TEJON RANCH CO.
Post Office Box 1000
Lebec, California 93243
April 13, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Tejon Ranch Co. on Monday, May 11, 1998, at
9:30 A.M., Los Angeles time, in the Grand Salon IV Room of the
Park Hyatt Los Angeles at Century City, 2151 Avenue of the
Stars, Los Angeles, California. Your Board of Directors and
management look forward to greeting those stockholders who are
able to attend.
The Notice of Annual Meeting and Proxy Statement
containing information concerning the business to be
transacted at the meeting appear in the following pages.
It is important that your shares be represented and voted
at the meeting, whether or not you plan to attend. Please
sign, date, and mail the enclosed proxy at your earliest
convenience.
Your interest and participation in the affairs of the
Company are greatly appreciated.
Sincerely,
Robert A. Stine,
President and
Chief Executive Officer
TEJON RANCH CO.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
on
May 11, 1998
The Annual Meeting of Stockholders of Tejon Ranch Co.
(the "Company") will be held in the Grand Salon IV Room of the
Park Hyatt Los Angeles at Century City, 2151 Avenue of the
Stars, Los Angeles, California on Monday, May 11, 1998, at
9:30 A.M., Los Angeles time, for the following purposes:
1. To elect three directors.
2. To approve the 1998 Stock Incentive Plan.
3. To approve the Non-Employee Director Stock
Incentive Plan.
4. To transact such other business as may properly
come before the meeting or any adjournment
thereof.
The names of the nominees for the Board of Directors of
the Company for election at the meeting are: Craig
Cadwalader, Rayburn S. Dezember, and Robert A. Stine.
The Board of Directors has fixed the close of business on
March 31, 1998, as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting.
Your attention is invited to the accompanying Proxy
Statement. To ensure that your shares are represented at the
meeting, please date, sign, and mail the enclosed proxy, for
which a return envelope is provided.
For the Board of Directors,
DONALD HASKELL, Chairman of the
Board
DENNIS MULLINS, Secretary
Lebec, California
April 13, 1998
PLEASE MARK YOUR INSTRUCTIONS ON THE ENCLOSED PROXY, SIGN AND
DATE THE PROXY, AND RETURN IT IN THE ENCLOSED POSTAGE PAID
ENVELOPE EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. IF
YOU ATTEND THE MEETING AND WISH TO DO SO, YOU MAY VOTE YOUR
SHARES IN PERSON EVEN IF YOU HAVE SIGNED AND RETURNED YOUR
PROXY.
TEJON RANCH CO.
Post Office Box 1000
Lebec, California 93243
PROXY STATEMENT
Annual Meeting of Stockholders
May 11, 1998
This Proxy Statement is being furnished in connection
with the solicitation of proxies by the Company for use at the
Annual Meeting of Stockholders to be held on May 11, 1998.
It is anticipated that the mailing of this Proxy
Statement and accompanying form of Proxy to stockholders will
begin on or about April 13, 1998.
SOLICITATION OF PROXIES
At the meeting, the stockholders of the Company will be
asked (1) to elect three directors, (2) to approve the 1998 <PAGE>
Stock Incentive Plan attached as Appendix "A" and incorporated
herein (the "Incentive Plan"), (3) to approve the
Non-Employee Director Stock Incentive Plan attached hereto as
Appendix "B" and incorporated herein (the "Director Plan"),
and (4) to transact such other business as may properly come
before the meeting. Your Board of Directors is asking for
your proxy for use at the meeting. Although management does
not know of any other matter to be acted upon at the meeting,
shares represented by valid proxies will be voted by the
persons named on the proxy in accordance with their best
judgment with respect to any other matters which may properly
come before the meeting.
The cost of preparing, assembling, and mailing the Notice
of Meeting, this Proxy Statement and the enclosed proxy ballot
will be paid by the Company. Following the mailing of this
Proxy Statement, directors, officers, and regular employees of
the Company may solicit proxies by mail, telephone, telegraph,
or in person; such persons will receive no additional
compensation for such services. Brokerage houses and other
nominees, fiduciaries and custodians nominally holding shares
of record will be requested to forward proxy soliciting
material to the beneficial owners of such shares and will be
reimbursed by the Company for their charges and expenses in
connection therewith at the rates approved by the American
Stock Exchange.
RECORD DATE AND VOTING
Holders of shares of Common Stock of record at the close
of business on March 31, 1998, are entitled to notice of, and
to vote at, the meeting. There were 12,685,994 shares of
Common Stock outstanding at the record date. A stockholder
giving a proxy may revoke it at any time before it is voted by
filing with the Company's Secretary a written notice of
revocation or a duly executed proxy bearing a later date.
Unless a proxy is revoked, shares represented by a proxy will
be voted in accordance with the voting instructions on the
proxy and, on matters for which no voting instructions are
given, shares will be voted for the nominees of the Board of
Directors as shown on the proxy and "FOR" both proposals
submitted for stockholder approval. On a matter for which the
"ABSTAIN" instruction is given, shares will be voted neither
"FOR" nor "AGAINST." Stockholders cannot abstain in the
election of directors, but they can withhold authority.
Stockholders who abstain or withhold authority will be
considered present for purposes of determining a quorum. The
rules of the New York and American Stock Exchanges permit
member organizations ("brokers") to vote shares on behalf of
beneficial owners, in the absence of instructions from
beneficial owners, on certain "routine" matters, including the
election of directors and ratification of independent public
accountants, but do not permit such votes on "non-routine"
matters, including the approval of the Incentive Plan and the
Director Plan. Situations where brokers are unable to vote on
non-routine proposals are referred to as "broker non-votes."
Broker non-votes will not be counted as present for purposes
of determining a quorum, have no effect on the outcome of
matters requiring the affirmative vote of a majority or super-
majority of shares represented at the meeting, including the
approval of the Incentive Plan and the Director Plan, and have
the effect of a negative vote on matters requiring the
affirmative vote of the holders of a majority or super-
majority of the shares outstanding.
Stockholders vote cumulatively in the election of
directors. Cumulative voting means that each share is
entitled to a number of votes equal to the number of directors
to be elected, which votes may be cast for one nominee or
distributed among two or more nominees. The three candidates
receiving the highest number of affirmative votes will be
elected as directors. On all other matters, each share has
one vote.
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table lists the stockholders known to the
Company to be the beneficial owners of more than 5% of the
shares of Company Common Stock outstanding as of March 23,
1998. The table also provides the stock ownership of all
directors and of the most highly compensated executive
officers as of the same date.
<TABLE>
Amount and
Nature of
Beneficial Percent
Name and Address of Stockholder Ownership(1) of Class
<S> <C> <C>
Ardell Investment Company 1,055,828(2) 8.33%
P.O. Box 1715
Newport Beach, CA 92659
M.H. Sherman Company 1,140,630(2) 8.99%
P.O. Box 1715
Newport Beach, CA 92659
EQSF Advisers, Inc. 3,245,508(3) 25.58%
767 Third Avenue
New York, NY 10017
Carl Marks Management Company, L.P. 740,000(4) 5.83%
135 East 57th Street
New York, NY 10022
State of Wisconsin Investment Board 999,600(5) 7.88%
P.O. Box 7842
Madison, WI 53707
Directors
Otis Booth, Jr. 1,000 below 1%
Craig Cadwalader 2,222,530(6) 17.52% <PAGE>
Dan T. Daniels 2,222,530(7) 17.52%
Rayburn S. Dezember 1,000(8) below 1%
Clayton W. Frye, Jr. 10,000 below 1%
Donald Haskell, Jr. 2,273,630(9) 17.92%
Norman Metcalf -0- -0-
Robert C. Ruocco 740,000(10) 5.83%
Geoffrey L. Stack -0- -0-
Robert A. Stine 26,000(8) below 1%
Martin J. Whitman 3,245,508(11) 25.58%
Phillip L. Williams -0- -0-
Executive Officers
Matt J. Echeverria 19,300(12) below 1%
John A. Wood 12,900(12) below 1%
Dennis Mullins 6,810(12) below 1%
Allen Lyda 14,000(12) below 1%
All officers and directors as a 6,366,873 49.84%
group
(18 persons)
</TABLE>
(1) In each case, the named stockholder has the sole voting
and investment power as to the indicated shares, except
as set forth in the footnotes below.
(2) Does not include 26,072 shares (0.21% of the number of
shares outstanding) owned of record and beneficially by
the Sherman Foundation, a non-profit public charity,
three of the trustees of which are directors of Ardell
Investment Company and M.H. Sherman Company, those being
Messrs. Donald Haskell, Chairman of the Board of
Directors of the Company, and Craig Cadwalader and Dan T.
Daniels, directors of the Company.
(3) Includes 3,045,508 shares owned beneficially and of
record by Third Avenue Value Fund and 200,000 shares
owned beneficially and of record by Third Avenue Small-
Cap Value Fund. EQSF Advisers, Inc. has sole voting and
investment power with respect to these shares.
(4) Includes 505,000 shares owned beneficially and of record
by Carl Marks Strategic Investments, L.P., 185,000 shares
owned beneficially and of record by Carl Marks Strategic
Investments II, L.P., and 50,000 shares owned
beneficially and of record by Uranus Fund Ltd. Carl
Marks Management Company, L.P. has sole voting and
investment power with respect to the shares owned by Carl
Marks Strategic Investments, L.P. and Carl Marks
Strategic Investments II, L.P. Carl Marks Offshore
Management, Inc., which is under common control with Carl
Marks Management Company, L.P., has sole voting and
investment power with respect to the shares owned by
Uranus Fund Ltd.
(5) Based upon information provided to the Company by the
stockholder on a Schedule 13G dated January 20, 1998,
and filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
(6) Includes 1,055,828 shares owned by Ardell Investment
Company, 1,140,630 shares owned by M.H. Sherman Company,
and 26,072 shares owned by Sherman Foundation. Mr.
Cadwalader is a director of Ardell Investment Company and
M.H. Sherman Company and a trustee of Sherman Foundation.
Mr. Cadwalader disclaims beneficial ownership as to all
of the shares owned by said entities for all other
purposes.
(7) Includes 1,055,828 shares owned by Ardell Investment
Company, 1,140,630 shares owned by M.H. Sherman Company,
and 26,072 shares owned by Sherman Foundation. Mr.
Daniels is Vice President, Treasurer and a director of
Ardell Investment Company, President and a director of
M.H. Sherman Company, and Vice President, Secretary and a
trustee of Sherman Foundation. Mr. Daniels disclaims
beneficial ownership as to all of the shares owned by
said entities for all other purposes.
(8) The shares owned by Messrs. Dezember and Stine are held
by family trusts. Each director and his spouse share
voting and investment power with respect to their shares.
Mr. Stine's total includes 25,000 shares underlying
options that are currently exercisable or become
exercisable within 60 days.
(9) Includes 51,100 shares owned by Mr. Haskell personally,
1,055,828 shares owned by Ardell Investment Company,
1,140,630 shares owned by M.H. Sherman Company, and
26,072 shares owned by Sherman Foundation. Mr. Haskell
is President and a director of Ardell Investment Company,
is Chairman of the Board and a director of M.H. Sherman
Company, and has the power to vote a majority of the
shares of each company. He is also President and a
trustee of Sherman Foundation. Mr. Haskell disclaims
beneficial ownership of the shares owned by the Sherman
Foundation for all other purposes.
(10) Includes 505,000 shares owned beneficially and of record
by Carl Marks Strategic Investments, L.P., 185,000 shares
owned beneficially and of record by Carl Marks Strategic
Investments II, L.P., and 50,000 shares owned
beneficially and of record by Uranus Fund Ltd. Mr.
Ruocco is a General Partner of Carl Marks Management
Company, L.P. and a Vice President of Carl Marks Offshore
Management, Inc., and shares voting and investment power
for both entities.
(11) Includes 3,045,508 shares owned beneficially and of
record by Third Avenue Value Fund and 200,000 shares
owned beneficially and of record by Third Avenue Small-
Cap Value Fund. Mr. Whitman is Chairman of the Board and
CEO of Third Avenue Trust, which contains Third Avenue
Value Fund and Third Avenue Small-Cap Value Fund as
investment series, and of EQSF Advisers, Inc., Third
Avenue Trust's investment advisor, and has the power to
vote a majority of the shares of EQSF Advisers, Inc. Mr.
Whitman disclaims beneficial ownership of the shares
owned by said entities for all other purposes.
(12) The shares owned by Messrs. Echeverria and Wood are held
as community property. Each officer and his spouse share
voting and investment power with respect to their shares.
The totals for Messrs. Echeverria, Lyda, Mullins and Wood
include shares underlying options that are currently
exercisable as follows: Mr. Echeverria 19,000 shares,
Mr. Lyda 14,000 shares, Mr. Mullins 6,810 shares and Mr.
Wood 10,000 shares.
ELECTION OF DIRECTORS
The Board of Directors now consists of twelve directors,
the authorized number of directors having been increased in
1997 from 10 to 12. The directors are divided into three
classes based upon when their terms expire. The terms of four
directors (Class I) expire at the 2000 Annual Meeting, the
terms of four directors (Class II) expire at the 1998 Annual
Meeting, and the terms of four directors (Class III) expire at
the 1999 Annual Meeting. Only three directors are being
elected to Class II positions at the 1998 Annual Meeting. Mr.
Williams' term expires at the 1998 Annual Meeting; he has
notified the Board that he does not intend to stand for
reelection. In January 1998 the Board of Directors amended
the Bylaws of the Company to decrease the authorized number of
directors from 12 to 11, and to decrease the authorized number
of Class II directors from four to three, effective as of the
1998 Annual Meeting. The regular terms of directors expire at
the third Annual Meeting following the Annual Meeting at which
the directors were elected, although directors continue to
serve until their successors are elected and qualified, unless
the authorized number of directors has been decreased.
The names of the nominees of the Board of Directors for
election as directors at the 1998 Annual Meeting (all of whom
are presently directors) are set forth in the table below,
along with certain other information. The table also includes
information as to other directors of the Company.
Other than nominations made at the direction of the Board
of Directors, nominations of persons for election to the Board
of Directors by stockholders must be made pursuant to timely
notice in writing to the Secretary of the Company. To be
timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company
not later than the close of business on the 10th day following
the day on which the Notice of Annual Meeting of Stockholders
was mailed. Such stockholder's notice must set forth: (i) as
to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating
to such person that is required to be disclosed in
solicitations of proxies for election of directors or is
otherwise required, in each case pursuant to the Securities
Exchange Act of 1934, as amended; and (ii) as to the
stockholder giving the notice, the name and address, as they
appear on the Company's books, of such stockholder, and the
class and number of shares of the Company which are
beneficially owned by such stockholder.
Except as noted below, each proxy solicited by and on
behalf of the Board of Directors will be voted "FOR" the
election of the nominees named below (unless such authority is
withheld as provided in the proxy) and one third of the votes
to which the stockholder is entitled will be cast for each of
the three nominees. In the event any one or more of the
nominees shall become unable to serve or refuse to serve as
director (an event which is not anticipated), the proxy
holders will vote for substitute nominees in their discretion.
If one or more persons other than those named below as
nominees for the 1998 Annual Meeting are nominated as
candidates for director by persons other than the Board of
Directors, the enclosed proxy may be voted in favor of any one
or more of said nominees of the Board of Directors or
substitute nominees and in such order of preference as the
proxy holders may determine in their discretion.
All references to the Company in the table below and the
remainder of this Proxy Statement relating to periods prior to
June 1987 include references to Tejon Ranch Co., a California
corporation and the Company's predecessor, which became a
wholly owned subsidiary of the Company as a result of a
reincorporation transaction consummated in June 1987.
<TABLE>
Nominees for Class II Directors First
Whose Terms Expire in 1998 Became
and Principal Occupation or Employment(1) Director Age
<S> <C> <C>
Craig Cadwalader(2) 1994 57
President, Chief Operating Officer and
Director,
Ardell Marina, Inc., yacht brokerage;
Director, M.H. Sherman Co.
Rayburn S. Dezember(2)(4) 1990 67
Director of Wells Fargo
& Co., CalMat Co.,
Bolthouse Farms, Inc.,
and The Bakersfield Californian
Robert A. Stine(3)(5) 1996 51
President and Chief Executive Officer,
Tejon Ranch Co.;
Director of Rancho Santa Fe National Bank
Continuing Directors and Principal Occupation
or Employment(1)
Otis Booth, Jr.(2)(3) 1970 74
Private investments and ranching;
Director of Clipper Fund, Inc.
Dan T. Daniels(2)(4) 1982 56
President and Director, M.H. Sherman
Company, investments
Clayton W. Frye, Jr.(3)(5) 1975 67
Senior Associate of Laurance S.
Rockefeller, business and investment
management; Director of The Times Mirror
Company.
Donald Haskell(3)(4)(5) 1967 70
Chairman of the Board, M.H. Sherman
Company, investments;
President, Ardell Investment Company,
investments;
Chairman of the Board, Tejon Ranch Co.
Norman Metcalfe 1998 55
Real estate and investments; Director of
First Sierra Financial, Inc.
Robert C. Ruocco(4) 1997 39
General Partner, Carl Marks Management
Company, L.P.,investment management;
Director of Sport & Health Company,
L.C., and Seaman Furniture
Company, Inc.
Geoffrey L. Stack 1998 54
Managing Director, SARES REGIS
Group, real estate development
and management; Director of Arral &
Partners.
Martin J. Whitman(5) 1997 73
Chairman of the Board and Chief Executive
Officer of Third Avenue Trust and EQSF
Advisers, Inc., investment management;
Danielson Holding Corporation, insurance;
and M.J. Whitman, Inc.,stock brokerage;
Distinguished Faculty Fellow, Yale
University School of Management; Director
of Nabors Industries, Inc.
</TABLE>
(1) Except as set forth below, each of the directors has been
engaged in his principal occupation described above
during the past five years. There are no family
relationships among any directors of the Company. All
directors are members of the Real Estate Committee, which
sits as a committee of the whole.
Mr. Metcalfe served as Vice Chairman and Chief Financial
Officer of The Irvine Company from March 1993 to December
1996. Until May 1993, Mr. Stack was President, a
Director and sole shareholder of Regis Group. Mr. Stine
served as the Chief Executive Officer of The Collins
Companies from 1986 to April 1995. He became President
and Chief Executive Officer of the Company on May 1,
1996, and a Director of the Company on May 13, 1996.
Since March 1990, Mr. Whitman has been the Chairman of
the Board, Chief Executive Officer and a Director (and,
since January 1991, the President) of Third Avenue Trust
and its predecessor, Third Avenue Value Fund, Inc.
(together with its predecessor, "Third Avenue Trust"), an
open-end management investment company registered under
the Investment Company Act of 1940 and containing
multiple investment series, and EQSF Advisers, Inc.
("EQSF"), Third Avenue Trust's investment adviser. Until
April 1994, Mr. Whitman also served as the Chairman of
the Board, Chief Executive Officer and a Director of
Equity Strategies Fund, Inc., previously a registered
investment company. Mr. Whitman is a Managing Director
of Whitman Heffernan Rhein & Co., Inc., an investment and
financial advisory firm which he co-founded in 1987 and
which ceased operations in December 1996. Mr. Whitman
has been a Director and Chairman of the Board since
August 1990 and Chief Executive Officer since August 1996
of Danielson Holding Corporation. Since 1974, Mr.
Whitman has been the President and controlling
stockholder of M.J. Whitman & Co., Inc. (now known as
Martin J. Whitman & Co., Inc.) ("MJW&Co") which, until
August 1991, was a registered broker-dealer. From August
1994 to December 1994, Mr. Whitman served as the Managing
Director of M.J. Whitman, L.P. ("MJWLP"), then a
registered broker-dealer which succeeded to the broker-
dealer business of MJW & Co. Since January 1995, Mr.
Whitman has served as the Chairman and Chief Executive
Officer (and, until June 1995, as President) of M.J.
Whitman, Inc. ("MJW"), which succeeded at that time to
MJWLP's broker-dealer business. Also since January 1995,
Mr. Whitman has served as the Chairman and Chief
Executive Officer of M.J. Whitman Holding Corp., the
parent of MJW and other affiliates. Mr. Whitman is a
Distinguished Faculty Fellow in Finance at the Yale
University School of Management.
(2) Member of Audit Committee.
(3) Member of Executive Committee.
(4) Member of Compensation Committee.
(5) Member of Nominating Committee.
The terms of Messrs. Frye, Haskell, Metcalfe and Whitman
expire at the 1999 Annual Meeting, and the terms of Messrs.
Booth, Daniels, Ruocco and Stack expire at the 2000 Annual
Meeting. No director's term expires at an Annual Meeting
unless his successor has been elected and qualified, or the
authorized number of directors has been decreased.
Board of Directors and Committees
Standing committees of the Board of Directors include the
Executive, Audit, Compensation, and Real Estate Committees.
The major functions of each of these committees are described
briefly below.
Except for certain powers which, under Delaware law, may
be exercised only by the full Board of Directors, the
Executive Committee may exercise all powers and authority of
the Board of Directors in the management of the business and
affairs of the Company.
The Audit Committee recommends engagement of the
independent accountants, reviews the arrangement and scope of
audit, considers comments made by the independent accountants
with respect to internal controls, reviews internal accounting
procedures and controls with the Company's financial
accounting staff, and reviews non-audit services provided by
the Company's independent accountants.
The Compensation Committee periodically reviews and
either adjusts or recommends to the Board of Directors
appropriate adjustments to the compensation arrangements for
executive officers.
The Nominating Committee periodically searches for and
considers qualified candidates to serve on the Board of
Directors. However, the nominees for director proposed by the
Board of Directors are selected by the entire Board.
The Real Estate Committee reviews all activities and
issues related to the Company's real estate assets. It
receives and considers the analyses of the Company's outside
land use and development consultants. The Committee directs
management on the direction that the Company's real estate
activities should take.
During 1997, there were six meetings of the Board of
Directors, two of the Audit Committee, three of the
Compensation Committee, two of the Nominating Committee, and
none of the Real Estate Committee or the Executive Committee.
During 1997 all incumbent directors attended 75% or more of
the aggregate total of such meetings of the Board of Directors
and committees of the Board on which they served, except Mr.
Dezember.
Director Compensation
During 1997, directors who are not employees of the
Company each received a quarterly retainer of $2,000, a fee of
$1,000 for attendance at any meeting of the Board and a fee of
$500 for attendance at any meeting of a Committee.
On January 26, 1998, the Board of Directors increased the
compensation payable to directors who are not employees of the
Company to an annual retainer of $24,000, a fee of $1,000 for
attendance at any meeting of the Board, a fee of $500 per
Committee meeting attended by such director on the day of a
Board meeting, and a fee of $1,000 per Committee meeting
attended by such director on a day when the Board is not
meeting. The fees are payable if the meeting was attended in
person or by telephone conference call. The annual retainer
is payable one-half in cash and one-half in stock options,
unless the director elects to receive his entire retainer in
stock options. The stock options used for this purpose are
those described in the Director Plan. See, "Approval of Non-
Employee Director Stock Incentive Plan". If the Director Plan
is not approved by the stockholders on or before January 25,
1999, then all directors will receive their annual retainer in
cash. If a director owns beneficially, or is affiliated with
a person or entity which owns beneficially, 5% or more of the
outstanding shares of the Common Stock of the Company, then
that director may elect to receive his entire annual retainer
in cash.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers and
persons who own beneficially more than 10% of the Company's
common stock to file reports of beneficial ownership and
changes in ownership with the Securities and Exchange
Commission. Messrs. Ruocco and Taylor failed to timely file
initial statements after taking office, but promptly filed the
reports when the oversight was called to their attention.
EXECUTIVE COMPENSATION
The following table shows the aggregate compensation paid
on an accrual basis by the Company and its subsidiaries during
1997 and each of the two previous years to the Chief Executive
Officer and to the four other executive officers of the
Company who were most highly compensated in 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
SECURITIES LTIP
UNDERLYING PAY- ALL OTHER
NAME AND PRINCIPAL SALARY(1) BONUS(1) OPTIONS(2) OUTS COMPENSATION
POSITION YEAR ($) ($) (#) ($) (3)($)
<S> <C> <C> <C> <C> <C> <C>
Robert A. Stine 1997 275,000 100,000 0 1,500
President and 1996 183,333(4) 36,665(4) 100,000 0
Chief Executive 1995 0 0 0 0
Officer
Matt J. Echeverria 1997 185,000 35,000 0 1,500
Senior Vice 1996 165,000 25,000 0 1,650
President 1995 144,232 25,000 0 1,442
Dennis Mullins 1997 143,000 15,000 0 1,430
Vice President 1996 135,000 12,500 0 1,350
General Counsel 1995 125,500 12,500 0 1,250
and Secretary
John A. Wood 1997 106,000 32,950 0 1,060
Vice President 1996 101,500 39,495 0 1,015
1995 101,500 37,462 0 80,000(5) 1,015
Allen E. Lyda 1997 138,000 20,000 0 1,380
Vice President, 1996 115,000 20,000 0 1,150
Treasurer and 1995 100,000 12,000 0 1,000
Secretary
</TABLE>
(1) Amounts shown include salary earned and received by
executive officers as well as salary earned but deferred
at the election of those officers. The bonus amounts
shown were accrued by the Company in the years shown but
were received by the officers in January of the following
year.
(2) In April 1997, the options of all officers listed above
(except Mr. Mullins) were amended to lower the previously
existing exercise price ($17.875 per share for Mr. Stine
and $20.00 per share for the other officers) to $16.00
per share, the closing price of the Company's Common
Stock on the American Stock Exchange at the close of
trading on the date of the amendment. The exercise price
of Mr. Mullins' options previously was $15.00 and was not
changed. At the same time, the schedule of dates upon
which options became exercisable was accellerated for all
officers listed above (except Mr. Stine) so that it
became the same as that previously provided to Mr. Stine
(see "Stock Options"). Prior to the amendment, the
options did not become exercisable until nine years after
the date of the grant. As a result of the amendment, all
of the options held by Messrs. Echeverria, Wood and Lyda
became exercisable immediately, and 40% of Mr. Mullins'
options became exercisable immediately.
(3) The amounts in this column include the matching
contributions made by the Company under its 401(k)
defined contribution plan.
(4) The amount shown reflects compensation for the partial
year from May 1, 1996, when Mr. Stine became President
and Chief Executive Officer of the Company, through
December 31, 1996.
(5) This payment, which was calculated by multiplying a
fraction of salary times years of service, was paid
pursuant to a long term incentive plan offered to all
employees working in the farming operations of Laval
Farms Limited Partnership (formerly Tejon Agricultural
Partners) to encourage them to work as long as needed
during the wind-down of the partnership. The amount was
paid by the partnership with its own funds, and the
Company did not bear directly or indirectly any of the
cost of the payment.
The Company has entered into an agreement with Mr. Stine
providing for him to serve as President, Chief Executive
Officer and a director of the Company. Under the agreement he
is entitled to a salary at an annual rate of $275,000 per year
(subject to review after November 1997), a bonus of up to 50%
of base salary and the grant of an option to purchase 100,000
shares of the Common Stock of the Company at the fair market
value of the shares on the date the option was granted. The
option was granted in May 1996 with an exercise price of
$17.875 per share, and the price was decreased to $16.00 per
share in April 1997. See "Stock Options." Although the
agreement does not provide for a term of employment, Mr. Stine
will be entitled to continuation of his salary for two years
if the Company terminates his employment without cause prior
to May 1, 1998, and to continuation of his salary for one year
if the Company terminates his employment without cause
thereafter. In addition such a termination would result in
acceleration of the exercise dates of Mr. Stine's stock
option. The agreement also provides for perquisites
consisting of a company car, country club membership and
participation in the Company's health, disability and life
insurance programs and its retirement plan.
The Company has entered into agreements with each of the
officers listed above (other than Mr. Stine, whose employment
agreement is described above), providing the employee with
specified severance benefits in the event the Company
terminates his employment without cause, or the employee
terminates his employment for good cause, within two years
following, or within three months prior to and in connection
with or anticipation of, a change of control of the Company.
"Change of control" is defined to mean a liquidation of the
Company; a change in the identity of a majority of the
directors on the Board, with certain exceptions; or a
transaction or series of transactions resulting in the sale of
substantially all of the Company's assets or the merger,
consolidation or reorganization of the Company, unless control
of the Company or a successor company that controls the
Company's assets is substantially the same after the
transaction, as defined. The severance benefits generally
consist of the continuation (for up to 30 months, subject to
certain limitations) of the employee's salary, his average
bonus over the three fiscal years preceding the termination,
and Company health and life insurance, as well as the
continuation for a substantially shorter period of time of
applicable perquisites, including Company car, country club
membership and/or Company housing.
Stock Options
In March 1992 the Board of Directors adopted a 1992 Stock
Option Plan providing for the granting of options to purchase
a maximum of 230,000 shares of the Company's Common Stock to
employees, advisors, and consultants of the Company. The 1992
Stock Option Plan was approved by the stockholders at the 1992
Annual Meeting No grants of options were made in 1997
pursuant to the 1992 Stock Option Plan.
The following table shows the number of shares subject to
exercisable and nonexercisable stock options outstanding at
December 31, 1997, and held by executive officers named in the
preceding Summary Compensation Table.
<TABLE>
OPTIONS EXERCISES AND YEAR-END VALUE TABLE
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS OPTIONS AT
ON VALUE AT FY-END(#) FY-END($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Robert A. Stine 0 0 10,000/90,000 $83,125/$748,125
Matt J. Echeverria 0 0 19,000/0 $157,938/0
Dennis Mullins 3,690 $65,500 6,810/4,500 $56,608/$37,406
John A. Wood 0 0 10,000/0 $83,125/0
Allen E. Lyda 0 0 14,000/0 $116,375/0
</TABLE>
(1) Market value of underlying securities at year end, minus
the exercise price of options.
The currently outstanding options reflected in the table
above (other than those of Messrs. Stine and Mullins) were
granted in 1992, are fully exercisable, and expire in 2002.
Mr. Stine's option was granted in May 1996, became exercisable
as to 10% of the shares on the first anniversary of the grant,
and will become exercisable as to 15% of the shares at the end
of the second and third years and 30% of the shares at the end
of the fourth and fifth years. In addition, a termination of
Mr. Stine's employment without cause would result in
acceleration of the exercise dates of his stock option. Mr.
Mullins' option was granted in 1993, will become fully
exercisable in December 1998 (subject to certain exceptions),
and expires in 2003. Under the terms of the option
agreements, if the optionee leaves the employ of the Company
for any reason other than death or disability, his options will
terminate within three months after any such termination of
employment and will be exercisable during those three months
only to the extent that they were exercisable on the date of
termination of employment. If the optionee's employment
terminates as the result of death or disability, the options
terminate one year after such death or disability and are
exercisable during that one year period only if the employee
has completed at least one full year of employment with the
Company after the date of grant. Under such circumstances the
options are exercisable to purchase that portion of the total
number of shares subject to the options equal to such total
number of shares times the fraction of the number of full years
of employment completed after the date of grant divided by ten.
The exercise date of the outstanding options will also be
accelerated in the event of a change in control of the Company.
"Change in control" is defined to include a merger,
consolidation, transfer of assets, issuance or transfer of
stock or other transaction or series of related transactions as
a result of which persons or entities other than the
stockholders immediately before the transaction or transactions
would own at least 80% of the voting stock of the Company or
its successor after the transaction.
In April 1997 the options of all executive officers
(except Mr. Mullins) were amended to lower the exercise price
to the closing price of the Company's Common Stock on the
American Stock Exchange at the close of trading on the date of
the amendment. The exercise price of Mr. Mullins' option ($15
per share) was lower than that closing price and was not
changed. The following table shows the number of shares
subject to options held by all executive officers which were
amended, the exercise prices before and after the amendment and
the remaining terms of the options at the time of the
amendment. See "Compensation Committee Report on Executive
Compensation" for a discussion of the repricing of the options.
<TABLE>
TEN-YEAR OPTION REPRICINGS
Number
of Length of
Securi- Original
ties Exercise Option
Under- Price at Term
lying Market Time of Remaining
Options Price of Repric- at Date
Repriced Stock at Time ing or of
or of Repricing Amend- New Repricing
Amended or Amendment ment Exercise or
Name Date (#) ($) ($) Price ($) Amendment
<S> <C> <C> <C> <C> <C> <C>
Robert A. April 7, 100,000 16.00 17.875 16.00 9 yrs,
Stine 1997 1 mo.
President
and Chief
Executive
Officer
Matt J. April 7, 19,000 16.00 20.00 16.00 4 yrs,
Echeverria 1997 11 mos.
Senior
Vice
President
John A. April 7, 10,000 16.00 20.00 16.00 4 yrs,
Wood 1997 11 mos.
Vice
President
David April 7, 16,000 16.00 20.00 16.00 4 yrs,
Dmohowski 1997 11 mos.
Vice
President
Allen Lyda April 7, 14,000 16.00 20.00 16.00 4 yrs,
Vice 1997 11 mos.
President
Treasurer
and
Assistant
Secretary
</TABLE>
In January 1998, the Board of Directors adopted the Incentive
Plan. See, "Approval of 1998 Stock Incentive Plan".
Pension Plan
The Company contributes each year to a Pension Plan for
its salaried employees the amount necessary to fund the Plan on
a actuarially sound basis. The amounts of these annual
contributions are not included in the compensation table above.
Pension benefits to be received from the Plan upon retirement
are determined by an employee's five year final average annual
compensation, length of service with the Company and age at
retirement, subject to certain limitations imposed on a
qualified retirement plan by the Internal Revenue Code.
In 1991 the Company adopted a Supplemental Executive
Retirement Plan (the "SERP") in order to restore to executives
designated by the Compensation Committee of the Board of
Directors the full benefits under the Pension Plan which would
otherwise be restricted by certain limitations now imposed
under the Internal Revenue Code. The SERP is unfunded, but the
associated liability will be reflected on the Company's
financial statement. No benefits under the Pension Plan or the
SERP become vested until the earlier of (a) the participant's
attainment of age 65, or (b) the completion of five or more
years of vesting service (as defined under the Pension Plan
referred to above). With respect to the SERP, an executive can
become vested upon the incurrence of a total and permanent
disability while employed by the Company as determined by the
Board of Directors or the Compensation Committee. The
Compensation Committee also has the power to grant a
participant vested status with respect to the SERP even if he
does not meet the foregoing requirements.
The table below illustrates the amount of annual pension
benefits payable under the Plan (as increased by amounts
payable to eligible executives under the SERP) to persons in
particular classifications who work to the normal retirement
age of 65.
<TABLE>
Years of Service
Five Year Final
Average Annual 10 20 25 or More
Compensation
<C> <C> <C> <C>
75,000 9,116 18,232 22,790
100,000 13,241 26,482 33,102
125,000 17,366 34,732 43,415
150,000 21,491 42,982 53,720
175,000 25,616 51,232 64,040
200,000 29,741 59,482 74,352
250,000 37,991 75,982 94,977
275,000 42,116 84,232 105,289
300,000 46,241 92,482 115,602
</TABLE>
For purposes of pension benefits, earnings consist of compensation
determined in the manner reflected in the preceding Summary Compensation
Table, except that for pension benefit purposes, bonuses are included in
the year paid instead of in the year accrued and amounts under "Long Term
Compensation Awards" and "All Other Compensation" are not counted. The
benefits presented are straight life annuity amounts and are determined
based on the benefit formula required by the Plan, which conforms to the
regulations of the Internal Revenue Service and ERISA. The credited years
of service under the Plan as of December 31, 1997, for those named in the
table above are Mr. Stine - 1 year, Mr. Wood - 19 years, Mr. Echeverria - 18
years, Mr. Lyda - 7 years, and Mr. Mullins - 4 years. All employees having
one year in service to the Company participate in the Plan. This includes
all current officers of the Company, except Mr. James Taylor, who was named
Vice President - Real Estate in May 1997.
Compensation Committee Interlocks and Insider Participation
During 1997 Mr. Haskell rented a Company owned house, and Wood River
Ranch, a corporation in which Mr. Haskell is the sole shareholder, boarded
horses at the Company's quarter horse facility. Aggregate payments made to
the Company for rent and horse boarding and training, including
reimbursements for incidental expenses, during 1997 totalled
$49,116. It is expected that this arrangement will continue throughout
1998. The boarding and training fees charged Wood River Ranch are
comparable to customary rates in the horse training and breeding business
and are the same as fees charged to other horse owners not affiliated with
the Company. The rent which Mr. Haskell pays for the house is not less than
the rent which the Company charges persons not affiliated with the Company
for comparable residences.
Commencing December 1, 1993, Mr. Haskell leased Mr. San Olen, a
quarter horse, to the Company, which uses Mr. San Olen for breeding
purposes. The lease term runs until December 31, 1998, and the Company has
an option to extend the lease term for an additional three years. The rent
paid by the Company is $1.00 per year triple net, plus one-half of all net
profits made from breeding Mr. San Olen with mares not owned by the Company.
The leasing of horses for breeding purposes typically involves the payment
of a substantial rent by the lessee. The Company believes that this
agreement is favorable to the Company compared to other such horse lease
arrangements.
Beginning in 1997 and continuing into 1998, Messrs. Echeverria, Lyda
and Wood fed cattle for their personal accounts at Champion Feedlot in
Hereford, Texas, which is owned by a Company subsidiary. Total costs for
feed, miscellaneous supplies and veterinary services were $100,202.80
through January 31, 1998 for Mr. Echeverria, $100,008 through February 17,
1998 for Mr. Lyda, and $148,437 through January 31, 1998 for Mr. Wood. Feed
and other supplies and services were sold to these officers at the same
prices they were then sold to unaffiliated feedlot customers. All accounts
are current as of February 17, 1998. As of January 30, 1998, Mr. Wood
incurred indebtedness to the feedlot in the amount of $162,487, representing
the cost of cattle purchased from third parties by the feedlot for Mr.
Wood's account. Mr. Wood had previously established a line of credit with a
local bank to finance this purchase and the indebtedness was the result of
an inadvertent failure by the feedlot to call on this line of credit
concurrently with the purchase. Mr. Wood paid interest on the indebtedness
at the rate of 9.5% per annum, the same rate that the feedlot charges to
unaffiliated customers, and all principal and interest was repaid as of
February 17, 1998.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
In past years, including 1997, the Compensation Committee's decisions
regarding executive compensation were not tied to any specific financial
performance criteria but were based on an analysis of each executive's
performance in balancing the short-term operating objectives of the Company
with the long-term objective of protecting and enhancing the value of the
Company's major asset - its land.
The Company is different from most companies in that its asset value
is very large, but its earnings from current operations are limited. While
the Company has sought an optimum level of income from the Company's
operations, many of the activities of the executives of the Company have
been directed toward the preservation and enhancement of the development
potential of the Company's land. Because of that it has been difficult to
measure precisely the ultimate financial benefit for the Company's
stockholders of each executive's performance.
The compensation of Mr. Stine as President and Chief Executive Officer
for 1997 was based upon the terms of the employment agreement entered into
with him when he joined the Company in May 1996. Under that agreement Mr.
Stine was to be paid a salary of $275,000 per year (subject to review after
November 1997), a bonus of up to 50% of his base salary and the grant of an
option to purchase 100,000 shares of Common Stock of the Company at the fair
market value of the shares on the date of grant. The $100,000 bonus paid to
Mr. Stine for 1997 reflects the favorable evaluation of Mr. Stine's
performance throughout the year, including the preparation of a five year
business plan to significantly increase the revenues and income of the
Company, the reorganization of responsibilities within the Company's
management and the creation of a joint venture with Petro Stopping Centers
to develop a travel plaza on 50 acres of the Company's land.
The compensation for executives other than Mr. Stine in 1997 was based
upon the individual and collective judgment of the Committee members as to
the particular executive's performance, rather than upon any mathematical
calculations relating to specific performance objectives. Salary and bonus
levels for 1997 and prior years generally reflect a long-term evaluation of
a particular executive as well as the nature of his duties and level of
experience. One exception to this overall basic approach is Mr. Wood, whose
bonus for 1997 was based on a formula relating to the farming division's
operating income.
In setting the compensation for executives other than Mr. Stine for
1997 the Compensation Committee considered information as to compensation
levels at other companies obtained through their public reports, private
surveys and direct communication. Although there is no group of companies
that are directly comparable to the Company, the Committee made its judgment
in part by taking into account what other companies of comparable size were
doing. The Committee did not attempt to set the compensation for Company
executives for 1997 at any particular level as compared to the other
companies, but merely evaluated what the companies are paying as one factor
along with others to be considered.
The Compensation Committee has relied upon stock options as the
primary long-term incentive compensation offered to executive officers and
continues to believe they are an important incentive to encourage executives
to remain with the Company. In April 1997 the dates upon which outstanding
stock options become exercisable were modified in order to make the options
a more meaningful part of each executive's total compensation package.
Prior to the modification, for each executive other than Mr. Stine the
options did not become exercisable until nine years after the date of grant
and expired ten years after the date of grant. As a result of the
modification, the options become exercisable as to 10% of the number of
shares on the first anniversary of the date of grant, 15% at the end of the
second and third years and 30% at the end of the fourth and fifth years.
The Committee believes that this schedule is more consistent with the
practice of other comparable companies. This is also the same schedule of
exercise dates that applies to Mr. Stine's option and was included in the
terms of the agreement entered into with him when he joined the Company in
May 1996. The Committee also approved reducing the option prices to the
fair market value of the shares on the date the modification of options was
approved, again to make the options a more significant portion of each
executive's total compensation package.
For 1998 the Compensation Committee has recommended to the Board of
Directors, and the Board of Directors has approved, significant changes in
the policies applicable to determining the compensation of executive
officers. During 1997 the Company retained an independent consultant to
advise it with respect to executive compensation and to survey other real
estate-oriented companies' practices with respect to executive compensation.
The new policies approved by the Board of Directors are based in significant
part on the recommendations of the independent consultant.
Under the new policies executive salaries will be increased somewhat
for some of the executives named in the Summary Compensation Table under
"Executive Compensation" but are expected to remain relatively stable, with
any significant increases in compensation to depend upon achieving certain
specific performance goals. Executives will be able to earn bonus
compensation ranging from 20% to 50% of annual salary for Mr. Stine and 18%
to 45% for the other named executives (except Mr. Wood), based upon the
extent to which performance criteria are satisfied. Sixty percent of the
bonus for Mr. Stine will be based upon the extent to which the revenues and
income of the Company achieve or exceed specified amounts and 40% will be
based upon the extent to which he achieves a number of specific personal
objectives. For executives in charge of particular operating divisions, 40%
of bonus is based upon Company revenues and income, 30% is based upon their
own division's revenues and income and 30% is based upon achieving a number
of specific personal objectives. For Mr. Lyda, whose performance does not
relate to any particular division of the Company, 70% of the bonus will be
based upon the Company's revenues and income and 30% will be based upon
achieving specific personal objectives, and for Mr. Mullins, whose
performance also does not relate to any particular division of the Company,
those percentages will be 50% and 50%. Mr. Wood's bonus will be equal to
1.25% of operating cash flow from the farming division (subject to certain
adjustments), but not to exceed $60,000.
In January 1998 the Compensation Committee recommended to the Board of
Directors, and the Board of Directors approved, a long-term compensation
plan that contemplates the granting of options on a periodic basis in the
discretion of the Board of Directors pursuant to the 1998 Stock Incentive
Plan. The Committee believes that stock options are a desirable form of
long-term compensation because they more closely align the interests of the
executives with those of the stockholders. The Committee also recommended,
and the Board approved, the granting of options to purchase an aggregate of
100,000 shares of Common Stock of the Company to five executive officers.
See "Approval of 1998 Stock Incentive Plan - Options Granted Under Incentive
Plan." These approvals by the Board are subject to the condition that the
stockholders approve the 1998 Stock Incentive Plan at the Annual Meeting.
As in past years, the number of shares subject to options granted to each
executive reflects a subjective, long-term evaluation of the executive as
well as the nature of his duties and level of experience.
The percentage of total compensation represented by salary, bonus and
stock options for 1998 was determined by the Committee and the Board based
upon the information and recommendations provided by the independent
consultant as well as input from individual members of the Committee and the
Board. No specific formulas were used to determine the relative mix of the
three forms of compensation.
Donald Haskell, Dan T. Daniels, Rayburn S. Dezember, Robert C. Ruocco,
Phillip L. Williams
Members of the Compensation Committee
PERFORMANCE GRAPH
The following graph is a comparison of cumulative total
shareowner returns for the Company, the Dow Jones Equity Market
Index, and the Dow Jones Real Estate Index for the period
shown.
<TABLE>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Tejon Ranch 100.00 87.25 71.90 87.25 85.03 146.04
Co.
DJ Equity 100.00 109.61 110.79 153.31 189.28 253.75
Market
DJ Real Estate 100.00 117.07 111.34 137.60 184.51 219.49
-- Assumes $100 invested on December 31, 1992
-- Total Return Assumes Reinvestment of Dividends
-- Fiscal Year Ending December 31
</TABLE>
<TABLE>
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
TEJON RANCH -12.75% -17.59% 21.34% -2.54% 71.76%
DJ EQUITY MKT 9.95% 0.77% 38.37 23.46% 34.06%
DJ REAL ESTATE 17.07% -4.89% 23.58% 34.09% 18.96%
</TABLE>
The stock price performance depicted in the above graph is not
necessarily indicative of future price performance. The Performance Graph
will not be deemed to be incorporated by reference in any filing by the
Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates the
Performance Graph by reference.
The Dow Jones Real Estate Index, for the most part, includes companies
which, unlike the Company, are principally engaged in the active phases of
commercial land development and which have revenues substantially greater
than those of the Company. The Company is unaware of any industry or line-
of-business index that is more nearly comparable.
APPROVAL OF 1998 STOCK INCENTIVE PLAN
At the Annual Meeting, the stockholders of the Company will be asked
to vote upon the approval of the Company's 1998 Stock Incentive Plan (the
"Incentive Plan"). The Incentive Plan was adopted by the Board of Directors
of the Company on January 26, 1998 and provides for the making of awards to
employees, consultants and advisors of the Company with respect to an
aggregate of 800,000 shares of Common Stock of the Company. Awards under
the plan are not restricted to any specific form or structure, although the
Company's present intention is that awards granted under the plan will be in
the form of stock options. The Board of Directors recommends a vote FOR
approval of the Incentive Plan.
The following is a summary of the principal features of the Incentive
Plan. This summary is qualified in its entirety by reference to the full
text of the Incentive Plan, a copy of which is attached to this Proxy
Statement as Appendix A.
Description of the Plan
Purpose of the Plan. The purpose of the Incentive Plan is to enable
the Company and its subsidiaries to attract, retain and motivate their
employees, consultants and advisors by providing for or increasing their
proprietary interests in the Company. The Board of Directors of the Company
has decided as a policy matter to increase the portion of the total
compensation of the officers of the Company that is based on incentives and
expects to use stock options granted under the Incentive Plan as a principal
means of providing the incentive compensation, together with payment of cash
bonuses. The Board believes that the use of options to purchase Common
Stock of the Company is desirable because it more closely aligns the
interests of the officers of the Company with those of the stockholders.
Eligibility. All employees of the Company and its subsidiaries are
eligible to receive awards under the Incentive Plan, although the Board of
Directors presently intends to limit the grant of awards under the Incentive
Plan to officers of the Company. Awards also can be granted under the
Incentive Plan to consultants and advisors of the Company and its
subsidiaries. The Board of Directors does not presently intend to grant
awards to any consultants or advisors, although it would have the
flexibility to do so if the Plan is approved by the stockholders.
Number of Shares Available Under the Plan. The aggregate number of
shares of Common Stock as to which awards can be granted under the Incentive
Plan is 800,000. That number is subject to adjustment in the event of a
stock split, reverse stock split, merger, and certain other significant
events. The closing price of the Company's Common Stock on the American
Stock Exchange on March 23, 1998 was $26.375.
Types of Awards To Be Granted Under the Plan. Under the Incentive
Plan awards may be granted in the form of stock options which qualify as
incentive stock options under Section 422 of the Internal Revenue Code of
1986 or options which do not qualify under any section of the Internal
Revenue Code (so-called "non-incentive stock options"). Only persons who
are employees of the Company may be granted incentive stock options. Such
options may not be granted at an exercise price less than the fair market
value of the shares on the date of grant, and any person who owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company may not be granted an incentive stock option at a
price less than 110% of the fair market value of the stock on the date of
grant. The term of options may not be greater than 10 years (5 years for
10% stockholders), the options must not be transferable other than by the
laws of descent and distribution, and they must be exercisable during the
life of the holder only by him or her. The plan under which incentive
options are granted must be approved by the stockholders within 12 months
after it is adopted by the Board of Directors. If the aggregate fair market
value of all shares of stock with respect to which incentive stock options
granted to an individual first become exercisable during any calendar year
exceeds $100,000, the options will not qualify as incentive options to the
extent of the excess.
Under the Incentive Plan the Board of Directors or a committee of
directors (see "Administration" below) will have the power to determine the
terms of each option granted, including the expiration, vesting and exercise
dates and whether the exercise price will be paid in cash, by tender of
outstanding shares of Common Stock, by surrendering option rights with
respect to existing unexercised stock options, by any combination of the
foregoing or by any other means approved by the Board of Directors or the
committee. See "Options Granted Under Incentive Plan" below for a
description of options which have been granted under the Incentive Plan
subject to stockholder approval of the Plan.
Although the Board of Directors presently intends that awards granted
under the Incentive Plan will be in the form of stock options, the Incentive
Plan allows the Company to enter into any type of arrangement with any
eligible grantee that involves or might involve the issuance of shares of
Common Stock of the Company, such as an option, stock appreciation right or
similar right with an exercise or conversion privilege at a price related to
the Common Stock of the Company, or a value derived from the value of the
Common Stock.
The types of awards which other companies have granted under similar
plans include stock appreciation rights, restricted stock and performance
share awards. Stock appreciation rights (also called "SARs") entitle the
grantee exercising the SAR to receive payment in an amount equal to the
difference between the fair market value of a share of stock on the date of
exercise and the exercise price of the SAR multiplied by the number of
shares as to which the SAR is exercised. The SAR can be settled in cash,
shares of stock or a combination of both. It is also possible to grant SARs
in tandem with stock options that are not eligible for the federal income
tax treatment afforded incentive stock options (see "Certain Federal Income
Tax Consequences of Options and Other Awards") in order to provide the
grantee with cash to pay the income taxes that are payable upon exercise of
such an option.
Awards can be granted in the form of shares of stock which are
restricted by agreements having terms and provisions determined by the Board
of Directors or a committee thereof, which may include forfeiture provisions
or restrictions on transferability that expire over time or upon the
satisfaction of certain performance or other requirements. Grantees
receiving restricted stock typically are entitled to dividends and voting
rights on the shares prior to the lapsing of the restrictions.
The Incentive Plan would also permit the Board of Directors or a
committee of the Board to grant performance share awards involving the
issuance of unrestricted shares of Common Stock based upon the appreciation
in the market value, book value or other measure of value of the Common
Stock, the performance of the Company based on earnings or cash flow or such
other factors as the Board or the committee may determine.
Administration. The Incentive Plan provides that it is to be
administered by the Board of Directors or a committee, which must consist of
two or more directors. The Incentive Plan gives the Board of Directors or
the committee broad authority to determine the persons to whom awards will
be granted, the time or times at which awards will expire, the types of
awards to be granted, the number of shares subject to each award and all
other terms and conditions of awards. The Board or the committee also has
the power to adopt, amend and rescind rules and regulations relating to the
Incentive Plan, to determine whether and the extent to which adjustments are
required to be made under the Incentive Plan and under outstanding awards in
the event of events such as stock splits, reverse stock splits, stock
dividends, other dividends or distributions (except cash dividends paid out
of earned surplus) or a merger, recapitalization or certain other
significant events. When the Incentive Plan was adopted, the Board of
Directors authorized the Compensation Committee to consider and make
recommendations to the Board with respect to the granting of options, but
the Board reserved to itself the power to make grants and otherwise
administer the Incentive Plan.
Duration, Termination and Amendment of Plan. The Incentive plan
provides that awards cannot be granted under the Plan after January 25,
2008, which is the expiration of ten years after the Incentive Plan was
adopted by the Board of Directors. Although no awards can be granted after
that date, shares of Common Stock can be issued until January 25, 2018
pursuant to awards granted on or prior to January 25, 2008. The Board of
Directors can amend or terminate the Incentive Plan at any time in any
manner, except that no amendment or termination of the Incentive Plan can
deprive any grantee of any award already granted without the consent of the
grantee, and no amendment can increase the number of shares subject to the
Plan that can be issued pursuant to incentive stock options or change, alter
or modify the employees or class of employees eligible to receive incentive
stock options without obtaining the approval of the stockholders within 12
months after the adoption of any such amendment and prior to the issuance of
any increased number of shares or the issuance of shares to any person not
eligible for awards prior to the amendment.
Options Granted Under Incentive Plan
On January 26, 1998, after adopting the Incentive Plan, the Board of
Directors authorized the granting of options to purchase an aggregate of
100,000 shares of Common Stock of the Company to five executive officers.
All of the options have terms of ten years, are exercisable at $23.875 per
share (the closing price of the Company's Stock on the day of grant) and
become exercisable as to 20% of the total number of shares subject to the
option on January 26, 2001 and as to an additional 20% of the total number
of shares on January 26 of each of the following four years. The options
will be rescinded if the Incentive Plan is not approved by the stockholders
within 12 months after the adoption of the Plan by the Board (which occurred
on January 26, 1998).
The following table shows the number of shares granted to the Chief
Executive Officer, to each of the four other executive officers of the
Company who were the most highly compensated in 1997 and to all executive
officers as a group. No options were granted to any other person.
<TABLE>
No. of Shares
Name Title Subject to Option
<S> <S> <C>
Robert A. Stine President and Chief 35,000
Executive Officer
Matt J. Echeverria Senior Vice President 21,000
Dennis Mullins Vice President, General Counsel 12,000
and Secretary
James Taylor Vice President, Real Estate 16,000
Allen E. Lyda Vice President, Treasurer and 16,000
Assistant Secretary
100,000
All executive officers as a
group
</TABLE>
All of the options granted under the Incentive Plan
terminate within three months after any termination of employment by the
grantee and are exercisable during that three-month period only to the
extent that they were exercisable on the date of termination of employment.
If the optionee's employment terminates as the result of death or
disability, the option terminates one year after such death or disability,
and if an optionee dies or becomes disabled after termination of his or her
employment, the option is exercisable until the first anniversary of such
death or disability. The options become fully exercisable with respect to
all shares in the event of a merger or consolidation as a result of which
there is a change in the ownership of voting securities of the Company of
more than 80% or a sale or transfer by the Company of all or substantially
all of its assets or a dissolution of the Company. The options also
terminate after any such event (subject to certain exceptions). The
Committee has the power in its sole discretion to accelerate the dates when
the options becomes exercisable for any reason.
The terms of the options permit payment of the purchase
price upon exercise to be made in cash or, subject to certain limitations,
by tendering outstanding shares of Common Stock valued at their then fair
market value (as defined), or by reducing the number of shares subject to
the option as to which it is then exercisable and crediting toward the
purchase price of other shares the difference between the exercise price and
the then fair market value of the shares as to which the option is being
reduced. If any of the options are not eligible for the tax treatment as
incentive stock options under the Internal Revenue Code (see "Certain
Federal Income Tax Consequences of Options and Other Awards"), any
withholding taxes can be paid in the same manner.
Certain Federal Income Tax Consequences of Options and Other Awards
The following is a brief description of the federal income
tax treatment that will generally apply to awards granted under the
Incentive Plan based on federal income tax laws in effect on the date of
this Proxy Statement. The exact federal income tax treatment of awards will
depend on the specific nature of the award. This summary does not
constitute tax advice, is not intended to be exhaustive and, among other
things, does not describe any state, local or foreign tax consequences, nor
does it fully describe the tax rules applicable to persons subject to
Section 16(b) of the Securities Exchange Act of 1934. Such persons should
consult their own tax advisors with respect to the tax rules applicable to
them.
Incentive Stock Options. Neither the grant nor exercise
of an incentive stock option under the Incentive Plan is taxable to the
employee receiving the option. If the employee holds the stock purchased
upon exercise of an incentive stock option for at least one year after the
purchase of the stock and at least two years after the option was granted,
his or her later sale of the stock will produce long-term capital gain or
loss, and the Company will not be entitled to any tax deduction. Under
current law, the maximum long-term capital gain rate of 20% only applies to
assets held for more than 18 months. The maximum rate is 28% for assets
held for more than 12 months but not more than 18 months. However, if the
employee sells or otherwise transfers the stock before these holding periods
have elapsed (a "disqualifying disposition"), he or she will generally be
taxed at ordinary income rates on the portion of any gain on the sale equal
to the excess of the fair market value of the stock when the option was
exercised over the option exercise price, and the Company will be entitled
to a tax deduction in the same amount. Any remaining gain or loss will be
short-term or long-term capital gain or loss depending on the holding period
of the shares. If shares acquired pursuant to the exercise of an incentive
option are surrendered to the Company upon exercise of an incentive option
and if such shares have not been held for the requisite one- and two-year
periods, the surrender will be treated as a disqualifying disposition.
Non-Incentive Options. Although the grant of
non-incentive stock options under the Incentive Plan also is not generally
taxable to the optionee, when he or she exercises the option, he or she will
be taxed at ordinary income rates on the excess of the fair market value of
the stock received over the option exercise price, and the Company will be
entitled to a tax deduction in the same amount. The amount paid by the
optionee on exercise plus the amount included in an optionee's income as a
result of the exercise of a non-incentive option will be treated as his or
her basis in the shares acquired, and any gain or loss on the subsequent
sale of the shares will be treated as long-term or short-term capital gain
or loss as the case may be.
Stock Appreciation Rights. The grant of a stock
appreciation right is generally not a taxable event for the grantee. Upon
exercise of the stock appreciation right, the grantee will recognize
ordinary income in an amount equal to the amount of cash received upon such
exercise, and the Company will be entitled to a deduction equal to the same
amount.
Restricted Stock. The purchase of restricted stock is not
a taxable event for the purchaser. When restrictions imposed upon the stock
expire, the purchaser will recognize ordinary income in an amount equal to
the excess, if any, of the fair market value of the restricted stock on the
date of such expiration over the purchase price of the shares. The
purchaser may, however, elect within 30 days after the date of purchase
under Section 83(b) of the Internal Revenue Code to recognize ordinary
income on the date of purchase in an amount equal to the excess of the fair
market value of the restricted stock on the date of purchase, determined
without regard to the restrictions imposed on such shares, over the purchase
price of the shares. If and when the purchaser recognizes ordinary income
attributable to the restricted stock, the Company will be entitled to a
deduction equal to the amount of such ordinary income.
Other Awards. Awards may be granted to employees under
the Incentive Plan that do not fall clearly into the categories described
above. The federal income tax treatment of these awards will depend upon
their specific terms.
Insiders. Special rules apply to awards if the grantee of
an award is subject to Section 16 of the Securities Exchange Act of 1934,
which applies to directors and officers of the Company and beneficial owners
of 10% or more of the outstanding shares of its Common Stock. Section 16
and the rules thereunder require that persons subject to Section 16 pay over
to the Company any profit realized from the purchase and sale of any equity
security if the purchase and sale occur within six months of each other
(subject to certain exceptions). Because of these provisions the timing of
the recognition of income with respect to awards granted under the Incentive
plan by persons subject to Section 16 may be different from that described
above, and such persons should consult their own tax advisors. Section 16
also has a corresponding effect on the timing of any deductions to which the
Company is entitled in connection with awards granted under the Incentive
Plan.
Excess Parachute Payments. The terms of the agreements
pursuant to which awards are made under the Incentive Plan may provide for
accelerated vesting or payment of an award in connection with a change in
ownership or control of the Company. The options granted on January 26,
1998 include such provisions. In that event and depending upon the
individual circumstances of the recipient employee, certain amounts with
respect to such awards may constitute "excess parachute payments" under the
golden parachute provisions of the Internal Revenue Code. Pursuant to those
provisions, an employee will be subject to a 20% excise tax on any "excess
parachute payment."
Withholding Taxes. The Company will generally be required
to withhold applicable taxes with respect to any ordinary income recognized
by a grantee in connection with awards under the Incentive Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS
A VOTE "FOR" APPROVAL OF THE INCENTIVE PLAN.
APPROVAL OF NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
At the Annual Meeting, the stockholders of the Company will asked
to vote upon the approval of the Company's Non-Employee Director Stock
Incentive Plan (the "Director Plan"). The Director Plan was adopted by the
Board of Directors of the Company on January 26, 1998 and provides for the
making awards to Directors of the Company who are not employees of the
Company or any of its subsidiaries (as defined below) with respect to an
aggregate of 200,000 shares of Common Stock of the Company. Awards under
the Director's Plan are not restricted to any specific form or structure,
although the Company's present intention is that awards granted under the
Plan will be in the form of stock options. The number of shares as to which
awards can be granted under the Director Plan is limited to 200,000 in the
aggregate. The Board of Directors recommends a vote FOR approval of the
Director Plan.
The following is a summary of the principal features of the
Director Plan. The summary is qualified in its entirety by reference to the
full text of the Director Plan, a copy of which is attached to this Proxy
Statement as Appendix B.
Description of Director Plan
Purpose of the Plan. The purpose of the Director Plan is to
enable the Company to attract, retain and motivate non-employee directors by
providing for or increasing their proprietary interests in the Company. The
Board of Directors believes that the ownership of stock by directors is
desirable because it more closely aligns the interests of each director with
those of the stockholders of the Company.
Eligibility. All of the Company's directors who are not employees
of the Company or its subsidiaries on a full-time basis are eligible to
receive grants under the Director Plan, except that directors who are
temporarily employees of the Company or a subsidiary on a full-time basis
are also eligible to receive awards under the Director Plan.
Number of Shares Available Under the Plan. The Director Plan
authorizes the granting of awards with respect to a maximum of 200,000
shares of Common Stock of the Company in the aggregate for all such awards.
The number of shares subject to the Plan is subject to adjustment in the
event of a stock split, reverse stock split, merger and certain other
significant events. The closing price of the Common Stock of the Company on
the American Stock Exchange on March 23, 1998 was $26.375.
Types of Awards To Be Granted Under the Plan. Options granted
under the Director Plan will be non-incentive stock options, which means
that they will not meet the requirements for the federal income tax
treatment afforded incentive stock options. See "Approval of 1998 Incentive
Stock Plan - Certain Federal Income Tax Consequences of Options and Other
Awards - Incentive Stock Option." Under the Director Plan the Board of
Directors or a committee of directors (see "Administration" below) will have
the power to determine the terms of each option granted, including the
expiration, vesting and exercise dates and whether the exercise price will
be paid in cash, by tender of outstanding shares of Common Stock, by
surrendering option rights with respect to existing unexercised stock
options, by any combination of the foregoing or by any other means approved
by the Board of Directors or the committee. See "Options Granted Under
Director Plan" below for a description of options which have been granted
under the Director Plan subject to stockholder approval of the Plan.
Although the Board of Directors presently intends that awards
granted under the Director Plan will be in the form of stock options, the
Director Plan allows the Company to enter into any type of arrangement with
a non-employee director that involves or might involve the issuance of
shares of Common Stock of the Company, such as an option, stock appreciation
right or similar right with an exercise or conversion privilege at a price
related to the Common Stock of the Company or a value derived from the value
of the Common Stock. The types of awards which other companies have granted
under similar plans include stock appreciation rights, restricted stock and
performance share awards. For descriptions of these types of awards see
"1998 Stock Incentive Plan - Description of the Plan - Types of Awards To Be
Granted Under the Plan."
Administration. The Director Plan provides that it is to be
administered by the Board of Directors or a committee of two or more
directors. The Director Plan gives the Board of Directors or the committee
broad authority to determine the non-employee directors to whom awards will
be granted, the time or times at which awards will expire, the types of
awards to be granted, the number of shares subject to each award and all
other terms and conditions of awards. The Board or the committee also has
the power to adopt, amend and rescind rules and regulations relating to the
Director Plan and to determine whether and the extent to which adjustments
are required to be made under the Director Plan and under outstanding awards
in the event of events such as stock splits, reverse stock splits, stock
dividends, other dividends or distributions (except cash dividends paid out
of earned surplus) or a merger, recapitalization or certain other
significant events. When the Director Plan was adopted, the Board of
Directors reserved to itself the authority with respect to the granting of
options and the administration of the Director Plan.
Duration, Termination and Amendment of Plan. The Director Plan
provides that awards cannot be granted under the Plan after December 31,
2002, which is the expiration of slightly less than five years after the
Director Plan was adopted by the Board of Directors. Although no awards can
be granted after that date, shares of Common Stock can be issued until
December 31, 2012 pursuant to awards granted under the Director Plan. The
Board of Directors can amend or terminate the Director Plan at any time in
any manner.
Options Granted Under Director Plan
On January 26, 1998, when the Board of Directors adopted the
Director Plan, it also adopted a program for the compensation of non-
employee directors which contemplates the granting of options under the
Director Plan. See "Election of Directors - Director Compensation." Under
that program each director will receive one-half or all of his or her
$24,000 annual retainer in the form of stock options to be granted annually,
except that a director affiliated with a person or entity owning
beneficially 5% or more of the outstanding shares of Common Stock of the
Company may elect to take his or her annual retainer compensation in cash.
The director compensation program adopted by the Board authorized
Company officers to grant stock options to directors as part of their annual
retainer compensation each year until 2002, absent a change to or rescission
of the director compensation program. Options granted to directors for this
purpose will be granted on the second Tuesday of January of each year for
which the retainer compensation is payable, except that the date of grant
for 1998 was February 2. The options will have an exercise price equal to
the fair market value of the shares on the date of grant, will have a term
of ten years, will be fully exercisable commencing on December 15 of the
calendar year in which they are granted and will not be transferable by the
director except in connection with his or her death or disability. The
death, disability or termination of the grantee's status as a director will
not cause any option granted under the Director Plan to terminate, except
that if a director ceases to serve in that capacity at any time during the
year for which the option is granted, the option will terminate as to the
number of shares that is proportional to the number of days remaining in the
year for which the option was granted through December 15 of that year.
To determine the number of shares subject to options to be granted
under the Director Plan to satisfy the Company's obligation to pay annual
retainer compensation (which is expressed in dollars), the value per share
of the options will be determined using the Black-Scholes method as of the
date of grant. The Black-Scholes method is a complex, commonly used method
to value options named for the men who developed it. The number of shares
subject to the option to be granted to each director for a particular year
will be determined by dividing the amount of the annual retainer
compensation to be paid to the director in the form of an option by a per
share value of the option so determined.
The director compensation program adopted by the Board is
presently intended to remain in effect until December 31, 2002, but the
Board has the power to amend or terminate the program at any time. In that
event awards could be granted to non-employee directors under the Director
Plan in forms other than the stock options described above.
On January 26, 1998, the Board of Directors authorized the
granting of options to purchase 1,236 shares of Common Stock of the Company
to each of the non-employee directors named under "Election of Directors"
for their 1998 annual retainer compensation, except that Messrs. Booth,
Daniels, Dezember and Ruocco elected to take their entire annual retainer
compensation in the form of options to purchase 2,472 shares and Messrs.
Cadwalader, Haskell and Whitman elected to receive their annual retainer
compensation entirely in cash. Thus the number of shares subject to options
granted to all directors as a group was 14,832. The exercise price under
the options was $24.50 per share, which was the closing price of the Common
Stock on the American Stock Exchange on the date of grant. The options will
be rescinded if the Director Plan is not approved by the stockholders within
12 months after the date it was adopted by the Board.
In addition to including the terms described above, the options
become fully exercisable with respect to all shares in the event of a merger
or consolidation as a result of which there is a change in the ownership of
voting securities of the Company of more than 80% or a sale or transfer by
the Company of all or substantially all of its assets or a dissolution of
the Company. The options also terminate after of any such event (subject to
certain exceptions). The Board of Directors has the power in its sole
discretion to accelerate the dates when the options become exercisable for
any reason.
The terms of the options permit payment of the purchase price upon
exercise to be made in cash or, subject to certain limitations, by tendering
outstanding shares of Common Stock valued at their then fair market value
(as defined), or by reducing the number of shares subject to the option as
to which it is then exercisable and crediting toward the purchase price of
other shares the difference between the exercise price and the then fair
market value of the shares as to which the option is being reduced.
Withholding taxes payable as a result of the exercise of the options can
also be paid in the same manner.
Certain Federal Income Tax Consequences of Options and Other Awards
Stock options granted under the Director Plan are expected to be
non-incentive stock options and will be treated for tax purposes in the
manner described for such options under the heading "Approval of 1998 Stock
Director Plan - Certain Federal Income Tax Consequences of Options and Other
Awards - Non-Incentive Options." The federal income tax treatment of other
kinds of awards granted under the Director Plan will be the same as
described in that section of this Proxy Statement.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE DIRECTOR PLAN
OTHER
Financial Information. The Company's Annual Report to
Stockholders accompanies this Proxy Statement. Copies of the Company's
Annual Report on Form 10-K (without exhibits) filed with the Securities and
Exchange Commission may be obtained by calling or writing Corporate
Secretary, Tejon Ranch Co., Post Office Box 1000, Lebec, California 93243,
(805) 248-6774.
Independent Accountants. Representatives of Ernst & Young LLP,
the independent public accountants for the fiscal year most recently
completed, will be at the meeting, will have an opportunity to make a
statement if they wish, and will be available to respond to appropriate
questions from stockholders.
Stockholder Proposals. A stockholder's proposal will be
considered at the 1998 Annual Meeting of Stockholders only if the
stockholder provides timely notice of such proposal in writing to the
Secretary of the Company. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
the Company not less than 30 days nor more than 60 days prior to the meeting
as originally scheduled, but if less than 40 days notice or prior public
disclosure of the date of the meeting is given or made to the stockholders,
then the notice must be received not later than the close of business on the
10th day following the day on which the Notice of Annual Meeting of
Stockholders was mailed. A stockholder's notice to the Secretary must set
forth as to each matter the stockholder proposes to bring before the Annual
Meeting (i) a brief description of the business desired to be brought before
the Annual Meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the Company
which are beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such business. To be considered for
inclusion in the proxy statement for the 1999 Annual Meeting, stockholder
proposals are required to be delivered to the Company on or before December
10, 1998.
Other Business. Management does not know of any matter to be
acted upon at the meeting other than those described above, but if any other
matter properly comes before the meeting, the persons named on the enclosed
proxy will vote thereon in accordance with their best judgment.
Stockholders are urged to sign and return their proxies without
delay.
For the Board of Directors,
DONALD HASKELL, Chairman of the Board
DENNIS MULLINS, Secretary
April 13, 1998
APPENDIX "A"
TEJON RANCH CO.
1998 STOCK INCENTIVE PLAN
Section 1. PURPOSE OF PLAN
The purpose of this 1998 Stock Incentive Plan ( this "Plan")
of Tejon Ranch Co., a Delaware corporation (the "Company"), is to enable the
Company and its subsidiaries to attract, retain and motivate their
employees, consultants and advisers by providing for or increasing the
proprietary interests of such persons in the Company.
Section 2. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an
employee, consultant or adviser of the Company or any of its subsidiaries (a
"Grantee") shall be eligible to be considered for the grant of Awards (as
hereinafter defined) hereunder; provided, however, that only those Grantees
who are employees of the Company or any of its subsidiaries shall be
eligible to be considered for the grant of Incentive Stock Options (as
hereinafter defined) hereunder.
Section 3. AWARDS
(a) The Board of Directors of the Company (the "Board") or
the Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with a
Grantee that is not inconsistent with the provisions of this Plan and that,
by its terms, involves or might involve the issuance of (i) shares of Common
Stock, par value $.50 per share, of the Company (the "Common Shares") or
(ii) a Derivative Security (as such term is defined in Rule 16a-1
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as such Rule may be amended from time to time) with an
exercise or conversion privilege at a price related to the Common Shares or
with a value derived from the value of the Common Shares. The entering into
of any such arrangement is referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or
performance shares, and an Award may consist of one such security or
benefit, or two or more of them in tandem or in the alternative.
(c) Common Shares may be issued pursuant to an Award for
any lawful consideration as determined by the Board or Committee, including,
without limitation, services rendered by the recipient of such Award.
(d) The exercise period for Awards granted in the form of
options shall not be more than 120 months from the date the option is
granted.
(e) Awards granted in the form of options shall provide
that neither the option nor any interest therein may be sold, assigned,
conveyed, gifted, pledged, hypothecated or otherwise transferred in any
manner other than by will or the laws of descent and distribution or any
transfer to a guardian or other personal representative in connection with
the disability of the Grantee.
(f) Awards granted in the form of options shall be
exercisable at such times and in such amounts as are determined by the Board
of Directors or the Committee, except that in no event shall any Award be
granted to any one person in any one calendar year with respect to more than
400,000 Common Shares.
(g) Subject to the provisions of this Plan, the Board or
the Committee, in its sole and absolute discretion, shall determine all of
the terms and conditions of each Award granted under this Plan, which terms
and conditions may include, among other things:
(i) a provision permitting the recipient of such
Award, including any recipient who is a director or officer of the
Company, to pay the purchase price of the Common Shares or other
property issuable pursuant to such Award, or such recipient's tax
withholding obligation with respect to such issuance, in whole or
in part, by any one or more of the following:
(A) the delivery of previously owned shares of
capital stock of the Company or other property,
(B) a reduction in the amount of Common Shares or
other property otherwise issuable pursuant to such Award,
(C) the delivery of a promissory note, the terms and
conditions of which shall be determined by the Board or the
Committee, or
(D) cash in the form of a personal, cashier's or
certified bank check;
(ii) a provision conditioning or accelerating the
receipt of benefits pursuant to such Award, either automatically
or in the discretion of the Committee, upon the occurrence of
specified events, including, without limitation, a change of
control of the Company, an acquisition of a specified percentage
of the voting power of the Company, the dissolution or liquidation
of the Company, a sale of substantially all of the property and
assets of the Company or an event of the type described in
Section 7 hereof; or
(iii) a provision required in order for such Award to
qualify as an incentive stock option under Section 422 of the
Internal Revenue Code (an "Incentive Stock Option").
Section 4. STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be
issued and issuable pursuant to all Awards, including Incentive Stock
Options granted under this Plan, shall not exceed 800,000 (subject to
adjustment as provided in Section 7). Such maximum number does not include
the number of Common Shares subject to the unexercised portion of any Awards
granted in the form of options, including Incentive Stock Options, under
this Plan that expires or is terminated. Such maximum number of Common
Shares is subject to adjustment as provided in Section 7 hereof (and is
referred to herein as the "Share Limitation").
(b) For purposes of Section 4(a) hereof, the aggregate
number of Common Shares issued and issuable pursuant to Awards granted under
this Plan shall at any time be deemed to be equal to the sum of the
following:
(i) the number of Common Shares which were issued
prior to such time pursuant to Awards granted under this Plan
excluding (except for purposes of computing the Share Limitation
applicable to Incentive Stock Options granted under this Plan)
shares which were reacquired by the Company pursuant to provisions
in the Awards with respect to which those shares were issued
giving the Company the right to reacquire such shares upon the
occurrence of certain events; plus
(ii) the number of Common Shares which are or may be
issuable at or after such time pursuant to outstanding Awards
granted under this Plan prior to such time.
Section 5. DURATION OF PLAN
No Awards shall be granted under this Plan after January 25,
2008. Although Common Shares may be issued after January 25, 2008 pursuant
to Awards granted prior to such date, no Common Shares shall be issued under
this Plan after January 25, 2018.
Section 6. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by the Board or a
committee thereof (the "Committee") consisting of two or more directors.
(b) Subject to the provisions of this Plan, the Board or
the Committee shall be authorized and empowered to do all things necessary
or desirable in connection with the administration of this Plan, including,
without limitation, the following:
(i) adopt, amend and rescind rules and regulations
relating to this Plan;
(ii) determine which persons meet the requirements of
Section 2 hereof for eligibility under this Plan and to which of
such eligible persons, if any, Awards shall be granted hereunder;
(iii) grant Awards to eligible persons and determine
the terms and conditions thereof, including the number of Common
Shares issuable pursuant thereto;
(iv) determine whether, and the extent to which
adjustments are required pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms
and conditions of any Award granted hereunder.
Section 7. ADJUSTMENTS
If the outstanding securities of the class then subject to
this Plan are increased, decreased or exchanged for or converted into cash,
property and/or a different number or kind of shares or securities, or cash,
property and/or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend
(other than a dividend paid out of earned surplus) or other distribution,
stock dividend, stock split, reverse stock split or the like, or in the
event that substantially all of the assets of the Company are sold, unless
the terms of such transaction or document evidencing an Award shall provide
otherwise, the Committee may make appropriate and proportionate adjustments
in (a) the number and type of shares or other securities that may thereafter
be acquired pursuant to Incentive Stock Options and other Awards theretofore
granted under this Plan and (b) the maximum number and type of shares or
other securities of the Company that may be issued pursuant to Incentive
Stock Options and other Awards thereafter granted under this Plan.
Section 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and
in any manner; provided, however, that (a) no such amendment or termination
shall deprive the recipient of any Award theretofore granted under this
Plan, without the consent of such recipient, of any of his or her rights
thereunder or with respect thereto; and (b) no such amendment shall increase
the aggregate number of Common Shares that may be issued pursuant to all
Incentive Stock Options granted under this Plan (except pursuant to
Section 7 hereof) or change, alter or modify the employees or class of
employees eligible to receive Incentive Stock Options under this Plan
without the approval of the stockholders of the Company, which approval must
be obtained within 12 months after the adoption of such amendment by the
Board and prior to the issuance of any increased number of shares or the
issuance of shares to any person not eligible under the terms of this Plan
before any such change.
Section 9. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of January 26, 1998, the
date upon which it was approved by the Board; provided, however, that no
Common Shares may be issued under this Plan until it has been approved,
directly or indirectly, by a majority vote of the holders of the outstanding
Common Shares of the Company present, or represented, and entitled to vote
at a meeting duly held in accordance with the laws of the State of Delaware.
If an Award granted under this Plan takes the form of an option, it shall be
rescinded if such stockholder approval is not obtained within 12 months
after the date set forth above upon which this Plan was approved by the
Board.
Section 10. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS
Notwithstanding anything to the contrary in this Plan, no
Common Shares purchased upon exercise of an Award, and no certificate
representing all or any part of such shares, shall be issued or delivered if
(a) such shares have not been admitted to listing upon official notice of
issuance on each stock exchange upon which shares of that class are then
listed or (b) in the opinion of counsel to the Company, such issuance or
delivery would cause the Company to be in violation of or to incur liability
under any Federal, state or other securities law, or any requirement of any
listing agreement to which the Company is a party, or any other requirement
of law or of any administrative or regulatory body having jurisdiction over
the Company.
APPENDIX "B"
TEJON RANCH CO.
NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
Section 1. PURPOSE OF PLAN
The purpose of this Non-Employee Director Stock Incentive
Plan (this "Plan") of Tejon Ranch Co., a Delaware corporation (the
"Company"), is to enable the Company to attract, retain and motivate its
non-employee directors by providing for or increasing the proprietary
interests of such persons in the Company.
Section 2. PERSONS ELIGIBLE UNDER PLAN
Any person who is a director of the Company and is not a
full-time employee of the Company or any of its wholly-owned or majority
owned subsidiaries (a "Grantee") shall be eligible to be considered for the
grant of Awards (as hereinafter defined) under this Plan. For purposes of
this Plan directors who work as employees part time or full time on a
temporary basis (as determined by the Board of Directors) shall be eligible
to be considered for the grant of Awards under this Plan.
Section 3. AWARDS
(a) The Board of Directors of the Company (the "Board") or
the Committee (as hereinafter defined) may authorize and direct one or more
officers of the Company to enter into, on behalf of the Company, any type of
arrangement with a Grantee that is not inconsistent with the provisions of
this Plan and that, by its terms, involves or might involve the issuance of
(i) shares of Common Stock, par value $.50 per share, of the Company (the
"Common Shares") or (ii) a Derivative Security (as such term is defined in
Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as such
Rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived
from the value of the Common Shares. The entering into of any such
arrangement is referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or
performance shares, and an Award may consist of one such security or
benefit, or two or more of them in tandem or in the alternative.
(c) Common Shares may be issued pursuant to an Award for
any lawful consideration as determined by the Board or the Committee,
including, without limitation, services rendered by the recipient of such
Award.
(d) The exercise period for awards granted in the form of
options shall be not more than 120 months from the date the option is
granted.
(e) Awards granted in the form of options shall provide
that neither the option nor any interest therein may be sold, assigned,
conveyed, gifted, pledged, hypothecated or otherwise transferred in any
manner other than by will or the laws of descent and distribution or any
transfer to a guardian or other personal representative in connection with
the disability of the Grantee.
(f) Awards granted in the form of options shall be
exercisable at such times and in such amounts as are determined by the Board
of Directors or the Committee.
(g) Subject to the other specific provisions of this Plan,
the Board or the Committee, in its sole and absolute discretion, shall
determine all of the terms and conditions of each Award granted under this
Plan, which terms and conditions may include, among other things, a
provision permitting the recipient of such Award, including any recipient
who is a director or officer of the Company, to pay the purchase price of
the Common Shares or other property issuable pursuant to such Award, or such
recipient's tax withholding obligation with respect to such issuance, in
whole or in part, by any one or more of the following:
(i) the delivery of previously owned shares of
capital stock of the Company or other property,
(ii) a reduction in the amount of Common Shares or
other property otherwise issuable pursuant to such Award,
(iii) the delivery of a promissory note, the terms and
conditions of which shall be determined by the Board, and/or
(iv) cash in the form of a personal or cashier's or
bank certified check.
Section 4. STOCK SUBJECT TO PLAN
(a) At any time, the aggregate number of Common Shares
issued and issuable pursuant to all Awards granted under this Plan shall not
exceed 200,000 ( the "Share Limitation"), subject to adjustment as provided
in Section 7 hereof.
(b) For purposes of Section 4(a) hereof, the aggregate
number of Common Shares issued and issuable pursuant to Awards granted under
this Plan shall at any time be deemed to be equal to the sum of the
following:
(i) the number of Common Shares which were issued
prior to such time pursuant to Awards granted under this Plan
excluding shares which were reacquired by the Company pursuant to
provisions in the Awards with respect to which those shares were
issued giving the Company the right to reacquire such shares upon
the occurrence of certain events; plus
(ii) the number of Common Shares which are or may be
issuable at or after such time pursuant to outstanding Awards
granted under this Plan prior to such time.
Section 5. DURATION OF PLAN
No Awards shall be granted under this Plan after
December 31, 2002. Although Common Shares may be issued after December 31,
2002 pursuant to Awards granted on or prior to such date, no Common Shares
shall be issued under this Plan after December 31, 2012.
Section 6. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by the Board or a
committee thereof (the "Committee") consisting of two or more directors.
(b) Subject to the provisions of this Plan, the Board or
the Committee shall be authorized and empowered to do all things necessary
or desirable in connection with the administration of this Plan, including,
without limitation, the following:
(i) adopt, amend and rescind rules and regulations
relating to this Plan;
(ii) determine which persons meet the requirements of
Section 2 hereof for eligibility under this Plan and to which of
such eligible persons, if any, Awards shall be granted hereunder;
(iii) grant Awards to eligible persons and determine
the terms and conditions thereof, including the number of Common
Shares issuable pursuant thereto;
(iv) determine whether, and the extent to which
adjustments are required pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms
and conditions of any Award granted hereunder.
Section 7. ADJUSTMENTS
If the outstanding securities of the class then subject to
this Plan are increased, decreased or exchanged for or converted into cash,
property and/or a different number or kind of shares or securities or cash,
property and/or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, dividend (other than a
dividend paid out of earned surplus), or other distribution, stock dividend,
stock split, reverse stock split or the like, or in the event that
substantially all of the assets of the Company are sold, then, unless the
terms of such transaction or document evidencing an Award shall provide
otherwise, the Committee may make appropriate and proportionate adjustments
in (a) the number and type of shares or other securities of the Company that
may be acquired pursuant to Awards theretofore granted under this Plan and
(b) the maximum number and type of shares or other securities of the Company
that may be issued pursuant to Awards thereafter granted under this Plan.
Section 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and
in any manner.
Section 9. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of January 26, 1998, the
date upon which it was approved by the Board; provided, however, that no
Common Shares may be issued under this Plan until it has been approved by a
majority vote of the holders of the outstanding shares of Common Stock of
the Company at a meeting duly held or by written consent in accordance with
the laws of the State of Delaware. If an Award granted under this Plan
takes the form of an option, it shall be rescinded if such stockholder
approval is not obtained within 12 months after the date set forth above
upon which this Plan was approved by the Board.
Section 10. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS
Notwithstanding anything to the contrary in this Plan, no
Common Shares purchased upon exercise of an Award, and no certificate
representing all or any part of such shares, shall be issued or delivered if
(a) such shares have not been admitted to listing upon official notice of
issuance on each stock exchange upon which shares of that class are then
listed or (b) in the opinion of counsel to the Company, such issuance or
delivery would cause the Company to be in violation of or to incur liability
under any Federal, state or other securities law, or any requirement of any
listing agreement to which the Company is a party, or any other requirement
of law or of any administrative or regulatory body having jurisdiction over
the Company.
TEJON RANCH CO. PROXY
This is solicited on behalf of the Board of Directors.
This undersigned acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 13 1998 and
hereby appoints DONALD HASKELL and ROBERT A. STINE as Proxies (each with
full power to act in the absence of the other, and each with full power of
substitution), to represent and to vote all shares of Common Stock of Tejon
Ranch Co. held of record by the undersigned on March 31, 1998, at the Annual
Meeting of Stockholders to be held on May 11, 1998, or any adjournment or
postponement thereof.
In their discretion, the proxies are authorized to vote upon such
other business as properly may come before the meeting.
PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE (Continued on reverse side)
FOLD AND DETACH HERE
TEJON RANCH CO.
Annual Meeting of Stockholders
May 11, 1998 9:30 a.m.
Park Hyatt Los Angeles
at Century City
Grand Salon IV Room
2151 Avenue of the Stars
Los Angeles, CA 90067
Withheld
For For All
1. Election of Three Directors (Class I) / / / /
(except as written to the contrary below)
Craig Cadwalader, Rayburn S. Dezember,
and Robert A. Stine
2. Approval of the 1998 Stock For Against Abstain
Incentive Plan / / / / / /
3. Approval of the Non-Employee
Director Incentive Plan / / / / / /
(Instructions: to withhold authority to vote for any
individual nominee write the nominee's name in the
space below)
This Proxy, when properly executed, will be
voted in the manner directed herein by the
undersigned. If no direction is made, this
proxy will be vested for the election of
directors and for both proposals submitted for
stockholder approval
Dated: _________________
Signature:______________________________
Signature:______________________________
Note: Please sign exactly as name appears below. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. If more than one name appears hereon, all persons named
should sign. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN
THE ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
TEJON RANCH CO.
Narrative Description of Graphic and Image
Information in Registrant's Proxy Materials
Description of Graphic or Image Information
Proxy Statement
Page 17 Contains line graph comparing five year total
cumulative return on $100 invested in Tejon Ranch Co.,
Dow Jones Equity Market and Dow Jones Real Estate
showing the data points set forth below:
<TABLE>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Tejon Ranch 100.00 87.25 71.90 87.25 85.03 146.04
Co.
DJ Equity 100.00 109.61 110.79 153.31 189.28 253.75
Market
DJ Real Estate 100.00 117.07 111.34 137.60 184.51 219.49
</TABLE>
Form of Proxy
Front Printed material indicating notice of Annual
Meeting and voting record date.
Reverse Printed material includes two boxes for purpose
of marking votes and includes signature lines.
