<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Legend Properties, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(4) Date filed:
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<PAGE> 2
LEGEND PROPERTIES, INC.
13662 OFFICE PLACE, SUITE 201
WOODBRIDGE, VIRGINIA 22192
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
Dear Shareholder:
The annual meeting of shareholders of Legend Properties, Inc., a Delaware
corporation (the "Company"), will be convened at the executive offices of the
Company, 13662 Office Place, Suite 201, Woodbridge, Virginia on June 30, 1998,
at 10:00 eastern time (the "Annual Meeting"). All shareholders of record of the
Company as of the close of business on May 15, 1998 (the "Shareholders") are
entitled to attend the Annual Meeting. At the Meeting, you will be asked:
(1) To elect five (5) directors to hold office until the next annual
meeting of Shareholders or otherwise as provided in the Company's Restated
Certificate of Incorporation;
(2) To concur in the selection of KPMG Peat Marwick LLP as the
Company's principal independent public accountants for the fiscal year
ended December 31, 1998; and
(3) To transact such other business as may properly come before the
Annual Meeting, or any adjournment thereof.
The Board of Directors of the Company has fixed the close of business on
May 15, 1998, as the record date (the "Record Date") for determining those
Shareholders entitled to notice of and to vote at the Annual Meeting. A complete
list of Shareholders entitled to vote at the Annual Meeting will be available
for inspection at the Company's offices for at least ten days prior to the
Annual Meeting date.
With respect to Proposal No. 1, the five individuals receiving the highest
number of votes will be elected as Directors. Approval of Proposal No. 2
requires the affirmative vote of a majority of the shares of the Company's
common stock present in person or represented by proxy and eligible to vote at
the Annual Meeting, a quorum being present. Accordingly, whether or not you plan
to attend the Annual Meeting, please complete, sign and date the accompanying
proxy card and return it in the enclosed postage-paid envelope. You may revoke
your proxy in the manner described in the accompanying Proxy Statement at any
time before it has been voted at the Annual Meeting. If you attend the Annual
Meeting, you may vote in person, even if you have previously returned your proxy
card. Your prompt cooperation will be greatly appreciated. This solicitation is
authorized by and is made on behalf of the Company's board of directors.
Sincerely,
/s/ EDWARD F. PODBOY, JR.
Edward F. Podboy, Jr.
President and Chief Executive Officer
A copy of the Company's 1997 Annual Report is included with this notice and
Proxy Statement.
<PAGE> 3
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS OF
LEGEND PROPERTIES, INC.
This proxy statement is furnished to the holders of shares ("the
Shareholders") of common stock, $0.01 par value (the "Common Stock" or the
"Shares"), of Legend Properties, Inc., a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Company's Board of
Directors (the "Directors" or the "Board") for use at the annual meeting of
Shareholders. The annual meeting will be convened on June 30, 1998, at
approximately 10:00 a.m. eastern time (the "Annual Meeting"). Copies of this
Proxy Statement, the attached notice, and the enclosed form of proxy were first
sent or given to Shareholders on or about May 22, 1998. Shareholders who wish to
attend the Annual Meeting should contact the Company at 703-680-2226 to make
arrangements.
The Company will pay the costs of soliciting proxies, including the cost of
preparing, printing and mailing this Proxy Statement. Proxies may be solicited
by the Directors, the Company's officers or employees. None of these individuals
will be compensated for soliciting proxies, but may be reimbursed for
out-of-pocket expenses. The Company will also reimburse brokerage houses, banks
and other custodians, nominees and fiduciaries for forwarding soliciting
materials to the beneficial owners of the Shares.
Shares represented by properly executed proxies in the accompanying form
received by the Board prior to the Annual Meeting will be voted at the Annual
Meeting. Shares represented by proxy will be voted as specified. If a choice is
not specified but the proxy is otherwise properly executed, the Shares
represented by that proxy will be voted in accordance with the recommendations
of the Board and in accordance with the judgment of the persons acting under
proxies on other matters presented for a vote. A Shareholder may revoke a proxy
by: (i) giving written notice to the Company before the proxy is voted at the
Annual Meeting; (ii) executing and delivering a later-dated proxy; or (iii)
attending the Annual Meeting and voting the Shares in person.
The close of business on May 15, 1998 has been fixed as the date for
determining those Shareholders entitled to notice of and to vote at the Annual
Meeting (the "Record Date"). On the Record Date, the Company had 6,290,874
Shares outstanding, each of which entities the holder thereof to one vote at the
Annual Meeting. Only Shareholders of record as of the Record Date will be
entitled to vote at the Annual Meeting. The presence of a majority of the
outstanding shares of Common Stock, represented in person or by proxy at the
Annual Meeting, will constitute a quorum. Abstentions and broker non-votes will
be treated as Shares present at the meeting for purposes of determining whether
a quorum exists. The five individuals receiving the highest number of votes will
be elected to the Board. The affirmative vote of a majority of the shares
present or represented at the meeting and entitled to vote, a quorum being
present, will be required to approve proposal number two. An abstention or
broker non-vote will have no effect since approval of the proposal requires only
a majority of the Shares actually voted.
The mailing address of the principal executive offices of the Company is
13662 Office Place, Suite 201, Woodbridge, Virginia 22192.
THE DATE OF THIS PROXY STATEMENT IS MAY 22, 1998.
SHAREHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION MADE BY THIS PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH EITHER IN THIS PROXY STATEMENT OR IN THE COMPANY'S AFFAIRS SINCE
THE
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<PAGE> 4
DATE HEREOF. THIS PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH THE SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING THE SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT
IS UNLAWFUL TO MAKE A SOLICITATION.
AVAILABLE INFORMATION
The Company files reports, proxy materials and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
materials and other information concerning the Company can be inspected and
copied at the Public Reference Section maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and, the
Citicorp Center, and at Seven World Trade Center, Suite 1300, New York, New York
10048. Copies can be obtained by mail from the Commission at prescribed rates
from the Public Reference Section of the Commission at its principal office in
Washington, D.C. The Commission also maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
2
<PAGE> 5
MATTERS TO BE CONSIDERED BY SHAREHOLDERS
PURPOSE OF THE MEETING
At the Annual Meeting which will be held at the Company's executive offices
located at 13662 Office Place, Suite 201, Woodbridge, Virginia 22192, on June
30, 1998 at 10:00 a.m. eastern time, Shareholders will be asked to consider and
vote upon the following proposals:
PROPOSAL NO. 1: To elect five individuals as Directors of the Company to
hold office until the next Annual Meeting of Shareholders, or otherwise as
provided in the Company's Restated Certificate of Incorporation (the
"Certificate").
PROPOSAL NO. 2: To concur in the selection of KPMG Peat Marwick LLP as the
Company's principal independent public accountants for the fiscal year ended
December 31, 1998.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Five individuals will be elected at the Annual Meeting to serve as
Directors of the Company until the next annual meeting of Shareholders or
otherwise as provided in the Certificate. Unless instructions to the contrary
are given, the persons named as proxy voters in the accompanying proxy, or their
substitutes, will vote for the following nominees for Directors with respect to
all proxies received by the Company. If any nominee should become unavailable
for any reason, the votes will be cast for a substitute nominee designated by
the Board. The Directors have no reason to believe that the nominees named will
be unable to serve if elected.
The nominees for Director are as follows:
Walter E. Auch, Sr., age 76, retired since 1986. From 1979-1986, Mr. Auch
was the Chairman and Chief Executive Officer of the Chicago Board Options
Exchange. Prior to that time, he was Executive Vice President, Director and a
member of the executive committee of PaineWebber. Mr. Auch is a director of
Pimco L.P., Geotek Communications, Smith Barney Concert Series Funds, Smith
Barney Trak Fund, Nicholas Applegate Funds, Fort Dearborn Fund, Semele Group,
Inc. and BSRT Management Corp. and a Trustee of Banyan Strategic Realty Trust,
Hillsdale College and the Arizona Heart Institute. Mr. Auch has been a director
of the Company since 1988.
Robert M. Ungerleider, age 56, is the President of Pilot Books, a book
publisher located in Greenport, New York and practices law with, and is of
counsel to, the firm of Felcher, Fox & Litner P.C., in New York, New York. He
has founded, developed and sold a number of start-up ventures including Verifone
Finance, an equipment leasing business, SmartPage, a paging service company and
Financial Risk Underwriting Agency, Inc., an insurance agency specializing in
financial guarantee transactions. Prior to these endeavors, Mr. Ungerleider
practiced real estate and corporate law for ten years. Mr. Ungerleider has been
a director of the Company since 1988.
Fred E. Welker, III, age 50, has been the President of Realty Financial
Advisors, Inc., a real estate investment banking firm, since January 1993. From
1982 to 1992, Mr. Welker was the Executive Vice President for the Southeast
Regional Office of Sonnenblick-Goldman Company, a real estate investment banking
firm. From 1981 to 1982, Mr. Welker was Vice President-Joint Ventures for
American Savings & Loan Association, and from 1976 to 1981 he was a commercial
loan officer with First Federal of Broward (merged with Glendale Federal). Mr.
Welker has been a director of the Company since January 1997.
Jan Petter Storetvedt, age 43, has been a director of OR Consult AS, a
company primarily involved with providing services to companies owned
substantially by Aker RGI ASA since September 1997. From March 1997 to August
1997, Mr. Storetvedt was the Senior Vice President, Investment Real Estate of
Aker RGI ASA. Since December 1991, Mr. Storetvedt has served as President, Chief
Executive Officer and Director of Avantor ASA, a publicly-traded Norwegian based
real estate company. Since March 1997, he has served as Chairman of the Board of
Avantor ASA. Mr. Storetvedt has been Chairman of the Board of the Company since
June 1997.
3
<PAGE> 6
Jon Alvar Oyasaeter, age 36, is Vice President, Investments of Aker RGI ASA
and has been employed by Aker since 1986, serving in a number of positions. Mr.
Oyasaeter is a graduate of the Norwegian School of Economics and Business
Administration and has been a Director of the Company since August 1997.
The Board is required to meet at least four times per year, either in
person or by telephonic conference. The Board met eleven times during the fiscal
year ended December 31, 1997. The Directors have established two committees, an
audit committee and a compensation committee. The audit committee is comprised
of Messrs. Ungerleider and Welker. The compensation committee is comprised of
Messrs. Storetvedt, Auch and Welker. During the fiscal year ended December 31,
1997, the audit committee and the compensation committee each met one time.
RECOMMENDATION OF THE BOARD: The Board hereby recommends and nominates
Messrs. Auch, Welker, Ungerleider, Storetvedt and Oyasaeter for election as
Directors to serve until the next annual meeting of Shareholders or as otherwise
provided in the Certificate.
VOTE REQUIRED. The five individuals receiving the highest vote totals will
be elected as directors.
PROPOSAL NO. 2: TO CONCUR IN THE APPOINTMENT BY THE BOARD OF DIRECTORS OF KPMG
PEAT MARWICK LLP AS THE COMPANY'S PRINCIPAL INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
KPMG Peat Marwick LLP ("KPMG") has served as the Company's principal
independent accountant since December 31, 1996. KPMG was the principal
independent accountant for RGI U.S. Holdings, Inc. ("RGI/US"), and audited
RGI/US' consolidated financial statements as of and for the years ended December
31, 1993, 1994 and 1995. The independent accounting firm of Ernst and Young LLP
("E&Y") served as the Company's principal independent accountant from December
21, 1995 to December 30, 1996. At no time during E&Y's engagement were there any
disagreements between the Company and E&Y on any matter of accounting principals
or practices, financial statement disclosure, or auditing scope or procedure.
The Board believes that KPMG is knowledgeable about the Company's
operations and accounting practices and is well qualified to act in the capacity
of its principal independent accountants. Therefore, the Board has selected KPMG
Peat Marwick LLP to act as the Company's principal independent accountants to
examine the Company's consolidated financial statements for the fiscal year
ended December 31, 1998. Although the selection of independent accountants does
not require the approval of the Company's shareholders, the Board believes it is
desirable to obtain the Shareholders' concurrence. Due to the difficulty and
expense involved in retaining another independent accounting firm on short
notice, the Board does not contemplate appointing another firm to act as the
Company's independent accountants for the fiscal year ended December 31, 1998 if
the Shareholders do not concur in the appointment of KPMG Peat Marwick LLP.
Instead, the Board will consider the vote as advice in making its selection of
independent accountants for the following year.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD: The Board hereby recommends that the Shareholders
concur in the following resolution which will be presented for a vote of the
Shareholders at the Annual Meeting:
RESOLVED, that KPMG Peat Marwick LLP be and hereby are appointed to
serve as the Company's principal independent accountants for the fiscal
year ended December 31, 1998.
VOTE REQUIRED. The affirmative vote of a majority of the votes cast by
Shareholders present in person or by proxy and eligible to vote at the Meeting,
a quorum being present, is required to adopt the foregoing resolution.
4
<PAGE> 7
EXECUTIVE OFFICERS
The following section sets forth information with respect to the Company's
executive officers. Each officer serves until his successor is elected and
qualified by the Directors or until his death, resignation or removal by the
Directors. For Mr. Storetvedt's biography see "Matters to be Considered by
Shareholders -- Election of Directors" above.
Edward F. Podboy, Jr., age 50, has been the President of the Company since
August 1997. Prior to his appointment, Mr. Podboy was the President of LPI
Development, Inc., a subsidiary of the Company. From 1991 to 1997 he was a Vice
President with Banyan Management Corp. He has also been the Chief Financial
Officer for United Development Co., was a management consultant for the public
accounting firm Coopers & Lybrand and Chief Financial Officer of a mortgage
banking operation.
Robert B. Cavoto, age 37, has been Vice President, Chief Financial Officer
and Assistant Secretary of the Company since November 1997. During 1997, prior
to this appointment, Mr. Cavoto was a financial consultant to LPI Development,
Inc., a subsidiary of the Company. From 1991 to 1997, he was an Asset Manager
with Banyan Management Corp., and was responsible for entitlement, development,
financing and disposition activities for a portfolio of mixed-use and
residential land developments. From 1988 to 1991, Mr. Cavoto was Vice President
of finance for a real estate company. Prior to that he was a manager in KPMG
Peat Marwick LLP's real estate practice. Mr. Cavoto received his B.S. in
Accounting from Northern Illinois University and is a Certified Public
Accountant.
Peter J. Henn, age 37, has been Vice President, General Counsel and
Secretary of the Company since November 1997. Since March 1994, Mr. Henn has
represented certain of the Company's Florida subsidiaries and provided real
estate closing and escrow services to the Company as President of Harbor Title &
Escrow Company. Mr. Henn received his B.A. and M.A. in Economics from Florida
Atlantic University and his J.D. from the University of Miami School of Law.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
A. DIRECTOR COMPENSATION
The Directors are paid an annual fee of $15,000, payable quarterly, plus
$875 for each board meeting, including meetings of the audit committee or
compensation committee, attended in person and $250 an hour for each board
meeting, including meetings of the audit committee or compensation committee,
attended via telephonic conference call. In addition, each Director is
reimbursed for out-of-pocket expenses incurred in attending Board meetings.
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<PAGE> 8
B. EXECUTIVE COMPENSATION
Salary Compensation Table. The following information is furnished with
respect to the current and former Chief Executive Officers (no other Executive
Officer employed by the Company at the end of calendar year 1997 earned salary
and bonus in excess of $100,000).
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3)
--------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
Edward F. Podboy, Jr. .............. 1997 $133,802 $44,985 $ 31,000
Chief Executive Officer(1) 1996 n/a n/a n/a
1995 n/a n/a n/a
Kenneth L. Uptain,.................. 1997 $283,131 -- --
Former Chief Executive Officer(2) 1996 n/a n/a 100,000
1995 n/a n/a --
</TABLE>
- ---------------
(1) Mr. Podboy has served as President and Chief Executive Officer of the
Company since August 1997. From April to August 1997, Mr. Podboy served as
President of LPI Development, Inc. a subsidiary of the Company.
(2) Mr. Uptain served as Chief Executive Officer of the Company from December
1996 to August 1997.
(3) Other compensation includes $31,000 in relocation expenses paid to Mr.
Podboy, and $100,000 in consulting fees paid to R.L. Associates, a
corporation of which Mr. Uptain is the sole shareholder.
The Company has entered into a three-year employment agreement with Edward
F. Podboy, to serve as the Company's President and Chief Executive Officer.
Under the agreement, the Company will pay Mr. Podboy a base compensation equal
to $225,000 in year one, $235,000 in year two and $245,000 in year three. In
addition to the base compensation, the Company will also pay Mr. Podboy
incentive compensation equal to: (i) a variable percentage of the Company's
total revenue based on overall Company performance in relation to the Company's
budget for the year; (ii) a percentage of funds raised for the Company's benefit
through recapitalization loans or joint ventures with third parties; (iii) a
percentage of revenue derived from the sale of certain non-core assets at
predetermined prices; and (iv) a percentage of total revenue if the Company is
sold or there is a change of control of the Company. The Company also
anticipates granting Mr. Podboy options to purchase share of the Company's
Common Stock.
Under the agreement, Mr. Podboy is also entitled to receive the balance
owed to him under the contract, but no less than one year's base compensation
plus 1.5% of the asset values which are part of the transaction less any debt
obligations (unless the obligations are assumed) upon a sale or change of
control of the Company. Mr. Podboy is also entitled to receive the standard
benefits package for Company employees, a car allowance of $500 per month, life
insurance equal to two times base compensation, disability insurance equal to
100% of base compensation for the first six months of any disability and 60% of
base compensation until age 65. The agreement is terminable by the Company with
or without cause under certain circumstances set forth in the agreement.
C. EXECUTIVE AND DIRECTORS' STOCK OPTION PLAN
On June 25, 1993, the Company's stockholders approved and adopted the 1993
Executive and Directors' Stock Option Plan (the "Plan"). The Plan grants the
Board of Directors the authority to issue up to 40,000 shares (adjusted for the
stock split) of the Company's Common Stock. The Plan consists of an Executive
Option Grant Program and a Director Option Grant Program. Under the Director
Option Grant Program, each Director holding office on the tenth business day
after adjournment of the annual meeting automatically receives an option to
acquire 1,000 Shares. Options granted to Directors vest 50% upon the first
anniversary of the date of the grant and 50% upon the second anniversary of the
date of the grant and expire ten years from the date of the grant.
The Board administers the Executive Option Grant Program and has the
authority to determine, among other things, the individuals to be granted
options, the exercise price at which Shares may be acquired, the
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<PAGE> 9
number of Shares subject to each option and the exercise period of each option.
The Board is also authorized to construe and interpret the Executive Option
Grant Program and to prescribe additional terms and conditions of exercise in
option agreements and provide the form of option agreement to be utilized with
the Executive Option Grant Program. No Director is eligible to receive options
under the Executive Option Grant Program.
Options granted under the Plan are not transferable except by will or by
the laws of descent and distribution, and are exercisable during an optionee's
lifetime only by the optionee or the appointed guardian or legal representative
of the optionee. Upon the: (a) death or permanent and total disability of an
optionee; or (b) retirement in accord with the Company's retirement practices,
then any unexercised options to acquire shares will be exercisable at any time
within one year in the case of (a) and ninety days in the case of (b) but in no
case beyond the expiration date specified in the Option Agreement. If, while
unexercised options remain outstanding under the Plan, the Company ceases to be
a publicly-traded company, or if the Company merges with another entity or a
similar event occurs, all options outstanding under the Plan will immediately
become exercisable at that time.
The Plan requires the optionee to pay, at the time of exercise, for all
shares acquired on exercise in cash, shares or, in the case of the Executive
Option Grant Program, other forms of consideration acceptable to the Board.
If the Company declares a stock dividend, splits its stock, combines or
exchanges its Shares, or engages in any other transactions which results in a
change in capital structure such as a merger, consolidation, dissolution,
liquidation or similar transaction, the Board may adjust or substitute, as the
case may be, the number of Shares available for options under the Plan, the
number of Shares covered by outstanding options, the exercise price per share of
outstanding options, any target price levels for vesting of the options and any
other characteristics of the options as the Board deems necessary to equitably
reflect the effects of those changes on the option holders.
The exercise prices as well as the number of shares issuable on any options
granted prior to the Merger have been adjusted to give effect to the Company's
25 to 1 reverse stock-split as approved by its stockholders.
Options granted under the Executive Option Grant Program are generally
exercisable and will vest in installments as follows: (1) 33.3% of the number of
shares commencing on the first anniversary of the date of grant; (ii) an
additional 33.3% of the shares commencing on the second anniversary of the date
of the grant; and (iii) an additional 33.4% of shares commencing on the third
anniversary of the date of grant. Options for all shares as granted under the
Director Option Grant Program will be exercisable and vest as follows: (i) 50.0%
of the number of shares commencing on the first anniversary of the date of
grant; and (ii) an additional 50.0% of the number of shares commencing on the
second anniversary of the date of grant. The Board is granted discretion to
determine the term of each Option granted under the Executive Option Grant
Program, but in no event will the term exceed ten years and one day from the
date of grant.
There were no stock options granted or exercised during the fiscal year
ended December 31, 1997, except for options granted to Directors under the
Director Option Grant Program.
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<PAGE> 10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation policy for the Company's executive officers is set by the
Compensation Committee. The Compensation Committee reviews and approves
compensation and terms of employment with respect to the Chief Executive Officer
and, based on the recommendations of the Chief Executive Officer, with respect
to certain officers and project presidents who report directly to the Chief
Executive Officer.
The Company's compensation philosophy is intended to contribute to
increasing shareholder value. To achieve this, the Company: (i) structures
compensation to the performance of its employees in achieving the strategic
business plan; and (ii) provides compensation sufficient to attract, motivate
and retain quality executives. Periodically, the Compensation Committee retains
the services of a compensation consulting firm to provide recommendations on
compensation and to compare the Company's compensation with a peer group of
companies in the real estate industry similar to the Company.
The components of compensation for executive officers are base salary,
annual bonuses and performance incentives. In determining base salary, primary
consideration is given to the executive's level of responsibility, individual
experience and skills, and by reference to the competitive marketplace for
comparable positions at comparable companies. Annual bonuses are determined
after evaluating company and individual results, and other objective and
subjective factors.
Performance incentives are provided for the Chief Executive Officer based
on the Company's revenue performance and the ability to raise additional funds
for the Company. The primary purpose of this component of compensation is to
provide an incentive for meeting or exceeding performance goals and to promote
long-term Company growth.
The Compensation Committee:
Jan Petter Storetvedt
Walter E. Auch, Sr.
Fred L. Welker
8
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return of
Legend Properties, Inc., the Russell 2000, and a "peer group" comprised of the
following companies: American Gulf Communities Corporation, Castle & Cooke,
Inc., HMG Courtland Properties, Inc., Interstate General Company, L.P. Oriole
Homes Corp. and Bluegreen Corporation (f/k/a Patten Corporation).
<TABLE>
<CAPTION>
Measurement Period The
(Fiscal Year Covered) Company Peer Group Russell 2000
<S> <C> <C> <C>
Dec 92 100.00 100.00 100.00
Dec 93 181.16 140.71 117.00
Dec 94 81.16 127.84 113.28
Dec 95 57.97 117.47 142.97
Dec 96 44.93 131.57 164.07
Jul 97 21.74 139.11 187.54
Dec 97 4.35 137.24 197.74
</TABLE>
On July 31, 1997, as a result of the Company's inability to meet the rules
established by Nasdaq for companies included in the small cap system, the
Company's shares were removed from the Nasdaq Small Cap Market. Although the
Company may attempt to relist the Shares on the Nasdaq Small Cap Market, the
Company does not currently satisfy the criteria for inclusion in the Nasdaq
system. There can be no assurance that the Company will ever be able to satisfy
the criteria.
The above graph is based upon Common Stock and index prices calculated as
of December 31 for each of the last five years. The Company's December 31, 1997
closing price per share of Common Stock was $0.75 based on trading in "pink
sheets" in the secondary market. Because of the delisting from the Nasdaq Small
Cap market described above, the last trading day on the Nasdaq Small Cap Market
is included as a separate data point in the graph. The Company's July 31, 1997
closing price per share of common stock was $3.75.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1998 regarding
the number and percentage of outstanding shares of the Company beneficially
owned by the directors and principal officers of the Company and each person
known by the Company to own more than 5% of its Common Stock. Share amounts and
percentages shown for each person or entity are adjusted to give effect to
shares of Common Stock of the Company that are not outstanding but may be
acquired by a person or entity upon exercise of all options exercisable by such
entity or person within 60 days of May 22, 1998. However, those Shares are not
deemed to
9
<PAGE> 12
be outstanding for the purpose of computing the percentage of outstanding shares
beneficially owned by any other person.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF INTEREST
------------------- ---------- -----------
<S> <C> <C>
RGI Holdings, Inc. and affiliates....................... 4,996,846 79%
1420 Fifth Avenue, Suite 4200
Seattle, Washington 98101
Walter E. Auch, Sr.(1).................................. 4,140 *
Edward F. Podboy, Jr.(1)................................ 840 *
Robert M. Ungerleider(1)................................ 5,060 *
Fred E. Welker, III(1).................................. 500 *
All Directors and Officers of the
Company as a group (8 persons)(1)..................... 10,540 *
</TABLE>
- ---------------
* less than 1%
(1) Represents shares and/or shares issuable upon exercise of options at
exercise prices ranging from $7.74 to $28.13 per share.
The Company is not aware of any arrangements, the operation of which may at
a subsequent date result in a change of control of the Company.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file initial
statements of beneficial ownership (Form 3), and statements of changes in
beneficial ownership (Forms 4 or 5), of Common Stock and other equity securities
of the Company with the Securities and Exchange Commission (the "SEC") and the
National Association of Securities Dealers, Inc. (the "NASD"). The SEC requires
officers, directors and greater than ten percent shareholders to furnish the
Company with copies of all these forms filed with the SEC or the NASD.
To the Company's knowledge, based solely on its review of the copies of
these forms received by it, or written representation from certain reporting
persons that no additional forms were required for those persons, the Company
believes that all filing requirements applicable to its officers, Directors, and
greater than ten percent beneficial owners were complied with during 1997,
except that the Form 3's for Messrs. Storetvedt and Oyasaeter were not timely
filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. CONSULTING AND OTHER FEES
The Company paid the law firm of Peter J. Henn, P.A. $175,550 during the
fiscal year ending December 31, 1997 for legal services provided to the Company
by Peter J. Henn, the Company's Vice President, General Counsel and Secretary.
Mr. Henn received no other compensation from the Company for serving as an
officer of the Company. Harbor Title & Escrow Company, owned 100% by Mr. Henn
who also serves as its president, also provides the Company with title insurance
for parcels sold by the Company and located in the State of Florida. Harbor
Title & Escrow Company received $64,500 in title insurance premiums from the
Company during the fiscal year ending December 31, 1997. Harbor Title & Escrow
Company charges the Company the minimum title insurance rates allowed under
Florida law as determined by the Florida Department of Insurance. The Company
has entered into a Legal Service Agreement with Mr. Henn's law firm under which
the Company will pay $200,000 for legal services to be provided to the Company
for the fiscal year ending December 31, 1998.
10
<PAGE> 13
B. PAYABLES
As of December 31, 1997 and 1996, respectively, the Company was indebted to
affiliates of RGI Holdings, Inc. in the following amounts:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Unsecured note payable to parent, interest at the prime
rate plus 5% (13.25% at December 31, 1996), principal
and interest due on demand............................ $ -- $ 400,000
Mortgage note payable, interest accrues at the lower of
prime rate plus 2% or 30-day LIBOR rate plus 2.5%
(8.22% at December 31, 1997). Interest payable at
December 31, 1998 and April 1, 1999, principal due
April 1, 1999, secured primarily by certain real
estate inventory...................................... 6,391,084 6,391,084
Unsecured note payable, interest accrues at LIBOR plus
1% (6.72% at December 31, 1997), principal and
interest due April, 1999.............................. 4,012,667 4,000,000
Mortgage note payable, interest accrues at the lower of
prime rate plus 2% or 30-day LIBOR rate plus 2.5%
(8.22% at December 31, 1997). Interest payable at
December 31, 1998 and April 1, 1999, principal due
April, 1999, secured primarily by certain real estate
inventory............................................. 24,258,788 24,258,788
Unsecured notes payable, interest accrues at LIBOR plus
1%. Principal and interest due July, 1999............. 10,400,000 10,400,000
Accrued interest....................................... 6,868,311 2,159,225
Line of credit, with a limit of $21,000,000, partially
secured by a second mortgage on certain real estate
inventory. Interest accrues at the prime rate plus 2%
(10.5% at December 31, 1997). Principal and accrued
interest due April 1999............................... 20,960,448 --
Other.................................................. 2,629 --
----------- -----------
$72,893,927 $47,609,097
=========== ===========
</TABLE>
From January 1, 1997 to September 30, 1997, the Company had short-term
borrowings from RGI Holdings, Inc. ("Holdings"), the Company's principal
stockholder, of approximately $20.7 million. In conjunction with the settlement
of the Delaware litigation (See Item 3 "Legal Proceedings" of the Company's
Annual Report for the year ended December 31, 1997), Holdings agreed to, among
other things, provide the Company with a line of credit in the aggregate
principal amount of $8.5 million, bearing interest at the prime rate plus 2%
(10.5% at March 20, 1998). The principal amount available under this line of
credit agreement was increased to $17.0 million in May 1997, and then to $21.0
million in August 1997. Draws on the $21.0 million line of credit mature on
April 1, 1999, and are partially secured by a second mortgage on certain of the
Company's real properties. As of March 31, 1998, the Company had fully drawn on
the credit line. The proceeds were used to, among other things, repay $2.6
million to Holdings for advances previously made to the Company during 1996 and
the first quarter of 1997. The remaining proceeds were used to fund development,
construction and operating costs associated with certain of the Company's
properties, as well as certain general and administrative costs. As of December
31, 1997 and March 31, 1998, the Company owed Holdings $20,960,448 on this line,
and $1,296,298 and $1,838,436, respectively, in accrued interest.
C. GUARANTEES
As of December 31, 1997, Resource Group International, Inc., and Aker RGI
ASA, the indirect parent of Holdings, had collectively guaranteed up to
approximately $43,900,000 of indebtedness incurred by direct and indirect
subsidiaries of the Company owning the Grand Harbor and Oak Harbor properties.
In addition, Aker RGI ASA has agreed to guarantee up to $15,000,000 of
development bonds secured by Southbridge and
11
<PAGE> 14
Chapman's Landing, real estate projects owned by the Company. As of December 31
1997, there was approximately $7,050,000 of development bonds outstanding.
SHAREHOLDER PROPOSALS
Shareholder proposals for next year's annual meeting of Shareholders must
be received by the Company at its executive office in Woodbridge, Virginia, on
or prior to January 20, 1999 for inclusion in the Company's proxy statement for
that meeting. Any Shareholder proposal must meet the requirements set forth in
the rules of the Securities and Exchange Commission relating to Shareholder
proposals.
OTHER MATTERS
As of the date of this Proxy Statement, no business other than that
discussed above is to be acted upon at the Meeting. If no other matters not
known to the Board should, however, properly come before the Meeting, the
persons appointed by the signed proxy intend to vote it in accordance with their
best judgment.
LEGEND PROPERTIES, INC.
By the order of the Board of Directors
/s/ EDWARD F. PODBOY, JR.
Edward F. Podboy, Jr.
President and Chief Executive Officer
Woodbridge, Virginia
May 22, 1998
12
<PAGE> 15
SKU# 4570-PS-98
<PAGE> 16
LGP43 2
DETACH HERE
PROXY
LEGEND PROPERTIES, INC.
13662 OFFICE PLACE
SUITE 201
WOODBRIDGE, VIRGINIA 22192
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward F. Podboy, and Peter J. Henn, and
each of them, as Proxies, with the power to appoint their substitutes, and
hereby authorizes them to represent and to vote, as designated on the reverse
side, all the Shares of Common Stock, $0.01 par value, of Legend Properties,
Inc. held of record by the undersigned on May 15, 1998, at the Annual Meeting
of Shareholders when convened on June 30, 1998, or any adjournment thereof.
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 AND 2.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE> 17
LGP43 2 DETACH HERE
<TABLE>
<S> <C>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. Election of Directors.
PROPOSAL to elect five Directors to hold office
until the next Annual Meeting of Shareholders,
or otherwise so provided in the Company's 2. PROPOSAL to concur in the FOR AGAINST ABSTAIN
Restated Certificate of Incorporation (mark selection to KPMG Peat [ ] [ ] [ ]
one box): Marwick LLP as the Company's
principal independent public
NOMINEES: Walter E. Auch, Sr., Robert M. accountants for the fiscal
Ungerleider, Fred E. Welker, III, Jon Alvar year ending December 31, 1998
Oyasaeter, Jan Petter Storetvedt (mark one box):
FOR WITHHELD
[ ] [ ] 3. In their discretion, the Proxies are authorized to transact any
[ ] other business as may properly come before the Meeting or
------------------------------------------- any adjournment thereof.
For all nominees expect as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
THIS CARD USING THE ENCLOSED ENVELOPE.
NOTE: Sign exactly as name appears at left. If joint
tenants, both should sign. If attorney, executor,
administrator, trustee of guardian, give full title
as such. If a corporation, please sign corporate
name by President or authorized officer. If
partnership, sign in full partnership name by
authorized person.
Signature: Date: Signature: Date:
---------------------------------- ---------- ------------------------ ------------
</TABLE>
