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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to .
COMMISSION FILE NUMBER 1-12269
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HOMESTEAD VILLAGE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
74-2770966
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
2100 RIVEREDGE PARKWAY, 9TH FLOOR
ATLANTA, GEORGIA 30328
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(770) 303-2200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA
CODE) SECURITIES REGISTERED PURSUANT TO SECTION
12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Shares of Common Stock, par value $.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Based on the closing price of the registrant's Common Stock on March 8,
2000, the aggregate market value of the Common Stock held by non-affiliates of
the registrant was $37,987,957.
At March 8, 2000, there were 120,031,477 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
TABLE OF CONTENTS
<TABLE>
ITEM DESCRIPTION PAGE
PART III
<S> <C> <C>
10. Directors and Executive Officers of the Registrant......................................... 1
11. Executive Compensation..................................................................... 3
12. Security Ownership of Certain Beneficial Owners and Management............................. 7
13. Certain Relationships and Related Transactions............................................. 10
</TABLE>
Note: The purpose of this Amendment No. 1 is to include the information required
by Items 10, 11, 12, and 13 of the Homestead Village Incorporated Annual Report
on Form 10-K for the year ended December 31, 1999.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
C. RONALD BLANKENSHIP -50- Director, Interim Chairman and Chief Executive
Officer of Homestead since May 1999. Mr. Blankenship was Advisory Director of
Homestead from October 1996 to May 1999. Mr. Blankenship has been the Vice
Chairman, Chief Operating Officer and a Director of Security Capital since May
1998 and was Managing Director of Security Capital from March 1991 to May 1998.
Mr. Blankenship was Non-Executive Chairman of Archstone from June 1997 to July
1998. From June 1991 to July 1997, Mr. Blankenship was Chairman of Archstone. He
became a Trustee of Archstone in March 2000, and was formerly an Advisory
Trustee of Archstone. He is also a Director of CarrAmerica Realty Corp. and
Storage USA, Inc. Mr. Blankenship is a Class I Director and his term expires in
2001.
JOHN P. FRAZEE, JR. -55- Director of Homestead since May 1996. Since August
1997, Mr. Frazee has served as Director, Chairman, and Chief Executive Officer
of PageNet, Inc. (a provider of wireless messaging and wireless information
services). Since August 1999, Mr. Frazee has been Chairman and Chief Executive
Officer of Vast Wireless Solutions, an Internet solutions provider. He was
President of PageNet, Inc. from August 1997 to June 1999, and formerly was Chief
Operating Officer of Sprint Corporation; prior to the March 1993 merger of
Sprint and Centel Corporation, Mr. Frazee had been the Chairman and Chief
Executive Officer of Centel since 1972. He is a Director of Security Capital
Group Incorporated, C-Span, Dean Foods Company, Vast Wireless Solutions, and
Cabot Microelectronics Corporation. He is also an Executive Board Member of The
Edwin L. Cox School of Business at Southern Methodist University and a Life
Trustee of Rush-Presbyterian St. Luke's Medical Center in Chicago, Illinois. Mr.
Frazee is a Class II Director and his term expires in 2002.
MANUEL A. GARCIA, III -56- Director of Homestead since April 1997. Since 1992,
Mr. Garcia has been the Chief Executive Officer of Atlantic Coast Management,
Inc. He is also Chief Executive Officer of Pebbles Restaurants, Inc. and M.
Garcia's, Inc. and a Vice President of Culinary Concepts, Inc. From 1969 to
1996, Mr. Garcia was the Chief Executive Officer of Davgar Restaurants, Inc. Mr.
Garcia is a Class III Director and his term expires at the annual meeting of
shareholders in 2000.
JAMES C. POTTS -53- President and Director of Homestead since March 2000 and
Chief Operating Officer since December 1999, where he is responsible for
Homestead operations. Mr. Potts was Executive Vice President of Homestead from
May 1999 to March 2000. From July 1998 to May 1999, Mr. Potts was Managing
Director of Homestead responsible for development. Prior thereto, Mr. Potts was
Co-Chairman and Chief Investment Officer for Security Capital Atlantic
Incorporated ("ATLANTIC") from January 1996 to July 1998 and a Director of
ATLANTIC and the management company responsible for the management of ATLANTIC
from October 1993 to July 1998. Mr. Potts was Chairman of ATLANTIC and the
management company responsible for its management from May 1994 to December
1995. Mr. Potts is a Class III Director and his term expires at the annual
meeting of shareholders in 2000.
JOHN C. SCHWEITZER -55- Director of Homestead since April 1997, and a Trustee of
Archstone since 1976. Since 1974, Mr. Schweitzer has been President of Westgate
Corp., general partner of Campbell Capital, Ltd., a real estate and investments
company in Austin, Texas. Mr. Schweitzer serves as a Director of Regency Realty
Corporation, Chase Bank of Texas, and KLRU Public Television. Mr. Schweitzer is
a Class II Director and his term expires in 2002.
EUGENE B. VESELL -60- Director of Homestead since June 1999. From December 1990
until his retirement in April 1999, Mr. Vesell was Managing Director at
Oppenheimer Capital, where he was a senior equity portfolio manager and research
analyst. Prior to joining Oppenheimer Capital, Mr. Vesell was a partner for ten
years with David J. Greene and Company, where his responsibilities included
research and portfolio management. Mr. Vesell is a Class I Director and his term
expires in 2001.
Security Capital has the right to nominate up to two Directors. See
Item 13 - "Certain Relationships and TransactionsCSecurity Capital Investor
Agreement." Mr. Blankenship is Security Capital's only current nominee. In
addition, Archstone has the right to nominate one Director. See Item 13 -
"Certain Relationships and TransactionsCArchstone Investor Agreement." Mr.
Schweitzer is Archstone's nominee. Homestead's Amended and Restated Articles of
Incorporation requires that a majority of the Directors be independent
Directors.
1
<PAGE>
EXECUTIVE OFFICERS
For information regarding the Executive Officers of Homestead, see Item
1.
MEETINGS AND COMMITTEES
The Board of Directors (the "Board") held fifteen meetings during 1999.
The Audit Committee of the Board consists of Messrs. Frazee, Garcia,
Schweitzer and Vesell. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews the plans and results of
the audit engagement with the independent public accountants, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of Homestead's internal
accounting controls. The Audit Committee held two meetings during 1999. Mr.
Frazee, who is also a director of Security Capital, has resigned from the Audit
Committee because of new rules issued by the New York Stock Exchange regarding
independent directors serving on an audit committee.
The Management Development and Compensation Committee ("MDCC") consists
of Messrs. Frazee, Garcia, Schweitzer and Vesell. The MDCC reviews and approves
the management development and compensation arrangements of Homestead and
administers the 1996 Long-Term Incentive Plan and the 1999 Long-Term Incentive
Plan. The MDCC held four meetings during 1999.
The Board does not have a nominating committee.
During 1999, each Director attended at least 75 percent of the total
number of meetings of the Board and the committees on which such Director
served.
DIRECTOR COMPENSATION
During 1999, the directors who are not employees of Homestead or
Security Capital ("Outside Directors") received an annual retainer of $22,000,
meeting fees of $1,000 for each Board meeting attended in person and $500 for
each Board meeting attended by telephone. For committee meetings, each outside
director receives $500 for each committee meeting attended in person and $250
for each committee meeting attended by telephone. Each Outside Director receives
a fee of $3,000 annually if the director is a chairman of any committee of the
Board. Both the retainer and meeting fees are paid quarterly. Directors who are
employees of Homestead or Security Capital are not separately compensated for
serving as directors. Directors are reimbursed for any out-of-town travel
expenses incurred in connection with attendance at Board meetings.
OUTSIDE DIRECTORS PLAN
Homestead adopted the Homestead Village Incorporated 1996 Outside
Directors Plan, under which up to 100,000 shares may be subject to options (the
"Outside Directors Plan"). Options granted in 1999 under the Outside Directors
Plan have a ten year term and vest at a rate of 25% per year beginning on the
first anniversary of the grant date. Options granted prior to 1999 have a
five-year term and are immediately exercisable in whole or in part. Options are
granted to each outside director as of the date of each annual meeting of
shareholders of Homestead at an exercise price equal to the fair market value of
the shares as of those dates. In 1999, options to purchase 5,000 shares each, at
an exercise price of $2.6250 per share, were granted to Messrs. Frazee, Garcia,
Schweitzer and Vesell. Options granted under the Outside Directors Plan provide
that the option holder may, in the event of the acquisition of 50% or more of
the outstanding shares as a result of any cash tender offer or exchange offer
(other than one made by Homestead), exercise the options immediately or
surrender the options, or any unexercised option thereof, to Homestead and
receive cash from Homestead equal to the difference between the exercise price
of each option and the per share price of the tender offer or exchange offer,
multiplied by the number of shares for which options are held.
2
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Homestead
directors, officers and beneficial owners of more than 10% of the outstanding
shares to file reports of ownership and changes in ownership of the shares with
the Securities and Exchange Commission and to send copies of such reports to
Homestead. Based solely upon a review of such reports and amendments thereto
furnished to Homestead and upon written representations of certain of such
persons that they were not required to file certain of such reports, Homestead
believes that no such person failed to file any such report on a timely basis
during 1999, except Mr. Schweitzer filed one late report reporting four
transactions, and Mr. Dressler filed one late report reporting two transactions.
ITEM 11. EXECUTIVE COMPENSATION
The following table presents the compensation for 1999, 1998 and 1997
paid to the Interim Chairman and Chief Executive Officer, the Interim Chief
Financial Officer and the three other most highly compensated officers during
1999 (the "Named Executive Officers"):
<TABLE>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ------------------------------
SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION STOCK COMPENSATION
($) (1) OPTIONS (#) ($) (2)
------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
C. Ronald Blankenship 1999 (3) (3) __ __ (3)
Interim Chairman and Chief
Executive Officer
David C. Dressler, Jr. (4) 1999 350,000 454,000 __ 550,000 528
President 1998 261,218 427,000 __ 90,900 270
1997 250,000 300,000 __ 258,058 270
James C. Potts (5) 1999 300,000 400,000 __ 575,000 4,052
Executive Vice President and 1998 104,974 140,000 __ 162,950 2,099
Chief Operating Officer
Gary L. DeLapp 1999 220,000 220,000 __ 240,000 4,792
Senior Vice President 1998 200,000 90,000 __ 22,750 3,576
1997 200,000 75,000 __ 74,710 3,716
A. Richard Moore, Jr. 1999 (6) (6) __ __ (6)
Interim Chief Financial
Officer
<FN>
- ---------------
(1) Includes perquisites and personal benefits received by each Named
Executive Officer if such amounts exceed the lesser of either $50,000 or 10% of
the executive's total combined annual salary and bonus.
(2) Includes the dollar value of insurance premiums paid by Homestead
with respect to term life insurance for the benefit of Named Executive Officer
as follows: Mr. Dressler $528 in 1999, $270 in 1998 and $270 in 1997; Mr. Potts
$852 in 1999; and Mr. DeLapp $632 in 1999, $216 in 1998 and $216 in 1997.
Beginning in 1997, Homestead matches up to 50% of the first 6% of compensation
contributed by the employee under the 401(k) Savings Plan with Homestead common
stock as follows: Mr. Potts $3,200 in 1999 and $2,099 in 1998; and Mr. DeLapp
$3,200 in 1999, $2,400 in 1998 and $3,500 in 1997. Includes contributions made
by Homestead under its Non-Qualified Savings Plan for Mr. DeLapp of $960 in 1999
and $960 in 1998.
(3) Mr. Blankenship became Interim Chairman and Chief Executive Officer
on May 11, 1999. Mr. Blankenship is also Vice Chairman, Chief Operating Officer
and a Director of Security Capital. Mr. Blankenship received no cash
compensation or options from Homestead. All compensation paid to Mr. Blankenship
in 1999 was paid exclusively by Security Capital. During 1999, Security Capital
paid Mr. Blankenship a salary of $550,000 and a bonus of $574,150, and paid life
insurance premiums of $4,260 for the benefit of Mr. Blankenship.
3
<PAGE>
(4) Mr. Dressler resigned as President and Director on March 2, 2000.
(5) Mr. Potts became an executive officer of Homestead in July 1998,
and the 1998 compensation figures reflect the portion of the year he was
employed by Homestead. On March 2, 2000, Mr. Potts was elected President and
Director.
(6) Mr. Moore became Interim Chief Financial Officer on June 23, 1999.
Mr. Moore is also a Managing Director of the Capital Division of Security
Capital. Mr. Moore received no cash compensation or options from Homestead. All
compensation paid to Mr. Moore in 1999 was paid exclusively by Security Capital.
During 1999, Security Capital paid Mr. Moore a salary of $400,000 and a bonus of
$400,000, paid life insurance premiums of $2,566 for the benefit of Mr. Moore,
and made contributions under the Security Capital Non-Qualified Savings Plan and
matching contributions under the Security Capital 401(k) Savings Plan for Mr.
Moore.
</FN>
</TABLE>
OPTION GRANTS
During 1999, options for 3,542,018 shares were granted to 185 employees
and officers of Homestead. The options vest twenty-five percent on each of the
first, second, third and fourth anniversaries of the date of grant. All options
expire ten years after the date of grant. The following table presents
information about individual grants of options to the Named Executive Officers.
<TABLE>
INDIVIDUAL GRANTS
PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT
NAME OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION DATE PRESENT
GRANTED (#) 1999 (%) ($/SHARE) DATE VALUE ($) (1)
------------------- -------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
C. Ronald Blankenship (2) _ _ _ _ _
David C. Dressler, Jr. 450,000 $2.1875 7/8/09 722,430
100,000 $3.0000 7/8/09 150,220
-------
550,000 15.53%
-------
James C. Potts 475,000 $2.1875 7/8/09 762,565
100,000 $3.0000 7/8/09 150,220
-------
575,000 16.23%
-------
Gary A. DeLapp 200,000 $2.1875 7/8/09 321,080
40,000 $3.0000 7/8/09 60,088
-------
240,000 6.78%
-------
A. Richard Moore, Jr. (2) _ _ _ _ _
<FN>
(1) The amounts shown are based on the Black-Scholes option pricing
model. The material assumptions incorporated in the Black-Scholes model in
estimating the value of the options include the following: an expected option
life of 4.5 years; a risk-free interest rate of 6.55%; no expected dividend
yield; and expected volatility of 96%. The actual value, if any, an optionee
will realize upon exercise of an option will depend on the excess of the market
value of the shares over the exercise price on the date the option is exercised.
There can be no assurance that the value realized by an optionee will be at or
near the value estimated by using the Black-Scholes model.
(2) Neither Mr. Blankenship nor Mr. Moore received any options to
purchase Homestead common stock.
</FN>
</TABLE>
4
<PAGE>
OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
None of the Named Executive Officers exercised options during 1999. The
following table presents certain information about the year-end value of
unexercised options for Homestead common stock and Security Capital Class A
Common Stock owned by the Named Executive Officers.
<TABLE>
SECURITY CAPITAL
HOMESTEAD COMMON STOCK CLASS A COMMON STOCK
-------------------------------------------------- ----------------------------------------------
VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT DECEMBER 31, 1999 UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR END (#) ($) (1) AT YEAR END (#) AT YEAR END ($)(2)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Ronald Blankenship (3) _ _ _ _ _ _ _ _
David C. Dressler (4) 154,309 804,649 _ _ 2,942 1,415 666,799 189,055
James C. Potts 9,487 728,463 _ _ 3,067 1,686 666,779 189,053
Gary A. DeLapp 31,864 330,596 _ _ 66 66 _ _
A. Richard Moore, Jr. (3) _ _ _ _ _ _ _ _
<FN>
(1) Based on the December 31, 1999 closing price of $2.1250 per share on
the New York Stock Exchange.
(2) Based on the December 31, 1999, closing price of $620 per share of
Security Capital Class A Common Stock.
(3) Neither Mr. Blankenship nor Mr. Moore own any options to purchase
Homestead common stock. Both Messrs. Blankenship and Moore own options to
purchase Security Capital common stock.
(4) Mr. Dressler resigned as President and Director on March 2, 2000, and
his Homestead and Security Capital options expire three months after his
resignation. Mr. Dressler exercised a portion of his Security Capital options in
March 2000. See Item 13 - "Certain Relationships and Related Transactions
Agreements with Officers and Former Officers."
</FN>
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Homestead has no employment contracts with any Named Executive Officer.
Under the Homestead 1996 Long-Term Incentive Plan, if a change in control (as
defined in the plan) of Homestead occurs, all unexpired options will become
immediately exercisable. Under the Homestead 1999 Long-Term Incentive Plan, if a
change of control (as defined in the plan) of Homestead occurs and an optionee
is terminated all unexpired options will become immediately exercisable.
In addition, Homestead has entered into change in control agreements
with each of its current officers, except Mr. Blankenship and Mr. Moore. The
agreements provide that if the officer is terminated or constructively
terminated other than for cause within two years after a change in control of
Homestead, the officer will be entitled to receive a lump-sum severance payment
(which amount depends upon the individual's responsibility level within
Homestead), together with certain payments and benefits, including continuation
of certain employee benefits. An additional payment will be required to
compensate certain officers for excise taxes imposed upon severance payments
under these agreements. The severance amount for Mr. Potts would equal two times
the sum of his base salary and target bonus for the year in which termination
5
<PAGE>
occurs, plus target bonus through the date of termination. The severance amounts
for other officers would be one times salary, plus pro-rated target bonus
through the date of termination. A transaction with Security Capital or another
affiliate of Homestead would not be treated as a change in control.
LOANS TO EXECUTIVE OFFICERS
See Item 13 - "Certain Relationships and Related Transactions -
Agreements with Officers and Former Officers" for a description of loans made to
executive officers of Homestead.
1999 LONG-TERM INCENTIVE PLAN
The 1999 Long-Term Incentive Plan authorizes the MDCC to establish one
or more qualified and non-qualified option programs and authorizes the award of
share grants (any of which may be subject to restrictions). A total of 6,000,000
shares have been reserved for issuance and 3,078,599 shares remain available for
award as of February 29, 2000. In the event of a transaction, such as a stock
split, affecting the type or number of outstanding shares, the MDCC will
appropriately adjust the number of shares subject to the 1999 Long-Term
Incentive Plan, the number or type of shares subject to outstanding awards and
the exercise price of outstanding awards. If Homestead is reorganized, merged or
consolidated with another company and the shareholders of Homestead receive
securities or other property, the MDCC shall provide for adjustments to
outstanding awards to allow the holders of such awards to receive an appropriate
portion of such securities or property. Such adjustments may include
substitution of the shares subject to the awards with the other property or
securities or providing for cancellation of all awards after providing the award
holders with the opportunity to exercise their awards. If a participant's
employment is terminated or the 1999 Long-Term Incentive Plan is terminated as a
result of a change in control (as defined in the 1999 Long-Term Incentive Plan)
of Homestead, all unexpired options and awards will become immediately
exercisable or fully vested, as the case may be. A transaction with Security
Capital or another affiliate of Homestead would not be treated as a change in
control.
Subject to the terms of the 1999 Long-Term Incentive Plan, the MDCC
determines which employees and other persons providing advisory services to
Homestead and its affiliates are eligible to receive awards under the 1999
Long-Term Incentive Plan, and the amount, price, timing and other terms and
conditions applicable to those awards. Non-employee directors of Homestead are
not eligible to participate in the 1999 Long-Term Incentive Plan.
Options become exercisable in accordance with the terms established by
the MDCC, which may include conditions relating to completion of a specified
period of service or achievement of performance standards. Options expire on the
date determined by the MDCC, which shall not be later than the earliest to occur
of (i) the tenth anniversary of the grant date, (ii) the first anniversary of
the participant's termination of employment by reason of death, disability or
retirement or (iii) the date three months after the date of the participant's
termination of employment for any other reason. Shares transferred to a
participant pursuant to the exercise of an option may be subject to such
additional restrictions or limitations as the MDCC may determine.
The 1999 Long-Term Incentive Plan authorizes the award of share grants
of up to 20% of the shares reserved for issuance under the Plan. The MDCC may
provide that any share award is subject to performance or other conditions
determined by the MDCC.
The MDCC may establish share purchase programs under the 1999 Long-Term
Incentive Plan. Any share purchase under the 1999 Long-Term Incentive Plan will
be subject to conditions, including price, established by the MDCC. The MDCC may
also provide for the award of matching shares with respect to any share purchase
award or for Homestead to provide the recipient with a loan for all or a portion
of the purchase price. Any loan must be full recourse and be secured by a pledge
of the shares purchased. No loan may have a term of longer than 10 years.
Subject to obtaining any approvals required by applicable law or NYSE
requirements, the Board may amend or terminate the 1999 Long-Term Incentive Plan
at any time, provided that no amendment or termination may materially adversely
affect the rights of participants under any award made under the plan prior to
the date that the amendment or termination is adopted by the Board.
6
<PAGE>
1996 LONG-TERM INCENTIVE PLAN
The 1996 Long-Term Incentive Plan authorizes the establishment of one
or more qualified and non-qualified option programs and authorizes the award of
share grants, any of which may be subject to restriction. In the event of
certain transactions affecting the type or number of outstanding shares, the
number of shares subject to the 1996 Long-Term Incentive Plan, the number or
type of shares subject to outstanding awards and the exercise price thereof will
be appropriately adjusted. The 1996 Long-Term Incentive Plan authorizes the
award of stock grants (which may be subject to restrictions), and performance
stock and authorizes the establishment of one or more stock purchase programs.
The MDCC administers the Plan. Subject to the terms of the 1996 Long-Term
Incentive Plan, the MDCC determines which employees or other individuals
providing services to Homestead shall be eligible to receive awards under the
1996 Long-Term Incentive Plan, and the amount, price, timing and other terms and
conditions applicable to such awards. A total of 4,000,000 shares were reserved
for issuance under the plan of which 2,364,243 remain available for awards as of
February 29, 2000.
Options become exercisable in accordance with the terms established by
the MDCC, which may include conditions relating to completion of a specified
period of service or achievement of performance standards. Options expire on the
date determined by the MDCC, which shall not be later than the earliest to occur
of (i) the tenth anniversary of the grant date, (ii) the first anniversary of
the participant's termination of employment by reason of death, disability or
retirement or (iii) the date three months after the date of the participant's
termination of employment for any other reason. Shares transferred to a
participant pursuant to the exercise of an option may be subject to such
additional restrictions or limitations as the MDCC may determine.
Under the 1996 Long-Term Incentive Plan, the MDCC may grant awards of
shares to participants, which are subject to such conditions and restrictions,
if any, as the MDCC determines. During the period a stock award is subject to
restrictions or limitations, the MDCC may award the participant dividend rights
with respect to such shares. The 1996 Long-Term Incentive Plan also provides
that the MDCC may establish one or more stock programs which may permit
purchases of shares.
The MDCC may award participants performance stock, the distribution of
which is subject to achievement of performance objectives. The number of shares
and the performance measures and periods shall be established by the MDCC at the
time the award is made.
Subject to obtaining any approvals required by applicable law or NYSE
requirements, the Board may amend or terminate the 1999 Long-Term Incentive Plan
at any time, provided that no amendment or termination may materially adversely
affect the rights of participants under any award made under the plan prior to
the date that the amendment or termination is adopted by the Board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF HOMESTEAD COMMON STOCK
The following table sets forth, as of February 29, 2000, information
concerning the beneficial ownership of shares of Homestead Common Stock for (i)
each person known to Homestead to be the beneficial owner of more than 5% of
shares outstanding, (ii) each Director of Homestead, (iii) each Named Executive
Officer, and (iv) the Directors and executive officers as a group. Unless
otherwise indicated, all such shares are owned directly, and the indicated
person or entity has sole voting and investment power and the address for each
such person is Homestead Village Incorporated, 2100 RiverEdge Parkway, 9th
Floor, Atlanta, Georgia 30328.
7
<PAGE>
<TABLE>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES (1)
<S> <C> <C>
Security Capital Group Incorporated .............................. 125,637,936 (2) 88.96%
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Archstone Communities Trust ...................................... 21,191,262 (3) 15.01%
7670 South Chester Street
Englewood, Colorado 80112
C. Ronald Blankenship............................................. 7,311 (4) *
John P. Frazee, Jr................................................ 79,358 (5) *
Manuel A. Garcia, III............................................. 29,000 (6) *
John C. Schweitzer................................................ 105,062 (7) *
Eugene B. Vesell.................................................. 87,546 (8) *
David C. Dressler, Jr............................................. 205,348 (9) *
James C. Potts.................................................... 15,916 (10) *
A. Richard Moore, Jr.............................................. 0 *
Gary A. DeLapp.................................................... 41,864 (11) *
All Directors and executive officers as a group (13 persons) 635,278 *
- -------------------
<FN>
* Less than 1%
(1) Assumes (i) in the case of Archstone that Archstone has converted
the principal amount of the convertible mortgage notes held by it and that no
other person has converted or exercised any outstanding convertible or
exercisable securities, (ii) in the case of Security Capital, that Archstone has
converted the principal amount of the convertible mortgage notes held by
Archstone, and that no other person has converted or exercised any outstanding
convertible or exercisable securities and (iii) in the case of each other
person, that such person has exercised all options owned by him which may be
exercised within 60 days and that no other person has converted or exercised any
outstanding convertible or exercisable securities.
(2) Includes shares beneficially owned by Archstone under the
convertible mortgage notes. As a result of its ownership of approximately 39.2%
of Archstone's outstanding common shares and Security Capital's contractual
arrangements with Archstone, Security Capital may be deemed to beneficially own
all shares beneficially owned by Archstone. SC Realty Incorporated, a wholly
owned subsidiary of Security Capital, owns of record 104,446,674 shares.
(3) All such shares are issuable upon conversion of the principal amount
of the convertible mortgage notes outstanding. As of February 29, 2000, the
principal amount of the Archstone convertible mortgage notes was approximately
$221 million, which are convertible into 21,191,262 shares at a conversion price
of one share for each $10.44 principal amount of convertible mortgage notes. See
Item 13 - "Certain Relationships and Transactions--Archstone Convertible
Mortgages."
(4) Includes 2,895 shares held by a corporation in which Mr.
Blankenship is the controlling shareholder.
8
<PAGE>
(5) Includes 22,758 shares held in an IRA, 600 shares held by children,
50,000 shares held by a corporation, of which Mr. Frazee is an officer, and
options to acquire 6,000 shares.
(6) Includes 15,000 shares held by a trust of which Mr. Garcia is
trustee, 10,000 shares held by a family limited partnership, and options to
acquire 4,000 Shares.
(7) Includes 5,000 shares held by a partnership of which Mr. Schweitzer
is a general partner, 2,000 shares held by a corporation that Mr. Schweitzer
owns, options to acquire 4,000 shares, and 1,062 shares held by Mr. Schweitzer's
wife.
(8) Includes 393 shares held by Mr. Vesell's wife and 45,675 shares held
by a trust for which Mr. Vesell is a trustee.
(9) Includes 5,010 shares held in trusts for Mr. Dressler's children of
which Mr. Dressler is a co-trustee and options to acquire 154,309 shares.
(10) Includes options to acquire 9,487 shares.
(11) Includes options to acquire 31,864 shares.
</FN>
</TABLE>
OWNERSHIP OF SECURITY CAPITAL CLASS A SHARES AND CLASS B SHARES
The following table sets forth, as of February 29, 2000, information
concerning the beneficial ownership of Class A Shares and Class B Shares of
Security Capital for (i) each Director of Homestead, (ii) each Named Executive
Officer, and (iii) the Directors and executive officers as a group. Unless
otherwise indicated, all such shares are owned directly, and the indicated
person has sole voting and investment power and the address for each such person
is Homestead Village Incorporated, 2100 RiverEdge Parkway, 9th Floor, Atlanta,
Georgia 30328.
<TABLE>
NUMBER OF SECURITY CAPITAL NUMBER OF SECURITY CAPITAL
CLASS A SHARES CLASS B SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) % (2) OWNED (3)(4) % (2)(5)
------------------------ ---------------------- ----- ------------ --------
<S> <C> <C> <C> <C>
C. Ronald Blankenship (6) 8,968 * 543,407 1.06%
John P. Frazee, Jr. (7) 6,067 * 318,366 *
Manuel A. Garcia, III 0 * 0 *
John C. Schweitzer 0 * 0 *
Eugene B. Vesell (8) 844 * 52,200 *
David C. Dressler, Jr. 4,660 * 233,022 *
James C. Potts 3,862 * 193,090 *
A. Richard Moore, Jr. 0 * 14,092 *
Gary A. DeLapp 65 * 3,285 *
All Directors and executive officers
as a group (13 persons) 25,651 2.16% 1,433,127 2.76%
- -------------
<FN>
* Less than 1%
(1) Includes Class A Shares which may be acquired upon the exercise of
options within 60 days for Messrs. Blankenship (8,582), Frazee (2,549), Dressler
(3,390), Potts (3,472), and DeLapp (65), and all Directors and executive
officers as a group (19,161).
(2) For each person who owns restricted stock units which vest within 60
days, or options or convertible securities which are exercisable within 60 days,
the calculation of the percentage ownership assumes that only that person has
exercised all of his options and converted all of his convertible securities and
that no other person has restricted stock units which have vested, has exercised
any outstanding options or has converted any convertible securities.
(3) Each Class A Share may be converted at any time into 50 Class B
Shares. Includes Class B Shares which may be acquired upon conversion of Class A
Shares, including Class A Shares which may be acquired upon the exercise of
options for Class A Shares as described in footnote 1 above.
(4) Includes Class B Shares which may be acquired upon the exercise of
options or vesting of restricted stock units within 60 days for Messrs.
Blankenship (91,207), Frazee (15,000), Moore (12,500), and all Directors and
executive officers as a group (128,791).
9
<PAGE>
(5) For each person who owns Class A Shares, the calculation of the
percentage ownership assumes that only that person has converted all of his
Class A Shares into Class B Shares and that no other person has converted any
Class A Shares.
(6) Includes 2,000 Class B Shares held by a corporation in which Mr.
Blankenship is the controlling shareholder.
(7) Includes eleven Class A Shares held by Mr. Frazee's children and
three Class A Shares held by his wife.
(8) Includes 422 Class A Shares held by a family trust for which Mr.
Vesell is trustee and 115 Class A Shares held in an IRA account.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PROPOSED TRANSACTION WITH SECURITY CAPITAL
On March 23, 2000, Security Capital submitted a letter to the Homestead
Board setting forth Security Capital's proposal to acquire all outstanding
shares of Homestead common stock not currently beneficially owned by Security
Capital for $3.40 per share in cash. In discussions with the Homestead Board,
Mr. Blankenship described the offer on behalf of Security Capital and stated
that the offer price included payment for Homestead's pre-May 1999 net operating
loss of $.12 per share, which Security Capital estimated was the value per share
of such net operating loss to an unaffiliated party which might seek to acquire
Homestead. If the proposed transaction were completed, Security Capital would
own 100% of the issued and outstanding shares, and Homestead would become a
wholly owned subsidiary of Security Capital. Security Capital's proposal is
conditioned, among other things, upon the approval of the Homestead Board,
including the approval of the independent members of the Homestead Board. The
proposal is not conditioned on financing. The Homestead Board formed a Special
Committee consisting of three independent members of the Homestead Board,
Messrs. Vesell, Garcia and Schweitzer, to consider Security Capital's proposal.
The Special Committee also retained a financial advisor and counsel.
PROTECTION OF BUSINESS AGREEMENT
Each of Archstone and Security Capital, upon the formation of
Homestead, entered into a Protection of Business Agreement, dated as of October
17, 1996, with Homestead which prohibits Archstone, Security Capital and their
respective affiliates from engaging, directly or indirectly, in the
extended-stay lodging business in the continental United States except through
Homestead and its subsidiaries. The Protection of Business Agreement also
prohibits Homestead from, directly or indirectly, engaging in the ownership,
operation, development, management or leasing of multifamily properties. The
Protection of Business Agreement does not prohibit Archstone or Security Capital
from: (i) owning securities of Homestead; (ii) owning up to 5% of the
outstanding securities of another person engaged in owning, operating,
developing, managing or leasing extended-stay lodging properties, so long as
they do not actively participate in the business of such person; (iii) owning
the outstanding securities of another person, a majority owned subsidiary,
division, group, franchise or segment of which is engaged in owning, operating,
developing, managing or leasing extended-stay lodging properties, so long as not
more than 5% of such person's consolidated revenues are derived from such
10
<PAGE>
properties; and (iv) owning securities of another person primarily engaged in
business other than a business owning, operating, developing, managing or
leasing extended-stay lodging properties, including a person primarily engaged
in business as an owner, operator or developer of hotel properties, whether or
not such person owns, operates, develops, manages or leases extended-stay
lodging properties. The Protection of Business Agreement does not prohibit
Homestead from: (i) owning securities of Archstone or Security Capital; (ii)
owning up to 5% of the outstanding securities of another person engaged in
owning, operating, developing, managing or leasing garden style multifamily
properties; and (iii) owning the outstanding securities of another person, a
majority owned subsidiary, division, group, franchise or segment of which is
engaged in owning, operating, developing, managing or leasing garden style
multifamily properties, so long as not more than 5% of such person's
consolidated revenues are derived from such properties. The Protection of
Business Agreement terminates in the event of an acquisition, directly or
indirectly (other than by purchase from Archstone and Security Capital or their
respective affiliates), by any person (or group of associated persons acting in
concert), other than Archstone, Security Capital or their respective affiliates,
of 25% or more of the outstanding shares of voting stock of Homestead, without
the prior written consent of the Board. Subject to earlier termination pursuant
to the preceding sentence, the Protection of Business Agreement will terminate
on October 17, 2006.
SECURITY CAPITAL INVESTOR AGREEMENT
Homestead and Security Capital are parties to an Investor Agreement,
dated as of October 17, 1996, and amended as of April 5, 1999 (the "Security
Capital Investor Agreement"), which provides Security Capital with a variety of
rights regarding the management of Homestead. The amendment to the Security
Capital Investor Agreement was a condition to Security Capital's increasing its
funding commitment from $200 million to $225 million in connection with the May
1999 common stock rights offering. Under the Security Capital Investor
Agreement, for so long as Security Capital beneficially owns at least 50.1% of
Homestead's outstanding shares, Security Capital has the right to approve, among
other things: (i) Homestead's annual budget; (ii) the incurrence of expenses in
any year exceeding (A) any line item in the annual budget by $500,000 or 10% and
(B) the total expenses set forth in the annual budget by 5%; (iii) the offer or
sale of any shares or any securities convertible into or exchangeable for shares
other than pursuant to (A) an employee benefit plan approved by Homestead's
shareholders, (B) previously issued warrants, options or rights, (C) a dividend
reinvestment plan or share purchase plan approved by the Board or (D) an
issuance of rights, options, or warrants for shares issued to all shareholders;
(iv) the issuance or sale of securities that are subject to mandatory redemption
or redemption at the option of the holder; (v) the adoption of any employee
benefit plan pursuant to which shares may be issued and any action with respect
to senior officers' compensation; (vi) the incurrence, restructuring,
renegotiation or repayment of indebtedness in which the aggregate amount
involved exceeds $1,000,000; (vii) the declaration or payment of any dividend or
other distribution; (viii) the acquisition or disposition in a single
transaction or group of related transactions where the purchase price exceeds $1
million; (ix) the entering into of service contracts (A) for property
management, investment management or leasing services, or (B) that contemplate
annual payments in excess of $500,000; (x) the entering into of any new
contract, including for construction, development, or other capital expenditure,
for which the total cost is reasonably expected to exceed $1,000,000 for any
contract or $5,000,000 in the aggregate; (xi) the entering into of any joint
venture for the development of any properties owned by Homestead in which the
book value of any property to be contributed by Homestead exceeds $1,000,000
individually or $5,000,000 in the aggregate; (xii) the entering into of any
franchising or licensing agreements; (xiii) the amendment of the articles of
incorporation or bylaws of Homestead; and (xiv) the waiver of anti-takeover
provisions of Maryland law or Homestead's articles of incorporation.
The Security Capital Investor Agreement also provides that, so long as
Security Capital owns at least 10% of the outstanding shares, Homestead may not
increase the number of directors on the Board to more than seven without the
approval of Security Capital. Security Capital also is entitled to designate one
or more persons as directors of Homestead, as follows: (i) so long as Security
Capital owns at least 10% but less than 25% of the outstanding shares, it is
entitled to nominate one person; and (ii) so long as Security Capital owns at
least 25% of the outstanding shares, it is entitled to nominate that number of
persons as shall bear approximately the same ratio to the total number of
members of the Board as the number of shares beneficially owned by Security
Capital bears to the total number of outstanding shares, provided that Security
Capital shall be entitled to designate no more than two persons so long as the
Homestead Board consists of no more than seven members. Security Capital
currently has one designee on the Board, Mr. Blankenship.
The Security Capital Investor Agreement also provides Security Capital
with registration rights pursuant to which, in certain specified circumstances,
Security Capital may request, on not more than three occasions, registration of
all of Security Capital's shares pursuant to Rule 415 under the Securities Act
of 1933.
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<PAGE>
ARCHSTONE CONVERTIBLE MORTGAGES
At December 31, 1999, Homestead owed convertible mortgage notes to
Archstone in the amount of $221,333,620. The notes were funded pursuant to a
mortgage funding commitment agreement to finance the development of properties
acquired by Homestead from Archstone in 1996. The notes are collateralized by 54
Homestead properties with a historical cost of $359.3 million. The notes accrue
interest at 9.0% on the principal amount, and require interest only payments
every six months on May 28 and November 28. The notes are due October 31, 2006,
and are callable on or after May 28, 2001. The notes are convertible, at the
option of the holder, into 21,191,262 shares of Homestead common stock at a
conversion ratio equal to one share for every approximate $10.44 of principal
amount outstanding. Archstone has no further funding commitment.
ARCHSTONE INVESTOR AGREEMENT
Archstone has entered into an investor and registration rights
agreement with Homestead pursuant to which Archstone is entitled to designate
one person for nomination to the Board, and Homestead will use its best efforts
to cause the election of such nominee, for so long as Archstone has the right to
convert in excess of $20 million in principal amount of loans made pursuant to
Archstone's funding commitment agreement. Such nominee may, but need not, be a
person also nominated by Security Capital pursuant to the Security Capital
Investor Agreement. Archstone has designated Mr. Schweitzer as its nominee. In
addition, Homestead has granted Archstone registration rights with respect to
the issuance upon conversion and the distribution of all of the shares issuable
upon conversion of the convertible mortgage notes. Archstone may request three
registrations pursuant to Rule 415 under the Securities Act of all shares issued
or issuable upon conversion of the convertible mortgage notes. Such
registrations, except for the fees and disbursements of counsel to Archstone,
shall be at the expense of Homestead.
COMMERZBANK LOAN AGREEMENTS, SECURITY CAPITAL SUBSCRIPTION AGREEMENT AND RIGHTS
OFFERING
During 1999, Homestead had three credit facilities with Commerzbank AG,
New York Branch ("CAG"), as the arranger or agent, and other lenders. CAG holds
all of the outstanding shares of Security Capital Series B Preferred Stock,
which is convertible into shares of Security Capital Class B Common Stock. On
March 18, 1999, two of the credit facilities, one in the maximum principal
amount of $170 million and secured by mortgages on Homestead's suburban
properties (the "Suburban Line") and the other in the maximum principal amount
of $30 million and secured by mortgages on Homestead's urban properties (the
"Urban Line"), were extended from April 23, 1999, to December 31, 2000. In
November 1999 the Urban Line was repaid and terminated. Borrowings under the
Suburban Line bore interest at rates equal to 2.0% to 3.0% over LIBOR, or
alternatively 1% to 2% over the prime rate or 1.5% to 2.5% over the federal
funds rate, with the margin depending upon the ratio of outstanding indebtedness
to the amount of qualifying collateral. Additionally, the Suburban Line required
a commitment fee of .375% per annum of the average undrawn amount under the
Suburban Line. Borrowings under the Urban Line incurred interest at the rate of
3.0% over LIBOR, or alternatively 2.0% over the prime rate or 2.5% over the
federal funds rate.
The third credit facility, which had a maximum principal amount of $200
million (the "Bridge Facility"), bore interest at the Eurodollar rate plus 1.25%
or at a base rate of prime plus 0.25%. The line was scheduled to expire on
October 31, 1999, and was secured by a subscription agreement with Security
Capital for $200 million of convertible subordinated debentures. The
subscription obligation was terminated upon the repayment of all amounts owed
under the Bridge Facility on May 28, 1999.
In May 1999 Homestead closed a common stock rights offering for $225
million of shares. Security Capital purchased 77,749,220 shares at $2.75 per
share in the common stock rights offering on the same terms and at the same
price as all other investors. Security Capital's participation in the rights
offering satisfied Security Capital's obligations under the subscription
agreement.
12
<PAGE>
On February 29, 2000, Homestead entered into an amended and restated
bank credit facility which allows for $110,000,000 of total borrowings of which
$35,000,000 is available on a revolving basis. The amended and restated line
matures February 28, 2003, bears interest at LIBOR plus 2.5%, is secured by 64
operating properties, permits payment of dividends based upon a definition of
free cash flow, and requires maintenance of financial ratio and coverage
covenants.
ADMINISTRATIVE SERVICES AGREEMENT
Homestead and Security Capital are parties to an administrative
services agreement (the "Administrative Services Agreement"), under which
Security Capital provides Homestead with administrative services for certain
aspects of Homestead's business. These services include, but are not limited to,
insurance administration, accounts payable administration, internal audit, cash
management, human resources, management information systems, tax administration,
shareholder communications and investor relations. The fees payable to Security
Capital are fixed fees for particular services provided. Any arrangements under
the Administrative Services Agreement for the provision of services are required
to be commercially reasonable and on terms not less favorable than those which
could be obtained from unaffiliated third parties. The Administrative Services
Agreement, which expires on December 31, 2000, is renewable for a one-year term,
subject to approval by a majority of the independent directors of Homestead.
Additionally, Security Capital provides legal administration services under a
separate agreement which expires on December 31, 2000. Homestead incurred fees
of $5,201,000 for administrative services provided by Security Capital during
1999.
TAX ALLOCATION AGREEMENT
As a result of Security Capital's ownership in Homestead exceeding 80%
after the closing of the May 1999 common stock rights offering, Homestead's
results after May 1999 are included in the federal income tax return of Security
Capital. Security Capital may utilize tax operating losses generated by
Homestead subsequent to May 1999. In order for Security Capital to utilize the
net operating loss carryforwards generated by Homestead through May 1999,
Homestead must generate future taxable income. To the extent Homestead's net
operating loss carryforwards are so utilized on Security Capital's federal tax
return, such loss carryforwards will not be available to Homestead in the
future. The use of the net operating losses was disclosed in the May 1999 common
stock rights offering documents. In order to formalize this understanding,
Homestead and Security Capital entered into a tax allocation agreement which
provides for tax liability or refund payments between the entities as determined
by a defined calculation of Homestead's proportionate share of taxable income
versus the total of taxable income for all entities filing as part of Security
Capital's federal tax return. The agreement also provides that if a capital
transaction were to occur where Security Capital owned less than 50% of
Homestead after the transaction, all net operating loss carryforwards generated
by Homestead through May 1999 would inure to Security Capital. For 1999 no
amounts were paid or due under the agreement
AGREEMENTS WITH OFFICERS AND FORMER OFFICERS
In January 1999, upon Robert Aldworth's resignation from Homestead as
Chief Financial Officer, Homestead and Mr. Aldworth entered into a separation
agreement and general release. Under the agreement Homestead paid Mr. Aldworth
$400,000 in consideration for a general release by Mr. Aldworth of Homestead and
its affiliates from all claims of Mr. Aldworth arising through the date of the
agreement.
In May 1999, upon Michael Cryan's resignation from Homestead as
Co-Chairman and Chief Operating Officer, Homestead and Mr. Cryan entered into a
separation agreement and general release. Under the agreement Homestead agreed
to pay Mr. Cryan $1,245,833 in twelve monthly installments and to pay
outplacement services in consideration for a general release by Mr. Cryan of
Homestead and its affiliates from all claims of Mr. Cryan arising through the
date of the agreement. In addition, Homestead reduced the principal amount and
interest outstanding under a secured promissory note, originally made by Mr.
Cryan to Homestead in October 1996 in payment for 25,000 shares of Homestead
common stock, from $235,000 to $62,500 and forgave payment of the remaining
$62,500. Upon forgiveness of the note, all the shares were released from
Homestead=s lien and delivered to Mr. Cryan.
In May 1999, upon Robert Morse's resignation from Homestead as Managing
Director, Homestead and Mr. Morse entered into a separation agreement and
general release. Under the agreement Homestead agreed to pay Mr. Morse $950,000
in twelve monthly installments and to pay outplacement services in consideration
for a general release by Mr. Morse of Homestead and its affiliates from all
claims of Mr. Morse arising through the date of the agreement. In addition, Mr.
Morse and Homestead amended the stock purchase agreement originally entered into
in March 1998 between Mr. Morse and Homestead for the purchase of 31,250 shares
13
<PAGE>
and the secured promissory note originally made by Mr. Morse to Homestead in
March 1998, in consideration for the shares purchased by Mr. Morse under the
stock purchase agreement. The purchase price per share under the stock purchase
agreement was reduced from $16.00 to $2.375 and the principal amount of the note
was reduced from $500,000 to $74,219. After these modifications, Homestead
redeemed the 31,250 shares held by Mr. Morse in consideration for cancellation
of the note.
In February 2000, upon Bryan Flanagan's resignation from Homestead as
Senior Vice President and Chief Accounting Officer, Homestead and Mr. Flanagan
entered into a separation agreement and general release. Under the agreement,
Homestead agreed to pay Mr. Flanagan $310,000 in twelve monthly installments and
pay outplacement services and moving expenses, in consideration for a general
release by Mr. Flanagan of Homestead and its affiliates from all claims of Mr.
Flanagan arising through the date of the agreement.
In March 2000, upon Mr. Dressler's resignation from Homestead as
President and Director, Homestead and Mr. Dressler entered into a separation
agreement and general release. Under the agreement, Homestead paid Mr. Dressler
$87,500 and agreed to pay him $875,000 in fifteen monthly installments, in
consideration for a general release by Mr. Dressler of Homestead and its
affiliates from all claims of Mr. Dressler arising through the date of the
agreement.
Homestead and Mr. Dressler entered into a consulting agreement dated as
of April 1, 2000, for a twelve-month period. Under the agreement, Homestead
agreed to pay Mr. Dressler a monthly consulting fee of $40,000 through March 31,
2001, for services consisting of advice and consultation with respect to the
marketing and sale of Homestead's remaining land held for sale and, if
applicable, certain developed properties, and oversight of the construction of
an expansion of an existing facility at Milpitas, California. All services
performed under the consulting agreement will be under the direction of Mr.
Blankenship. The ultimate responsibility for making all decisions regarding the
marketing and sale of the properties subject to the consulting agreement remain
with Homestead and shall be subject to approval by Messrs. Blankenship and
Potts. Mr. Dressler will be entitled to a transaction fee from the sale of the
properties subject to the consulting agreement in an amount of 1% of the first
$90 million of gross receipts (as defined in the consulting agreement) on the
sale of the properties and 2% of gross receipts in excess of $90 million on the
sale of such properties. A transaction fee will be earned on any properties
which are sold before March 31, 2001, or properties under either a binding
agreement for sale or a binding letter of intent on or before March 31, 2001,
and which close. Any monthly consulting fee paid prior to payment of a
transaction fee will be deducted from the transaction fee. The consulting
agreement can be terminated for cause, in which event no further amounts will be
due Mr. Dressler. Homestead can terminate the consulting agreement without cause
after September 30, 2000, upon payment to Mr. Dressler of the greatest of: (a)
$360,000; (b) 80% of the total commission value of properties under contract for
sale or bona fide offers on properties subject to the consulting agreement; or
(c) the unpaid transaction fees on the sale of properties which close. Mr.
Dressler will be entitled to keep any monthly fees or transaction fees paid
before termination which are in excess of these minimums.
During 1999, Mr. Dressler had one outstanding loan from Homestead in
the principal amount of $250,000 which was entered into on October 15, 1996. He
used the proceeds of that loan to purchase 25,000 restricted shares under the
1996 Long-Term Incentive Plan, which shares vested on October 15, 1998. The loan
was due on January 5, 2006, was secured by the shares purchased with the loan
proceeds, and interest accrued at the lowest rate charged by Morgan Guaranty
Trust Company on maturities of 90 days or less, plus 0.25%. As of July 8, 1999,
Homestead agreed to reduce the aggregate amount of principal and interest under
the note to $54,687. In September 1999 Mr. Dressler repaid all amounts owed
under the note with the proceeds of a bonus paid by Homestead. Upon repayment of
the note, the shares were released from Homestead=s lien and were delivered to
Mr. Dressler. Mr. Dressler then pledged these shares as additional collateral
for a loan from Security Capital to Mr. Dressler.
Mr. Dressler had six outstanding loans from Security Capital in the
aggregate amount of $1,419,113 as of March 1, 2000, which are described below.
All these loans were repaid in full in March 2000.
Under the terms of an amended and restated secured promissory note and
related pledge agreement, Security Capital loaned Mr. Dressler $962,113. The
note was payable on the earlier of December 31, 2000, or 120 days after Mr.
Dressler was no longer an officer of an affiliate of Security Capital. Interest
on the unpaid balance accrued at 7.00% per year and was payable annually. The
proceeds of the note were used to pay personal obligations of Mr. Dressler. The
note was secured by 25,000 shares of Homestead common stock, 1,244.78 Class A
Shares of Security Capital and options to purchase Class A Shares of Security
Capital owned by Mr. Dressler. The note was also secured by a life insurance
policy on Mr. Dressler in the amount of $1,300,000.
14
<PAGE>
Security Capital also loaned Mr. Dressler $207,000 in September 1993
under an unsecured full recourse promissory note. At the time the note was
issued, Mr. Dressler was an officer of Security Capital. The note was payable on
September 1, 2003, or 90 days after Mr. Dressler was no longer an employee of
Security Capital or one of its subsidiaries. Interest on the unpaid principal
amount of the note accrued at a floating rate per annum equal to the lowest rate
charged by Morgan Guaranty Trust Company of New York to its most creditworthy
corporate customers for unsecured loans having a maturity of ninety days or
less, in effect from time to time, plus .25%. Interest was payable annually. Mr.
Dressler used the proceeds of the loan to purchase Security Capital common
stock.
The other four loans made by Security Capital to Mr. Dressler in 1992
and 1993 were unsecured and full recourse and had an aggregate principal amount
of $250,000. At the time these four loans were made, Mr. Dressler was an officer
of Security Capital. Each loan was due on January 4, 2001. Interest on the
unpaid principal amount of the loans accrued at a floating rate per annum equal
to the lowest rate charged by Morgan Guaranty Trust Company of New York to its
most creditworthy corporate customers for unsecured loans having a maturity of
ninety days or less. Interest was payable semiannually. Mr. Dressler used the
proceeds of these four loans to purchase Security Capital common stock.
Under an agreement entered into as of March 1, 2000, with Security
Capital, Mr. Dressler sold to Security Capital 1,244.748 Class A Shares of
Security Capital at $640 per share and 25,000 Homestead shares at $2.50 per
share for a total of $859,139, executed cashless exercises of options for
1,784.305 Class A Shares of Security Capital and delivered net proceeds of
$573,760 to Security Capital, and delivered a check for $577, in full payment of
principal and interest on all six notes.
During 1999, James C. Potts had two loans outstanding with Security
Capital in the aggregate principal amount of $255,550 under two unsecured full
recourse promissory notes. The first note was in the principal amount of $75,000
and was payable on September 1, 2003. The second note was in the principal
amount of $180,550 and was payable on January 5, 2006. Interest under each note
accrued on the unpaid principal amount at a floating rate per annum equal to the
lowest rate charged by Morgan Guaranty Trust Company of New York to its most
creditworthy corporate customers for unsecured loans having a maturity of ninety
days or less, in effect from time to time, plus .25%. Interest on the $75,000
note was payable annually and interest on the $180,550 note was payable
semiannually. Mr. Potts used the proceeds of the loans to purchase Security
Capital common stock. At the time the notes were issued, Mr. Potts was an
employee of Security Capital. In February 2000 Mr. Potts repaid both loans in
full.
In January 1999, Mr. Potts and Archstone entered into an agreement
pursuant to which Mr. Potts (i) resigned as a trustee of Archstone, (ii)
tendered to Archstone 89,136 Common Shares of Archstone, and (iii) agreed to the
cancellation of all options and dividend equivalent units of Archstone held by
him, and in exchange Archstone forgave the $1,885,308 loan that had been made to
Mr. Potts to acquire such Archstone Common Shares and made a cash payment to Mr.
Potts of $550,000. At the time the loan was made, Mr. Potts was an officer and
trustee of Archstone.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 and pursuant to the authorization granted by that certain
Power of Attorney filed by the registrant with its Annual Report on Form 10-K
for the year ended December 31, 1999, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ JEFFREY A. KLOPF
Its: Senior Vice President and Secretary
Date: April 26, 2000
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