UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 | |||
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ | |||
| Check the appropriate box: | |||
| ☐ | Preliminary Proxy Statement | ||
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
| ☒ | Definitive Proxy Statement | ||
| ☐ | Definitive Additional Materials | ||
| ☐ | Soliciting Material Pursuant to §240.14a-12 | ||
| (Name of Registrant as Specified In Its Charter) | |||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||
| Payment of Filing Fee (Check the appropriate box): | |||
| ☒ | No fee required. | ||
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
| (1) | Title of each class of securities to which transaction applies: | ||
| (2) | Aggregate number of securities to which transaction applies: | ||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
| (4) | Proposed maximum aggregate value of transaction: | ||
| (5) | Total fee paid: | ||
| ☐ | Fee paid previously with preliminary materials. | ||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||
| (1) | Amount Previously Paid: | ||
| (2) | Form, Schedule or Registration Statement No.: | ||
| (3) | Filing Party: | ||
| (4) | Date Filed: | ||
15360 Barranca Parkway
Irvine, California 92618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 20152016 Annual Meeting of Stockholders of Standard Pacific Corp.CalAtlantic Group, Inc. will be held at 15360 Barranca Parkway, Irvine, CA 92618, on Wednesday, June 3, 2015May 25, 2016 at 10:30 a.m., local time, for the following purposes:
| (1) | To elect |
| (2) | Ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for |
| (3) |
| To transact such other business as may properly come before the Annual Meeting and any postponement or adjournment thereof. |
These items of business are more fully described in the proxy statement accompanying this notice. The Board of Directors recommends stockholders vote FOR proposals (1), (2), (3) and (4).each of the above proposals.
The Board of Directors has fixed the close of business on April 8, 2015March 30, 2016 as the record date for the determination of stockholders entitled to receive notice of and to vote at the meeting and any postponements or adjournments of the meeting. The presence, either in person or by proxy, of persons entitled to vote a majority of the voting power of our capital stock that is entitled to vote at the meeting is necessary to constitute a quorum for the transaction of business at the meeting. To ensure that your vote is recorded, please provide your voting instructions as soon as possible, even if you plan to attend the meeting in person. We encourage you to vote via the internet or by telephone. If you requested a paper copy of our proxy materials, you also have the option of voting by completing, signing, dating and returning the proxy card that accompanied the printed materials. Submitting your vote via the internet or by telephone or proxy card will not affect your right to vote in person if you decide to attend the annual meeting.
We are pleased to take advantage of the rules that allow companies to furnish their proxy materials via the internet. As a result, we are mailing to our stockholders a notice of internet availability of proxy materials instead of a paper copy of our proxy statement and our annual report to stockholders. The notice of internet availability of proxy materials contains instructions on how to access those documents via the internet. The notice of internet availability of proxy materials also contains instructions on how to request a paper copy of our proxy materials, including our proxy statement, our annual report to stockholders and a form of proxy card or voting instruction card, as applicable.
| By Order of the Board of Directors | |
| JOHN P. BABEL | |
| Secretary |
Irvine, California
April 24, 201515, 2016
| Page | ||
| THE PROXY STATEMENT AND ANNUAL MEETING | ||
| 1 | ||
| 1 | ||
| THE BOARD OF DIRECTORS | ||
| 3 | ||
| 10 | ||
| EXECUTIVE COMPENSATION | ||
| 34 | ||
| AUDIT AND AUDITOR INFORMATION | ||
| 41 | ||
| 42 | ||
| 43 | ||
| 44 | ||
| REQUIRED NOTICES AND OTHER INFORMATION | ||
| 45 | ||
| 45 | ||
| 45 | ||
PROXY STATEMENT
15360 Barranca Parkway
Irvine, California 92618
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 2015MAY 25, 2016
This proxy statement contains information related to our annual meeting of stockholders to be held Wednesday, June 3, 2015,May 25, 2016, beginning at 10:30 a.m., local time, at our headquarters, located at 15360 Barranca Parkway, Irvine, CA 92618 (the "Annual Meeting"). Your proxy for the meeting is being solicited by the Standard Pacific Corp.CalAtlantic Group, Inc. Board of Directors. This proxy statement will be available on the internet, and the notice of internet availability of proxy materials is first being mailed to stockholders beginning on or about April 24, 2015.15, 2016.
The entire cost of this solicitation of proxies will be borne by the Company, including expenses in connection with preparing, assembling and mailing the notice of internet availability of proxy materials. The Company may reimburse brokers or persons holding stock in their names or in the names of their nominees for their expenses in sending proxy materials to beneficial owners who request paper copies. Certain officers, directors and regular employees of the Company, who will receive no extra compensation for their services, may solicit proxies by mail, telephone, facsimile, e-mail or personally.
In accordance with the rules and regulations adopted by the SEC, we have elected to provide access to our proxy materials to our stockholders via the internet. Accordingly, a notice of internet availability of proxy materials has been mailed to our stockholders. Stockholders have the ability to access the proxy materials at www.proxyvote.com, or request that a printed set of the proxy materials be sent to them, by following the instructions set forth on the notice of internet availability of proxy materials mailed to them. Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy materials. This means that only one copy of our proxy materials or notice of internet availability of proxy materials, as applicable, may have been sent to multiple stockholders in the same house. We will promptly deliver a separate notice of internet availability of proxy materials and, if requested, a separate proxy statement and annual report, to each stockholder that makes a request using the procedure set forth on the notice of internet availability of proxy materials.
On April 8, 2015March 30, 2016 (the "Record Date"), the Company had outstanding a total of 275,116,482118,825,674 shares of Company common stock (the "Common Stock") and 267,829 shares of Series B Junior Participating Convertible Preferred Stock (the "Series B Preferred Stock" and, collectively with the Common Stock, the "Shares"). Holders of the Shares are entitled to receive notice of and to vote at the Annual Meeting. As of the Record Date, the holders of Series B Preferred Stock were entitled to vote on all matters upon which the holders of Common Stock are entitled to vote, with holders of the Common Stock (excluding the holder of the Series B Preferred Stock) entitled to 51% of the total voting power of the Shares and the holder of the Series B Preferred Stock entitled to 49% of the total voting power of the Shares (the combined voting power of the Common Stock and Series B Preferred Stock held by the holder of the Series B Preferred Stock equals 49%).
The presence, either in person or by proxy, of persons entitled to vote a majority of the voting power of the Shares is necessary to constitute a quorum for the transaction of business at the Annual Meeting.
The persons named in the accompanying proxy card will vote Shares represented by all valid proxies in accordance with the instructions contained thereon. In the absence of instructions, Shares represented by properly completed proxies will be voted:
| · | FOR the election of the ten directors of the Company designated herein as nominees (see "Proposal No. 1: Election of Directors"); and |
| · | FOR ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for |
1
Any stockholder may revoke his or her proxy at any time prior to its use by writing to the Secretary of the Company, by voting again via mail, telephone or the internet, or by attending the Annual Meeting and casting his or her vote in person. A stockholder's last timely vote will be the vote that is counted.
If your shares are held in a brokerage account or by another nominee, you are considered the "beneficial owner" of shares held in "street name", and the notice of internet availability of proxy materials is being forwarded to you by your broker or nominee (the "record holder") along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder regarding how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. Rules of the New York Stock Exchange (the "NYSE") determine whether proposals presented at stockholder meetings are "routine" or "non-routine." If a proposal is routine, a broker or other entity holding shares for a beneficial owner in street name may vote on the proposal absent voting instructions from the beneficial owner. If a proposal is non-routine, the broker or other entity may vote on the proposal only if the beneficial owner has provided voting instructions. A "broker non-vote" occurs when the broker or other entity is unable to vote on a proposal because the proposal is non-routine and the beneficial owner does not provide instructions.
Votes cast by proxy or in person at the Annual Meeting will be counted by the persons appointed by the Company to act as election inspectors for the meeting. The election inspectors will treat abstentions and broker non-votes as Shares that are present and entitled to vote for purposes of determining the presence of a quorum. For purposes of determining the outcome of any matter as to which a broker or nominee has physically indicated on the proxy or indicated electronically that it does not have discretionary authority to vote, those Shares will be treated as not present and not entitled to vote with respect to that matter (even though those Shares are considered entitled to vote for quorum purposes and may be entitled to vote on other matters). Under such circumstances, the broker non-vote will have no effect on the outcome of the vote on the proposals to be voted on at the 20152016 Annual Meeting.
Stockholders may provide voting instructions by telephone by calling toll free 1-800-690-6903 from the U.S. or Canada, or via the internet at www.proxyvote.com at any time before 11:59 p.m. Eastern Time on June 2, 2015.May 24, 2016. Telephone and internet voting access is available 24 hours a day, 7 days a week until 11:59 p.m. Eastern Time on June 2, 2015.May 24, 2016. Please have your notice and proxy control number in hand when you telephone or visit the website.
Board Membership, Leadership and Structure
We completed our merger with The Ryland Group, Inc. on October 1, 2015. As a condition to the closing of the merger, the Board adopted Article X of our bylaws (the "Corporate Governance Bylaws") which sets forth negotiated corporate governance items related to our Board and Committees that are intended to remain in place for three years following the completion of the merger. The Corporate Governance Bylaws supplement the more general corporate governance related items set forth in our Corporate Governance Guidelines.
Corporate Governance Bylaws. For three years following the completion of the merger, the Board will be comprised of 10 members—five individuals selected by the Continuing Ryland Directors (or their successors) and five individuals selected by the Continuing Company Directors (or their successors). Each of the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee of the Board will be comprised of two non-executive Continuing Ryland Directors and two non-executive Continuing Company Directors. In addition, the former chairman of the Ryland board of directors, will serve as the Company's lead independent director, unless removed from his role by an affirmative vote of at least 75% of the Board (excluding the lead independent director). A vacancy resulting from his cessation of service can only be filled by a director who is a Continuing Ryland Director (or their successor). Vacancies on the Board resulting from cessation of service within the first three years following the closing of the merger by a Continuing Ryland Director (or their successor) or a Continuing Company Director (or their successor) will be filled only by an individual whose appointment or election is endorsed by at least a majority of the Continuing Ryland Directors or by at least a majority of the Continuing Company Directors, respectively, or by a sole remaining Continuing Ryland Director or Continuing Company Director, as applicable.
Also, for three years following the effective time of the merger:
| · | the Nominating and Corporate Governance Committee will be chaired by a Continuing Company Director, and each of the Audit Committee and the Compensation Committee will be chaired by a Continuing Ryland Director; and |
| · | in the case of a vacancy, a Continuing Ryland Director, who meets the qualifications set forth in the applicable committee charter, will be appointed as an alternate for a committee member or chair who is a Continuing Ryland Director, and a Continuing Company Director, who meets the qualifications set forth in the applicable committee charter, will be appointed as an alternate for a committee member or chair who is a Continuing Company Director. |
For three years following the completion of the merger, these governance provisions may be modified, amended or repealed, and any provision or other resolution inconsistent with these governance provisions may be adopted, or such modification, amendment repeal or adoption may be recommended to our stockholders, only by the affirmative vote of 75% of our Board (or, if there are no Continuing Ryland Directors or Continuing Company Directors to fill a vacancy as described above, remaining directors (even if less than a quorum) or the sole remaining director of the Company).
Corporate Governance Guidelines. Subject to the Corporate Governance Bylaws, our Corporate Governance Guidelines provide a framework for our corporate governance structure and culture and cover topics including, director independence, selection and composition of the Board and its committees, director compensation and performance of the Board. The Nominating and Corporate Governance Committee is responsible for, among other matters, overseeing and reviewing the guidelines and reporting and recommending to the Board any changes thereto.
Our Corporate Governance Guidelines provide that the Chairman of the Board and Chief Executive Officer will be selected in the manner that the Board deems is in the best interest of the Company at a given point in time. The Board does not have a policy as to whether the roles of Chairman and Chief Executive Officer should be separate or combined and, if the roles are to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. In connection with our merger, the Board decided to separate the roles of Chairman and Chief Executive. At that time, Scott D. Stowell, our pre-merger Chief Executive Officer, who has served as a director of the Company since 2012, was appointed to serve as Executive Chairman of the Board and The Ryland Group, Inc.'s President and Chief Executive Officer, Larry T. Nicholson, was appointed to serve as our
President and Chief Executive Officer. Mr. Stowell has been re-appointed to serve as our Executive Chairman for 2016 and Mr. Nicholson will continue to serve as our President and Chief Executive Officer in 2016.
Our Corporate Governance Guidelines also provide that our Chairman will also serve as the Company's Lead Independent Director if the Chairman is independent. Since Mr. Stowell is also a member of the Company's management team, he is not independent. Our Corporate Governance Bylaws provide that for the three year period following October 1, 2015, William L. Jews, the former chairman of The Ryland Group, Inc.'s Board of Directors and current member of the Company's Nominating and Corporate Governance Committee, will serve as our Lead Independent Director.
Our Executive Chairman, Mr. Stowell, and our Lead Independent Director, Mr. Jews, work together to establish the agenda for each meeting of the Board in consultation with the Chief Executive Officer and coordinate and develop the agenda for each executive session of the independent directors. Mr. Stowell convenes and chairs each meeting of the Board and Mr. Jews convenes and chairs each of the regular executive sessions of the independent directors. Mr. Jews coordinates feedback to the Executive Chairman and to the Chief Executive Officer on behalf of the independent directors regarding business issues and management. Mr. Jews reviews, and approves if appropriate, requests for approvals or waivers under the Company's Code of Business Conduct and Ethics with regard to proposed chief executive officer and director conduct. Mr. Stowell acts as the designated spokesperson for the Board when it is appropriate for the Board to comment publicly on a matter. In addition to Mr. Stowell and Mr. Jews, the chairman of each of the standing committees of our Board provides leadership to the Board within the area for which his committee is responsible.
Director Independence
Our Corporate Governance Guidelines provide that a majority of the members of the Board must meet the criteria for independence as required by the NYSE listing standards. As set forth in the Corporate Governance Guidelines, a director will be independent only if the Board determines, after consideration of all relevant facts and circumstances, that such director is a person who is free from any relationship that would interfere with the exercise of independent judgment as a member of the Board. In making that determination, the Board has adopted the categorical standards relating to director independence set forth in the NYSE listing standards. The Board has determined that each of its current members, except for Scott D. Stowell and Larry T. Nicholson, meet the aforementioned independence standards. Mr. Stowell and Mr. Nicholson do not meet the aforementioned independence standards because they serve as our Executive Chairman and Chief Executive Officer, respectively.
Communications with the Board
Stockholders and other interested parties may communicate with the Board, including the Lead Independent Director, by sending written communications to the attention of the Corporate Secretary at the Company's principal executive offices. All such communications received by the Company are compiled by the Corporate Secretary and forwarded to the Chairman of the Board, Lead Independent Director, respective committee chairman, or other directors as appropriate.
Risk Oversight
The Audit Committee is responsible for overseeing the Company's guidelines and policies with respect to risk assessment and risk management. The Audit Committee includes a discussion with management of the potential risks and exposures the Company faces and the steps management is taking to identify and manage those risks on the agenda for at least two of its regularly scheduled meetings each year, and the committee and/or the full Board may also discuss risk issues with management at other times as they arise. In addition, the full Board takes responsibility for overseeing some larger areas of operational risk, such as significant land purchases and financings.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all of the Company's employees, including its senior financial and executive officers, as well as the Company's directors. The Company will disclose any material waivers of, or amendments to, any provision of the Code of Business Conduct and Ethics
that applies to the Company's directors and senior financial and executive officers on its website, www.calatlantichomes.com or in a current report on Form 8-K, as required.
In addition, the Company has adopted a whistleblower procedure pursuant to which employees and others have access to our Board and senior management to raise any concerns about unethical business practices and other Company related concerns confidentially.
Board Attendance; Executive Sessions
During 2015, the Board held seven meetings. Each of the directors attended at least 75% of the total number of meetings of the Board and committees on which he or she then served. In addition, the Company's non-management directors held formal quarterly meetings without the presence of management (executive sessions), as well as a number of additional informal meetings without the presence of management, from time to time, as determined necessary by the Lead Independent Director. We do not have a policy requiring our Directors to attend our annual meeting. The 2015 annual meeting of stockholders was attended by our former Chairman of the Board, Ronald R. Foell and Scott D. Stowell.
Board Committees
Committee Leadership and Members: Our Board had standing Audit, Compensation, and Nominating and Corporate Governance Committees. The current membership of each committee is as follows:
Name | Audit | Compensation | Nominating & Corporate Governance | ||
| Bruce A. Choate |  | | |||
| Douglas C. Jacobs | | ||||
| William L. Jews♦ | | ||||
| David J. Matlin |  | ||||
| Robert E. Mellor | | | |||
| Norman J. Metcalfe | | | |||
| Larry T. Nicholson | |||||
| Peter Schoels | | | |||
Scott D. Stowell  | |||||
| Charlotte St. Martin | | ||||
ChairmanMember ♦Lead Independent Director Executive Chairman of the BoardAudit Committee: The Audit Committee, which held six meetings during 2015, represents the Board in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company and its subsidiaries and is also responsible for providing oversight to the Company's risk management function. Under the Audit Committee's charter, the committee is required to meet at least four times per year or more frequently as circumstances dictate. The Audit Committee has general responsibility for:
| · | overseeing the integrity of the Company's accounting, auditing and financial reporting processes, the adequacy of the Company's internal controls and the completeness and accuracy of the Company's financial statements; |
| · | reviewing with management and the Company's independent auditor the Company's annual financial statements and Annual Report on Form 10-K and quarterly financial statements and Quarterly Reports on Form 10-Q prior to filing with the SEC; |
| · | appointing the Company's independent auditor, reviewing its independence, effectiveness and significant relationships with the Company (if any), and approving the hiring by the Company of current and former employees of the independent auditor (if any); |
| · | pre-approving all audit engagement fees and terms and all non-audit engagements with the Company's independent auditor; |
| · | approving major changes to the Company's internal auditing and accounting principles and practices; |
| · | overseeing the Company's guidelines and policies with respect to risk assessment and risk management; |
| · | establishing, reviewing and updating a code of ethical conduct and a whistleblower complaint procedure; |
| · | reviewing legal compliance matters and the adequacy of the Company's disclosure controls and procedures; |
| · | discussing the general types of information to be disclosed and presentation of the Company's earnings press releases and related presentations; |
| · | reviewing annually the performance of the Committee and the contents of the Audit Committee charter; and |
| · | performing any other actions that the Board deems appropriate. |
The Audit Committee has been established in accordance with applicable SEC rules and regulations, and all the members of the Audit Committee are independent directors as independence for audit committee members is defined under the NYSE listing standards. In addition, the Board of Directors has determined that each member of the Audit Committee qualifies as an "audit committee financial expert" within the meaning of applicable SEC rules and regulations. The extensive background in accounting and finance and/or the management of accounting and finance professionals that each member of the Audit Committee possesses, as described more particularly under the heading "Proposal No. 1 Election of Directors–Nominees for Election", qualifies him as an audit committee financial expert.
Compensation Committee: The Compensation Committee, which held seven meetings during 2015, represents the Board in discharging its responsibilities relating to the oversight of compensation paid to Company employees, directors and executives. All of the members of the Compensation Committee are independent directors as defined under the NYSE listing standards, Section 162(m) of the Internal Revenue Code and SEC Rule 16b-3.
Under the Compensation Committee's charter, the committee is required to meet at least four times per year or more frequently as circumstances dictate. The Compensation Committee has general responsibility for:
| · | establishing the Company's compensation philosophy, objectives and policies; |
| · | reviewing, establishing and approving compensation programs and levels of compensation for the Company's directors and executive officers, including equity-based compensation awards; |
| · | administration of stock incentive plans (including the selection of employees to receive awards and the determination of the amount and the terms and conditions of such awards); |
| · | annually reviewing and appraising the performance of the Company's Chief Executive Officer and Executive Chairman and providing developmental feedback to the Chief Executive Officer and Executive Chairman and, when appropriate, to other executive officers of the Company; |
| · | making recommendations to the Board on management succession relating to the Chief Executive Officer and Executive Chairman and other executive officer positions; and |
| · | establishing, and reviewing compliance with, director and executive officer stock ownership guidelines. |
In determining executive compensation, the Compensation Committee may take into consideration the research and recommendations provided by compensation consultants and other advisors engaged directly by the committee, as well as recommendations made by the Company's Chief Executive Officer and Executive Chairman. This process is described in greater detail in the "Compensation Discussion and Analysis" section of this proxy statement. The Compensation Committee generally does not delegate authority granted the committee by its charter.
Nominating and Corporate Governance Committee: The Nominating and Corporate Governance Committee held four meetings during 2015. All of the members of the committee are independent directors as
defined under the NYSE listing standards. The Nominating and Corporate Governance Committee's charter requires that the committee meet at least once per year or more frequently as circumstances dictate, and that it has general responsibility for:
| · | recommending the slate of directors to be nominated by the Board for election at the annual meeting of stockholders and reviewing and recommending candidates to fill vacancies on the Board; |
| · | recommending to the Board the composition of board committees; |
| · | overseeing and reviewing the Company's Corporate Governance Guidelines; |
| · | monitoring a process to assess the effectiveness of the Board; and |
| · | considering recommendations for directors submitted by stockholders as well as considering properly submitted stockholder proposals, including proposals that nominate candidates for membership on the Board. |
Director Identification, Qualification and Nominating Procedures
Subject to the requirements set forth in the Corporate Governance Bylaws, the Nominating and Corporate Governance Committee utilizes a variety of methods for identifying director nominees, including considering potential director candidates who come to the committee's attention through current officers, directors, professional search firms, stockholders or other persons. The Committee seeks to include diverse candidates in the pool from which new Board nominees are chosen, and will expand search parameters to non-traditional environments (including government, academia and non-profit organizations) for new candidates. In addition, pursuant to the terms of the Stockholders Agreement (described in more detail below under the heading "Certain Relationships and Related Transactions; Transactions with Related Persons") between the Company and MatlinPatterson, the Company's largest stockholder, MatlinPatterson is entitled to designate up to two directors as nominees for Board of Directors membership as long as it holds at least 20% of the voting power of the Shares and one director as long as it holds at least 10% of the voting power of the Shares. MatlinPatterson currently holds in excess of 20% of the voting power of the Shares. The Nominating and Corporate Governance Committee is required to nominate each such person designated by MatlinPatterson if the committee determines that such nominees possess the characteristics required by the Company's governance standards, provided, that, the committee is not obligated to nominate any MatlinPatterson nominee if such nominee is an officer or director of:
| · | any company that competes to any significant extent with the business of the Company or its subsidiaries in the geographic areas in which they operate; |
| · | another company that has a class of equity securities registered with the SEC and that is engaged in substantial homebuilding or land development activities within the United States; or |
| · | a company that does not have a class of equity securities registered with the SEC and that has annual revenues of more than $200 million (in its most recently completed fiscal year) from homebuilding and land development activities within the United States. |
Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board. This assessment includes an evaluation of the nominee's judgment and skills (depth of understanding of the Company's industry, financial sophistication, leadership, objectivity, and other factors deemed appropriate by the committee) and the diversity of the nominee's background and experience (which includes, but is not limited to, gender, race, ethnicity, sexual orientation, gender identity, culture and geography), all in the context of the perceived needs of the Board of Directors at that point in time.
In addition to the foregoing, the Company's Corporate Governance Guidelines provide that each member of the Board of Directors should have the following minimum qualifications:
| · | the highest character and integrity; |
| · | an ability and desire to make independent and thoughtful analytical inquiries; |
| · | meaningful experience at a strategy/policy setting level; |
| · | outstanding ability to work well with others; |
| · | sufficient time available to carry out the significant responsibilities of a member of the Board of Directors; and |
| · | freedom from any conflict of interest (other than Board members serving pursuant to an agreement between the Company and any stockholder or the employment by the Company in the case of an inside director) that would interfere with his or her independent judgment and proper performance of responsibilities as a member of the Board of Directors. |
If a stockholder believes that he or she has identified an appropriate candidate willing to serve on the Company's Board of Directors, that stockholder may submit the recommendation for consideration to the Nominating and Corporate Governance Committee to the attention of the Corporate Secretary at the Company's principal executive offices. The Nominating and Corporate Governance Committee will review properly submitted stockholder recommendations in the same manner as it evaluates all other nominees.
In addition, the Company's bylaws provide that nominations for the election of directors may be made by any stockholder entitled to vote in the election of directors; provided, however, that a stockholder may nominate a person for election as a director at an annual meeting of the stockholders only if written notice of such stockholder's intent to make such nomination has been given to the Company's Corporate Secretary at the Company's principal executive offices not later than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting or, if the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, or if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 7th day following the first public announcement of the date of such meeting or, in the case of a special meeting, not later than the close of business on the later of the 60th day prior to such special meeting or the 7th day following the first public announcement of the date of such meeting. Each such notice shall set forth:
(i) as to each person whom the stockholder proposes to nominate for election or re-election as a director: (a) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934 (the "Exchange Act"), and (b) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; provided, however, that, in addition to the information required in the stockholder's notice the Company may require each such person to furnish such other information as may reasonably be required by the Company to determine the eligibility of such person to serve as a director of the Company, including information relevant to a determination whether such person can be considered an independent director;
(ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (a) the name and address, as they appear on the Company's books, of the stockholder who intends to make the nomination and the name and address of such beneficial owner, (b) the class and number of shares of the Company that are owned of record by each of such stockholder and such beneficial owner as of the date of the notice, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company owned of record by each of the stockholder and such beneficial owner as of the record date for the meeting, and (c) a representation that the stockholder intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; and
(iii) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the nomination is made, as to such beneficial owner, and if such stockholder or beneficial owner is an entity, as to each control person thereof: (a) the class and number of shares of the Company that are beneficially owned by such stockholder or beneficial owner and by any control person as of the date of the notice, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company beneficially owned by such stockholder or beneficial owner and by any control person as of the record date for the meeting, (b) a description of any agreement, arrangement, or understanding with respect to the nomination between or among the stockholder, beneficial owner or control person and any other person or persons (naming such person or persons), including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Exchange Act Schedule 13D (regardless of whether the requirement to file a Schedule 13D is applicable) and the stockholder's agreement to notify the
Company in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, (c) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder, beneficial owner or control person, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Company's capital stock, or maintain, increase or decrease the voting power of the stockholder, beneficial owner or control person with respect to shares of stock of the Company, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, and (d) a representation whether such stockholder or beneficial owner, if any, intends or is part of a group that intends to solicit proxies from stockholders in support of such nomination. In addition, the stockholder intending to make such nomination shall promptly provide any other information reasonably requested by the Company.
Certain Relationships and Related Transactions; Transactions with Related Persons
Our Code of Business Conduct and Ethics and our written Employment of Relatives Policy govern transactions between the Company and our directors, executive officers, and their immediate family members. The Code of Business Conduct and Ethics provides that no director, executive officer, or any of their immediate family members may, directly or indirectly, sell, buy, lease, or otherwise provide or receive any goods, property or services from the Company without obtaining the pre-approval required by the code. Our Employment of Relatives Policy provides that the approval of our Lead Independent Director must be obtained prior to the Company or any subsidiary hiring, transferring or promoting a relative of a director or executive officer. These policies do not set forth any categorical standards that must be followed when determining whether to grant or deny approval. Rather, we rely on the good judgment and common sense of the required approver, the Lead Independent Director in the case of approvals relating to the other directors and the chief executive officer, and the chief executive officer in the case of approvals related to the Company's other officers, to determine whether the proposed transaction is consistent with the principles underlying our policies.
While the Company does not have a general policy regarding transactions between the Company and beneficial owners of five percent or more of the Shares, the terms of the Stockholders Agreement between the Company and MatlinPatterson (owner of approximately 36% of the voting power of the Shares as of the Record Date) provides a framework pursuant to which the Company's transactions with MatlinPatterson will be analyzed. The Stockholders Agreement provides that transactions with MatlinPatterson or its affiliates (other than certain acquisitions of the Company's capital stock that require the approval of the Company's stockholders) are required to be pre-approved by a majority of the non-management, non-MatlinPatterson, independent members of the Board of Directors.
To our knowledge, during 2015 there were no transactions between the Company and any of our directors, executive officers, five percent or greater beneficial owners of Shares, or any of the immediate family members of any of the foregoing persons that would be required to be reported in this proxy statement, except for those listed below.
During 2015, the Company purchased finished homesites in two master planned communities developed by Crescent Resources, LLC. Crescent Resources, LLC is a land management and real estate development Company in which an affiliate of MatlinPatterson has a significant indirect ownership interest. The total purchase price for the acquisition of the homesites in 2015 was approximately $2.1 million. The purchase price for these transactions was established at arm's length and was approved by the independent members of our Board of Directors who are not affiliated with MatlinPatterson. MatlinPatterson was not involved in the negotiation of these transactions and we do not believe they derived any direct or indirect benefits from these transactions other than the indirect benefits afforded to them as a result of their ownership interests in the Company and in Crescent.
Access to Corporate Governance Documentation and Other Information Available on Our Website
The Company's Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters for each of the Audit, Compensation, and Nominating and Corporate Governance Committees are accessible via the Company's website at www.calatlantichomes.com.
Annually, the Compensation Committee reviews the Company's non-management director compensation program with the goal of maintaining a program that comports with market norms and that aligns the interests of non-management directors with those of stockholders. This review includes an examination of publicly available information regarding compensation paid to non-management directors at the other publicly traded homebuilders and general industry participants in a peer group examined by the Compensation Committee (D.R. Horton Inc., KB Home, Lennar Corporation, M.D.C. Holdings, Inc., Meritage Homes Corporation, NVR, Inc., Pulte Group, Inc., Toll Brothers, Inc., Masco Corporation, Mohawk Industries Inc., Owens Corning, and USG Corporation), a review of general industry director compensation information and, from time to time, a discussion with an outside compensation consultant.
In 2015, each non-management director was eligible to receive total annual compensation valued at $220,000, consisting of a cash retainer of $100,000 and quarterly grants of common stock with an annual value of $120,000. Following our October 1, 2015 merger with The Ryland Group, Inc., the Compensation Committee decided to slightly modify the structure of the program by increasing the annual value of the quarterly stock grant to $130,000. The Compensation Committee believes the total amount of compensation is consistent with market norms and that the mix between cash and stock strikes the appropriate balance between providing non-management directors with a significant portion of their compensation in stock to better align their interests with our other stockholders, while providing them sufficient cash to fund income taxes associated with their receipt of the stock.
The annual cash retainer is paid in four equal installments on February 15, May 15, August 15 and November 15. The stock grant is paid in quarterly installments in shares of Common Stock that are priced at the closing price of Common Stock on each of March 31, June 30, September 30 and December 31. The stock is fully vested on the date of grant. As a reflection of a greater workload, our Lead Independent Director receives an additional $125,000 annual cash retainer and our Audit and Compensation Committee Chairman each receive an additional $20,000 annual cash retainer, payable quarterly in the same manner and at the same time as the general cash retainer paid to all non-management directors.
2015 Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash($) | Stock Awards(s) ($)(2) | Total($) | ||||||
| Bruce A. Choate | $ | 115,000 | $ | 122,500 | $ | 237,500 | |||
| Ronald R. Foell (4) | $ | 90,000 | $ | 90,000 | $ | 180,000 | |||
| Douglas C. Jacobs | $ | 115,000 | $ | 122,500 | $ | 237,500 | |||
| William L. Jews | $ | 56,250 | $ | 32,500 | $ | 88,750 | |||
| David J. Matlin (1) | $ | — | $ | — | $ | — | |||
| Robert E. Mellor | $ | 30,000 | $ | 32,500 | $ | 62,500 | |||
| Norman J. Metcalfe (3) | $ | 30,000 | $ | 32,500 | $ | 62,500 | |||
| John R. Peshkin (4) | $ | 75,000 | $ | 90,000 | $ | 165,000 | |||
| Peter Schoels (1) | $ | — | $ | — | $ | — | |||
| Charlotte St. Martin (3) | $ | 25,000 | $ | 32,500 | $ | 57,500 | |||
| (1) | Mr. Matlin and Mr. Schoels have elected to decline all compensation that they would otherwise be entitled to receive as members of the Board. |
| (2) | Prior to October 1, 2015, each non-employee director was entitled to receive an aggregate of $120,000 of our Common Stock, issued in four quarterly installments of $30,000. After October 1, 2015, each non-employee director was entitled to receive an aggregate of $130,000 of our Common Stock, issued in four quarterly installments of $32,500. The actual number of shares issued to each non-employee director is determined by dividing $30,000 or $32,500 by the closing price of our Common Stock as of the last day of each quarter. For 2015, Messrs. Choate and Jacobs each received an aggregate of 2,946 shares of Company Common Stock, Messrs. Foell and Peshkin each received an aggregate of 2,089 shares of Company Common Stock and Mr. Metcalfe, Ms. St. Martin, Mr. Jews and Mr. Mellor each received an aggregate of 857 shares of Company Common Stock. |
| (3) | Mr. Metcalfe and Ms. St. Martin contributed their 857 share fourth quarter common stock grant (described in footnote (2) above) into the Company's Nonqualified Deferred Compensation Plan. Mr. Metcalfe also contributed his $25,000 fourth quarter annual cash retainer payment into the plan. |
| (4) | Mr. Foell and Mr. Peshkin retired from the Board at the time of our October 1, 2015 merger with The Ryland Group, Inc. |
Non-Employee Director Stock Ownership Guidelines
The Company has adopted Non-Employee Director Stock Ownership Guidelines for the purpose of further aligning the interests and actions of our directors with the interests of our other stockholders. Each non-employee member of the Company's Board of Directors (other than directors who are employees of any of our 10% or greater stockholders or their affiliates who are not subject to these guidelines) is required to hold a number of shares equal to three times the annual cash retainer paid to the director and is required to reach full compliance with these guidelines within five years of the date the director becomes subject to them. As of December 31, 2015, each of our directors was in compliance with the guidelines.
Our bylaws provide that for the three year period beginning October 1, 2015, which is the date of the closing of the merger transaction between us and The Ryland Group, Inc., our Board of Directors consists(the "Board") will consist of a single class of seventen members that are elected annually. Theannually, of which five director nominees will be selected by the persons (or their successors) who were directors of the Company immediately prior to and following the closing of the merger (collectively, the "Continuing Company Directors"), and of which five director nominees will be selected by the former Ryland directors (or their successors) who were directors of the Company immediately following the closing of the merger (collectively, the "Continuing Ryland Directors"). Each such nomination is subject to approval by at least a majority of the Board, of Directors has nominated each of our current seven directors to stand for election atwhich approval may not be withheld if the meeting. If elected, each nominee will serve untilcandidate is qualified and such approval is otherwise consistent with the 2016 annual meeting of stockholders or until the election and qualification of his respective successor.Board's fiduciary duties.
The qualifications of each director nominee are described below under the heading "Nominees for Election."
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE TEN NOMINEES NAMED IN THIS PROXY STATEMENT FOR DIRECTOR.
Assuming the presence of a quorum, the seventen directors that receive the most "For" votes will be elected at the Annual Meeting. Broker non-votes will have no effect on the election of directors because such election is by a plurality vote. Unless instructed otherwise in the proxy, the persons named on the enclosed proxy card will vote all proxies received by them for the election of the seventen nominees identified below. The Board of Directors does not contemplate that any of its proposed nominees will become unavailable for any reason, but if such unavailability should occur before the Annual Meeting, proxies will be voted for another nominee selected by the BoardBoard.
The Board of Directors has nominated Bruce A. Choate, Ronald R. Foell, Douglas C. Jacobs, David J. Matlin, John R. Peshkin, Peter SchoelsAudit Committee is responsible for overseeing the Company's guidelines and Scott D. Stowell for election as directors at the Annual Meeting. Following is biographical information about eachpolicies with respect to risk assessment and risk management. The Audit Committee includes a discussion with management of the director nomineespotential risks and reasons whyexposures the Nominating and Governance CommitteeCompany faces and the steps management is taking to identify and manage those risks on the agenda for at least two of its regularly scheduled meetings each year, and the committee and/or the full Board determinedmay also discuss risk issues with management at other times as they arise. In addition, the full Board takes responsibility for overseeing some larger areas of operational risk, such as significant land purchases and financings.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that eachapplies to all of the director nominees should serve onCompany's employees, including its senior financial and executive officers, as well as the Board.
Company's directors. The Company will disclose any material waivers of, or amendments to, any provision of the Code of Business Conduct and Ethics
that applies to the Company's directors and senior financial and executive officers on its website, Age;www.calatlantichomes.com 67or in a current report on Form 8-K, as required.
During 2015, the Board held seven meetings. Each of the Compensation Committee and memberdirectors attended at least 75% of the Audit Committee
Board Committees
Committee Leadership and Members: Our Board had standing Audit, Compensation, and Nominating and Corporate Governance and Executive Committees
Name | Audit | Compensation | Nominating & Corporate Governance | ||||
| Bruce A. Choate | |  | |||||
| Douglas C. Jacobs | | ||||||
| William L. Jews♦ |  | ||||||
| David J. Matlin | | ||||||
| Robert E. Mellor | | | |||||
| Norman J. Metcalfe | | | |||||
| Larry T. Nicholson | |||||||
| Peter Schoels | | | |||||
|  | | | ||||
| | | |||||
| Scott D. Stowell | |||||||
| Charlotte St. Martin | | ||||||
Chairman Member ♦Lead Independent DirectorExecutive Chairman of the BoardAudit Committee: The Audit Committee, which held fivesix meetings during 2014,2015, represents the Board in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company and its subsidiaries and is also responsible for providing oversight to the Company's risk management function. Under the Audit Committee's charter, the committee is required to meet at least four times per year or more frequently as circumstances dictate. The Audit Committee has general responsibility for:
| · | overseeing the integrity of the Company's accounting, auditing and financial reporting processes, the adequacy of the Company's internal controls and the |
| · | reviewing with management and the Company's independent auditor the Company's annual financial statements and Annual Report on Form 10-K and quarterly financial statements and Quarterly Reports on Form 10-Q prior to filing with the SEC; |
| · | appointing the Company's independent auditor, reviewing its independence, effectiveness and significant relationships with the Company (if any), and approving the hiring by the Company of current and former employees of the independent auditor (if any); |
| · | pre-approving all audit engagement fees and terms and all non-audit engagements with the Company's independent auditor; |
| · | approving major changes to the Company's internal auditing and accounting principles and practices; |
| · | overseeing the Company's guidelines and policies with respect to risk assessment and risk management; |
| · | establishing, reviewing and updating a code of ethical conduct and a whistleblower complaint procedure; |
| · | reviewing legal compliance matters and the adequacy of the Company's disclosure controls and procedures; |
| · | discussing the general types of information to be disclosed and presentation of the Company's earnings press releases and related presentations; |
| · | reviewing annually the performance of the Committee and the contents of the Audit Committee charter; and |
| · | performing any other actions that the Board |
The Audit Committee has been established in accordance with applicable SEC rules and regulations, and all the members of the Audit Committee are independent directors as independence for audit committee members is defined under the NYSE listing standards. In addition, the Board of Directors has determined that Douglas C. Jacobs, an independent director,each member of the Audit Committee qualifies as an "audit committee financial expert" within the meaning of applicable SEC rules and regulations. Mr. Jacobs'The extensive background in accounting and finance and/or the management of accounting and finance professionals that each member of the Audit Committee possesses, as described more particularly under the heading "Proposal No. 1 Election of Directors–Nominees for Election", qualifies him as ouran audit committee financial expert.
Compensation Committee: The Compensation Committee, which held nineseven meetings during 2014,2015, represents the Board in discharging its responsibilities relating to the oversight of compensation paid to Company employees, directors and executives. All of the members of the Compensation Committee are independent directors as defined under the NYSE listing standards, Section 162(m) of the Internal Revenue Code and SEC Rule 16b-3.
Under the Compensation Committee's charter, the committee is required to meet at least four times per year or more frequently as circumstances dictate. The Compensation Committee has general responsibility for:
| · | establishing the Company's compensation philosophy, objectives and policies; |
| · | reviewing, establishing and approving compensation programs and levels of compensation for the Company's directors and executive officers, including equity-based compensation awards; |
| · | administration of stock incentive plans (including the selection of employees to receive awards and the determination of the amount and the terms and conditions of such awards); |
| · | annually reviewing and appraising the performance of the Company's Chief Executive Officer and Executive Chairman and providing developmental feedback to the Chief Executive Officer and Executive Chairman and, when appropriate, to other executive officers of the Company; |
| · | making recommendations to the Board on management succession relating to the Chief Executive Officer and Executive Chairman and other executive officer positions; and |
| · | establishing, and reviewing compliance with, director and executive officer stock ownership guidelines. |
In determining executive compensation, the Compensation Committee may take into consideration the research and recommendations provided by compensation consultants and other advisors engaged directly by the committee, as well as recommendations made by the Company's Chief Executive Officer.Officer and Executive Chairman. This process is described in greater detail in the "Compensation Discussion and Analysis" section of this proxy statement. The Compensation Committee generally does not delegate authority granted the committee by its charter.
Nominating and Corporate Governance Committee: The Nominating and Corporate Governance Committee held one meetingfour meetings during 2014.2015. All of the members of the committee are independent directors as
defined under the NYSE listing standards. The Nominating and Corporate Governance Committee's charter requires that the committee meet at least once per year or more frequently as circumstances dictate, and that it has general responsibility for:
| · | recommending the slate of directors to be nominated by the Board for election |
| · | recommending to the Board the composition of board committees; |
| · | overseeing and reviewing the Company's Corporate Governance Guidelines; |
| · | monitoring a process to assess the effectiveness of the Board; and |
| · | considering recommendations for directors submitted by stockholders as well as considering properly submitted stockholder proposals, including proposals that nominate candidates for membership on the Board. |
Subject to the Board of Directors or that must be made by independent directors, in the management and direction of the business and conduct of the affairs of the Company, subject to any specific directions or limitations dictated by the Board of Directors.
| · | any company that competes to any significant extent with the business of the Company or its subsidiaries in the geographic areas in which they operate; |
| · | another company that has a class of equity securities registered with the SEC and that is engaged in substantial homebuilding or land development activities within the United States; or |
| · | a company that does not have a class of equity securities registered with the SEC and that has annual revenues of more than $200 million (in its most recently completed fiscal year) from homebuilding and land development activities within the United |
Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board of Directors.Board. This assessment includes an evaluation of the nominee's judgment and skills (depth of understanding of the Company's industry, financial sophistication, leadership, objectivity, and other factors deemed appropriate by the committee) and the diversity of the nominee's background and experience (which includes, but is not limited to, gender, race, ethnicity, sexual orientation, gender identity, culture and geography), all in the context of the perceived needs of the Board of Directors at that point in time.
In addition to the foregoing, the Company's Corporate Governance Guidelines provide that each member of the Board of Directors should have the following minimum characteristics:qualifications:
| · | the highest character and integrity; |
| · | an ability and desire to make independent and thoughtful analytical inquiries; |
| · | meaningful experience at a strategy/policy setting level; |
| · | outstanding ability to work well with others; |
| · | sufficient time available to carry out the significant responsibilities of a member of the Board of Directors; and |
| · | freedom from any conflict of interest (other than Board members serving pursuant to an agreement between the Company and any stockholder or the employment by the Company in the case of an inside director) that would interfere with his or her independent judgment and proper performance of responsibilities as a member of the Board of Directors. |
If a stockholder believes that he or she has identified an appropriate candidate willing to serve on the Company's Board of Directors, that stockholder may submit the recommendation for consideration to the Nominating and Corporate Governance Committee to the attention of the Corporate Secretary at the Company's principal executive offices. The Nominating and Corporate Governance Committee will review properly submitted stockholder recommendations in the same manner as it evaluates all other nominees.
In addition, the Company's bylaws provide that nominations for the election of directors may be made by any stockholder entitled to vote in the election of directors; provided, however, that a stockholder may nominate a person for election as a director at an annual meeting of the stockholders only if written notice of such stockholder's intent to make such nomination has been given to the Company's Corporate Secretary at the Company's principal executive offices not later than 90 daysthe close of business on the 90th day prior to the first anniversary dateof the preceding year's annual meeting nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting or, if the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, or if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th90th day prior to such annual meeting or the seventh7th day following the first public announcement of the date of such meeting or, in the case of a special meeting, not later than the close of business on the later of the 60th60th day prior to such special meeting or the seventh7th day following the first public announcement of the date of such special meeting. Each such notice mustshall set forth, amongforth:
(i) as to each person whom the stockholder proposes to nominate for election or re-election as a director: (a) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934 (the "Exchange Act"), and (b) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; provided, however, that, in addition to the information required in the stockholder's notice the Company may require each such person to furnish such other thingsinformation as may reasonably be required by the Company's bylaws: (i)Company to determine the eligibility of such person to serve as a director of the Company, including information relevant to a determination whether such person can be considered an independent director;
(ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (a) the name and address, as they appear on the Company's books, of the stockholder who intends to make the nomination and the name and address of such beneficial owner, (b) the class and number of shares of the person or personsCompany that are owned of record by each of such stockholder and such beneficial owner as of the date of the notice, and the stockholder's agreement to be nominated; (ii)notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company owned of record by each of the stockholder and such beneficial owner as of the record date for the meeting, and (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; and
(iii) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the nomination is made, as to such beneficial owner, and if such stockholder or beneficial owner is an entity, as to each control person thereof: (a) the class and number of shares of the Company that are beneficially owned by such stockholder or beneficial owner and by any control person as of the date of the notice, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company beneficially owned by such stockholder or beneficial owner and by any control person as of the record date for the meeting, (b) a description of all arrangementsany agreement, arrangement, or understandingsunderstanding with respect to the nomination between or among the stockholder, and each nomineebeneficial owner or control person and any other person or persons (naming such person(s)) pursuant to which the nominationperson or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by such stockholder aspersons), including without limitation any agreements that would be required to be includeddisclosed pursuant to Item 5 or Item 6 of Exchange Act Schedule 13D (regardless of whether the requirement to file a Schedule 13D is applicable) and the stockholder's agreement to notify the
Company in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, (c) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder, beneficial owner or control person, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Company's capital stock, or maintain, increase or decrease the voting power of the stockholder, beneficial owner or control person with respect to shares of stock of the Company, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, and (d) a representation whether such stockholder or beneficial owner, if any, intends or is part of a group that intends to solicit proxies from stockholders in support of such nomination. In addition, the stockholder intending to make such nomination shall promptly provide any other information reasonably requested by the Company.
Certain Relationships and Related Transactions; Transactions with Related Persons
Our Code of Business Conduct and Ethics and our written Employment of Relatives Policy govern transactions between the Company and our directors, executive officers, and their immediate family members. The Code of Business Conduct and Ethics provides that no director, executive officer, or any of their immediate family members may, directly or indirectly, sell, buy, lease, or otherwise provide or receive any goods, property or services from the Company without obtaining the pre-approval required by the code. Our Employment of Relatives Policy provides that the approval of our Lead Independent Director must be obtained prior to the Company or any subsidiary hiring, transferring or promoting a relative of a director or executive officer. These policies do not set forth any categorical standards that must be followed when determining whether to grant or deny approval. Rather, we rely on the good judgment and common sense of the required approver, the Lead Independent Director in the case of approvals relating to the other directors and the chief executive officer, and the chief executive officer in the case of approvals related to the Company's other officers, to determine whether the proposed transaction is consistent with the principles underlying our policies.
While the Company does not have a general policy regarding transactions between the Company and beneficial owners of five percent or more of the Shares, the terms of the Stockholders Agreement between the Company and MatlinPatterson (owner of approximately 36% of the voting power of the Shares as of the Record Date) provides a framework pursuant to which the Company's transactions with MatlinPatterson will be analyzed. The Stockholders Agreement provides that transactions with MatlinPatterson or its affiliates (other than certain acquisitions of the Company's capital stock that require the approval of the Company's stockholders) are required to be pre-approved by a majority of the non-management, non-MatlinPatterson, independent members of the Board of Directors.
To our knowledge, during 2015 there were no transactions between the Company and any of our directors, executive officers, five percent or greater beneficial owners of Shares, or any of the immediate family members of any of the foregoing persons that would be required to be reported in this proxy statement, except for those listed below.
During 2015, the Company purchased finished homesites in two master planned communities developed by Crescent Resources, LLC. Crescent Resources, LLC is a land management and real estate development Company in which an affiliate of MatlinPatterson has a significant indirect ownership interest. The total purchase price for the acquisition of the homesites in 2015 was approximately $2.1 million. The purchase price for these transactions was established at arm's length and was approved by the independent members of our Board of Directors who are not affiliated with MatlinPatterson. MatlinPatterson was not involved in the negotiation of these transactions and we do not believe they derived any direct or indirect benefits from these transactions other than the indirect benefits afforded to them as a result of their ownership interests in the Company and in Crescent.
Access to Corporate Governance Documentation and Other Information Available on Our Website
The Company's Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters for each of the Audit, Compensation, and Nominating and Corporate Governance Committees are accessible via the Company's website at www.calatlantichomes.com.
Annually, the Compensation Committee reviews the Company's non-management director compensation program with the goal of maintaining a program that comports with market norms and that aligns the interests of non-management directors with those of stockholders. This review includes an examination of publicly available information regarding compensation paid to non-management directors at the other publicly traded homebuilders and general industry participants in a proxy statement filedpeer group examined by the Compensation Committee (D.R. Horton Inc., KB Home, Lennar Corporation, M.D.C. Holdings, Inc., Meritage Homes Corporation, NVR, Inc., Pulte Group, Inc., Toll Brothers, Inc., Masco Corporation, Mohawk Industries Inc., Owens Corning, and USG Corporation), a review of general industry director compensation information and, from time to time, a discussion with an outside compensation consultant.
In 2015, each non-management director was eligible to receive total annual compensation valued at $220,000, consisting of a cash retainer of $100,000 and quarterly grants of common stock with an annual value of $120,000. Following our October 1, 2015 merger with The Ryland Group, Inc., the Compensation Committee decided to slightly modify the structure of the program by increasing the annual value of the quarterly stock grant to $130,000. The Compensation Committee believes the total amount of compensation is consistent with market norms and that the mix between cash and stock strikes the appropriate balance between providing non-management directors with a significant portion of their compensation in stock to better align their interests with our other stockholders, while providing them sufficient cash to fund income taxes associated with their receipt of the stock.
The annual cash retainer is paid in four equal installments on February 15, May 15, August 15 and November 15. The stock grant is paid in quarterly installments in shares of Common Stock that are priced at the closing price of Common Stock on each of March 31, June 30, September 30 and December 31. The stock is fully vested on the date of grant. As a reflection of a greater workload, our Lead Independent Director receives an additional $125,000 annual cash retainer and our Audit and Compensation Committee Chairman each receive an additional $20,000 annual cash retainer, payable quarterly in the same manner and at the same time as the general cash retainer paid to all non-management directors.
2015 Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash($) | Stock Awards(s) ($)(2) | Total($) | ||||||
| Bruce A. Choate | $ | 115,000 | $ | 122,500 | $ | 237,500 | |||
| Ronald R. Foell (4) | $ | 90,000 | $ | 90,000 | $ | 180,000 | |||
| Douglas C. Jacobs | $ | 115,000 | $ | 122,500 | $ | 237,500 | |||
| William L. Jews | $ | 56,250 | $ | 32,500 | $ | 88,750 | |||
| David J. Matlin (1) | $ | — | $ | — | $ | — | |||
| Robert E. Mellor | $ | 30,000 | $ | 32,500 | $ | 62,500 | |||
| Norman J. Metcalfe (3) | $ | 30,000 | $ | 32,500 | $ | 62,500 | |||
| John R. Peshkin (4) | $ | 75,000 | $ | 90,000 | $ | 165,000 | |||
| Peter Schoels (1) | $ | — | $ | — | $ | — | |||
| Charlotte St. Martin (3) | $ | 25,000 | $ | 32,500 | $ | 57,500 | |||
| (1) | Mr. Matlin and Mr. Schoels have elected to decline all compensation that they would otherwise be entitled to receive as members of the Board. |
| (2) | Prior to October 1, 2015, each non-employee director was entitled to receive an aggregate of $120,000 of our Common Stock, issued in four quarterly installments of $30,000. After October 1, 2015, each non-employee director was entitled to receive an aggregate of $130,000 of our Common Stock, issued in four quarterly installments of $32,500. The actual number of shares issued to each non-employee director is determined by dividing $30,000 or $32,500 by the closing price of our Common Stock as of the last day of each quarter. For 2015, Messrs. Choate and Jacobs each received an aggregate of 2,946 shares of Company Common Stock, Messrs. Foell and Peshkin each received an aggregate of 2,089 shares of Company Common Stock and Mr. Metcalfe, Ms. St. Martin, Mr. Jews and Mr. Mellor each received an aggregate of 857 shares of Company Common Stock. |
| (3) | Mr. Metcalfe and Ms. St. Martin contributed their 857 share fourth quarter common stock grant (described in footnote (2) above) into the Company's Nonqualified Deferred Compensation Plan. Mr. Metcalfe also contributed his $25,000 fourth quarter annual cash retainer payment into the plan. |
| (4) | Mr. Foell and Mr. Peshkin retired from the Board at the time of our October 1, 2015 merger with The Ryland Group, Inc. |
Non-Employee Director Stock Ownership Guidelines
The Company has adopted Non-Employee Director Stock Ownership Guidelines for the purpose of further aligning the interests and actions of our directors with the interests of our other stockholders. Each non-employee member of the Company's Board of Directors (other than directors who are employees of any of our 10% or greater stockholders or their affiliates who are not subject to these guidelines) is required to hold a number of shares equal to three times the annual cash retainer paid to the director and is required to reach full compliance with these guidelines within five years of the date the director becomes subject to them. As of December 31, 2015, each of our directors was in compliance with the guidelines.
Our bylaws provide that for the three year period beginning October 1, 2015, which is the date of the closing of the merger transaction between us and The Ryland Group, Inc., our Board of Directors (the "Board") will consist of a single class of ten members elected annually, of which five director nominees will be selected by the persons (or their successors) who were directors of the Company immediately prior to and following the closing of the merger (collectively, the "Continuing Company Directors"), and of which five director nominees will be selected by the former Ryland directors (or their successors) who were directors of the Company immediately following the closing of the merger (collectively, the "Continuing Ryland Directors"). Each such nomination is subject to approval by at least a majority of the Board, which approval may not be withheld if the candidate is qualified and such approval is otherwise consistent with the Board's fiduciary duties.
In addition, pursuant to the proxy rulesterms of the SEC;Amended and (v)Restated Stockholders Agreement (the "Stockholders Agreement") between us and MP CA Homes, LLC ("MatlinPatterson"), for so long as MatlinPatterson owns at least 20% of our voting power it will have the consentright to designate two directors as nominees for Board membership. If MatlinPatterson owns less than 20% but at least 10% of our voting power, MatlinPatterson will be entitled to designate one director as a nominee for Board membership. We are (subject to certain exceptions discussed on page 7 of this proxy statement) required to nominate each director designated by MatlinPatterson, if the Nominating and Corporate Governance Committee determines that such nominees possess the characteristics required by the Company's governance standards, and to have the Board recommend that stockholders vote for the election of each nomineedesignated director. MatlinPatterson currently holds in excess of 20% of our voting power and is therefore entitled to servedesignate two director candidates. MatlinPatterson has designated two persons, current Board members David J. Matlin and Peter Schoels, as a director nominees.
The Continuing Company Directors have selected current directors Bruce A. Choate, Douglas C. Jacobs, David J. Matlin, Peter Schoels, and Scott D. Stowell for nomination for Board membership and the Continuing Ryland Directors have selected current directors William L. Jews, Robert E. Mellor, Norman J. Metcalfe, Larry T. Nicholson, and Charlotte St. Martin for nomination for Board membership. Consistent with the advice of the CompanyNominating and Corporate Governance Committee, the Board has unanimously approved each of these selections and has nominated each such person to stand for election at the Annual Meeting. If elected, each nominee will serve until the 2017 annual meeting of stockholders or until the election and qualification of his or her respective successor.
The qualifications of each director nominee are described below under the heading "Nominees for Election."
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE TEN NOMINEES NAMED IN THIS PROXY STATEMENT FOR DIRECTOR.
Assuming the presence of a quorum, the ten directors that receive the most "For" votes will be elected at the Annual Meeting. Broker non-votes will have no effect on the election of directors because such election is by a plurality vote. Unless instructed otherwise in the proxy, the persons named on the enclosed proxy card will vote all proxies received by them for the election of the ten nominees identified below. The Board does not contemplate that any of its proposed nominees will become unavailable for any reason, but if so elected.such unavailability should occur before the Annual Meeting, proxies will be voted for another nominee selected by the Board.
Risk Oversight
The Audit Committee is responsible for overseeing the Company's guidelines and policies with respect to risk assessment and risk management. The Audit Committee includes a discussion with management of the potential risks and exposures the Company faces and the steps management is taking to identify and manage those risks on the agenda for at least two of its regularly scheduled meetings each year, and the committee and/or the full Board may also discuss risk issues with management at other times as they arise. In addition, the full Board of Directors takes responsibility for overseeing some larger areas of operational risk, such as significant land purchases and financings.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all of the Company's employees, including its senior financial and executive officers, as well as the Company's directors. The Company will disclose any material waivers of, or amendments to, any provision of the Code of Business Conduct and Ethics
that applies to the Company's directors and senior financial and executive officers on its website, www.standardpacifichomes.comwww.calatlantichomes.com or in a current report on Form 8-K, as required.
In addition, the Company has adopted a whistleblower procedure pursuant to which employees and others have access to our Board of Directors and senior management to raise any concerns about unethical business practices and other Company related concerns confidentially.
Board Attendance; Executive Sessions
During 2015, the Board held seven meetings. Each of the directors attended at least 75% of the total number of meetings of the Board and committees on which he or she then served. In addition, the Company's non-management directors held formal quarterly meetings without the presence of management (executive sessions), as well as a number of additional informal meetings without the presence of management, from time to time, as determined necessary by the Lead Independent Director. We do not have a policy requiring our Directors to attend our annual meeting. The 2015 annual meeting of stockholders was attended by our former Chairman of the Board, Ronald R. Foell and Scott D. Stowell.
Board Committees
Committee Leadership and Members: Our Board had standing Audit, Compensation, and Nominating and Corporate Governance Committees. The current membership of each committee is as follows:
Name | Audit | Compensation | Nominating & Corporate Governance | ||
| Bruce A. Choate | | | |||
| Douglas C. Jacobs | | ||||
| William L. Jews♦ | | ||||
| David J. Matlin | | ||||
| Robert E. Mellor | | | |||
| Norman J. Metcalfe | | | |||
| Larry T. Nicholson | |||||
| Peter Schoels | | | |||
Scott D. Stowell | |||||
| Charlotte St. Martin | | ||||
ChairmanMember ♦Lead Independent Director Executive Chairman of the BoardAudit Committee: The Audit Committee, which held six meetings during 2015, represents the Board in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company and its subsidiaries and is also responsible for providing oversight to the Company's risk management function. Under the Audit Committee's charter, the committee is required to meet at least four times per year or more frequently as circumstances dictate. The Audit Committee has general responsibility for:
| · | overseeing the integrity of the Company's accounting, auditing and financial reporting processes, the adequacy of the Company's internal controls and the completeness and accuracy of the Company's financial statements; |
| · | reviewing with management and the Company's independent auditor the Company's annual financial statements and Annual Report on Form 10-K and quarterly financial statements and Quarterly Reports on Form 10-Q prior to filing with the SEC; |
| · | appointing the Company's independent auditor, reviewing its independence, effectiveness and significant relationships with the Company (if any), and approving the hiring by the Company of current and former employees of the independent auditor (if any); |
| · | pre-approving all audit engagement fees and terms and all non-audit engagements with the Company's independent auditor; |
| · | approving major changes to the Company's internal auditing and accounting principles and practices; |
| · | overseeing the Company's guidelines and policies with respect to risk assessment and risk management; |
| · | establishing, reviewing and updating a code of ethical conduct and a whistleblower complaint procedure; |
| · | reviewing legal compliance matters and the adequacy of the Company's disclosure controls and procedures; |
| · | discussing the general types of information to be disclosed and presentation of the Company's earnings press releases and related presentations; |
| · | reviewing annually the performance of the Committee and the contents of the Audit Committee charter; and |
| · | performing any other actions that the Board deems appropriate. |
The Audit Committee has been established in accordance with applicable SEC rules and regulations, and all the members of the Audit Committee are independent directors as independence for audit committee members is defined under the NYSE listing standards. In addition, the Board of Directors has determined that each member of the Audit Committee qualifies as an "audit committee financial expert" within the meaning of applicable SEC rules and regulations. The extensive background in accounting and finance and/or the management of accounting and finance professionals that each member of the Audit Committee possesses, as described more particularly under the heading "Proposal No. 1 Election of Directors–Nominees for Election", qualifies him as an audit committee financial expert.
Compensation Committee: The Compensation Committee, which held seven meetings during 2015, represents the Board in discharging its responsibilities relating to the oversight of compensation paid to Company employees, directors and executives. All of the members of the Compensation Committee are independent directors as defined under the NYSE listing standards, Section 162(m) of the Internal Revenue Code and SEC Rule 16b-3.
Under the Compensation Committee's charter, the committee is required to meet at least four times per year or more frequently as circumstances dictate. The Compensation Committee has general responsibility for:
| · | establishing the Company's compensation philosophy, objectives and policies; |
| · | reviewing, establishing and approving compensation programs and levels of compensation for the Company's directors and executive officers, including equity-based compensation awards; |
| · | administration of stock incentive plans (including the selection of employees to receive awards and the determination of the amount and the terms and conditions of such awards); |
| · | annually reviewing and appraising the performance of the Company's Chief Executive Officer and Executive Chairman and providing developmental feedback to the Chief Executive Officer and Executive Chairman and, when appropriate, to other executive officers of the Company; |
| · | making recommendations to the Board on management succession relating to the Chief Executive Officer and Executive Chairman and other executive officer positions; and |
| · | establishing, and reviewing compliance with, director and executive officer stock ownership guidelines. |
In determining executive compensation, the Compensation Committee may take into consideration the research and recommendations provided by compensation consultants and other advisors engaged directly by the committee, as well as recommendations made by the Company's Chief Executive Officer and Executive Chairman. This process is described in greater detail in the "Compensation Discussion and Analysis" section of this proxy statement. The Compensation Committee generally does not delegate authority granted the committee by its charter.
Nominating and Corporate Governance DocumentationCommittee: The Nominating and Other Information Available on Our WebsiteCorporate Governance Committee held four meetings during 2015. All of the members of the committee are independent directors as
defined under the NYSE listing standards. The Nominating and Corporate Governance Committee's charter requires that the committee meet at least once per year or more frequently as circumstances dictate, and that it has general responsibility for:
| · | recommending the slate of directors to be nominated by the Board for election at the annual meeting of stockholders and reviewing and recommending candidates to fill vacancies on the Board; |
| · | recommending to the Board the composition of board committees; |
| · | overseeing and reviewing the Company's Corporate Governance Guidelines; |
| · | monitoring a process to assess the effectiveness of the Board; and |
| · | considering recommendations for directors submitted by stockholders as well as considering properly submitted stockholder proposals, including proposals that nominate candidates for membership on the Board. |
Director Identification, Qualification and Nominating Procedures
Subject to the requirements set forth in the Corporate Governance Bylaws, the Nominating and Corporate Governance Committee utilizes a variety of methods for identifying director nominees, including considering potential director candidates who come to the committee's attention through current officers, directors, professional search firms, stockholders or other persons. The Committee seeks to include diverse candidates in the pool from which new Board nominees are chosen, and will expand search parameters to non-traditional environments (including government, academia and non-profit organizations) for new candidates. In addition, pursuant to the terms of the Stockholders Agreement (described in more detail below under the heading "Certain Relationships and Related Transactions; Transactions with Related Persons") between the Company and MatlinPatterson, the Company's largest stockholder, MatlinPatterson is entitled to designate up to two directors as nominees for Board of Directors membership as long as it holds at least 20% of the voting power of the Shares and one director as long as it holds at least 10% of the voting power of the Shares. MatlinPatterson currently holds in excess of 20% of the voting power of the Shares. The Nominating and Corporate Governance Committee is required to nominate each such person designated by MatlinPatterson if the committee determines that such nominees possess the characteristics required by the Company's governance standards, provided, that, the committee is not obligated to nominate any MatlinPatterson nominee if such nominee is an officer or director of:
| · | any company that competes to any significant extent with the business of the Company or its subsidiaries in the geographic areas in which they operate; |
| · | another company that has a class of equity securities registered with the SEC and that is engaged in substantial homebuilding or land development activities within the United States; or |
| · | a company that does not have a class of equity securities registered with the SEC and that has annual revenues of more than $200 million (in its most recently completed fiscal year) from homebuilding and land development activities within the United States. |
Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board. This assessment includes an evaluation of the nominee's judgment and skills (depth of understanding of the Company's industry, financial sophistication, leadership, objectivity, and other factors deemed appropriate by the committee) and the diversity of the nominee's background and experience (which includes, but is not limited to, gender, race, ethnicity, sexual orientation, gender identity, culture and geography), all in the context of the perceived needs of the Board of Directors at that point in time.
In addition to the foregoing, the Company's Corporate Governance Guidelines Code of Business Conduct and Ethics, and the charters forprovide that each member of the Audit, Compensation,Board of Directors should have the following minimum qualifications:
| · | the highest character and integrity; |
| · | an ability and desire to make independent and thoughtful analytical inquiries; |
| · | meaningful experience at a strategy/policy setting level; |
| · | outstanding ability to work well with others; |
| · | sufficient time available to carry out the significant responsibilities of a member of the Board of Directors; and |
| · | freedom from any conflict of interest (other than Board members serving pursuant to an agreement between the Company and any stockholder or the employment by the Company in the case of an inside director) that would interfere with his or her independent judgment and proper performance of responsibilities as a member of the Board of Directors. |
If a stockholder believes that he or she has identified an appropriate candidate willing to serve on the Company's Board of Directors, that stockholder may submit the recommendation for consideration to the Nominating and Corporate Governance and Executive Committees are accessible viaCommittee to the attention of the Corporate Secretary at the Company's websiteprincipal executive offices. The Nominating and Corporate Governance Committee will review properly submitted stockholder recommendations in the same manner as it evaluates all other nominees.
In addition, the Company's bylaws provide that nominations for the election of directors may be made by any stockholder entitled to vote in the election of directors; provided, however, that a stockholder may nominate a person for election as a director at www.standardpacifichomes.com.an annual meeting of the stockholders only if written notice of such stockholder's intent to make such nomination has been given to the Company's Corporate Secretary at the Company's principal executive offices not later than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting or, if the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, or if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 7th day following the first public announcement of the date of such meeting or, in the case of a special meeting, not later than the close of business on the later of the 60th day prior to such special meeting or the 7th day following the first public announcement of the date of such meeting. Each such notice shall set forth:
(i) as to each person whom the stockholder proposes to nominate for election or re-election as a director: (a) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934 (the "Exchange Act"), and (b) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; provided, however, that, in addition to the information required in the stockholder's notice the Company may require each such person to furnish such other information as may reasonably be required by the Company to determine the eligibility of such person to serve as a director of the Company, including information relevant to a determination whether such person can be considered an independent director;
(ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (a) the name and address, as they appear on the Company's books, of the stockholder who intends to make the nomination and the name and address of such beneficial owner, (b) the class and number of shares of the Company that are owned of record by each of such stockholder and such beneficial owner as of the date of the notice, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company owned of record by each of the stockholder and such beneficial owner as of the record date for the meeting, and (c) a representation that the stockholder intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; and
(iii) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the nomination is made, as to such beneficial owner, and if such stockholder or beneficial owner is an entity, as to each control person thereof: (a) the class and number of shares of the Company that are beneficially owned by such stockholder or beneficial owner and by any control person as of the date of the notice, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company beneficially owned by such stockholder or beneficial owner and by any control person as of the record date for the meeting, (b) a description of any agreement, arrangement, or understanding with respect to the nomination between or among the stockholder, beneficial owner or control person and any other person or persons (naming such person or persons), including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Exchange Act Schedule 13D (regardless of whether the requirement to file a Schedule 13D is applicable) and the stockholder's agreement to notify the
Company in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, (c) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder, beneficial owner or control person, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Company's capital stock, or maintain, increase or decrease the voting power of the stockholder, beneficial owner or control person with respect to shares of stock of the Company, and the stockholder's agreement to notify the Company in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, and (d) a representation whether such stockholder or beneficial owner, if any, intends or is part of a group that intends to solicit proxies from stockholders in support of such nomination. In addition, the stockholder intending to make such nomination shall promptly provide any other information reasonably requested by the Company.
Certain Relationships and Related Transactions; Transactions with Related Persons
Our Code of Business Conduct and Ethics and our written Employment of Relatives Policy govern transactions between the Company and our directors, executive officers, and their immediate family members. The Code of Business Conduct and Ethics provides that no director, executive officer, or any of their immediate family members may, directly or indirectly, sell, buy, lease, or otherwise provide or receive any goods, property or services from the Company without obtaining the pre-approval required by the code. Our Employment of Relatives Policy provides that the approval of our Lead Independent Director must be obtained prior to the Company or any subsidiary hiring, transferring or promoting a relative of a director or executive officer. These policies do not set forth any categorical standards that must be followed when determining whether to grant or deny approval. Rather, we rely on the good judgment and common sense of the required approver, the Lead Independent Director in the case of approvals relating to the other directors and the chief executive officer, and the chief executive officer in the case of approvals related to the Company's other officers, to determine whether the proposed transaction is consistent with the principles underlying our policies.
While the Company does not have a general policy regarding transactions between the Company and beneficial owners of five percent or more of the Shares, the terms of the Stockholders Agreement between the Company and MatlinPatterson (owner of 49%approximately 36% of the voting power of the Shares as of the Record Date) provides a framework pursuant to which the Company's transactions with MatlinPatterson will be analyzed. The Stockholders Agreement provides that transactions with MatlinPatterson or its affiliates (other than certain acquisitions of the Company's capital stock that require the approval of the Company's stockholders) are required to be pre-approved by a majority of the non-management, non-MatlinPatterson, independent members of the Board of Directors.
To our knowledge, during 20142015 there were no transactions between the Company and any of our directors, executive officers, five percent or greater beneficial owners of Shares, or any of the immediate family members of any of the foregoing persons that would be required to be reported in this proxy statement, except for those listed below.
During 2014,2015, the Company purchased finished homesites in two master planned communities developed by Crescent Resources, LLC. Crescent Resources, LLC is a land management and real estate development Company in which an affiliate of MatlinPatterson has a significant indirect ownership interest. The total purchase price for the acquisition of the homesites in 20142015 was approximately $6.4 million, with homesites valued at approximately $7.9 million remaining to be purchased by the Company in these two master planned communities in future periods.$2.1 million. The purchase price for these transactions was established at arm's length and was approved by the independent members of our Board of Directors who are not affiliated with MatlinPatterson. MatlinPatterson was not involved in the negotiation of these transactions and we do not believe they derived any direct or indirect benefits from these transactions other than the indirect benefits afforded to them as a result of their ownership interests in the Company and in Crescent.
Access to Corporate Governance Documentation and Other Information Available on Our Website
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities listed in column (a)) (c) | ||||
| Equity compensation plans approved by stockholders(1)(2) | 26,182,880 | $ | 5.84 | 51,230,067 | |||
Annually, the Compensation Committee reviews the Company's non-management director compensation program with the goal of maintaining a program that comports with market norms and that aligns the interests of non-management directors with those of stockholders. This review includes an examination of publicly available information regarding compensation paid to non-management directors at the other publicly traded homebuilders and general industry participants in a peer group examined by the Compensation Committee (Toll Brothers,(D.R. Horton Inc., Hovnanian Enterprises, Inc., Beazer Homes USA, Inc.,KB Home, Lennar Corporation, M.D.C. Holdings, Inc., The Ryland Group, Meritage Homes Corporation, Taylor Morrison Home Corp.NVR, Inc., Pulte Group, Inc., Toll Brothers, Inc., Masco Corporation, Mohawk Industries Inc., Owens Corning, and KB Home)USG Corporation), a review of general industry director compensation information and, from time to time, a discussion with an outside compensation consultant.
In 2014,2015, each non-management director was eligible to receive total annual compensation valued at $220,000, consisting of an annuala cash retainer of $100,000 and quarterly grants of common stock valued at $30,000.with an annual value of $120,000. Following our October 1, 2015 merger with The Ryland Group, Inc., the Compensation Committee has decided to continueslightly modify the structure of the program for 2015.by increasing the annual value of the quarterly stock grant to $130,000. The Compensation Committee believes the total amount of compensation is consistent with market norms and that the mix between cash and stock strikes the appropriate balance between providing non-management directors with a significant portion of their compensation in stock to better align their interests with our other stockholders, while providing them sufficient cash to fund income taxes associated with their receipt of the stock.
The annual cash retainer is paid in four equal installments on February 15, May 15, August 15 and November 15. The stock grant is paid in quarterly installments in shares of Common Stock that are priced at the closing price of Common Stock on each of March 31, June 30, September 30 and December 31. The stock is fully vested on the date of grant. As a reflection of a greater workload, our Lead Independent Director receives an additional $125,000 annual cash retainer and our Audit and Compensation Committee Chairman each receive an additional $20,000 annual cash retainer, payable quarterly in the same manner and at the same time as the general cash retainer paid to all non-management directors. Upon election or appointment to the Board of Directors, each new non-management director receives a grant of 5,000 shares of restricted stock which vests in full one year after the date of grant.
| Name | Fees Earned or Paid in Cash($) | Stock Awards(s) ($)(2) | Total($) | Fees Earned or Paid in Cash($) | Stock Awards(s) ($)(2) | Total($) | ||||||||||||
| Bruce A. Choate | $ | 120,000 | $ | 120,000 | $ | 240,000 | $ | 115,000 | $ | 122,500 | $ | 237,500 | ||||||
| Ronald R. Foell | $ | 120,000 | $ | 120,000 | $ | 240,000 | $ | 90,000 | $ | 90,000 | $ | 180,000 | ||||||
| Douglas C. Jacobs | $ | 120,000 | $ | 120,000 | $ | 240,000 | $ | 115,000 | $ | 122,500 | $ | 237,500 | ||||||
| David J. Matlin(1) | $ | — | $ | — | $ | — | ||||||||||||
| John R. Peshkin | $ | 100,000 | $ | 120,000 | $ | 220,000 | ||||||||||||
| Peter Schoels(1) | $ | — | $ | — | $ | — | ||||||||||||
| William L. Jews | $ | 56,250 | $ | 32,500 | $ | 88,750 | ||||||||||||
| David J. Matlin (1) | $ | — | $ | — | $ | — | ||||||||||||
| Robert E. Mellor | $ | 30,000 | $ | 32,500 | $ | 62,500 | ||||||||||||
| Norman J. Metcalfe (3) | $ | 30,000 | $ | 32,500 | $ | 62,500 | ||||||||||||
| John R. Peshkin (4) | $ | 75,000 | $ | 90,000 | $ | 165,000 | ||||||||||||
| Peter Schoels (1) | $ | — | $ | — | $ | — | ||||||||||||
| Charlotte St. Martin (3) | $ | 25,000 | $ | 32,500 | $ | 57,500 | ||||||||||||
| (1) | Mr. Matlin and Mr. Schoels have elected to decline all compensation that they would otherwise be entitled to receive as members of the Board. |
| (2) |
| (3) | Mr. Metcalfe and Ms. St. Martin contributed their 857 share fourth quarter common stock grant (described in footnote (2) above) into the Company's Nonqualified Deferred Compensation Plan. Mr. Metcalfe also contributed his $25,000 fourth quarter annual cash retainer payment into the plan. |
| (4) | Mr. Foell and Mr. Peshkin retired from the Board at the time of our October 1, 2015 merger with The Ryland Group, Inc. |
Non-Employee Director Stock Ownership Guidelines
The Company has adopted Non-Employee Director Stock Ownership Guidelines for the purpose of further aligning the interests and actions of our directors with the interests of our other stockholders. Each non-employee member of the Company's Board of Directors (other than directors who are employees of any of our 10% or greater stockholders or their affiliates who are not subject to these guidelines) is required to hold a number of shares equal to three times the annual cash retainer paid to the director and is required to reach full compliance with these guidelines within five years of the date the director becomes subject to them. As of December 31, 2014,2015, each of our directors was in compliance with the guidelines.
Our bylaws provide that for the three year period beginning October 1, 2015, which is the date of the closing of the merger transaction between us and The Ryland Group, Inc., our Board of Directors (the "Board") will consist of a single class of ten members elected annually, of which five director nominees will be selected by the persons (or their successors) who were directors of the Company immediately prior to and following the closing of the merger (collectively, the "Continuing Company Directors"), and of which five director nominees will be selected by the former Ryland directors (or their successors) who were directors of the Company immediately following the closing of the merger (collectively, the "Continuing Ryland Directors"). Each such nomination is subject to approval by at least a majority of the Board, which approval may not be withheld if the candidate is qualified and such approval is otherwise consistent with the Board's fiduciary duties.
In addition, pursuant to the terms of the Amended and Restated Stockholders Agreement (the "Stockholders Agreement") between us and MP CA Homes, LLC ("MatlinPatterson"), for so long as MatlinPatterson owns at least 20% of our voting power it will have the right to designate two directors as nominees for Board membership. If MatlinPatterson owns less than 20% but at least 10% of our voting power, MatlinPatterson will be entitled to designate one director as a nominee for Board membership. We are (subject to certain exceptions discussed on page 7 of this proxy statement) required to nominate each director designated by MatlinPatterson, if the Nominating and Corporate Governance Committee determines that such nominees possess the characteristics required by the Company's governance standards, and to have the Board recommend that stockholders vote for the election of each designated director. MatlinPatterson currently holds in excess of 20% of our voting power and is therefore entitled to designate two director candidates. MatlinPatterson has designated two persons, current Board members David J. Matlin and Peter Schoels, as director nominees.
The Continuing Company Directors have selected current directors Bruce A. Choate, (Chairman), Douglas C. Jacobs, David J. Matlin, Peter Schoels, and John R. PeshkinScott D. Stowell for nomination for Board membership and the Continuing Ryland Directors have selected current directors William L. Jews, Robert E. Mellor, Norman J. Metcalfe, Larry T. Nicholson, and Charlotte St. Martin for nomination for Board membership. Consistent with the advice of the Nominating and Corporate Governance Committee, the Board has unanimously approved each of these selections and has nominated each such person to stand for election at the Annual Meeting. If elected, each nominee will serve until the 2017 annual meeting of stockholders or until the election and qualification of his or her respective successor.
The qualifications of each director nominee are described below under the heading "Nominees for Election."
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE TEN NOMINEES NAMED IN THIS PROXY STATEMENT FOR DIRECTOR.
Assuming the presence of a quorum, the ten directors that receive the most "For" votes will be elected at the Annual Meeting. Broker non-votes will have no effect on the election of directors because such election is by a plurality vote. Unless instructed otherwise in the proxy, the persons named on the enclosed proxy card will vote all proxies received by them for the election of the ten nominees identified below. The Board does not contemplate that any of its proposed nominees will become unavailable for any reason, but if such unavailability should occur before the Annual Meeting, proxies will be voted for another nominee selected by the Board.
Nominees for Election
Following is biographical information about each director nominee and reasons why the Nominating and Governance Committee and the Board determined that each of the director nominees are qualified to serve on the Board.
| Bruce A. Choate |
Age: 68
Year in which First Elected a Director: 2007
Current Committees: Member of the Audit and Compensation Committees
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Since December 2002, Mr. Choate has served as membersChief Executive Officer and Director of Watson Land Company, a privately-held real estate investment trust ("REIT) located in Carson, California. Mr. Choate also served as President of Watson Land Company from December 2002 through the third quarter of 2015. Prior to December 2002, Mr. Choate served since 1991 as Watson Land Company's Chief Financial Officer. Mr. Choate also served on the Board of Directors for AvalonBay Communities, Inc., a publically traded apartment REIT, and was a member of AvalonBay's investment and finance committee and its nominating and corporate governance committee until May 2015. Mr. Choate's extensive background in the real estate industry, including his extensive real estate related accounting and financial expertise, are skills critical to his roles on our Audit and Compensation Committees and led to our Board's conclusion to nominate Mr. Choate for re-election.
| Douglas C. Jacobs |
Age: 75
Year in which First Elected a Director: 1998
Current Committees: Member of the Audit Committee
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Since 2015, Mr. Jacobs has served as Chief Financial Officer and Treasurer of Brownstone Services LLC and several other private companies owned by the beneficiary of a marital trust since July 2015. From January 2006 to June 2015, Mr. Jacobs served as Executive Vice President - Finance and Chief Financial Officer of Brooklyn NY Holdings LLC, a privately held investment advisory company established to manage the assets of a family trust. Prior to that, Mr. Jacobs served as Executive Vice President – Finance, Chief Financial Officer and treasurer of the Cleveland Browns from March 2001 to December 2005. Prior to that Mr. Jacobs, among other things, served as a partner of the accounting firm, Arthur Andersen, LLP. Mr. Jacobs is also a Director of Stoneridge, Inc., a designer and manufacturer of electronic systems for motor vehicles, a member of its compensation committee and Chairman of its audit committee and is a Director of M/G Transport Services LLC, a barge line and inland waterways carrier. Mr. Jacobs' extensive background in accounting and finance, qualify him as an "audit committee financial expert" within the meaning of applicable SEC regulations, which is critical to his role on our Audit Committee and led to our Board's conclusion to nominate Mr. Jacobs for re-election.
| William L. Jews |
Age: 64
Year in which First Elected a Director: 2015
Current Committees: Lead Independent Director and a member of the Nominating and Corporate Governance Committee
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Jews served as a member of the Board of Directors of The Ryland Group, Inc. from 1995 until October 2015, including as Chairman of the Board and Lead Independent Director. He is also a director of Choice Hotels International, Inc., CACI International Inc., and KCI Technologies Inc. He served as President and Chief Executive Officer of CareFirst Blue Cross Blue Shield until 2006 and was instrumental in the expansion and growth of this successful and complex health insurance company in Maryland, Washington D.C., Virginia and Delaware, generating over $6 billion in annual revenue during a time of business, market and regulatory challenge. He previously served as a Director for a nationally recognized leader in credit related services, MBNA Corporation. He has also served on the Boards of Ecolabs Corp., Camden Learning Corporation and Bank of America. His experience on various boards provides Mr. Jews with a broad range of experience and knowledge which is relevant to his current role as the Company's Lead Independent Director and led to our Board's conclusion to nominate Mr. Jews for election.
| David J. Matlin |
Age: 54
Year in which First Elected a Director: 2008
Current Committees: Chairman of the Nominating and Corporate Governance Committee
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Matlin has served as Chief Executive Officer of MatlinPatterson Global Advisers LLC, a private equity firm since 2002. Prior to July 2002, Mr. Matlin was a Managing Director at Credit Suisse First Boston, and head of their Distressed Securities Group since its formation in 1994. Prior to joining CSFB, Mr. Matlin was Managing Director of distressed securities and a founding partner of Merrion Group, L.P., a successor to Scully Brothers & Foss L.P. (1988- 1994). Mr. Matlin also serves as an Advisory Board member of Wharton Private Equity Partners (WPEP). Mr. Matlin was identified by, and serves as a member of our Board pursuant to the terms of the Stockholders Agreement between the Company and its largest stockholder, MatlinPatterson. In addition, the Board believes that Mr. Matlin's extensive financial expertise makes it appropriate to nominate him for re-election to our Board.
| Robert E. Mellor |
Age: 72
Year in which First Elected a Director: 2015
Current Committees: Chairman of the Compensation Committee during 2014. There are noand a member of the Audit Committee
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Mellor served as a member of the Board of Directors of The Ryland Group, Inc. from 1999 until October 2015. He currently serves as Chairman of the Board of Directors of Coeur Mining, Inc. and as Lead Director of Monro Muffler Brake, Inc. Until December 2015, Mr. Mellor was also a Director of Stock Building Supply, Inc. Until 2010, Mr. Mellor served as Chairman and CEO of Building Materials Holding Corporation, a corporation that was a key supplier of labor and materials to the homebuilding industry. As a result, Mr. Mellor has a significant understanding of the Company's core homebuilding business. Mr. Mellor previously was of counsel with the leading national law firm of Gibson, Dunn & Crutcher, LLP and, therefore, has a valuable knowledge and understanding of the legal issues and regulatory complexities that the Company must address as a publicly traded homebuilder. As the Chairman of the Board and Lead Director of two well recognized companies, he provides expertise to our Board in the ever-changing landscape of corporate governance and strategic planning, which led to our Board's conclusion to nominate Mr. Mellor for election.
| Norman J. Metcalfe |
Age: 73
Year in which First Elected a Director: 2015
Current Committees: Chairman of the Audit Committee and a member of the Compensation Committee interlocks
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Metcalfe served as a member of the Board of Directors of The Ryland Group, Inc. from 2000 until October 2015. Mr. Metcalfe has an extensive background in real estate development and homebuilding. He currently serves as Chairman of the Board of Directors of The Tejon Ranch Company, a diversified real estate development and agribusiness company located in Southern California. He previously was Vice Chairman and Chief Financial Officer of The Irvine Company, one of the nation's largest real estate and community development companies. Prior to The Irvine Company, Mr. Metcalfe spent over 20 years in various real estate, corporate finance and investment positions with the Kaufman and Broad/ SunAmerica family of companies. These positions included President and Chief Investment Officer of SunAmerica Investments and member of the Board of Directors and Chief Financial Officer of Kaufman and Broad Home Corporation (currently known as KB Home). Mr. Metcalfe brings a wealth of knowledge of our core homebuilding business and his extensive financial expertise qualifies him as a qualify him as an "audit committee financial expert" within the meaning of applicable SEC regulations, which is critical to his role as the Chairman of our Audit Committee. All of these strengths informed our Board's conclusion to nominate Mr. Metcalfe for election to our Board.
| Larry T. Nicholson |
Age: 58
Year in which First Elected a Director: 2015
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Nicholson has served as President and Chief Executive Officer of the Company since October 2015. Prior to our October 1, 2015 merger with The Ryland Group, Inc., Mr. Nicholson served Ryland in various roles since joining Ryland in 1996, including as Director, President and Chief Executive Officer from June 2009 until 2015, Executive
Vice President and Chief Operating Officer from 2007 until 2008, President of the Southeast Region from 2005 until 2007, and President of the Orlando Division until 2005. Throughout his working career, Mr. Nicholson has held a wide variety of positions within the homebuilding industry. His role on the Board is essential to linking the operational and strategic decisions necessary to continue our Company's success, which led to the Board's conclusion to nominate Mr. Nicholson for election.
| Peter Schoels |
Age: 42
Year in which First Elected a Director: 2009
Current Committees: Member of the Compensation Committee and Nominating and Corporate Governance Committee
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Schoels has served as the Managing Partner of MatlinPatterson Global Advisers LLC, a private equity firm, since July 2002. Prior to July 2002, Mr. Schoels was a member of Credit Suisse's Distressed Group which he joined in 2001. He has made investments in North America, Latin America, Europe and the CIS. Before joining Credit Suisse, Mr. Schoels was Director of Finance and Strategy for Tradeledger and KnowledgePlatform, both subsidiaries of Itim Group Plc (2000-2001). Previously, he was Manager of Mergers and Acquisitions for Ispat International NV (now Mittal Steel), specializing in buying distressed steel assets in emerging markets (1998-2000). Mr. Schoels was identified by, and serves as a member of our Board pursuant to the terms of the Stockholders Agreement between the Company and other entities involvingits largest stockholder, MatlinPatterson. In addition, the Company'sBoard believes that Mr. Schoels' financial expertise and significant experience in acquiring businesses makes it appropriate to nominate him for re-election to our Board.
| Scott D. Stowell |
Age: 58
Year in which First Elected a Director: 2012
Current Committees: Executive Chairman of the Board of Directors
Principal Occupation and Other Public Company Directorships for Five Prior Years and Other Information: Mr. Stowell has served as Executive Chairman of the Board of Directors of CalAtlantic Homes since October 2015. Prior to that, Mr. Stowell served as our Chief Executive Officer from January 2012 and as President since March 2011. Mr. Stowell also served as Chief Operating Officer from May 2007 to March 2011, President of our Southern California Region from September 2002 to May 2007 and President of our Orange County division from April 1996 to September 2002. Mr. Stowell is also a Director of Pacific Mutual Holding Company, the ultimate parent company of Pacific Life Insurance Company. The Board believes that Mr. Stowell's homebuilding expertise and thirty years of experience with the Company allow him to provide critical leadership to the Company as we work to complete the integration of our October 2015 merger with The Ryland Group, Inc.
| Charlotte St. Martin |
Age: 70
Year in which First Elected a Director: 2015
Current Committees: Member of the Nominating and Corporate Governance Committee
Principal Occupation for Five Prior Years and Other Information: Ms. St. Martin served as a member of the Board of Directors of The Ryland Group, Inc. from 1996 until October 2015. Since April 2015, Ms. St. Martin has served as President of The Broadway League, the national trade association representing commercial theatre in the United States. Prior to that she was the Executive Director of The Broadway League since 2006. Prior to The Broadway League, Ms. St. Martin was Executive Vice President of Loews Hotels until 2005. Ms. St. Martin brings valuable insight and knowledge from her prior experience managing the operations and marketing of Loews Hotels, a national hotel brand that operates in similar markets to the Company. As an executive officerswith Loews Hotels, she was involved with the critical elements necessary for the operational success of Loews' principal resort properties and directors.hotels. Prior to her position as a senior executive with Loews in New York, she was President and Chief Executive Officer of a 1,600 room Loews Hotel which employed 2,000 people. Ms. St. Martin has served on the Boards of Gibson Greetings, Inc. and Metropolitan Bank. Given her extensive managerial experience and knowledge of the markets in which we operate, Ms. St. Martin provides valuable input into the deliberations and decisions of our Board of Directors, which led to the Board's conclusion to nominate Ms. St. Martin for election.
The Compensation Committee of the Board of Directors has reviewed and discussed with management the contents of the "Compensation Discussion and Analysis" section below. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
Robert E. Mellor (Chairman)
Bruce A. Choate (Chairman)
The foregoing Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any Company filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except to the extent the Company specifically incorporates this report.
Bruce A. Choate (Chairman), Douglas C. Jacobs, Robert E. Mellor, Norman J. Metcalfe, Peter Schoels, and former director, John R. Peshkin, all served as members of the Compensation Committee during 2015. There are no Compensation Committee interlocks between the Company and other entities involving the Company's executive officers and directors.
Stockholder "Say-On-Pay" Voting
On May 7, 2014, we held our annual meeting of stockholders. At that meeting, stockholders were provided the opportunity to cast non-binding advisory votes on the compensation of our named executive officers and the frequency with which stockholders should be provided the opportunity to vote on the compensation of our named
executive officers in the future. Following the recommendation of our Board of Directors, over 98% of votes cast by stockholders at the meeting were voted to approve the compensation of our named executive officers and nearly 63% of votes cast were voted in favor of a three year frequency for future "say-on-pay" advisory votes. Consistent with these results, our Compensation Committee applied a similar compensation philosophy when setting 2015 and 2016 executive compensation and decided on a three year frequency for future "say-on-pay" votes. The next "say-on-pay" vote will be held at the 2017 annual meeting of stockholders.
Compensation Philosophy and Objectives
The objective of our executive compensation program is to attract, motivate, retain and reward key executives, support our business strategy through a "pay for performance" philosophy tied to individual and overall company results, and align the long-term interests of our executives with those of our other stockholders.
Core Principles. Consistent with these objectives, the Committee has developed a compensation program for executive officers, including the Company's named executive officers, predicated on the following core principles:
| · | The overall level of total compensation for executives should be reasonable and competitive with the compensation paid to similarly situated peer executives, subject to variation for factors such as the individual's ability, experience, performance, duties, responsibilities, prior contributions and future potential contributions to the Company. |
| · | Annual incentive opportunities should represent a significant portion of total possible compensation for executives and should provide for variations in performance. |
| · | A significant portion of total possible compensation should be paid in the form of long term equity incentives (stock options, stock appreciation rights, restricted stock and/or performance shares) thereby |
| enhancing the executive's financial interest in the creation of long-term stockholder value and aligning the interests of our executives with those of our stockholders. |
Our Best Practices
Our compensation program incorporates the following best practices:
| WE DO | WE DO NOT | |||
  | The majority of our compensation is performance-based, |   | We do not provide | |
| Incentive compensation earned by our executives is subject to claw-back provisions in certain instances where compensation is based in whole or in part on reported financial results that are subsequently modified as a result of a restatement and the executive has engaged in misconduct. | | We do not provide tax-gross ups on perquisites to our executives. | |
| Following a change-in-control, post termination cash benefits are not payable unless an executive's employment is terminated ("double trigger"). | | ||
| | We do not permit our executives to hedge the economic risk of owning Company stock. | ||
| | We do not permit our executives to pledge Company stock. | ||
| Our Compensation Committee is | | We do not maintain separate or supplemental retirement plans for | |
| Our Compensation Committee is advised by an independent compensation consultant who provides the Committee with comparator compensation data and a risk assessment of our executive compensation practices. This consultant is retained directly by the Committee. | | We do not reprice or replace stock options or other equity awards. | |
The majority of our executive compensation is performance-based and is dependent on and determined by the success of the Company's financial, operational, strategic and stock performance. The charts below show the 20142015 percentage of performance-based compensation for our CEO and Executive Chairman and other Named Executive Officers ("NEOs"):
(FROM SUMMARY COMPENSATION TABLE – PAGE 36)34)
17
Our Company Performance in 20142015
We believe this combination of two industry leaders offers the following advantages:
| · | Combined strength of two industry leading companies with proud legacies and nearly 100 years of combined homebuilding experience |
| · | Experienced and proven leadership with shared visions and passion for success |
| · | Positioned to take advantage of opportunities and efficiencies while accelerating both companies growth strategies |
| · | Better navigation of industry cyclicality through broader market and product diversification and greater economies of scale |
| · | Significant synergy potential and efficient integration resulting from compatibility |
Completing a transaction of this magnitude required a tremendous amount of time and effort from our executive compensation program in Marchteam and from other members of 2012,management. Despite the Company has achievedinevitable distraction and disruption to our operations caused by the merger process and subsequent integration efforts, our management team was able to keep our local operating teams focused on delivering the quality craftsmanship, outstanding customer experience and exceptional architectural design our customers have come to expect from us over our 50 year history. This continued focus translated into solid overall operating and financial performance.performance for 2015.
Highlights of the Company's performance during 2014pro forma 2015 and comparisons to 2013pro forma 2014 include:
| · |
| · |
| · |
| · | Pro forma average number of active selling communities of 558, up |
To view actual 2015 results and comparisons to 2014, please see our Report on Form 10-K for the year ended December 31, 2015, which has been included with this Proxy Statement.
Procedure for Setting Executive Compensation
Role of the Compensation Committee. The Compensation Committee (in this section, the "Committee") is responsible for all aspects of executive compensation, including, among other things:
| · | establishing the Company's compensation philosophy, objectives and policies; |
| · | reviewing and approving all elements and levels of the compensation and benefits of the Company's executive officers; |
| · | annually appraising the performance of the Chief Executive Officer and Executive Chairman and providing developmental feedback to the Chief Executive Officer and Executive Chairman and, when appropriate, to the other executive officers of the Company; and |
| · | administering the Company's compensation plans, including its equity incentive plans. |
Each member of the Committee is an independent director.
The Committee generally meets in conjunction with our quarterly Board meetings and from time to time at additional special meetings on an as-needed basis. The Committee held seven meetings during late 2013 and early 2014 at which proposed 2014 executive officer compensation was discussed and held five meetings during late 2014 and early 2015 at which proposed 2015 executive officer compensation was discussed and held four meetings during late 2015
and early 2016 at which proposed 2016 executive officer compensation was discussed. The Committee also informally communicates between meetings as necessary to conduct the Committee's business. While the Company's Chief Executive Officer, Executive Chairman, Chief Legal Officer and Senior Vice President of Human Resources generally attend Committee meetings, the Committee also meets in executive session without management from time to time as it deems appropriate. Compensation matters are also discussed at executive sessions of the full Board, where both Committee members and other independent members of the Board of Directors are present without management.
The Committee makes compensation decisions for all of the Company's named executive officers and certain other highly compensated employees.officers. The Committee evaluates performance, compensation levels and compensation program structure throughout the year, but generally begins the process of structuring the upcoming year's compensation program at a regularly scheduled meeting in October. Following a series of special Committee meetings, that take place beginning in December, the Committee finalizes compensation programs for the current year in March, formally adopting base salaries and annual cash incentive compensation programs, and approving grants of long-term equity incentives, such as stock options, stock appreciation rights, restricted stock and performance share awards. This timing allows the Committee to consider prior performance and to satisfy the requirements of Section 162(m) necessary to achieve tax deductibility of certain performance based compensation payments, while maximizing the incentive effect of any compensation tied to annual performance.
Role of Management. The Company's Chief Executive Officer annually reviews each executive officer's performance with the Committee and makes recommendations to the Committee with respect to the appropriate base salary and incentive compensation program for each executive officer. The Committee takes these proposals into consideration, among other matters, when making compensation decisions.
Use of Compensation Consultant. TheIn October 2015, the Committee has retained a new independent compensation consultant, Exequity LLPSteven Hall & Partners ("SH&PExequity"), to provide guidance on best practices and key developments in compensation, assistance with program design, benchmarking data, and to otherwise assist the Committee with its duties. In the second halfExequity is a nationally recognized independent provider of 2011, as a reflection of the Committee's belief that the Company's executive compensation program should be revised to reflect the Company's operational transition to a focus on growth, the Committee, SH&P, and membersadvisory services, with no affiliation with any other service provider. In light of the Company's senior management team worked together to conductOctober 2015 transformational merger of equals transaction with The Ryland Group, Inc., the Committee first tasked Exequity with conducting a comprehensive review of the Company's managementexecutive compensation practices. As a result of this process,program. Exequity's review, which was completed and presented to the Committee adopted a newat its February 2016 regularly scheduled meeting, validated the existing executive compensation program framework that was used beginninghad first been adopted by the Committee in 2012. The2012 and the Committee, again in consultation with SH&PExequity and Company management, reviewed the results of the program for 2012, 2013 and 2014, concludingdetermined, as more particularly described below, that use of the same general executive compensation program framework was also appropriate for 2015.2016.
Competitive Marketplace Assessment. The Committee looks to a paycompensation comparator peer group as a source of marketplace data regarding executive compensation structure and payment levels. TheFor 2015, the Company's paycompensation comparator peer group includesincluded companies in the homebuilding industry with similar size, scope and complexity, within a range of 0.5 to 2 times the Company's revenues. For purposes of setting 2014 and 2015 compensation, the pay comparator group includedrevenues (
Beazer Homes USA, Inc., Hovnanian Enterprises, Inc., KB Homes, M.D.C. Holdings, Inc., Meritage Homes Corporation, The Ryland Group, Inc., Toll Brothers, Inc. and Taylor Morrison Home Corp.). For purposes of setting 2016 compensation, in light of the Company's merger transaction with Ryland, which nearly doubled the size, scope and complexity of the Company, the compensation comparator group was modified to include comparators that are similar in size to the combined company and to expand the group to include general industry participants in addition to peer homebuilders. The Company is at approximately the median of this new group in terms of revenue and market capitalization. The 2016 compensation comparator group includes:
| Homebuilders | General Industry Participants |
| D.R. Horton Inc. | Masco Corporation |
| Lennar Corporation | Mohawk Industries Inc. |
| Pulte Group, Inc. | Owens Corning |
| Toll Brothers, Inc. | USG Corporation |
| KB Home | |
| M.D.C. Holdings, Inc. | |
| Meritage Homes Corporation | |
| NVR, Inc. |
In addition to the information obtained on paycompensation comparators, the Committee also typically reviews broader based compensation survey data. While the pay comparator and broader survey information provide useful data points, the Committee does not tie compensation levels to fixed benchmarks. Instead, market analyses are one factor among many that the Committee reviews when determining compensation levels. Other important considerations include individual performance and experience, scope of responsibilities and the need to recruit and retain individuals to fill key positions.
Compensation Elements
Our compensation program is comprised of the following pay elements:
| · | Base Salary. The Committee believes base salaries should be adequate to attract and retain management, and to provide a reasonable fixed base level of compensation. Base salaries for the named executive officers are established based on the scope of their responsibilities, experience, performance and contributions to the Company, taking into account compensation paid to similarly situated peer executives and other compensation data determined to be relevant by the Committee. |
| · | Annual Cash Incentive Compensation. The Committee believes that, in addition to base salary, an annual cash incentive compensation program should be designed to motivate and reward executives for |
| · | Equity Compensation. The Committee believes that equity awards |
| · | Perquisites and Other Benefits. The Committee does not believe that executives should |
Overview. In early 20142015 and again in March 2015,2016, following review of the Company's short and long term strategy and competitive compensation data, including data provided by the Committee's independent compensation consultant, SH&P, and other discussions between members of the Committee, Company senior management, and other Board members, the Committee adopted the 20142015 and 20152016 compensation programs described below for each of the Company's named executive officers. At December 31, 2015, Ourour named executive officers are:were:
| Title | ||
| Scott D. Stowell | Executive Chairman | |
| Larry T. Nicholson | Chief Executive Officer |
| Chief Operating Officer | ||
| Jeff J. McCall | Chief Financial Officer |
Wendy L. Marlett | Chief Marketing Officer |
John P. Babel | Chief Legal Officer |
Mr. Nicholson and Mr. Skelly became executive officers of the Company on October 1, 2015 in connection with the closing of our merger transaction with The Ryland Group, Inc. In connection with the merger, we entered into an employment agreement with Mr. Nicholson and an additional letter agreement with Mr. Nicholson and Mr. Skelly. Except as modified by the employment agreement and letter agreements, we also assumed Ryland's obligations under the other compensation related agreements to which Mr. Nicholson and Mr. Skelly were a party with Ryland prior to the merger transaction. These agreements are described more particularly below under the heading "Employment Related Agreements; Impact of the Merger".
The 20142015 and 20152016 compensation programs are designed to provide each of theseour officers with a total compensation package appropriate with respect to his or her scope of responsibilities and competitive (in both total dollar value and in compensation mix) with his or her similarly situated peers. The 20142015 and 20152016 program designs are generally consistent with each other and the compensation programs approved by the Committee insince 2012, and 2013, reflecting the Committee's belief that these compensation programs worked well to drive the executive behaviors that led to the Company's strong financial performance for each of those years.
Base Salaries.For 2014, the Following is a list of our named executive officers and their base salaries of Mr. Stowell, Mr. McCall, Ms. Marlettfor 2015 and Mr. Babel were $930,000 (increased to $1,000,0002016. Base salaries for the named executive officers are established based on August 1, 2014), $670,000, $560,000, and $490,000, respectively. Effective April 1, 2015, the base salaries of Mr. Stowell, Mr. McCall, Ms. Marlett and Mr. Babel were $1,000,000, $700,000, $575,000, and $505,000, respectively. The base salaries reflect the Committee's view of each individual executive's scope of responsibilitytheir responsibilities, experience, performance and contributions to the base pay ofCompany, taking into account compensation paid to similarly situated peer executives amongand other compensation data determined to be relevant by the Company's pay comparators.Committee.
| Name | Title | 2015 | 2016 |
| Scott D. Stowell | Executive Chairman | $1,000,000 | $1,000,000 |
| Larry T. Nicholson | President and Chief Executive Officer | $1,000,000 | $1,000,000 |
| Peter G. Skelly | Chief Operating Officer | $675,000 | $725,000 |
| Jeff J. McCall | Chief Financial Officer | $700,000 | $725,000 |
| Wendy L. Marlett | Chief Marketing Officer | $575,000 | $590,000 |
| John P. Babel | Chief Legal Officer | $505,000 | $535,000 |
Annual Cash Incentive Compensation. In March 2014, the Committee established annualAnnual cash incentive targets, expressed as a percentage of base salary, for each of our named executive officers, 125% of base salary for Mr. Stowell, 100% of base salary for Mr. McCall and 50% of base salary for Ms. Marlett and Mr. Babel. In August 2014, in light of Mr. Stowell's performance and a review of his compensation level relative to his peers, the Committee also provided Mr. Stowell with the opportunity to earn additional cash annual incentive compensation for 2014 targeted at $450,000 (discussed in more detail below). For 2015, the Committee once again established annual cash incentive targets, expressed as a percentage of base salary, for each of our named executive officers, 150% of base salary for Mr. Stowell, 100% of base salary for Mr. McCall and 50% of base salary for Ms. Marlett and Mr. Babel. The Committee believes that these annual incentive opportunitiesawards are consistent with those provided to other similarly situated executives among the Company's pay comparators.
on achieving appropriate return on investment. Payouts under the program are subject to a minimum performance threshold and are subject to a cap, defined as a percentage of base salary. Maximum payouts will only be earned for superior Company performance.
2015 Annual Cash Incentive Compensation Program Structure. For 2014,2015, each executive was provided the Company earned $350 million in pre-tax income. This amount was $25 million over the $325 million pre-tax income target contained in the Company's business plan and $75 million over the $275 million minimum performance threshold. This minimum performance threshold, the achievementopportunity to earn annual cash incentive compensation with a targeted level of which would result inincentive compensation set at a payout equal to 50%percentage of the executive's base salary. 2015 cash incentive compensation was to be earned based on the Company's 2015 pre-tax income. In addition, Ms. Marlett and Mr. Babel's achievement of targeted amountlevels of annual incentive compensation represented an amount $17 million higher thanalso depended upon the nearly $258 millionachievement of individual and departmental performance objectives related to their respective areas of supervision. The 2015 annual cash incentive programs for Mr. Nicholson and Mr. Skelly that we assumed in connection with our October 1, 2015 merger with The Ryland Group, Inc. were structured in a similar manner as the Company's program, with threshold, target and maximum levels of compensation to be earned based on pre-tax income earnedincome. The following table sets forth the 2015 annual cash incentive compensation program structure for each executive. Payouts for 2015 to each executive under this program are discussed in more detail below under the heading "2015 Named Executive Officer Annual Cash Incentive Compensation and Bonus Payouts".
| 2015 Annual Cash Incentive Compensation Program Structure | |||
| Name | Payout at Threshold (% of Target) | Payout at Target (% of Base Salary) | Payout at Max (% of Target) |
| Scott D. Stowell | 50% | 180% | 200% |
| Larry T. Nicholson* | 50% | 200% | 200% |
| Peter G. Skelly* | 50% | 85% | 200% |
| Jeff J. McCall | 50% | 100% | 200% |
| Wendy L. Marlett | 50% | 50% | 200% |
| John P. Babel | 50% | 50% | 200% |
* Mr. Nicholson and Mr. Skelly's awards were not granted by the Compensation Committee, but were assumed by the Company in 2013.connection with its October 1, 2015 merger with The Ryland Group, Inc.
2016 Annual Cash Incentive Compensation Program Structure. For 2016, each executive has been provided the opportunity to earn annual cash incentive compensation with a targeted level of incentive compensation set at a percentage of the executive's base salary. 2016 cash incentive compensation will be earned 50% based on the Company's 2016 pre-tax income and 50% based on the Company's 2016 operating margin. The Committee has established a minimum performance threshold for 2016 pre-tax income and operating margin below which the executive will earn no annual cash incentive compensation and has established a cap on the total cash incentive compensation that the executive may receive. Alternatively, if the threshold level of 2016 pre-tax income or 2016 operating margin is not achieved, the executive will be entitled to receive cash incentive compensation of up to 50% of his or her annual cash incentive target if the Company exceeds a threshold number of home deliveries during 2016 at the discretion of the Compensation Committee. The following table sets forth specific annual cash incentive compensation program related information for each executive. The Committee believes that these annual incentive opportunities are consistent with those provided to other similarly situated executives among the Company's compensation comparators.
| 2016 Annual Cash Incentive Compensation Program Structure | |||
| Name | Payout at Threshold (% of Target) | Payout at Target (% of Base Salary) | Payout at Max (% of Target) |
| Scott D. Stowell | 50% | 180% | 200% |
| Larry T. Nicholson | 50% | 200% | 200% |
| Peter G. Skelly | 50% | 100% | 200% |
| Jeff J. McCall | 50% | 100% | 200% |
| Wendy L. Marlett | 50% | 75% | 200% |
| John P. Babel | 50% | 75% | 200% |
Long Term Equity Compensation. In addition to cash compensation, the Committee provides annual equity awards to the Company's executive officers, such as stock options, stock appreciation rights, restricted stock and performance share awards. These awards encourage executive ownership of Company common stock, further
aligning the interest of executives with those of the Company's other stockholders, and provide the executive with an incentive (because the equity compensation generally vests over an extended timeframe) to remain with the Company for a long and productive career.
2015 Long Term Equity Compensation Program Structure. For 2014 and 2015, the committee decided to provide a long-term equity grant to each of the Company's then named executive officers, the dollar value of each grant expressed as a percentage of the executive's base salary, 350%, 200%, 100% and 100%, respectively, for Mr. Stowell, Mr. McCall, Ms. Marlett and Mr. Babel.salary. The awards consist of 33 1/3% restricted common stock, 33 1/3% capped common stock appreciation rights and 33 1/3% performance share awards (see tablestable below). The dollar valueFor 2015, Mr. Nicholson and Mr. Skelly were awarded long-term equity grants under the legacy Ryland equity program, which were assumed by the Company in connection with the merger. Mr. Nicholson and Mr. Skelly's 2015 grants were also expressed as a percentage of the grant for each executive reflects the Committee's viewbase salary and consist of each individual's scope of responsibility40% restricted stock and the total compensation package of similarly situated executives among the Company's pay comparators.
Capped Stock Appreciation Rights and Restricted Stock.Stock. For 2014 and 2015, theThe capped stock appreciation rights and restricted stock vest in three equal installments on each of the first three anniversaries of the issuance date with one-half of the dollar value of these awards issued on April 1st and October 1st of the respective plan year; provided, that, in the case of the restricted stock award, a threshold level of Company pre-tax income must be achieved before the award begins to vest ($275350 million for 2014)2015). The 2014 capped stock appreciation rightsWith respect to the awards made to the continuing Company executives, one-half of dollar value of these awards was issued on April 1, 2015 and restricted stock hadone-half on October 1, 2015, with grant date prices per share of $8.44$44.55 and $7.40 on April 1, 2014 and October 1, 2014,$41.16, respectively, (equalequal to the Company's common stock closing price on the issuance date), with thedates.
| Name | 4/1/15 SAR Grant | 10/1/15 SAR Grant | 4/1/15 Restricted Stock Grant | 10/1/15 Restricted Stock Grant |
| Scott D. Stowell | 110,805 | 109,595 | 13,093 | 14,172 |
| Jeff J. McCall | 44,322 | 43,838 | 5,237 | 5,668 |
| Wendy L. Marlett | 18,203 | 18,004 | 2,151 | 2,328 |
| John P. Babel | 15,987 | 15,813 | 1,889 | 2,044 |
The value per share of the stock appreciation rights is capped at $4.00$20.00 above the grant price. With respect to the restricted stock awards made to Mr. Nicholson and Mr. Skelly by Ryland for 2015, following their conversion from Ryland stock to Company stock, Mr. Nicholson and Mr. Skelly were issued 40,315 and 10,750 shares, respectively.
Performance Share Awards. For 2014On April 1, 2015, Mr. Stowell, Mr. McCall, Ms. Marlett and 2015,Mr. Babel, received performance share awards with the Committee splitthreshold, target and maximum number of shares for each executive set as follows:
| Name | Shares Earned at Threshold | Shares Earned at Target | Shares Earned at Maximum |
| Scott D. Stowell | 9,872 | 19,742 | 59,226 |
| Jeff J. McCall | 3,949 | 7,896 | 23,688 |
| Wendy L. Marlett | 1,622 | 3,243 | 9,729 |
| John P. Babel | 1,425 | 2,848 | 8,544 |
With respect to the performance share awards made to Mr. Nicholson and Mr. Skelly by Ryland for 2015 and assumed by the Company, following their conversion from Ryland stock to Company stock, Mr. Nicholson and Mr. Skelly received performance share awards with the target number of shares set for each executive at 60,606 and 16,161, respectively. The number of shares of stock ultimately issued to each executive with respect to the 2015 performance share award program cannot yet be determined; provided, that, in connection with the merger, Mr. Nicholson and Mr. Skelly were guaranteed to receive at least their targeted number of shares.
For 2015, the Company's performance share award program was originally designed so that 50% of the dollar value of each executive's performance share award vests based on the achievement of an earnings per share metric and 50% vests based on the Company's relative total shareholder return as compared to a peer group. Similar in design, the 2015 Ryland performance share award program was designed so that 50% of the dollar value of each executive's performance share award vests based on the achievement of a revenue growth metric and 50% vests based on the Company's relative total shareholder return as compared to a peer group. In light of the combination of the legacy Company management team and former Ryland management team as a result of our October 1, 2015 merger, the Committee decided that it was in the best interests of the Company to combine the 2015 Company performance share award program and 2015 legacy Ryland
performance share award program so that both the legacy Company named executive officers and legacy Ryland named executive officers are aligned on the same performance metrics. As a result, the 2015 performance share award program was modified so that 50% of the dollar value of each executive's performance share award vests based on the achievement of a revenue growth metric (replacing the EPS metric from the legacy Company program with the revenue growth metric from the legacy Ryland program) and 50% vests based on the Company's relative total shareholder return as compared to a peer group (retaining the total shareholder return metric in the same formulation as originally set forth by the Committee when it created the 2015 program, which is also consistent with the total shareholder return metric contained in the legacy Ryland program). In addition, to preserve the 162(m) deductibility of the award, the performance period for the revenue growth metric was modified from the three year period ending December 31, 2017 to the two year period ending December 31, 2017. The Committee believes that, with the annual cash incentive award program's focus on earnings and half of the performance share award program focused on revenue and half on total shareholder return relative to peers, the overall incentive compensation program creates a healthy focus on properly balancing profitability and growth, while considering returns to stockholders.
| Aggregate 2015 Equity Award Structure | |||||
| Name | % of Base Salary | Dollar Value of Equity Award | |||
Capped Stock Appreciation Rights | Restricted Stock | Performance Share Awards | |||
| Revenue Based | TSR Based | ||||
| Scott D. Stowell | 350% | $1,166,667 | $1,166,666 | $583,334 | $583,333 |
| Larry T. Nicholson* | 450% | ˗ | $1,800,000 | $1,350,000 | $1,350,000 |
| Peter G. Skelly* | 178% | ˗ | $480,000 | $360,000 | $360,000 |
| Jeff J. McCall | 200% | $466,667 | $466,666 | $233,334 | $233,333 |
| Wendy L. Marlett | 100% | $191,667 | $191,666 | $95,834 | $95,833 |
| John P. Babel | 100% | $168,334 | $168,333 | $84,167 | $84,166 |
* Mr. Nicholson and Mr. Skelly's awards were not granted by the Compensation Committee, but were assumed by the Company in connection with its October 1, 2015 merger with The Ryland Group, Inc.
| Aggregate 2016 Equity Award Structure | ||||
| Name | % of Base Salary | Dollar Value of Equity Award | ||
Restricted Stock | Performance Share Awards | |||
| Revenue Based | TSR Based | |||
| Scott D. Stowell | 405% | $1,620,000 | $1,215,000 | $1,215,000 |
| Larry T. Nicholson | 450% | $1,800,000 | $1,350,000 | $1,350,000 |
| Peter G. Skelly | 200% | $580,000 | $435,000 | $435,000 |
| Jeff J. McCall | 200% | $580,000 | $435,000 | $435,000 |
| Wendy L. Marlett | 115% | $271,400 | $203,550 | $203,550 |
| John P. Babel | 115% | $246,100 | $184,575 | $184,575 |
Revenue Component of Performance Share Award. The Committee established the various levels of performance required to earn the earnings per sharerevenue growth component of the performance share award (see table below) based on the Company's projections and the Board's expectations regarding projected earnings per share levels at the time the award was made.revenues. The Committee believes that exceptional Company performance is required for the executives to earn the maximum level of performance shares.
shares tied to revenue. For 2014,2015, the earnings per sharerevenue metric component of the award is based on the Company's actual earnings per share for the year endedrevenue growth from January 1, 2016 through December 31, 2016.2017. For 2015,2016, the earnings per sharerevenue metric component of the award is based on the Company's cumulative earnings per share for the years 2015-2017.revenue growth from January 1, 2016 through December 31, 2018. The "Target" number of shares of Company common stock awarded to each named executive officer is determined by dividing the applicable portion of their base salary by the fair value per share of the award on the grant date. In accordance with applicable accounting rules, the "fair value" for common stock awards that vest based on company performance (such as earnings per share)revenue growth) is the Company's common stock closing price per share on the grant date.
| 2015 PSA Award | 2016 PSA Award | ||
Revenue Growth Thresholds 2016-2017 | Revenue Growth Thresholds 2016-2018 | ||
% of Targeted Revenue Growth Achieved | Multiple of Target Shares | % of Targeted Revenue Growth Achieved | Multiple of Target Shares |
| 92% | 0 | 92% | 0 |
| 96% | 0.5 x Target | 96% | 0.5 x Target |
| 100% | 1 x Target | 100% | 1 x Target |
| 104% | 1.5 x Target | 104% | 1.5 x Target |
| 108% | 2 x Target | 108% | 2 x Target |
| 112% | 2.5 x Target | ||
| 116% | 3 x Target | ||
Total Shareholder Return Component of Performance Share Award. The Committee established the various levels of performance required to earn the total shareholder return ("TSR") component of the performance share award (see table below) based on the Committee's view of the difficulty of achieving the relative TSR ranks reflected in the table below. The Committee believes that the ranking required for the executives to earn the maximum payout of this award is extremely difficult to achieve and would be an exceptional result for stockholders.
accordance with applicable accounting rules, "fair value" for common stock awards that vest based on market conditions (such as TSR) is determined by an independent third party valuation firm using a lattice model.
| 2015 PSA Award | 2016 PSA Award | ||
2015-2017 Performance Period | 2016-2018 Performance Period | ||
| Company TSR Rank | Multiple of Target Shares | Company TSR Rank | Multiple of Target Shares |
| #12 - #14 | 0 | 30th percentile or below | 0 |
| #10 or #11 | 0.5 x Target | 40th percentile | 0.5 x Target |
| #7 - #9 | 1 x Target | 50th percentile | 1 x Target |
| #4 - #6 | 2 x Target | 70th percentile | 1.5 x Target |
| #1 - #3 | 3 x Target | 90th percentile or above | 2 x Target |
The TSR peer group consists of a larger group of homebuilders than those contained in the Company's paycompensation comparator group, but excludes other industry participants, reflecting the Committee's belief that the Company's relative TSR performance should be measured against the other publicly traded homebuilding companies that the Company is likely competing against for investor dollars. This peer group for 2014 included2015 includes Lennar Corp., PulteGoup,PulteGroup, Inc., DRD.R. Horton, Inc., NVR, Inc., Brookfield Residential Properties, Inc., Taylor Morrison Home Corporation, Toll Brothers, Inc., TRI Pointe Homes, Inc., Hovnanian Enterprises, Inc., Beazer Homes USA, Inc., M.D.C. Holdings, Inc., The Ryland Group, Inc., Meritage Homes Corporation, and KB Home. Brookfield Residential Properties,Hovnanian Enterprises, Inc. was, Beazer Homes USA, Inc., and The Ryland Group, Inc. (because of our merger) were eliminated from the peer group for 2016.
Executive Stock Ownership Guidelines. In March 2012, the Compensation Committee adopted new Executive Stock Ownership Guidelines for the purpose of further aligning the interests and actions of the executives with the interests of the Company's stockholders. Under the guidelines, our named executive officers are required to hold a multiple of their base salary in Company common stock (CEO 3x, other named executive officers 2x). In October 2015, the committee modified these guidelines to increase the Chief Executive Officer's holding requirement from 3x to 5x and created a new holding requirement of 3x for the Company's Executive Chairman. Each such executive officer is required to reach full compliance with the guidelines within five years of the date he or she first becomes subject to the guidelines. If an executive officer fails to reach compliance with the guidelines within the five year phase in period, he or she will be paid 100% of annual incentive compensation in common stock until compliance is achieved. He or she will also be required to hold at least fifty percent of all common stock awarded to him or her (excluding shares sold to fund tax liabilities associated with the receipt or vesting of awards) until the required ownership threshold is met. As of December 31, 2015, each of our named executive officers was in compliance with the guidelines because it has announced it will no longerthey were within the five year phase in period.
Prohibitions on Hedging and Pledging Company Stock. In order to avoid creating conflicts between an executive's interests and those of other stockholders, our Insider Trading Policy prohibits all covered persons, including executives, from hedging the economic risk of owning Company shares. In addition, in April 2013, the Board implemented a prohibition on the pledging of Company stock by directors and named executive officers. This policy was effective April 1, 2014. These prohibitions do not apply to stock held by MatlinPatterson and its affiliates, which may be a public company.
deemed to be held by MatlinPatterson affiliated Board members David Matlin and Peter Schoels under applicable beneficial ownership rules.Executive Officer.Chairman (Chief Executive Officer until October 1, 2015). In addition to his initial base salary of $930,000, Scott D. Stowell was provided the opportunity to earn 2015 annual cash incentive compensation of between 0 and 250%360% of his base salary based on the Company's 20142015 pre-tax income. The target annual cash incentive compensation for 20142015 for Mr. Stowell was 125%180% of his base salary. As described above, the Company earned 110% of the pre-tax income target set forth in the 2015 annual cash incentive compensation plan and, as a result, Mr. Stowell received 2015 annual cash incentive compensation of $2,489,400. Additionally, Mr. Stowell received a merger related bonus of $2,000,000 that was paid on October 1, 2015 in connection with the completion of our merger with Ryland.
Chief Executive Officer (Commencing October 1, 2015). In connection with, and as a condition to the closing of our October 1, 2015 merger with The Ryland Group, Inc., we entered into an employment agreement with Larry T. Nicholson to serve as our President and Chief Executive Officer and assumed Ryland's obligations under Mr. Nicholson's CEO Severance Agreement, Executive Severance Agreement, and with respect to his various equity awards. Among other things, these arrangements provided that Mr. Nicholson would be eligible to earn annual cash incentive compensation with a target of 200% of his base salary andbased on the achievement of a pre-tax income target. The target annual cash incentive compensation was to be earned if the Company achieved its pre-tax income target of $325$287 million reflected in the Company's 2014 business plan, a 26% increase over the Company's actual 2013 pre-tax income. The Committee also established a $275 million pre-tax income minimum performance threshold, a nearly 7% increase over the Company's actual 2013 pre-tax income, the achievement of which would result in Mr. Stowell earning cash incentive compensation equal to 62.5% of his base salary.was achieved. The Company's actual pre-tax income for 2014 was $350 million, 108%2015, after being adjusted to exclude the impact of the $325merger, was approximately $438 million, target level of pre-tax earnings necessary forwhich entitled Mr. StowellNicholson to earn the200% of his targeted level of incentive compensation. As a result, Mr. Stowell received 2014Nicholson was entitled to receive 2015 annual cash incentive compensation of $1,355,976, equal$4,000,000. However, Mr. Nicholson requested, and the Compensation Committee agreed, to 146%reduce Mr. Nicholson's actual 2015 incentive compensation payment by $1,400,000. As a result, Mr. Nicholson received a 2015 incentive compensation payment of his initial base salary under this program.$2,600,000.
Chief Operating Officer (Commencing October 1, 2015). In August 2014, in lightconnection with, and as a condition to the closing of our October 1, 2015 merger with The Ryland Group, Inc., we assumed Ryland's employment related obligations to Mr. Stowell's performanceSkelly, including with respect to Mr. Skelly's 2015 incentive compensation program, Executive Severance Agreement, and various equity awards. Pursuant to the arrangements we assumed from Ryland, Mr. Skelly was entitled to earn annual cash incentive compensation with a reviewtarget of his compensation level relative to his peers, the Committee increased85% of his base salary from $930,000 to $1,000,000. The Committee also created a supplemental cash incentive program for Mr. Stowell based on the Company's achievement of a targeted level of $215.1 million in pre-tax income for the six month period commencing July 1, 2014. If this targeted level were achieved, Mr. Stowell would earn an additional $450,000 in cash incentive compensation. Mr. Stowell would not be entitled to earn any additionalincome. The target annual cash incentive compensation unless a threshold level of $182.0 million inwas to be earned if pre-tax income for this six month periodof $287 million was achieved (85% of the target), at which level he would earn a bonus of $225,000 and would be eligible to earn up at a maximum of $900,000 in additional cash incentive compensation if the Company earned $314.4 million in pre-tax income (146% of the target).achieved. The Company's actual pre-tax income for 2015, after being adjusted to exclude the six month period commencing July 1, 2014 was $196.5 million, or 91%impact of the $215.1merger, was approximately $438 million, target level of pre-tax earnings necessary forwhich entitled Mr. StowellSkelly to earn the200% of his targeted level of additional incentive compensation. As a result, Mr. StowellSkelly received additional 20142015 annual cash incentive compensation of $323,591 under this program.$1,150,000. Additionally, Mr. Skelly received a discretionary bonus of $275,000 in connection with his efforts related to the merger.
Chief Financial Officer. In addition to his base salary of $670,000, Jeff J. McCall was provided the opportunity to earn annual cash incentive compensation of between 0 and 200% of his base salary based on the Company's 20142015 pre-tax income. The target annual cash incentive for Mr. McCall was 100% of his base salary and was to be earned ifsalary. As described above, the Company achieved itsearned 110% of the pre-tax income target of $325 million reflectedset forth in the Company's 2014 business plan, a 26% increase over the Company's actual 2013 pre-tax income. The Committee also established a $275 million pre-tax income minimum performance threshold, a nearly 7% increase over the Company's actual 2013 pre-tax income, the achievement of which would result in Mr. McCall earning2015 annual cash incentive compensation equal to 50% of his base salary. The Company's actual pre-tax income for 2014 was $350 million, 108% of the $325 million target level of pre-tax earnings necessary for Mr. McCall to earn the targeted level of incentive compensation. Asplan and, as a result, Mr. McCall received 20142015 annual cash incentive compensation of $781,509, equal$968,100. Additionally, Mr. McCall received a discretionary bonus of $235,000 in connection with his efforts related to 117% of his base salary.our merger with Ryland.
Chief Marketing Officer and Chief Legal Officer. In addition to their base salaries of $560,000 and $490,000, Wendy L. Marlett, the Company's Chief Marketing Officer, and John P. Babel, the Company's Chief Legal Officer, were provided the opportunity to earn annual cash incentive compensation of between 0% and 100% of their base salaries, with the targeted amount of annual cash incentive compensation set at 50% of their base salaries. This targeted amount of annual cash incentive compensation was to be earned if: (i)if the Company achieved its pre-tax income target of $325$400 million reflected in the Company's 2014 business plan (60% of the targeted amount would be earned), (ii) and Ms. Marlett and Mr. Babel achieved theirBabel's level of achievement with respect to various departmental and individual performance goals (20%objectives as determined by the Chief Executive Officer and the Committee (40% of the targeted amount would be earned), and (iii). As described above, the Chief Executive Officer and the Committee subjectively determined that their performance warranted a targeted levelCompany earned 110% of compensation (20% of the targeted amount would be earned) based on a variety of Company, department and other individual performance measures. The Committee also established a minimum performance threshold of $275 million for the pre-tax income component of theirtarget set forth in the 2015 annual cash incentive compensation program (no annual incentive compensation would be paid with respect to the pre-tax income component if the Company did not achieve at least $275 million in pre-tax income for 2014)plan and minimum performance thresholds for each of Ms. Marlett and Mr. Babel's individual goals. Ms. Marlett and Mr. Babel would havewere awarded the maximum that could be earned cash incentive compensation equalwith respect to just 20% of their base salaries if the Company achieved the pre-tax income threshold of $275 million, they each achieveddepartmental and individual performance. As a minimum level of performance on their individual performance goals, and they were not awarded any part of the subjectively determined bonus.
result, Ms. Marlett received a payout of $326,601, or 58% of her base salary for 2014, reflecting the Company's performance at 108% of its 2014 business plan with respect to pre-tax income (discussed above), the Chief
Employment Related Agreements; Impact of Merger
The Company consummated its merger transaction with The Ryland Group, Inc. on October 1, 2015. Each of the Company's pre-merger named executive officers, Scott D. Stowell, Jeff J. McCall, Wendy L. Marlett and John P. Babel, continued as named executive officers following the merger. In addition, Larry Nicholson, Ryland's former President and Chief Executive Officer, and Peter Skelly, Ryland's former Chief Operating Officer, became named executive officers of the Company. Following is a description of the employment related arrangements between the Company and each named executive officer.
Letter Agreements Regarding Mr. Nicholson and Mr. Skelly's 2015 Restricted Stock Unit and Performance Share Awards. In connection with the merger, we entered into letter agreements with Mr. Nicholson and Mr. Skelly, pursuant to which they agreed to waive the acceleration of the vesting of their 2015 restricted stock units and 2015 performance share awards that would have otherwise occurred as a result of the merger and to permit the modification of the performance metrics applicable to the performance share awards to align with the performance metrics applicable to the 2015 performance share awards made to the Company's continuing executive officers. Under the terms of the letter agreements, Mr. Nicholson and Mr. Skelly are, subject to continued employment, guaranteed to receive at least the target number of shares under their modified 2015 performance share awards.
Employment Agreement and Change of Control Arrangements with Mr. Stowell. In connection with the merger, the Company entered into an employment agreement with Mr. Stowell to serve as the Company's Executive Chairman. The employment agreement, which has a three-year term, provided Mr. Stowell with an initial annual base salary of $1 million, set his annual personal health and services allowance at the same percentage of base salary as that provided to the chief executive officer, and set his annual bonus target, equity grants and other incentives at 90% of the amount provided to the chief executive officer. It also contains Mr. Stowell's waiver of his right to assert that the merger and the related changes in his compensation, responsibilities and role following the merger constitute "good reason" under his severance and change in control protection agreement (described below). Finally, Mr. Stowell's employment may not be terminated without "cause" unless at least 75% of the Board approves a resolution authorizing such termination.
Employment Agreement and Change of Control Arrangements with Mr. Nicholson. In connection with the merger, the Company entered into an employment agreement with Mr. Nicholson to serve as the Company's President and Chief Executive Officer. The employment agreement, which has a three-year term, provided Mr. Nicholson with an initial annual base salary of $1 million, set his annual bonus target for 2015 at 200% of his base salary, and set his annual personal health and services allowance at 9.5% of his base salary. The agreement does not set his target level of annual bonus payments beyond 2015 or set forth the terms for 2014, reflectingequity awards or other incentive compensation, instead leaving such decisions to the Company's performancesole discretion of the Compensation Committee. Finally, the agreement provides that Mr. Nicholson's employment may not be terminated without "cause" unless at 108%least 75% of its 2014 business planthe Board approves a resolution authorizing such termination.
In connection with respectthe merger the Company also assumed Mr. Nicholson's two existing severance agreements, an executive severance agreement and a CEO severance agreement. The merger constituted a "change in control" under these agreements, but Mr. Nicholson has agreed that neither the merger nor the related changes in his compensation, responsibilities and role following the merger constitutes "good reason" for purposes of these agreements. Pursuant to pre-tax income (discussedthe executive severance agreement, during a "change of control period," if Mr. Nicholson's employment is terminated without "cause" or if Mr. Nicholson resigns for "good reason", Mr. Nicholson will have the right to receive: (i) a lump sum cash payment equal to his unpaid salary for the remainder of the year in which termination occurs, a pro rata bonus through the date of termination based on the target annual bonus for the year in which termination occurs or in the first paragraphabsence of a specified target annual bonus for that year, the highest bonus he earned in any of the three years prior to termination, plus an amount equal to two times the highest "annual compensation" paid to him for any of the three years prior to termination, (ii) acceleration and payment of any outstanding equity and incentive awards, (iii) participation in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which he currently participates at the sole cost of the Company for a period of two years following his termination of employment, (iv) a lump sum cash payment for two years of continued participation in the personal health and services allowance and benefits provided to him prior to the change of control, (v) reimbursement for the costs of relocating in order to pursue professional or career opportunities within two years after termination, including taxes payable on the reimbursement, any costs or commissions related to selling his homes, and all moving expenses and any other benefits provided by the Company under its relocation program, and (vi) a lump sum cash payment equal to 10% of his "annual compensation" for the
calendar year immediately preceding termination of employment in lieu of reimbursement for outplacement services. "Annual compensation" means the sum of Mr. Nicholson's annual base salary and bonus paid or earned (even if paid in a subsequent year), and all amounts credited to him, vested and unvested, under any incentive compensation or other benefit or compensation plan, including long-term and equity incentive award plans during the year.
Pursuant to the CEO severance agreement, if Mr. Nicholson's employment is terminated without "cause", Mr. Nicholson will have the right to receive: (i) a pro rata share of his annual bonus incentive payment for the year in which the termination occurs and payment of all benefits to which he has a vested right at the time of termination, (ii) a lump sum cash payment equal to the aggregate amount of 24 months of his annual base salary as in effect prior to the date of notice of termination, (iii) a lump sum cash payment equal to twice the highest amount of annual bonus incentive payment paid or payable in the three previous years prior to the year of termination, (iv) an equity award equal to the highest restricted stock unit award granted during the three previous years (or a lump sum cash payment in an amount equal to the fair market value of such shares if such award cannot be made), (v) acceleration and payment of any outstanding equity and incentive awards, (vi) continued participation in the life, medical, dental, vision, AD&D, prescription drug, and long-term disability programs in which he participates prior to termination for a period of two years following termination of employment or equivalent benefits for the same period, and (vii) a lump sum cash payment equal to the value of coverage under the executive life insurance program as well as the value of the personal health services allowance for a period of 24 months.
Severance payments to Mr. Nicholson in connection with a qualifying termination within a "change of control period" may be made pursuant to either the CEO severance agreement or the executive severance agreement, whichever would convey the greater economic benefit to Mr. Nicholson, but not both.
Change of Control Arrangement with Mr. Skelly. In connection with the merger the Company assumed Mr. Skelly's executive severance agreement. Pursuant to this section above),agreement, in the Chief Executive Officer and Committee's subjective viewevent that his employment is terminated by the Company without "cause" or Mr. Babel was entitledSkelly resigns for "good reason" during a "change of control period," Mr. Skelly will have the right to receive his targeted levela lump sum cash payment equal to a pro rata bonus through the date of compensationtermination based on the target annual bonus for achievementthe year in which termination occurs or in the absence of department and individual performance measures, and Mr. Babel's achievementa specified target annual bonus for that year, the highest bonus earned by him in any of the targeted levellast three years prior to termination, plus an amount equal to two times the highest "annual compensation" paid to him for any of performancethe three years prior to termination. In addition to these benefits, upon a qualifying termination, he will have the right to receive (i) acceleration and payment of any outstanding equity and incentive awards, (ii) participation in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which he then participates at the sole cost of the Company for a period of two years following termination of employment, (iii) a lump sum cash payment for two years of continued participation in the personal health and services allowance and benefits provided to him prior to the change of control, (iv) reimbursement for the costs of relocating in order to pursue professional or career opportunities within two years after termination, including taxes payable on the reimbursement, any costs or commissions related to selling his two individual performance goals, successfully developing a new nationwide sales disclosurehome, and all moving expenses and any other benefits provided by the Company under its relocation program, and establishing a revised framework(v) the right to receive reimbursement for outplacement services used within two years of the date of termination of up to 25% of his "annual compensation" for the Company's customer care program.calendar year prior to the date of termination.
Change in Control and Severance Protection Agreements with Mr. Stowell, Mr. McCall, Ms. Marlett and Mr. Babel)Babel. The 2014 awards consist of 33 1/3% restricted common stock, 33 1/3% capped common stock appreciation rights ($4.00 appreciation cap) and 33 1/3% performance share awards. The dollar value of the grant for eachCompany's continuing executive for 2014 reflects the Committee's view of each individual's scope of responsibility and the total compensation package of similarly situated executives among the Company's pay comparators. The mix of equity awards reflects the Committee's attempt to balance the important retentive value of equity awards that vest over time with its desire to align the interests of Company executives with those of stockholders.
her current base salary plus his or her target annual cash incentive bonus for the year prior to the year of termination, and Company paid COBRA for two years in the case of the CEO, and 1.5 years in the case of the other named executive officers. No special treatment of equity awards is provided.
If the executive's employment with the Company is terminated by the Company without cause or by the executive for good reason (generally consisting of adverse changes in responsibilities, compensation, benefits or location of work place) in connection with a change in control (i.e., "Double-Trigger" required for payouts), the executive is entitled to receive a lump sum payment equal to a multiple (CEO(Mr. Stowell 3x, other named executive officers 2x) of the sum of his or her current base salary plus his or her target bonus for the year of termination, Company paid
COBRA for three years in the case of the CEOMr. Stowell and 2 years in the case of the other named executive officers, and an additional pro-rata bonus. The amount of the pro-rata bonus is determined by multiplying the target bonus for the year of termination by the quotient obtained by dividing the number of days in the year up to and including the date of termination by 365. In addition, all unvested equity awards will vest as of the date of termination.
The change-in-control component of these agreements reflect the Committee's belief that the interests of stockholders will be best served if the interests of the Company's named executive officers are aligned with the stockholders, and that providing change in control benefits should eliminate or at least reduce the reluctance of executive management to pursue potential change in control transactions that may be in the best interests of stockholders. The Committee believes that the overall cost and design of both the severance and change-in-control programs are consistent with market norms. In order to receive payments under the agreements the executives must execute the Company's standard form release agreement, which includes non-solicitation, non-disparagement and confidentiality requirements.
Potential Payments Upon Termination or Change-in-Control
The following table providestables provide an estimate of the total cash payment and other value that would have been received by each named executive officer assuming that the Company had become obligated to pay the executive officers either severance or change-in-control benefits on December 31, 2014.2015. The amounts indicated below are estimates of amounts that would be payable to the named executive officers and the estimates are based on multiple assumptions that may not prove correct. Accordingly, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. Our October 1, 2015 merger with The Ryland Group, Inc. constituted a "change in control" under each of the change in control related agreements described above. Therefore, for a period of two years following the date of the merger (three years in the case of Mr. Stowell and Mr. Nicholson), our executives will be entitled to the enhanced "change in control" related benefits if their employment is terminated by the Company without cause or by the executive for good reason.
Change-In-Control Benefit(1) Double Trigger (CIC + Termination) | Severance Benefit(2) Termination Without Cause (No CIC) | |||||||
| Name | Cash | + | Unvested Equity Awards (3) | = | Total | Cash | ||
| Scott D. Stowell | $9,450,000 | + | $7,224,302 | = | $16,674,302 | $3,800,000 | ||
| Jeff J. McCall | $3,350,000 | + | $3,123,836 | = | $6,473,836 | $1,980,000 | ||
| Wendy L. Marlett | $1,960,000 | + | $1,057,505 | = | $3,017,505 | $1,245,563 | ||
| John P. Babel | $1,715,000 | + | $934,588 | = | $2,649,588 | $1,091,250 | ||
Estimated Value of Termination and Change-in-Control Benefits
Change-In-Control Benefit(1) Double Trigger (CIC + Termination) | Severance Benefit(2) Termination Without Cause (No CIC) | |||||||
| Name | Cash | + | Unvested Equity Awards (3) | = | Total | Cash | ||
| Scott D. Stowell | $10,200,000 | + | $6,555,908 | = | $16,755,908 | $5,225,000 | ||
| Jeff J. McCall | $3,500,000 | + | $3,092,911 | = | $6,592,911 | $2,055,000 | ||
| Wendy L. Marlett | $2,012,500 | + | $977,609 | = | $2,990,109 | $1,282,500 | ||
| John P. Babel | $1,767,500 | + | $889,850 | = | $2,657,350 | $1,125,000 | ||
| (1) | Benefit is equal to a multiple of the sum of base salary and |
| (2) | Benefit is equal to a multiple of the sum of base salary and |
| (3) | In accordance with SEC rules, this amount represents the difference between the Company's stock price of |
| For the purposes of this calculation, in accordance with the performance share award agreements, amounts related to performance share awards include the "target" number of shares of Company common stock that will be issued to each named executive officer in the event of a change-in-control. |
| Change-in-Control Benefits | ||||||||||||
| Named Executive Officer | Cash ($) (1) | Equity ($) (2) | Perquisites / Benefits ($) (3) | Total ($) | ||||||||
| Larry T. Nicholson | $ | 19,788,767 | $ | 3,826,925 | $ | 1,055,441 | $ | 24,671,133 | ||||
| Peter G. Skelly | $ | 7,461,551 | $ | 1,020,466 | $ | 134,488 | $ | 8,616,505 | ||||
| (1) | Cash. Amounts reflect the value of cash severance payments payable under the applicable named executive officer's executive severance agreement as described above. The severance amounts in this column are all "double trigger" in nature, which means that payment of these amounts is conditioned on both the occurrence of a change of control and a qualifying termination of employment. For purposes of this table, Mr. Nicholson is assumed to have received severance payments and benefits under his executive severance agreement and not his CEO severance agreement. |
| (2) | Equity. Amounts reflect the value of the restricted stock units (including any accrued cash dividend equivalents) and performance share awards that are currently outstanding and unvested. These amounts have been calculated assuming that the fair market value of a share of Company common stock is equal to $37.92 (the closing price of such stock on December 31, 2015) multiplied by all unvested awards held by the named executive officer as of December 31, 2015. Amounts included in this column were all "single trigger" in nature, which meant that payment was conditioned solely upon the occurrence of a change in control. However, in connection with our merger, Mr. Nicholson and Mr. Skelly waived their single trigger vesting acceleration for the amounts listed in this column, which means that payment of these amounts is conditioned on both the occurrence of the merger and a qualifying termination of employment. Neither Mr. Nicholson nor Mr. Skelly hold any unvested stock options as of December 31, 2015. |
| (3) | Perquisites/Benefits. Amounts reflect, as applicable, the value of perquisites and benefits payable under the applicable named executive officer's executive severance agreement as described above and include the following: the estimated value of two years continued participation in the life, accident and health insurance and employee welfare benefit plans in which the executive participates, and an equivalent cash payment for two years of continued participation in the personal health and services allowance—Mr. Nicholson, $219,649; Mr. Skelly, $134,488. Amounts also include a lump sum cash payment of $835,792 for Mr. Nicholson equal to 10% of his "annual compensation" for 2014 (the calendar year immediately preceding the executive's assumed termination of employment) in lieu of the reimbursement for outplacement services. Under his executive severance agreement, Mr. Skelly is eligible to receive reimbursement for the costs of all outplacement assistance he receives up to 25% of his "annual compensation" for the calendar year prior to the date of his termination of employment, which potential reimbursement amount is not determinable at this time given that it will depend on the level of outplacement assistance he receives. These benefits are all "double trigger" in nature, which means that payment of these amounts is conditioned on both the occurrence of the merger and a qualifying termination of employment. |
The table below sets forth the assumed amount of payments that would be paid to Mr. Nicholson if there had been a termination of his employment by the Company without "cause" on December 31, 2015.
| Mr. Nicholson's Severance Benefit | |||||
| 2015 annual bonus incentive payment | $2,000,000 | ||||
| Twenty-four months of annual base salary | $2,000,000 | ||||
| Separation from service lump sum cash payment equal to 2x the highest annual bonus paid in the three prior years | $6,145,858 | ||||
| Separation from service equity award equal to the highest restricted stock unit award granted during the three prior years | $2,785,848 | ||||
| Accelerated vesting of equity awards | $3,826,925 | ||||
| Value of health and welfare benefits for two years | $29,650 | ||||
| Lump sum cash payment equal to the value of additional benefits for two years | $190,000 | ||||
| TOTAL | $16,978,281 | ||||
In the event that Mr. Nicholson's employment is terminated by reason of death, his benefits are determined in accordance with the Company's retirement, insurance or other applicable program then in effect. In addition, the Company shall pay to Mr. Nicholson's beneficiaries or estate a prorated share of his bonus for the year in which termination occurs as well as all benefits to which they have a right in accordance with the plan or agreement governing such benefits.
In the event that Mr. Nicholson becomes "disabled" and is unable to perform his duties for more than 120 days during any 12-month period or, in the reasonable determination of the Board of Directors, Mr. Nicholson's "disability" would exist for more than 120 days, the Company has the right to terminate his employment. Upon such termination, the Company's obligation to pay and provide compensation shall expire except that the Company will pay to Mr. Nicholson a prorated share of his bonus for the year in which termination occurs. Additionally, the
Company will pay Mr. Nicholson his base salary through the effective date of termination together with all benefits to which he has a vested right in accordance with the plan, document or agreement governing such benefits. "Disability" means the incapacity of Mr. Nicholson to engage in the performance of his duties with the Company, due to injury, illness, disease or bodily or mental infirmity.
Mr. Nicholson may terminate his employment with the Company at any time by giving the Board of Directors 90 days written notice prior to the effective date of termination. Upon such termination, the Company will pay Mr. Nicholson his base salary through the date of termination and all benefits to which he has a vested right. Mr. Nicholson will not receive an annual bonus for the year in which termination occurs.
The Board of Directors may terminate Mr. Nicholson's employment at any time for "cause" and the Company will pay Mr. Nicholson his base salary through the date of termination. Upon such a termination, Mr. Nicholson will forfeit all rights and benefits he is entitled to receive including any right to a bonus for the year in which termination occurs, but excluding any benefits in which he has a vested right. "Cause" is defined as Mr. Nicholson's willful and continued failure to perform the material duties of his position after receiving notice of and being given reasonable opportunity to cure such failure, willful misconduct demonstrably and materially injurious to the Company, or conviction of a felony.
Other Compensation Related Plans and Policies
401(k) Retirement and Savings Plan. All employees, including the named executive officers, may participate in the Company's 401(k) Retirement and Savings Plan. Each employee may elect to make before-tax contributions up to the current tax limits. The Company matched employee contributions up to $5,000 per employee per year for 2015 and increased this amount to $7,000 for 2016.
Nonqualified Deferred Compensation Plan. All of the Company's senior managers, including the named executive officers, and certain other Company employees, may participate in the Company's nonqualified deferred compensation plan. The plan allows participants to defer the receipt of income through contributions to the plan that are directed by the participant into a variety of investment funds options. The Company does not currently provide matching contributions to the plan.
Personal Health and Services Allowance. All of our senior managers, including the named executive officers, are entitled to a Personal Health and Services Allowance ("PHSA") provided as a percent of their base salary. The PHSA is intended as a means to motivate participants to monitor their physical health and financial stability by incentivizing them to receive medical examinations and physical health training and to have a professional review of their personal finances and tax preparation. It is also provided in lieu of mileage reimbursement or a car allowance. For 2016, our named executive officers are provided 9.5% of their base salary annually as a PHSA.
Risk Oversight and Control. We believe the goals established for our performance based compensation programs coupled with the internal controls and oversight of the risk elements in our business have minimized the possibility that our compensation programs and practices will have a material adverse effect on the Company and its financial and operational performance. As described in the section titled "Risk Oversight" on page 4 of this Proxy Statement, our Audit Committee has general oversight responsibility with respect to risk management, and exercises appropriate oversight to insure that risks are not viewed in isolation and are appropriately controlled and reported to the Board. Our compensation programs are designed to work within this system of oversight and control, and the Compensation Committee considers whether our compensation programs reward reasonable risk taking and achieve the proper balance between the desire to appropriately reward employees while protecting the Company and its stockholders. Exequity, the Compensation Committee's independent consultant, conducted a compensation risk assessment based on the Company's 2016 plan designs, and has informed the Compensation Committee that it does not believe the company's executive compensation plans and programs are likely to result in a material and adverse effect on the company.
Tax Deductibility of Named Executive Officer Compensation
Compensation. The Committee generally attempts to structure executive compensation in a manner so as to minimize the impact of Section 162(m) of the Internal Revenue Code. Under Section 162(m), a company may not deduct non-performance based compensation in excess of $1,000,000 paid to a named executive officer (other than the Chief Financial Officer). The Committee believes that it is generally in the Company's best interests for its executives' compensation to meet the requirements of
Section 162(m). Accordingly, the Committee has taken appropriate actions, to the extent it believes feasible, to preserve the deductibility of the annual incentive and long-term awards it pays to executives. However, notwithstanding this general policy, the Committee also believes that there may beare circumstances in which the Company's interests are best served by maintaining flexibility in the way compensation is provided, whether or not compensation is fully deductible under Section 162(m). For instance, during 2012 and 2013, the Committee determined, in consultation with SH&P,its compensation consultant, that it was appropriate to make time based restricted stock grants to the Company's executive officers. TimeRestricted stock grants that vest based restricted stock grantssolely on the passage of time are not considered performance based compensation for purposes of Section 162(m). As a result, we anticipate that as these restricted
stock grants vest, a portion of this compensation will likely not be deductible. For 2013 and 2014, the non-deductible portion of compensation attributable to this vesting was approximately $160,000 and $531,171, respectively. Beginning in 2014, the Committee modified our executive restricted stock award program to introduce a performance condition to our executive restricted stock awards that is intended to make the restricted stock awards deductible performance based compensation for purposes of Section 162(m).
Summary Compensation Table
The following table summarizes the compensation of the Company's named executive officers for 2012, 2013, 2014 and 2014.2015.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(1) | All Other Compensation ($)(3) | Total ($) |
Scott D. Stowell (Chief Executive Officer) | 2014 | 951,667 | 2,469,979 | 1,385,000 | 1,679,567 | 6,063 | 6,492,276 |
| 2013 | 887,500 | 1,800,000 | 900,000 | 1,800,000 | 6,067 | 5,393,567 | |
| 2012 | 825,000 | 1,275,000 | 1,127,330 | 1,700,000 | 5,293 | 4,932,623 | |
Jeff J. McCall (Chief Financial Officer) | 2014 | 665,000 | 893,315 | 446,666 | 781,509 | 19,037 | 2,805,527 |
| 2013 | 625,000 | 736,666 | 368,334 | 1,300,000 | 5,275 | 3,035,275 | |
| 2012 | 550,000 | 412,500 | 605,720 | 1,100,000 | 57,793 | 2,726,013 | |
Wendy L. Marlett (Chief Marketing Officer) | 2014 | 555,187 | 373,318 | 186,667 | 326,601 | 5,583 | 1,447,356 |
| 2013 | 536,813 | 270,376 | 135,187 | 432,600 | 5,587 | 1,380,563 | |
| 2012 | 525,000 | 196,875 | 159,269 | 406,875 | 5,293 | 1,293,312 | |
John P. Babel (Chief Legal Officer) | 2014 | 486,250 | 326,648 | 163,332 | 285,776 | 5,271 | 1,267,277 |
| 2013 | 462,500 | 237,500 | 118,750 | 380,000 | 5,275 | 1,204,025 | |
| 2012 | 425,000 | 159,373 | 146,769 | 340,000 | 5,293 | 1,076,435 |
| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(1) | All Other Compensation ($)(3) | Total ($) | ||||||||
Scott D. Stowell (Executive Chairman) | 2015 | 1,000,000 | 2,000,000 | 2,333,166 | 1,166,664 | 2,489,400 | 6,067 | 8,995,297 | ||||||||
| 2014 | 951,667 | ― | 2,469,979 | 1,385,000 | 1,679,567 | 6,063 | 6,492,276 | |||||||||
| 2013 | 887,500 | ― | 1,800,000 | 900,000 | 1,800,000 | 6,067 | 5,393,567 | |||||||||
Larry T. Nicholson (Chief Executive Officer) | 2015 | 250,000 | ― | ― | ― | 2,600,000 | 34,956 | 2,884,956 | ||||||||
Peter G. Skelly (Chief Operating Officer) | 2015 | 168,750 | 275,000 | ― | ― | 1,150,000 | 22,653 | 1,616,403 | ||||||||
Jeff J. McCall (Chief Financial Officer) | 2015 | 692,500 | 235,000 | 933,162 | 466,665 | 968,100 | 8,907 | 3,304,334 | ||||||||
| 2014 | 665,000 | ― | 893,315 | 446,666 | 781,509 | 19,037 | 2,805,527 | |||||||||
| 2013 | 625,000 | ― | 736,666 | 368,334 | 1,300,000 | 5,275 | 3,035,275 | |||||||||
Wendy L. Marlett (Chief Marketing Officer) | 2015 | 571,250 | 250,000 | 383,266 | 191,658 | 397,613 | 5,587 | 1,799,374 | ||||||||
| 2014 | 555,187 | ― | 373,318 | 186,667 | 326,601 | 5,583 | 1,447,356 | |||||||||
| 2013 | 536,813 | ― | 270,376 | 135,187 | 432,600 | 5,587 | 1,380,563 | |||||||||
John P. Babel (Chief Legal Officer) | 2015 | 501,250 | 400,000 | 336,566 | 168,330 | 349,208 | 5,275 | 1,760,629 | ||||||||
| 2014 | 486,250 | ― | 326,648 | 163,332 | 285,776 | 5,271 | 1,267,277 | |||||||||
| 2013 | 462,500 | ― | 237,500 | 118,750 | 380,000 | 5,275 | 1,204,025 |
| (1) | Annual bonus and non-equity incentive plan compensation is generally paid in February for the prior year's performance. The |
| (2) | The amounts reflected in these columns are the aggregate grant date fair values of equity awards. The methodology and assumptions used to calculate these values are set forth in Note |
| anniversaries of the issuance date. These awards are described in more detail in the "Compensation Discussion and Analysis" section under the heading |
| (3) | Includes premiums on life, long-term disability, and travel and accident insurance coverage paid by the Company and the Company's contribution to the executive's 401(k) Plan account. In addition, amounts in this column for 2015 include the Company's contribution of $23,750 and $16,031 to the Personal Health and Services Allowance for Mr. Nicholson and Mr. Skelly, respectively, and $7,500 and $5,062, respectively, for the Company's matching contribution related to the Executive and Director Deferred Compensation Plan II. Amounts in this column include $13,765 of commuting expenses |
Grants of Plan-Based Awards
The following table sets forth information concerning awards granted under the Company's equity and non-equity incentive plans for 20142015 to each of the Company's named executive officers. These awards are described in more detail under the headings "Overview of 20142015 and 20152016 Named Executive Officer Compensation" and "2014"2015 Named Executive Officer Annual Cash Incentive Compensation Payouts" contained in the "Compensation Discussion and Analysis" section of this proxy statement.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Compensation Committee Approval Date | Threshold ($)(1) | Target ($)(1) | Maximum ($)(1) | Threshold (#)(2) | Target (#)(2) | Maximum (#)(2) | Grant Date | Compensation Committee Approval Date | Threshold ($)(1) | Target ($)(1) | Maximum ($)(1) | Threshold (#)(2) | Target (#)(2) | Maximum (#)(2) | ||||||||||||||||||||||||||||||
Scott D. Stowell | 581,250 | 1,162,500 | 2,325,000 | — | — | — | — | — | — | 900,000 | 1,800,000 | 3,600,000 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | — | — | — | 541,147 | 8.44 | 542,500 | 04/01/15 | 03/13/15 | — | — | — | — | — | — | 110,805 | 44.55 | 583,333 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 64,277 | 64,277 | 64,277 | — | — | 542,498 | 04/01/15 | 03/13/15 | — | — | — | 13,093 | 13,093 | 13,093 | — | — | 583,293 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 64,277 | 64,277 | 257,108 | — | — | 542,498 | (5) | 04/01/15 | 03/13/15 | — | — | — | 6,547 | 13,093 | 39,279 | — | — | 583,293 | (5) | |||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 33,173 | 33,173 | 132,692 | — | — | 542,489 | (5) | 04/01/15 | 03/13/15 | — | — | — | 3,325 | 6,649 | 19,947 | — | — | 583,260 | (5) | |||||||||||||||||||||||
| 225,000 | 450,000 | 900,000 | — | — | — | — | — | — | 10/01/15 | 03/13/15 | — | — | — | — | — | — | 109,595 | 41.16 | 583,331 | |||||||||||||||||||||||||||
| 08/05/14 | 07/28/14 | — | — | — | — | — | — | 304,259 | 7.54 | 300,000 | 10/01/15 | 03/13/15 | — | — | — | 14,172 | 14,172 | 14,172 | — | — | 583,320 | |||||||||||||||||||||||||
| 08/05/14 | 07/28/14 | — | — | — | 39,787 | 39,787 | 39,787 | — | — | 300,000 | ||||||||||||||||||||||||||||||||||||
| Larry T. Nicholson(6) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | — | — | — | 550,649 | 7.40 | 542,500 | ||||||||||||||||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | 73,310 | 73,310 | 73,310 | — | — | 542,494 | ||||||||||||||||||||||||||||||||||||
Peter G. Skelly(6) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Jeff J. McCall | 335,000 | 670,000 | 1,340,000 | — | — | — | — | — | — | 350,000 | 700,000 | 1,400,000 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | — | — | — | 222,776 | 8.44 | 223,333 | 04/01/15 | 03/13/15 | — | — | — | — | — | — | 44,322 | 44.55 | 233,333 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 26,461 | 26,461 | 26,461 | — | — | 223,331 | 04/01/15 | 03/13/15 | — | — | — | 5,237 | 5,237 | 5,237 | — | — | 233,308 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 26,461 | 26,461 | 105,844 | — | — | 223,331 | (5) | 04/01/15 | 03/13/15 | — | — | — | 2,619 | 5,237 | 15,711 | — | — | 233,308 | (5) | |||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 13,656 | 13,656 | 54,624 | — | — | 223,321 | (5) | 04/01/15 | 03/13/15 | — | — | — | 1,330 | 2,659 | 7,977 | — | — | 233,251 | (5) | |||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | — | — | — | 226,688 | 7.40 | 223,333 | 10/01/15 | 03/13/15 | — | — | — | — | — | — | 43,838 | 41.16 | 233,332 | |||||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | 30,180 | 30,180 | 30,180 | — | — | 223,332 | 10/01/15 | 03/13/15 | — | — | — | 5,668 | 5,668 | 5,668 | — | — | 233,295 | |||||||||||||||||||||||||
Wendy L. Marlett | 112,000 | 280,000 | 560,000 | — | — | — | — | — | — | 143,750 | 287,500 | 575,000 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | — | — | — | 93,100 | 8.44 | 93,333 | 04/01/15 | 03/13/15 | — | — | — | — | — | — | 18,203 | 44.55 | 95,830 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 11,058 | 11,058 | 11,058 | — | — | 93,330 | 04/01/15 | 03/13/15 | — | — | — | 2,151 | 2,151 | 2,151 | — | — | 95,827 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 11,058 | 11,058 | 44,232 | — | — | 93,330 | (5) | 04/01/15 | 03/13/15 | — | — | — | 1,076 | 2,151 | 6,453 | — | — | 95,827 | (5) | |||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 5,707 | 5,707 | 22,828 | — | — | 93,329 | (5) | 04/01/15 | 03/13/15 | — | — | — | 546 | 1,092 | 3,276 | — | — | 95,792 | (5) | |||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | — | — | — | 94,736 | 7.40 | 93,334 | 10/01/15 | 03/13/15 | — | — | — | — | — | — | 18,004 | 41.16 | 95,828 | |||||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | 12,612 | 12,612 | 12,612 | — | — | 93,329 | 10/01/15 | 03/13/15 | — | — | — | 2,328 | 2,328 | 2,328 | — | — | 95,820 | |||||||||||||||||||||||||
John P. Babel | 98,000 | 245,000 | 490,000 | — | — | — | — | — | — | 126,250 | 252,500 | 505,000 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | — | — | — | 81,462 | 8.44 | 81,666 | 04/01/15 | 03/13/15 | — | — | — | — | — | — | 15,987 | 44.55 | 84,164 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 9,676 | 9,676 | 9,676 | — | — | 81,665 | 04/01/15 | 03/13/15 | — | — | — | 1,889 | 1,889 | 1,889 | — | — | 84,155 | |||||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 9,676 | 9,676 | 38,704 | — | — | 81,665 | (5) | 04/01/15 | 03/13/15 | — | — | — | 945 | 1,889 | 5,667 | — | — | 84,155 | (5) | |||||||||||||||||||||||
| 04/01/14 | 03/14/14 | — | — | — | 4,993 | 4,993 | 19,972 | — | — | 81,652 | (5) | 04/01/15 | 03/13/15 | — | — | — | 480 | 959 | 2,877 | — | — | 84,125 | (5) | |||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | — | — | — | 82,893 | 7.40 | 81,666 | 10/01/15 | 03/13/15 | — | — | — | — | — | — | 15,813 | 41.16 | 84,166 | |||||||||||||||||||||||||
| 10/01/14 | 03/14/14 | — | — | — | 11,036 | 11,036 | 11,036 | — | — | 81,666 | 10/01/15 | 03/13/15 | — | — | — | 2,044 | 2,044 | 2,044 | — | — | 84,131 | |||||||||||||||||||||||||
| (1) | The amounts in these columns reflect the threshold, target and maximum potential payouts to our executives under their |
| on their individual performance goals and received their targeted level of discretionary bonus. The amount reflected as the "Maximum" is the amount of cash that would be payable to the executive if the Company's |
| (2) | The amounts reflected in these columns represent long-term equity award compensation related to restricted stock and performance share awards that could be earned by our executives based on Company performance. Mr. Stowell, Mr. McCall, Ms. Marlett and Mr. Babel received the following grants of restricted common stock: |
| (3) | The amounts reflected in this column represent capped stock appreciation rights granted to Mr. Stowell, Mr. McCall, Ms. Marlett and Mr. Babel under their individual incentive compensation programs for |
| (4) | For a description of the methodology and assumptions used to calculate the grant date fair value of our stock awards, please see Note |
| (5) | The grant date fair value of the performance share awards is equal to the dollar amount of the "Target" award. On the grant date for these awards, the Company estimated that it was probable that the performance conditions necessary to earn the "Target" award would be satisfied. If the maximum performance level is achieved, the grant date fair value of the |
| (6) | Mr. Nicholson and Mr. Skelly became executive officers on October 1, 2015 following the closing of the Company's merger with The Ryland Group, Inc. No plan-based or equity awards were granted by the Company to Mr. Nicholson or Mr. Skelly during 2015. |
Outstanding Equity Awards At Fiscal Year End
The following table provides a summary of equity awards granted to each of the Company's named executive officers that were outstanding as of December 31, 2014.2015.
| Option Awards | Stock Awards | |||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (19) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (19) | ||||||||||
| Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||
| Scott D. Stowell | 86,470 | — | — | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 60,000 | — | 120,000 | (1) | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 139,276 | 69,637 | (2) | — | 41.9500 | 04/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 7,152 | (3) | 271,204 | — | — | |||||||||
| — | — | — | — | — | 27,305 | (4) | 1,035,406 | — | — | |||||||||
| 36,077 | 72,152 | (5) | — | 42.2000 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 8,570 | (6) | 324,974 | — | — | |||||||||
| — | — | — | — | — | — | — | 12,855 | (7) | 487,462 | |||||||||
| — | — | — | — | — | — | — | 6,634 | (7) | 251,561 | |||||||||
| 20,284 | 40,567 | (8) | — | 37.7000 | 08/05/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 5,305 | (9) | 201,166 | — | — | |||||||||
| 36,710 | 73,419 | (10) | — | 37.0000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 9,774 | (11) | 370,630 | — | — | |||||||||
| — | 110,805 | (12) | — | 44.5500 | 04/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 13,093 | (13) | 496,487 | — | — | |||||||||
| — | — | — | — | — | — | — | 13,093 | (14) | 496,487 | |||||||||
| — | — | — | — | — | — | — | 6,649 | (14) | 252,130 | |||||||||
| — | 109,595 | (15) | — | 41.1600 | 10/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 14,172 | (16) | 537,402 | — | — | |||||||||
| Larry T. Nicholson (18) | 78,342 | — | — | 16.2200 | 03/01/2016 | — | — | — | — | |||||||||
| 178,342 | — | — | 17.8800 | 03/01/2019 | — | — | — | — | ||||||||||
| — | — | — | — | — | 40,315 | 1,528,745 | — | — | ||||||||||
| — | — | — | — | — | — | — | 30,303 | 1,149,090 | ||||||||||
| — | — | — | — | — | — | — | 30,303 | 1,149,090 | ||||||||||
| Peter G. Skelly (18) | 20,382 | — | — | 17.8800 | 03/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 10,750 | 407,640 | — | — | ||||||||||
| — | — | — | — | — | — | — | 8,081 | 306,432 | ||||||||||
| — | — | — | — | — | — | — | 8,080 | 306,394 | ||||||||||
| Jeff J. McCall(17) | 27,975 | — | — | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 40,000 | — | 80,000 | (1) | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 57,000 | 28,499 | (2) | — | 41.9500 | 04/01/2018 | — | — | — | — | |||||||||
| 180,000 | — | — | 19.0000 | 06/01/2018 | — | — | — | — | ||||||||||
| — | — | — | — | — | 2,928 | (3) | 111,030 | — | — | |||||||||
| — | — | — | — | — | 11,174 | (4) | 423,718 | — | — | |||||||||
| 14,852 | 29,703 | (5) | — | 42.2000 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 3,528 | (6) | 133,782 | — | — | |||||||||
| — | — | — | — | — | — | — | 5,292 | (7) | 200,673 | |||||||||
| — | — | — | — | — | — | — | 2,731 | (7) | 103,560 | |||||||||
| 15,113 | 30,224 | (10) | — | 37.0000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 4,024 | (11) | 152,590 | — | — | |||||||||
| — | 44,322 | (12) | — | 44.5500 | 04/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 5,237 | (13) | 198,587 | — | — | |||||||||
| — | — | — | — | — | — | — | 5,237 | (14) | 198,587 | |||||||||
| — | — | — | — | — | — | — | 2,659 | (14) | 100,829 | |||||||||
| — | 43,838 | (15) | — | 41.1600 | 10/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 5,668 | (16) | 214,931 | — | — | |||||||||
| Wendy L. Marlett | 13,352 | — | — | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 8,000 | — | 16,000 | (1) | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 60,000 | — | — | 19.0500 | 09/07/2017 | — | — | — | — | ||||||||||
| 20,920 | 10,460 | (2) | — | 41.9500 | 04/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 1,074 | (3) | 40,726 | — | — | |||||||||
| — | — | — | — | — | 4,101 | (4) | 155,510 | — | — | |||||||||
| 6,207 | 12,413 | (5) | — | 42.2000 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 1,474 | (6) | 55,894 | — | — | |||||||||
| — | — | — | — | — | — | — | 2,211 | (7) | 83,841 | |||||||||
37
| Option Awards | Stock Awards | |||||||||||||||||
Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (17) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (17) | ||||||||||
| Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||
| Scott D. Stowell | 19,999 | — | — | 4.0200 | 02/07/2015 | — | — | — | — | |||||||||
| 1,165,947 | — | — | 3.1000 | 08/22/2015 | — | — | — | — | ||||||||||
| 1,000,000 | — | — | 0.6700 | 03/09/2016 | — | — | — | — | ||||||||||
| 288,233 | 144,117 | (1) | — | 4.2900 | 04/01/2017 | — | — | — | — | |||||||||
| 300,000 | — | 600,000 | (2) | 4.2900 | 04/01/2017 | — | — | — | — | |||||||||
| — | — | — | — | — | 33,023 | (3) | 240,738 | — | — | |||||||||
| — | — | — | — | — | 792,540 | (4) | 5,777,617 | — | — | |||||||||
| 348,190 | 696,378 | (5) | — | 8.3900 | 04/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 71,514 | (6) | 521,337 | — | — | |||||||||
| — | — | — | — | — | — | — | 107,271 | (7) | 782,006 | |||||||||
| — | 541,147 | (8) | — | 8.4400 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 64,277 | (9) | 468,579 | — | — | |||||||||
| — | — | — | — | — | — | — | 64,277 | (10) | 468,579 | |||||||||
| — | — | — | — | — | — | — | 33,173 | (10) | 241,831 | |||||||||
| — | 304,259 | (11) | — | 7.5400 | 08/05/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 39,787 | (12) | 290,047 | — | — | |||||||||
| — | 550,649 | (13) | — | 7.4000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 73,310 | (14) | 534,430 | — | — | |||||||||
| Jeff J. McCall | 93,252 | (15) | 46,626 | (1) (15) | — | 4.2900 | 04/01/2017 | — | — | — | — | |||||||
| 200,000 | (15) | — | 400,000 | (2) (15) | 4.2900 | 04/01/2017 | — | — | — | — | ||||||||
| — | — | — | — | — | 10,684 | (3) (15) | 77,886 | — | — | |||||||||
| — | — | — | — | — | 256,412 | (4) (15) | 1,869,243 | — | — | |||||||||
| 142,500 | (15) | 284,999 | (5) (15) | — | 8.3900 | 04/01/2018 | — | — | — | — | ||||||||
| 1,300,000 | (15) | — | — | 3.8000 | 06/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 29,267 | (6) (15) | 213,356 | — | — | |||||||||
| — | — | — | — | — | — | — | 43,901 | (7) (15) | 320,038 | |||||||||
| — | 222,776 | (8) | — | 8.4400 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 26,461 | (9) | 192,901 | — | — | |||||||||
| — | — | — | — | — | — | — | 26,461 | (10) | 192,901 | |||||||||
| — | — | — | — | — | — | — | 13,656 | (10) | 99,552 | |||||||||
| — | 226,688 | (13) | — | 7.4000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 30,180 | (14) | 220,012 | — | — | |||||||||
| Wendy L. Marlett | 44,507 | 22,253 | (1) | — | 4.2900 | 04/01/2017 | — | — | — | — | ||||||||
| 40,000 | — | 80,000 | (2) | 4.2900 | 04/01/2017 | — | — | — | — | |||||||||
| 400,000 | — | — | 3.8100 | 09/07/2017 | — | — | — | — | ||||||||||
| — | — | — | — | — | 5,099 | (3) | 37,172 | — | — | |||||||||
| — | — | — | — | — | 122,376 | (4) | 892,121 | — | — | |||||||||
| 52,301 | 104,601 | (5) | — | 8.3900 | 04/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 10,742 | (6) | 78,309 | — | — | |||||||||
| — | — | — | — | — | — | — | 16,113 | (7) | 117,464 | |||||||||
| — | 93,100 | (8) | — | 8.4400 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 11,058 | (9) | 80,613 | — | — | |||||||||
| — | — | — | — | — | — | — | 11,058 | (10) | 80,613 | |||||||||
| — | — | — | — | — | — | — | 5,707 | (10) | 41,604 | |||||||||
| — | 94,736 | (13) | — | 7.4000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 12,612 | (14) | 91,941 | — | — | |||||||||
| John P. Babel | 150,000 | (16) | — | — | 0.6700 | 03/09/2016 | — | — | — | — | ||||||||
| 36,029 | 18,015 | (1) | — | 4.2900 | 04/01/2017 | — | — | — | — | |||||||||
| 40,000 | — | 80,000 | (2) | 4.2900 | 04/01/2017 | — | — | — | — | |||||||||
| — | — | — | — | — | 4,128 | (3) | 30,093 | — | — | |||||||||
| — | — | — | — | — | 99,068 | (4) | 722,206 | — | — | |||||||||
| 45,942 | 91,883 | (5) | — | 8.3900 | 04/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 9,436 | (6) | 68,788 | — | — | |||||||||
| — | — | — | — | — | — | — | 14,154 | (7) | 103,183 | |||||||||
| — | 81,462 | (8) | — | 8.4400 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 9,676 | (9) | 70,538 | — | — | |||||||||
| — | — | — | — | — | — | — | 9,676 | (10) | 70,538 | |||||||||
| — | — | — | — | — | — | — | 4,993 | (10) | 36,399 | |||||||||
| — | 82,893 | (13) | — | 7.4000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 11,036 | (14) | 80,452 | — | — | |||||||||
| — | — | — | — | — | — | — | 1,141 | (7) | 43,267 | |||||||||
| 6,316 | 12,631 | (10) | — | 37.0000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 1,681 | (11) | 63,744 | — | — | |||||||||
| — | 18,203 | (12) | — | 44.5500 | 04/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 2,151 | (13) | 81,566 | — | — | |||||||||
| — | — | — | — | — | — | — | 2,151 | (14) | 81,566 | |||||||||
| — | — | — | — | — | — | — | 1,092 | (14) | 41,409 | |||||||||
| — | 18,004 | (15) | — | 41.1600 | 10/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 2,328 | (16) | 88,278 | — | — | |||||||||
| John P. Babel | 10,808 | — | — | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 8,000 | — | 16,000 | (1) | 21.4500 | 04/01/2017 | — | — | — | — | |||||||||
| 18,377 | 9,188 | (2) | — | 41.9500 | 04/01/2018 | — | — | — | — | |||||||||
| — | — | — | — | — | 944 | (3) | 35,796 | — | — | |||||||||
| — | — | — | — | — | 3,602 | (4) | 136,588 | — | — | |||||||||
| 5,431 | 10,861 | (5) | — | 42.2000 | 04/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 1,290 | (6) | 48,917 | — | — | |||||||||
| — | — | — | — | — | — | — | 1,935 | (7) | 73,375 | |||||||||
| — | — | — | — | — | — | — | 998 | (7) | 37,844 | |||||||||
| 5,526 | 11,052 | (10) | — | 37.0000 | 10/01/2019 | — | — | — | — | |||||||||
| — | — | — | — | — | 1,471 | (11) | 55,780 | — | — | |||||||||
| — | 15,987 | (12) | — | 44.5500 | 04/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 1,889 | (13) | 71,631 | — | — | |||||||||
| — | — | — | — | — | — | — | 1,889 | (14) | 71,631 | |||||||||
| — | — | — | — | — | — | — | 959 | (14) | 36,365 | |||||||||
| — | 15,813 | (15) | — | 41.1600 | 10/01/2020 | — | — | — | — | |||||||||
| — | — | — | — | — | 2,044 | (16) | 77,508 | — | — | |||||||||
| (1) |
| 4/2/2012 capped market-based stock appreciation rights; one half of the remaining award vests if the Company's common stock closing price reaches |
| (2) | 4/1/2013 capped stock appreciation rights; the remaining award vests on 4/2/2016. |
| (3) | 4/ |
| (4) | 4/ |
| (5) | 4/1/ |
| (6) | 4/1/ |
| 4/1/2014 performance share award; in accordance with SEC rules, this amount represents the number of shares of Company common stock that will be issued to each executive if "target" |
| 8/5/2014 capped stock appreciation rights; one half of the remaining award vests on 4/1/2016 and 4/1/2017. |
| (9) | 8/5/2014 restricted stock award; one half of the remaining award vests on 4/1/2016 and 4/1/2017. |
| (10) | 10/1/2014 capped stock appreciation rights; one half of the remaining award vests on 10/1/2016 and 10/1/2017. |
| (11) | 10/1/2014 restricted stock award; one half of the remaining award vests on 10/1/2016 and 10/1/2017. |
| (12) | 4/1/2015 capped stock appreciation rights; one third of the award vests on |
| 4/1/2015 performance share award; in accordance with SEC rules, this amount represents the number of shares of Company common stock that will be issued to each executive if "target" revenue growth and relative total shareholder return ("TSR") performance over a two-year and three-year period from 2016-2017 and 2015-2017, respectively, is achieved under the executive's performance share award agreement. On the date the performance share awards were granted, and as of the date of this proxy statement, the Company estimates that it is probable that "target" revenue growth over the two-year period from 2016-2017, and "target" relative TSR performance over the three-year period from 2015-2017 in comparison to the TSR performance of a comparative peer group selected by the Compensation Committee, will be achieved. |
| (15) | 10/1/ |
| 10/1/ |
| Certain of Mr. McCall's equity awards are held in a family LLC for which Mr. McCall is the sole manager authorized to act on behalf of the LLC. |
| Outstanding equity awards for Mr. |
| Market value based on the closing price of |
Option Exercises and Stock Vested
The following table sets forth on an aggregated basis for each of the Company's named executive officers, the number and value of shares of Common Stock acquired upon exercise of stock options, and the number and value of shares of Common Stock acquired upon vesting of restricted stock during 2014.2015.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||
Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | |||||||||
| Name | (#) | ($) | (#) | ($) | (#) | ($) | (#) | ($) | ||||||||
| Scott D. Stowell | 414,054 | 2,170,777 | 68,779 | 579,504 | 437,186 | 14,811,081 | 184,088 | 8,352,614 | ||||||||
| Larry T. Nicholson | 100,000 | 2,536,812 | — | — | ||||||||||||
| Peter G. Skelly | 13,587 | 341,129 | — | — | ||||||||||||
| Jeff J. McCall | — | — | 25,317 | 213,355 | 80,000 | 2,080,000 | 60,120 | 2,727,614 | ||||||||
| Wendy L. Marlett | — | — | 10,470 | 88,214 | 20,000 | 494,015 | 28,146 | 1,277,822 | ||||||||
| John P. Babel | 50,000 | 391,500 | 8,845 | 74,528 | 30,000 | 1,249,458 | 22,962 | 1,042,132 | ||||||||
2015 Nonqualified Deferred Compensation
Executive Contributions | Company Contributions | Aggregate Earnings/(Losses) | Aggregate Withdrawals/ Distributions | Aggregate balance at December 31, | ||||||
| Name | in 2015 ($) | in 2015 ($)(1) | in 2015 ($)(2) | in 2015 ($) | 2015 ($)(3) | |||||
| Scott D. Stowell | — | — | — | — | — | |||||
| Larry T. Nicholson | 25,000 | 7,500 | 125,899 | — | 3,306,800 | |||||
| Peter G. Skelly | 10,125 | 5,062 | 670 | (317,687) | — | |||||
| Jeff J. McCall | — | — | — | — | — | |||||
| Wendy L. Marlett | — | — | — | — | — | |||||
| John P. Babel | — | — | — | — | — |
| (1) | The amounts reflected in the Executive Contributions in 2015 column are reported as compensation earned within the Summary Compensation Table during 2015 by each of Mr. Nicholson and Mr. Skelly. Matching contributions to the EDDCP II (defined below) made by the Company are also included in the "All Other Compensation" column of the "Summary Compensation Table" on page 34 of this Proxy Statement. |
| (2) | Represents earnings or losses related to participants' accounts that are invested in a variety of independently managed investment funds available under the plan. |
| (3) | This aggregate balance represents the participants' accounts in the Nonqualified Deferred Compensation Plan maintained by the Company (assumed from Ryland in connection with the merger). Except to the extent identified in footnote (1), the amount reported in the aggregate balance at December 31, 2015 for Mr. Nicholson was not reported as compensation paid by the Company in previous fiscal years. |
The Company's Executive and Director Deferred Compensation Plan II ("EDDCP II") was assumed from Ryland in connection with the merger. As such, all contributions set forth in the table above only represent activity in the plan from October 1, 2015 to December 31, 2015. None of the former Standard Pacific named executive officers were eligible to participate in this plan. The EDDCP II allowed executives and directors to defer receipt of a portion of base salary and annual bonus. Participants were eligible to receive matching contributions from the Company in an amount equal to 50 cents for each dollar contributed by a participant up to 6% of a participant's annual base salary and bonus. These contributions are in excess of the limitations on contributions that apply to the Company's 401(k) qualified deferred compensation plan. As of December 31, 2015, all of the named executive officers who participated in the EDDCP II had fully vested in the Company's matching contributions due to their length of employment with the Company. The Company no longer provides matching contributions to the EDDCP II, as the plan was effectively frozen on December 31, 2015 (subject to future distributions based on the original election of the participants). The Company's new Nonqualified Deferred Compensation Plan, which began on January 1, 2016, was established to replace the EDDCP II and is discussed in more detail in the "Other Compensation Related Plans and Policies" section of this Proxy Statement on page 33.
Under the EDDCP II, participants made irrevocable deferral elections for their compensation prior to the end of the year preceding the plan year in which the services giving rise to the compensation to be deferred were performed or, at the discretion of the Committee administering the plan, prior to six months before the end of the performance service period for the compensation being deferred if the compensation was determined to be "performance-based." Participants could defer up to 100% of their annual base salary and bonus in the EDDCP II. For purposes of the EDDCP II, compensation that qualified for deferral did not include amounts earned or paid under the Company's long-term incentive compensation plans, personal health and services allowance discretionary bonuses, stock options, fringe benefits, relocation expenses, non-monetary awards and other allowances paid to an executive for employment services rendered.
The value of aggregate earnings or losses in deferred accounts within the EDDCP II is determined based upon the performance of investment funds selected by the participant from a range of choices provided by the Company and the plan administrator. Changes to investment fund elections may be made by the participants from time-to-time, and changes to the selection of funds available under the plan may be made by the Company at any time upon a minimum of a month's notice to plan participants.
Participants may elect to receive distributions from their accounts under the EDDCP II on a fixed payment date, upon determination of disability or the occurrence of a "change-in-control," or after six months from the date of their "separation from service" with the Company in the form of a lump sum cash payment or up to 15 annual installments. Participants also may withdraw their funds due to an unforeseeable financial emergency at the sole discretion of the Company.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2015 with respect to the shares of Common Stock that may be issued under our equity compensation plans.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities listed in column (a)) (c) | ||||
| Equity compensation plans approved by stockholders(1)(2) | 5,773,080 | $ | 33.83 | 9,061,407 | |||
| (1) | Amounts provided include the impact of 195,027 shares of unvested restricted stock and 677,436 shares of Company common stock that will be issued if "maximum" performance is achieved in connection with performance share awards outstanding as of December 31, 2015. See additional discussion within the Compensation Discussion and Analysis section of this proxy statement. |
Each plan is administered by the Compensation Committee of the Board of Directors. The Company's 2014 Plan, which is the only plan pursuant to which future awards may be made, provides the committee discretion to award options, stock appreciation rights, restricted stock, incentive bonuses and incentive stock to employees, directors, and executive officers of the Company and its subsidiaries. The committee is also authorized to amend, alter or discontinue each plan, except to the extent that it would impair the rights of a participant.
To: The Board of Directors
The Audit Committee oversees the Company's financial reporting process on behalf of the Board of Directors. The Company's management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited consolidated financial statements in the Annual Report on Form 10-K with Company management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with U.S. generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of the Company's accounting principles and such other matters it is required to discuss with the independent registered public accounting firm by Statement on Auditing Standards No. 61, as amended, "Communication with Audit Committees," other standards of the Public Company Accounting Oversight Board (United States), rules of the Securities and Exchange Commission, and other applicable regulations. In addition, the Audit Committee has discussed with the independent registered public accounting firm the firm's independence from Company management and the Company and received the written disclosures and letter from the firm required by applicable requirements of the Public Company Accounting Oversight Board and considered the compatibility of non-audit services with the independent registered public accounting firm's independence.
The Audit Committee also reviewed and discussed management's report on its assessment of the effectiveness of the Company's internal control over financial reporting and the independent registered public accounting firm's report on management's assessment and the effectiveness of the Company's internal control over financial reporting.
The Audit Committee discussed with the Company's internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examinations; its evaluations of the Company's internal control, including internal control over financial reporting; and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements and management's assessment of the effectiveness of the Company's internal control over financial reporting be included in the Annual Report on Form 10-K for the year ended December 31, 2014.2015.
Audit Committee
Bruce A. Choate
Robert E. Mellor
The foregoing Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates this report.
Ernst & Young LLP was retained to audit the Company's consolidated financial statements for 20142015 and to provide various other services to the Company and its subsidiaries. In addition, as part of its annual process, the Audit Committee will consider the appointment ofhas appointed Ernst & Young as the Company's auditor for fiscal year 2015.2016. Representatives of Ernst & Young are expected to be present at the 20152016 Annual Meeting and they will be given an opportunity to make a statement if they desire to do so and are expected to be available to respond to any appropriate questions from stockholders.
Audit Fees and All Other Fees
The following table sets forth the fees paid or accrued by the Company for the audit and other services provided by Ernst & Young for fiscal years ended December 31, 20142015 and 2013.2014.
Fiscal Year Ended December 31, | Fiscal Year Ended December 31, | |||||||||
| 2014 | 2013 | 2015 | 2014 | |||||||
| Audit Fees(1) | $ | 871,040 | $ | 852,715 | $ | 1,499,620 | $ | 871,040 | ||
| Audit-Related Fees(2) | 1,995 | 340,745 | 1,995 | 1,995 | ||||||
| Tax Fees(3) | 206,640 | 201,557 | 233,082 | 206,640 | ||||||
| All Other Fees | — | — | — | — | ||||||
| Total(4) | $ | 1,079,675 | $ | 1,395,017 | $ | 1,734,697 | $ | 1,079,675 | ||
| (1) | Includes fees and expenses related to fiscal year audits and interim reviews of the Company and its financial services subsidiary, |
| (2) | Consists primarily of fees to assist with diligence relating to potential acquisitions. Also includes fees related to an online subscription to Ernst & Young's internal accounting literature database. |
| (3) | Includes fees related to research with respect to various tax issues. |
| (4) | All fees listed above were approved by the Audit Committee. |
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee is responsible for pre-approving all audit and permissible non-audit services provided by the independent auditor. For audit services, each year the independent auditor provides the Audit Committee with an engagement letter outlining the scope of the audit and review services proposed to be performed during the year and the cost for performing such services, which must be formally approved by the Audit Committee before such services commence.
Each year, management submits to the Audit Committee a list of audit-related and non-audit services with respect to which the independent auditor may be engaged. When assessing whether it is appropriate to engage the independent auditor to perform such services, the Audit Committee considers, among other things, whether such services are consistent with the auditor's independence. For those services approved by the Audit Committee, the committee also establishes an aggregate cap on fees associated with such services. In addition, at each regular meeting of the Audit Committee management reports to the committee details of audit related and non-audit related services that were rendered by the independent auditor since the prior meeting.
In order to expedite the handling of unexpected matters, the Audit Committee has authorized its Chairman to approve audit and non-audit services that do not fall within the pre-approved list. If the Chairman approves such services, he reports the action taken to the committee at its next regular meeting. All audit, audit-related and permissible non-audit services provided by the Company's independent auditors to the Company for the fiscal year ended December 31, 20142015 were approved or pre-approved in accordance with the foregoing policy. In addition, the Audit Committee considered the provision of the services listed in the table above by Ernst & Young and determined that the provision of such services was compatible with maintaining the independence of Ernst & Young.
The Audit Committee has appointed Ernst & Young LLP as the Company's independent registered public accounting firm for 2016.
Background on Proposal
Stockholder ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2016 is not required. However, the Board and the Audit Committee are submitting the matter to stockholders for ratification as a matter of good corporate practice.
THE BOARD AND THE AUDIT COMMITTEE RECOMMEND THAT STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2016.
Effects of Advisory Vote
Assuming the presence of a quorum at our annual meeting of stockholders, under our bylaws, the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the proposal is necessary for its approval. As a result, abstentions will have the effect of votes against the proposal, whereas broker non-votes will have no effect on the outcome of the vote. Unless instructed otherwise in the proxy, the persons named in the accompanying form of proxy will vote all proxies for the proposal. Because the vote on this proposal is advisory in nature, it will not be binding on the Board. However, if stockholders fail to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for 2016, the Audit Committee will consider the appointment of another independent registered public accounting firm. Even if the selection of Ernst & Young LLP is ratified, the Audit Committee may terminate the appointment of Ernst & Young LLP as our independent registered public accounting firm without the approval of stockholders whenever the Audit Committee deems such termination appropriate.
The following table sets forth certain information as of March 15, 20152016 (except as noted otherwise) regarding ownership of the Company's Shares by (1) each director of the Company, (2) each executive officer of the Company named in the summary compensation table, (3) all directors and executive officers of the Company as a group, and (4) each person known by the Company to be the beneficial owner of more than 5% of any class of the Company's Shares. This table is based on information supplied to the Company by the Company's executive officers and directors and on Schedule 13Gs filed with the Securities and Exchange Commission. Except as noted below, the address of the named beneficial owner is c/o Standard Pacific Corp.CalAtlantic Group, Inc., 15360 Barranca Parkway, Irvine, California 92618.
| Common Stock | Senior Preferred Stock | Common Stock | ||||||||||
| Name of Beneficial Owner | Shares(1) | Percent of Class** | Shares | Percent of Class | Shares(1) | Percent of Class** | ||||||
| Directors and Executive Officers | ||||||||||||
| Scott D. Stowell | 4,761,705 | 1.7 | — | — | 783,009 | * | ||||||
| Larry T. Nicholson | 726,899 | * | ||||||||||
| Peter G. Skelly | 136,462 | * | ||||||||||
| Jeff J. McCall | 2,256,949 | * | — | — | 456,940 | * | ||||||
| Wendy L. Marlett | 714,586 | * | — | — | 166,251 | * | ||||||
| John P. Babel | 481,970 | * | — | — | 95,670 | * | ||||||
| Bruce A. Choate | 190,058 | * | — | — | 40,958 | * | ||||||
| Ronald R. Foell | 529,807 | * | — | — | ||||||||
| Douglas C. Jacobs | 114,523 | * | — | — | 25,851 | * | ||||||
| William L. Jews | 43,600 | * | ||||||||||
| David J. Matlin (2) | 126,400,000 | (2) | 267,829(3) | 100 | 42,842,557 | 35.8 | ||||||
| John R. Peshkin | 45,083 | * | — | — | ||||||||
| Robert E. Mellor (3) | 72,936 | * | ||||||||||
| Norman J. Metcalfe | 75,248 | * | ||||||||||
| Peter Schoels (2) | 126,400,000 | (2) | 267,829(3) | 100 | 42,842,557 | 35.8 | ||||||
| Directors and Executive Officers as a Group (10 persons) | 135,494,681 | 267,829(3) | 100 | |||||||||
| Charlotte St. Martin | 38,006 | * | ||||||||||
| Directors and Executive Officers as a Group (14 persons) | 45,504,387 | 37.8 | ||||||||||
| 5% Beneficial Owners | — | — | ||||||||||
| MP CA Homes LLC (3) | 126,400,000 | (3) | 267,829(3) | 100 | ||||||||
| BlackRock, Inc. (4) | 16,805,034 | 6.1 | — | — | ||||||||
| MP CA Homes LLC (4) | 42,842,557 | 35.8 | ||||||||||
| BlackRock, Inc. (5) | 8,622,857 | 7.2 | ||||||||||
| Eminence Capital, LP (6) | 6,060,442 | 5.1 | ||||||||||
| * | Less than one percent. |
| ** | Applicable percentage of ownership is based on |
| (1) | The total number of shares listed in the "Shares" column for each named executive officer and director includes the following number of shares subject to stock options and stock appreciation rights held by such named executive officer or director which are exercisable within 60 days after March 15, |
| (2) | As a result of his ownership interest in, and employment with, an affiliate of MP CA Homes, LLC, each of Mr. Matlin and Mr. Schoels may be deemed to be the beneficial owner of all of the shares of Common Stock |
| (3) | Does not include 2,038 shares of Common Stock owned by Mr. Mellor's wife as to which he disclaims beneficial ownership. |
| (4) | MP CA Homes LLC (identified as MatlinPatterson throughout the rest of this proxy statement), an affiliate of MatlinPatterson Global Advisers LLC, beneficially owns, and is the record holder of |
BlackRock, Inc. beneficially owns |
| (6) | Eminence Capital, LP beneficially owns 6,060,442 shares of Common Stock, over which is has shared voting and shared dispositive power. Eminence Capital, LP serves as the management company to a group of investment funds and the investment advisor to a separately managed account. The investment funds and separately managed account are the owners of the Common Stock. Ricky C. Sandler is identified as the Chief Executive Officer of Eminence Capital, LP and the Managing Member of Eminence GP, LLC, which serves as the general partner or manager of the investment funds. Eminence Capital's address is 65 East 55th Street, 25th Floor, New York, NY 10022. This information is based on |
Any eligible stockholder of the Company wishing to have a proposal considered for inclusion in the Company's 20162017 proxy solicitation materials pursuant to and in compliance with Rule 14a-8 ("Rule 14a-8") must set forth such proposal in writing and submit it to the Company's Corporate Secretary on or before December 26, 2015.16, 2016. The Board of Directors will review proposals from eligible stockholders if they are received by December 26, 2015such date and will determine whether such proposals will be included in the Company's 20162017 proxy solicitation materials. Under Rule 14a-8 a stockholder is eligible to present proposals to the Board of Directors if he or she is the record or beneficial owner of at least one percent, or $2,000 in market value, of Company securities entitled to be voted at the 2016 annual meeting of stockholders and has held such securities for at least one year, and he or she continues to own such securities through the date on which the meeting is held. Proposals must be submitted in accordance with Rule 14a-8 of the Exchange Act of 1934, as amended.
If a stockholder desires to have a proposal presented or nominate a director candidate at the Company's 20162017 annual meeting of stockholders and the proposal is not intended to be included in the Company's 20162017 proxy solicitation materials, the stockholder must give advance notice to the Company in accordance with the Company's bylaws. According to the bylaws of the Company, in order for a stockholder proposal to be properly brought before any meeting of stockholders, the stockholder must give notice of the proposal in writing to the Company's Corporate Secretary at the Company's principal executive offices by March 5, 2016.not later than February 24, 2017 nor earlier than January 25, 2017. All stockholder proposals must include the information required by the Company's bylaws. Stockholders may contact the Company's Corporate Secretary at the address set forth below for a copy of the bylaw provisions that set forth the requirements for making stockholder proposals and nominating director candidates. For information about stockholder director nominations, reference is made to the information included under the caption "Information Concerning the Board of Directors -- Director Identification, Qualification and Nominating Procedures" in this proxy statement.
To the Company's knowledge, based solely on its review of the copies of reports filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 that were required to be furnished to us, all of the reports required under Section 16(a), during or with respect to the fiscal year ended December 31, 2014,2015, were filed on a timely basis, except that Scott Stowell, the Company's Chief Executive Officer, inadvertently filed a late Form 4 with respect to the grant to Mr. Stowell of equity awards on August 5, 2014. This grant was reported on a Form 4 filed on October 2, 2014.basis.
Along with this proxy statement, the Company has made available to each stockholder entitled to vote, a copy of its Annual Report to Stockholders and Annual Report on Form 10-K. The Company will provide, without charge, a copy of its Annual Report on Form 10-K for the year ended December 31, 20142015 (without the exhibits thereto) and/or a copy of any exhibits to its 20142015 Form 10-K upon the written or oral request of any stockholder or beneficial owner of its Common Stock. Requests should be directed to the below address.
John P. Babel
Corporate Secretary
15360 Barranca Parkway
Irvine, California 92618
(949) 789-1600
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 3, 2015MAY 25, 2016
The Notice of Internet Availability of Proxy Materials and this proxy statement and Annual Report on Form 10-K for the year ended December 31, 20142015 are available at www.proxyvote.com.www.proxyvote.com.
This proxy statement contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve
substantial risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include, but are not limited to, statements made in the Compensation Discussion and Analysis section of this proxy statement regarding the anticipated actions and effects of our compensation structure and programs and statements included in the other proposals contained herein. Standard PacificThe Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect Standard Pacific'sthe Company's business, particularly those mentioned under the heading "Risk Factors" in Standard Pacific'sthe Company's Annual Report on Form 10-K, and in the periodic reports that Standard Pacificthe Company files with the SEC on Form 10-Q and Form 8-K.
At the time of the preparation of this proxy statement, the Board of Directors of the Company was not aware of any other matters that would be presented for action at the Annual Meeting. Should any other matters properly come before the meeting, action may be taken thereon pursuant to the proxies in the form enclosed, which confer discretionary authority on the persons named therein or their substitutes with respect to such matters.
46
