance also serves as a director and Chairman of the Board of Comstock Mining, Inc. (formerly Goldspring, Inc.), a public company. Mr. Nance'sNance’s extensive experience as a CPA and in numerous phases of the real estate industry, his business and management experience gained in running his own businesses, his service as a director and audit committee member for other public companies and his knowledge and understanding of finance and financial reporting, led to the Board'sBoard’s conclusion that he should serve as a director of the Company.
Gary N. Jacobs -- Mr. Jacobs is an attorney at law and a partner in the law
firm of Glaser, Weil, Fink, Jacobs Howard & Shapiro, LLP. He was appointed to
the Board and as Secretary of the Company in 1998. Mr. Jacobs also served as a
Director and General Counsel of MGM MIRAGE (NYSE: MGM) from 2000, as Secretary
of MGM MIRAGE from 2002 and as Executive Vice President from 2000 to August
2009, when he became President Corporate Strategy. Mr. Jacobs retired from all
of his positions with MGM MIRAGE effective, December 15, 2009. Mr. Jacob's
extensive experience as an attorney and as an executive officer and director of
a large public company, and his knowledge and understanding of business
transactions, finance, public company reporting and corporate governance, led
to the Board's conclusion that he should serve as a director of the Company.
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John C. Love -- — Mr. Love was appointed to the Board in 1998. Mr. Love is an international hospitality and tourism consultant. He is a retired partner in the national CPA and consulting firm of Pannell Kerr Forster and, for the last 3031 years, a lecturer in hospitality industry management control systems and competition & strategy at Golden Gate University and San Francisco State University. He is Chairman Emeritus of the Board of Trustees of Golden Gate University and the Executive Secretary of the Hotel and Restaurant Foundation. Mr. Love is also a Director of Santa Fe and Portsmouth. Mr. Love'sLove’s extensive experience as a CPA and in the hospitality industry, including teaching at the university level for the last 3031 years in management control systems, and his knowledge and understanding of finance and financial reporting, led to the Board'sBoard’s conclusion that he should serve as a director of the Company.
David C. Gonzalez -- — Mr. Gonzalez was appointed Vice President Real Estate of the Company on January 31, 2001. Over the past 2225 years, Mr. Gonzalez has served in numerous capacities with the Company, including Controller and Director of Real Estate.
David T. Nguyen -- — Mr. Nguyen was appointed as Treasurer of the Company on February 26, 2003.2003 and serves as the Company’s Principal Financial Officer. Mr. Nguyen also serves as Treasurer of Santa Fe and Portsmouth, having been appointed to those positions on February 27, 2003. Mr. Nguyen is a Certified Public Accountant and, from 1995 to 1999, was employed by PricewaterhouseCoopers LLP where he was a Senior Accountant specializing in real estate. Mr. Nguyen served as the Company'sCompany’s Controller from 1999 to 2001 and from 20032002 to the present.
Michael G. Zybala -- — Mr. Zybala is an attorney at law and has served as Assistant Secretary and legal counsel of the Company since January 1999. Mr. Zybala is also the Vice President and Secretary of Santa Fe and Portsmouth and has served as their General Counsel since 1995. Mr. Zybala has provided legal services to Santa Fe and Portsmouth since 1978.
Family Relationships: There are no family relationships among directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.
Involvement in Certain Legal Proceedings: No director or executive officer, or person nominated or chosen to become a director or executive officer, was involved in any legal proceeding requiring disclosure.
BOARD AND COMMITTEE INFORMATION
InterGroup is a Smaller Reporting Company under the rules and regulations of the Securities and Exchange Commission ("SEC"(“SEC”). The Company'sCompany’s common stock is listed on the Capital Market tier of the NASDAQ Stock Market LLC ("NASDAQ"(“NASDAQ”).
The Board of Directors of InterGroup currently consists of five members. With the exception of the Company'sCompany’s President and CEO, John V. Winfield, all of InterGroup'sInterGroup’s Board of Directors consists of "independent"“independent” directors as independence is defined by the applicable rules of the SEC and NASDAQ. The Board of Directors held four meetings during the 20102013 Fiscal Year (in person, telephonically or by written consent). No Director attended (whether in person, telephonically, or by written consent) less than 75% of all meetings held during the period of time he served as Director during the 20102013 Fiscal Year. The independent directors also meet in executive session at least two times per year.
Board Leadership Structure
The Chairman of the Board, Mr. Winfield, also serves as our Chief Executive Officer. The Board believes that combining the Chairman and Chief Executive officer roles is the most appropriate structure for the Company at this time because (i) this structure has had a longstanding history with the Company, which the Board believes has served our stockholders well through many economic cycles and business challenges; (ii) the Board believes Mr. Winfield’s unique business experience and history with the Company makes it appropriate for him to serve in both capacities; and (iii) the Board believes its corporate government processes and committee structures preserve Board independence by insuring independent discussions among directors and independent evaluation of, and communications with, members of senior management such that separation of the Chairman and Chief Executive Officer roles is unnecessary at this time.
Role of the Board in Oversight of Risk
The Board of Directors does not have a separate risk oversight body, but rather manages risk directly. The Board mitigates risk through discussing with management the appropriate level of risk for the Company and evaluating the risk information received by management. These risks include financial, competitive and operational risks. Further, on a quarterly basis, management reports to the Audit Committee regarding the Company’s various risk areas to as part of the Committee’s oversight role over financial reporting in accordance with the Audit Committee charter. In addition, other committees of the Board of Directors consider risks within their areas of responsibility.
We do not consider that our compensation policies encourage excessive risk-taking. The design of our compensation policies encourages employees to remain focused on both short-term and long-term financial and operational goals. Our equity awards typically vest over a number of years, which we believe encourages employees to focus on sustained stock price appreciation over time and the intrinsic value of the Company instead of short-term financial results.
Communications with the Board of Directors
The Board of Directors has not established a formal process for security holders to send communications to the Board of Directors and the Board has not deemed it necessary to establish such a procedure at this time. Historically, almost all communications that the Company receives from security holders are administrative in nature and are not directed to the Board of Directors. If the Company should receive a security holder communication directed to the Board of Directors, or to an individual director, said communication will be relayed to the Board of Directors or the individual director as the case may be.
Board Attendance at Annual Meetings of Shareholders
The Company does not have any formal policy with regard to board members attendance at annual meetings of shareholders but encourages each director to attend said meetings. All of the Company's directors, withWith the exception of Director Jacobs,Grunwald, all of the Company’s directors attended the fiscal 20092012 annual meeting of shareholders.
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Committees:
Committees
The Company has an Executive Committee that meets in lieu of the Board upon the request of the Chairman of the Committee. Mr. Winfield is Chairman of the Executive Committee. The Committee held twothree meetings (in person, telephonically or by written consent) during the 20102013 Fiscal Year.
The Company'sCompany’s Administrative and Compensation Committee (the "Compensation
Committee"“Compensation Committee”) is comprised of three "independent"“independent” members of the Board of Directors as independence is defined by the applicable rules of the SECSecurities and Exchange Commission (the “SEC”) and NASDAQ. Mr. Nance, Mr. Grunwald and Mr. Jacobs were the members of the Compensation Committee during fiscal year 2013. Mr. Grunwald resigned as a Director effective September 1, 2013. None of the members of the Compensation Committee is or has been an executive officer of the Company, or had any relationships requiring disclosure by the Company under the SEC rules or NASDAQ listing requirements.
Mr. Nance serves as Chairman of the Compensation Committee. The Company has not established a charter for the Compensation Committee. The Compensation Committee reviews and recommends to the Board of Directors the compensation for the Company'sCompany’s Chief Executive Officer and other executive officers, including equity or performance based compensation and plans. The Compensation Committee seeks to design and set compensation to attract and retain highly qualified executive officers and to align their interests with those of long-term owners of the Company. The Compensation Committee may also make recommendations to the Board of Directors as to the amount and form of director compensation. The Compensation Committee has not engaged any compensation consultants in determining the amount or form of executive or director compensation, but does review and monitor published compensation surveys and studies. The Compensation Committee may delegate to the Company's
Chief Executive Officer the authority determine the compensation of certain
executive officers. The Compensation Committee held twothree meetings (in person, telephonically or by written consent) during the 20102013 Fiscal Year. The Compensation Committee also oversees the Company'sCompany’s 2007 Stock Compensation Plan for Non-Employee Directors (the "2007“2007 Stock Plan"Plan”), the Company'sCompany’s 2008 Restricted Stock Unit Plan (the "2008“2008 RSU Plan"Plan”) and the Company'sCompany’s 2010 Omnibus Employee Incentive Plan (the "2010“2010 Incentive Plan"Plan”). As a Smaller Reporting Company under the rules of the SEC, the Company is in the process of drafting an Compensation Committee Charter consistent with the rules adopted by the SEC and NASDAQ for Smaller Reporting Companies and will post such Charter on its website within 30 days of its Annual Meeting. The Board has adopted guidelines consistent with most of the requirements contained in such rules.
The Company has a Real Estate Investment Committee, which is chaired by Mr. Nance. This Committee held fournine meetings (in person, telephonically or by written consent) during the 20102013 Fiscal Year. The Real Estate Investment Committee reviews and considers potential acquisitions, dispositions, and financings of properties.
The Company'sCompany’s Nominating Committee is comprised of two "independent"“independent” directors as independence is defined by the applicable rules of the SEC and NASDAQ. The Company has not established a charter for the Nominating Committee and the Committee has no policy with regard to consideration of any director candidates recommended by security holders. As a Smaller Reporting Company whose directors own in excess of sixty eightseventy percent of the voting shares of the Company, InterGroup has not deemed it appropriate to institute such a policy. There have not been any material changes to the procedures by which security holders may recommend nominees to the Company'sCompany’s board of directors during the last fiscal year. Mr. LoveJacobs is the Chairman of the Nominating Committee. The Committee held one meeting during the 20102013 Fiscal Year.
The Company'sCompany’s Securities Investment Committee oversees and establishes certain investment procedures and reports to the Board of Directors. The Committee'sCommittee’s Chairman is Mr. Winfield. This committee held three meetings (in person, telephonically or by written consent) during the 20102013 Fiscal Year.
The Company'sCompany’s Special Strategic Options Committee is chaired by Mr. Winfield. This committee held notwo formal meetings during the 20102013 Fiscal Year, butand its members consult with each other frequently on an informal basis. The Special Strategic Options Committee reviews and considers the Company'sCompany’s strategic options and provides guidance to accomplish its goals considering both current and prospective investment opportunities.
The Company is a Smaller Reporting Company under SEC rules. The Company'sCompany’s Audit Committee is currently comprised of threetwo members: Directors Nance (Chairperson), Grunwald and Love and Mr. Babin is expected to be named to the Audit Committee at the Annual Meeting, each of whowhom meet the independence requirements of the SEC and NASDAQ as modified or supplemented from time to time. Directors Nance and Love also meet the Audit Committee Financial Expert requirement as defined by the SEC and NASDAQ.NASDAQ based on their qualifications and business experience discussed above. The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility of overseeing management'smanagement’s conduct of the financial reporting process, the annual independent audit of the Company'sCompany’s financial statements, reviewing the financial reports provided by the Company to any governmental body or the public; the Company'sCompany’s system of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; and the Company'sCompany’s auditing, accounting and financial processes generally. The Audit Committee is also responsible for the selection and retention of the Company'sCompany’s independent registered public accounting firm. The Audit Committee held fivesix meetings during the 20102013 Fiscal Year.
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The Company'sCompany’s Board of Directors has adopted a written charter for the Audit Committee, which is reviewed on an annual basis. A copy of that written charter, as amended, is attached as Appendixposted on the Company’s website at www.intgla.com.
Code of Ethics
The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Code of Ethics is posted on the Company’s website at www.intgla.com. The Company will provide to this proxy statement.
any person without charge, upon request, a copy of its Code of Ethics by sending such request to: The InterGroup Corporation, Attn: Treasurer, 10940 Wilshire Blvd., Suite 2150, Los Angeles, CA 90024. The Company will promptly disclose any amendments or waivers to its Code of Ethics on Form 8-K and will post such information on its website.
EXECUTIVE COMPENSATION
Executive Officers Compensation
The following table provides certain summary information concerning compensation awarded to, earned by, or paid to the Company'sCompany’s principal executive officer and other named executive officers of the Company whose total compensation exceeded $100,000 for all services rendered to the Company and its subsidiaries for each of the Company'sCompany’s last two completed fiscal years ended June 30, 20102013 and June 30, 2009.2012. There was no non-equity incentive plan compensation or nonqualified deferred compensation earnings. There are currently no employment contracts with the executive officers.
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SUMMARY COMPENSATION TABLE
| Name and Principal Position | Fiscal Year | Salary | Bonus | Stock Awards | Option Awards | All Other Compensation | Total | |||||||||||||||||||
| John V. Winfield | 2013 | $ | 522,000 | (1) | - | - | - | $ | 139,000 | (4) | $ | 661,000 | ||||||||||||||
| Chairman; President and | 2012 | $ | 522,000 | (1) | - | $ | 375,000 | (2) | $ | 510,000 | (3) | $ | 173,000 | (4) | $ | 1,580,000 | ||||||||||
| Chief Executive Officer | ||||||||||||||||||||||||||
| David C. Gonzalez | 2013 | $ | 216,000 | $ | 35,000 | $ | 53,000 | (5) | - | - | $ | 304,000 | ||||||||||||||
| Vice President | 2012 | $ | 192,000 | $ | 70,000 | - | - | - | $ | 262,000 | ||||||||||||||||
| Real Estate | ||||||||||||||||||||||||||
| David T. Nguyen | 2013 | $ | 180,000 | (6) | $ | 15,000 | - | - | - | $ | 195,000 | |||||||||||||||
| Treasurer and | 2012 | $ | 180,000 | (6) | $ | 20,000 | - | - | - | $ | 200,000 | |||||||||||||||
| Controller | - | |||||||||||||||||||||||||
| Michael G. Zybala | 2013 | $ | 180,000 | (7) | $ | 20,000 | - | - | - | $ | 200,000 | |||||||||||||||
| Assistant Secretary | 2012 | $ | 163,000 | (7) | $ | 25,000 | - | $ | 67,000 | (8) | - | $ | 260,000 | |||||||||||||
| and General Counsel | - | - | ||||||||||||||||||||||||
(1) Mr. Winfield also serves as President and Chairman of the Board of the Company'sCompany’s subsidiary, Santa Fe, and Santa Fe'sFe’s subsidiary, Portsmouth. Mr. Winfield received a salary from Santa Fe and Portsmouth in the aggregate amount of $255,000 from those entities for each of fiscal years 20102013 and 2009,2012, as well as director'sdirector’s fees totaling $12,000 for each year. Those amounts are included in this item.
(2) Dollar For fiscal 2013 and 2012, the dollar amount reflects the fair market value of 54,62815,000 shares of common stock issued to Mr. Winfield upon the vesting of 54,62815,000 Restricted Stock Units ("RSUs"(“RSUs”) on September 10, 20092011, as determined by reference to the closing price of the Company'sCompany’s common stock as reported on the NASDAQ Capital Market on the vesting date. Thedates. With respect to the September 10, 2011 vesting, Mr. Winfield surrendered 4,958 shares of the 15,000 shares issued to him back to the Company to satisfy tax withholding requirements. All RSUs were issued pursuant to the Company'sCompany’s 2008 RSU Plan. On December 21, 2008, Mr. Winfield surrendered to the Company 225,000 fully vested stock options in exchange for 84,628 RSUs pursuant to an exchange offer made by the Compensation Committee as authorized by 2008 RSU Plan. Each RSU represents
a promise to deliver, in the future, one share of Common Stock, subject to
certain vesting requirements and other restrictions. The number of RSUs to be
issued under the exchange offer was determined by multiplying the number of
options that were surrendered by the difference between the exercise price of
the options surrendered ($7.917) and the closing price of the Company's common
stock on December 19, 2008 of $12.69, with that product divided by the closing
price of the common stock on December 19, 2008. Since the value of the RSUs
issued equaled the value of the options surrendered, no dollar compensation
amount was recognized for fiscal 2009. The RSUs are taxable as ordinary income to Mr. Winfield upon vesting and issuance of the shares of Common Stock. Mr.
Winfield's remaining RSUs vest, and
(3) For fiscal 2012, the shares of common stock are issuable, as
follow: September 10, 2010 - 15,000; and September 10, 2011 - 15,000 shares.
6
(3) Dollardollar amount reflects aggregate grant date fair value of options expected to vest, computed in accordance with FASB ASC Topic 718, of 100,00090,000 stock options granted to Mr. Winfield on March 16, 2010February 28, 2012 pursuant to the Company'sCompany’s 2010 Incentive Plan. [See Note 17 to the Consolidated Financial Statements for assumptions.] The options expire 10 years from the date of grant and have an exercise price of $10.30$19.77 per share, which was 100% of the fair market value of the Company'sCompany’s common stock as determined by reference to the closing price as reported on the NASDAQ Capital Market on March 16, 2010,February 28, 2012, the date of grant. The options are subject to both time and performance based vesting requirements, each of which must be satisfied before the options are fully vested and eligible to be exercised. Pursuant to the time vesting requirements, the options vest over a period of five years, with 20,00018,000 options vesting upon each one year anniversary of the date of grant. Pursuant to the performance vesting requirements, the options vest in increments of 20,00018,000 shares upon each increase of $2.00 or more in the market price of the Company'sCompany’s common stock above the exercise price ($10.30)19.77) of the options. To satisfy this requirement, the common stock must trade at that increased level for a period of at least ten trading days during any one quarter. Assuming that the highest level of performance conditions will be achieved, the total value of the grant is estimated at $944,000.
(4) Amounts include an auto allowance and compensation for a portion of the salary of an assistant. The auto allowance was $30,000$29,000 for 2013 and $29,000 during
fiscal years 2010 and 2009, respectively.2012. The amount of compensation related to the assistant was approximately $57,000$54,000 and $52,000$59,000 for fiscal years 20102013 and 2009,2012, respectively. During fiscal 20102013 and 2009,2012, the Company and its subsidiaries also paid annual premiums in the total amount of $85,000 for split dollar whole life insurance policies owned by, and the beneficiary of which are, a trust for the benefit of Mr. Winfield'sWinfield’s family. Of the $85,000 in premiums paid each year, Santa Fe and Portsmouth paid $43,000 of that amount. The Company has a secured right to receive, from any proceeds of the policies, reimbursement of all premiums paid prior to any payment to the beneficiary.
(5) Dollar For fiscal 2013, Mr. Gonzalez exercised 5,000 stock options with an exercise price of $10.30. The Company received cash proceeds of $52,000 related to the stock option exercise. The intrinsic value of the stock options exercised was $53,000.
(6) Mr. Nguyen’s salary is allocated approximately 50% to the Company and 50% to Santa Fe and Portsmouth.
(7) For fiscal 2013 and 2012, respectively, these amounts include $123,000 and $113,000 in salary and bonus allocated to and paid by Portsmouth and $30,000 and $25,000 in salary allocated to Santa Fe. .
(8) For fiscal 2012, the dollar amount reflects aggregate grant date fair value of options expected to vest, computed in accordance with FASB ASC Topic 718, of 5,000 stock options granted to Mr. GonzalezZybala on March 16, 2010July 1, 2011 pursuant to the Company'sCompany’s 2010 Incentive Plan. [See Note 17 to the Consolidated Financial Statements for assumptions.] The options expire 10 years from the date of grant and have an exercise price of $10.30$24.92 per share.share, which was 100% of the fair market value of the Company’s common stock as determined by reference to the closing price as reported on the NASDAQ Capital Market on the date of grant. The options vest as follow: 2,500over a period of five years, with 1,000 options vest on March 16,
2011; and 2,500 options vest on March 16, 2012.
(6) Mr. Nguyen's salary is allocated approximately 50% to the Company and 50%
to Santa Fe and Portsmouth.
(7) For fiscal 2010 and 2009, respectively, these amounts include $105,000 and
$94,800 in salary allocated to and paid by Portsmouth and $18,750 and $16,200
in salary allocated to Santa Fe.
Compensation Committee and Executive Compensation
The Company's Administrative and Compensation Committee (the "Compensation
Committee") is comprised of three "independent" membersvesting upon each one year anniversary of the Boarddate of Directors as independence is defined bygrant.
Performance Based Compensation
For the applicable rules of the SEC and
NASDAQ. Mr. Nance serves as Chairman of the Compensation Committee. The
Company has not established a charter for the Compensation Committee. The
Compensation Committee reviews and recommends to the Board of Directors the
compensation for the Company's Chief Executive Officer and other executive
officers, including equity or performance based compensation and plans. The
Compensation Committee seeks to design and set compensation to attract and
retain highly qualified executive officers and to align their interests with
those of long-term owners of the Company. The Compensation Committee may also
make recommendations to the Board of Directors as to the amount and form of
director compensation. The Compensation Committee has not engaged any
compensation consultants in determining the amount or form of executive of
director compensation, but does review and monitor published compensation
surveys and studies. The Compensation Committee may delegate to the Company's
Chief Executive Officer the authority to determine the compensation of certain
executive officers. The Compensation Committee also oversees the Company's
2007 Stock Plan, the 2008 RSU Plan and the 2010 Incentive Plan.
On July 18, 2003,fiscal year ended June 30, 2004, the disinterested members of the respective Boards of Directors of the Company'sCompany and the Company’s subsidiary, Santa Fe and Santa Fe'sFe’s subsidiary, Portsmouth, established a performance based compensation program for the Company'sCompany’s CEO, John V. Winfield, to keep and retain his services as a direct and active manager of the securities portfolios of those companies. On January
12, 2004, the disinterested members of the Securities Investment Committee of
InterGroup also established a performance based compensation program for Mr.
Winfield, which was ratified by the Board of Directors. The Company's previous
experience and results with outside money managers was not acceptable.
Pursuant to the criteria established the Board of Directors, Mr. Winfield is
7
Company'sCompany’s investment portfolio for that quarter. Should the companies have a net investment loss during any quarter, Mr. Winfield would not be entitled to any further performance-based compensation until any such investment losses are recouped by the Company. This performance based compensation program may be modified or terminated at the discretion of the respective Boards of Directors. No performance based compensation was earned or paid for fiscal years ended June 30, 20102013 or 2009.
2012.
Outstanding Equity Awards as ofat Fiscal Year Ended June 30, 2010
2013
The following table sets forth information concerning option awards and stock awards for each named executive officer that were outstanding as of the end of the Company'sCompany’s last competedcompleted fiscal year ended June 30, 2010.2013. There were no other equity incentive plan awards that were outstanding.
| Option Awards | Stock Awards | |||||||||||||||||||||
| Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price $ | Option expiration date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested | ||||||||||||||||
| John V. Winfield | 60,000 | 40,000 | (1) | $ | 10.30 | 3/15/2020 | - | - | ||||||||||||||
| John V. Winfield | 18,000 | 72,000 | (2) | $ | 19.77 | 2/27/2022 | - | - | ||||||||||||||
| Michael G. Zybala | 1,000 | 4,000 | $ | 24.92 | 6/30/2021 | - | - | |||||||||||||||
(1) Stock options issued to Mr. Winfield pursuant to the Company'sCompany’s 2010 Incentive Plan are subject to both time and performance based vesting requirements, each of which must be satisfied before the options are fully vested and eligible to be exercised. Pursuant to the time vesting requirements, the options vest over a period of five years, with 20,000 options vesting upon each one year anniversary of the date of grant, March 16, 2010. Pursuant to the performance vesting requirements, the options vest in increments of 20,000 shares upon each increase of $2.00 or more in the market price of the Company'sCompany’s common stock above the exercise price ($10.30) of the options. To satisfy this requirement, the common stock must trade at that increased level for a period of at least ten trading days during any one quarter. As of June 30, 2013, 18,000 options have met the performance vesting requirements.
(2) On December 21, 2008, Stock options issued to Mr. Winfield surrenderedpursuant to the Company 225,000Company’s 2010 Incentive Plan are subject to both time and performance based vesting requirements, each of which must be satisfied before the options are fully vested stockand eligible to be exercised. Pursuant to the time vesting requirements, the options in exchange for 84,628 Restricted Stock Units ("RSUs")
pursuant to an exchange offer made by the Compensation Committee as authorized
by the Company's 2008 RSU Plan. On September 10, 2009, 54,628vest over a period of those RSUs
vested and Mr. Winfield was issued 54,628 shares of common stock. The balancefive years, with 18,000 options vesting upon each one year anniversary of the RSUsdate of grant, February 28, 2012. Pursuant to the performance vesting requirements, the options vest andin increments of 18,000 shares upon each increase of $2.00 or more in the shares of Common Stock are issuable as follow:
September 10, 2010 - 15,000 shares; and September 10, 2011 - 15,000 shares.
(3) Market value was calculated based on the closingmarket price of the Company's
Common Stock onCompany’s common stock above the exercise price ($19.77) of the options. To satisfy this requirement, the common stock must trade at that increased level for a period of at least ten trading days during any one quarter. As of June 30, 2010 of $15.26 per share as reported on2013, 18,000 options have met the NASDAQ
Capital Market.
(4)performance vesting requirements.
(3) Mr. Gonzalez'sZybala’s stock options vest as follow: 2,500over a period of five years, with 1,000 options vest on March 16,
2011; and 2,500 options vest on March 16, 2012.
8
Internal Revenue Code Limitations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”), provides that, in the case of a publicly held corporation, the corporation is not generally allowed to deduct remuneration paid to its chief executive officer and certain other highly compensated officers to the extent that such remuneration exceeds $1,000,000 for the taxable year. Certain remuneration, however, is not subject to disallowance, including compensation paid on a commission basis and, if certain requirements prescribed by the Code are satisfied, other performance based compensation. Since InterGroup, Santa Fe and Portsmouth are each public companies, the $1,000,000 limitation applies separately to the compensation paid by each entity. Stock option expenses are also amortized over a several years. For fiscal years 20102013 and 2009,2012, no compensation paid by the Company to its CEO or other executive officers was subject the deduction disallowance prescribed by Section 162(m) of the Code.
| 9 |
EQUITY COMPENSATION PLANS
The Company currently has three equity compensation plans, each of which has been approved by the Company'sCompany’s stockholders. The Company's 1998 Stock Option
Plan for Selected Key Officers, Employees and Consultants (the "Key Employee
Plan") expired on December 8, 2008 and no options under the Key Employee Plan
were granted in fiscal 2009. The Key Employee Plan was replaced by The
InterGroup Corporation 2008 Restricted Stock Unit Plan (the "2008 RSU Plan"),
described below. The Company's 1998 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan") was terminated upon shareholder
approval, and Board adoption, of The InterGroup Corporation 2007 Stock
Compensation Plan for Non-Employee Directors (the "2007 Stock Plan"), described
below, since all options authorized to be issued under the Non-Employee
Director Plan were exhausted in fiscal 2006. AnyHowever, any outstanding stock options issued under the Key Employee Plan or the Non-Employee Director PlanCompany’s prior equity compensation plans remain effective in accordance with their terms.
The purpose of the Company'sCompany’s equity compensation plans is to provide a means whereby officers, directors and key employees of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of these plans is to provide a means through which the Company may attract able individuals to become employees or serve as directors of the Company and to provide a means for such individuals to acquire and maintain stock ownership in the Company, thereby strengthening their concern for the welfare of the Company.
The InterGroup Corporation 2007 Stock Compensation Plan for Non-Employee Directors
The InterGroup Corporation 2007 Stock Compensation Plan for Non-Employee Directors (the "2007“2007 Stock Plan"Plan”) was approved by the shareholders of the Company on February 21, 2007, and was thereafter adopted by the Board of Directors. The 2007 Plan will terminate upon the earlier of the date all shares reserved for issuance have been awarded or February 21, 2017, if not sooner terminated by the Board upon recommendation by the Compensation Committee. The stock to be available for issuance under the 2007 Stock Plan shall be unrestricted shares of the Company's Common Stock,Company’s common stock, par value $.01 per share, which may be unissued shares or treasury shares. Subject to certain adjustments upon changes in capitalization, a maximum of 60,000 shares of the Common Stockcommon stock will be available for issuance to participants under the 2007 Stock Plan.
All non-employee directors are eligible to participate in the 2007 Stock Plan. Each non-employee director as of the adoption date of the 2007 Stock Plan was granted an award of 600 unrestricted shares of the Company's Common Stock.Company’s common stock. On each July 1 following the adoption date of the 2007 Stock Plan, each non-
employeenon-employee director shall receive an automatic grant of a number of shares of Company's Common Stockcompany’s common stock equal in value to $18,000 based on 100% of the fair market value (as defined) of the Common Stock on the date of grant, provided he or she holds such position on that date and the number of shares of Common Stock available for grant under the 2007 Stock Plan is sufficient to permit such automatic grant. Any fractional shares resulting from such grant will be rounded up to next highest whole share. All stock awards to non-employee directors will be fully vested on the date of grant. The dollar amount of the annual grant is subject to further adjustment by the Board of Directors upon recommendation by the Compensation Committee. 9
Common Stockcommon stock and are fully vested on the date of grant. The right of the non-
employeenon-employee director to receive his or her annual grant of Commoncommon stock is personal to the director and is not transferable. Once received, shares of Common Stockcommon stock awarded to the non-employee director are freely transferable subject to any requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). On June 28, 2007, Company filed a registration statement on Form S-8 to register the shares subject to the 2007 Stock Plan and the Company'sCompany’s two prior stock option plans under the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”).
Upon recommendation of the Compensation Committee, the Board may, at any time and from time to time and in any respect, amend or modify the 2007 Stock Plan. The Board must obtain stockholder approval of any material amendment to the 2007 Stock Plan if required by any applicable law, regulation or stock exchange rule. The Board of Directors may amend the 2007 Stock Plan or any award agreement, which amendment may be retroactive, in order to conform it to any present or future law, regulation or ruling relating to plans of this or similar nature. No amendment or modification of the 2007 Stock Plan or any award agreement may adversely affect any outstanding award without the written consent of the participant holding the award.
Upon recommendation of the Compensation Committee, the Board of Directors, on February 23, 2011, voted to increase the annual grant awarded to each of the non-employee directors to a number of shares of Company’s common stock equal in value to $22,000, effective as of the July 1, 2011 grant, while decreasing the annual cash compensation payable to non-employee directors from $16,000 to $12,000 per year.
For the fiscal year ended June 30, 2010,2013, the four non-employee directors of the Company, Josef A. Grunwald, Gary N. Jacobs, John C. Love and William J. Nance, each received a grant of 1,501882 shares of Common Stock pursuant to the 2007 Stock Plan.
The InterGroup Corporation 2008 Restricted Stock Unit Plan
On December 3, 2008, the Board of Directors adopted, subject to shareholder approval, a new equity compensation plan for its officers, directors and key employees entitled, The InterGroup Corporation 2008 Restricted Stock Unit Plan (the "2008“2008 RSU Plan"Plan”). The 2008 RSU Plan was approved and ratified by the shareholders on February 18, 2009.
The 2008 RSU Plan authorizes the Company to issue restricted stock units ("RSUs"(“RSUs”) as equity compensation to officers, directors and key employees of the Company on such terms and conditions established by the Compensation Committee of the Company. RSUs are not actual shares of the Company'sCompany’s common stock, but rather promises to deliver common stock in the future, subject to certain vesting requirements and other restrictions as may be determined by the Committee. Holders of RSUs have no voting rights with respect to the underlying shares of common stock and holders are not entitled to receive any dividends until the RSUs vest and the shares are delivered. No awards of RSUs shall vest until at least six months after shareholder approval of the Plan. Subject to certain adjustments upon changes in capitalization, a maximum of 200,000 shares of the common stock are available for issuance to participants under the 2008 RSU Plan. The 2008 RSU Plan will terminate ten (10) years from December 3, 2008, unless terminated sooner by the Board of Directors. After the 2008 RSU Plan is terminated, no awards may be granted but awards previously granted shall remain outstanding in accordance with the Plan and their applicable terms and conditions.
The shares of common stock to be delivered upon the vesting of an award of RSUs have been registered under the Securities Act, pursuant to a registration statement filed on Form S-8 by the Company on June 16, 2010. The grant of RSUs is personal to the recipient and is not transferable. Once received, shares of common stock issuable upon the vesting of the RSUs are freely transferable subject to any requirements of Section 16(b) of the Exchange Act. Under the 2008 RSU Plan, the Compensation Committee also has the power and authority to establish and implement an exchange program that would permit the Company to offer holders of awards issued under prior shareholder approved compensation plans to exchange certain options for new RSUs on terms and conditions to be set by the Committee. The exchange program is designed to increase the retention and motivational value of awards granted under prior plans. In addition, by exchanging options for RSUs, the Company will reduce the number of shares of common stock subject to equity awards, thereby reducing potential dilution to stockholders in the event of significant increases in the value of its common stock.
Pursuant to an exchange offer authorized by the Compensation Committee, a total of 2,5648,245 RSUs were issued to fourfive holders of Non-Employee Director stock options in exchange for a total of 12,00015,000 stock options which were surrendered to the Company on June 30, 2010.2013. The number of RSUs issued was determined by
10
12.00)11.47) and the closing price of the Company'sCompany’s common stock on June 30, 20102013 of $15.26,$20.99, with that product divided by the closing price of the common stock on June 30, 2010. The
2,5642013. Of the 8,195 RSUs issued pursuant to that exchange offer, vest4,100 vested on October 1, 2010.
2013 and 4,120 will vest on April 1, 2014.
The InterGroup Corporation 2010 Omnibus Employee Incentive Plan
On February 24, 2010, the shareholders of the Company approved The InterGroup Corporation 2010 Omnibus Employee Incentive Plan (the "2010“2010 Incentive Plan"Plan”), which was formally adopted by the Board of Directors following the annual meeting of shareholders. The 2010 Incentive Plan authorizes a total of up to 200,000 shares of common stock to be issued as equity compensation to officers and employees of the Company in an amount and in a manner to be determined by the Compensation Committee in accordance with the terms of the Plan. The 2010 Incentive Plan authorizes the awards of several types of equity compensation including stock options, stock appreciation rights, performance awards and other stock based compensation. The 2010 Incentive Plan will expire on February 23, 2020, if not terminated sooner by the Board of Directors upon recommendation of the Compensation Committee. Any awards issued under the Plan will expire under the terms of the grant agreement.
The shares of common stock to be issued under the 2010 Incentive Plan have been registered under the Securities Act, pursuant to a registration statement filed on Form S-8 by the Company on June 16, 2010. Once received, shares of common stock issued under the Plan will be freely transferable subject to any requirements of Section 16(b) of the Exchange Act.
On March 16, 2010,February 28, 2012, the Compensation Committee authorized the grant of 100,00090,000 stock options to the Company'sCompany’s Chairman, President and Chief Executive, John V. Winfield to purchase up to 100,00090,000 shares of the Company'sCompany’s common stock pursuant to the 2010 Incentive Plan. The exercise price of the options is $10.30,$19.77, which equals 100% of the fair market value of the Company's Common
StockCompany’s common stock as determined by reference to the closing price of the Company's Common
StockCompany’s common stock as reported on the NASDAQ Capital Market on March 16, 2010,February 28, 2012 the date of grant. The options expire ten years from the date of grant, unless earlier terminated in accordance with the terms of the 2010 Incentive Plan. The options shall be subject to both time and performance based vesting requirements, each of which must be satisfied before options are fully vested and eligible to be exercised. Pursuant to the time vesting requirements, the options vest over a period of five years, with 20,00018,000 options vesting upon each one year anniversary of the date of grant. Pursuant to the performance vesting requirements, the options vest in increments of 20,00018,000 shares upon each increase of $2.00 or more in the market price of the Company'sCompany’s common stock above the exercise price ($10.30)19.77) of the options. To satisfy this requirement, the common stock must trade at that increased level for a period of at least ten trading days during any one quarter. As of June 30, 2013, 18,000 options have met the performance vesting requirements.
On March 16, 2010,July 1, 2011, the Compensation Committee also authorized a grant of 5,000 stock options to the Company's Vice President Real Estate, David C. Gonzalez,Company’s Assistant Secretary and General Counsel, Michael G, Zybala, to purchase up to 5,000 shares of the Company'sCompany’s common stock pursuant to the 2010 Incentive Plan. The exercise price of the options is $10.30$24.92 and the options expire ten years from the date of grant, unless earlier terminated in accordance with the terms of the 2010 Incentive Plan. The options vest as follows: March
16, 2011 - 2,500 shares; and March 16, 2012 - 2,500 shares.
over a period of five years, with 1,000 options vesting upon each one year anniversary of the date of grant, July 1, 2011.
Change in Controls Provisions in Equity Compensation Plans.
Plans
Under the Company'sCompany’s 2008 RSU Plan and its 2010 Incentive Plan, RSUs, stock options and other incentive awards may vest upon a change in control of the Company in accordance with their respective grant agreements. Outstanding unvested RSUs issued to pursuant to the Company's CEO and to its Directors2008 RSU Plan in exchange for vested stock options will immediately vest upon a change in control. Outstanding stock options issued pursuant to the Company's CEO and to its Vice President of Real EstateCompany’s 2010 Incentive Plan will also immediately vest and become exercisable upon a change in control. Except for the foregoing, there are no employment contracts between the Company and its Officers or Directors or any change in control arrangements.
11
SHAREHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION
At its Fiscal 2010 Annual Meeting of Shareholders held on February 23, 2011, the Company submitted to its shareholders two proposals regarding executive compensation. The first proposal to approve, in a non-binding vote, the compensation of the Company’s named executive officers was approved by the shareholders, having received more than 98% of the shares voted at the meeting in favor of the proposal. The second proposal was to determine, in a non-binding vote, whether a shareholder advisory vote to approve the compensation of the Company’s executive officers should occur every one, two or three years. The shareholders overwhelmingly voted in favor of three years as the frequency in which the Company should have an advisory vote on executive compensation with more than 96% percent of the shares voted at the meeting being in favor of three years. The Compensation Committee and the Board of Directors Eachhave considered the guidance provided by these advisory votes and have set three years as the frequency in which it will have a non-binding vote on executive compensation.
COMPENSATION OF DIRECTORS
Until fiscal 2011, each non-employee director receivesreceived an annual cash retainer in the amount of $16,000, to be paid in equal quarterly payments. Upon recommendation of the Compensation Committee, the Board of Directors, on February 23, 2011, voted to decrease the annual cash compensation payable to non-employee directors from $16,000 to $12,000, effective as of fiscal year ended June 30, 2011. With the exception of members of the Audit Committee, non-employee directors willdo not receive any additional fees for attending Board or Committee meetings, but will beare entitled to reimbursement of their reasonable expenses to attend such meetings. Members of the Audit Committee are paid a fee of $1,000 per quarter, with the Chair of that Committee to receive $1,500 per quarter. As an executive officer, the Company'sCompany’s Chairman has elected to forego his annual board fees.
Non-employee directors are also eligible for grants of equity compensation under the Company'sCompany’s 2007 Stock Plan and 2008 RSU Plan. Pursuant to the 2007 Stock Plan, each non-employee director iswas entitled to an annual grant of a number of shares of Common Stockcommon stock of the Company equal in value to $18,000 based on the fair market value of the Common Stock on the date of grant. To compensate for the $4,000 reduction in annual cash compensation payable to non-employee directors as discussed above, the Board of Directors, upon recommendation of the Compensation Committee, increased the annual grant of common stock to an amount equal in value to $22,000, effective as of the July 1, 2011 grant. Non-employee directors may also be eligible to participate in exchange offers as may be authorized by the Compensation Committee under the 2008 RSU Plan to exchange previously issued stock options for RSUs.
The following table sets forth the compensation paid to directors for the fiscal year ended June 30, 2010:
2013:
DIRECTOR COMPENSATION
Fees
Earned
or Paid Stock All Other
Name in Cash(1) Awards Compensation Total
- ----------------- --------- ---------- ------------ -------
Josef A. Grunwald $22,000(2) $37,335(6) - $ 59,335
Gary N. Jacobs $16,000 $36,053(7) - $ 52,053
John C. Love $66,000(3) $36,053(8) - $102,053
William J. Nance $68,000(4) $44,542(9) - $112,542
John V. Winfield(5) - - - -
- --------------
| Name | Fees Earned or Paid in Cash(1) | Stock Awards | All Other Compensation | Total | ||||||||||||
| Gary N. Jacobs | $ | 12,000 | $ | 63,125 | (5) | - | $ | 75,125 | ||||||||
| John C. Love | $ | 62,000 | (2) | $ | 63,125 | (6) | - | $ | 125,125 | |||||||
| William J. Nance | $ | 64,000 | (3) | $ | 63,125 | (7) | - | $ | 127,125 | |||||||
| John V. Winfield(4) | - | - | - | |||||||||||||
(1) Amounts shown include board retainer fees, committee fees and meeting fees.
(2) Mr. Grunwald also serves as a director of the Company's subsidiary,
Portsmouth. This amount includes $6,000 in regular board fees paid to Mr.
Grunwald by Portsmouth.
(3) Mr. Love also serves as a director of the Company'sCompany’s subsidiaries, Santa Fe and Portsmouth. Amounts shown include $8,000 in regular board and audit committee fees paid by Santa Fe and $8,000 in regular board and audit committee fees paid by Portsmouth. These amounts also include $30,000 in special hotel committee fees paid by Portsmouth related to the oversight of its Hotel asset.
(4)
(3) Mr. Nance also serves as a director of the Company'sCompany’s subsidiaries, Santa Fe and Portsmouth. Amounts shown include $8,000 in regular board and audit committee fees paid by Santa Fe and $8,000 in regular board and audit committee fees paid by Portsmouth. These amounts also include $30,000 in special hotel committee fees paid by Portsmouth related to the oversight of its Hotel asset.
(5)
(4) As Chief Executive Officer, the Company'sCompany’s Chairman, John V. Winfield, was not paid any board, committee or meetings fees. Mr. Winfield did receive a total of $12,000 in regular board fees from the Company'sCompany’s subsidiaries, which is reported on the Summary Compensation Table.
(6)
(5) Dollar amounts shown reflect the following: the fair market value of $18,000$22,000 for 1,501882 shares of common stock issued on July 1, 20092, 2012 pursuant to the Company'sCompany’s 2007 Stock Plan; the fair market value of $9,555$20,575 for 955825 shares of common stock issued on January 7, 2010October 1, 2012 upon the vesting of 955824 RSUs issued pursuant to
12
the 2008 RSU Plan; and $9,780 equaling the dollar amount realized upon the
exercise of 3,000 stock options on June 30, 2010, based on difference between
the exercise price ($12.00) and the market price of the Company's stock on that
date of $15.26. As of June 30, 2010, Mr. Grunwald also had an aggregate of
14,400 vested stock options outstanding.
(7) Dollar amounts shown reflect the following: fair market value of $18,000
for 1,501 shares of common stock issued on July 1, 2009 pursuant to the
Company's 2007 Stock Plan; fair market value of $8,498 for 969 shares of common
stock issued on August 19, 2009 upon the vesting of 969 RSUs issued pursuant to the 2008 RSU Plan; and the fair market value of $9,555$20,550 for 955824 shares of common stock issued on January 7, 2010 upon the vesting of 955 RSUs issuedApril 1, 2013 pursuant to the 2008 RSU Plan. As of June 30, 2010,2013, Mr. Jacobs also had an aggregate of 14,4005,400 vested stock options outstanding and 641a total of 819 RSUs that did not vest until
Octoberand are issuable as shares of common stock on April 1, 2010.
(8)2014.
(6) Dollar amounts shown reflect the following: the fair market value of $18,000$22,000 for 1,501882 shares of common stock issued on July 1, 20092, 2012 pursuant to the Company's 2007 Stock Plan; the fair market value of $8,498$20,575 for 969825 shares of common stock issued on August 19, 2009October 1, 2012 upon the vesting of 969824 RSUs issued pursuant to the 2008 RSU Plan; and the fair market value of $9,555$20,550 for 955824 shares of common stock issued on January 7, 2010 upon the vesting of 955 RSUs issuedApril 1, 2013 pursuant to the 2008 RSU Plan. As of June 30, 2010,2013, Mr. Love also had an aggregate of 14,4005,400 vested stock options outstanding and 641a total of 819 RSUs that did not vest until
Octoberand are issuable as shares of common stock on April 1, 2010.
(9)2014.
(7) Dollar amounts shown reflect the following: the fair market value of $18,000$22,000 for 1,501882 shares of common stock issued on July 1, 20092, 2012 pursuant to the Company's 2007 Stock Plan; fairthefair market value of $16,987$20,575 for 1,937825 shares of common stock issued on August 19, 2009October 1, 2012 upon the vesting of 1,937824 RSUs issued pursuant to the 2008 RSU Plan; and the fair market value of $9,555$20,550 for 955824 shares of common stock issued on January 7, 2010 upon the vesting of 955 RSUs issuedApril 1, 2013 pursuant to the 2008 RSU Plan. As of June 30, 2010,2013, Mr. Nance also had an aggregate of 14,4005,400 vested stock options outstanding and 641a total of 819 RSUs that did not
vest until Octoberand are issuable as shares of common stock on April 1, 2010.
2014.
Change in Control or Other Arrangements
Except for the foregoing, there are no other arrangements for compensation of Directors and there are no employment contracts between the Company and its Directors or any change in control arrangements.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executiveCompany’s officers and directors, and each beneficial owner of more than ten percent of the Common Stock of the Company, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive
officers,Officers, directors and greater than ten-percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based upon asolely on its review of the copies of such reports received by it,Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, or written representations from certain reporting persons that no Form 5'sForms 5 were required for those persons, the Company believes that during fiscal 2010 allknows of one Form 4 report not filed on a timely basis. All other filing requirements applicable to its officers, directors, and greater than ten-percent beneficial owners were complied with.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 11, 2011,13, 2014, certain information with respect to the beneficial ownership of Common Stock of the Company owned by (i) each Director and each of the named Executive Officers, (ii) all Directors and Executive Officers as a group and (iii) those persons or groups known by the Company to own more than five percent of the outstanding shares of Common Stock, (ii) each Director and Executive
Officer, and (iii) all Directors and Executive Officers as a group.
Name and Address of Amount and Nature
Beneficial Owner (1) of Beneficial Owner(2) Percentage(3)
- -------------------- ---------------------- -------------
John V. Winfield 1,458,581 60.2%
Josef A. Grunwald 120,223(4) 5.3%
William J. Nance 57,737(5) 2.4%
Gary N. Jacobs 25,747(6) 1.1%
John C. Love 22,372(7) 0.9%
David C. Gonzalez 30,750(5) 1.3%
Michael G. Zybala 0 *
David T. Nguyen 120 *
All Directors and
Executive Officers as a
Group (8 persons) 1,725,530 69.2%
- ------------------
Stock.
| Name of Beneficial Owner | Amount and Nature of | Percent | ||||||
| John V. Winfield | 1,535,522 | (3) | 64.9 | % | ||||
| William J. Nance | 53,609 | (4) | 2.3 | % | ||||
| Gary N. Jacobs | 21,628 | (5) | 0.9 | % | ||||
| John C. Love | 18,253 | (6) | 0.8 | % | ||||
| David C. Gonzalez | 26,770 | 1.1 | % | |||||
| Michael G. Zybala | 2,000 | (7) | * | |||||
| David T. Nguyen | 0 | * | ||||||
| All Directors and Executive Officers as a Group (7 persons) | 1,656,782 | 70.0 | % | |||||
* Ownership does not exceed 1%.
(1) Unless otherwise indicated the address for the persons listed is: 10940
Wilshire Blvd., Suite 2150, Los Angeles, California 90024.
(2) Unless otherwise indicated and subject to applicable community property laws, each person has sole voting and investment power with respect to the shares beneficially owned.
(3)
(2) Percentages are calculated on the basis of 2,424,1642,369,927 shares of Common Stock outstanding at January 11, 2011,13, 2014, plus any securities that person has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights.
(4)
(3) Includes 14,40078,000 shares that Mr. GrunwaldWinfield has a right to acquire pursuant to vested stock options.
(5)
(4)Includes 14,4005,400 shares that Mr. Nance has a right to acquire pursuant to vested stock options. (6)Does not include 819 RSUs that will vest on April 1, 2014 and which will be issued as shares of Common Stock on the vesting date.
(5) Includes 14,4005,400 shares that Mr. Jacobs has a right to acquire pursuant to vested stock options. Does not include 819 RSUs that will vest on April 1, 2014 and which will be issued as shares of Common Stock on the vesting date. Other than his options, and any unvested RSUs, all shares of Mr. Jacobs are held by the Gary and Robin Jacobs Family Trust.
(7)
(6) Includes 14,4005,400 shares that Mr. Love has a right to acquire pursuant to vested stock options. (8)Does not include 819 RSUs that will vest on April 1, 2014 and which will be issued as shares of Common Stock on the vesting date.
(7) Includes 15,0002,000 shares which Mr. GonzalezZybala has the right to acquire pursuant to vested stock options.
14
As of January 11, 2011 the number of holders of record of the Company's Common
Stock was approximately 535. Such number of owners was determined from the
Company's shareholders records and does not include beneficial owners of the
Company's Common Stock whose shares are held in names of various brokers,
clearing agencies or other nominees. Including beneficial holders, there are
approximately 950 shareholders of the Company's Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 4, 1998, the Administrative and Compensation Committee authorized the Company to obtain whole life and split dollar insurance policies covering the Company'sCompany’s President and Chief Executive Officer, Mr. Winfield. During fiscal 20102013 and 2009,2012, the Company paid annual premiums in the amount of approximately $85,000 for the split dollar insurance policy owned by, and the beneficiary of which is, a trust for the benefit of Mr. Winfield'sWinfield’s family. The Company has a secured right to receive, from any proceeds of the policy, reimbursement of all premiums paid prior to any payments to the beneficiary.
On June 30, 1998, the Company'sCompany’s Chairman and President entered into a voting trust agreement with the Company giving the Company the power to vote his 4.0% interest in the outstanding shares of the Santa Fe common stock.
In December 2013, The Compensation Committee approved an increase in the aggregate annual base compensation which Mr. Winfield receives from the Company, Santa Fe and Portsmouth by a total of $250,000, of which it is anticipated that approximately $150,000 will be paid by the Company and approximately $100,000 will be paid by Portsmouth.
In connection with the successful completion of the refinancing of the San Francisco Hilton-Financial District owned by Justice Investors, a subsidiary of Portsmouth, and the reorganization of Justice, the Compensation Committee has approved payments to certain officers of Justice and the Company, including $500,000 to Mr. Winfield and $250,000 to Mr. Zybala. In addition, in connection with the foregoing, the Compensation Committee approved additional fees for service on Committees of the InterGroup and Portsmouth Board of Directors as follows: $250,000 to each of Mr. Jacobs and Mr. Nance in connection with their service on the Strategic Options Committee; and $50,000 to Mr. Love in connection with his service on the Hotel Committee of Portsmouth. With respect to such fees, (which will be paid by Justice) 20% was paid in December 2013, and it is anticipated that 20% will be paid ins fiscal 2014 and the remaining 60% will be paid in fiscal 2015.
As Chairman of the Securities Investment Committee, the Company'sCompany’s President and Chief Executive officer, John V. Winfield, oversees the investment activity of the Company in public and private markets pursuant to authority granted by the Board of Directors. Mr. Winfield also serves as Chief Executive Officer and Chairman of Santa Fe and Portsmouth and oversees the investment activity of those companies. Depending on certain market conditions and various risk factors, the Chief Executive Officer, his family, Santa Fe and Portsmouth may, at times, invest in the same companies in which the Company invests. The Company encourages such investments because it places personal resources of the Chief Executive Officer and his family members, and the resources of Santa Fe and Portsmouth, at risk in connection with investment decisions made on behalf of the Company. Under the direction of the Securities Investment Committee, the Company has instituted certain modifications to its procedures to reduce the potential for conflicts of interest.
The Company, its subsidiary Santa Fe and Santa Fe'sFe’s subsidiary, Portsmouth, have established performance based compensation programs for Mr. Winfield'sWinfield’s management of the securities portfolios of those companies. The performance based compensation program was approved by the disinterested members of the respective Boards of Directors of the Company and its subsidiaries. No performance bonus compensation was paid to Mr. Winfield for the fiscal years ended June 30, 20102013 and 2009.
2012.
Director Independence
InterGroup's
InterGroup’s common stock is listed on the NASDAQ Capital Market tier of the NASDAQ Stock Market LLC ("NASDAQ"(“NASDAQ”). InterGroup is a Smaller Reporting Company under the rules and regulations of the SEC. The Board of Directors of InterGroup currently consists of five members. With the exception of the Company'sCompany’s President and CEO, John V. Winfield, all of InterGroup'sInterGroup’s Board of Directors consists of "independent"“independent” directors as independence is defined by the applicable rules of the SEC and NASDAQ. There are no members of the Company'sCompany’s compensation, nominating or audit committees that do not meet those independence standards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"“FOR” THE ELECTION OF JEROLD R. BABIN AS A CLASS A DIRECTOR AND GARY N. JACOBS AND
WILLIAM J. NANCE AS CLASS B DIRECTORS OF THE COMPANY.
15
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the firm of Burr Pilger Mayer, Inc. ("BPM"(“BPM”, formerly Burr, Pilger & Mayer LLP) as the Company'sCompany’s independent registered public accounting firm for the fiscal year ending June 30, 2011.2014. BPM has served as the Company'sCompany’s independent registered public accounting firm since October 23, 2007. Although the action of shareholders in this matter is not required, the Audit Committee believes it is appropriate to seek shareholder ratification of this appointment. Ratification requires the affirmative vote of a majority of the shares represented and voted at the Annual Meeting.
We expect that a representative of Burr Pilger Mayer, Inc. will be present at the Annual Meeting to respond to appropriate questions from Shareholders, and we will provide this representative with an opportunity to make a statement if he or she desires to do so.
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 (the “Exchange Act”) OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
AUDIT COMMITTEE REPORT
The Audit Committee'sCommittee’s responsibilities are described in a written charter adopted by the Board of Directors, which is attached as Appendix A to this
Proxy Statement.Directors. The Audit Committee primary duties and responsibilities are to: serve as an independent and objective party to monitor the Company'sCompany’s financial reporting process and internal control system; appoint and approve the compensation of the Company'sCompany’s independent registered public accounting firm; review and appraise the audit efforts of the Company'sCompany’s independent registered public accounting firm; and provide an open avenue of communications among the independent registered public accounting firm, financial and senior management, and the Board of Directors. During fiscal year ended June 30, 2010,2013, the Company retained Burr Pilger Mayer, Inc. ("BPM"(“BPM”) as its independent registered public accounting firm to provide audit and audit related services. All fees and expenses paid to BPM were approved by the Audit Committee.
The Audit Committee reviewed and discussed the audited financial statements with management and BPM, and management represented to the Audit Committee that the consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States. The discussions with BPM also included the matters required by Statement on Auditing Standards No. 114 (AICPA,Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (United States) in Rule 3200T regarding "Communication“Communication with Audit Committees."
Committees.”
The Audit Committee has also received the written disclosures and the letter from BPM required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant'saccountant’s communications with the Audit Committee concerning independence, which was also discussed with BPM.
Based on the Audit Committee'sCommittee’s review of the audited financial statements, and the review and discussions with management and BPM referred to above, the Audit Committee recommended to the Company'sCompany’s Board of Directors that the audited financial statements be included in the Company'sCompany’s Annual Report on Form 10-K for the fiscal year ended June 30, 20102013 for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE:
WILLIAM J. NANCE, CHAIRPERSON
JOHN C. LOVE
JOSEF A. GRUNWALD
16
Audit Fees
The aggregate fees billed for each of the last two fiscal years ended June 30, 20102013 and 20092012 for professional services rendered by Burr Pilger Mayer, Inc., the independent registered public accounting firm for the audit of the Company's (including its consolidated subsidiaries)Company’s annual financial statements and review of financial statements included in the Company'sCompany’s Form 10-Q reports or services normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years, were as follows:
Fiscal Year
-------------------------
2010 2009
-------- --------
Audit Fees(1) $329,000 $303,000
Audit Related Fees(2) 3,000 20,000
Tax Fees - -
All Other Fees - -
-------- --------
TOTAL: $332,000 $323,000
======== ========
(1) Includes approved out-of-pocket costs.
(2) For fiscal 2010, fees were for review of S-8 Registration Statement and
procedures for issuance of related consent. For fiscal 2009, fees were for
review of SEC comment letters, restatements of financial statements and related
Form 8-K reports.
| 2013 | 2012 | |||||||
| Audit fees | $ | 278,000 | $ | 286,000 | ||||
| Audit related fees | - | - | ||||||
| Tax fees | - | - | ||||||
| All other fees | - | - | ||||||
| TOTAL: | $ | 278,000 | $ | 286,000 | ||||
Audit Committee Pre-Approval Policies
The Audit Committee shall pre-approve all auditing services and permitted non-
auditnon-audit services (including the fees and terms thereof) to be performed for the Company by its independent registered public accounting firm, subject to any de minimus exceptions that may be set for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Committee prior to the completion of the audit. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting. All of the services described herein were approved by the Audit Committee pursuant to its pre-approval policies.
None of the hours expended on the principal auditor'sindependent registered public accounting firms’ engagement to audit the Company'sCompany’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal auditor'sindependent registered public accounting firm’s full-time permanent employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"“FOR” THE RATIFICATION OF THE APPOINTMENT OF BURR PILGER MAYER, INC. AS THE COMPANY'SCOMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
17
PROPOSAL NO. 3
NON-BINDING VOTE ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which was added by the Dodd-Frank Wall Street and Consumer Protection Act (the "Dodd“Dodd Frank Act"Act”) and the related rules of the SEC, we are including in these proxy materials a separate resolution subject to shareholder vote to approve, in a non-binding vote, the compensation of our named executive officers as disclosed on pages 67 to 11.12. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers. The text of the resolution in respect of Proposal No. 3 is as follows:
"Resolved,
“Resolved, that the shareholders approve, in a non-binding vote, the compensation of the Company's named executive officers as disclosed on Pages 67 to 1112 in the Proxy Statement relating to the Company's Fiscal 2010 Annual2013Annual Meeting to be held on February 23,
2011."
19, 2014.”
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
“FOR”
THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
18
PROPOSAL NO. 4
NON-BINDING VOTE ON
APPROVAL OF AMENDMENT TO THE FREQUENCYINTERGROUP CORPORATION
2010 OMNIBUS EMPLOYEE INCENTIVE PLAN AND
A GRANT OF SHAREHOLDER
VOTES ON EXECUTIVE COMPENSATIONOPTIONS
Description of the Amendment
Based on the recommendation of the Compensation Committee of our Board of Directors, we are submitting to the shareholders for approval an amendment (the “2010 Plan Amendment”)to The InterGroup Corporation 2010 Omnibus Employee Incentive Plan (which we refer to as the “2010 Incentive Plan”). A majority of the outstanding shares of Common Stock are required to approve the 2010 Incentive Plan. The Amendment would increase the number of shares of common stock subject to the 2010 Incentive Plan from 200,000 shares to 400,000 shares and would increase the number of shares that could be subject to awards to any individual participant under the 2010 Incentive Plan in any year from 100,000 shares to 200,000 shares. The Company has received firm written commitments that at least 52% of the outstanding shares of the Company will vote in favor of the Amendment.
Our executive officers and key employees have an interest in the proposal to amend the 2010 Incentive Plan since each is an eligible participant in such awards that may be granted under the 2010 Incentive Plan by the Compensation Committee. As of January 11, 2010, there were four (4) named executive officers that are eligible participants under the 2010 Incentive Plan and 7 employees, including officers.
On December 26, 2013, the Compensation Committee authorized, subject to shareholder approval, a grant of non-qualified and incentive stock options for an aggregate of 160,000 shares (the “Option Grant”) to the Company’s President and Chief Executive Officer, John V. Winfield. The grant of stock options was made pursuant to, and consistent with, the 2010 Incentive Plan, as proposed to be amended. The non-qualified stock options are for 133,195 shares and have a term of ten years, expiring on December 26, 2023, with an exercise price of $18.65 per share. The incentive stock options are for 26,805 shares and have a term of five years, expiring on December 26, 2018, with an exercise price of $20.52 per share. In accordance with the requirements of Section 14Aterms of the Securities Exchange
Act2010 Incentive Plan, the exercise prices were based on 100% and 110%, respectively, of 1934,the fair market value of the Company’s common stock as determined by reference to the closing price of the Company’s common stock as reported on the NASDAQ Capital Market on the date of grant. The stock options are subject to time vesting requirements, with 20% of the options vesting annually commencing on the first anniversary of the grant date.
A copy of the 2010 Incentive Plan, as proposed to be amended, (the "Exchange Act"), which was addedis attached to this Proxy Statement as Appendix A and is hereby incorporated by reference. The following summary of the key provisions of the 2010 Incentive Plan is qualified in its entirety by reference to the attached 2010 Incentive Plan document.
Description of the Plan
EFFECTIVE DATE AND TERM. The Amendment will be effective February 19, 2014 upon formal adoption by the Dodd-Frank
Wall StreetBoard of Directors if approved by the shareholders at the Annual Meeting. The 2010 Incentive Plan will terminate upon the earlier of the date all shares reserved for issuance have been awarded or February 23, 2020, if not sooner terminated by the Board upon recommendation by the Committee.
ADMINISTRATION AND ELIGIBILITY. Among other powers, the Compensation Committee has full and Consumer Protection Act (the "Dodd Frank Act")exclusive power to: interpret the terms and the related
rulesintent of the SEC, we2010 Incentive Plan and any award agreement; determine eligibility for awards; determine award recipients; establish the amount and type of award; determine the fair market value of our common stock; determine the terms and conditions of awards; grant awards; and make all other determinations relating to the 2010 Incentive Plan.
The Compensation Committee may delegate to one or more of its members, agents or advisors or to one or more of our officers, or those of our subsidiaries or affiliates, such administrative duties or powers as it may deem advisable. The Compensation Committee may authorize one or more of our officers to designate employees to be recipients of awards and/or determine the size of any such award; provided that (i) the Compensation Committee may not delegate such authority with respect to awards to be granted to any of our officers or other directors or a person who beneficially owns more than ten percent of the common stock, (ii) the authorizing resolution of the Compensation Committee must state the total number of awards that may be so granted; and (iii) the officer must report periodically to the Compensation Committee about the nature and scope of the awards granted.
SHARES AVAILABLE FOR AWARDS; MAXIMUM AWARDS. The stock to be available for issuance under the 2010 Incentive Plan are includingbe shares of the Company’s Common Stock, par value $.01 per share, which may be unissued shares or treasury shares. Subject to certain adjustments upon changes in these proxy materialscapitalization, a separate
resolutionmaximum of 400,000 shares of the Common Stock will be available for issuance to participants under the 2010 Incentive Plan. The maximum aggregate number of shares subject to shareholder voteall awards granted in any one plan year to recommend,any one participant shall be 200,000.
TYPES OF AWARDS.
Stock Options. Stock options allow the participant to buy a certain number of shares of the common stock at an exercise price equal to at least the fair market value (as determined by the Compensation Committee) on the date the option is granted. Stock options may be incentive stock options intended to qualify for special tax treatment or nonqualified stock options. Specific terms of the option are set by the Compensation Committee and reflected in each award agreement. Upon exercise of a non-binding vote,
whetherstock option, the participant may pay the exercise price using (i) cash, common stock, or a non-binding shareholder votecombination of cash and common stock, or (ii) a cashless exercise procedure through the participant’s broker, or (iii) any other payment method approved or accepted by the Compensation Committee, including a net gain procedure. The maximum term of stock options is ten years.
Stock Appreciation Rights. SARs entitle the participant to approvereceive a payment equal to the compensation“spread” between the exercise price of the right and the fair market value of the shares subject to the right on the date of exercise. SARs may be free standing or granted in tandem with a stock option. The Compensation Committee will determine the term of any SAR granted, provided that no SAR, including an SAR issued in tandem with a stock option, may be exercised after the tenth anniversary of its grant date.
Performance Awards. The Compensation Committee may grant performance awards in the form of performance shares or performance units and will set the specific terms of any such award. The Compensation Committee will set the initial value of each performance unit at the time of grant. Each performance share will have an initial value equal to the fair market value of a share on the date of grant, as determined by the Compensation Committee. The Compensation Committee will set performance goals which, depending on the extent to which they are met, will determine the value and/or the number of performance units/shares to be paid to the participant. Holders of performance share awards will have voting rights only upon issuance of the underlying shares. The Compensation Committee may grant holders of performance share awards the right to receive dividend equivalents, which may be paid currently or accumulated and paid to the extent that performance shares become non-forfeitable, as determined by the Compensation Committee. Dividend equivalents may be settled in cash, shares or a combination of both. Holders of performance units have no voting rights or dividend rights associated with those awards.
Other Stock-Based Awards. The Compensation Committee may also grant other types of stock-based awards, including the grant or offer for sale of unrestricted shares of our named
executive officers (that is similarcommon stock. The terms of any such award will be at the discretion of the Compensation Committee, subject to the non-binding voteterms of the 2010 Incentive Plan.
PERFORMANCE MEASURES. The 2010 Incentive Plan provides that, with respect to certain awards, the Compensation Committee may make the degree of payout and/or vesting dependent upon the attainment of certain performance measures set forth in Proposal 3)
should occur every one, twothe 2010 Incentive Plan. Performance goals with respect to awards intended to qualify as performance based compensation are limited to the following performance measures: net earnings or threenet income (before or after taxes); earnings per share; net sales or revenue growth; net operating profit; return measures (including return on assets, capital, invested capital, equity, sales or revenue); cash flow (including operating cash flow, free cash flow, cash flow return on equity and cash flow return on investment); EBITDA; gross or operating margins; productivity ratios; share price (including growth measures and total shareholder return); expense targets; margins; operating efficiency; market share; customer satisfaction; working capital targets; and economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of capital).
Performance measures may be used to measure our performance together with our subsidiaries as a whole or any of our business units or any combination thereof. Performance measures may also be established relative to: (i) peer companies selected by the Compensation Committee; (ii) internal goals; or (iii) levels attained in prior years. The textCompensation Committee may provide in any award that an evaluation of performance may include or exclude various events, including asset write-downs, the resolution with
respecteffect of Proposal 4 ischanges in the tax laws and extraordinary items such as follows:
"Resolved,acquisitions or divestitures. In addition, if applicable tax and/or securities laws and applicable listing rules change to permit Compensation Committee discretion to alter the governing performance measures, then the Compensation Committee may make such changes without seeking stockholder approval.
TAX WITHHOLDING. To the extent that the shareholders recommend, in a non-binding vote,
whether a non-binding shareholder vote to approve the
compensation of the Company's named executive officers should
occur every one, two or three years"
In considering their vote, shareholders may wish to review the information
presentedparticipant incurs any tax liability in connection with Proposal 3the exercise or receipt of an award under the 2010 Incentive Plan, we have the right to deduct or withhold, or to require the participant to pay to us, the minimum statutory amount to satisfy federal, state and the information on the Company's
compensation policies and decisions regarding named executive officers as
disclosed on pages 6 to 11. In addition, shareholders should note the
following:
* A triennial policy would permit shareholders and directors to evaluate
the effects of our compensation program on long-term performance and
would help align "say on pay" with the goal of avoiding short-term focus
in corporate governance and executive pay arrangements.
*local tax withholding obligations. In addition, the triennial approachCompensation Committee may allow the participant to satisfy the withholding obligation by allowing us to withhold a portion of the shares to be issued to the participant. Those shares would allow shareholdersbe available for future awards under the 2010 Incentive Plan.
TRANSFERABILITY. All awards under the 2010 Incentive Plan are nontransferable other than by will or the laws of descent and distribution, provided that, with respect to engageawards other than incentive stock options, the Compensation Committee may, in its sole discretion, permit transferability to a more thoughtful analysisfamily member or family trust, foundation or other entity, on a general or specific basis. Unless otherwise provided in the award agreement, awards granted under the 2010 Incentive Plan may be exercised only by the participant during the participant’s lifetime.
AMENDMENT AND TERMINATION. The Compensation Committee may, at any time and votingfrom time to time and in any respect, amend or modify the 2010 Incentive Plan. The Board must obtain stockholder approval of any material amendment to the 2010 Incentive Plan if required by providing more time between
votes to gage executive officer performance.
For these reasons, we believe that a three-year time horizon is appropriateany applicable law, regulation or stock exchange rule. In addition, no option or SAR award under the 2010 Incentive Plan may be repriced, replaced or regranted through cancellation without the prior approval of the stockholders, except for adjustments by the Compensation Committee for corporate changes described above. The Board of Directors may amend the 2010 Incentive Plan or any award agreement, which amendment may be retroactive, in order to conform it to any present or future law, regulation or ruling relating to plans of this or similar nature. No amendment or modification of the 2010 Incentive Plan or any award agreement may adversely affect any outstanding award without the written consent of the participant holding the award.
ADJUSTMENTS FOR CORPORATE CHANGES. In the event of a recapitalization, reclassification or other specified event affecting us or shares of our common stock, the Compensation Committee shall make appropriate and proportionate adjustments in the number and kind of shares that may be issued under the 2010 Incentive Plan, as well as other maximum limitations under the 2010 Incentive Plan, and the number and kind of shares of common stock or other rights and prices under outstanding awards.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of certain federal income tax consequences that will generally apply to awards issued under the 2010 Incentive Plan, based on current federal income tax laws. This summary is not intended to be exhaustive and, among other things, does not describe state, local or foreign income and other tax consequences. Participants in the 2010 Incentive Plan should not rely on this discussion for individual tax advice, as each participant’s situation and the tax consequences of exercising awards and disposing of the underlying shares of common stock will vary depending upon the specific facts and circumstances involved. Each participant is advised to consult with his or her own tax advisor.
Incentive Stock Options. A participant will not recognize income upon the grant or exercise of an award that qualifies as an incentive stock option (“ISO”) under the 2010 Incentive Plan. However, the difference between the fair market value of the stock on the date of exercise and the exercise price is an item of tax preference which may cause the participant to be subject to the alternative minimum tax in the year in which the ISO is exercised.
If a participant exercises an ISO and does not dispose of the underlying shares within (i) two years from the date of grant of the ISO, and (ii) one year from the date of exercise, the participant will generally recognize capital gain or loss on a subsequent sale of the stock equal to the difference between the sales price and the exercise price. If a participant disposes of common stock acquired upon exercise of an ISO before the expiration of either the two-year or the one-year holding periods described in the preceding sentence (each a “disqualifying disposition”), the participant will generally realize ordinary income in an amount equal to the lesser of (a) the excess of the fair market value of the shares on the date of exercise over the exercise price, or (b) the excess of the fair market value of the shares on the date of disposition over the exercise price. The remaining gain, if any, will be taxed to the participant as long-term or short-term capital gain depending on the holding period for such shares. We will not be allowed any deduction for federal income tax purposes at either the time of grant or the time of exercise of an ISO. Upon any disqualifying disposition by a participant, we will generally be allowed a deduction to the extent the participant realizes ordinary income.
Nonqualified Stock Options. A participant who is granted an option under the 2010 Incentive Plan which does not qualify as an ISO shall be treated as having been granted a nonqualified stock option (“NQSO”). Generally, the grant of an NQSO does not result in a participant recognizing income. Upon the exercise of an NQSO, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the shares of the common stock at the time of exercise over the exercise price of the NQSO. We will generally be entitled to a deduction for federal income tax purposes in an amount equal to the amount included in income by the participant, provided we satisfy our information reporting obligations with respect to such income.
On a subsequent sale of the shares of the common stock, the participant will recognize capital gain or loss equal to the difference between the amount realized from the sale of stock and the participant’s adjusted basis in those shares, which will generally be the sum of the amount paid and the amount of income previously recognized by the participant in connection with the exercise of the NQSO. Such capital gain will be long or short term depending upon the holding period for such shares.
Stock Appreciation Rights. In general, a participant will not recognize ordinary income for federal income tax purposes upon the grant of an SAR, and we will not be entitled to a deduction at that time. Upon the exercise of an SAR, the participant will recognize ordinary income equal to the amount by which the fair market value of a share on the exercise date exceeds the exercise price of the SAR, multiplied by the number of shares with respect to which the participant exercises his or her SAR. We will be entitled to a federal income tax deduction equal to the amount of ordinary income the recipient is required to recognize in connection with the exercise. The participant’s basis in those shares will equal their fair market value on the date of their acquisition.
In general, the issuance of a tandem SAR will not result in a participant recognizing ordinary income. We will not be entitled to a deduction at such time. Upon the exercise of a tandem SAR, the participant will recognize ordinary income equal to the amount by which the fair market value of the shares acquired under the tandem SAR on the exercise date exceeds the exercise price of such shares. We will generally be entitled to a corresponding deduction equal to the amount of income recognized by the participant.
Other Stock-Based or Performance-Based Awards. The recipient of performance units/shares or other stock-based or performance-based awards under the 2010 Incentive Plan will not recognize taxable income at the time of grant as long as the award is nontransferable and is subject to a substantial risk of forfeiture as a result of performance-based vesting targets, continued services requirements or other conditions that must be satisfied before delivery of shares can occur. The recipient will generally recognize ordinary income when the substantial risk of forfeiture expires or is removed. We will generally be entitled to a corresponding deduction equal to the amount of income the recipient recognizes. On a subsequent sale of the shares, the recipient will recognize capital gain or loss equal to the difference between the sales price and the participant’s adjusted basis in those shares, which will generally be the amount of income previously recognized by the participant.
Miscellaneous Tax Issues. Compensation to a participant who is an employee which results from awards under the 2010 Incentive Plan constitute wages for purposes of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act and thus will result in additional tax liability to us, generally with respect to each award at the time that such award is no longer subject to a substantial risk of forfeiture or becomes transferable.
NEW PLAN BENEFITS. The Amendment will become effective upon adoption by the Board of Directors following approval by our shareholders. Other than the Option Grant, no benefits have been received or allocated under the Amendment. As such, any additional benefits and amounts are not determinable at this time.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information as of June 30, 2013 with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance, aggregated as follows:
| Plan category | Member of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options warrants and rights | Remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) and (c) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 230,195 | (1) | $ | 14.98 | (2) | 111,109 | (3) | |||||
| Equity compensation plans not approved by security holders | None | N/A | None | |||||||||
| Total | 230,195 | (1) | $ | 14.98 | (2) | 111,109 | (3) | |||||
(1) There were 220,000 stock options outstanding as of June 30, 2013. Also included are 8,195 Restricted Stock Units issued pursuant to the 2008 RSU Plan that were not vested as of June 30, 2013.
(2) Reflects the weighted average exercise price of all outstanding options.
(3) As of June 30, 2013, the Company had 31,262 shares of Common Stock available for future issuance pursuant to the 2007 Stock Compensation Plan for Non-Employee Directors. Pursuant to the 2007 Plan, each non-employee director will receive, on July 1 of each year, an annual grant of a number of shares of Common Stock of the Company equal in value to $22,000 based on the fair market value of the Common Stock on the date of grant. The Company also had 79,847 RSUs available for future issuance under the 2008 RSU Plan. As of June 30, 2013, there were no shares available for future issuance under the 2010 Incentive Plan.
BOARD RECOMMENDATION; INTEREST OF CERTAIN PERSONS
The Board of Directors believes that the Amendment will provide a valuable benefit to the Company by enhancing its ability to attract and retain highly qualified officers and employees. The Board has recommended that the Amendment be submitted to the shareholders with a more comprehensive view of whether or
named executive officer compensation programs are achievingat the Annual Meeting for their objectives.
approval.
The Company’s officers and key employees have an interest in the proposal to adopt the Amendment since each is an eligible participant in such awards that may be granted under the 2010 Incentive Plan by the Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOUA VOTE "THREE YEARS"
WITH RESPECT TO HOW FREQUENTLY A NON-BINDING SHAREHOLDER VOTE TO
APPROVE“FOR” APPROVAL
OF THE COMPENSATION OF OUR EXECUTIVE OFFICERS SHOULD OCCUR.
19
OTHER BUSINESS
As of the date of this statement, management knows of no business to be presented at the meeting that is not referred to in the accompanying notice. As to other business that may properly come before the meeting, it is intended that the proxies properly executed and returned will be voted in respect thereof at the discretion of the person voting the proxies in accordance with the best judgment of that person.
SHAREHOLDER PROPOSALS
It is presently anticipated that the fiscal 20112014 Annual Meeting of Shareholders will be held on or around February 22, 2012. Any shareholder25, 2015. Shareholder proposals intended to be considered for inclusion in the proxy statement and form of proxy for presentation at the fiscal 20112014 Annual Meeting must be received by the Company no later than October 22, 2011. The proposalSeptember 26, 2014 in accordance with Rule 14a-8 of Regulation 14A under the Exchange Act. In addition, all proposals must be in accordancecomply with the provisions of Rule 14a-8 promulgated byadopted under Section 14(a) of the Securities and Exchange Commission under the
Securities Act of 1934.1934, as amended (the “Exchange Act”), which lists the requirements for the inclusion of shareholder proposals in company-sponsored proxy materials. Any proposals must be submitted in writing to the following address: Corporate Secretary, The InterGroup Corporation, 10940 Wilshire Blvd., Suite 2150, Los Angeles, CA 90024. It is suggested that the proposal be submitted by certified mail -– return receipt requested.
| 24 |
ANNUAL REPORT ON FORM 10-K
The Company'sCompany’s Annual Report for the fiscal year ended June 30, 20102013 accompanies this proxy statement, but is not deemed a part of the proxy solicitation material. A copy of the Company'sCompany’s Form 10-K for the fiscal year ended June 30, 2010,2013, as required to be filed with the Securities and Exchange Commission,SEC, excluding exhibits, will be mailed to shareholders without charge upon written request to: John V. Winfield, President, The InterGroup Corporation, 10940 Wilshire Blvd., Suite 2150, Los Angeles, CA 90024. Such requests must set forth a good-faith representation that the requesting party was either a holder of record or beneficial owner of the common stock of the Company on January 11,
2011.13, 2014. The Company'sCompany’s Form 10-K and other public filings are also available on the Company’s website at www.intgla.com and through the Securities and Exchange Commission's world-wide-web site
(http://www.sec.gov).
Commission’s website www.sec.gov.
By Resolution of the Board of Directors
THE INTERGROUP CORPORATION
Gary N. Jacobs
Secretary
Dated: January 27, 2014
Los Angeles, California
January 21, 2011
24
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APPENDIX A
THE INTERGROUP CORPORATION
AUDIT COMMITTEE CHARTER
(As Amended on January 13, 2011)
Purpose:
- -------
2010 OMNIBUS EMPLOYEE INCENTIVE PLAN
(As Amended)
Article 1.
Establishment, Purpose, and Duration
1.1 ESTABLISHMENT. The primary purposeInterGroup Corporation, a Delaware corporation (hereinafter referred to as the "Company"), establishes an incentive compensation plan to be known as The InterGroup Corporation 2010 Omnibus Employee Incentive Plan (hereinafter referred to as the "Plan"), as set forth
in this document.
This Plan permits the grant of the Audit Committee is to assistNonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Performance Shares, Performance Units and Other Stock-Based Awards.
This Plan shall become effective upon adoption by the Board of Directors in fulfilling its responsibility of overseeing management's conduct of the Company's financial reporting process,Company after shareholder approval (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2 PURPOSE OF THIS PLAN. The purpose of this Plan is to provide a means whereby Officers and Employees of the Company's systemsCompany develop a sense of internal
accountingproprietorship and personal involvement in the development and financial controls, and the annual independent audit of the
Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate
any matter brought to its attention and shall have full access to all books,
records, facilities and personnelsuccess of the Company, and to encourage them to devote their best efforts to the powerbusiness of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of this Plan is to retain
outside counsel, auditorsprovide a means through which the Company may attract able individuals to become Officers and Employees of the Company and to provide a means for such individuals to acquire and maintain stock ownership in the Company, thereby strengthening their concern
for the welfare of the Company.
1.3 DURATION OF THIS PLAN. Unless sooner terminated as provided herein, this Plan shall terminate ten (10) years from the Effective Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan's terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of (a) adoption of this Plan by the Board, or (b) the Effective Date.
Article 2.
Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1 “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Performance Shares, Performance Units, or Other Stock-Based Awards, in each case subject to the terms of this Plan.
2.2 “Award Agreement” means either (i) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (ii) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet or other experts for this purpose. The Boardnon-paper Award Agreements, and the Committee areuse of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.
2.3 “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in place to representRule 13d-3 of the Company's shareholders,General Rules and Regulations under the Company's independent registered public accounting firm is ultimately
accountable toExchange Act.
2.4 “Board” or “Board of Directors” means the Board and the Committee as such representatives of shareholders. It is the responsibilityDirectors of the Committee to maintain free and
openCompany.
2.5 “Code” means the U.S. Internal Revenue Code of communication between the Board, the independent registered
public accounting firm and the financial management and internal auditors of
the Company.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership:
- ----------
The Committee shall be comprised of at least three (3) "independent" directors
that meet the composition requirements1986, as defined by the rules of the
Securities and Exchange Commission ("SEC") and The NASDAQ Stock Market LLC
("NASDAQ") as may be modified and supplementedamended from time to time. Accordingly,
allFor purposes of this Plan, references to sections of the membersCode shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
2.6 “Committee” means the Compensation Committee of the Committee will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company;
2. Are not affiliates of the Company;
3. Do not receiveBoard or a subcommittee thereof, or any compensation from the Company other than in the capacity
as director; and
4. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee.
In addition, at least one member of the Committee will qualify as an audit
committee financial expert as defineddesignated by the Securities and Exchange
Commission.Board to administer this Plan. The members of the Committee shall be electedappointed from time to time by and shall serve at the discretion of the Board. If the Committee
does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.
2.7 “Company” means The InterGroup Corporation, a Delaware corporation, and any successor thereto as provided in Article 17 herein.
2.8 “Covered Employee” means any salaried Employee who is or may become a "Covered Employee," as defined in Code Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of (i) ninety (90) days after the beginning of the Performance Period, or (ii) twenty-five percent (25%) of the Performance Period has elapsed, as a "Covered Employee" under this Plan for such applicable Performance Period.
2.9 “Director” means any individual who is a member of the Board of Directors of the Company.
2.10 “Effective Date” has the meaning set forth in Section 1.1.
2.11 “Employee” means any person, including Officers, designated as an employee of the Company and/or its Subsidiaries on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company and/or Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company and/or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company and/or Subsidiary during such period.
2.12 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.13 “Fair Market Value” or "FMV" means a price that is based on the opening, closing, actual, high, low, or average selling prices of a Share reported on The NASDAQ Stock Market ("NASDAQ") or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Unless the Committee determines otherwise, Fair Market Value shall be deemed to be equal to the reported closing price of a Share on the most recent date on which Shares were publicly traded. If there are no Common Stock transactions reported for such date, the determination shall be made as of the last immediately preceding date on which the Common Stock transactions were reported. If there shall be any material alteration in the present system of reporting sales prices of the Common Stock, or if the Common Stock shall no longer be traded or listed as set forth above, the Fair Market Value of the Common Stock as of a particular date shall be determined under such method as shall be determined by the Committee. Such definition(s) of FMV shall be specified in each Award Agreement and may differ depending on whether FMV is in reference to the grant, exercise, vesting, settlement, or payout of an Award.
2.14 “Family Members” of a Participant means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such Participant, including adoptive relationships, any person sharing such Participant's household (other than a tenant or employee), a trust in which such individuals have more than fifty percent of the beneficial interest, a foundation in which these individuals (or the Participant) control the management of assets, and any other entity in which these individuals (or the Participant) own more than fifty percent of the voting interest.
2.15 “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article 7.
2.16 “Full Value Award” means an Award other than in the form of an ISO, NQSO or SAR, and which is settled by the issuance of Shares.
2.17 “Grant Price” means the price established at the time of grant of a SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.
2.18 “Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422, or any successor provision.
2.19 “Insider” means an individual who is, on the relevant date, an officer, or Director of the Company, or a more than ten percent (10%) Beneficial Owner of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.
2.20 “Non-employee Director” means a Director who is not an Employee.
2.21 “Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.
2.22 “Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.
2.23 “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.24 “Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 9.
2.25 “Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.
2.26 “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.
2.27 “Performance Measures” means measures as described in Article 11 on which the performance goals are based and which are approved by the Company's shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.
2.28 “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.
2.29 “Performance Share” means an Award under Article 8 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the annual
meetingtime it is payable is determined as a function of the Boardextent to which corresponding performance criteria have been achieved.
2.30 “Performance Unit” means an Award under Article 8 herein and shall serve until their successorssubject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
2.31 “Permitted Transfer” means any transfer of an Award, other than an ISO, by a Participant to a Participant's Family Member made by gift or domestic relations order if such transfer is not for value; provided, however, that neither (i) a transfer under a domestic relations order in settlement of marital property rights nor (ii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members or the Participant in exchange for an interest in that entity shall be duly
electeddeemed a transfer for value for the purposes of determining whether a transfer is a Permitted Transfer.
2.32 “Plan” means The InterGroup Corporation 2010 Omnibus Employee Incentive Plan, as amended.
2.33 “Plan Year” means the Company's fiscal year.
2.34 “Share” means a share of common stock of the Company, $.01 par value per share.
2.35 “Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms of Article 7 herein.
2.36 “Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.
2.37 “Tandem SAR” means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled).
Article 3.
Administration
3.1 General. The Committee shall be responsible for administering this Plan, subject to this Article 3 and qualified. Unlessthe other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.
3.2 Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of the Plan or any Award Agreement, and, subject to Article 16, adopting modifications and amendments to this Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Associates, and/or its Subsidiaries operate.
3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company, and/or its Subsidiaries and Associates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; and (b) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee who is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.
Article 4.
Shares Subject to this Plan and Maximum Awards
4.1 Number of Shares Available for Awards and Maximum Awards. Subject to adjustment as provided in Section 4.3 herein, the maximum number of Shares available for issuance to Participants under this Plan (the "Share Authorization") shall be four hundred thousand (400,000) Shares. The maximum aggregate number of Shares subject to all Awards granted in any one Plan Year to any one Participant shall be 200,000.
4.2 Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee's permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under this Plan or the tax withholding requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if an SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under this Plan. The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares.
4.3 Adjustments in Authorized Shares. If the outstanding securities of the class then subject to this Plan are increased, decreased or exchanged for or converted into cash, property or a Chairmandifferent number or kind of securities, or if cash, property or securities are distributed in respect of those outstanding securities, in any case as a result of a reorganization, merger consolidation, recapitalization, restructuring , reclassification, extraordinary dividend or other distribution, stock split, reverse stock split or the like, or if substantially all of the property and assets of the Company are sold, then, the Committee will make appropriate and proportionate adjustments in (a) the number and type of shares or other securities or cash or other property that may be acquired pursuant to Options or are the basis for determining the value of other Awards previously granted under this Plan, (b) the maximum number and type of shares or other securities or cash or other property that may be issued pursuant to Awards thereafter granted under this Plan, and (c) the maximum number of Shares for which Awards may be granted during any one calendar year; provided, however, that no adjustment may be made to the number of Shares that may be acquired pursuant to outstanding Incentive Stock Options or the maximum number of Shares with respect to which Incentive Stock Options may be granted under this Plan to the extent the adjustment would result in those options being treated as other than Incentive Stock Options.
Subject to Section 15.3, the Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. Subject to Section 15.3, the determination of the Committee is elected byas to the full Board,foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
Subject to the membersprovisions of Article 15 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may designateauthorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate (including, but not limited to, a Chairmanconversion of equity awards into Awards under this Plan in a manner consistent with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the rules under Code Sections 422 and 424, as and where applicable.
Article 5.
Eligibility and Participation
5.1 Eligibility. Individuals eligible to participate in this Plan include all Officers and Employees.
5.2 Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.
Article 6.
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the CommitteeCompany or of any parent or subsidiary corporation (as permitted under Code Sections 422 and 424).
6.2 Award Agreement. Each Option grant shall be evidenced by majority votean Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO.
6.3 Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant. Notwithstanding the foregoing, the price at which shares of stock may be purchased under an ISO granted to a Participant who is a ten-percent owner shall not be less than one hundred ten percent (110%) of the FMV of the Shares as determined on the date of grant. For this purpose, a "ten-percent owner" shall mean a person who, at the time the ISO is granted, owns stock with more than ten percent (10%) of the total combined voting power of all classes of stock of the Company.
6.4 Term of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, the period during which an ISO may be exercised by a ten percent owner shall expire not later than five years from the date the ISO is granted.
6.5 Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price (provided that except as otherwise determined by the Committee, Membership.
Meetings:
- --------the Shares that are tendered must have been held by the Participant for at least six (6) months (or such other period, if any, as the Committee may permit) prior to their tender to satisfy the Option Price if acquired under this Plan or any other compensation plan maintained by the Company or have been purchased on the open market); (c) by a cashless exercise (broker-assisted exercise) through a "same day sale" commitment; (d) by utilizing a net gain procedure; (e) by a combination of (a), (b), (c) and (d); or (f) any other method approved or accepted by the Committee in its sole discretion.
The net gain procedure, is intended to work, in effect, like a stock-settled SAR. An option holder who elects to use the net gain procedure will receive the number of shares of common stock with a value equal to the difference between the market price on the date of exercise and the exercise price of the option, less applicable tax withholding. For example, if an optionee has an option to acquire 300 shares at an exercise price of $10.00 per share and exercises the option when the market price is $30.00 and the withholding rate is 30%, the optionee would receive 140 shares (100 shares would be withheld to pay the exercise price and 60 shares would be withheld to pay the required withholding tax.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of [book entry Shares], or upon the Participant's request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.7 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.
6.8 Termination of Employment. Each Participant's Award Agreement shall meet at least four times annually, or more frequently as
circumstances dictate. A majorityset forth the extent to which the Participant shall have the right to exercise the Option following termination of the membersParticipant's employment or provision of services to the Company and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall constitute a quorumbe included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for the transactiontermination.
6.9 Notification of business. MinutesDisqualifying Disposition. If any Participant shall make any disposition of each meeting of
the Committee should be recorded by the SecretaryShares issued pursuant to the Committee. Approval by
a majorityexercise of an ISO under the members presentcircumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.
Article 7.
Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at a meeting at which a quorum is presentany time and from time to time as shall constitute approvalbe determined by the Committee. The Committee may also actgrant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs.
The Grant Price for each grant of a Freestanding SAR shall be determined by A-1
unanimous written consent without a meeting. Asthe Committee and shall be specified in the Award Agreement; provided, however, the Grant Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
7.2 SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.3 Term of SAR. The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant.
7.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion,
imposes.
7.5. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of its jobthe Shares subject to foster open
communication, the Committee should meet at least annually with management andrelated Option upon the Company's independent registered public accounting firm in separate
executive sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately. In addition, the Committee or at
least its Chairman should meet with the Company's independent registered public
accounting firm and management quarterly to review the Company's financials
consistent with #2 below. The Committee may request any officer or employeesurrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Option Price of the underlying ISO; and (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.6 Settlement of SAR Amount. Subject to Section 19.11 herein, upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company of Shares in an amount determined by multiplying:
(a) The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price, less applicable tax withholding; by
(b) The number of Shares with respect to which the SAR is exercised.
7.7 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with or provision of services to the Company's outside counsel Company, its Associates, and/or its Subsidiaries, as the Company's independent
registered public accounting firm to attend a meetingcase may be. Such provisions shall be determined in the sole discretion of the Committee, or to
meet with any members of, or consultants to, the Committee.
Key Responsibilities:
- --------------------
The Committee's job is one of oversight, and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the Company's independent registered public accounting firm is responsible
for auditing those financial statements pursuant to professional standards.
Additionally, the Committee recognizes that financial management has more time,
knowledge and detailed information about the Company than do Committee members.
Consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this
guide as appropriate given the circumstances.
1. The Committee shall review with management and the Company's
independent registered public accounting firm the audited financial statements
to be included in the Company's Annual ReportAward Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to this Plan, and may reflect distinctions based on Form 10-K (or the Annual
Report to Shareholders if distributed prior to the filing of the Form 10-K)
prior to the filing of the Form 10-K or, if deemed appropriate, prior to any
year-end earnings release.reasons for termination.
7.8 Other Restrictions. The Committee shall reviewimpose such other conditions and/or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
Article 8.
Performance Units/ Performance Shares
8.1 Grant of Performance Units/ Performance Shares. Subject to the terms and consider with the
Company's independent registered public accounting firm all matters required to
be discussed by Statement on Auditing Standards ("SAS") No. 114 (AICPA,
Professional Standards, Vol. 1, AU Section 380), as adopted by the Public
Company Accounting Oversight Board (United States) in Rule 3200T regarding
"Communication with Audit Committees."
2. As a whole, or throughprovisions of this Plan, the Committee, chair,at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall review
withdetermine.
8.2 Value of Performance Units/ Performance Shares. Each Performance Unit shall have an initial value that is established by the Company's independent registered public accounting firmCommittee at the Company's
interim financial results to be included in the Company's quarterly reports to
be filed with Securities and Exchange Commission and the matters required to be
discussed by SAS No. 114 with respect to quarterly financial statements. Such
review will occur priortime of grant. Each Performance Share shall have an initial value equal to the Company's filingFair Market Value of a Share on the Form 10-Q or, if deemed
appropriate, prior to any quarterly earnings releases.
3. Review disclosures made to the Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operationdate of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
4. The Committee shall:
(a) request from the Company's independent registered public
accounting firm annually written disclosures and a letter
required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent accountant's
communications with the Audit Committee concerning independence.
(b) discuss with the Company's independent registered public
accounting firm any disclosed relationships or services which
may impact that firm's objectivity or independence; and
(c) recommend that the Board take appropriate action in response
to the Company's independent registered public accounting firm's
report to satisfy itself of that firm's independence.
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5.grant. The Committee shall haveset performance goals in its discretion which, depending on the sole authorityextent to appoint which they are met, will determine the value and/or replacenumber of Performance Units/ Performance Shares that will be paid out to the Company's independent registered public accounting firm (subject, ifParticipant.
8.3 Earning of Performance Units/ Performance Shares. Subject to the terms of this Plan, after the applicable to shareholder ratification). The CommitteePerformance Period has ended, the holder of Performance Units/ Performance Shares shall be directly
responsible forentitled to receive payout on the compensationvalue and oversightnumber of Performance Units/ Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the work ofextent to which the Company's
independent registered public accounting firm (including resolution of
disagreements between management and the Company's independent registered
public accounting firm regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work. The Company's
independent registered public accounting firm shall report directly to the
Committee.
6. The Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the company by its independent registered public accounting firm, subject to
the de minimus exceptions for non-audit services described in Section 10A
(i)(1)(B) of the Exchange Act which are approved by the Committee prior to the
completion of the audit. The Committee may form and delegate authority to
subcommittees consisting of one or more members when appropriate, including the
authority to grant preapprovals of audit and permitted nonaudit services,
provided that decisions of such subcommittee to grant preapprovals shall be
presented to the full Committee at its next scheduled meeting.
7. Review and discuss quarterly reports from the Company's independent
registered public accounting firm:
(a) All critical accounting policies and practices to be
used.
(b) All alternative treatments of financial information
within generally accepted accounting principles thatcorresponding performance goals have been discussed with management, ramificationsachieved.
8.4 Form and Timing of the usePayment of such alternative disclosures and treatments, and the
treatment preferred by the independent registered public
accounting.
(c) Other material written communications between the
independent registered public accounting firm and management,
such as any management letter or schedulePerformance Units/ Performance Shares. Payment of unadjusted
differences.
8. Periodically consult with the Company's independent registered public
accounting firm, out of the presence of management, about internal controls and
the fullness and accuracy of the organization's financial statements.
9. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent registered public accounting firm who
participated in any capacity in the audit of the Company.
10. Discuss with management the Company's use of "pro forma" or
"adjusted" non-GAAP information, as well as financial information and earnings
guidance provided to analysts and rating agencies. Such discussion mayearned Performance Units/ Performance Shares shall be done
generally (consisting of discussing the types of information to be disclosed
and the types of presentations to be made).
11. Establish regular and separate systems of reporting to the Committee
by each of management, the independent registered public accounting firm, and
the internal accountants regarding any significant judgments made in
management's preparation of the financial statements, and the view of each as
to appropriateness of such judgments.
12. Following completion of the annual audit, review separately with each
of management and the independent registered public accounting firm any
significant difficulties encountered during the course of the audit, including
any restrictions on the scope of work or access to required information.
13. Review any significant disagreement among management and the
independent registered public accounting firm in connection with the
preparation of the financial statements.
A-3
14. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
15. Establish, review, and update periodically a Code of Ethical Conduct,
and ensure that management has established a system to enforce this Code.
16. Review and approve any transactions between the Company and its
officers, directors or 5% shareholders.
17. The Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by the Committee for payment of compensationand as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/ Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
8.5 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant's employment with or provision of services to the Company, its Associates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.
Article 9.
Other Stock-Based Awards
9.1 Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
9.2 Value of Other Stock-Based Awards. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
9.3 Payment of Other Stock-Based Awards. Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.
9.4 Termination of Employment. The Committee shall determine the extent to which the Participant shall have the right to receive Other Stock-Based Awards following termination of the Participant's employment with or provision of services to the Company, its Associates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, and may be included in an agreement entered into with each Participant, but need not be uniform among all Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Article 10.
Transferability of Awards
10.1 Transferability of Incentive Stock Options. No ISO granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under Article 6 shall be exercisable during his or her lifetime only by such Participant.
10.2 All Other Awards. Except for any Permitted Transfers provided for in a Participant's Award Agreement, which Permitted Transfers may be subject to additional restrictions determined by the Committee and as set forth in the Award Agreement, no other Award granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except with respect to interests in Awards which have been subject to a Permitted Transfer provided for in a Participant's Award Agreement, all Awards granted to a Participant under this Plan shall be exercisable during his or her lifetime only by such Participant. With respect to those Awards (other than ISOs), if any, that are subject to Permitted Transfers, references in this Plan to exercise or payment related to such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant's Family Members to whom such Permitted Transfers were made.
Article 11.
Performance Measures
11.1 Performance Measures. The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
(a) Net earnings or net income (before or after taxes);
(b) Earnings per share;
(c) Net sales or revenue growth;
(d) Net operating profit;
(e) Return measures (including but not limited to, return on assets, capital, invested capital, equity, sales or revenue);
(f) Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);
(g) Earnings before or after taxes, interest, depreciation, and/or amortization;
(h) Gross or operating margins;
(i) Productivity ratios;
(j) Share price (including, but not limited to, growth measures and total shareholder return);
(k) Expense targets;
(l) Margins;
(m) Operating efficiency;
(n) Market share;
(o) Customer satisfaction;
(p) Working capital targets; and
(q) Economic value added or EVA(r) (net operating profit after tax minus the sum of capital multiplied by the cost of capital).
Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Associate as a whole or any business unit of the Company, Subsidiary, and/or Associate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12.
11.2 Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write- downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's independent
registered publicannual report to shareholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
11.3 Adjustment of Performance-Based Compensation. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.
11.4 Committee Discretion. In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance- Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1.
Article 12.
Dividend Equivalents
Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee.
Article 13.
Beneficiary Designation
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant's death shall be paid or exercised by the Participant's executor, administrator, or legal representative.
Article 14.
Rights of Participants
14.1 Employment. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Associates, and/or its Subsidiaries, to terminate any Participant's employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as an Officer or Director for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, its Associates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 15, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Associates, and/or its Subsidiaries.
14.2 Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
14.3 Rights as a Stockholder. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 15.
Amendment, Modification, Suspension, and Termination
15.1 Amendment, Modification, Suspension, and Termination. Subject to Section 15.3, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval of the Company's stockholders and except as provided in Section 4.3, Options or SARs issued under this Plan will not be repriced, replaced, or regranted through cancellation, or by lowering the Option Price of a previously granted Option or the Grant Price of a previously granted SAR, and no material amendment of this Plan shall be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule.
15.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting firmprinciples, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
15.3 Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary (other than Section 15.4), no termination, amendment, suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.
15.4 Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Board of Directors may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of renderingconforming the Plan or issuing an audit reportAward Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), and to the administrative regulations and rulings promulgated thereunder.
Article 16.
Withholding
16.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any advisors employedtaxable event arising as a result of this Plan.
16.2 Share Withholding. With respect to withholding required upon the exercise of Options or SARs, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and signed by the Committee.
Reporting Responsibilities:
- --------------------------Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
Article 17.
Successors
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 18.
General Provisions
18.1 Legend. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
18.2 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
18.3 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
18.4 Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
18.5 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to:
(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of Shares under any applicable national or foreign law or ruling of anygovernmental body that the Company determines to be necessary or advisable.
18.6 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary or advisable to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
18.7 Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.
18.8 Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be affected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
18.9 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries, and/or its Associates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any person acquires a right to receive payments from the Company, its Subsidiaries, and/or its Associates under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Associate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Associate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.
18.10 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall preparedetermine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
18.11 Retirement and Welfare Plans. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be included as "compensation" for purposes of computing the report required bybenefits payable to any Participant under the rulesCompany's or any Subsidiary's or Associate's retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant's benefit.
18.12 Deferred Compensation. No deferral of compensation (as defined under Code Section 409A or guidance thereto) is intended under this Plan. However, the Committee may permit deferrals of compensation pursuant to the terms of a Participant's Award Agreement, a separate plan or a subplan which meets the requirements of Code Section 409A and any related guidance. Employees who are subject to Code Section 409A shall only be granted Awards under this Plan that meet the requirements of Code Section 409A or qualify for an exemption under Code Section 409A or any related guidance. If any Employee who is subject to Code Section 409A receives an Award that does not comply with Code Section 409A or qualify for an exemption thereto, such Award shall be null and void and shall be deemed to have never been granted. Additionally, to the extent any Award is subject to Code Section 409A, notwithstanding any provision herein to the contrary, the Plan does not permit the acceleration of the Securities
and Exchange Commissiontime or schedule of any distribution related to such Award, except as permitted by Code Section 409A, the regulations thereunder, and/or the Secretary of the United States Treasury.
18.13 Nonexclusivity of this Plan. The adoption of this Plan shall not be included inconstrued as creating any limitations on the Company's annual proxy statement.
The Committee shall prepare such other reports for the full Board of Directors
and others as it shall deem necessary to discharge its responsibilities under
this Charter.
A-4
FORM OF PROXY
THE INTERGROUP CORPORATION
This Proxy is Solicited on Behalfpower of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
18.14 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company's or a Subsidiary's or an Associate's right or power to make adjustments, reclassifications, reorganizations, or changes of Directors
The undersigned hereby (a) acknowledges receiptits capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Notice of Annual
Meeting of Shareholders of The InterGroup CorporationCompany or a Subsidiary or an Associate to take any action which such entity deems to be held on February
23, 2011 at 2:30 P.M. atnecessary or appropriate.
18.15 Governing Law. The Plan and each Award Agreement shall be governed by the Hilton San Francisco Financial District, 750
Kearny Street, San Francisco, CA 94108 andlaws of the Proxy Statement in connection
therewith each dated January 21, 2011; (b) appoints John V. Winfield and Gary
N. Jacobs, as proxies, each with the power to appoint hisState of Delaware, excluding any conflicts or her substitute,
and hereby authorizes them to represent and to vote, as designated on the
reverse sidechoice of law rule or principle that might otherwise refer construction or interpretation of this FormPlan to the substantive law of Proxy, allanother jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the sharesfederal or state courts of Common StockDelaware, to resolve any and all issues that may arise out of The
InterGroup Corporation held of record by the undersigned on January 11, 2011 at
the Annual Meeting of Shareholdersor relate to be held on February 23, 2011this Plan or at any adjournment thereof.
(Continued and to be signed on reverse side)
Annual Meeting of Shareholders Of
THE INTERGROUP CORPORATION
FEBRUARY 23, 2011
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, Proxy Statement and Proxy Card
are available at www.intergroupcorporation.com
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.
- ----------------------------------------------------------------------------
Please sign, date and return promptly in the enclosed envelope. Please mark
your vote in blue or black ink as shown here [x]
1. Election of Class B Directors
[ ] FOR THE NOMINEES Nominees:
( ) Gary N. Jacobs
( ) William J. Nance
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
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 (x).
2. PROPOSAL TO APPROVE THE RETENTION FOR AGAINST ABSTAIN
OF BURR PILGER MAYER, INC. AS [ ] [ ] [ ]
AS THE COMPANY'S INDEPENDENT REGISTERED
PUBLIC ACCOUNTANT.
3. PROPOSAL TO APPROVE BY NON-BINDING VOTE, FOR AGAINST ABSTAIN
THE COMPENSATION OF THE NAMED EXECUTIVE [ ] [ ] [ ]
OFFICERS.
The Board of Directors recommends you vote "3 Years" on the following proposal.
4. PROPOSAL TO RECOMMEND, BY NON-BINDING 1 year 2 years 3 years ABSTAIN
VOTE, THE FREQUENCY OF SHAREHOLDER VOTES [ ] [ ] [ ] [ ]
ON NAMED EXECUTIVE OFFICER COMPENSATION.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy is solicited on behalf of the Board of Directors. This proxy, when
properly executed, will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this Proxy will be voted FOR
Proposals 1, 2 and 3 and "3 Years" with respect to proposal 4.
To change the address on your account, please check the box at the right
and indicate your new 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 Shareholder _____________________ Date: ____________
Signature of Shareholder _____________________ Date: ____________
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held by 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.
related Award Agreement.
