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 under 14a-12§240.14a-12 | |
BEAZER HOMES USA, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check the appropriate box):
| | | BEAZER HOMES USA, INC. (Name of registrant as specified in its charter) | | | | | | | (Name of person(s) filing proxy statement, if other than the registrant) | | | | | | | Payment of Filing Fee (Check the appropriate box): | | | | ☒ | | 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(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: | | | | Explanatory Note: This filing is identical to a previous filing on December 20, 2019, which was inadvertently designated as a DEFA14A instead of a DEF 14A. | | |
2018 PROXY STATEMENT
Dear Fellow Stockholders: The 20192020 annual meeting of stockholders of Beazer Homes USA, Inc. will be held at 8:30 a.m., Eastern Time, on Wednesday, February 6, 2019,5, 2020, at our principal executive offices at 1000 Abernathy Road, Suite 260,The Westin Atlanta Perimeter North, 7 Concourse Pkwy, NE, Atlanta, Georgia 30328, for the following purposes: lElection of the nineeight directors named in the accompanying Proxy Statementproxy statement to serve until our annual meeting in 2020; 2021;lRatification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019; 2020;lApproval of the compensation of our named executive officers; Amendment of our Amended and Restated Certificate of Incorporation to extend the term of a protective amendment designed to preserve tax benefits associated with our net operating losses;
lApproval of a new Section 382 Rights Agreement to become effective upon the expiration of our existing Section 382 Rights Agreement, to preserve tax benefits associated with our net operating losses;amended and restated 2014 Long-Term Incentive Plan; andlTransaction of any other business that may properly come before the meeting or any adjournments or postponements thereof. Holders of record of our common stock as of the close of business on December 12, 2018,11, 2019 are entitled to notice of, and to vote at, the annual meeting. For instructions on voting, please refer to the Notice of Internet Availability of Proxy Materials you received in theby mail or the section entitled “How to Vote” beginning on page 1 of thethis proxy statement, or, ifstatement. If you received a paper copy of thethis proxy statement, yourplease refer to the enclosed proxy card. Your vote is important. Whether or not you plan to attend the annual meeting, we encourage you to vote as soon as possible. By Order of the Board of Directors, 
STEPHEN
ALLAN P. ZELNAK, JR.Non-ExecutiveMERRILL
Chairman, of the Board of DirectorsPresident and Chief Executive Officer December 21, 201820, 2019Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be held on February 6, 2019:
This proxy statement, along with the Company’s Annual Report on Form10-K
for the fiscal year ended
September 30, 2018, are available free of charge on the Company’s website at
http://www.beazer.com
| | | 
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on February 5, 2020: This proxy statement, along with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, are available free of charge on the Company’s website at http://www.beazer.com |
This executive summary provides an overview of the information contained within this proxy statement. We encourage you to read the entire proxy statement prior to voting.
ANNUAL MEETING OF STOCKHOLDERS ROADMAP
ANNUAL MEETING
| | | | | | | | | STOCKHOLDERS
ANNUAL MEETING
| |  | | STOCKHOLDER
VOTING MATTERS
|
| | | | | | | | | | | When: | Wednesday, February 6, 2019
5, 2020 8:30 a.m.(Eastern time)Beazer Homes
1000 Abernathy Road,
Suite 260
| Where: | The Westin Atlanta Perimeter North
7 Concourse Pkwy, NE
Atlanta, Georgia 30328Stockholders of record as of the
close of business on December 12,
2018 are entitled to notice of, and
to vote at, the annual meeting.
This proxy statement, along with
the Company’s Annual Report on
Form10-K for the fiscal year ended
September 30, 2018, are available
on the Company’s website at
http://www.beazer.com.
On December 21, 2018, we began
mailing this proxy statement to
stockholders who requested paper
copies.
|
Stockholders of record as of the close of business on December 11, 2019 are entitled to notice of, and to vote at, the annual meeting. This proxy statement, along with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, are available on the Company’s website at beazer.com. On December 20, 2019, we began mailing this proxy statement to stockholders who requested paper copies.
VOTING MATTERS | | | | PROPOSAL
| |
| | | | PROPOSAL | BOARD’S VOTING
RECOMMENDATION | | PAGE
REFERENCE
| | | | | | Election of directors | | For Each
Nominee
| | 10
| | 12 | | | | Ratification of appointment of independent auditors | For | For
| | 16
| | 17 | | | | Approval of executive compensation | For | For
| | 18
| | 19 | | Approval of the Company's amended and restated 2014 Long-Term Incentive Plan | For | 44 |
| | | Amendment of certificate of incorporation to preserve tax benefits
| | For
| | 41
| | | | | | Approval of Section 382 Rights Agreement to preserve tax benefits
| | For
| | 41
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | i |
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As we began fiscal 2019, the new home sales market was very challenging, driven by rapidly rising mortgage rates that contributed to affordability concerns and a softening in demand. In 2018,that environment, we continuedincreased incentives to pursuespur home sales and allocated capital to debt reduction and share repurchases. This response — together with improvements in the overall sales environment and a successful refinancing to reduce borrowing costs — improved results in ways that will be even more meaningful in fiscal 2020. For fiscal 2019, we: •Improved new home orders, backlog and community count, which provides a solid foundation for growth as we move into fiscal 2020; •Improved operations by streamlining our objectiveproduct offerings, which has led to higher customer satisfaction scores, reduced construction cycle times and lower build costs; and •Improved allocation of providingcapital, which enabled both investment in our customers with homes that incorporate exceptional valuebusiness and qualitythe return of nearly $90 million to investors. In short, despite a tough sales environment at affordable prices, while creating durable and growing value for our employees, partners and stockholders.the start of fiscal 2019, we ended the year in a better position than we began. Here are several highlights of our financial and operational and strategic achievements duringin fiscal 2018:2B-10 Plan
Surpassed our multi-year plan to reach at least $2 billion in revenue and $200 million of Adjusted EBITDA
2019: | | | | | | | | | | FINANCIAL | FINANCIAL
| | | | $2.1 BILLION | | Revenue | | | | Achieved $2.1 billion in homebuilding revenue a 9.6% increase year-over-year | | $180.2 MILLION | $204.7 MILLION
| | Adjusted EBITDA | | | | | Achieved $204.7$180.2 million in Adjusted EBITDA a 14.5% increase year-over-year | | $51.3 MILLION | $250 MILLION
| | Debt ReductionRepurchases | | | Repurchased $51.3 million of debt. We expect to reduce outstanding debt in 2020 by more than we did in 2019, with the goal of reducing debt below $1 billion over time | | $500.0 MILLION | Refinancing | | | We issued $350 million of 7.25% unsecured Senior Notes due 2029 and entered into an unsecured term loan with a principal amount of $150 million. The proceeds from these transactions were used to refinance $500 million of 8.75% unsecured Senior Notes due 2022, which generated a $11 million per year reduction in cash interest cost | | Completed three-year, $250$34.6 MILLION
| Share Repurchases | | | We repurchased $34.6 million debt reduction planof our outstanding common stock at an average price of $10.54 per share | | | | | OPERATIONAL | OPERATIONAL
| | | | 3.0 PER 2.8 SALES/MONTH
| | Sales Pace | | | | Achieved average monthly sales pace per community of 3.0 2.8, in line with our targets |
| $360,200
| | Average Selling Price | | | | | Ended the year with an average selling price (ASP) of $360,200 for our homes, marking our seventh consecutive year of ASP growth
|
| | 160 COMMUNITIES
| | Community Count | | | | | Ended the year with a community count of 160 | | | | | | | |  | $377.7 THOUSAND | STRATEGIC
| | Average Selling Price | | 34 NEWLY
ACQUIRED
COMMUNITIES
| | AcquisitionsOur average selling price (ASP) for the year was $377,700, marking our eighth consecutive year of ASP growth and reflecting an increase of 4.9% year-over-year, primarily related to changes in geographic mix | | Completed the acquisitions of Bill Clark Homes and Venture Homes during166 COMMUNITIES | Community Count | | | Ended the year adding 34 existing and future communitieswith an active community count of 166 |
| | | During 2019, the Board and management willfiscal 2020, we expect to continue to take stepspursue our balanced growth strategy, which is designed to position Beazer for future success by growingimprove profitability and returns from a more efficient and less leveraged balance sheet. In particular, we are targeting EBITDA growth in excess of 10% and EPS, while managing the balance sheetmore than $50 million in debt reduction, with a net debt to drive return on assets (ROA) above 10%.EBITDA ratio below 5 times. | | |
| | | | Please see Annex I for a reconciliation ofnon-GAAP measures to GAAP measures. |
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GOVERNANCE HIGHLIGHTS ✓ | | | | | | | | | | | | | | | | ü | Annual election of all directors |
✓ | Majority vote standard for the election of directors
|
✓ | Officer and director stock ownership requirements
|
✓ü | 20% female representation among ournon-employee directors
|
✓ | Policies against hedging, pledging and stock option repricing
|
✓ | Clawbacks of incentive awards in the event of a restatement |
✓ü | Majority vote standard for the election of directors | | ü | Double triggers for both cash severance and accelerated vesting of equity upon a change in control |
✓ü | Officer and director stock ownership and holding requirements | | ü | Robust Board and Committee evaluation practices |
✓ü | Policies against hedging, pledging and stock option repricing | | ü | Long-standing stockholder engagement practices | | | | | |
We are committed to a robust stockholder engagement program. Our Board values our stockholders’ perspectives and feedback from stockholders on our business, corporate governance and executive compensation are important considerations for Board discussions throughout the year. Over the course of the year, our team held more than 8070 meetings with stockholders and investors. Our Board maintains a process for stockholders and interested parties to communicate with the Board. Stockholders and interested parties may write or call our Board as provided under “Corporate Governance” on pg. 9.page 11.
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Below are the directors nominated for election by stockholders at the annual meeting. The Board recommends a vote “FOR” each of the directors. | | | | | | | | | | | | AGE | | SERVING SINCE | | COMMITTEES SERVED | | INDEPENDENT | Elizabeth S. Acton | | 67 | | 2012 | | Audit, Finance (Chair) | | Yes | Laurent Alpert | | 72 | | 2002 | | Nom/Corp Gov (Chair), Finance | | Yes | Brian C. Beazer | | 83 | | 1994 | | Compensation, Nom/Corp Gov | | Yes | Peter G. Leemputte | | 61 | | 2005 | | Audit, Finance | | Yes | Allan P. Merrill | | 52 | | 2011 | | Not Applicable | | No | Peter M. Orser | | 62 | | 2016 | | Compensation (Chair), Finance | | Yes | Norma A. Provencio | | 61 | | 2009 | | Compensation, Nom/Corp Gov | | Yes | Danny R. Shepherd | | 67 | | 2016 | | Audit (Chair), Compensation | | Yes | Stephen P. Zelnak, Jr. | | 73 | | 2003 | | Non-Executive Chair, Audit, Nom/Corp Gov | | Yes |
| | | | | | | | | | | | | | | | AGE | SERVING SINCE | COMMITTEES SERVED | INDEPENDENT | | Elizabeth S. Acton | 68 | 2012 | Audit, Finance (Chair) | Yes | | Laurent Alpert | 73 | 2002 | Nom/Corp Gov, Finance | Yes | | Allan P. Merrill | 53 | 2011 | Not Applicable* | No | | Peter M. Orser | 63 | 2016 | Compensation (Chair), Finance | Yes | | Norma A. Provencio | 62 | 2009 | Compensation, Nom/Corp Gov (Chair)** | Yes | | Danny R. Shepherd | 68 | 2016 | Audit (Chair), Compensation | Yes | | David J. Spitz | 47 | 2019 | Compensation | Yes | | C. Christian Winkle | 56 | 2019 | Finance | Yes |
*Chairman **Lead Director COMMITTEE COMPOSITION(PG. 6)8) The standing committees of the Board of Directors has anare the Audit Committee, a Compensation Committee, a Nominating/Corporate Governance Committee and a Finance Committee. Below are our current directors, their committee memberships and their 20182019 attendance rates for regularly scheduled Board and committee meetings.meetings during the period he or she was on the Board.As part of the Board's comprehensive, long-term Board succession plan, three of our current directors are retiring and will not stand for reelection at the annual meeting. Retiring directors are noted below. | | | | | | | | | | | | | | | | | | | AUDIT | COMPENSATION | NOMINATING/CORPORATE GOVERNANCE | FINANCE | ATTENDANCE
RATE | | Elizabeth S. Acton | l | | | l | 100% | | BOARD
Laurent Alpert | | | l | l | 100% | | AUDIT
Brian C. Beazer* | | l | | l | 100% | | COMPENSATION
Peter G. Leemputte* | l | | l |
| 100% | | NOM/
CORP GOV
| | FINANCE
| | ATTENDANCE
RATE
| Elizabeth S. Acton
| | 
| |
| | | | | | 
| | 100%
| Laurent Alpert
| | 
| | | | | | 
| |
| | 100%
| Brian C. Beazer
| |
| | | |
| |
| | | | 100%
| Peter G. Leemputte
| |
| |
| | | | | |
| | 100%
| Allan P. Merrill | | | | | 100% | |
| | | | | | | | | | 100%
| Peter M. Orser | | l | | l | 100% | |
| | | |
| | | |
| | 100%
| Norma A. Provencio | | l | l | | 100% | |
| | | |
| |
| | | | 100%
| Danny R. Shepherd | l | l | | | 100% | |
David J. Spitz | | l |
| | 100% | |
C. Christian Winkle | | | | l | 100% | |
| | | | | | 100%
| Stephen P. Zelnak, Jr. * | l | | l | | 94% | |
lChair *Retiring director. Chair
| | |
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|
The following are several of the key qualifications, skills and experience of our Board nominees that we believe are uniquely important to our business.
✓ | | | | | | | | | | | | | | | | ü | Homebuilding/Construction Industry Experience |
| Merrill, Orser, Shepherd | Beazer,
| ü | CEO/COO Experience Merrill, Orser, Shepherd, ZelnakSpitz, Winkle |
| ü | Beazer, Merrill, Orser, Shepherd, Zelnak
|
✓ | CFO/Accounting/Finance Experience |
| Acton, Leemputte, Merrill, Provencio, |
Spitz✓ | | ü | Public Company Board Experience |
| Beazer, Leemputte, Provencio, Shepherd, Zelnak
Spitz |
| Expertise Merrill, Orser, |
✓ Spitz | | ü | Corporate Governance |
| Expertise Alpert, Provencio |
The lack of a mark for a director does not mean that he or she does not possess that particular qualification, skill or experience. The marks above simply indicate that the characteristic is one for which the director is especially well known among our Board. We believe our Board reflects the broad expertise and perspective needed to govern our business and constructively engage with senior management. Our executive compensation program consistsis composed of the following elements:
✓ | | | | | | | | | | | | | | | | ü | Base salary | | ü | Long-term equity incentive compensation (performance shares and restricted stock) |
✓ | | | | | | ü | Short-term cash incentive compensation, based on performance |
✓ | Long-term equity incentive compensation
|
| (performance shares and restricted stock)
|
✓ü | Benefits available to all employees |
2018
FISCAL 2019 EXECUTIVE COMPENSATION ACTIONS ✓ | | | | | | | ü | No changes were made to Mr. Merrill’s base salary was increased from $900,000 to $950,000.salary. Mr. Salomon’s base salary was increased from $525,000$550,000 to $550,000.$600,000, and Mr. Belknap joined the Company in January 2018 and his initialBelknap's base salary was $450,000. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Base Salary” forincreased from $450,000 to $500,000, in each case primarily to align salary more information about these salary adjustmentsclosely with industry peers. |
✓ | | | ü | No changes were made to Mr. Merrill’s long-term incentive award opportunity. Mr. Salomon’s long-term incentive target award opportunity was increased from 250%175% to 300%200% of base salary, and Mr. Salomon’s short-termBelknap's long-term incentive target award opportunity was increased from 100%125% to 125%150%, in each case primarily to align target incentives more closely with expanded roles and responsibilities. | | | | ü | No changes were made to the short-term incentive award opportunities, expressed as percentages of base salary. See “Compensation Discussion and Analysis — Elementssalary, of Fiscal 2018 Compensation Program — Short-Term Incentive Compensation” and “— Long-Term Incentive Compensation” for more information about these adjustments to target compensation |
✓ | any named executive officer (NEO). We based 75%65% of the fiscal 20182019 short-term incentive opportunity for named executive officersNEOs on achievement of Bonus Plan EBITDA, 10% on Return on Assets (ROA) and 25% of the incentive opportunity on key operational metrics metrics. |
✓ | | | ü | We determined to use operational objectives identical to those used in determining the fiscal 20172018 short-term incentive opportunity, with improvement over fiscal 2017 results required in all casesthe addition of an objective related to further improving overhead efficiency. |
| | |
ü | | v
|
✓ | We determined that Messrs. Merrill, Salomon and BelknapNEOs would be eligible to receive an award for the operational components of the 20182019 short-term bonus opportunity only if threshold Bonus Plan EBITDA was achieved achieved. |
✓ | | | ü | We retained the discretion to deduct from awards earned for failure to achieve certain construction quality standards based on the assessment of an independent third-party expertexpert. |
✓ | | | ü | We continued our practice of awarding performance shares equal totwo-thirds of an NEO’s overall long-term incentive target award opportunity, and time-based restricted stock equal toone-third of the target award opportunityopportunity. |
✓ | | | ü | We based 2018-20202019-2021 performance share metrics on cumulativepre-tax income, return on assets and the numberexpansion of Gatherings® home salesour Gatherings® product line. |
✓ | | | ü | We continued to include an adjustment to performance shares based on 3-year relative total shareholder return (TSR) performance vs. companies in the S&P Homebuilders Select Industry Index. |
✓ | We no longer use employment agreements for our NEOs. We entered into new severance and change in control agreements with our NEOs upon the expiration of previously-existing employment agreements
|
Compensation outcomes from performance incentives were well-aligned with the strong performance our management team achieved during fiscal 2018:2019:✓ | The annual
| | | | | | ü | Annual cash incentive program delivered apercent-of-target outcome ranging from 122.9% to 144.9%incentives were earned between threshold and target award opportunity levels based on actual vs. planned outcomes for the operational and financial performance factors, described under “Compensation Discussion and Analysis — Short-Term Incentive Compensation”with payouts for the NEOs lower by an average of 41.0% compared with the prior year, despite a reduction in Adjusted EBITDA of 12.0%. |
✓ | | | ü | The three-year award cycle of the 20162017 performance share program ended on September 30, 2018,2019, with results yielding a payout relative to target of 140.0%157.5% (after applying a TSR modifier). See “Compensation DiscussionMetrics included pre-tax income, ROA and Analysis — Long-Term Incentive Compensation” for more informationratio of net debt/Adjusted EBITDA, which were collectively subject to a TSR modifier. |
Although stockholder ratification is not required, the appointment of Deloitte & Touche LLP as the Company’s independent auditors for fiscal 20192020 is being submitted for ratification at the annual meeting because the Board believes doing so is a good corporate governance practice. The Board recommends a vote “FOR” the ratification of the Company’s independent auditors.CHARTER AMENDMENT
NEW RIGHTS AGREEMENT2014 LONG-TERM INCENTIVE PLAN (PG. 41)44)We have significant deferred tax assets comprised primarilyare seeking shareholder approval to amend and restate the 2014 Long-Term Incentive Plan (as amended and restated, the Amended 2014 Plan). The Amended 2014 Plan would amend and restate the 2014 Plan to, among other things, increase the number of net operating losses, or NOLs,shares available under the 2014 Plan from 3,850,000 to 5,550,000, limit the maximum value of equity awards that we use (and wantmay be granted to continueany non-employee director during any fiscal year to use)$350,000, add a requirement that, subject to offset the taxable income welimited exceptions, all awards are now generatingsubject to a minimum one-year vesting period, and expect to continue to generate in the future. These benefits, which have substantial value to us, can be significantly impaired, however, if we experience an “ownership change” under Section 382 of the Internal Revenue | | |
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Code (which is discussed in detail under “Proposals 4 and 5 — Background” on page 41). To help protect against an “ownership change” and preserve our ability to fully maximize our NOLs, our stockholders have previously approved certain protective measures, including the charter amendment and the Section 382 Rights Agreement described in Proposal 4 and Proposal 5, respectively.
These protective provisions are set to expire in November 2019. Accordingly, we are now seeking stockholder approval to extend the expiration datesterm of eachthe 2014 Plan to 10 years from the date of these protective provisions by an additional three years. We have provided a brief “Frequently Asked Questions” section beginning on page 41, followed by the related proposals.annual meeting. The Board recommends a vote “FOR” the approval of both the protective charter amendment and the new Rights Agreement.
Amended 2014 Plan. | | | | | |
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viii |
TABLE OF CONTENTS | | | | | | | PROXY STATEMENT SUMMARY | | i |
| | | | | | | | | | | | | | 12 | | | | | | 2 | Votes Needed
| | 3 | | | | | 4 | | | |
| | | | | | | | | | | 6 | | | 7 | | | 7 | | | 8 | | | 810 | | | 8 | | | 8 | | | 8 | | | 911 | | | 9 |
| | 10 |
| | 14 |
| | 16 |
| | 17 |
| | | COMPENSATION DISCUSSION AND ANALYSIS | 18 | | CD&A OVERVIEW | | | Who We Are | | | 2019 Business Highlights | 21 | | Fiscal 2019 Compensation Highlights | 23 |
PROXY STATEMENT GENERAL
This proxy statement contains information about the 20192020 annual meeting of stockholders of Beazer Homes USA, Inc. In this proxy statement both “Beazer” and the “Company” refer to Beazer Homes USA, Inc. This proxy statement and the enclosed proxy card are being made available to you by the Company’s Board of Directors starting on or about December 21, 2018.20, 2019. PURPOSE OF THE ANNUAL MEETING
At the Company’s annual meeting, stockholders will vote on the following matters: Proposal 1: election of directors;
| | | | | | | l | Proposal 1: election of directors; | | | | l | Proposal 2: ratification of appointment of Deloitte & Touche LLP as the Company’s independent auditors; | | | | l | Proposal 3: approval of the compensation of the Company’s named executive officers; | | | | l | Proposal 4: approval of the Company's amended and restated 2014 Long-Term Incentive Plan; and | | | | l | Transaction of any other business that properly comes before the meeting or any adjournments or postponements thereof. As of the date of this proxy statement, the Company is not aware of any other business to come before the meeting. |
Proposal 2: ratification of appointment of Deloitte & Touche LLP as the Company’s independent auditors;
Proposal 3: approval of the compensation of the Company’s named executive officers;
Proposal 4: amendment of the Company’s Amended and Restated Certificate of Incorporation;
Proposal 5: approval of a new Section 382 Rights Agreement; and
Transaction of any other business that properly comes before the meeting or any adjournments or postponements thereof. As of the date of this proxy statement, the Company is not aware of any other business to come before the meeting.
WHO CAN VOTE
Only stockholders of record holding shares of Beazer common stock at the close of business on the record date, December 12, 2018,11, 2019, are entitled to receive notice of the annual meeting and to vote the shares of Beazer common stock they held on that date. The Company’s stock transfer books will not be closed. A complete list of stockholders entitled to vote at the annual meeting will be available for examination by any Beazer stockholder at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, for purposes relating to the annual meeting, during normal business hours for a period of ten days before the meeting. As of December 12, 2018,11, 2019, there were 32,952,41831,383,048 shares of Beazer common stock issued and outstanding. Holders of Beazer common stock are entitled to one vote per share and are not allowed to cumulate votes in the election of directors.
If your shares of Beazer common stock are held by a broker, bank or other nominee (in “street name”), you will receive instructions from them on how to vote your shares. As further described below, if your shares are held in street name and you do not give your broker, bank or other nominee specific instructions on how to vote your shares, the entity holding your shares may vote them at its discretion on any “routine” matters; however, your shares will not be voted on any“non-routine” “non-routine” matters. An absence of voting instructions on any“non-routine” “non-routine” matters will result in a “brokernon-vote.”
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The only “routine” matter to be acted upon at the annual meeting is Proposal No. 2: ratification of appointment of Deloitee & Touche LLP as the Company’s independent auditors. All other matters to be acted upon at the annual meeting are“non-routine” matters and, as such, “non-routine” matters. Accordingly, if you hold all or any portion of your shares in street name and you do not give your broker, bank or other nominee specific instructions on how to vote your shares, your shares will not be voted on any of the following“non-routine” “non-routine” matters: Proposal 1: election of directors;
| | | | | | | l | Proposal 1: election of directors; | | l | Proposal 3: advisory vote to approve the compensation of the Company’s named executive officers; and | | l | Proposal 4: approval of the Company's amended and restated 2014 Long-Term Incentive Plan. |
Proposal 3: advisory vote to approve the compensation of the Company’s named executive officers;
Proposal 4: amendment of the Company’s Amended and Restated Certificate of Incorporation; and
Proposal 5: approval of a new Section 382 Rights Agreement.
If you hold shares of Beazer common stock in your own name (as a “stockholder of record”), you may vote your shares:  | | | | | | | over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials; or |
| if you requested to receive printed proxy materials, by using the toll-free telephone number listed on the enclosed proxy card (specific directions for using the telephone voting system are included on the proxy card); or |
| if you requested to receive printed proxy materials, by marking, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. |
Whichever method you use, your shares of Beazer common stock will be voted as you direct. If you designate the proxies named in these proxy materials to vote on your behalf, but do not specify how to vote your shares, they will be voted: • | |
| | | | | l | FORthe election of the director nominees; |
•l | |
FORthe ratification of appointment of Deloitte & Touche LLP as the Company’s independent auditors; |
•l | |
FORapproval of the compensation of the Company’s named executive officers; |
•l | | FORamendment approval of the Company’s AmendedCompany's amended and Restated Certificaterestated 2014 Long-Term Incentive Plan; and | | l | In accordance with the judgment of Incorporation;the persons voting the proxy on any other matter properly brought before the meeting or any adjournments or postponements of the annual meeting. |
• | | FOR approval of a new Section 382 Rights Agreement; and
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In accordance with the judgment of the persons voting the proxy on any other matter properly brought before the meeting or any adjournments or postponements of the annual meeting.
You may revoke your proxy by submitting a new proxy with a later date by Internet, telephone or mail (if applicable), by voting at the meeting, or by filing a written revocation with Beazer’s corporate secretary. Your attendance at the annual meeting alone will not automatically revoke your proxy. If you vote in advance using one of the above methods, you may still attend and vote at the meeting.
A majority of the shares of Beazer common stock outstanding and entitled to vote on the record date will constitute a quorum, permitting the business of the annual meeting to be conducted. If your shares are present in person or by proxy, your shares will be part of the quorum. VOTES NEEDED | | |
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You may vote FOR or AGAINST any or all director nominees or you may ABSTAIN as to one or more director nominees. In order to be elected, the number of votes FOR a director must exceed the number of votes AGAINST such director. As set forth in our bylaws, only votes FOR or AGAINST the election of a director nominee will be counted. Abstentions and broker non-votes count for quorum purposes, but not for purposes of the election of directors. A vote to ABSTAIN is not treated as a vote FOR or AGAINST and will have no effect on the outcome of the vote. Ratification of Appointment of Independent Auditors You may vote FOR or AGAINST the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Broker non-votes are not applicable to this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter. Approval of the Compensation of Our Named Executive Officers You may vote FOR or AGAINST the approval of the compensation of our named executive officers or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Brokernon-votes will not be counted as shares entitled to vote on this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter.Amendment to Company’s Amended and Restated Certificate of Incorporation
You may vote FOR or AGAINST the proposed amendment to the Company’s Amended and Restated Certificate of Incorporation or you may ABSTAIN. A majority of all outstanding shares of common stock entitled to vote must be voted FOR approval of this matter in order for it to pass. A brokernon-vote and a vote to ABSTAIN will have the effect of a vote AGAINST the matter.
Approval of New Section 382 Rights Agreement
You may vote FOR or AGAINST the new Section 382 Rights Agreement or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Broker non-votes will not be counted as shares entitled to vote on this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter.
Approval of the Amended and Restated 2014 Long-Term Incentive Plan You may vote FOR or AGAINST the approval of the Company's amended and restated 2014 Long-Term Incentive Plan or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Broker non-votes will not be counted as shares entitled to vote on this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter. The affirmative vote of a majority of the shares cast at the annual meeting is required for approval of any other business that may properly come before the meeting or any adjournment thereof. Only votes FOR or AGAINST approval of any other business will be counted. Abstentions and broker non-votes count for quorum purposes, but not for the voting on the approval of such other business.
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Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspectors of the election.
Expenses incurred in connection with the solicitation of proxies will be paid by the Company. In addition, we have engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies. We anticipate that the costs associated with this engagement will be approximately $18,500$19,500 plus costs and expenses incurred by MacKenzie. We will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for costs incurred in connection with this solicitation.
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Our Board of Directors has evaluated all business and charitable relationships between the Company and the Company’s directors during fiscal 20182019 as required by the Company’s Corporate Governance Guidelines. As a result of this evaluation, the Board has determined that each non-employee director (all directors other than Mr. Merrill) is an “independent director” as defined by the standards for director independence established by applicable laws, rules and listing standards including the standards for independent directors established by The New York Stock Exchange, Inc. , or NYSE, (NYSE) and the Securities and Exchange Commission or SEC.(SEC). The Company’s Corporate Governance Guidelines are available on the Company’s website (www.beazer.com).at beazer.com. The Corporate Governance Guidelines require that non-employee directors meet in executive session as part of each regularly scheduled meeting of the Board. These executive sessions are called and chaired by our non-executive chairman. Pursuant to Lead Director. Under our Corporate Governance Guidelines, the non-executive chairman Lead Director is an independent director who is elected by the affirmative vote of a majority of the independent directors. In addition to chairing the executive sessions of the non-executive chairman independent directors, the Lead Director discusses with the other independent directors management’smanagement's proposed meeting agendaagendas for meetings of the Board and reviews the approved meeting agendaagendas with our chief executive officer, leads the discussion with our chief executive officer following the independent directors’directors' executive sessions and leads periodic discussions with other Board members and management concerning the Board’sBoard's information needs.
BOARD LEADERSHIP STRUCTURE AND GOVERNANCE PRACTICES
Board Leadership Structure Our Board believes that, at this present time, it is appropriate for the positions of Chairman of the Board and Chief Executive Officer to be held by separate individuals. Stephen P. Zelnak, Jr. was appointed to serve as ournon-executive Chairman on February 4, 2015. The Board regularly reviews all aspects of its governance profile, including its leadership structure. As part of this review, and in connection with the decision by our former Chairman, Mr. Zelnak, to retire from the Board, our Board determined that a combined CEO-Chairman coupled with an empowered and independent Lead Director would be the most appropriate corporate governance structure for the Company and its stockholders at this time. Accordingly, in November 2019, our Board appointed Mr. Merrill as Chairman and Ms. Provencio as Lead Director. Mr. Merrill was appointed as Chairman based on his leadership skills, experience in and knowledge of the homebuilding sector — including his leadership and experience as Chair of the Policy Advisory Board of the Joint Center for Housing Studies at Harvard University and as Chair of the Leading Builders of America, an industry trade association. In addition, the Board recognized Mr. Merrill's exemplary tenure at the Company — including more than 12 years of service, over eight of which as President and CEO. The Board believes that Mr. Merrill’s continued leadership is essential to meeting the Company’s long-term strategic objectives. The independent directors of the Board appointed Ms. Provencio as Lead Director because she possesses the experience, qualities and skills necessary for the role, including high personal integrity and a readiness to challenge management when appropriate, drawing on more than 30 years of experience in the public accounting field and 10 years of service to the Board. Our Board believes Ms. Provencio is highly qualified to discharge responsibilities that are consistent with the duties of an independent Lead Director, including presiding at all meetings of independent directors, consulting on all meeting schedules and agendas, being available for direct consultation with the Company’s stockholders, and assisting with the Board’s thorough CEO evaluations, Board evaluations and succession planning activities. For more information on the role and responsibilities of our Lead Director, see Exhibit A ("Lead Director Role and Responsibilities") to our Corporate Governance Guidelines, which are available on the Company's website at beazer.com.
Our Board believes that its new leadership structure, together with the Company’s already strong corporate governance practices, creates a productive relationship between the Board and makes changes as appropriate.management, including strong independent oversight. Our Board will continue to review its leadership structure regularly. Majority Vote Standard and Director Resignation Policy Our Bylaws and Corporate Governance Guidelines provide a majority voting standard for the election of directors in uncontested elections. Director nominees will be elected if the votes cast for such nominee exceed the number of votes cast against such nominee. In the event that (i) a stockholder proposes a nominee to compete with nominees selected by our Board, and the stockholder does not withdraw the nomination prior to our mailing the notice of the stockholders meeting, or (ii) one or more directors are nominated by a stockholder pursuant to a solicitation of written consents, then directors will be elected by a plurality vote. The Corporate Governance Guidelines provide that our Board will only nominate candidates who tender their irrevocable resignations, which are effective upon (i) the candidate not receiving the required vote at the next annual meeting at which they face re-election reelection and (ii) our Board of Directors accepting the candidate’s resignation. In the event that any director does not receive a majority vote, then pursuant to our Corporate Governance Guidelines, provide that the Nominating/Corporate Governance Committee, or NCG Committee, will act on an expedited basis to determine whether to accept the director’s resignation and will submit its recommendation to the Board. In deciding whether to accept a director’s resignation, the Board and the Nominating/Corporate Governance, or NCG Committee may consider any factors that they deem relevant. Our Corporate Governance Guidelines also provide that the director whose resignation is under consideration will abstain from the deliberation process. All candidates standing for re-election reelection at the annual meeting have tendered such resignations. | | |
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Effective risk oversight is a priority for our Board. The goal of the Company’s risk management process is to understand and manage risk in accordance with the Board’s tolerance for risk. All committees report on the risk categories they oversee to the full Board. Our Board has delegated primary responsibility for overseeing our risk management process to the Audit Committee. The Audit Committee oversees our risk identification and mitigation processes and specifically oversees management of our financial, legal and fraud policies, as well as our regulatory compliance and cybersecurity risks. This includes regular evaluation of risks related to the Company’s financial statements, including internal controls over financial reporting. Members of management, including our Chief Financial Officer, General Counsel, Compliance Officer and Director of Internal Audit, report to the Audit Committee on a quarterly basis regarding on-going risk management activities. In addition, the Audit Committee consults withand the full Board receive regular reports from our Chief Technology Officer regarding ongoing cybersecurity initiatives, and requests such individual, together with other members of senior management to report to the Audit Committee or the full Board regularly onregarding their assessment of cybersecurity and related risks to the Company.Company, as well as ongoing cybersecurity initiatives. The Audit Committee also oversees the internal audit function and our independent auditors, and meets separately on at least a quarterly basis with our Compliance Officer, Director of Internal Audit and representatives of our independent auditors as part of this oversight responsibility. Our Compensation Committee oversees risks related toperiodically reviews our compensation philosophy and programsprogram designs to determinehelp ensure that our compensation programs, including those applicable to our executives, do not encourage excessiveinappropriate risk taking.taking that could have a materially adverse impact on the Company. The Compensation Committee works with its independent compensation consultant to structure executive compensation plans that are appropriately aligned with key business objectives, company performance and stockholder interests. For more information on risk considerations in our compensation programs, please see “Compensation Discussion and Analysis — Elements of Fiscal 20182019 Compensation Program — Risk Considerations in Our Compensation Programs” below. Our Finance Committee oversees risks relating to liquidity, capital structure and investments, including land acquisition and development. The Finance Committee, as well as the Board as a whole, reviews our long-term strategic plans, annual budget, capital commitments, cash needs and funding plans. Management is responsible for identifying and managing thethese risks, while directors provide oversight to management in this process. Our Nominating/Corporate Governance Committee oversees risks relating to governance matters. The Committee also oversees our ethics program, including implementation of our Code of Business Conduct and Ethics, and compliance by directors and management with the corporate governance and ethics standards of the Company.
Environmental and Social Responsibility We are committed to contributing to the sustainability of communities through our support for a variety of charitable foundations; promoting safety, diversity and inclusion in our workforce; and building our homes and communities with a concern for their impact on the environment. Our Board of Directors provides oversight of environmental and social matters, and is committed to supporting our efforts to operate as a good corporate citizen. Some highlights of our accomplishments in these areas appear below. Environmental Responsibility We are committed to making home ownership more affordable and building our homes with a concern for their impact on the environment. We work with industry-leading partners who, like us, provide innovation and quality and foster environmentally-friendly processes. Our construction practices are designed to provide our customers with healthy and comfortable indoor environments, while contributing to sustainability of the communities in which we operate. Beazer Homes has participated in the ENERGY STAR® Program since 1998, certifying over 63,000 new homes during that period. In 2019, we were selected as an ENERGY STAR Sustained Excellence Partner of the Year for the fourth consecutive year, and we continue to focus on energy efficiency by partnering with ENERGY STAR to assure 100% of our homes meet or exceed ENERGY STAR program requirements. With a focus on durability and energy efficiency, we have effectively contributed to the reduction of greenhouse emissions by saving the environment over 12,000 metric tons of CO2 equivalent emissions in 2019 alone and, since 2011, over 100,000 metric tons of CO2 equivalent emissions. We also foster new sustainability initiatives as we work to protect the quality of our environment. Our efforts include implementing programs such as energy-efficient homes with ACH (Air Changes per Hour) ratings better than industry standards, which lessens the impact on our environment of maintaining a comfortable home. This is accomplished through whole home weatherization and efficiency systems, internal quality inspections and a rigorous 3rd party quality inspection program that tests every home we build, all of which are designed to assure consistency with our high expectations on construction standards. Another example of our efforts in this area is our National Storm Water Program, which has been developed to ensure we are protecting the environment and complying with applicable federal, state and local regulations. This helps us design and build our neighborhoods to better manage the flow of rain water through the community, while helping to keep materials such as dirt, paint, concrete residue, oils or other waste from leaving our construction sites. We continue to incorporate efficient and waste-reducing practices into home building, offering long-term benefits to both consumers and the environment. For example, we are engaged in a project with EntekraTM Fully Integrated Off-Site Solutions for framing systems in Sacramento, California. Our homes framed as part of this project are constructed more efficiently, with a cleaner job-site and reduced waste. More broadly, during fiscal 2019, we focused on a continuing objective to simplify our product offerings, which includes streamlining our plan and structural options, as well as design selections, to improve efficiency, reduce costs and minimize waste at construction sites. Social Responsibility Safety is a core principle at Beazer, and a healthy and safe working environment for our employees is our highest priority. We are also committed to fostering a diverse and inclusive environment, with equal employment opportunity hiring practices and policies. Our benefits package is highly-competitive, with industry-leading PTO and parental leave policies. We strive to put our customers first in everything we do, and we differentiate ourselves from our competition by: (1) offering flexible floor plans that provide personalization of living space at no additional cost; (2) building into every Beazer home exceptional quality and comfort that translates into a lower cost of ownership; and (3) saving our customers thousands of dollars on their home loan with our Mortgage Choice program that makes it easy to compare multiple loan offers from competing lenders. We take seriously our responsibility to strengthen the communities in which we operate. In addition to various division-level initiatives that serve local communities, we have a long-standing partnership with the Fisher House Foundation, a
not-for-profit organization that builds comfort homes where military and veterans’ families can stay free of charge while a loved one is in the hospital. We have significant participation from our employees in charitable activities, such as the 2019 Rock ‘n Roll Marathon, where our employees raised and contributed over $200,000 to support the Fisher House Foundation, the MS 150, a two-day bike ride to support the National Multiple Sclerosis Society, and numerous local-community charitable projects, including Operation FINALLY HOME, which provides mortgage-free homes to military families. MEETINGS OF THE BOARD OF DIRECTORS There are
The four standing committees of the Board: AnBoard are the: Audit Committee, a Nominating/Corporate Governance Committee, a Compensation Committee, and a Finance Committee. Actions taken by these committees are reported to the Board of Directors at the next following Board meeting. All directors then serving on the Board attended the Company’s 20182019 annual meeting of stockholders held on February 1, 2018.6, 2019. The following table below shows the current membership of the Board and each standing committee, and the number of meetings held during fiscal 2018:2019. Directors who are retiring from the Board at the annual meeting are noted below, as are the two directors who joined the Board during the fourth quarter of fiscal 2019:
| | | | | | | | | | | | | | | | | | | | | | BOARD | AUDIT | COMPENSATION | NOMINATING/CORPORATE GOVERNANCE | FINANCE | ATTENDANCERATE | | Elizabeth S. Acton | l | l | | | l | 100% | | | Laurent Alpert | l | | | l | l | 100% | | | Brian C. Beazer* | l | | l | | l | 100% | | | Peter G. Leemputte* | l | l | | l | | 100% | | | Allan P. Merrill | l | | | | | 100% | | | Peter M. Orser | l | | l | | l | 100% | | | Norma A. Provencio | l | | l | l | | 100% | | | Danny R. Shepherd | l | l | l | | | 100% | | | David J. Spitz** | l | | l | | | 100% | | | C. Christian Winkle** | l | | | | l | 100% | | | Stephen P. Zelnak, Jr.* | l | l | | l | | 94% | | | Number of Meetings in 2019 | 5 | 6 | 4 | 7 | 6 | |
lChair *Retiring director. **Director appointed during the fourth quarter of fiscal 2019. AUDIT COMMITTEE
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| | | | | | | | | | | | | | | | BOARD | | AUDIT | | COMPENSATION | | NCG | | FINANCE | | ATTENDANCE
RATE | Elizabeth S. Acton | |
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| | 100% | Laurent Alpert | |
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| | 100% | Brian C. Beazer | |
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| | | | 100% | Peter G. Leemputte | |
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| | 100% | Allan P. Merrill | |
| | | | | | | | | | 100% | Peter M. Orser | |
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| | 100% | Norma A. Provencio | |
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| | | | 100% | Danny R. Shepherd | |
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| | | | | | 100% | Stephen P. Zelnak, Jr. | |
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| | | | 100% | Number of Meetings in 2018 | | 5 | | 5 | | 3 | | 5 | | 5 | | |
Chair
AUDIT COMMITTEE
Our Audit Committee assists the Board in its oversight responsibility relating to: the integrity of the Company’s consolidated financial statements, accounting and financial reporting processes, and systems of internal controls over accounting and financial reporting;
| | | | | | | l | The integrity of the Company’s consolidated financial statements, accounting and financial reporting processes, and systems of internal controls over accounting and financial reporting; | | l | The Company’s compliance with legal and regulatory requirements; |
the Company’s compliance with legal and regulatory requirements;
the independent auditor’s qualifications, independence and performance, including sole authority for appointment, compensation, oversight, evaluation and termination;
the performance of the Company’s internal audit function;
the report of the Audit Committee required by the rules of the SEC, as included in this proxy statement;
reviewing related party transactions, and
| | | | | | | l | The independent auditor’s qualifications, independence and performance, including sole authority for appointment, compensation, oversight, evaluation and termination; | | l | The performance of the Company’s internal audit function; | | l | The report of the Audit Committee required by the rules of the SEC, as included in this proxy statement | | l | Reviewing related party transactions, and | | l | The fulfillment of the other responsibilities set out in its charter |
the fulfillment of the other responsibilities set out in its charter.
Our Board has determined that all members of the Audit Committee are “financially literate” under NYSE rules and also qualify as financial experts, as defined in Item 407 of RegulationS-K under the Securities Act of 1933, as amended, and each are considered “financially literate” under NYSE rules.amended. Our Board also has reviewed the composition of the Audit Committee pursuant to the rules of the SEC and NYSE governing audit committees, and confirmed that all members of the Audit Committee are “independent”independent under such rules.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE
As described further below, the duties of our NCG Committee include recommending to the Board the slate of director nominees submitted to stockholders for election at each annual meeting and proposing qualified candidates to fill vacancies on the Board. The NCG Committee is also responsible for developing corporate governance principles for the Company, and overseeing the evaluation of the Board of Directors. Our Board has reviewed the composition of the NCG Committee pursuant to the rules of the NYSE governing nominating and governance committees, and confirmed that all members of the NCG Committee are “independent” under such rules. The NCG Committee considers director nominee recommendations from executive officers of the Company, independent members of the Board and stockholders of the Company, as well as recommendations from other interested parties. The NCG Committee may also retain an outside search firm to assist it in finding appropriate nominee candidates. Stockholder recommendations for director nominees received by the Company’s corporate secretary (at the address for submitting stockholder proposals and nominations set forth under the heading | | |
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“Procedures “Procedures Regarding Director Candidates Recommended by Stockholders” below) are forwarded to the NCG Committee for consideration.
During 2019, the NCG Committee, in consultation with the full Board, engaged a search firm to provide and to help vet candidates for Board seats in connection with a long-term Board succession plan. See also “Director Qualifications” below."— Director Qualifications" below for more information.
Our Compensation Committee reviews the Company’s management resources and structure and administers the Company’s cash- and equity-based compensation programs for directors and management, which includes our named executive officers. Our Board has reviewed the composition of the Compensation Committee pursuant to the rules of the NYSE governing compensation committees, and confirmed that all members of the Compensation Committee are “independent” under such rules. All members of the Committee are also “outside directors,” as defined by applicable federal tax law or regulations of the Internal Revenue Service.
Our Finance Committee provides assistance to the Board by reviewing from time to time matters concerning corporate finance, including equity and debt financings, acquisitions and divestitures, share and debt repurchases and dividend policy.
COMMITTEE CHARTERS AND OTHER INFORMATION You can
Interested parties may access electronic copies of the charters of our Audit Committee, NCG Committee, Compensation Committee and Finance Committee on the Company’s website (www.beazer.com).at beazer.com. Our Corporate Governance Guidelines and our Code of Business Conduct and Ethics, which meet the requirements of a code of ethics under applicable SEC regulations and NYSE standards, are also available on the Company’s website. You may request printedPrinted copies of any of these documents may be requested by writing to the Company’s corporate secretary at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328.
BOARD AND COMMITTEE EVALUATIONS
Our Board recognizes that a thorough evaluation process is an important element of corporate governance and enhances our Board’s effectiveness. Therefore, each year, the NCG Committee oversees the evaluation process, which includes an assessment of boththe performance of the individual directors, the full Board and Committee performance,the committees of the Board, and feedback is solicited for areas of improvement. These evaluations and feedback are then reviewed and shared with the full board during executive session.
Pursuant to our Corporate Governance Guidelines, the NCG Committee is directed to work with our Board on an annual basis to determine the appropriate qualifications, skills and experience for each director and for our Board as a whole. In evaluating these characteristics, the Committee and our Board take into account many factors, including the individual director’s general understanding of our business on an operational level, as well as his or her professional background and willingness to devote sufficient time to Board duties. | | |
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While our Board does not have a specific diversity policy, it considers diversity of race, ethnicity, gender, age and professional accomplishments in evaluating director candidates. Each individual is evaluated in the context of our Board as a whole, with the objective of recommending a group of nominees that can best promote the success of our business and represent stockholder interests through the exercise of sound judgment based on diversity of experience and background.
When identifying potential director candidates - whether to replace a director who is retiring or has resigned, or to expand the Board to gain additional capabilities - the NCG Committee, in consultation with the full Board, determines the skills, experience and other characteristics that a potential candidate should possess in light of the composition and needs of the Board and its committees.The NCG Committee also considers whether or not the candidate would be considered independent under the applicable NYSE and SEC governance standards.
As noted above, during fiscal 2019, the NCG Committee engaged a search firm to provide and to help vet candidates for Board seats in connection with a comprehensive, long-term Board succession plan.In such instances, the NCG Committee also considers the assessment of the search firm it has retained and the background information such firm provides on any person it recommends for consideration.The full Board customarily interviews leading candidates. See "Proposal 1 — Election of Directors — General" for more information. PROCEDURES REGARDING DIRECTOR CANDIDATES RECOMMENDED BY STOCKHOLDERS
The NCG Committee will consider Board candidates recommended by our stockholders. If the NCG Committee determines to nominate a stockholder-recommended candidate, then that nominee’s name will be included in the proxy statement for our next annual meeting. Stockholder recommendations must be addressed to: Beazer Homes USA, Inc., Attention: Chair, Nominating/Corporate Governance Committee, 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328. Our stockholders also have the right under our Bylaws to directly nominate director candidates at an annual meeting by following the procedures outlined in our Bylaws. If a director candidate were to beOur NCG Committee evaluates candidates recommended by a stockholder, our NCG Committee would evaluate the candidatestockholders in the same manner it evaluates director candidates identified by the Committee.
REPORTING OF CONCERNS TO INDEPENDENT DIRECTORS If you have any
Any concerns about the Company you may communicate thembe communicated directly to our independent directors. We maintain an ethics hotline (at 1-866-457-9346) that individuals may call to report any concerns to Global Compliance, a third party service provider that administers our ethics hotline. Individuals may report their concerns anonymously, should they wish to do so. Written communications shouldmay be mailed to the Company’s Corporate Secretarycorporate secretary at 1000 Abernathy Road, Suite 260, Atlanta, GA 30328, and the Corporate Secretarycorporate secretary will forward such communications to our independent directors.
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ELECTION OF DIRECTORS GENERAL As part of a comprehensive, long-term Board succession plan, three of our current directors will not stand for reelection at the annual meeting. After many years of distinguished service, Messrs. Beazer, Zelnak and Leemputtee will retire from the Board. Brian Beazer, the Company's founder and Chairman Emeritus, has served as a director of the Company for over 25 years, since our IPO in 1994. Mr. Beazer served as our Non-Executive Chairman of the Board from 1994 until February 2015. Stephen Zelnak has served as a director of the Company since February 2003 and as our Non-Executive Chairman of the Board from February 2015 to November 2019. Peter Leemputte, a former Chairman of the Board's Audit and Compensation Committees, has served as a director of the Company since August 2005. We would like to take this opportunity to thank each of them for their many years of service to Beazer Homes, its Board and stockholders. The NCG Committee conducted an extensive director search in fiscal 2019, which resulted in the appointment of two new directors to our Board in August 2019. In connection with the retirements noted above and these new appointments, the Board has followed the recommendation of the NCG Committee and reduced the size of the Board from eleven to eight members, effective as of the annual meeting. Each of the nominees listed below has been nominated as a director to serve a term of one year and until his or her respective successor has been qualified and elected. Each of the following nominees is presently serving as a director. Our Board of Directors periodically evaluates the appropriate size for our Board of Directors and will set the number of directors in accordance with our Bylaws and based on recommendations of the NCG Committee. In the event any nominee is not available as a candidate for director, votes will be cast pursuant to authority granted by the proxy for such other candidate or candidates as may be recommended by the NCG Committee and subsequently nominated by our Board of Directors. Our Board of Directors has no reason to believe that any of the following nominees will be unable or unwilling to serve as a director, if elected. The biographical information appearing below with respect to each nominee has been furnished to us by the nominee: Ms. Acton, 67,68, has served as a director of the Company since May 2012. Prior to her retirement in April 2012, Ms. Acton was Executive Vice President Finance (from 2011 to 2012) and Executive Vice President and Chief Financial Officer from (2002 to 2011) of Comerica Incorporated, a financial services company. Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company from 1983 to 2002, including Vice President and Treasurer from 2000 to 2002 and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company from 1998 to 2000. She is an Independent Trustee of the Fidelity Fixed Income and Asset Allocation Funds. Ms. Acton received a Bachelor’s degree from the University of Minnesota and a Master of Business Administration degree in Finance from Indiana University. Ms. Acton has over 35 years of significant financial management expertise as well as significant experience as a finance executive for two public companies. We believe Ms. Acton’s finance and accounting expertise is valuable to the Company in many respects, including with respect to assessment of our capital structure and financial strategy as Chair of our Finance Committee, as well as compliance with our obligations under various regulatory requirements for financial expertise on our Board of Directors and Audit Committee.
Mr. Alpert, 72,73, has served as a director of the Company since February 2002. Mr. Alpert is a Senior Counsel of the international law firm of Cleary, Gottlieb, Steen & Hamilton. He joined Cleary Gottlieb in 1972, and was a partner from 1980 until his retirement in November 2016. He received his undergraduate degree from Harvard College and a law degree from Harvard Law School. Mr. Alpert is also an overseer of the International Rescue Committee, a non-profit organization providing relief and resettlement services to refugees. Mr. Alpert brings to our Board of Directors over 40 years of experience practicing law with one of the world’s pre-eminent law firms and over 16 years’ experience on our Board of Directors. He has substantial experience representing companies in a broad range of industries. In light of the regulatory environment in which the Company operates and the continued emphasis on corporate governance, ethics and compliance for public companies, Mr. Alpert’s experience, training and judgment are deemed to be of significant benefit to the Company. | | |
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BRIAN C. BEAZER
Mr. Beazer, 83, is our Chairman Emeritus and has served as a director of the Company since our IPO in 1994. Mr. Beazer served as ourNon-Executive Chairman of the Board from 1994 until February 2015. From 1968 to 1983, Mr. Beazer was Chief Executive Officer of Beazer PLC, a United Kingdom company, and then was Chairman and Chief Executive Officer of that company from 1983 to the date of its acquisition by Hanson PLC in 1991. During that time, Beazer PLC expanded its activities internationally to include homebuilding, quarrying, contracting and real estate and generated annual revenue of approximately $3.4 billion. Mr. Beazer was educated at the Cathedral School, Wells, Somerset, England. He is a director of Beazer Japan, Ltd. and Seal Mint, Ltd. and is a private investor.
Mr. Beazer has been in the homebuilding and construction industry worldwide for over 50 years. His experience and vision have been driving forces at the Company since prior to its IPO. His extraordinary experience and stature as a highly respected international businessman provide the Company with unique insight into national and international economic policies that impact the homebuilding industry, as well as anin-depth understanding of the domestic homebuilding industry. We continue to benefit from his knowledge and experience in his role as Chairman Emeritus.
PETER G. LEEMPUTTE
Mr. Leemputte, 61, has been a director of the Company since August 2005. Mr. Leemputte joined Keurig Green Mountain, Inc., a leader in specialty coffee, coffee makers, teas and other beverages, in June 2015 and served as Chief Financial Officer and Treasurer from August 2015 until his retirement following the sale of the company in June 2016. Prior to that, from September 2008 to March 2015, Mr. Leemputte worked at Mead Johnson Nutrition Company, a global leader in infant and children’s nutrition, where he served most recently as Executive Vice President and Chief Financial Officer. Previously, Mr. Leemputte was Senior Vice President and Chief Financial Officer for Brunswick Corporation. He joined Brunswick in 2001 as Vice President and Controller. Prior to joining Brunswick Corporation, Mr. Leemputte held various management positions at Chicago Title Corporation, Mercer Management Consulting, Armco Inc., FMC Corporation and BP. Mr. Leemputte holds a Bachelor of Science degree in Chemical Engineering from Washington University, St. Louis and a Master of Business Administration in Finance from the University of Chicago Booth School of Business. Mr. Leemputte currently serves as a director of MasterCraft Boat Company (NASDAQ: MCFT).
Mr. Leemputte’s experience, particularly his increasingly important financial responsibilities for several of the nation’s leading corporations, provides significant financial and accounting expertise that has been invaluable to the Company in many respects, including assessment of our capital structure and financial strategy.
ALLAN P. MERRILL Mr. Merrill, 52,53, joined the Company in May 2007 as Executive Vice President and Chief Financial Officer, and was named President and Chief Executive Officer in June 2011.2011 and Chairman in November 2019. Prior to joining the Company, Mr. Merrill worked in both investment banking and in online real estate marketing. From 1987 to 2000, Mr. Merrill worked for the investment banking firm UBS (and its predecessor Dillon, Read & Co.), where he was a managing director and ultimately served as co-head of the Global Resources Group, overseeing relationships with construction and building materials companies around the world, as well as with clients in other industries. During his investment banking career, he advised the Company on its 1994 IPO as well as on several major acquisitions. Immediately prior to joining the Company, Mr. Merrill worked for Move, Inc., where he served as Executive Vice President of Corporate Development and Strategy. From April 2000 to October 2001, Mr. Merrill was president of Homebuilder.com, a division of Move, Inc. Mr. Merrill is chair of the Policy Advisory Board of the Joint Center for Housing Studies at Harvard University and a member of the Executive CommitteeLeading Builders of the Metro Atlanta Chamber of Commerce.America. He is also a director of Builder Homesite, Inc. and he chairs the Management Committee of the Leading Builders of America. He is a graduate of the University of Pennsylvania’s Wharton School with a Bachelor of Science degree in Economics. We believe Mr. Merrill’s experience in and knowledge of the homebuilding sector, gained primarily through finance, capital markets and strategic development roles over more than 2025 years, is particularly valuable to the Company as it seeks to achieve its financial and operational goals. | | |
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Mr. Orser, 62,63, has been a director of the Company since February 2016. From 2010 to 2014, Mr. Orser served as President and Chief Executive Officer of the Weyerhaeuser Real Estate Company, a subsidiary of Weyerhaeuser Company, where he oversaw five different homebuilding operations across the United States. In July 2014, under his leadership, Weyerhaeuser completed the successful sale of the company. Prior to that, Mr. Orser spent almost 25 years in various positions at Quadrant Homes, a leading homebuilder in the state of Washington and a subsidiary of Weyerhaeuser, including serving as President from 2003 to 2010. Mr. Orser is active in a number of other civic organizations, including serving as Chairman of the Runstad Department of Real Estate Advisory Board, University of Washington, and was appointed by the Governor to serve on the Washington State Affordable Housing Advisory Board. Mr. Orser holds a Bachelor of Science degree from the University of Puget Sound and a Master of Urban Planning from the University of Washington. Mr. Orser’s experience in the homebuilding industry provides significant operational and safety expertise to the Company. We believe his understanding of our industry, as well as his management experience gained over the course of his career, provides tremendous valueis valuable to the Board.Company. Ms. Provencio, 61,62, has been a director of the Company since November 2009.2009 and was named Lead Director in November 2019. Ms. Provencio is President and owner of Provencio Advisory Services Inc., a healthcare financial and operational consulting firm. Prior to forming Provencio Advisory Services in October 2003, she was the Partner-in-Charge of KPMG’s Pacific Southwest Healthcare Practice since May 2002. From 1979 to 2002, she was with Arthur Andersen, serving as that firm’s Partner-in-Charge of the Pharmaceutical, Biomedical and Healthcare Practice for the Pacific Southwest. Ms. Provencio received her Bachelor of Science in Accounting from Loyola Marymount University. She is a certified public accountant and also a member of the Board of Trustees of Loyola Marymount University.
Ms. Provencio has over 3020 years’ experience in the public accounting field. We believe her in-depth understanding of accounting rules and financial reporting regulations to be extremely valuable to the Company’s commitment and efforts to comply with regulatory requirements. Mr. Shepherd, 67,68, has been a director of the Company since November 2016. Prior to his retirement in 2015, Mr. Shepherd was Vice Chairman (from 2014 to 2015) and served as Senior Vice President, Executive Vice President and Chief Operating Officer (from 2001 to 2014) of Vulcan Materials Company, a producer of construction aggregates. Mr. Shepherd is a current director of GCP Applied Technologies. Mr. Shepherd received his Bachelor of Science degree from Georgia Institute of Technology. Mr. Shepherd has significant experience in the building materials industry, and he has over forty years of public company experience. He served in various management roles over the course of his career, including thirteen years as an executive of a large producer of construction aggregates. We believe his in-depth understanding of our industry, as well as his management and operational experience, provides tremendous value to the Board.STEPHEN P. ZELNAK, JR.
Company. DAVID J. SPITZ Mr. Zelnak, 73,Spitz, 47, has served as a director of the Company since February 2003 and as ourNon-Executive Chairman of the Board since February 2015.August 2019. He is currently the chief executive officer and a directormember of Martin Marietta Materials, Inc.the board of directors of ChannelAdvisor Corp., a producer of aggregates forleading e-commerce cloud platform whose mission is to connect and optimize the construction industry where he hasworld's commerce, since May 2015. He also served as Chief Executive Officerpresident and chief operating officer of ChannelAdvisor from 1993 through 20092010 until May 2015, and Chairmanpreviously served in a number of capacities from 2006 until 2010. He was an entrepreneur-in-residence at the BoardAurora Funds, a venture capital firm, from 2005 to 2008. Previously, from 2000 to 2002, Mr. Spitz was founder and chief technology officer of Directors from 1997 through May 2014. Mr. Zelnak joined Martin Marietta Corporation in 1981WindWire, a mobile marketing company that was acquired by Avesair, where he then served as the Presidentpresident until its acquisition by Inphonic in 2003. In 1996 he co-founded, and until 1998 served as chief technology officer of, Martin Marietta’s Materials Group and of Martin Marietta’s Aggregates Division.Netsation, a network management software company acquired by Nortel Networks, where he then served as senior principal technologist until 2000. Mr. Zelnak also serves as Chairman and majority owner of ZP Enterprises, LLC, a private investment firm. Mr. ZelnakSpitz received a Bachelor’sB.A. degree from Georgia Institute of Technology and Masters degrees in Administrative Science and Business Administrationcomputer science from the University of Alabama System.California, San Diego. He has served as Chairmanholds four U.S. patents, is past chairman of the North Carolina ChamberSchool of Science and Mathematics Foundation Board and is the past Chairmanchairman and a member of the North Carolina Community College Foundation. He serves onexecutive committee and board of directors of CED, an entrepreneurial support organization for companies in the Advisory Boardsoutheastern United States. Mr. Spitz’s high-level management experience with software and technology companies, computer science background and deep technology industry experience provides value to the Company. C. CHRISTIAN WINKLE Mr. Winkle, 56, has served as a director of the CollegeCompany since August 2019. He is currently the chief executive officer and a member of Managementthe board of directors for Sunrise Senior Living, which operates senior living communities in the United States, Canada and the United Kingdom, including 21 Gracewell Healthcare communities. He has been at North Carolina State UniversitySunrise Senior Living since September 2013. He was chief executive officer of MedQuest, Inc., a leading operator of independent, fixed-site, outpatient diagnostic imaging centers in the United States from November 2005 to August 2013. He served as president and chief executive officer for Mariner Health Care, Inc., which operated skilled nursing facilities, assisted living and long-term acute care hospitals from January 1999 to July 2004. Mr. Winkle was the chief operating officer at Integrated Health Services, where he helped pioneer the sub-acute care sector and was responsible for all of the facility and ancillary service operations. He is a Trustee Emeritusmember of Argentum and American Seniors Housing Association (ASHA) boards. Mr. Winkle received his Bachelor of Science degree from Case Western Reserve University. Mr. Winkle's broad management experience and his specific expertise in serving the Georgia Tech Foundation.important aging adults demographic provides value to the Company. RECOMMENDATION | | |
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Mr. Zelnak brings over 30 years’ experience as a senior executive in the building materials industry, as well as an educational background that includes business administration, organizational behavior and finance. In addition, his prior experience as the chief executive officer of a publicly-traded company is especially beneficial in his role as a member of the Audit Committee and the Nominating/Corporate Governance Committee. His vast knowledge of the building industry and mentorship skills are tremendous assets to the Board and the executive management team in his role asNon-Executive
Chairman.
RECOMMENDATION
The Board of Directors recommends a voteFOR the election of each of the nominees named above.
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SUMMARY OF 20182019 NON-EMPLOYEE DIRECTOR COMPENSATION
Our non-employee directors generally receive an annual cash retainerretainers for Board and committee service and an annual equity grantrestricted stock award that vests one year from the date of grant. They also receive reimbursement for reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings; however,but, they do not receive fees for meeting attendance. The
To reward our directors’ efforts and contributions, the Compensation Committee seeks to position non-employee director compensation at or near the 50th percentile of industry peers, to reward our directors’ efforts and contributions, with a meaningful emphasis on equity-based awards to align their interests with stockholders. With the assistance of its independent advisor, the Compensation Committee periodically reviews our non-employee director compensation program to ensure it is sufficiently competitive vs. industry peers to facilitate the attraction and retention of highly experienced and qualified board members. The peer group includes the same companies used in senior executive benchmarking, as listed on page 26. NON-EMPLOYEE DIRECTOR CASH COMPENSATION
For fiscal year 2018,2019, all non-employee directors, other than Messrs. Spitz and Winkle, received a $75,000 annual cash retainer. Messrs. Spitz and Winkle joined the Board in August 2019, and each received a pro rata portion of the annual cash retainer. We also provide annual committee chair retainers of $25,000 for our Audit Committee chair and $20,000 for each of our other committee chairs. Non-chair committee members receive $12,500 annually for service on the Audit Committee and $10,000 annually for service on all other committees.committees (Messrs. Spitz and Winkle received a pro rata portion of applicable committee fees). In addition to the $75,000 annual cash retainer paid to allnon-employee directors, the former non-executive Chairman receivesreceived an additional $75,000 annual cash retainer. However, the non-executive Chairman doesdid not receive additional retainers for committee service. In fiscal 2019, Mr. Zelnak received $75,000 for his service as non-executive Chairman. Mr. Merrill will not receive additional compensation for his service as Chairman. Beginning with fiscal 2020, the Board has adopted a Lead Director structure. See "Corporate Governance — Board Leadership Structure and Governance Practices" for more information. Our Lead Director will receive an additional annual cash retainer of $37,500 for serving as Lead Director.
For fiscal 2018,2019, allnon-employee directors (other than Messrs. Spitz and Winkle) received an equity grant with the number of shares calculated by dividing $100,000 by the fair market value of a share of common stock on the date of grant, rounded down to the nearest whole number. Each of Messrs. Spitz and Winkle received a pro rata grant valued at approximately $15,000. Directors are eligible to receive grants of equity-based awards under the Company’s long-term incentive plans at the discretion of our Compensation Committee. Our Compensation Committee’s rationale for equity grants to directors is similar to that for our named executive officers; namely, to align their interests with those of
stockholders. The amount of the director grant is determined in consultation with our Compensation Committee’s independent compensation consultant, Pearl Meyer. See footnote 2 to the Director Compensation Table below. In addition to the $100,000 annual equity award to allnon-employee directors, the former non-executive Chairman receivesreceived an additional $100,000 annual equity award. Except as described above, our non-employee directors did not receive any other compensation from the Company for services rendered as a director during fiscal 2018.2019. Our directors are subject to stock ownership and holding requirements, as described under “Compensation Discussion and Analysis — Elements of Fiscal 20182019 Compensation Program — Stock Ownership and Holding Requirements” below. DIRECTOR COMPENSATION TABLE | | |
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DIRECTOR COMPENSATION TABLE
The following table sets forth the compensation of each non-employee director in fiscal year 2018. | | | | | | | | | | | | | | | | NAME(1) | | FEES EARNED OR
PAID IN CASH ($) | | STOCK AWARDS ($) (2) | | TOTAL ($) | Elizabeth S. Acton | | | | 107,500 | | | | | 99,988 | | | | | 207,488 | | Laurent Alpert | | | | 105,000 | | | | | 99,988 | | | | | 204,988 | | Brian C. Beazer | | | | 95,000 | | | | | 99,988 | | | | | 194,988 | | Peter G. Leemputte | | | | 99,600 | | | | | 99,988 | | | | | 199,588 | | Peter M. Orser | | | | 101,650 | | | | | 99,988 | | | | | 201,638 | | Norma A. Provencio | | | | 100,438 | | | | | 99,988 | | | | | 200,426 | | Danny R. Shepherd | | | | 105,813 | | | | | 99,988 | | | | | 205,801 | | Stephen P. Zelnak, Jr. | | | | 150,000 | | | | | 199,997 | | | | | 349,997 | |
| | | | | | | | | | | | NAME (1) | FEES EARNED OR PAID IN CASH($) | STOCK AWARDS($)(2) | TOTAL($) | | Elizabeth S. Acton | 107,500 | | 99,997 | | 207,497 | | | Laurent Alpert | 98,500 | | 99,997 | | 198,497 | | | Brian C. Beazer | 95,000 | | 99,997 | | 194,997 | | | Peter G. Leemputte | 97,500 | | 99,997 | | 197,497 | | | Peter M. Orser | 105,000 | | 99,997 | | 204,997 | | | Norma A. Provencio | 101,500 | | 99,997 | | 201,497 | | | Danny R. Shepherd | 110,000 | | 99,997 | | 209,997 | | | David J. Spitz | 12,963 | | 15,061 | | 28,024 | | | C. Christian Winkle | 12,963 | | 15,061 | | 28,024 | | | Stephen P. Zelnak, Jr. | 150,000 | | 199,994 | | 349,994 | |
| | | | | | | Allan Merrill, our Chairman, President and Chief Executive Officer, is a member of our Board of Directors, but does not receive separate compensation for his Board service. |
 | | | Represents the aggregate grant date fair value of awards determined in accordance with FASB ASC Topic 718. These are not amounts paid to or realized by thenon-employee directors. Further information regarding the valuation of stock awards can be found in Notes 2 and 16 to our Consolidated Financial Statements in our 20182019 Form10-K. In fiscal 2018,2019, Ms. Acton, Ms. Provencio and Messrs. Alpert, Beazer, Leemputte, Orser and Shepherd were each granted 4,88710,183 shares of restricted stock. Mr. Zelnak was granted 9,77520,366 shares of restricted stock, consisting of: (a) hisnon-employee director grant of 4,88710,183 shares; and (b) an additional grant of 4,88810,183 shares in connection with his service as Chairman of the Board. Messrs. Spitz and Winkle were each granted 1,284 shares of restricted stock. Each award vests on theone-year anniversary of its grant date. |
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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED The Audit Committee of our Board of Directors has selected the firm of Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively, Deloitte & Touche), to serve as our independent registered public accounting firm for the fiscal year ending September 30, 2019.2020. Deloitte & Touche has served as our accounting firm since 1996. The services provided to the Company by Deloitte & Touche for the last two fiscal years are described under the caption “Principal Accountant Fees and Services” below. Stockholder approval of the appointment is not required; however, our Board of Directors believes that obtaining stockholder ratification of the appointment is a sound governance practice. Representatives of Deloitte & Touche will be present at the annual meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from stockholders. | | | | | | | | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
For the fiscal years ended September 30, 20182019 and 2017,2018, the following professional services were performed by Deloitte & Touche.
Audit Fees: The aggregate audit fees billed for the fiscal years ended September 30, 2019 and 2018 were $1,130,000 and 2017 were $1,065,000, and $1,205,000, respectively. Audit fees consisted of fees associated with the audit of our annual financial statements and internal control over financial reporting, the audits of certain consolidated subsidiaries, reviews of the financial statements included in our quarterly reports on Form10-Q, and other services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees: The aggregate fees billed for audit-related services for the fiscal years ended September 30, 20182019 and 20172018 were $33,790 and $33,800,$33,790, respectively. These fees related to assurance and related services performed by Deloitte & Touche that are reasonably related to the performance of the audit or review of our financial statements. These services included employee benefit and compensation plan audits.
Tax Fees: No fees for tax services were billed by or paid to Deloitte & Touche in either fiscal year 20182019 or fiscal All Other Fees: No other fees were billed by or paid to Deloitte & Touche in either fiscal year 20182019 or fiscal year 2017.2018. Our Audit Committee annually approves each year’s engagement for audit services in advance. Our Audit Committee has also established complementary procedures to require pre-approval of all permitted non-audit services provided by our independent auditors.
The Board of Directors recommends a voteFOR ratification of the appointment of Deloitte & Touche as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2019.2020.
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The Audit Committee meets the definition of an audit committee as set forth in Section 3(a)(58)(A) of the Exchange Act and operates under a written charter adopted by our Board of Directors. Each member of the Audit Committee is independent and financially literate in the judgment of the Board of Directors and as required by the Sarbanes-Oxley Act and applicable SEC and NYSE rules. The Board of Directors has also determined that Ms. Acton and Messrs. Leemputte, Shepherd and Zelnak qualify as “audit committee financial experts,” as defined under SEC regulations. Management is responsible for our internal controls and the financial reporting process. Deloitte & Touche, the Company’s independent registered public accounting firm, is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and for issuing a report thereon. The Audit Committee’s responsibility is generally to monitor and oversee these processes, as described in the Audit Committee Charter. The Audit Committee reviewed and discussed with management the Company’s audited financial statements as of and for the fiscal year ended September 30, 2018.2019. The Audit Committee has discussed with Deloitte & Touche the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted bythe applicable requirements of the PCAOB in Rule 3200T.and the SEC. The Audit Committee has also received the written communications from Deloitte & Touche required by the PCAOB regarding Deloitte & Touche’s communications with the Audit Committee concerning independence and has discussed with Deloitte & Touche their independence. The Audit Committee has considered whether the provision of the non-audit services described below by Deloitte & Touche is compatible with maintaining their independence and has concluded that the provision of these services does not compromise such independence. Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 20182019 for filing with the SEC. DANNY R. SHEPHERD (CHAIR) The Members of the Audit Committee
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ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, as amended, the Company is asking its shareholders to cast an advisory vote to approve the compensation of the Company’s named executive officers or NEOs,(NEOs), as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K. This proposal, commonly known as “say-on-pay,” "Say On Pay", gives our shareholders the opportunity to express their views on the design and effectiveness of our executive compensation programs. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this proxy statement. As described in detail in the section of this proxy statement titled “Compensation Discussion and Analysis,” our executive compensation programs are designed to attract, motivate and retain our executive officers (including our NEOs), who are critical to our success. Under these programs,At the same time our Compensation Committee is committed to ensuring that our executive compensation program reinforces key business and strategic objectives in support of long-term shareholder value creation and appropriately aligns pay for performance without encouraging inappropriate risk taking. Accordingly, our NEOs are rewarded for the achievement of specific annual, long-term and strategic goals in support of long-term value creation. Please read the section of this proxy statement titled “Compensation Discussion and Analysis,” and the Executive Compensation tables that follow it, for additional details about our executive compensation programs. At each
We have a long history of strong shareholder support for our executive compensation programs, with Say on Pay support levels averaging over 93% over the Company’s annual meetings since the 2012 annual meeting of shareholders, the Company’s shareholders have approved, on an advisory basis, the compensation of the Company’s NEOs, as disclosed in the proxy statement for such meeting, and thelast five years. The Board and the Compensation Committee have considered the result of these shareholder votes in setting compensation policies and making compensation decisions for each of the fiscal years that has followed. At our 20182019 annual meeting of stockholders, over 97%87% of shares present in person or represented by proxy voted for approval of our executive compensation. At our 20172018 annual meeting of shareholders, the Company’s shareholders once again determined that oursay-on-pay Say On Pay vote should be held on an annual basis. In accordance with this determination, we are asking our shareholders to voteFOR the following resolution: RESOLVED, that the compensation paid to the NEOs, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Executive Compensation tables, and the narrative discussion, is hereby approved. Thesay-on-pay vote is advisory and, therefore, not binding on the Company, the Compensation Committee or our Board of Directors.
Our Board of Directors and our Compensation Committee value the opinions of our shareholders, and to the extent there is a significant vote against the compensation paid to our NEOs, as disclosed in this proxy statement, we will consider our shareholders’ concerns and will evaluate what, if any, further actions are necessary to address those concerns.
The Board of Directors recommends a voteFOR approval of the compensation of our named executive officers.
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INTRODUCTION This Compensation Discussion and Analysis (CD&A) describes the compensation programs for our Named Executive Officersnamed executive officers (NEOs). Our current NEOs, who also served as our NEOs in fiscal 2018, are: | | | | | | NAME | | TITLE | Allan P. Merrill | | Chairman, President and Chief Executive Officer | Robert L. Salomon | | Executive Vice President and Chief Financial Officer | Keith L. Belknap | | Executive Vice President and General Counsel |
CD&A
In fiscal 2019, we implemented several changes to our management structure for corporate functions and departments to better align functional teams with our strategic objectives. As part of these changes, in addition to his responsibilities as Chief Financial Officer, Mr. Salomon now oversees all land acquisition, capital sourcing and information technology functions. Mr. Belknap now leads our customer teams, which include customer financial services, marketing, customer experience and customer care functions, in addition to his responsibilities as General Counsel. As previously noted, in November 2019, the Board appointed Mr. Merrill as Chairman, in addition to his continuing role as President and Chief Executive Officer.
We are a geographically diversified homebuilder with operations in 13 states within three geographic regions in the United States. Our homes are designed to appeal to homeowners at different price points across various demographic segments.segments, principally first time buyers, first move-up buyers, empty nesters and retirees. Our objective is to provide our customers with homes that incorporate exceptional value and quality, at affordable prices, while creating durableseeking to maximize our return on invested capital over the course of a housing cycle. Our primary points of differentiation include: Choice PlansTM,which allows customers to personalize their primary living areas for how they want to live in the home, at no additional cost; Surprising Performance, as every Beazer home is designed and growing valuebuilt to provide exceptional quality and comfort that results in lower cost of ownership; and Mortgage Choice, which makes it easy for our employees, partnerscustomers to comparison shop among competing lenders, potentially saving them thousands of dollars on their home loan. We are committed to social and stockholders.environmental responsibility — supporting a variety of charitable foundations, promoting safety, diversity and inclusion in our workforce and building our homes and communities with a concern for their impact on the environment. For a discussion of our environmental and social responsibility efforts, see "Corporate Governance — Board Leadership Structure and Governance Practices — Environmental and Social Responsibility" beginning on page 7. 
2018
As we began fiscal 2019, the new home sales market was very challenging, driven by rapidly rising mortgage rates that contributed to affordability concerns and a softening in demand. In 2018,that environment, we continuedincreased incentives to pursue our objectivespur home sales and allocated capital to debt reduction and share repurchases. This response — together with improvements in the overall sales environment and a successful refinancing to reduce borrowing costs — improved results in ways that will be even more meaningful in fiscal 2020. For fiscal 2019, we: | | | | | | | l | Improved new home orders, backlog and community count, which provides a solid foundation for growth as we move into fiscal 2020; | | | | l | Improved operations by streamlining our product offerings, which has led to higher customer satisfaction scores, reduced construction cycle times and lower build costs; and | | | | l | Improved allocation of capital, which enabled both investment in our business and the return of nearly $90 million to investors. |
In short, despite a tough sales environment at the start of providing our customers with homes that incorporate exceptional value and quality at affordable prices, while creating durable and growing value for our employees, partners and stockholders. Listed belowfiscal 2019, we ended the year in a better position than we began. Here are several highlights of our financial and operational and strategic achievements duringin fiscal 2018:2019: 2B-10
PlanSurpassed our multi-year plan to reach at least $2 billion in revenue and $200 million of Adjusted EBITDA
| | | | | | | | | | FINANCIAL | FINANCIAL
| | $2.1 BILLION | | Achieved $2.1 billion in homebuilding revenue a 9.6% increase year-over-year | | $180.2 MILLION | $204.7 MILLION
| | Achieved $204.7$180.2 million in Adjusted EBITDA a 14.5% increase year-over-year | | $51.3 MILLION | $250 MILLION
Debt Repurchases Repurchased $51.3 million of debt. We expect to reduce outstanding debt in 2020 by more than we did in 2019, with the goal of reducing debt below $1 billion over time | | $500.0 MILLION | Debt Reduction
Completed three-year, $250Refinancing
| | | We issued $350 million debtof 7.25% unsecured Senior Notes due 2029 and entered into an unsecured term loan with a principal amount of $150 million. The proceeds from these transactions were used to refinance $500 million of 8.75% unsecured Senior Notes due 2022, which generated a $11 million per year reduction planin cash interest cost | | $34.6 MILLION | Share Repurchases | | | We repurchased $34.6 million of our outstanding common stock at an average price of $10.54 per share |
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| | | | | | OPERATIONAL | OPERATIONAL
| | 3.0 PER 2.8 SALES/MONTH
| | Achieved average monthly sales pace per community of 3.02.8, in line with our targets | | | $360,200
| | Average Selling Price
Ended the year with an average selling price of $360,200 for our homes, marking our seventh consecutive year of ASP growth
| | | 160 COMMUNITIES
| | Community Count
Ended the year with a community count of 160
|
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| 34 NEWLY
ACQUIRED
COMMUNITIES
| | Acquisitions
Completed the acquisitions of Bill Clark Homes and Venture Homes during
| | | | | | | $377.7 THOUSAND | Average Selling Price | | | Our average selling price (ASP) for the year adding 34 existingwas $377,700, marking our eighth consecutive year of ASP growth and future communitiesreflecting an increase of 4.9% year-over-year, primarily related to changes in geographic mix | | 166 COMMUNITIES | Community Count Ended the year with an active community count of 166 | | | | | During fiscal 2020, we expect to continue to pursue our balanced growth strategy, which is designed to improve profitability and returns from a more efficient and less leveraged balance sheet. In particular, we are targeting EBITDA growth in excess of 10% and more than $50 million in debt reduction, with a net debt to EBITDA ratio below 5 times. | | |
During 2019, the Board and management will continue to take steps to position Beazer for future success by growing EBITDA and EPS, while managing the balance sheet to drive ROA above 10%.
For purposes of this CD&A: “Adjusted EBITDA” means earnings before interest, taxes, depreciation, amortization, debt extinguishment charges and impairments, and is calculated by adding charges, including inventory impairment and abandonment charges, joint venture impairment charges and other | | | | | | | l | “Adjusted EBITDA” means earnings before interest, taxes, depreciation and amortization, and is calculated by adding charges, including debt extinguishment charges, inventory impairment and abandonment charges and other non-recurring items for the period to EBITDA. | | | | l | “EBITDA” means earnings before interest, taxes, depreciation and amortization, and is calculated by adding non-cash charges, including depreciation and amortization for the period, to EBIT. | | | | l | “EBIT” means net income (loss) before (a) previously capitalized interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization; and (b) income taxes. | | | | l | “Bonus Plan EBITDA” means Adjusted EBITDA before accrual of corporate bonuses. |
| | | | Please see Annex I for a reconciliation of non-GAAP measures to GAAP measures. |
FISCAL 2019 COMPENSATION HIGHLIGHTS
Actions | | | | | | | l | No changes were made to EBITDA.“EBITDA” means earnings before interest, taxes, depreciation, amortization, debt extinguishment charges and impairments, and is calculated by addingnon-cash charges, including depreciation and amortization for the period, to EBIT.
“EBIT” means net income (loss) before (a) previously capitalized interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization; and (b) income taxes.
“Bonus Plan EBITDA” means Adjusted EBITDA before accrual of corporate bonuses.
Please see Annex I for a reconciliation of Adjusted EBITDA to net income (loss).
2018 COMPENSATION HIGHLIGHTS
Actions
✓ | | Mr. Merrill’s base salary was increased from $900,000 to $950,000. Mrsalary. Mr. Salomon’s base salary was increased from $525,000$550,000 to $550,000.$600,000, and Mr. Belknap joined the Company in January 2018 and his initialBelknap's base salary was $450,000.increased from $450,000 to $500,000, in each case primarily to align salary more closely with industry peers. See “— Elements of Fiscal 20182019 Compensation Program — Base Salary” below for more information about these salary adjustments. |
✓ | | | l | No changes were made to Mr. Merrill’s long-term incentive award opportunity. Mr. Salomon’s long-term incentive target award opportunity was increased from 250%175% to 300%200% of base salary, and Mr. Salomon’s short-termBelknap's long-term incentive target award opportunity was increased from 100%125% to 125% of base salary.150%, in each case primarily to align target incentives more closely with expanded roles and responsibilities. See "— Introduction" and “— Elements of Fiscal 20182019 Compensation Program — Short-TermLong-Term Incentive Compensation” and “— Loss-Term Compensation” below for more information about these adjustments to target compensation. |
✓ | | | l | OperationalNo changes were made to the short-term incentive award opportunities, expressed as percentages of base salary, of any NEO. We based 65% of the fiscal 2019 short-term incentive opportunity for NEOs on achievement of Bonus Plan EBITDA, 10% on Return on Assets and 25% on key operational metrics.
| | | | l | We determined to use operational objectives foridentical to those used in determining the fiscal 2018 short-term incentive opportunity, were identicalwith the addition of an objective related to those usedfurther improving overhead efficiency. | | | | l | We determined that NEOs would be eligible to receive an award for the fiscal 2017operational components of the 2019 short-term incentivebonus opportunity with improvement over fiscal 2017 results required in all cases. Discretiononly if threshold Bonus Plan EBITDA was achieved. | | | | l | We retained the discretion to deduct from awards earned for failure to achieve certain construction quality standards based on the assessment of an independent third-party expert. |
✓ | | | l | We continued our practice of awarding performance-based restricted stockperformance shares equal totwo-thirds of an NEO’s overall long-term incentive award opportunity, and time-based restricted stock equal toone-third of award opportunity. |
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✓ | | We based 2018-20202019-2021 performance share metrics on cumulativepre-tax income, return on assets and the numberexpansion of Gatherings® home sales, with achievement subjectour Gatherings® product line. | | | | l | We continued to include an adjustment to performance shares based on relative TSRtotal shareholder return (TSR) performance. |
Outcomes ✓ | | We no longer use employment agreements for our NEOs. We entered into new severance
| | | | | l | Annual cash incentives were earned between threshold and change in control agreements with our NEOs upon the expiration of previously-existing employment agreements. |
Outcomes
✓ | | The short-term bonustarget award opportunity delivered apercent-of-target outcome ranging from 122.9% to 144.9%,levels based on actual vs. planned outcomes for the operational and financial performance factors, describedwith payouts for the NEOs lower by an average of approximately 41% compared with the prior year, despite a reduction in EBITDA of 12.0%. Additional details are provided under “— Elements of Fiscal 20182019 Compensation Program — Short-Term Incentive Compensation” below.
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✓ | | | l | The three-year award cycle of the 20162017 performance share program ended on September 30, 2018,2019, with results yielding a payout relative to target of 140.0%157.5%, as described under “— Elements of Fiscal 20182019 Compensation Program —Long-Term Incentive Compensation” below. |
PHILOSOPHY AND OBJECTIVES Our executive compensation philosophy is to design compensation programs that: ✓ | | Attract, retain and reward top talent;
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✓ | | Align pay with performance; and
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✓ | | Provide a substantial portion of our compensation in long-term equity-based compensation to reinforce key business and strategic objectives in support of long-term value creation.
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l Attract, retain and reward top talent; l Align pay with performance without encouraging inappropriate risk taking; and l Provide a substantial portion of our compensation in long-term equity-based compensation to reinforce key business and strategic objectives in support of long-term value creation. CORE PRINCIPLES AND KEY OBJECTIVES
We utilize a combination of base salary, short-term cash incentives and long-term equity incentives in the form of performance shares and, to a lesser extent, time-based restricted stock. The Committee generally seeks to align overall target compensation opportunities within a competitive range (plus or minus 10%) of the peer group 50th percentile. Our Compensation Committee reviews our core compensation philosophy annually in conjunction with the review of our compensation programs. While our core compensation philosophy and objectives have remained largely constant,consistent in recent years, the Committee has made adjustments to various aspects of our compensation programs to meet changing needs and circumstances of the Company. For example, the addition of a debt reduction metric forused in the three-year performance periodaward cycle associated with the performance shares granted in fiscal 20162017 was the result of a strategic objective to aggressively reduce debt.debt rather than maximize near-term growth. Similarly, beginning with the three-year award cycle associated with performance shares granted in fiscal 2018, the debt reduction metric was replaced with a growth metric related to our Gatherings ® product line to reinforce a key strategic priority. The Committee believes that base salary and incentive compensation opportunities should be set based on a variety of factors, including key business objectives and strategic priorities, Company performance, the compensation practices of our peer group, each executive’s specific responsibilities and skill sets, and the relationship among the compensation levels of members of our management team. The Committee has taken into consideration our need to attract and retain qualified executives in an industry that continues to experience an intense level of competition for senior executives. By structuring compensation programs with features that are balanced between short- and long-term incentives as well as cash and equity awards, the Committee believes it can: align management’s interests with those of our stockholders in both the short- and long-term; reduce risks that may be associated with compensation that is overly focused on short-term objectives; and attract, retain and motivate senior management personnel. PAY FOR PERFORMANCE | | |
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Our coreCompensation Committee is committed to ensuring that our executive compensation philosophy continues to be focusedprogram reinforces key business and strategic objectives in support of long-term shareholder value creation and appropriately aligns pay with performance. This is demonstrated by the heavy emphasis placed on providing incentivevariable, performance-based incentives for our named executive officers (representing 64% of target total compensation tofor our management team when they achieveCEO and averaging 59% of target total compensation for other senior executive officers), use of challenging financial andnon-financial goals that the Committeeperformance hurdles, and our Board of Directors believe are criticaldifferences in realized pay relative to enhancing stockholder value.target opportunity. As part of that philosophy, failure to reach such goals can result in no compensation under a
particular plan or metric. For example, none of the performance shares granted to our NEOs in fiscal years 2011 through 20142015 vested because required performance targets were not achieved.
Our compensation practices include: ✓ | |
| | | | | l | Emphasis on Performance-Based Pay:64 percent 64% of the ongoing pay mix for our CEO, and an average of 58%59% of the target pay mix for our other NEOs, is variable and performance-based. In aggregate, 62 percent62% of the target compensation for our CEO and other NEOs for 20182019 was variable and performance-based. |
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Long-term vesting:Our equity-based pay vehicles have multi-year vesting periods to reward long-term performance and value creation, enhance retention and deter inappropriate risk taking. |
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Multiple Performance Measures:We use multiple metrics to evaluate Company performance, covering both short-term and long-term performance objectives, with award funding caps to deter inappropriate risk taking. |
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Stock Ownership Requirements:We have stock ownership requirements for our directors and officers. For example, our CEO must hold common stock equivalent in value to at least five times base salary. |
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No Repricing:Our stock options cannot be repriced, reset or exchanged for cash if under water without stockholder approval. |
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Anti-Pledging and Hedging Policies:We prohibit our directors and executive officers from (i) holding Beazer securities in a margin account or pledging any Beazer securities as collateral for a loan and (ii) entering into any hedge or other transaction in Beazer securities that limits the risk of ownership of Beazer common stock or stock options. |
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Double Trigger Change in Control Provisions:We have a policy of requiring a double trigger to receive cash severance and to receive accelerated vesting of equity awards upon a change in control. |
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Clawback:Each equity award is conditioned on repayment or forfeiture as required by existing law. In addition, each executive officer’s incentive compensation is subject to repayment or such other means of recovery (or a combination thereof) as is necessary to comply with law or related rules and regulations of the SEC or NYSE. |
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No TaxGross-Ups:We maintain severance agreements with our NEOs that standardize executive separation terms, minimize the risk of excessive payouts and do not provide for any tax gross-ups. |
ROLE OF THE COMPENSATION COMMITTEE, MANAGEMENT AND COMPENSATION CONSULTANTS
The principal responsibilities of our Compensation Committee include: meeting with its independent compensation consultant, with and without the presence of management, to review and structure objectives and compensation programs for our NEOs that are aligned with the Company’s business and financial strategy, and accordingly, stockholder interests;
| | | | | | | l | meeting with its independent compensation consultant, with and without the presence of management, to review and structure objectives and compensation programs for our NEOs that are aligned with both the Company’s business and financial strategy and stockholder interests; | | | | l | evaluating the performance of our NEOs in light of those objectives; and | | | | l | based on this evaluation, determining and approving the compensation level for our CEO and for other executive officers. |
evaluating the performance of our NEOs in light of those objectives; and
based on this evaluation, determining and approving the compensation level for our CEO and for other executive officers.
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The Committee has retained Pearl Meyer for each of the last sixseven fiscal years to provide advice regarding compensation plan design, compensation levels and benchmarking data and advice. Prior to retaining Pearl Meyer for fiscal 2018,2019, the Committee determined that Pearl Meyer qualifies as an independent compensation consultant. Pearl Meyer reports directly to the Committee and does not provide any other services to the Company. In relation to compensation program design for fiscal 2018,2019, the Committee took into account discussions with, and presentations by, key members of our management team to ensure that our compensation plans were aligned with our operating, financial and strategic objectives. On an annual basis, Mr. Merrill reviews the performance of the other NEOs, and makes recommendations to the Committee based on his review. In addition, our non-executive chairman discussed Mr. Merrill’s performance with the Committee. Mr. Merrill is present for the Committee’s deliberations related to the compensation of the other NEOs, but not for the Committee’s discussions related to his own compensation.
For fiscal year 2018,2019, our peer group comprised AV Homes, Inc., Century Communities, Inc., Hovnanian Enterprises, Inc., KB Home, LGI Homes, Inc., M.D.C. Holdings, Inc., M/I Homes, Inc., M.D.C. Holdings, Inc., Meritage Homes Corporation, Taylor Morrison Home Corporation,Corp., TRI Pointe Group, Inc. and William Lyon Homes (the “20182019 Peer Group”)Group). These companies were chosen because, in addition to being among our chief competition among publicly-traded homebuilders, they are closely aligned to us in terms of size. WCI Communities,Former peer AV Homes, Inc. was removed from the peer group for fiscal year 20182019 because it was acquired during our fiscal year 2017. Based in part on recommendations of Pearl Meyer, the Committee determined to add Century Communities, Inc. and LGI Homes, Inc. as additional peers for fiscal year 2018 to replace the loss of WCI Communities, Inc. from the peer group and increase the sample size to eleven companies.2018. Each year, the Committee’s independent consultant conducts a review of peer group pay levels and practices, which the Committee takes into consideration when establishing NEO compensation levels, along with a variety of other factors, such as Company and individual performance, each incumbent’s qualifications and responsibilities, the Company’s recruiting experience and talent management needs and the Committee’s business judgment. While the Committee believes benchmarking against pay practices at other publicly-held homebuilders is useful in determining whether our executive compensation practices are reasonable for fiscal 2018,2019, it did not establish compensation levels based solely on benchmarking industry practices. Nonetheless, based on data for the 20182019 Peer Group, the Committee was advised by Pearl Meyer that target total compensation for our NEOs remained targeted betweenwas positioned within a competitive range (plus or minute 10%) of the 25th and 50th percentile market values in the aggregate and within or below a competitive range (plus or minus 10%) of the 50th percentile for each incumbent.NEO.
ELEMENTS OF FISCAL 2019 COMPENSATION PROGRAM
CONSIDERATION OF SAY ON PAY VOTES Following
We have a long history of strong shareholder support for our 2017executive compensation programs, with Say on Pay support levels averaging over 93% for the last five years. The Board and 2018the Compensation Committee have considered the result of these shareholder votes in setting compensation policies and making compensation decisions for each of the fiscal years that has followed. At our 2019 annual meetingsmeeting of stockholders, the Committee reviewed the resultsover 87% of the stockholder advisory votes onshares present in person or represented by proxy voted for approval of our executive compensation. Over 97% of the shares voted on the proposal at both the 2017 and 2018 annual meetings were voted in support of the compensation of our NEOs. In designing the compensation program for fiscal year 2018,2019, the Committee considered the results of the 20172018 Say on Pay vote, our ongoing dialogue with stockholders, internal considerations such as key business and talent management objectives, consistency from year to year and an evaluation of peer practices. After consideration, the Committee concluded that, for fiscal year 2018,2019, it was appropriate to maintain most elements of the existing compensation mix ofprogram design for our NEOs, with a slight variationonly minor changes to the short-term incentive plan metrics and weightings and no change in the components of the long-term incentive plan, to reflectwhich reflects the Company’s current strategic direction. The fiscal year 20182019 compensation program continues to tie the majority of our NEOs’ compensation to performance metrics that support the Company’s strategy of balanced growth. BASE SALARY | | |
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ELEMENTS OF FISCAL
2018 COMPENSATION PROGRAM
BASE SALARY
Our ability to recruit and retain executive talent depends on setting competitive base salaries. We begin with an analysis of base pay relative to the market. We target base pay at or near the peer group 50th percentile (or median) and then evaluate the need to make any adjustments based on vertical variables such as pay parity relative to other officers and internal accountability. We review base salaries annually, as a whole and individually every 12 months, unless circumstances require otherwise. For non-CEO NEO salaries, we solicit CEO input. Based on its review for the 20182019 fiscal year, the Committee decideddetermined that no changes would be made to increase theMr. Merrill's base salary for Mr. Merrill by 5.5%salary. The Committee determined to $950,000 to recognize his continued strong performance and leadership. This was Mr. Merrill’s first salary increase since assuming the CEO role in 2011. Mr. Salomon’s base salary was increased by 4.8%9.09% to $550,000$600,000 and to increase Mr. Belknap's base salary by 11.11% to $500,000. These increases were made primarily to align base salaries more closely with industry peers. Mr. Belknap joined the Company in January 2018 and his base salary was initially established at $450,000. Based on Pearl Meyer’s market pay analysis, fiscal 20182019 salaries were positioned slightly above and within a competitive range of the peer group 50th percentile for Mr.Messrs. Merrill at the 50th percentile for Mr.and Salomon, respectively, and between the 25th and 50th percentiles for Mr. Belknap.
SHORT-TERM INCENTIVE COMPENSATION
Our annual cash incentive plan is designed to motivate and reward executives for achieving key business objectives that continue to drive the Company’s success and generate returns for our stockholders. We set annual cash incentive bonus
targets hierarchically based on a multiple of base salary. Based on Pearl Meyer’s analysis, fiscal 20182019 short-term incentive targets positioned target total annual cash compensation between the peer group 25th and 50th percentiles. For fiscal 2018,2019, the Committee determined to use operational objectives identical to those used in determining fiscal 20172018 bonus opportunity, though improvement over fiscal 2017 results was requiredwith the addition of an objective related to limiting growth in all cases.overhead expenses. In addition, NEOs would be eligible to receive an award for other components of the 20182019 Bonus Plan only if threshold 20182019 Bonus Plan EBITDA was achieved. The Committee also added Return on Assets to the financial component to further reinforce this key strategic objective within our annual business plan. The Committee retained the discretion to adjust results for unanticipated and exceptional items and to deduct from awards earned for failure to achieve certain construction quality standards based on the assessment of an independent third-party expert. 2018 OBJECTIVES
Bonus Plan EBITDA— 75% of bonus opportunity — In light of the demonstrated success of the Adjusted EBITDA metric as a driver of financial results in prior years and because improvement in Adjusted EBITDA is key to accomplishment of the strategic plan, the Committee determined that 75% of the overall annual bonus opportunity would be based on the achievement of levels of Bonus Plan EBITDA. The Committee established a 2018 Bonus Plan EBITDA objective with a $192.50 million threshold: $206.64 million target and a $215.00 million maximum.
Customer Satisfaction Scores— 10% of bonus opportunity — In order to achieve a bonus No discretion was exercised with respect to this metric, the Company would have to improve on customer satisfaction survey scores from the prior year in a predetermined number of its divisions in order to achieve either a threshold, target or maximum award.
Construction Cycle Times— 10% of bonus opportunity — In order to achieve a bonus with respect to this metric, the Company would have to improve on construction cycle times from the prior year, and a threshold, target or maximumfiscal 2019 award would be earned depending on the number of days of overall improvement.
determinations.Sales Pace and Margin— 5% of bonus opportunity — NEOs were eligible to receive 20% of this 5% overall component for each quarter that the Company met or exceeded a benchmark combination of sales pace and margin and the remaining 20% of this metric if the benchmark was achieved for the full year.
2019 OBJECTIVES | | | | | |
l | Bonus Plan EBITDA — 65% of bonus opportunity — In light of the demonstrated success of the Adjusted EBITDA metric as a driver of financial results in prior years and because improvement in Adjusted EBITDA is key to accomplishment of the strategic plan, the Committee determined that 65% of the overall annual bonus opportunity would be based on the achievement of levels of Bonus Plan EBITDA. The Committee established a 2019 Bonus Plan EBITDA objective with a $175.0 million threshold: $195.00 million target and a $215.00 million maximum. | | 24
| | l | Return on Assets — 10% of bonus opportunity — Return on assets is based on the ratio of Adjusted EBITDA to total assets (defined as the Company’s total assets as shown on the consolidated balance sheet included in the Company’s Form 10-K for fiscal 2019) for fiscal 2019. | | | | l | Customer Satisfaction Scores — 10% of bonus opportunity — In order to achieve a bonus with respect to this metric, the Company would have to improve on aggregate customer satisfaction survey scores from the prior year to achieve either a threshold, target or maximum award. | | | | l | Construction Cycle Times — 5% of bonus opportunity — In order to achieve a bonus with respect to this metric, the Company would have to improve on construction cycle times from the prior year, and a threshold, target or maximum award would be earned depending on the number of days of overall improvement. | | | | l | Overhead — 5% of bonus opportunity — NEOs were eligible to receive 20% of this 5% overall component for each quarter that the Company met or exceeded a benchmark combination of cost savings and the remaining 20% of this metric if the benchmark was achieved for the full year. | | | | l | Sales Pace and Margin — 5% of bonus opportunity — NEOs were eligible to receive 20% of this 5% overall component for each quarter that the Company met or exceeded a benchmark combination of sales pace and margin contribution and the remaining 20% of this metric if the benchmark was achieved for the full year. |
20182019 ACHIEVEMENT OF OBJECTIVES
In 2018,2019, the following results were achieved against these objectives: | | | | | | | | | | | | | OBJECTIVE | WEIGHTING (%) | RESULT | ACHIEVEMENT | | Bonus Plan EBITDA | 65 | | $184.95 million | Between threshold and target | | Return on Assets | 10 | | 9.21% | Did not meet threshold | | Customer Satisfaction Scores | 10 | | Improved by 101 bps | Between target and maximum | | Construction Cycle Times | 5 | | Improved by 2.25% | Maximum | | Overhead | 5 | | Exceeded benchmark for
3 quarters and full year | Between threshold and target | | Sales Pace / Margin | 5 | | Below benchmark for 4 quarters and full year | Did not meet threshold | | Total | 100 | | | Between threshold and target |
| WEIGHTING (%)
| | RESULT
| | ACHIEVEMENT
| Bonus Plan EBITDA
| | 75
| | $212.2 million
| | Between target and maximum
| Customer Satisfaction Scores
| | 10
| | Improved by 80 bps
| | Between threshold and target
| Construction Cycle Times
| | 10
| | Improved by 1.1%
| | Between threshold and target
| Sales Pace / Margin
| | 5
| | Exceeded benchmark for 2 quarters and for full year
| | Between threshold and target
| Total
| | 100
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To the extent actual 20182019 Bonus Plan performance was between the threshold and target performance levels, or between the target and maximum performance levels, linear interpolation was applied to determine the actual payout under each component of the 20182019 Bonus Plan. Because the slope from targetthreshold to maximum performance levels differs among the NEOs, the bonus as a percentage of target shown in the table below will also vary among the NEOs. 2018
The annual cash incentive bonuses awarded to the NEOs for 2018 were: | | | | | | | | | | | | | | | | | | | | | NAME | | 2018 TARGET
BONUS (%) | | 2018 TARGET
BONUS ($) | | 2018 ANNUAL
CASH INCENTIVE
BONUS ($) | | BONUS AS A
PERCENTAGE
OF TARGET (%) | Allan P. Merrill | | | | 150 | | | | | 1,425,000 | | | | | 2,064,537 | | | | | 144.9 | | Robert L. Salomon | | | | 125 | | | | | 687,500 | | | | | 845,092 | | | | | 122.9 | | Keith L. Belknap | | | | 100 | | | | | 450,000 | | | | | 651,959 | | | | | 144.9 | |
2019 were lower by an average of 41% compared with the prior year. Actual awards are shown in the following table: | | | | | | | | | | | | | | | | NAME | 2019 TARGET BONUS (%) | 2019 TARGET BONUS ($) | 2019 ANNUAL CASH INCENTIVE BONUS ($) | BONUS AS A PERCENTAGE OF TARGET (%) | | Allan P. Merrill | 150 | | 1,425,000 | | 1,128,332 | | 79.2 | | | Robert L. Salomon | 125 | | 750,000 | | 530,281 | | 70.7 | | | Keith L. Belknap | 100 | | 500,000 | | 395,906 | | 79.2 | |
LONG-TERM INCENTIVE COMPENSATION
Based on recommendations from Pearl Meyer and other factors, the Committee awarded performance shares equal to two-thirds of overall long-term incentive target award opportunity, and time-based restricted stock equal to one-third of award opportunity. The Committee intended to establish a mix of equity awards that remains highly performance-based, while at the same time providing retention strength. The Committee also determined to increase Mr. Merrill’s targetthe long-term incentive compensation from 250% to 300% of base salary. Target long-term incentive compensationaward opportunity for Messrs. Salomon and Belknap is 175%to 200% and 125%150%, respectively, of base salary.salary, in each case primarily to align target incentives more closely with expanded roles and responsibilities as described under "—Introduction" above. Long-term incentive compensation targetsaward opportunities for the NEOs were positioned at or near thebetween peer group 50th percentile.percentile and 75th percentile market values. Time-based restricted stock awards generally vest ratably over a three-year period, beginning with the first anniversary of the grant date. In fiscal year 2018,2019, the NEOs were granted the following number of shares of restricted stock: Mr. Merrill: 46,432;96,741; Mr. Salomon: 15,68140,733 and Mr. Belknap: 9,398.25,458.PERFORMANCE SHARES Background In order to facilitate pay for performance, our core compensation philosophy continues to be focused on providing incentive compensation to our management team when they achieve challenging financial and non-financial goals that the Compensation Committee and our Board of Directors believe are critical to enhancing long-term shareholder value. As part of that philosophy, the Committee believes that a significant portion of equity awards should be performance-based, with failure to reach such goals resulting in no compensation under a particular plan or metric. Accordingly, two-thirds of our senior executive management team’s overall long-term incentive awards are comprised of performance shares, which reflect a target number of shares that may be issued to the award recipient at the end of a three-year award cycle based on the achievement of performance targets established at the time of grant. Due to the limited number of shares available for issuance under the 2014 Plan, in fiscal 2019, the portion of any earned awards that exceeded target was paid in cash rather than shares. When determining awards, the Committee utilizes performance metrics consisting of a variety of challenging financial goals aligned with key strategic objectives. In addition, in order to ensure the awards align with enhancing shareholder
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PERFORMANCE SHARES
value, any awards earned at the end of the three-year performance period are subject to adjustment (by up to +/- 20%) based on our relative total shareholder return (TSR) compared to industry peers. The chart below sets forth the Committee’s performance share metrics for awards granted in fiscal 2015 through 2019, which we believe illustrate the Committee’s rigorous approach:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Period | 3-Year Target Performance Metric | | | | | | | Cumulative Pre-Tax Income ($) | | Return on Assets (%) | | Net Debt to Adjusted EBITDA | | | | | | | | | | 2015 - 2017 | 83.1 million | | N/A | | N/A | | | | | | | | | | 2016 - 2018 | 140.0 million | | 9* | | 6x** | | | | | | | | | | 2017 - 2019 | 160.0 million | | 10 | | 5x | | | | | | | | | | 2018 - 2020 | 200.0 million | | 10 | | N/A*** | | | 2019 - 2021 | 240.0 million | | 11 | | N/A*** | |
* Return on Assets was 5.9% for fiscal 2015. ** Net Debt to Adjusted EBITDA was 8.8x as of September 30, 2015. *** Beginning with grants in fiscal 2018, this metric was replaced with a proprietary growth metric related to our Gatherings product line to reinforce a key strategic priority. For the award cycle ending in fiscal 2018, as a result of achieving specific long-term strategic goals (which were established in fiscal 2016), performance shares were earned by our management team for the first time since 2011, which we believe underscores the rigor the Committee applies when setting performance goals. Performance Measures for the Fiscal 2017 - 2019 Award Cycle Each performance share award reflects a target number of shares (based on the fair market value of our common stock on the award date) that may be issued to the award recipient at the end of a three-year award cycle based on the achievement of performance targets that are either (a) applicable to cumulative results over the entire three-year cycle or (b) applicable only to the final fiscal year of the three-year award cycle. At the end of each award cycle, the Committee confirms performance against the applicable performance targets, and performance shares corresponding to the level of achievement during the award cycle are calculated. In determining fiscal year 2016-20182017-2019 performance share award metrics, the Committee considered the fluid nature of the housing market and need to design metrics that would not be obsolete in the event of a change in strategy during the three-year award cycle ending with fiscal 2018.2019. The three metrics used for the fiscal 2016-20182017-2019 award cycle were: Cumulativepre-tax income (defined as the Company’s income from continuing operations, before taxes and excluding impairments and abandonments, bond losses and such othernon-recurring items as the Committee may approve) over the entire three-year award cycle;
| | | | | | | l | Cumulative pre-tax income (defined as the Company’s income from continuing operations, before taxes and excluding impairments and abandonments, bond losses and such other non-recurring items as the Committee may approve) over the entire three-year award cycle; | | | | l | Return on assets, based on the ratio of Adjusted EBITDA to total assets (defined as the Company’s total assets as shown on the consolidated balance sheet included in the Company’s Form 10-K for fiscal 2019) for fiscal 2019; and | | | | l | Debt reduction, as measured at September 30, 2019, based on the ratio of net debt (defined as the Company’s total debt as shown on the consolidated balance sheet included in the Company’s Form 10-K for fiscal 2019, less unrestricted cash) to Adjusted EBITDA for fiscal 2019. |
Determination of Shares Earned Shares earned are based on achieving the ratioThreshold, Target or Superior levels of Adjusted EBITDA to total assets (defined asperformance on one or more of the Company’s total assets as shownmetrics described above. One-third of target shares are earned for each metric achieving Threshold performance, two-thirds of target shares are earned for each metric achieving Target performance and 100% of target shares are earned for each metric achieving Superior performance. The shares earned on the consolidated balance sheet includedthree metrics are totaled, subject to both a 175% cap and a TSR Modifier to determine the final award. As noted above, due to the limited number of shares available for issuance under the 2014 Plan, in the Company’s Form10-K for fiscal 2018) for fiscal 2018; and Debt reduction, as measured at September 30, 2018, based on the ratio2019, shares earned in excess of net debt (defined as the Company’s total debt as shown on the consolidated balance sheet includedtarget were paid in the Company’s Form10-K for fiscal 2018, less unrestricted cash) to Adjusted EBITDA for fiscal 2018.
cash.In addition, as in previous years, to maintain alignment with stockholders, relative TSR performance was a component of the fiscal 2016-2018 performance share awards, as described more fully below.
Performance Measures
| | | | | | | l | To illustrate, achievement of a Threshold level of performance on each of the three metrics would result in 33.3% of target shares earned for each metric or a total of 100% of the target number of shares, subject to adjustment based on the TSR Modifier. | | | | l | Superior-level performance on any one metric (100%) would earn a target number of shares subject to the TSR Modifier. | | | | l | The maximum number of shares that can be earned based on the results of the three metrics described above would be 175% of Target, even if Superior performance is achieved on all three metrics (300% of target shares). In the event of such maximum achievements, the maximum adjustment under the TSR modifier of 20% would result in shares awarded totaling no more than 210% of target. | | | | l | For performance between Threshold and Target or between Target and Superior, straight line interpolation between such levels is applied. | | | | l | The Committee retains the discretion to reduce the number of shares finally awarded notwithstanding the number earned pursuant to the above, and to award any amounts in excess of target in cash instead of shares. |
Results for the Fiscal 2016-2018 Performance Period2017-2019 Award CycleCumulative | | | | | | | l | Cumulative pre-tax income — The performance necessary to earn a Threshold, Target and Superior payout required a cumulative pre-tax income of $140 million, $160 million and $180 million, respectively. Actual cumulative pre-tax income for the fiscal 2017-2019 award cycle was $193.4 million. | | | | l | Return on assets — The performance necessary to earn a Threshold, Target and Superior payout required a ROA for fiscal 2019 of 9%, 10% and 11%, respectively. Actual return on assets for fiscal 2019 was 9.21%. | | | | l | Ratio of net debt to Adjusted EBITDA — The performance necessary to earn a Threshold, Target and Superior payout required a net debt to Adjusted EBITDA ratio at the end of fiscal 2019 of no more than 6 times, 5 times and 4 times, respectively. As measured at September 30, 2019, the actual ratio of net debt to Adjusted EBITDA for fiscal 2019 was 5.9 times. |
Threshold performance necessary to earn a target payout required a cumulativepre-tax income of $140 million, and the performance necessary to earn a maximum payout required cumulativepre-tax income of at least $160 million. Actual cumulativepre-tax income for the fiscal 2016-2018 award cycle was $167.8 million. Return on assets — The performance necessary to earn a target payout required a return on assets for fiscal 2018 of 9%, and the performance necessary to earn a maximum payout required a return on assets of at least 10%. Actual return on assets for fiscal 2018 was 9.6%.
Ratio of net debt to Adjusted EBITDA — The performance necessary to earn a target payout required a net debt to Adjusted EBITDA ratio of no more than 6 times at the end of fiscal 2018, and the performance necessary to earn a maximum payout required a net debt to Adjusted EBITDA ratio of no more than 5 times. As measured at September 30, 2018, the actual ratio of net debt to Adjusted EBITDA for fiscal 2018 was 5.3 times.
We exceeded target performance levels for all three metrics, and a Superior performance level was exceeded for one of the metrics. For performance between Threshold and Target and between Target and Superior, straight line interpolation between such levels was applied, resulting in earned awards of 175.0% of target.Target. However, earned awards were subject to adjustment based on our relative TSR, as discussed below.
The Committee has historically incorporated a TSR metric into
While our target performance awards are based on specific metrics established at the NEOs’ long-termtime of grant, we believe that incentive program. The Committee believes it is importantcompensation should also be directly tied to continue utilizing relative TSR as a component of the NEO long-term incentive program.shareholder value. As a result, after determining the number of shares earned based on the financial measures the following three-year relative TSR scale is applied as a modifier:
| | | | | | | TSR PERCENTILE RANK VS. S&P
HOMEBUILDERS SELECT INDUSTRY INDEX
| | ADJUSTMENT TO # OF
PERFORMANCE SHARES | At or above 75th Percentile | | +20% | 70-74th Percentile | | +15% | 65-69th Percentile | | +10% | 60-64th Percentile | | +5% | 40-59th Percentile | | No adjustment | 35-39th Percentile | | -5% | 30-34th Percentile | | -10% | 25-29th Percentile | | -15% | Below 25th Percentile | | -20% |
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As a result,After application of the TSR modifier, the recipients’ percentage of awards earned attributable to the fiscal 2016-2018 performance period2017-2019 award cycle was reduced from 175.0% to 140.0%157.5% of target.
Target. During the same 3-year period ended September 30, 2019, our TSR increased by a total of 23.5%, which was at the 34th percentile vs. peers. As further illustration of the Committee’s commitment to linking executive compensation to shareholder value, based on our stock price as of September 30, 2019 and assuming performance at target for performance awards that are subject to actual performance in fiscal years 2020 and 2021, realizable pay for our executive management team for equity grants (including all restricted stock and performance shares granted) over the past five fiscal years (fiscal years 2015 – 2019) represents approximately 78% of their grant date value. Accordingly, through heavy emphasis on variable, performance-based incentives with rigorous performance goals based on key business and strategic objectives and actual payouts subject to adjustment based on shareholder returns, the Committee believes our long-term incentive program appropriately aligns pay for performance while facilitating shareholder value creation. Performance Shares Issued Shares issued to NEOs for the fiscal 2016-20182017-2019 award cycle are set forth in the following table: | | | | | | | | | | | | | | | | NAME | | PERFORMANCE
SHARES AWARD TARGET (#) | | PERFORMANCE
SHARES EARNED (#) | | PERFORMANCE SHARES
EARNED AS A PERCENTAGE
OF AWARD TARGET (%) | Allan P. Merrill | | | | 105,338 | | | | | 147,473 | | | | | 140.0 | | Robert L. Salomon | | | | 43,013 | | | | | 60,218 | | | | | 140.0 | | Keith L. Belknap | | | | n/a | | | | | n/a | | | | | n/a | |
| | | | | | | | | | | | | NAME | PERFORMANCE SHARES AWARD TARGET (#) | PERFORMANCE SHARES EARNED (#)* | PERFORMANCE SHARES EARNED AS A PERCENTAGE OF AWARD TARGET (%) | | Allan P. Merrill | 119,904 | 188,848 | 157.5 | | Robert L. Salomon | 48,960 | 77,112 | 157.5 | | Keith L. Belknap** | 0 | 0 | 0 |
* Due to the limited number of shares available under the 2014 Plan, for fiscal 2019, shares earned in excess of award target were paid in cash. As a result, Messrs. Merrill and Salomon received cash payments of $1,048,638 and $428,192 respectively, in lieu of additional shares. ** Joined the Company in 2018. Performance Measures for 2018-20202019-2021 Performance Shares We established
In fiscal 2016 and 2017, we utilized a debt reduction metric for the three-year award cycles associated with the performance measuresshares granted in fiscal 2016 and 2017 as a result of a strategic objective to aggressively reduce debt. During fiscal 2018, we successfully achieved this objective as we completed our three-year, $250 million debt reduction plan. Accordingly, in order to align our compensation program with the changing needs and circumstances of the Company, we replaced the debt reduction metric beginning with 2018-2020 performance awards with a new key strategic metric tied to the expansion of our Gatherings® product line. The Committee believes this new metric aligns with its rigorous and business strategy-focused approach and underscores its pay for our 2018-2020performance philosophy.
With respect to performance metrics for 2019–2021 performance awards, the Committee set the following targets: | | | | | | | l | Cumulative pre-tax income — The performance necessary to earn a Threshold payout requires a cumulative pre-tax income of $220 million, Target payout requires a cumulative pre-tax income of $240 million, and the performance necessary to earn a Superior payout requires a cumulative pre-tax income of at least $260 million. | | | | l | Return on assets — The performance necessary to earn a Threshold payout requires a return on assets for fiscal 2021 of 10%, Target payout requires a return on assets of 11%, and the performance necessary to earn a Superior payout requires a return on assets for fiscal 2021 of at least 12%. | | | | l | Gatherings communities — The specific performance targets for the Gatherings metric are not disclosed here because we believe that the disclosure would result in competitive harm to us by potentially disrupting our vendor and supplier relationships and providing competitors with insight into our business strategies beyond what is disclosed publicly. The Committee believes management’s ability to achieve the specific performance targets and the level of difficulty associated with meeting these performance targets is consistent with the other metrics for these performance shares. |
Consistent with performance share awards in prior years, for 2019–2021 performance share grants, the actual number of shares earned will be based on achieving the Threshold, Target or Superior levels of performance on one or more of the metrics described above. One-third of target shares will be earned for each metric achieving Threshold performance, two-thirds of target shares will be earned for each metric achieving Target performance and 100% of target shares will be earned for each metric achieving Superior performance. The shares earned on the three metrics will be totaled, and will be subject to a 175% cap and a relative TSR Modifier in accordance with our core compensation philosophy of providing incentive compensationorder to our management team when they achieve challenging financial andnon-financial goals that we believe are critical to value creation.determine the final award. As such, we based our 2018-2020 performance share metrics on cumulativepre-tax income, return on assets anda result, after determining the number of Gatherings® home sales.shares earned, the three-year relative TSR scale shown above will be applied as a modifier.
Our NEOs receive the standard benefits received byavailable to all employees, including: group health (medical, dental, pharmacy, and vision), group life, accidental death and dismemberment, business travel accident, disability plans, defined contribution retirement plans (a Money Purchase Retirement Plan and a 401(k) Savings Plan), and vacation. Deferred Compensation Plan The Company maintains the Beazer Homes Deferred Compensation Plan, or the Deferred Plan, to provide eligible employees the opportunity to defer a portion of their current compensation. With respect to fiscal year 2018,2019, the Committee made a contribution to the Deferred Plan for the benefit of each NEO as follows: Mr. Merrill, $100,000; Mr. Salomon, $75,000, and Mr. Belknap, $50,000. These contributions are made in regular installments and are subject to several restrictions and limitations including the Committee’s right to terminate or suspend any such contribution in the future. We do not have a defined benefit pension plan or supplemental executive retirement plan. Our executive management team, including our NEOs, participate in our various benefit programs on the same terms as other employees. The Company does not provide to its NEOs supplemental executive retirement plans, company cars (or automobile reimbursements), club memberships or other significant perquisites.
STOCK OWNERSHIP AND HOLDING REQUIREMENTS
The Company maintains a stock ownership and holding policy that requires NEOs and members of the Board of Directors to acquire and retain a meaningful level of stock ownership in the Company. In 2014,November 2019, the Board amended the policy to significantly increase the ownership requirement for our NEOs, from 3.0non-employee directors to 4.0 times base salary to 5.0 times base salary for our CEO, and from 1.5 times base salary to 3.0 times base salary for our other NEOs. | | |
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the annual board cash retainer.
The current stock ownership requirements are based on a multiple of base salary or annual retainer, as applicable, and are as set forth below: | | | | | | | | MULTIPLE OF BASE SALARY/ ANNUAL RETAINER | CEO | | 5.0 x base salary | Other NEOs | | 3.0 x base salary | Non-employee Directors | | 3.04.0 x annual retainer
|
For purposes of the stock ownership policy, the following types of share holdings are counted towards an individual’s stock ownership: (i) stock that is considered beneficially owned, (ii) two-thirds of service-based restricted stock and (iii) one-third of “in the money” stock options. Unearned performance shares do not count towards ownership requirements. Individuals subject to this policy are required to be in compliance with ownership requirements no later than the fifth anniversary of the date the individual becomes a NEO or director. As of December 12, 2018,11, 2019, each of our NEOs and directors other than Mr. Belknap, was in compliance with the requirements of our stock ownership requirements. Mr. Belknap joined the Company in January 2018.and holding policy. The policy also requires NEOs and directors to hold 50% of net after-tax shares issued upon vesting of restricted stock or stock option exercises until their required respective stock ownership levels are achieved.
COMPENSATION CLAWBACK POLICY
In 2011, the Committee adopted an incentive compensation clawback policy that would enable the Company to clawback all or a portion of incentive compensation in the event an individual’s misconduct causes the Company to have to issue a restatement of its financial statements, to the extent that such individual’s incentive compensation was based on the misstated financials. In addition, awards under our 2014 Long-Term Incentive Plan are subject not only to our existing clawback policy but any other clawback policy adopted by the Compensation Committee, and the Committee has the authority to recoup or cancel awards if a participant engages in “detrimental activity” with respect to the Company. As described in further detail under “Executive Compensation — Potential Payments Upon Termination or Change of Control,” pursuant to the severance agreements with each of our NEOs, any incentive compensation that is paid or granted to the NEOs will be subject to recoupment under the terms thereof.
RISK CONSIDERATIONS IN OUR COMPENSATION PROGRAMS
The Committee does not believe our compensation programs encourage inappropriate risk taking. The Committee, with assistance from Pearl Meyer, arrived at this conclusion for the following reasons:
| | | | | | | l | Our employees receive both fixed and variable compensation. The fixed portion provides a steady income regardless of the Company’s stock price or financial performance. This allows executives to focus on the Company’s business without an excessive focus on the Company’s stock price. |
✓ | | | l | Incentive award opportunities are tied to multiple metrics over various time periods that align with key strategic objectives. | | | | l | Incentive award opportunities are capped, with incentive payouts subject to clawback provisions. | | | | l | Our equity awards for executives generally vest over three-year periods, which discourages short-term risk taking. Our substantial equity holding requirements extend these time frames further. |
✓ | | | l | Our equity ownership and holding requirements encourage a long-term perspective by our executives. |
✓ | | | l | Our equity compensation plan provides that our executives’ unvested long-term equity compensation is forfeited upon voluntary termination. |
TAX LEGISLATION RELATED TO COMPENSATION | | |
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TAX LEGISLATION RELATED TO COMPENSATION
Historically, it has been the Committee’s general policy to consider whether particular payments and awards are deductible by the Company for federal income tax purposes under Section 162(m) of the Internal Revenue Code. Section 162(m) has limited the deductibility for federal income tax purposes of compensation payments to certain executive officers in excess of $1 million, subject to certain exemptions and exceptions for qualified performance-based compensation. Although the Committee has taken into consideration the provisions of Section 162(m), being eligible for tax deductibility has not been a primary focus, but one consideration among many in the design of our executive compensation programs. On December 22, 2017, the President signed H.R. 1, the “Tax Cuts and Jobs Act” was signed into law. The new law repeals certain exceptions to the deductible limit for performance-based compensation for tax years beginning after 2017. In addition, the new law requires compensation of the principal executive officer, principal financial officer and three highest compensated officers (“covered employees”) to be subject to the limit. Once an employee is treated as a covered employee in a tax year after December 31, 2016, the individual remains a covered employee for all future years, including once they are no longer employed by the corporation or with respect to payments made after the death of a covered employee. The new law does provide for a transition rule to these Section 162(m) changes whereby the expansion of the rules mentioned above does not apply to remuneration paid under a written, binding contract in effect on November 2, 2017, which is not materially modified on or after this date. While the Compensation Committee cannot predict how our compensation policies may be further affected by this limitation, it is anticipated that certain compensation paid to our executives that have not met the requirements of this new law will not be deductible. Internal Revenue Code section 409A requires “nonqualified deferred compensation plans” to meet requirements in order to avoid acceleration of the recipient’s federal income taxation of the deferred compensation. The Internal Revenue Service issued final regulations in April 2007 regarding the application of Section 409A, which were generally effective January 1, 2009. Prior to effectiveness, companies were expected to comply in “good faith” with the statute, taking note of the interim guidance issued by the Internal Revenue Service. We provide benefits through several plans that are intended to meet the requirements of the final regulations.
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The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management. Based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis set forth above be included in this Proxy Statement. DAVID J. SPITZ The Members of the Compensation Committee
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SUMMARY COMPENSATION TABLE
The table below summarizes compensation information for our named executive officers for the fiscal years 2019, 2018 2017 and 2016. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NAME AND PRINCIPAL POSITION | | FISCAL
YEAR | | SALARY
($) | | BONUS
($) | | STOCK
AWARDS
($)(1) | | NON-EQUITY
INCENTIVE PLAN
COMPENSATION
($)(2) | | ALL OTHER COMPENSATION ($)(3) | | TOTAL ($) | Allan P. Merrill | | | | 2018 | | | | | 949,231 | | | | | 0 | | | | | 3,030,152 | | | | | 2,064,537 | | | | | 108,250 | | | | | 6,152,170 | | President and Chief Executive Officer | | | | 2017 | | | | | 900,000 | | | | | 0 | | | | | 2,380,694 | | | | | 2,380,849 | | | | | 110,023 | | | | | 5,771,566 | | | | | | 2016 | | | | | 900,000 | | | | | 0 | | | | | 2,375,372 | | | | | 1,442,957 | | | | | 162,982 | | | | | 4,881,311 | | Robert L. Salomon | | | | 2018 | | | | | 549,616 | | | | | 0 | | | | | 1,023,342 | | | | | 845,092 | | | | | 83,273 | | | | | 2,501,323 | | Executive Vice President and Chief Financial Officer | | | | 2017 | | | | | 525,000 | | | | | 0 | | | | | 972,101 | | | | | 925,886 | | | | | 80,882 | | | | | 2,503,869 | | | | | | 2016 | | | | | 525,000 | | | | | 0 | | | | | 969,951 | | | | | 579,022 | | | | | 57,875 | | | | | 2,131,848 | | Keith L. Belknap | | | | 2018 | (4) | | | | 320,192 | | | | | 0 | | | | | 608,521 | | | | | 651,959 | | | | | 44,490 | | | | | 1,625,162 | | Executive Vice President
and General Counsel | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | NAME AND
PRINCIPAL POSITION | FISCAL
YEAR | SALARY ($) | BONUS ($) | STOCK AWARDS ($) (1) | STOCK OPTIONS ($) (2) | NON-EQUITY INCENTIVE PLAN COMPENSATION ($) (3) | ALL OTHER COMPENSATION ($) (4) | TOTAL
($) | Allan P. Merrill President and Chief Executive Officer | 2019 | 950,000 | | — | | 2,981,558 | | 21,850 | | 1,128,332 | | 108,400 | | 5,190,140 | | | 2018 | 949,231 | | — | | 3,030,152 | | — | | 2,064,537 | | 108,250 | | 6,152,170 | | | 2017 | 900,000 | | — | | 2,380,694 | | — | | 2,380,849 | | 110,023 | | 5,771,566 | | Robert L. Salomon Executive Vice President and Chief Financial Officer | 2019 | 599,038 | | — | | 1,255,391 | | — | | 530,281 | | 83,400 | | 2,468,110 | | | 2018 | 549,616 | | — | | 1,023,342 | | — | | 845,092 | | 83,273 | | 2,501,323 | | | 2017 | 525,000 | | — | | 972,101 | | — | | 925,886 | | 80,882 | | 2,503,869 | | Keith L. Belknap Executive Vice President and General Counsel
| 2019 | 499,038 | | — | | 784,616 | | — | | 395,906 | | 58,154 | | 1,737,714 | | | 2018 | 320,192 | | — | | 608,521 | | — | | 651,959 | | 44,490 | | 1,625,162 | | | | | | | | | | | |
| | | | | | | Represents the aggregate grant date fair value of restricted stock and performance shares awarded in each of the fiscal years indicated above, determined in accordance with FASB ASC Topic 718. These are not amounts paid to or realized by the NEOs. The grant date fair value of the performance shares was calculated based on a “Monte Carlo” simulation model, which utilizes numerous arbitrary assumptions about financial variables that determine the probability of satisfying the performance conditions stipulated in the award. Further information regarding the valuation of stock and option awards can be found in Notes 2 and 16 to our Consolidated Financial Statements in our 20182019 Form10-K. We caution that the amounts reported in the table for equity- relatedequity-related awards and, therefore, total compensation, may not represent the amounts that each NEO will actually realize from the awards. Whether, and to what extent, an NEO realizes value will depend on a number of factors, including Company performance and stock price. For more information on restricted stock and performance shares, see “Compensation Discussion and Analysis — Elements of Fiscal 2019 Compensation Program — Long-Term Incentive Compensation” above. |
| Represents the grant date fair value of an option to purchase 5,000 shares of common stock with a per share exercise price of $9.62. For more information, see Note 6 to the Grants of Plan-Based Awards Table below. | | Amounts in this column are paid pursuant to the Company’s short-term incentive plan as described under “Compensation Discussion and Analysis — Elements of Fiscal 2019 Compensation Program — Short-Term Incentive Compensation” above. |
 | For information on All Other Compensation, see table below. |
 | Mr. Belknap joined the company in January 2018.
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The table below provides a detailed breakdown of the amounts for fiscal 20182019 under “All Other Compensation” in the Summary Compensation Table above. | | | | | | | | | | | | | | | | | | | | | NAME | | YEAR | | DEFERRED COMPENSATION OR
DISCRETIONARY LUMP SUM
CONTRIBUTIONS ($) | | 401(K)
COMPANY
MATCH ($) | | TOTAL ($) | Allan P. Merrill | | 2018 | | | | 100,000 | | | | | 8,250 | | | | | 108,250 | | Robert L. Salomon | | 2018 | | | | 75,000 | | | | | 8,273 | | | | | 83,273 | | Keith L. Belknap | | 2018 | | | | 36,538 | | | | | 7,952 | | | | | 44,490 | |
| | | | | | | | | | | | | | | NAME | YEAR | DEFERRED COMPENSATION OR
DISCRETIONARY LUMP SUM
CONTRIBUTIONS ($) | 401(K)
COMPANY
MATCH ($) | TOTAL ($) | | Allan P. Merrill | 2019 | 100,000 | 8,400 | | 108,400 | | | Robert L. Salomon | 2019 | 75,000 | 8,400 | | 83,400 | | | Keith L. Belknap | 2019 | 50,000 | 8,154 | 58,154 | |
GRANTS OF PLAN-BASED AWARDS TABLE
The following table shows information about eligible or granted plan-based awards for fiscal 20182019 to our NEOs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NAME | | AWARD
TYPE (1) | | GRANT DATE | | ESTIMATED FUTURE PAYOUTS UNDERNON-EQUITY INCENTIVE
PLAN AWARDS (2) | | ESTIMATED FUTURE ISSUANCES OF SHARES UNDER EQUITY INCENTIVE PLANS(3) | | ALL OTHER STOCK-BASED AWARDS (#) (4) | | GRANT DATE
FAIR VALUE OF STOCK- BASED AWARDS ($)(5) | | THRESHOLD ($) | | TARGET
($) | | MAXIMUM
($) | | THRESHOLD ($) | | TARGET
($) | | MAXIMUM
($) | |
Allan P. Merrill | | | | BP | | | | | 11/16/17 | | | | | 712,500 | | | | | 1,425,000 | | | | | 2,850,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | RS | | | | | 11/16/17 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 46,432 | | | | | 949,999 | | | | | | PS | | | | | 11/16/17 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 92,864 | | | | | 195,014 | | | | | — | | | | | 2,080,154 | | Robert L. Salomon | | | | BP | | | | | 11/16/17 | | | | | 275,000 | | | | | 687,500 | | | | | 1,100,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | RS | | | | | 11/16/17 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 15,681 | | | | | 320,833 | | | | | | PS | | | | | 11/16/17 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 31,362 | | | | | 65,860 | | | | | — | | | | | 702,509 | | Keith L. Belknap | | | | BP | | | | | 11/16/17 | | | | | 225,000 | | | | | 450,000 | | | | | 900,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | RS | | | | | 1/8/18 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 9,398 | | | | | 187,490 | | | | | | PS | | | | | 11/16/17 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 18,796 | | | | | 39,472 | | | | | — | | | | | 421,030 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NAME | AWARD TYPE (1) | GRANT
DATE | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS (2) | | | ESTIMATED FUTURE ISSUANCES OF SHARES UNDER EQUITY INCENTIVE PLANS (3) | | | ALL OTHER STOCK-BASED AWARDS (#) (4) | GRANT DATE FAIR VALUE OF STOCK- BASED AWARDS ($) (5) | ALL OTHER OPTION AWARDS (#)(6) | EXERCISE OR BASE PRICE OF OPTION AWARDS ($) | | | | THRESHOLD
($) | TARGET
($) | MAXIMUM
($) | THRESHOLD
(#) | TARGET
(#) | SUPERIOR
(#) | | | | | | Allan P. Merrill | BP | 11/15/18 | 712,500 | | 1,425,000 | | 2,850,000 | | — | | — | | — | | — | | — | | — | | — | | | RS | 11/15/18 | — | | — | | — | | — | | — | | — | | 96,741 | | 949,997 | | — | | — | | | PS | 11/15/18 | — | | — | | — | | — | | 193,482 | | 406,312 | | — | | 2,031,561 | | — | | — | | | NQSO | 05/22/19 | — | | — | | — | | — | | — | | — | | — | | — | | 5,000 | | 9.62 | | | Robert L. Salomon | BP | 11/15/18 | 300,000 | | 750,000 | | 1,200,000 | | — | | — | | — | | — | | — | | — | | — | | | RS | 11/15/18 | — | | — | | — | | — | | — | | — | | 40,733 | | 399,998 | | — | | — | | | PS | 11/15/18 | — | | — | | — | | — | | 81,466 | | 171,079 | | — | | 855,393 | | — | | — | | | Keith L. Belknap | BP | 11/15/18 | 250,000 | | 500,000 | | 1,000,000 | | — | | — | | — | | — | | — | | — | | — | | | RS | 11/15/18 | — | | — | | — | | — | | — | | — | | 25,458 | | 249,998 | | — | | — | | | PS | 11/15/18 | — | | — | | — | | — | | 50,916 | | 106,924 | | — | | 534,618 | | — | | — | |
| | | | | | | Award Type: “BP” means potential cash awards under 20182019 Short-Term Incentive Plan; “RS” means shares of time-vesting restricted stock; “PS” means performance shares. |
| Amounts represent the range of possible cash payouts for fiscal 20182019 under the 20182019 Short-Term Incentive Plan, as described under “Compensation Discussion and Analysis — Elements of Fiscal 20182019 Compensation Program — Short-Term Incentive Compensation” above. The awards that were earned based on actual performance for fiscal 20182019 were paid in November 20182019 and are shown in the“Non-Equity “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. |
| Represents the range of shares of Common Stock that may vest after the end of the three-year award cycle applicable to a performance share award, assuming achievement of threshold, target and maximumsuperior performance. See “Compensation Discussion and Analysis — Elements of Fiscal 20182019 Compensation Program — Long-Term Incentive Compensation — Performance Measures for 2018-20202019-2021 Performance Shares” above. |
| Represents time-vestingtime-vested restricted stock. The shares of restricted stock generally vest in equal installments on the first, second and third anniversaries of the grant date. See “Compensation Discussion and Analysis — Elements of Fiscal 20182019 Compensation Program — Long-Term Incentive Compensation — Restricted Stock” above. |
| See footnote 1 to the Summary Compensation Table above for an explanation of the calculation of the grant date fair value of stock-based awards. | | Represents an option to purchase 5,000 shares of common stock with a per share exercise price of $9.62, the closing price of common stock on the NYSE on the date of grant. The option was awarded in connection with a 2019 employee stock option program that matches open market purchases of common stock with the grant of stock options on a 1:1 basis, up to a maximum of 5,000 shares per employee, with a term of eight years. The program was available to all full-time employees of the Company, with vesting of options on the second anniversary of the grant dates, subject to continued employment through the vesting date. |
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE
The following table provides information with respect to outstanding unexercised options and unvested performance-based restricted stock and time-based restricted stock held by our NEOs at September 30, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OPTION AWARDS | | STOCK AWARDS | NAME | | GRANT
DATE | | | | NUMBER OF SECURITIES UNDERLYING
OPTIONS/SSARS | | OPTION EXERCISE PRICE ($) | | OPTION EXPIRATION DATE | | NUMBER OF SHARES OF STOCK THAT HAVE NOT VESTED (#)(1) | | MARKET VALUE OF SHARES OF STOCK THAT HAVE NOT VESTED ($)(2) | | NUMBER OF PER- FORMANCE SHARES THAT HAVE NOT VESTED (#) | | | | MARKET VALUE OF PERFOR- MANCE SHARES THAT HAVE NOT VESTED ($) (3) | | | (#) | |
|
|
| | EXERCISABLE | | UNEXERCIS-
ABLE | | | | | | | | | | | | | Allan P. Merrill | | | | 11/16/11 | | | | | | | | | | 58,264 | | | | | — | | | | | 10.80 | | | | | 11/16/19 | | | | | — | | | | | — | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/14/12 | | | | | | | | | | 86,000 | | | | | — | | | | | 13.33 | | | | | 11/14/20 | | | | | — | | | | | — | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/8/13 | | | | | | | | | | 86,000 | | | | | — | | | | | 19.11 | | | | | 11/8/21 | | | | | — | | | | | — | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/23/15 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 17,557 | | | | | 184,349 | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/23/15 | | | | | (4 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 105,338 | | | | | (4 | ) | | | | 1,106,049 | | | | | | | | | | | | | | | | | | 11/17/16 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 39,968 | | | | | 419,664 | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/17/16 | | | | | (5 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 119,904 | | | | | (5 | ) | | | | 1,258,992 | | | | | | | | | | | | | | | | | | 11/16/17 | | | | | (6 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 92,864 | | | | | (6 | ) | | | | 975,072 | | | | | | | | | | | | | | | | | | | 11/16/17 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 46,432 | | | | | 487,536 | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | Robert L. Salomon | | | | 11/16/11 | | | | | | | | | | 20,392 | | | | | — | | | | | 10.80 | | | | | 11/16/19 | | | | | — | | | | | — | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/14/12 | | | | | | | | | | 30,200 | | | | | — | | | | | 13.33 | | | | | 11/14/20 | | | | | — | | | | | — | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/8/13 | | | | | | | | | | 30,200 | | | | | — | | | | | 19.11 | | | | | 11/8/21 | | | | | — | | | | | — | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/23/15 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 7,169 | | | | | 75,275 | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/23/15 | | | | | (4 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 43,013 | | | | | (4 | ) | | | | 451,637 | | | | | | | | | | | | | | | | | | 11/17/16 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 16,320 | | | | | 171,360 | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | 11/17/16 | | | | | (5 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 48,960 | | | | | (5 | ) | | | | 514,080 | | | | | | | | | | | | | | | | | | 11/16/17 | | | | | (6 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 31,362 | | | | | (6 | ) | | | | 329,301 | | | | | | | | | | | | | | | | | | | 11/16/17 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 15,681 | | | | | 164,651 | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | Keith L. Belknap | | | | 1/8/18 | | | | | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 9,398 | | | | | 98,679 | | | | | — | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | 11/16/17 | | | | | (6 | ) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 18,796 | | | | | (6 | ) | | | | 197,358 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OPTION AWARDS | | | | | STOCK AWARDS | | | | | | | NAME | GRANT
DATE | | NUMBER OF SECURITIES UNDERLYING OPTIONS/SSARS | | OPTION
EXERCISE
PRICE ($) | OPTION
EXPIRATION
DATE | | NUMBER OF SHARES OF STOCK THAT HAVE NOT VESTED (#) (1) | MARKET VALUE OF SHARES OF STOCK THAT HAVE NOT VESTED ($) (2) | NUMBER
OF PER-
FORMANCE
SHARES
THAT HAVE
NOT VESTED
(#) | | MARKET VALUE OF PERFOR- MANCE SHARES THAT HAVE NOT VESTED ($) (3) | | | | | (#) | | | | | | | | | | | | | | EXERCISABLE | UNEXERCIS-ABLE | | | | | | | | | | | Allan P. Merrill | 11/16/11 | | 58,264 | | — | | 10.80 | | 11/16/19 | | — | | — | | — | | | — | | | | 11/14/12 | | 86,000 | | — | | 13.33 | | 11/14/20 | | — | | — | | — | | | — | | | | 11/8/13 | | 86,000 | | | | 19.11 | | 11/8/21 | | — | | — | | — | | | — | | | | 5/22/19 | | — | | 5,000 | | 9.62 | | 5/22/27 | | — | | — | | — | | | — | | | | 11/17/16 | | — | | — | | — | | — | | | 19,984 | | 297,762 | | — | | | — | | | | 11/17/16 | (4) | — | | — | | — | | — | �� | | | — | | — | | 119,904 | | (4) | 1,786,570 | | | | 11/16/17 | | — | | — | | — | | — | | | 30,955 | | 461,230 | | — | | | — | | | | 11/16/17 | (5) | — | | — | | — | | — | | | — | | — | | 92,864 | | (5) | 1,383,674 | | | | 11/15/18 | | — | | — | | — | | — | | | 96,741 | | 1,441,441 | | — | | | — | | | | 11/15/18 | (6) | — | | — | | — | | — | | | — | | — | | 193,482 | | (6) | 2,882,882 | | | | Robert L. Salomon | 11/16/11 | | 20,392 | | — | | 10.80 | | 11/16/19 | | — | | — | | — | | | — | | | | 11/14/12 | | 30,200 | | — | | 13.33 | | 11/14/20 | | — | | — | | — | | | — | | | | 11/8/13 | | 30,200 | | — | | 19.11 | | 11/8/21 | | — | | — | | — | | | — | | | | 11/17/16 | | — | | — | | — | | — | | | 8,160 | | 121,584 | | — | | | — | | | | 11/17/16 | (4) | — | | — | | — | | — | | | — | | — | | 48,960 | | (4) | 729,504 | | | | 11/16/17 | | — | | — | | — | | — | | | 10,454 | | 155,765 | | — | | | — | | | | 11/16/17 | (5) | — | | — | | — | | — | | | — | | — | | 31,362 | | (5) | 467,294 | | | | 11/15/18 | | — | | — | | — | | — | | | 40,733 | | 606,922 | | — | | | — | | | | 11/15/18 | (6) | — | | — | | — | | — | | | — | | — | | 81,466 | | (6) | 1,213,843 | | | | Keith L. Belknap | 1/8/18 | | — | | — | | — | | — | | | 6,266 | | 93,363 | | — | | | — | | | | 1/8/18 | (5) | — | | — | | — | | — | | | — | | — | | 18,796 | | (5) | 280,060 | | | | 11/15/18 | | — | | — | | — | | — | | | 25,458 | | 379,324 | | — | | | — | | | | 11/15/18 | (6) | — | | — | | — | | — | | | — | | — | | 50,916 | | (6) | 758,648 | | |
| | | | | | | Award vests ratably over a three-year period. |
| Reflects the value using the closing price of common stock on the NYSE on the last trading day of fiscal year 20182019 (September 28, 2018)30, 2019) of $10.50$14.90 per share. |
| “Market value” is calculated by multiplying the number of shares that have not vested by the closing price of common stock on the NYSE on September 28, 201830, 2019 of $10.50$14.90 per share. |
| Represents performance shares awarded in fiscal 2016 for a three-year award cycle (fiscal 2016 through fiscal 2018). The performance shares shown are based on actual performance. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Long-Term Incentive Compensation — Performance Shares” above. These performance shares vested in November 2018. For more information regarding these performance shares, see pages28-31 of the Company’s proxy statement for the 2017 annual meeting of stockholders filed with the SEC on December 19, 2016.
|
 | Represents performance shares awarded in fiscal 2017 for a three-year award cycle (fiscal 2017 through fiscal 2019). The performance shares shown assume targetare based on actual performance forand represent the award cycle.target. Shares earned in excess of award target were paid in cash. As a result, Messrs. Merrill and Salomon received cash payments of $1,048,638 and $428,192, respectively. See “Compensation Discussion and Analysis — Elements of Fiscal 2019 Compensation Program — Long-Term Incentive Compensation — Performance Shares” above. These performance shares vested in November 2019. For more information regarding these performance shares, see pages28-30 of the Company’s proxy statement for itsthe 2018 annual meeting of stockholders filed with the SEC on December 15, 2017. |
 | Represents performance shares awarded in fiscal 2018 for a three-year award cycle (fiscal 2018 through fiscal 2020). The performance shares shown assume target performance for the award cycle. For more information regarding these performance shares, see pages 25-27 of the Company’s proxy statement for its 2018 annual meeting of stockholders filed with the SEC on December 21, 2018. | | Represents performance shares awarded in fiscal 2019 for a three-year award cycle (fiscal 2019 through fiscal 2021). The performance shares shown assume target performance for the award cycle. See “Compensation Discussion and Analysis — Elements of Fiscal 20182019 Compensation Program — Long-Term Incentive Compensation — Performance Measures for 2018-20202019-2021 Performance Shares” above. |
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OPTION EXERCISES AND STOCK VESTED TABLE
The table below provides supplemental information relating to the value realized upon the exercise of stock options and upon the vesting of restricted stock during fiscal 20182019 for each NEO. | | | | | | | | | | | | | | STOCK AWARDS | NAME | | NUMBER OF SHARES
ACQUIRED ON VESTING (#) | | VALUE REALIZED UPON
VESTING ($) | Allan P. Merrill | | | | 300,650 | | | | | 4,085,002 | | Robert L. Salomon | | | | 100,682 | | | | | 1,402,379 | | Keith L. Belknap | | | | 0 | | | | | 0 | |
| | | | | | | | | | STOCK AWARDS | | | NAME | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED UPON
VESTING ($) | | Allan P. Merrill | 200,491 | | 2,100,887 | | | Robert L. Salomon | 80,774 | | 846,668 | | | Keith L. Belknap | 3,132 | | 36,363 | |
NON-QUALIFIED DEFERRED COMPENSATION TABLE
The table below provides supplemental information relating to compensation deferred during fiscal 20182019 under the terms of the Beazer Homes Deferred Compensation. | | | | | | | | | | | | | | | | | | | | | | | | | | NAME | | EXECUTIVE
CONTRIBUTIONS
IN LAST FY ($) | | COMPANY
CONTRIBUTIONS
IN LAST FY ($) | | AGGREGATE
EARNINGS/
(LOSSES) IN
LAST FY ($) (1) | | AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
($) | | AGGREGATE BALANCE AT LAST FYE ($) (2) | Allan P. Merrill | | | | 0 | | | | | 100,000 | | | | | 69,959 | | | | | 0 | | | | | 1,403,034 | | Robert L. Salomon | | | | 0 | | | | | 75,000 | | | | | 58,645 | | | | | 0 | | | | | 558,643 | | Keith L. Belknap | | | | 0 | | | | | 36,539 | | | | | 498 | | | | | 0 | | | | | 37,037 | |
| | | | | | | | | | | | | | | | | | | NAME | EXECUTIVE
CONTRIBUTIONS
IN LAST FY ($) | COMPANY
CONTRIBUTIONS
IN LAST FY ($) | AGGREGATE EARNINGS/ (LOSSES) IN LAST FY ($) (1) | AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
($) | AGGREGATE BALANCE AT LAST FYE ($) (2) | Allan P. Merrill | 0 | | 100,000 | | 47,179 | | 0 | | 1,550,213 | | | Robert L. Salomon | 0 | | 75,000 | | 20,762 | | 0 | | 654,405 | | | Keith L. Belknap | 0 | | 50,000 | | 4,611 | | 0 | | 91,648 | |
| | | | | | | Represents amounts of earnings on the balance of the participants’ accounts that are attributable to the performance of independently managed funds available to and selected by each participant under the Deferred Plan and in which deferred amounts are deemed to be invested. None of the earnings in this column are included in the “Summary Compensation Table” above because they were not preferential or above-market. |
| Aggregate balances include unvested amounts of Company contributions. |
Narrative Disclosure to Non-Qualified Deferred Compensation Table Under the Deferred Plan, participants select from a menu of investment options which track a variety of independently managed benchmark funds in which the funds are deemed to be invested. The return on the underlying investments determines the amount of earnings and losses that are credited or debited to the participants’ account. There is no guaranteed rate of return on these funds and the rate of return depends on the participants’ deemed investment option elections and on the market performance of the underlying funds. Deferred amounts and Company contributions are deposited in a trust that qualifies as a grantor trust under the Internal Revenue Code. Our obligations under the Deferred Plan are unsecured general obligations and rank equally with our other unsecured general creditors. Amounts deferred by participants and earnings and losses thereon are 100% vested.
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POTENTIAL PAYMENTS UPON TERMINATION OR
SEVERANCE AND CHANGE IN CONTROL AGREEMENTS In September 2018, we
We have entered into new severance and change in control agreements with each of our named executive officers. With respect to Messrs. Merrill and Salomon, these new agreements replaced their former employment agreements, which also expired in September 2018.The newThese agreements set forth each executive’s then current base salary, eligibility to receive awards pursuant to short-term and long-term incentive compensation programs, deferred compensation and severance payments, all of which are described in greater detail below. The agreements are substantially identical innon-economic terms, and set forth each executive’snon-competition andnon-solicitation, confidentiality and intellectual property obligations.
Mr. Merrill’s agreement provides for a base salary of $950,000, an annual target bonus opportunity pursuant to the annual cash incentive plan of 150% of base salary and annual long-term incentive awards of up to 300% of base salary. The new agreement for Mr. Salomon provides for a base salary of $550,000, a target annual bonus opportunity of 125% of base salary and annual long-term incentive awards of up to 175% of base salary. The agreement for Mr. Belknap provides for a base salary of $450,000, a target annual bonus opportunity of 100% of base salary and annual long-term incentive awards of up to 125% of base salary. Base salaries, performance metrics and actual target opportunities for any given year remain within the discretion of the Company’s Compensation Committee. The agreements also provide for each executive’s eligibility to participate in the Company’s Deferred Compensation Plan.
The agreements provide for a lump sum severance payment in the event of a “change of control” of the Company followed by a termination of the executive without “cause” or a resignation by the executive for “good reason” within two years of the change of control. In such event, the severance payment for Mr. Merrill would be three times the sum of his then current base salary and target annual cash incentive bonus target for the fiscal year in which the termination occurs, and, in the case of Messrs. Salomon and Belknap, the severance payments would be two times the sum of the executive’s then current base salary and target annual incentive bonus for the fiscal year in which the termination occurs, in each case payable in a lump sum. Where there is no “change of control,” in the event of a termination of the executive without “cause” or a resignation by the executive for “good reason,” such executive would receive a severance payment. The severance payment for Mr. Merrill in this situation would be (1) two times the sum of his then current base salary and target annual incentive bonus for the fiscal year in which the termination occurs, payable in equal installments over twelve months, and (2) a pro rata annual incentive bonus for the fiscal year in which the termination occurs calculated based on actual performance for the year, payable at the same time bonuses are paid to other executives. For Messrs. Salomon and Belknap, the severance payment would be (1) one and one-fourth times the sum of the executive’s then current base salary and target annual incentive bonus for the fiscal year in which termination occurs, payable in equal installments over twelve months, and (2) a pro rata annual incentive bonus for the fiscal year in which the termination occurs calculated based on actual performance for the year, payable at the same time bonuses are paid to other executives. No severance will be payable in the event the executive is terminated for “cause” or the executive resigns without “good reason.” The agreements do not entitle the executives to any extension or continuation of employee benefits after termination, except in the event the executive is entitled to receive severance pay, in which case the executive may receive up to twelve months of coverage under the group health, dental and vision plans the executive participated in prior to termination. In addition, there is no provision to “gross up” any payment to account for taxes for which the executive may be liable. Under the agreements, any incentive compensation that is paid or granted to the executives will be subject to recoupment under the terms of the Company’s “clawback” policy. | | |
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DISPOSITION OF OUTSTANDING EQUITY AWARDS The new severance and change in control agreements with each of our named executive officers also govern the disposition of outstanding equity awards issued under our 2014 Long-Term Incentive Plan in the event the executive’s employment is terminated under various scenarios or in the event there is a change in control of the Company.
Termination of Employment by the Company with Cause or Resignation by Executive Pursuant to the severance agreements, equity grants under our 2014 Long-Term Incentive Plan provide that all unvested awards will be forfeited in the event the executive is terminated by the Company for “cause” or the executive voluntarily resigns and the resignation is not within two years after of a change in control of the Company.
Termination of Employment by the Company without “Cause,” by Executive for Good Reason or Retirement If the executive’s employment is terminated by the Company without cause, the executive resigns for “good reason,” or the executive retires, unvested equity grants under our 2014 Long-Term Incentive Plan will generally vest as follows: •awards that vest solely on a time basis will vest pro rata based on the number of months the executive was employed during the applicable vesting period; and •awards that vest based on the Company’s performance will vest pro rata based on the Company’s performance during the applicable performance period and the number of months the executive was employed during such period. If the executive’s employment is terminated due to death or disability, all unvested equity grants under our 2014 Long-Term Incentive Plan will fully vest.
In the event of an anticipated change in control of the Company, the Company’s Compensation Committee has the authority to determine that awards granted under our 2014 Long-Term Incentive Plan: •will be continued by the Company (if the Company is the surviving entity);
•will be assumed by the surviving entity or its parent or subsidiary; or •will be substituted for by the surviving entity or its parent or subsidiary with an equivalent award for the outstanding award. If an award is continued, assumed or substituted upon a change in control, such award will generally provide similar terms and conditions and preserve the same benefits as the outstanding award that is being continued or replaced, and, in the event executive’s employment is terminated without cause or the executive terminates his employment for good reason within two years following the change in control, the unvested outstanding award (or assumed or substituted award) will fully vest. | | |
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Awards that are not continued, assumed or substituted upon a change of control will fully vest, subject to the Compensation Committee's discretion.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL TABLE The table below summarizes the compensation payable to each NEO in the event of termination of employment. The amount of compensation payable to each NEO in each situation is listed, assuming termination had occurred on the last day of our most recent fiscal year, September 30, 2018.2019. All equity awards have been valued as of September 28, 2018,30, 2019, the last trading day in the fiscal year. | | | | | | | | | | | | | | | | | | | | | | | TYPE OF TERMINATION | NAME | | PAYMENT OR BENEFIT TYPE | | TERMINATION FOLLOWING CHANGE OF CONTROL WITHOUT CAUSE ($) | | DEATH OR
DISABILITY ($) | | WITHOUT
CAUSE OR
FOR GOOD
REASON ($) | Allan P. Merrill | | Severance | | | | 7,125,000 | | | | | — | | | | | 6,814,537 | | | | Vesting of Unvested Long-Term Awards | | | | 4,431,661 | | | | | 4,431,661 | | | | | 2,663,240 | | | | Benefits Continuation | | | | 17,241 | | | | | — | | | | | 17,241 | | | | | Total | | | | 11,573,902 | | | | | 4,431,661 | | | | | 9,495,018 | | Robert L. Salomon | | Severance | | | | 2,475,000 | | | | | — | | | | | 2,391,967 | | | | Vesting of Unvested Long-Term Awards | | | | 1,706,303 | | | | | 1,706,303 | | | | | 1,058,352 | | | | Benefits Continuation | | | | 18,100 | | | | | — | | | | | 18,100 | | | | | Total | | | | 4,199,403 | | | | | 1,706,303 | | | | | 3,468,419 | | Keith L. Belknap | | Severance | | | | 1,800,000 | | | | | — | | | | | 1,776,959 | | | | Vesting of Unvested Long-Term Awards | | | | 296,037 | | | | | 296,037 | | | | | 71,513 | | | | Benefits Continuation | | | | 17,241 | | | | | — | | | | | 17,241 | | | | | Total | | | | 2,113,278 | | | | | 296,037 | | | | | 1,865,713 | |
| | | | | | | | | | | | | | | | | TYPE OF TERMINATION | | | | NAME | PAYMENT OR BENEFIT TYPE | TERMINATION
FOLLOWING
CHANGE OF
CONTROL WITHOUT CAUSE ($) | DEATH OR
DISABILITY ($) | WITHOUT CAUSE OR FOR GOOD REASON ($) | | Allan P. Merrill | Severance | 7,125,000 | | — | | 5,878,332 | | | Vesting of Unvested Long-Term Awards | 8,253,557 | | 8,279,957 | | 4,350,683 | | | Benefits Continuation | 17,405 | | — | | 17,405 | | | Total | 15,395,962 | | 8,279,957 | | 10,246,420 | | | Robert L. Salomon | Severance | 2,700,000 | | — | | 2,217,781 | | | Vesting of Unvested Long-Term Awards | 3,294,911 | | 3,294,911 | | 1,701,248 | | | Benefits Continuation | 13,907 | | — | | 13,907 | | | Total | 6,008,818 | | 3,294,911 | | 3,932,936 | | | Keith L. Belknap | Severance | 2,000,000 | | — | | 1,645,906 | | | Vesting of Unvested Long-Term Awards | 1,511,397 | | 1,511,397 | | 1,036,121 | | | Benefits Continuation | 18,270 | | — | | 18,270 | | | Total | 3,529,667 | | 1,511,397 | | 2,700,297 | |
The following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee. We identified the median employee using the employee population on September 30, 20182019 that received taxable compensation (other than our Chief Executive Officer) for the fiscal year 2018,2019 , which included our reviewing gross compensation, excluding equity, within the fiscal year 2018.2019. Compensation was annualized for employees who joined the Company during the fiscal year. The annual total compensation of our median employee (other than the Chief Executive Officer) for the fiscal year 20182019 was $88,722.$101,513. As disclosed in the Summary Compensation Table above, our Chief Executive Officer’s annual total compensation for fiscal 20182019 was $6,152,170.$5,190,140. For purposes of determining the ratio, the annual total compensation of the CEO and the median employee includes the dollar value of non-discriminatory health and welfare benefit contributions made by the Company, which are not required to be reported as compensation in the Summary Compensation Table. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was 58:51:1. For fiscal 2018,2019, long-term equity-based compensation comprised 49%58% of our CEO’s compensation, the ultimate value of which is related directly to company and common stock performance. As a result of this emphasis on equity and stockholder alignment, the CEO pay ratio is 30:22:1 when utilizing a methodology for determining the median employee that excludes equity. This information is being provided for compliance purposes. Because SEC rules permit significant flexibility in terms of approaches used to calculate compensation and identify the median employee, comparisons of pay ratios among companies may not be very meaningful, even for companies within the same industry. Neither the Compensation Committee nor the executives of our Company used the pay ratio measure in making compensation decisions.
PROPOSAL 4 – APPROVAL OF AMENDED AND RESTATED 2014 LONG-TERM INCENTIVE PLAN BACKGROUND On February 6, 2014, our stockholders approved the Company’s 2014 Long-Term Incentive Plan (as amended, the “2014 Plan”) and authorized issuance of 2,000,000 shares under the 2014 Plan. On February 3, 2017, our stockholders approved an amendment to the 2014 Plan, which, among other things, authorized the issuance of an additional 1,850,000 shares. As of December 11, 2019, only 622,975 shares remain available for future issuance under the 2014 Plan (the “Remaining Shares”), which will not be sufficient to fund grants at competitive levels for fiscal year 2021 and beyond. On November 6, 2019, our Board approved the Amended and Restated 2014 Long-Term Incentive Plan (the “Amended 2014 Plan”), subject to approval by our stockholders at the Annual Meeting, and is now asking our stockholders to approve the Amended 2014 Plan. The Amended 2014 Plan would amend and restate the 2014 Plan as follows: •Increase the number of shares available under the 2014 Plan from 3,850,000 to 5,550,000. •In addition to retaining individual participant award limits, limit the maximum value of equity awards that may be granted to any non-employee director during any fiscal year to $350,000. •Extend the term of the 2014 Plan to 10 years from the date of the Annual Meeting. •Added a requirement that all awards are subject to a minimum one-year vesting period, except for vesting due to death, disability or awards that, in the aggregate, do not exceed five percent (5%) of the total number of shares available under the 2014 Plan. •Clarified that dividends or dividend equivalents will not be paid until the underlying award becomes vested. •Update the share withholding rules to be consistent with revised accounting rules. •Make certain other conforming changes consistent with the foregoing. All other terms of the 2014 Plan will remain in effect. Selected Data as of December 11, 2019 Set forth below is information regarding awards currently outstanding under the 2014 Plan and the 2010 Equity Incentive Plan (the "2010 Plan"), which are the Company's only outstanding equity incentive plans. The Company made annual award grants to employees and non-employee directors in November 2019, and those awards are included in the data below. The 2010 Plan expires on February 3, 2020 and no additional awards will be granted under that plan. | | | | | | | Stock options outstanding | 400,287 | | 37
Weighted average exercise price | $15.35 | | | Weighted average remaining contractual life | 2.75 | | Restricted shares outstanding | 634,586 | | | Performance shares outstanding | 796,024 | | | Shares remaining for grant under the 2014 Plan | 622,975 | | | Shares remaining for grant under the 2010 Plan | 160 | | Common stock outstanding | 31,383,048 |
Purpose of the Amended 2014 Plan and Why You Should Vote to Approve It The objectives of the Amended 2014 Plan are to (1) attract and retain employees, non-employee directors, consultants, advisors and other persons who perform services for the Company by providing compensation opportunities that are competitive with other companies; (2) provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its affiliates; and (3) align the long-term financial interests of employees and other individuals who are eligible to participate in the Amended 2014 Plan with those of stockholders and reinforce key strategic objectives in support of long-term value creation. The Amended 2014 Plan authorizes the Compensation Committee to provide equity-based compensation in the form of stock options, SARs, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, other stock-based awards and long-term incentive compensation awards for the purpose of providing our officers and other employees, and those of our subsidiaries, and non-employees who provide services to the Company, incentives and rewards for performance. In conjunction with independent compensation consultants we have designed the Amended 2014 Plan to reflect our commitment to effective management of equity-based incentive compensation. We have designed the Amended 2014 Plan to ensure that it implements best practices in long-term compensation plan design, and that we continue to operate the plan in an effective manner. The details of the key design elements of the Amended 2014 Plan are set forth in the section entitled “—Plan Summary” below. The use of our stock as part of our compensation program is important to our continued success because we believe it fosters a pay-for-performance culture that is an important element of our overall compensation philosophy. Equity-based compensation aligns the compensation interests of our employees with the interests of our stockholders and promotes a focus on long-term value creation because our equity-based compensation awards can be subject to time-based vesting and/or performance criteria. As further described in the section entitled “Compensation Discussion and Analysis” beginning on page 20 of this Proxy Statement, we believe our future success depends in large part on our ability to attract, motivate and retain high quality employees. Our ability to provide awards under our long-term compensation plans is critical to achieving this success. As described above, the number of shares remaining available for future grants under the Amended 2014 Plan is very limited. If the Amended 2014 Plan is not approved, we would be at a severe competitive disadvantage as we would not be able to use equity-based awards to recruit and compensate our officers and other employees. In such a circumstance, the Company could be faced with losing key talent or using cash incentives. If the Amended 2014 Plan is approved, we intend to utilize the shares authorized to continue our practice of incentivizing key individuals through annual equity-based grants. We expect that the authorized share request will allow us to continue to grant long-term incentives for the next three years, subject to future stock prices and participation levels. We believe that we have demonstrated a commitment to sound equity compensation practices in recent years. We recognize that equity-based compensation awards dilute shareholder equity, so we have carefully managed our equity-based incentive compensation. Our equity-based compensation practices are targeted to be competitive and consistent with market practices, and we believe our historical share usage has been responsible and mindful of stockholder interests, as described above.
In evaluating this proposal, stockholders should specifically consider the information set forth under the section entitled “—Plan Summary” below.
Plan Summary The following summary of the material terms of the Amended 2014 Plan is qualified in its entirety by reference to the full text of the Amended 2014 Plan, which is attached as Appendix I to this Proxy Statement. The Amended 2014 Plan is not a tax-qualified deferred compensation plan under Section 401(a) of the Code, and is not intended to be an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974. Administration of the Amended 2014 Plan. The Amended 2014 Plan will continue to be administered by the Compensation Committee or such other committee consisting of two or more members as may be appointed by the Board (in each case, the “Committee”). The Committee will determine the individuals to whom awards will be granted, the
number of shares subject to an award, and the other terms and conditions of an award. So long as our shares are traded on the NYSE, all of the members of the Committee must be independent directors within the meaning of the listing standards of the NYSE relating to corporate governance matters. If any member of the Committee does not qualify as a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, the Board will appoint a subcommittee of the Committee, consisting of at least two members of the Board who qualify as “non-employee directors”, to grant awards to officers and members of the Board who are subject to Section 16 of the Exchange Act (“Insiders”). References to the Committee in this summary include and, as appropriate, apply to any such subcommittee. Subject to the express provisions of the Amended 2014 Plan, the Committee is authorized and empowered to do all things that the Committee in its discretion determines to be necessary or appropriate in connection with the administration and operation of the Amended 2014 Plan. The Committee may delegate its authority to one or more of its members (but not less than two members with respect to Insiders). To the extent permitted by law and applicable stock exchange rules, the Committee may also delegate its authority to one or more persons who are not members of the Board, except that no such delegation will be permitted with respect to Insiders. Eligible Participants. Employees of the Company or certain affiliates, non-employee members of the Board, and any other individual who provides bona fide services to the Company or certain affiliates not in connection with the offer or sale of securities in a capital raising transaction (subject to certain limitations) are eligible for selection by the Committee for the grant of awards under the Amended 2014 Plan. While all employees of the Company are potentially eligible to receive awards under the Amended 2014 Plan, the Company has historically granted awards under its long-term incentive plans to a more limited group of approximately 55 employees and non-employee directors. Types of Awards. The Amended 2014 Plan provides for the grant of non-qualified stock options (“NQSOs”), incentive stock options (“ISOs”), SARs, restricted stock, RSUs, performance shares, performance units, other stock-based awards and long-term incentive compensation awards to eligible participants. ISOs may only be granted to employees of the Company or its subsidiaries. Minimum Vesting Requirements. No award may be subject to a vesting period of less than one year from the date of grant, except in the case of death or disability of the participant and, if the Amended 2014 Plan is approved, with respect to awards which in the aggregate do not exceed five percent (5%) of the total number of shares available under the Amended 2014 Plan. Award Pool. The number of shares that will be available for issuance pursuant to awards granted under the Amended 2014 Plan is 5,550,000 shares, which includes the Remaining Shares (the “Award Pool”), subject to adjustment as described in the 2014 Plan. In determining the number of shares to request for the Amended 2014 Plan, the Committee worked with Pearl Meyer, the Committee’s independent compensation consultant, to evaluate our recent share usage, our share availability under prior long term incentive plans, our historical burn rate under the 2014 Plan, the potential cost to stockholders of the new share request under Amended 2014 Plan, and the overhang cost associated with outstanding equity-based awards that we granted previously. The shares issued by the Company under the Amended 2014 Plan will be authorized but unissued shares or shares currently held (or subsequently acquired) as treasury shares, including shares purchased on the open market or in private transactions. Each NQSO, ISO, and SAR that may be settled in shares will be counted as one share and deducted from the Award Pool. SARs that may not be settled in shares will not result in a reduction of the Award Pool. Each share of restricted stock, each share-settled RSU, and each other stock-based/stock-settled award will be counted as one share and deducted from the Award Pool (restricted stock units and other stock-based awards that may not be settled in shares will not result in a deduction from the Award Pool). Each performance share that may be settled in shares will be counted as one share (based on the number of shares that would be paid for achievement of target performance) and deducted from the Award Pool. A performance unit that may be settled in shares will be counted as a number of shares (based on the number of shares that would be paid for achievement of target performance), with the number determined by dividing the value of the performance unit at the time of grant by the fair market value of a share at the time of grant (the closing price of a share of the Company on the NYSE on the immediately preceding trading day), and the resulting number of shares will be deducted from the Award Pool. If a performance share or performance unit is later settled based on above-target performance, the actual number of shares
corresponding to the above-target performance, calculated pursuant to the applicable methodology specified above, will be deducted from the Award Pool at the time of settlement; in the event that the Award is later settled based upon below-target performance, the actual number of shares corresponding to the below-target performance, calculated pursuant to the applicable methodology specified above, will be added back to the Award Pool. Performance shares and units that may not be settled in shares will not result in a reduction in the Award Pool. If shares awarded or subject to issuance under the Amended 2014 Plan are not issued, or are reacquired by the Company, for reasons including, but not limited to, a forfeiture of restricted stock or an RSU or the termination, expiration or cancellation of an NQSO, ISO, SAR, performance share or performance unit or the settlement of an award in cash in lieu of shares, that number of shares will be added back to the Award Pool. Limitation on Share Recycling. The Amended 2014 Plan provides that if the tax withholding obligation, exercise price or purchase price under an award is satisfied by the Company retaining shares that otherwise would have been issued in settlement of the award or by shares tendered by the participant, the number of shares so retained or tendered will not be added back to the Award Pool. In addition, any shares that are purchased by the Company with proceeds from the exercise of an award shall not be added back to the Award Pool. Individual Limits. Subject to adjustment as described in the Amended 2014 Plan, the maximum number of NQSOs, ISOs, and SARs that, in the aggregate, may be granted pursuant to awards in any one fiscal year to any one participant is 750,000, the maximum number of shares of restricted stock and RSUs that, in the aggregate, may be granted pursuant to awards in any one fiscal year to any one participant is 250,000 shares and units, the maximum number of performance units (valued as of the grant date) that, in the aggregate, may be granted pursuant to awards in any one fiscal year to any one participant is 500,000 shares (to the extent settled in shares) or $3,000,000 (to the extent settled in cash), the maximum number of performance shares and other stock-based awards that, in the aggregate, may be granted pursuant to awards in any one fiscal year to any one participant is 500,000, and the maximum long-term incentive compensation awards that, in the aggregate, may be granted pursuant to awards in any one fiscal year to any one participant is $3,000,000. In addition, if the Amended 2014 Plan is approved, the maximum fair value of equity awards that, in the aggregate, may be granted in any one fiscal year to any one non-employee director is $350,000. The limitations on performance shares, performance units and other awards will be applied based on the maximum amount that could be paid under each such award. Adjustments. The Committee will make equitable adjustments in the number and class of securities available for issuance under the Amended 2014 Plan (including under any awards then outstanding), the number and type of securities subject to the individual limits set forth in the Amended 2014 Plan, and the terms of any outstanding award, as it determines are necessary and appropriate, to reflect any merger, reorganization, consolidation, recapitalization, reclassification, stock split, reverse stock split, spin-off combination, or exchange of shares, distribution to stockholders (other than an ordinary cash dividend), or similar corporate transactions or events. Stock Options. A stock option provides the participant with the right to buy a specified number of shares at a specified price (“exercise price”) after certain conditions have been met. The Committee may grant both NQSOs and ISOs under the Amended 2014 Plan. The tax treatment of NQSOs is different from the tax treatment of ISOs, as explained in the section below entitled “—Certain Federal Income Tax Consequences.” The Committee will determine and specify in the award agreement whether the option is an NQSO or ISO, the number of shares subject to the option, the exercise price of the option and the period of time during which the option may be exercised (including the impact of a termination of employment). A participant receiving options will not possess voting rights and will accrue dividend equivalents on options only to the extent provided in the agreement relating to the award. Any rights to dividend equivalents on options will be subject to the same restrictions on vesting and payment as the underlying award. No option can be exercisable more than ten years after the date of grant and the exercise price of a stock option must be at least equal to the fair market value of a share on the date of grant of the option. A participant may pay the exercise price under an option in cash; in a cash equivalent approved by the Committee; if approved by the Committee, by tendering previously-acquired shares (or delivering a certification or attestation of ownership of such shares) having an aggregate fair market value at the time of exercise equal to the total option price (provided that the tendered shares must have been held by the participant for any period required by the Committee); or by a combination of these payment methods. The Committee may also allow cashless exercises as permitted under the Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, or by any other means which the
Committee determines to be consistent with the Amended 2014 Plan’s purpose and applicable law. No certificate representing a share (to the extent shares are so evidenced) will be delivered until the full option price has been paid. Stock Appreciation Rights (SARs). A SAR entitles the participant to receive cash, shares, a combination thereof, or such other consideration as the Committee may determine, in an amount equal to the excess of the fair market value of a share on the exercise date over the grant price for the SAR, after certain conditions have been met. The Committee will determine and specify in the SAR award agreement the number of shares subject to the SAR, the grant price, which generally must be at least equal to the fair market value of a share on the date of grant of the SAR, and the period of time during which the SAR may be exercised (including the impact of a termination of employment). A participant receiving SARs will not possess voting rights and will accrue dividend equivalents on SARs only to the extent provided in the agreement relating to the award. Any rights to dividend equivalents on SARs will be subject to the same restrictions on vesting and payment as the underlying award. No SAR can be exercisable more than ten years after the date of grant. SARs may be granted in tandem with a stock option or independently. If a SAR is granted in tandem with a stock option, the participant may exercise the stock option or the SAR, but not both. Restricted Stock and Restricted Stock Units (RSUs). The Committee will specify the terms of a restricted stock or RSU award in the award agreement, including the number of shares of restricted stock or units; the purchase price, if any, to be paid for such restricted stock/unit, which may be more than, equal to, or less than the fair market value of a share and may be zero; any restrictions applicable to the restricted stock/unit such as continued service or achievement of performance goals; subject to the minimum vesting requirements, the length of the restriction period and whether any circumstances, such as death or disability, shorten or terminate the restriction period; the rights of the participant during the restriction period to vote and receive dividends in the case of restricted stock or to receive dividend equivalents in the case of RSUs that accrue dividend equivalents; and whether restricted stock units will be settled in cash, shares or a combination of both. Any rights to dividends or dividend equivalents will be subject to the same restrictions on vesting and payment as the underlying award. Performance Shares and Performance Units. A performance share will have an initial value equal to the fair market value of a share on the date of grant. A performance unit will have an initial value that is established by the Committee at the time of grant. In addition to any non-performance terms applicable to the performance share or performance unit, the Committee will set performance goals which, depending on the extent to which they are met, will determine the number or value of the performance shares or units that will be paid out to the participant. The Committee may provide for payment of earned performance shares/units in cash or in shares or in the form of other awards granted under the Amended 2014 Plan which have a fair market value equal to the value of the earned performance shares/units at the close of the applicable performance period. Performance shares/units will not possess voting rights and will accrue dividend equivalents only to the extent provided in the agreement relating to the award; provided, however, that rights to dividend equivalents are permitted only to the extent they comply with, or are exempt from, Section 409A of the Code (“Section 409A”). Any rights to dividend equivalents will be subject to the same restrictions on vesting and payment as the underlying award. Long-Term Incentive Compensation Awards. The Committee will have the authority to grant long-term performance-based incentive compensation awards. Any such long-term incentive compensation award must relate to a period of more than one fiscal year of the Company. The Committee will determine all terms and conditions of such awards, including the performance measures (as described below), the performance period, the potential amount payable, and the timing of the payment. The long-term incentive compensation awards will be payable in cash and the Committee may provide participants with the right to defer all or part of any award. Performance Measures. The Committee may select performance measures for awards from among the following: earnings, earnings per share, consolidated pre-tax earnings, net earnings, net income, operating income, earnings before interest and taxes (“EBIT”), earnings before interest, taxes, depreciation and amortization (“EBITDA”), gross margin, operating margin, profit margin, revenues, revenue growth, market value added, market share, economic value added, return measures (including but not limited to return on equity, return on investment, return on assets, return on net assets, and return on capital employed), total stockholder return, relative total stockholder return, profit, operating profit, economic profit, capitalized economic profit, after-tax profit, pre-tax profit, cash, cash flow measures (including but not limited to operating cash flow, free cash flow and cash flow return), sales, sales volume, sales growth, sales velocity, assets, inventory turnover ratio, productivity ratios, share price, cost, unit cost, expense ratios, charge-off levels, operating
efficiency, operating expenses, improvement in or attainment of expense levels, working capital, improvement in or attainment of working capital levels, debt, debt to equity ratio, debt reduction, capital targets, consummation of acquisitions, dispositions, projects or other specific events or transactions and/or such other metrics as may be approved by the Committee from time to time. Any performance measure may be applied to the Company and certain affiliates in the aggregate, to a selection of or one or more of these entities, to each as a whole or alternatively, or to any business unit of the Company or any other entity included in the term “Employer,” either individually, alternatively or in any combination and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to results for previous years or to a designated comparison group of entities or to a published or stock market or other index, in each case as specified by the Committee. The Committee will specify the period over which the performance goals for a particular award will be measured. The Committee will determine whether the applicable performance goals have been met with respect to a particular award and, if they have, the Committee must so certify in writing and ascertain the amount payable under the award. The Committee is authorized to make adjustments in performance-based criteria or in the terms and conditions of other awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements (including, but not limited to, asset write-downs; litigation or claim judgments or settlements; reorganizations or restructuring programs; extraordinary, unusual, or nonrecurring items of gain or loss as defined under U.S. generally accepted accounting principles; mergers, acquisitions or divestitures; and foreign exchange gains and losses) or changes in applicable laws, regulations or accounting principles. The adjustments must be made in accordance with guidelines established by the Committee at the time the performance-based award is granted. The Committee also has discretion to adjust downward the determination of the degree of attainment of the pre-established performance goals. Other Stock-Based Awards. The Committee may grant other forms of equity-based or equity-related awards that the Committee determines to be consistent with the purpose of the Amended 2014 Plan and the interests of the Company. These other awards may provide for cash payments based in whole or in part on the value or future value of shares, for the acquisition or future acquisition of shares, or any combination thereof. Where the value of such an award is based on the difference in the value of a share at different points in time, the grant or exercise price must generally not be less than 100% of the fair market value of a share on the date of grant. A participant receiving these other awards will not possess voting rights and will accrue dividend equivalents on these other awards only to the extent provided in the agreement relating to the award. Any rights to dividend equivalents on these other awards will be subject to the same restrictions on vesting and payment as the underlying award. Change in Control. Unless otherwise provided in an employment, change in control or similar agreement with the Company that provides for the effect of a Change in Control of the Company (as defined in the Amended 2014 Plan) on outstanding awards granted under the Amended 2014 Plan (each, an “Outstanding Award”), the individual award agreement may provide (in addition to other provisions) that upon a Change in Control the Committee shall have the authority to determine that Outstanding Awards: (a) will be continued by the Company (if the Company is the surviving entity); or (b) will be assumed by the surviving entity or its parent or subsidiary; or (c) will be substituted for by the surviving entity or its parent or subsidiary with an equivalent award for the Outstanding Award. The Amended 2014 Plan further provides that, if an Outstanding Award is not continued, assumed or substituted upon a Change in Control, the agreement may provide that the Committee will in its discretion determine the impact of the Change in Control on the Outstanding Award, including the right to determine to fully vest Outstanding Awards that are not continued, assumed or substituted and to cash out Outstanding Awards. The determinations by the Committee may be different with respect to (i) the type of Outstanding Award, (ii) the date on which the Outstanding Award was granted, or (iii) the participant’s employment position. If an Outstanding Award is continued, assumed or substituted upon a Change in Control, the continued, assumed or substituted award will provide (i) similar terms and conditions and preserve the same benefits as the Outstanding Award that is being continued or replaced, and (ii) that, in the event of the participant’s involuntary termination without Cause (as defined in the Amended 2014 Plan) or termination for Good Reason (as defined in the Amended 2014 Plan) on, or within the two-year period following, the date of the Change in Control, the Outstanding Award (or substituted award) will fully vest and become immediately exercisable and/or nonforfeitable.
Under the Amended 2014 Plan, the award agreement may contain such other provisions relating to the treatment of Outstanding Awards upon a Change in Control as the Committee determines are necessary or desirable. The Committee has determined that the agreements governing future equity awards to our NEOs under the Amended 2014 Plan will generally include provisions requiring that the NEO’s employment be terminated without Cause or for Good Reason after the Change in Control for the NEO’s unvested Outstanding Awards to fully vest (a “double-trigger” provision). Clawback Policies. Awards under the Amended 2014 Plan, as well as any future awards under the 2010 Equity Incentive Plan, are subject to any policy (a “clawback policy”) of recoupment or forfeiture of compensation adopted by the Committee from time to time, including clawback policies to comply with Section 954 of the Dodd-Frank Act and Section 304 of the Sarbanes-Oxley Act. The Committee may also provide for recoupment or forfeiture of awards if a participant engages in “detrimental activity” with respect to the Company. For information regarding the Company's existing incentive compensation clawback policy, see “Corporate Governance—Board Corporate Governance Practices—Compensation Clawback Policy.” In addition, the definition of “Cause” as a ground for termination and forfeiture of outstanding awards includes a material violation of the Company’s Code of Business Conduct and Ethics. Transferability. Awards generally may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by a participant other than by will or the laws of descent and distribution, and each option or SAR may be exercisable only by the participant during his or her lifetime. However, the Committee may provide in an award agreement for an NQSO that the NQSO be transferable consistent with securities law and other applicable law. NQSOs and SARs may not be transferred for value or consideration. Amendment and Termination. The Committee may amend or terminate the Amended 2014 Plan in whole or in part at any time, but the amendment or termination cannot adversely affect any rights or obligations with respect to an award previously granted without the affected participant’s written consent. The Company must obtain the approval of the stockholders before amending the Amended 2014 Plan to the extent required by Section 422 of the Code or the rules of the NYSE or other applicable law. The Committee may amend an outstanding award agreement in a manner not inconsistent with the terms of the Amended 2014 Plan, but the amendment will not be effective without the participant’s written consent if the amendment is adverse to the participant. The Committee cannot reprice a stock option or SAR except in accordance with the adjustment provisions of the Amended 2014 Plan (as described above) or to the extent the stockholders approve the repricing. For this purpose, a repricing generally is an amendment to the terms of an outstanding stock option or SAR that would reduce the option exercise price or SAR price or a cancellation, exchange, substitution, buyout or surrender of an outstanding stock option or SAR in exchange for cash, another award or stock option or SAR with an option exercise price or SAR price that is less than the option exercise price or SAR price of the original stock option or SAR.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is intended only as a brief summary of the federal income tax rules relevant to the primary types of awards available for issuance under the Amended 2014 Plan and is based on the terms of the Code, and the regulations and rulings thereunder, as currently in effect. The applicable statutory provisions are highly technical and subject to change in the future (possibly with retroactive effect), as are their interpretations and applications. The following summary is limited only to United States federal income tax treatment. Nonqualified Stock Options (NQSOs). A participant is not taxed upon the grant of an NQSO. However, the participant will recognize ordinary income upon exercise of the NQSO in an amount equal to the difference between the NQSO exercise price and the fair market value of the shares acquired on the date of exercise. The Company generally will have a deduction in an amount equal to the amount of ordinary income recognized by the participant in the Company’s tax year during which the participant recognizes ordinary income. Upon the sale of shares acquired pursuant to the exercise of an NQSO, the participant will recognize capital gain or loss to the extent that the amount realized from the sale is different than the fair market value of the shares on the date of exercise. This gain or loss will be long-term capital gain or loss if the shares have been held for more than one year after exercise.
Incentive Stock Options (ISOs). A participant is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares covered by the ISO on the exercise date will, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO for at least two years following the ISO grant date and at least one year following exercise, the participant’s gain, if any, upon a subsequent disposition of the shares is long-term capital gain. The amount of the gain is the difference between the proceeds received on disposition and the participant’s basis in the shares (which generally equals the ISO exercise price). If a participant disposes of shares acquired pursuant to exercise of an ISO before satisfying these holding periods, the participant will recognize both ordinary income and capital gain in the year of disposition. The Company is not entitled to a federal income tax deduction on the grant or exercise of an ISO or on the participant’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to the ordinary income recognized by the participant. In order for an option to qualify as an ISO for federal income tax purposes, the grant of the option must satisfy various other conditions specified in the Code. In the event an option intended to be an ISO fails to qualify as an ISO, it will be taxed as an NQSO as described above. Restricted Stock Awards. For restricted stock awards, the participant generally will recognize taxable ordinary income when the substantial risk of forfeiture lapses. If the substantial risk of forfeiture lapses in increments over several years, the participant will recognize income in each year in which the substantial risk of forfeiture lapses as to an increment. The income recognized upon lapse of a substantial risk of forfeiture will be equal to the fair market value of the shares determined as of the time that the substantial risk of forfeiture lapses less any purchase price paid for the shares. The Company generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant. Alternatively, if the shares are subject to a substantial risk of forfeiture, the participant may make a timely election under Section 83(b) of the Code (“Section 83(b)”) to recognize ordinary income for the taxable year in which the participant received the shares in an amount equal to the fair market value of the shares at that time. That income will be taxable at ordinary income tax rates. If a participant makes a timely Section 83(b) election, the participant will not recognize income at the time the substantial risk of forfeiture lapses with respect to the shares. At the time of disposition of the shares, a participant who has made a timely Section 83(b) election will recognize gain taxable at the applicable capital gains rate in an amount equal to the difference between the amount he has previously recognized as ordinary income and the amount received on the disposition of the shares. Restricted Stock Units (RSUs). A participant generally is not taxed upon the grant of an RSU. Generally, if an RSU is designed to be paid on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, then the participant will recognize ordinary income at that time equal to the amount of cash and the fair market value of the shares received by the participant, and the Company will be entitled to an income tax deduction for the same amount. However, if an RSU is not designed to be paid on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, the RSU may be deemed a nonqualified deferred compensation plan under Section 409A. In that case, the participant will recognize ordinary income at the time he receives the shares and any cash. Performance Share/Unit Awards; Stock Appreciation Rights (SARs). A participant generally is not taxed upon the grant of a performance share/unit or SAR. The participant will recognize taxable income at the time of settlement of the performance share/unit or at the time of exercise of the SAR in an amount equal to the amount of cash and the fair market value of the shares received upon settlement or exercise. The income recognized will be taxable at ordinary income tax rates. The Company generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant. Any gain or loss recognized upon the disposition of the shares acquired pursuant to settlement of a performance share/unit or exercise of a SAR will qualify as long-term capital gain or loss if the shares have been held for more than one year after settlement or exercise. Long-Term Incentive Compensation Awards. A participant who is paid a long-term incentive compensation award will recognize ordinary income equal to the amount of cash paid, and the Company will be entitled to a corresponding income tax deduction.
GOLDEN PARACHUTE PAYMENTS The terms of the agreement evidencing an award under the Amended 2014 Plan may provide for accelerated vesting or accelerated payout of the award in connection with a Change in Control of the Company. In such event, certain amounts with respect to the award may be characterized as “parachute payments” under the golden parachute provisions of the Code potentially resulting in adverse tax consequences to the individual and the Company. In such event, the Committee generally has the authority in its discretion to reduce the amount payable with respect to an award. TAX WITHHOLDING The Amended 2014 Plan permits the plan administrator to allow for the withholding or surrender of shares in satisfaction of tax withholding with respect to awards with a value up to the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under U.S. generally accepted accounting principles). NEW AMENDED 2014 PLAN BENEFITS No awards have been granted yet under the Amended 2014 Plan. The Committee will grant future awards at its discretion. We cannot determine the number of awards that may be granted in the future but the number will not exceed the amount approved by stockholders. ADDITIONAL EQUITY COMPENSATION PLAN INFORMATION The following table details the number of equity grants over the past three fiscal years, including those subject to service-based vesting provisions and those subject to performance-based vesting provisions, as well as performance share vesting activity. We believe that our equity grant levels are well within the bounds of competitive practice versus peers and our significant emphasis on performance share grants to executive officers demonstrates our commitment to pay for performance and long-term value creation.
| | | | | | | | | | | | | | | | | | | | | | Fiscal Year Ending September 30 | Weighted Average Number of Common Shares Outstanding(1) | Number of Stock Options Granted | Number of Service-Based Restricted Shares Granted | Target Number of Performance Shares Granted(2) | Number of Performance Shares Vested | Total Number of Service-Based Shares Granted Plus Vested Performance Shares | | 2019 | 30,617,357 | | 30,782 | | 448,657 | | 467,819 | | 321,833 | | 770,490 | | | 2018 | 32,140,703 | | 25,230 | | 277,165 | | 165,085 | | — | | 277,165 | | | 2017 | 31,951,989 | | 29,410 | | 271,855 | | 263,696 | | — | | 271,855 | | | 3-Year Totals | | | 85,422 | | 997,677 | | 896,600 | | 321,833 | | 1,319,510 | | | 3-Year Average | | 28,474 | | 332,559 | | 298,867 | | 107,278 | | 439,837 | |
(1) Reflects weighted average number of common shares outstanding used to calculate our basic earnings per share as reported in our audited consolidated financial statements. (2) Target number for the twelve months ending September 30,2019 includes 86,050 shares that were issued above target based on performance level achieved under performance-based vesting
Securities Authorized for Issuance under Equity Compensation Plans The following table provides information about the Company’s shares of common stock that may be issued under our existing equity compensation plans as of September 30, 2019, all of which have been approved by our stockholders: | | | | | | | | | | | | | | | | | Plan Category | Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans | | Equity compensation plans approved by stockholders | 523,754 | | $14.34 | | 1,195,633 | |
REGISTRATION WITH THE SEC We intend to file an amendment to the Company's current Registration Statement on Form S-8 relating to the issuance of shares of common stock under the Amended 2014 Plan with the SEC pursuant to the Securities Act as soon as practicable after approval of the Amended 2014 Plan by our stockholders.
REQUIRED VOTE This proposal requires the affirmative vote of a majority of our common stock present in person or by proxy at the Annual Meeting.
RECOMMENDATION
The Board of Directors recommends a vote FOR approval of the Amended and Restated 2014 Long-Term Incentive Plan.
OWNERSHIP SECURITY OWNERSHIP OF CERTAIN
GREATER THAN 5% BENEFICIAL OWNERS
The following table sets forth, to the best of our knowledge and belief, certain information regarding the beneficial ownership of our common stock by each person known to the Company to be the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of more than 5% of our outstanding common stock as of December 12, 2018. | | | | | | | | | | | | | | | | NAME AND ADDRESS OF BENEFICIAL OWNER | | NUMBER OF COMMON
SHARES BENEFICIALLY OWNED | | PERCENT OF
OUTSTANDING (1) | | | BlackRock, Inc. (2) | | | | | | | | | | | | | | | | 55 East 52nd Street | | | | 3,135,962 | | | | | 9.5% | | | | | | | New York, NY 10022 | | | | | | | | | | | | | | | |
| | | | | | | | | | NAME AND ADDRESS OF BENEFICIAL OWNER | NUMBER OF COMMON
SHARES BENEFICIALLY OWNED | PERCENT OF OUTSTANDING (1) | | BlackRock, Inc. (2) 55 East 52nd Street New York, NY 10022 | 2,693,575 | | 8.58% | | | | | | Capital World Investors(3) 333 South Hope Street Los Angeles, CA 90071 | 1,659,813 | | 5.29% | | | | | | Donald Smith & Co., Inc.(4) 152 West 57th Street New York, NY 10019 | 3,001,447 | | 9.56% | | | | | | LSV Asset Management(5) 155 N. Wacker Drive, Suite 4600 Chicago, IL 60606 | 1,687,884 | | 5.38% | | | | | | Towle & Co.(6) 1610 Des Peres Road, Suite 250 St. Louis, MO 63131 | 2,426,370 | | 7.73% | | | | | | The Vanguard Group(7) 100 Vanguard Blvd. Malvern, PA 19355 | 1,656,114 | | 5.28% | |
| | | | | | | Based upon 32,952,41831,383,048 shares of common stock outstanding as of December 12, 2018.11, 2019. Beneficial ownership is determined in accordance with the rules of the SEC under which shares are beneficially owned by the person or entity that holds investment and/or voting power. |
| Based upon information set forth in a Schedule 13G filed by BlackRock, Inc. on February 4, 2019, BlackRock, Inc. reported beneficial ownership and sole voting power of 2,615,143 shares and beneficial ownership and sole dispositive power of 2,693,575 shares. | | Based upon information set forth in a Schedule 13G filed by Capital World Investors, a division of Capital Research and Management Company (CRMC), on February 12, 2019, Capital World Investors reported beneficial ownership, sole voting and dispositive power of 1,659,813 shares. Capital World Investors of CRMC and Capital International Limited collectively provide investment management services under the name Capital World Investors. Capital World Investors holds more than five percent of the outstanding common stock on behalf of SMALLCAP World Fund, Inc. | | Based upon information set forth in a Schedule 13G/A filed by BlackRock,Donald Smith & Co., Inc. on January 29, 2018. BlackRock,March 26, 2019, Donald Smith & Co., Inc. reported beneficial ownership and sole voting power of 3,054,3102,634,547 shares and beneficial ownership and sole dispositive power of 3,135,9623,001,447 shares. | | Based upon information set forth in a Schedule 13G filed by LSV Asset Management on February 13, 2019, LSV Asset Management reported beneficial ownership and sole voting power of 837,317 shares and beneficial ownership and sole dispositive power of 1,687,884 shares. | | Based upon information set forth in a Schedule 13G filed by Towle & Co. on December 31, 2018, Towle & Co. reported beneficial ownership and sole voting power of 2,002,890 shares and beneficial ownership and sole dispositive power of 2,426,370 shares. | | Based upon information set forth in a Schedule 13G filed by The Vanguard Group on February 11, 2019, The Vanguard Group reported beneficial ownership and sole voting power of 31,310 shares and beneficial ownership and sole dispositive power of 1,619,367 shares. |
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SECURITY OWNERSHIP OF EXECUTIVE OFFICERS
AND DIRECTORS
The following table sets forth information, as of December 12, 2018,11, 2019, with respect to the beneficial ownership of our common stock by each director, each of our NEOs, and all directors and executive officers as a group. Except as otherwise indicated, each beneficial owner possesses sole voting and investment power with respect to all shares. | | | | | | | | | | | NAME OF BENEFICIAL OWNER | | NUMBER OF COMMON SHARES
BENEFICIALLY OWNED (1) (2) (3) (4) | | PERCENT OF OUTSTANDING (5) | Elizabeth S. Acton | | | | 49,495 | | | | | * | | Laurent Alpert | | | | 58,775 | | | | | * | | Brian C. Beazer | | | | 142,685 | | | | | * | | Keith L. Belknap | | | | 104,568 | | | | | * | | Peter G. Leemputte | | | | 60,315 | | | | | * | | Allan P. Merrill | | | | 1,235,330 | | | | | 3.7 | % | Peter M. Orser | | | | 31,530 | | | | | * | | Norma A. Provencio | | | | 53,675 | | | | | * | | Robert L. Salomon | | | | 487,717 | | | | | 1.5 | % | Danny R. Shepherd | | | | 37,680 | | | | | * | | Stephen P. Zelnak, Jr. | | | | 354,730 | | | | | 1.1 | % | Directors and Executive Officers as a Group (11 persons) | | | | 2,616,500 | | | | | 7.9 | % |
*Less
| | | | | | | | | | NAME OF BENEFICIAL OWNER | NUMBER OF COMMON SHARES BENEFICIALLY OWNED (1) (2) (3) (4) | PERCENT OF OUTSTANDING (5) | | Elizabeth S. Acton | 57,497 | | * | | | Laurent Alpert | 66,777 | | * | | | Brian C. Beazer | 142,685 | | * | | | Keith L. Belknap | 160,458 | | * | | | Peter G. Leemputte | 60,315 | | * | | | Allan P. Merrill | 1,294,771 | | 4.10% | | | Peter M. Orser | 39,532 | | * | | | Norma A. Provencio | 61,677 | | * | | | Robert L. Salomon | 509,905 | | 1.62% | | Danny R. Shepherd | 45,682 | | * | | | David J. Spitz | 9,286 | | * | | | C. Christian Winkle | 9,286 | | * | | Stephen P. Zelnak, Jr. | 354,730 | | 1.13% | | | Directors and Executive Officers as a Group (13 persons) | 2,812,601 | | 8.90% | |
 Beneficial ownership includes shares of unvested, time-based restricted stock within 60 days of December 11, 2019: Ms. Acton - 8,002, Mr. Alpert - 8,002, Mr. Belknap - 40,271, Mr. Merrill - 142,391, Mr. Orser - 8,002, Ms. Provencio - 8,002, Mr. Salomon - 57,991, Mr. Shepherd - 8,002, Mr.Spitz - 9,286 and Mr. Winkle 9,286. Beneficial ownership for Messrs. Merrill, Salomon and Belknap includes unvested performance shares granted in November 2017, November 2018 and November 2019: Mr. Merrill - 411,185, Mr. Salomon - 164,044 and Mr. Belknap - 110,044. Beneficial ownership includes shares underlying vested stock options: Mr. Merrill - 172,000 and Mr. Salomon - 60,400. All of the vested shares beneficially owned by Ms. Acton are held indirectly through the Robert and Elizabeth Acton Living Trust dated as of December 17, 2010 as amended. Mr. Beazer’s ownership includes 58,600 shares of common stock held indirectly through BC Beazer Investments PTE Ltd. Mr. Leemputte’s ownership includes 2,460 shares of common stock held indirectly through Peter Leemputte TTEEFBO Peter G. Leemputte Trust. Based upon 31,383,048 shares of outstanding common stock as of December 11, 2019 and shares deemed outstanding with respect to each person pursuant to Exchange Act Rule 13d-3(d)(1). Adjusted as necessary to reflect the shares issuable to such person upon the vesting or exercise of his stock options listed in footnote 3 above (and assuming no other stock options are exercised). Shares of common stock subject to stock options that are currently exercisable or vested, or will become exercisable or vested within 60 days of December 11, 2019, are deemed outstanding for computing the percentage ownership of the person holding such stock options, but are not deemed outstanding for computing the percentage ownership of any other persons. | Beneficial ownership includes shares of unvested, time-based restricted stock: Ms. Acton - 10,183, Mr. Alpert - 10,183, Mr. Belknap - 34,856, Mr. Beazer - 10,183, Mr. Leemputte - 10,183, Mr. Merrill - 147,680, Mr. Orser - 10,183, Ms. Provencio - 10,183, Mr. Salomon - 59,347, Mr. Shepherd - 10,183 and Mr. Zelnak - 20,366.
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| Beneficial ownership for Messrs. Merrill, Salomon and Belknap includes unvested performance shares granted in November 2016, November 2017 and November 2018: Mr. Merrill - 406,250, Mr. Salomon - 161,788 and Mr. Belknap - 69,712.
|
| Beneficial ownership includes shares underlying vested stock options: Mr. Merrill - 230,264 and Mr. Salomon - 80,792.
|
| All of the vested shares beneficially owned by Ms. Acton are held indirectly through the Robert and Elizabeth Acton Living Trust dated as of December 17, 2010 as amended. Mr. Beazer’s ownership includes 58,600 shares of common stock held indirectly through BC Beazer Investments PTE Ltd. Mr. Leemputte’s ownership includes 2,460 shares of common stock held indirectly through Peter Leemputte TTEEFBO Peter G. Leemputte Trust.
|
| Based upon 32,952,418 shares of outstanding common stock as of December 12, 2018 and shares deemed outstanding with respect to each person pursuant to Exchange Act Rule13d-3(d)(1). Adjusted as necessary to reflect the shares issuable to such person upon the vesting or exercise of his stock options listed in footnote 3 above (and assuming no other stock options are exercised). Shares of common stock subject to stock options that are currently exercisable or vested, or will become exercisable or vested within 60 days of December 12, 2018, are deemed outstanding for computing the percentage ownership of the person holding such stock options, but are not deemed outstanding for computing the percentage ownership of any other persons.
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DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
REPORTS
Section 16(a) of the Securities Exchange Act requires our executive officers and directors and persons who own more than 10% of our stock, as well as certain affiliates of such persons, to file initial reports of ownership and changes of ownership with the SEC. These parties are required to furnish us with copies of the reports they file. Based solely on a review of the copies of the Section 16(a) reports and amendments thereto known to us, we believe that all reports required pursuant to Section 16(a) for fiscal year 20182019 were timely filed by our executive officers and directors, except for a Form 54/A filed on November 19, 2019 for Mr. Beazer disclosingMerrill, which reported the acquisition of a stock option to purchase of 3,000 shares of common stock was filed late due to an administrative error on the part of the Company.SECURITIES AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information about the Company’s5,000 shares of common stock that may be issued under our existing equity compensation plans as of September 30, 2018, all of which have been approved by our stockholders.
| | | | | | | | | | | | | | | | | | | | PLAN CATEGORY | | NUMBER OF COMMON SHARES
TO BE ISSUED UPON EXERCISE
OF OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS | | | | WEIGHTED AVERAGE EXERCISE
PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS | | | | NUMBER OF COMMON SHARES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
EQUITY COMPENSATION PLANS | Equity compensation plans approved by stockholders | | 533,052 | | | | $14.26 | | | | 2,066,189 |
was inadvertently omitted. EXECUTIVE OFFICERS OF THE COMPANY
Biographical information, as of September 30, 2018,2019, for the executive officers of the Company is set forth below. Biographical information for Allan P. Merrill is set forth above under “Proposal 1 — Election of Directors — Nominees.”
ROBERT L. SALOMON. Mr. Salomon, 58,59, our Executive Vice President and Chief Financial Officer, joined the Company in February 2008 as Senior Vice President, Chief Accounting Officer and Controller. Mr. Salomon was previously with the homebuilding company Ashton Woods Homes where he served as Chief Financial Officer and Treasurer since 1998. Previously, he held various financial management roles of increasing responsibility over asix-year period with homebuilder M.D.C. Holdings, Inc. Mr. Salomon has 3435 years of financial management experience, 2526 of which have been in the homebuilding industry. Mr. Salomon is a member of the American Institute of Certified Public Accountants and a graduate of the University of Iowa with a Bachelor of Business Administration degree.
KEITH L. BELKNAP. Mr. Belknap, 60,61, joined the Company as Executive Vice President, General Counsel and Corporate Secretary in January 2018. Mr. Belknap was previously EVP, Business Development, General Counsel and Chief Compliance Officer of Mueller Water Products, Inc. Previously, he served as SVP and General Counsel of PRIMEDIA, Inc., a digital media and real estate advertising company. In addition, Mr. Belknap held senior legal positions with PPG Industries and Georgia-Pacific Corporation. He began his legal career at Skadden, Arps, Slate, Meagher & Flom LLP where he practiced for 10 years. Mr. Belknap received a Bachelor of Arts degree from the University of Tulsa and a Juris Doctor from Harvard Law School.
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PROPOSALS 4 AND 5 –
TRANSACTIONS WITH RELATED PERSONS REVIEW, APPROVAL OR RATIFICATION OF AMENDED AND RESTATEDCERTIFICATE OF INCORPORATION AND
NEW SECTION 382 RIGHTS AGREEMENT
TRANSACTIONS WITH RELATED PERSONS | | |  | | BACKGROUND AND FREQUENTLY ASKED QUESTIONS
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BACKGROUND
Until recently, we generated significant net operating losses for tax purposes, or NOLs, which we use (and want to continue to use) to offset the taxable income we are now generating and expect to continue to generate in the future. Accordingly, our NOLs, along with our other deferred tax assets, have substantial value to us. As of September 30, 2018, our deferred tax assets, including our NOLs, totaled approximately $248 million.
However, the Internal Revenue Code places strict limits on our ability to fully maximize our NOLs. For example, under Section 382 of the Code, the value of our NOLs could be significantly reduced if we experienced an “ownership change,” which would occur if a 5% stockholder (or a group of stockholders) increased its ownership by more than 50% during a rolling three-year period. If this were to occur, Section 382 would impose an annual limit on the amount of NOLs we could use to offset our income taxes, which could result in a material amount of our NOLs expiring unused. A number of complex tax rules are involved in making this determination, including who is considered a 5% stockholder and whether any ownership change has, in fact, occurred. Because of this complexity, and the simple reality that we — like any public company — have limited knowledge about the true ownership of our outstanding shares, it is very difficult for us to comply with Section 382’s limitations without the use of the protective devices described in Proposals 4 and 5.
The charter amendment described in Proposal 4 has been in place since 2011 when our stockholders first overwhelmingly approved it. Similarly, the Section 382 Rights Agreement described in Proposal 5 has been in place since 2013 when it, too, was overwhelmingly approved by our stockholders. Since then, our stockholders havere-approved Proposals 4 and 5 by wide margins every three years. Because both of these protective devices are set to expire in November 2019, the purpose of Proposals 4 and 5 is to renew them for another three years until November 2022.
Accordingly, our Board of Directors strongly recommends that stockholders once again approve the adoption of both Proposals 4 and 5.
FREQUENTLY ASKED QUESTIONS
We have prepared the following frequently asked questions to assist our stockholders in their understanding of the complexities involved in determining the value of our deferred tax assets, including our NOLs, as well as our ability to maximize them. We urge our stockholders to read carefully Proposals 4 and 5, including their related Appendices, and the other documents to which Proposals 4 and 5 refer or are otherwise incorporated herein by reference, because this section does not provide all of the information that might be important to them.
Are the amount of the Company’s NOLs subject to challenge by the IRS?
The IRS could challenge the amount of our NOLs, but has not done so to date. If the IRS were to audit or otherwise seek to validate the amount of our NOLs. our ability to use our NOLs could be reduced, perhaps significantly. In addition, the complexity of Section 382’s provisions and the limited knowledge any public company has or is able to obtain about the ownership of its publicly-traded stock make it difficult to determine whether an ownership change has occurred. Therefore, we cannot assure you that the IRS will not claim that we experienced an ownership change and attempt to reduce or eliminate the benefit of our NOLs even if Proposals 4 and 5 are approved.
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Will Proposals 4 and 5 prevent all transfers that could result in an ownership change?
Although Proposals 4 and 5 are intended to reduce the likelihood of an ownership change, we cannot assure that they will prevent all transfers of our stock that could result in such an ownership change. In particular, absent a court determination, we cannot assure you that the charter amendment described in Proposal 4 will be enforceable against all of our stockholders. In addition, the new Rights Agreement described in Proposal 5 may deter, but ultimately cannot block, all transfers of our stock that might result in an ownership change. However, our Board of Directors believes that both measures are needed and that they will serve as important tools to help prevent an ownership change that could substantially reduce or eliminate the significant long-term potential benefits of our NOLs.
Will the charter amendment and the new Rights Plan impact the liquidity or trading value of the Company’s common stock?
The protective devices described in Proposals 4 and 5 generally restrict a stockholder’s ability to acquire, directly or indirectly, additional shares of our common stock in excess of 4.95%. Furthermore, a stockholder’s ability to dispose of its common stock may be limited by reducing the number of acquirers capable of purchasing the shares in light of their own ownership levels. We recommend that stockholders monitor carefully their ownership of our stock and consult their own legal advisors and/or us to assist them in determining whether their ownership of our stock approaches the restricted levels described in Proposals 4 and 5.
If the protective devices contained in Proposals 4 and 5 are extended, our Board of Directors intends to continue to disclose that our shares continue to be subject to transfer restrictions, both on certificates representing newly-issued or transferred shares as well as publicly so that potential recipients of uncertificated shares will have the ability to be aware of the transfer restrictions and ownership limitations imposed by the protective provisions. Because certain buyers, including persons who wish to acquire 4.95% or more of our common stock as well some institutional holders who may not be comfortable holding common stock with transfer restrictions or other ownership limits, may not be able to purchase our common stock, extending the protective mechanisms could depress the trading value of our common stock in an amount that could more than offset any value preserved from protecting our NOLs.
Will the charter amendment and the new Rights Plan have an anti-takeover effect?
Our Board of Directors approved the adoptions of the protective provisions contained in Proposals 4 and 5 in order to preserve the value of our NOLs, not as part of a plan to render more difficult, or discourage, a takeover of the Company, such as a merger, tender offer, proxy contest or assumption of control by a substantial holder of our common stock. However, if extended, the protective provisions contained in Proposals 4 and 5 could have an anti-takeover effect because, among other things, they will restrict the ability of a person or group to accumulate 4.95% or more of our common stock and the ability of a person or group now owning 4.95% or more of our common stock to acquire additional shares without the approval of our Board of Directors. We are not aware presently aware of any potential takeover transaction.
What is the effect of the transfer restrictions contained in the charter amendment on my shares if I vote against Proposal 4 but it is nonetheless still approved by stockholders?
Delaware law provides that the transfer restrictions contained in the charter amendment for common stock issued prior to the amendment’s adoption will be effective as to (1) stockholders with respect to shares that were voted in favor of the amendment and (2) purported transferees of such shares if:
the transfer restriction is conspicuously noted on the certificate(s) representing such shares; or
the transferee had actual knowledge of the transfer restrictions (even absent the conspicuous notation).
If Proposal 4 is approved, we intend to continue having newly-issued certificated or certificated transferred shares issued with the relevant transfer restrictions conspicuously noted on the certificate(s). In addition, if Proposal 4 is approved, we intend to give a notice regarding the relevant transfer restrictions to registered holders of our common stock in uncertificated form, as contemplated by Delaware law. For the purpose of determining whether a stockholder is subject to the transfer restrictions imposed by the protective provisions, we have taken
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and intend to continue to take the position that all shares issued prior to the effectiveness of Proposal 4 that are proposed to be transferred were voted in favor of Proposal 4, unless the contrary is established. We may also assert that stockholders have waived the right to challenge or otherwise cannot challenge the enforceability of the charter amendment, unless a stockholder establishes that it did not vote in favor of extending the protective provisions. Nonetheless, a court could find that the protective provisions contained in the charter amendment are unenforceable, either in general or as applied to a particular stockholder or fact situation.
PROPOSAL 4 —
ADOPTION OF CHARTER AMENDMENT TO EXTEND
NOL PROTECTIVE PROVISIONS
This proposal is asking our stockholders to extend protective provisions contained in our charter that are designed to assist us to in protecting the value of our NOLs by limiting and/or prohibiting transfers of our stock that could affect the percentage of stock that is treated as being owned by a holder of 4.95% of our shares. These provisions were first approved by our stockholders in 2011 and, since then, have beenre-approved every three years. Because the provisions are due to expire in November 2019, we are once again asking stockholders to extend them for another three years to November 12, 2022.
DESCRIPTION OF THE NOL PROTECTIVE PROVISIONS
The following description of the protective provisions is qualified in its entirety by reference to the full text of our charter, which was filed as Exhibit 3.1 to our Current Report on Form8-K filed with the SEC on February 8, 2011 (as amended by the first and second extensions, which were filed as Exhibit 3.1 to our Current Report on Form8-K filed with the SEC on November 7, 2013, and Exhibit 3.8 to our Annual Report on Form10-K filed with the SEC on November 15, 2016, respectively), and the full text of the proposed extension to the protective provisions, which is attached hereto asAppendix I. We urge you to carefully read our charter in its entirety as the discussion of the protective provisions below is only a summary.
Prohibited Transfers. The protective provisions generally prohibit any direct or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if the effect would be to:
increase the direct or indirect ownership of our stock by any person from less than 4.95% to 4.95% or more; or
increase the percentage of our common stock owned directly or indirectly by a person owning or deemed to own 4.95% or more of our common stock.
Complicated common stock ownership rules prescribed by the Code apply in determining whether a person is a 4.95% stockholder. For purposes of determining the existence and identity of, and the amount of our common stock owned by, any stockholder, we are entitled to rely on the existence or absence of certain public securities filings as of any date, subject to our actual knowledge of the ownership of our common stock. We also have the right to require a proposed transferee, as a condition to registration of a transfer of our common stock, to provide all information reasonably requested regarding such person’s direct and indirect ownership of our common stock.
These transfer restrictions may result in the delay or refusal of certain requested transfers of our common stock or may prohibit ownership (thus requiring dispositions) of our common stock due to a change in the relationship between two or more persons or entities or to a transfer of an interest in an entity other than us that, directly or indirectly, owns our common stock. The transfer restrictions will also apply to proscribe the creation or transfer of certain “options” (which are broadly defined by Section 382) with respect to our common stock to the extent that, in certain circumstances, the creation, transfer or exercise of the option would result in a proscribed level of ownership.
Consequences of Prohibited Transfers. Any direct or indirect transfer attempted in violation of the protective provisions is void immediately, and the purported transferee will not be recognized as the owner of the shares
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owned in violation of the protective provisions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of such common stock, or in the case of options, receiving our common stock in respect of their exercise. In this Proxy Statement, our common stock purportedly acquired in violation of the protective provisions is referred to as “excess stock.”
In addition to a prohibited transfer being void as of the date it is attempted, upon the Company’s demand, the purported transferee must transfer the excess stock to our agent along with any dividends or other distributions paid with respect to such excess stock. Our agent is required to sell such excess stock in anarm’s-length transaction (or series of transactions) that would not constitute a violation under the protective provisions. The net proceeds of the sale, together with any other distributions with respect to such excess stock received by our agent, after deduction of all costs incurred by the agent, will be distributed first to the purported transferee in an amount, if any, up to the cost (or in the case of gift, inheritance or similar transfer, the fair market value of the excess stock on the date of the prohibited transfer) incurred by the purported transferee to acquire such excess stock, and the balance of the proceeds, if any, will be distributed to a charitable beneficiary. If the excess stock is sold by the purported transferee, such person will be treated as having sold the excess stock on behalf of the agent and will be required to remit all proceeds to our agent (except to the extent we grant written permission to the purported transferee to retain an amount not to exceed the amount such person otherwise would have been entitled to retain had our agent sold such shares).
Any stockholder who knowingly violates the protective provisions will be liable for any and all damages we suffer as a result of such violation, including damages resulting from any limitation in our ability to use our NOLs and any professional fees incurred in connection with addressing such violation.
Modification and Waiver of Transfer Restrictions. Our Board of Directors has the discretion to approve a transfer of our common stock that would otherwise violate the transfer restrictions if it determines that the transfer is in our stockholders’ best interests. If our Board of Directors decides to permit such a transfer, that transfer or later transfers may result in an ownership change that could limit our use of our NOLs.
In the event of a change in law, our Board of Directors will have the unilateral authority to modify the 4.95% ownership threshold, as well as any of the definitions, terms and conditions of the transfer restrictions, or to eliminate the transfer restrictions in their entirety. Our Board of Directors may also establish, modify, amend or rescindby-laws, policies and any procedures for purposes of determining whether any transfer of common stock would jeopardize our ability to use our NOLs.
EXPIRATION
If approved, the protective provisions will expire on the earliest of (i) the determination by our Board of Directors that the provisions are no longer necessary for the preservation of our NOLs because of the amendment or repeal of Section 382 or any successor statute, (ii) the beginning of a taxable year to which our Board of Directors determines that none of our NOLs may be carried forward (iii) such date as our Board of Directors otherwise determines that the provisions are no longer necessary for the preservation of our NOLs and (iv) November 12, 2022.
EFFECTIVENESS AND ENFORCEABILITY
Although the protective provisions are intended to reduce the likelihood of an ownership change, we cannot eliminate the possibility that an ownership change will occur. The effectiveness of the protective provisions is limited by, among other things:
Our Board of Directors’ right to permit a transfer to an acquirer that results or contributes to an ownership change if it determines that such transfer is in our stockholders’ best interests.
A court’s finding that part or all of our charter is not enforceable, either in general or as to a particular fact situation.
Certain changes in relationships among stockholders or other events could cause an ownership change under Section 382.
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Accordingly, we cannot assure you that an ownership change will not occur even if the protective provisions are extended. However, our Board of Directors believes that the protective provisions, together with the Rights Agreement discussed in Proposal 5, provide significant protections to preserve our ability to use our NOLs to offset future income tax liabilities.
REQUIRED VOTE
This proposal requires the affirmative vote of a majority of our outstanding shares of common stock.
RECOMMENDATION
The Board of Directors recommends that stockholders voteFOR this proposal.
PROPOSAL 5 —
APPROVAL OF SECTION 382 RIGHTS AGREEMENT
In February 2013, our stockholders first approved the adoption of a Section 382 Rights Agreement, which was intended to act as a deterrent to any person desiring to acquire 4.95% or more of our common stock. By its terms, the original Rights Agreement was to expire in November 2016. Accordingly, in February 2016, our stockholders adopted a new Rights Agreement which contained substantially the same terms as the first Rights Agreement. Because that Rights Agreement is scheduled to expire in November 2019, we are now seeking stockholder approval to enter into yet another new Section 382 Rights Agreement, which is the same in all material respects as the two previous Rights Agreements approved by stockholders in 2013 and 2016, except that it will expire on November 14, 2022 if adopted.
Because the Section 382 charter protections described in Proposal 4 will not eliminate the possibility that an ownership change will occur, we believe the new Rights Agreement, which is designed to deter transfers of our stock that could result in an ownership change, is an important tool to further protect our ability to utilize our NOLs.
DESCRIPTION OF THE RIGHTS AGREEMENT
The following description of the Rights Agreement is qualified in its entirety by reference to the text of the Rights Agreement, which is attached to this Proxy Statement as Appendix II. We urge you to read it carefully in its entirety as the discussion below is only a summary.
The Rights. Our Board of Directors authorized the issuance of one right per outstanding common share payable upon the effectiveness of the Rights Agreement to our stockholders of record as of November 14, 2019. Subject to the terms, provisions and conditions of the Rights Agreement, if the rights become exercisable, each right would initially represent the right to purchase from us oneone-thousandth of a share of our Series A Junior Participating Preferred Shares, for a purchase price of $50.00 per right (which we refer to as the “purchase price”). If issued, each fractional Series A Preferred Share would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of our common stock. However, prior to exercise, a right will not give its holder any rights as a stockholder of the Company, including any dividend, voting or liquidation rights.
Exercisability. The rights are not exercisable until the earlier of (1) ten calendar days after a public announcement by us that a person has acquired at least 4.95% or more of our outstanding stock (which we refer to as an “acquiring person”) and (2) ten business days (or such later date as may be determined by our Board of Directors) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in such person becoming an acquiring person. We refer to the date that the rights become exercisable under the proposed Rights Agreement as the “distribution date.”
Any transfer of our stock prior to the distribution date will constitute a transfer of the associated rights. After the distribution date, the rights may be transferred separately from the transfer of the underlying common stock until our Board of Directors determines otherwise (as described below).
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After the distribution date, each holder of a right (other than the acquiring person) will generally be entitled to exercise the right and, upon payment of $100.00 (i.e., two times the purchase price), will be entitled to receive that number of shares of our common stock or other securities having a market value of $100.00.
Exemptions. Our Board of Directors recognizes there may be instances when an acquisition of our common stock that would cause a stockholder to become an acquiring person may not jeopardize or endanger in any material respect the availability of our NOLs or there may be situations when the acquisition would otherwise be in the Company’s and its stockholders’ best interests. Accordingly, the Rights Agreement grants full discretion to our Board of Directors to exempt acquisitions in such instances.
Redemption. We may redeem the rights (at a price of $0.001 per share) at any time until ten calendar days following the public announcement that a person has become an acquiring person. Upon any such redemption, the ability to exercise the rights will terminate and the only right the holder will have is the right to receive the redemption price of $0.001 per right.
Expiration. If approved and adopted, the Rights Agreement will expire on the earliest of the following:
the close of business on November 14, 2022;
the redemption of the rights;
the exchange of the rights;
the effective date of the repeal of Section 382 or any successor statute if our Board of Directors determines that the Rights Agreement is no longer necessary or desirable; and
the first day of a taxable year to which our Board of Directors determines that no tax benefits may be carried forward.
Anti-Dilution Provisions. Our Board of Directors may adjust the purchase price of the Series A Preferred Shares, the number of Series A Preferred Shares issuable and the number of outstanding rights to prevent dilution that may occur due to any number of events, including among others, a share dividend or a share split. In general, no adjustments to the purchase price of less than 1% will be made.
Amendments. Prior to the distribution date, our Board of Directors will have the general right to supplement or amend any provision of the Rights Agreement in any respect. After the distribution date, no amendment may be made by our Board of Directors that would adversely affect the interests of any rights holders.
REQUIRED VOTE
This proposal requires the affirmative vote of a majority of our common stock present in person or by proxy at the Annual Meeting.
RECOMMENDATION
The Board of Directors recommends that stockholders voteFOR this proposal.
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TRANSACTIONS WITH
RELATED PERSONS
REVIEW, APPROVAL OR RATIFICATION OF
TRANSACTIONS WITH RELATED PERSONS
The Audit Committee of our Board of Directors, in accordance with its charter and our Related Party Transactions Policy, is responsible for conducting an appropriate review of all proposed related party transactions to identify potential conflict of interest situations. Any identified related party transactions are then presented to our Board of Directors for approval and implementation of appropriate action to protect us from potential conflicts of interest. We have also adopted a Code of Ethics pursuant to which all directors and employees must disclose any potential conflicts of interest or related party transactions prior to entering into any such transactions. There were no reportable transactions with related persons during fiscal year 2018.2019. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee during fiscal year 20182019 were Messrs. Beazer, Leemputte, Orser, Shepherd and ShepherdSpitz and Ms. Provencio. Mr. BeazerSpitz joined the Compensation Committee in February 2018.August 2019. None of the members of our Compensation Committee has ever been an officer or employee of the Company or any of our subsidiaries. None of the members of our Compensation Committee had any relationship requiring disclosure under “Transactions with Related Persons.” During fiscal year 2018,2019, none of our executive officers served as a director or member of the compensation committee (or other committee of the board of directors performing equivalent functions) of another entity that had an executive officer serving on our Board of Directors.
PROPOSALS TO BE INCLUDED IN OUR PROXY STATEMENT FOR THE 20202021 ANNUAL MEETING
Any proposal by a stockholder to be included in the proxy statement for our 20202021 annual meeting of stockholders must be received at our principal executive offices, 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, not later than August 23, 2019.22, 2020. Any such proposal must also meet the other requirements of the rules of the SEC relating to stockholder proposals.
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STOCKHOLDER PROPOSALS REGARDING NOMINATIONS OR OTHER BUSINESS AT THE 20202021 ANNUAL MEETING
Any proposal by a stockholder for nominations or other business at our 20202021 annual meeting of stockholders (outside of the processes for proposals to be included in the proxy statement for our 20202021 annual meeting of stockholders described above) must be received at our principal executive offices, 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, no earlier than July 24, 2019 23, 2020 and no later than August 23, 2019. 22, 2020. Any such notice must also meet the other requirements of our by-laws relating to stockholder proposals.
Management does not know of any items, other than those referred to in this Proxy Statement, which may properly come before the meeting or other matters incident to the conduct of the meeting. As to any other item or proposal that may properly come before the meeting, including voting on a proposal omitted from this Proxy Statement pursuant to the rules of the SEC or any proposal to adjourn or postpone the meeting, it is intended that proxies will be voted in accordance with the discretion of the proxy holders. By Order of the Board of Directors, 
Dated: December 21, 201820, 2019 | | |
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APPENDIX I
PROTECTIVE AMENDMENT EXTENSION
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BEAZER HOMES USA, INC.
Beazer Homes USA, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), pursuant to the General Corporation Law of the State of Delaware (the “DGCL”), DOES HEREBY CERTIFY as follows:
| Article EIGHT of the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Amended and Restated Certificate of Incorporation”), is hereby amended by replacing paragraph (i) of the existing Article EIGHT in its entirety with the following:
|
“Expiration Date” means the earliest of (1) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this Article EIGHT is no longer necessary or desirable for the preservation of Tax Benefits, (2) the close of business on the first day of a taxable year of the Corporation as to which the Board of Directors determines that no Tax Benefits may be carried forward, (3) such date as the Board of Directors shall fix in accordance with Part XII of this Article EIGHT and (4) November 12, 2022.”
| In accordance with the provisions of Section 242 of the DGCL, the Board of Directors of the Corporation duly adopted the above amendment to the Amended and Restated Certificate of Incorporation (the “Amendment”), deemed the Amendment advisable and directed that the Amendment be considered by the Corporation’s stockholders. Notice of the Amendment was duly given to the stockholders of the Corporation in accordance with Section 222 of the DGCL. The Amendment was adopted by the Corporation’s stockholders on February 6, 2019 in accordance with Section 242 of the DGCL.
|
| Pursuant to Sections 103 and 242 of the DGCL, the Amendment shall become effective at 12:00 a.m., New York City time, on Saturday, November 12, 2019.
|
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer to execute this Certificate of Amendment on this day of November, 2019.
| | | Name: | | Robert L. Salomon | Title: | | Executive Vice President and Chief Financial Officer |
| | | Attest: | | | Name: | | Keith L. Belknap | Title: | | Executive Vice President and General Counsel |
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APPENDIX II
NEW SECTION 382 RIGHTS AGREEMENT
BEAZER HOMES USA, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
as
Rights Agent
Section 382 Rights Agreement
Dated as of November 6, 2018
Effective as of November 14, 2019
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APPENDIX I AMENDED AND RESTATED 2014 LONG-TERM INCENTIVE PLAN
BEAZER HOMES USA, INC.
AMENDED AND RESTATED 2014 LONG-TERM INCENTIVE PLAN
SECTION 382
RIGHTS AGREEMENT
SECTION 382 RIGHTS AGREEMENT, dated asTable of November 6, 2018 (the “Agreement”), betweenContents
| | | | | | | | | | | | | | | | Article 1 - | General Provisions | | 1 | | | 1.1 | Establishment of Plan | | 1 | | | 1.2 | Purpose of Plan | | 1 | | | 1.3 | Types of Awards | | 1 | | | 1.4 | Effective Date | | 1 | | | 1.5 | Termination of Plan | | 1 | | | Article 2 - | Definitions | | 1 | | | Article 3 - | Administration | | 6 | | | 3.1 | General | | 6 | | | 3.2 | Authority of the Committee | | 6 | | | 3.3 | Rules for Foreign Jurisdictions | | 7 | | | 3.4 | Delegation of Authority | | 7 | | | 3.5 | Agreements | | 7 | | | 3.6 | Indemnification | | | 8 | | Article 4 - | Shares Subject to the Plan | | 8 | | | 4.1 | Number of Shares | | | 8 | | 4.2 | Individual Limits | | | 9 | | 4.3 | Adjustment of Shares | | | 10 | | Article 5 - | Stock Options | | | 10 | | 5.1 | Grant of Options | | | 10 | | 5.2 | Option Price | | | 11 | | 5.3 | Duration of Options | | | 11 | | 5.4 | Exercise of Options | | | 11 | | 5.5 | Payment | | | 11 | | 5.6 | Nontransferability of Options | | | 11 | | 5.7 | Special Rules for ISOs | | | 11 | | 5.8 | Dividends and Other Distributions | | | 12 | | Article 6 - | Stock Appreciation Rights | | | 12 | | 6.1 | Grant of SARs | | | 12 | | 6.2 | Tandem SARs | | | 12 | | 6.3 | Payment | | | 12 | | 6.4 | SAR Price | | | 12 | | 6.5 | Duration of SARs | | | 12 | | 6.6 | Exercise of SARs | | | 13 | | 6.7 | Nontransferability of SARs | | | 13 | | 6.8 | Dividends and Other Distributions | | | 13 | | Article 7 - | Restricted Stock and Restricted Stock Units | | | 13 | | 7.1 | Grant of Restricted Stock/Unit | | | 13 | | 7.2 | Nontransferability | | | 13 | | 7.3 | Certificates | | | 13 |
| | | | | | | | | | | | | | | | 7.4 | Dividends and Other Distributions | | | 14 | | 7.5 | Short-Term Deferral | | | 14 | | Article 8 - | Performance Shares and Units | | | 14 | | 8.1 | Grant of Performance Shares/Units | | | 14 | | 8.2 | Value of Performance Shares/Units | | | 14 | | 8.3 | Earning of Performance Shares/Units | | | 14 | | 8.4 | Form and Timing of Payment of Performance Shares/Units | | | 14 | | 8.5 | Dividends and Other Distributions | | | 15 | | 8.6 | Nontransferability | | | 15 | | Article 9 - | Other Stock-Based Awards | | | 15 | | Article 10 - | Long-Term Incentive Compensation Awards | | | 15 | | Article 11 - | Performance Measures | | | 15 | | 11.1 | In General | | | 15 | | 11.2 | Performance Measures | | | 15 | | 11.3 | Committee Determination of Achievement of Performance Goals; Adjustments 16 | | | | | Article 12 - | Beneficiary Designation | | | 16 | | Article 13 - | Deferrals | | | 16 | | Article 14 - | Withholding | | | 17 | | 14.1 | Tax Withholding | | | 17 | | 14.2 | Share Withholding | | | 17 | | Article 15 - | Amendment and Termination | | | 17 | | 15.1 | Amendment or Termination of Plan | | | 17 | | 15.2 | Amendment of Agreement | | | 17 | | 15.3 | Recoupment of Compensation or Cancellation of Awards | | | 17 | | Article 16 - | Change in Control | | | 18 | | Article 17 - | Miscellaneous Provisions | | | 18 | | 17.1 | Restrictions on Shares | | | 18 | | 17.2 | Rights of Stockholder | | | 19 | | 17.3 | No Implied Rights | | | 19 | | 17.4 | Compliance with Code Section 409A | | | 19 | | 17.5 | Successors | | | 19 | | 17.6 | Tax Elections | | | 19 | | 17.7 | Right of Setoff | | | 19 | | 17.8 | No Fractional Shares | | | 19 | | 17.9 | Uncertificated Shares | | | 19 | | 17.10 | Legal Construction | | | 20 | | 17.11 | Data Privacy; Transfer of Data | | | 20 | | | | | |
BEAZER HOMES USA, INC. AMENDED AND RESTATED 2014 LONG-TERM INCENTIVE PLAN Article 1 - General Provisions 1.1Establishment of Plan. Beazer Homes USA, Inc., a Delaware corporation (the “Company”“Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust companypreviously established an incentive compensation plan known as the “Beazer Homes USA, Inc. 2014 Long-Term Incentive Plan” (the “Rights Agent”“Incentive Plan”).WITNESSETH:
WHEREAS, the Company has generated NOLs (as defined in Section 1 hereof) for United States federal income tax purposes; and such NOLs may potentially provide valuable tax benefits Effective as of ________and subject to the Company; the Company desires to avoid an “ownership change” within the meaning of Section 382approval of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder, and thereby preserve the ability to utilize fully such NOLs and certain other tax benefits; and, in furtherance of such objective, the Company desires to enter into this Agreement; and
WHEREAS, on November 6, 2018 (the “Rights Dividend Declaration Date”),Company’s stockholders, the Board of Directors of the Company authorizedamended and declared a dividend distributionrestated the Incentive Plan to be known as the “Beazer Homes USA, Inc. Amended and Restated 2014 Long-Term Incentive Plan” (the “Plan”), as set forth in this document.
1.2Purpose of one preferred share purchase right (a “Right”)Plan. The objectives of the Plan are to (i) attract and retain employees, directors, and other persons who perform services for each share of common stock, par value $0.001 per share,the Company and its affiliates by providing compensation opportunities that are competitive with other companies; (ii) provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company (the “Common Stock”) outstanding atand its affiliates; and (iii) align the closelong-term financial interests of business on November 14, 2019 (the “Record Date”),employees and has authorized the issuanceother Eligible Participants with those of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each share of Common Stock issued between the Record Date (whether originally issued or delivered from the Company’s treasury) andstockholders. 1.3Types of Awards. Awards under the earlier of the close of business on the Distribution Date (as defined in Section 3 hereof) and the Expiration Date (as defined in Section 7(a) hereof), each Right initially representing the rightPlan may be made to purchase oneone-thousandth of a share (a “Unit”) of Series A Junior Participating Preferred Stock (the “Preferred Stock”) of the Company having the rights, powers and preferences set forthEligible Participants in the form of Designations, Preferences and(i) Incentive Stock Options, (ii) Nonqualified Stock Options, (iii) Stock Appreciation Rights, attached hereto as Exhibit A, upon(iv) Restricted Stock, (v) Restricted Stock Units, (vi) Performance Shares, (vii) Performance Units, (viii) Other Stock-Based Awards, (ix) Long-Term Incentive Compensation Awards or any combination thereof. 1.4Effective Date. The Plan will become effective on the date on which the Company’s stockholders approve the Plan (the “Effective Date”). 1.5Termination of Plan. No Awards shall be granted under the Plan after the tenth anniversary of the Effective Date. However, Awards granted under the Plan on or prior to the tenth anniversary of the Effective Date shall remain outstanding beyond that date in accordance with the terms and subjectconditions of the Plan and the Agreements corresponding to such Awards. Article 2 - Definitions Except where the context otherwise indicates, the following definitions apply: 2.1“Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. All citations to sections of the Act or rules thereunder are to such sections or rules as they may from time to time be amended or renumbered. 2.2“Agreement” means the written agreement evidencing an Award granted under the Plan that specifies the size, form, terms, conditions hereinafter set forth.WHEREAS,and duration of each Award.
As determined by the Committee, each Agreement shall consist of either (i) a written agreement in a form approved by the Committee and executed on February 6, 2019, the stockholdersbehalf of the Company approved the adoptionby an officer duly authorized to act on its behalf, or (ii) an electronic notice of this AgreementAward grant in a form approved by the Company.NOW, THEREFORE,Committee and recorded by the Company (or its designee) in considerationan electronic recordkeeping system used for the purpose of tracking Award grants under the Plan, and if required by the Committee, executed or otherwise electronically accepted by the recipient of the premisesAward in such form and manner as the mutual agreements herein set forth, the parties hereby agree as follows:
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the meanings indicated:
“Acquiring Person” shall meanCommittee may require.
The Committee may authorize any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.95% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiaryofficer of the Company (iii)(other than the particular Award recipient) to execute any employee benefit plan ofor all Agreements on behalf the Company, or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, (iv) any Exempted Person or (v) any Person that beneficially owns at least a majority of the Common Stock following consummation of a Qualified Offer. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” solely as a result of an Exempted Transaction.“Affiliate” and “Associate” shall mean, with respect to any Person, any other Person whose Common Stock would be deemed constructively owned by such first Person for purposes of Section 382 of the Code, would be deemed owned by a single “entity” as defined in Treasury Regulation §Company.
1.382-3(a)(1)
in which both such Persons are included, or otherwise would be deemed aggregated with Common Stock owned by such first Person pursuant to the provisions of Section 382 of the Code and the Treasury Regulations thereunder; provided, however, that a Person shall not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company.
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A Person shall be deemed2.3“Award” means an Option, a “Beneficial Owner” of, shall be deemed to have “Beneficial Ownership” and shall be deemed to “beneficially own” any securities which such Person directly owns, or would be deemed to constructively own, pursuant to Section 382 of the Code and the Treasury Regulations promulgated thereunder.
“Business Day” shall mean any day other thanStock Appreciation Right, Restricted Stock, a Saturday, SundayRestricted Stock Unit, a Performance Share, a Performance Unit, an Other Stock-Based Award, a Long-Term Incentive Compensation Award or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
combination thereof. 2.4“Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such dateprovided;however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.“Code”Award Pool” shall have the meaning set forth in the recitalsascribed to this Agreement.
“Common Stock” shall have the meaning set forth in the recitals to this Agreement, except that “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person (or, if such Person is a Subsidiary of another Person, the Person or Persons that ultimately control such first mentioned Person).
“Common Stock Equivalents” shall have the meaning set forthterm in Section 11(a)(iii) hereof.
4.1. 2.5“Current Market Price” shall have the meaning set forth in Sections 11(d)(i) and 11(d)(ii) hereof.“Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.
“Distribution Date” shall have the meaning set forth in Section 3(a) hereof.
“Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b) hereof.
“Exempted Person” shall mean any Person who, together with all Affiliates and Associates of such Person,
is the Beneficial Owner of securities (as disclosed in public filings with the Securities and Exchange Commission on the Rights Dividend Declaration Date), representing 4.95% or more of the shares of Common Stock outstanding on the Rights Dividend Declaration Dateprovided;however, that any such Person described in this clause (i) shall no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of securities representing a percentage of Common Stock that exceeds byone-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such Person had at any time since the Rights Dividend Declaration Date, except solely (x) pursuant to equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a redemption of shares of Common Stock by the Company; or
becomes the Beneficial Owner of securities representing 4.95% or more of the shares of Common Stock then outstanding because of a reduction in the number of outstanding shares of Common Stock then outstanding as a result of the purchase by the Company or a Subsidiary of the Company of shares of Common Stockprovided;however, that any such Person described in this clause (ii) shall no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner, at any time after the date such Person became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock, of securities representing a percentage of Common Stock that exceeds byone-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such Person had at any time since the date such Person first became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock, except solely (x) pursuant to equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock
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represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a redemption of shares of Common Stock by the Company; or
who is a Beneficial Owner of 4.95% or more of the shares of Common Stock outstanding and whose beneficial ownership, as determined by the Board of Directors in its sole discretion, (x) would not jeopardize or endanger the availability to the Company of its NOLs or other Tax Benefits or (y) is otherwise in the best interests of the Companyprovided;however, that if a Person is an Exempted Person solely by reason of this clause (iii), then such Person shall cease to be an Exempted Person if (A) such Person ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock, (B) after the date of such determination by the Board of Directors, such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of securities representing a percentage of Common Stock that exceeds byone-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such Person had at any time since the date such Person first became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock, except solely (I) pursuant to equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (II) as a result of a redemption of shares of Common Stock by the Company, or (C)Board” means the Board of Directors of the Company, in its sole discretion, makes a contrary determination with respectas constituted from time to time.
2.6“Cause” means, “Cause” as defined under any written employment or service agreement applicable to the effectParticipant at the time of the Participant’s termination or if no such Person’s beneficial ownership (together with all Affiliates and Associates ofemployment or service agreement exists or if such Person) with respectemployment or service agreement does not contain any such definition, “Cause” means (a) the Participant’s act or failure to act amounting to gross negligence or willful misconduct to the availability todetriment of the Company or any affiliate; (b) the Participant’s dishonesty, fraud, theft or embezzlement of its NOLsfunds or other Tax Benefits.A purchaser, assigneeproperties in the course of Participant’s employment or transfereeservice; (c) the Participant’s commission of or pleading guilty to or confessing to any felony; or (d) the Participant’s breach of any restrictive covenant agreement with the Company or any affiliate, including, but not limited to, covenants not to compete, non-solicitation covenants and non-disclosure covenants. “Cause” shall also include a material violation of the sharesCompany’s Code of Common Stock (or warrantsBusiness Conduct & Ethics or options exercisable for Common Stock) from an Exempted Person shall not thereby become an Exempted Person, except that a transferee from the estateany successor or similar Company policy governing ethical behavior. The existence of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person“Cause” under this Section 2.6 shall be determined in good faith by the Committee.
2.7“Change in Control” means, except as otherwise expressly provided in an ExemptedAgreement, the occurrence of any of the following events: (a)The accumulation in any number of related or unrelated transactions by any Person so long as such Person continues to be theof Beneficial OwnerOwnership of 4.95%twenty-five percent (25%) or more of the then outstanding shares of Common Stock.“Exempted Transaction” shall mean any transaction that the Board of Directors determines, in its sole discretion, is exempt from this Agreement, which determination shall be made in the sole and absolute discretioncombined voting power of the BoardCompany’s voting stock; provided that for purposes of Directors priorthis subsection (a), a Change in Control will not be deemed to the date of such transaction, including, without limitation,have occurred if the Boardaccumulation of Directors determines that (i) neithertwenty-five percent (25%) or more of the Beneficial Ownership of sharesthe combined voting power of Common Stockthe Company’s voting stock resulted from (i) any acquisition of voting stock by the Company or by any Person, directlyemployee benefit plan (or related trust) sponsored or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize or endanger the availability tomaintained by the Company or any affiliate or (ii) any acquisition of voting stock directly from the Company provided the Person’s Beneficial Ownership of the Tax Benefits or (ii) such transaction is otherwise in the best interestscombined voting power of the Company. In granting an exemption under this definition,Company’s voting stock at no time thereafter equals thirty-five percent (35%) or more of the Boardcombined voting power of Directors may require any Person who would otherwise be an Acquiring Person to make certain representations or undertakings or to agree that any violation or attempted violation of such representations or undertakings will result in such consequences and subject to such conditions as the Board of Directors may determine in its sole discretion, including that any such violation shall result in such Person becoming an Acquiring Person.
“Expiration Date” shall have the meaning set forth in Section 7(a) hereof.
“Final Expiration Date” shall have the meaning set forth in Section 7(a) hereof.
“NOLs” shall mean the Company’s net operating loss carryforwards.
“Person” shall mean any individual, firm, corporation, limited liability company, partnershipvoting stock; or other entity, or a group of Persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of
Section 1.382-3(a)(1)
of the Treasury Regulations, and shall include any successor (by merger or otherwise) of such individual or entity, but shall not include a Public Group (as such term is defined inSection 1.382-2T(f)(13) of the Treasury Regulations).“Preferred Stock” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of Preferred Stock, par value $0.01 per share, of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock.
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“Principal Party” shall(b)Consummation of a merger, consolidation, reorganization or similar transaction (a “Business Combination”), unless, immediately following that Business Combination, (i) all or substantially all of the Persons who had Beneficial Ownership of the voting stock of the Company immediately prior to that Business Combination have Beneficial Ownership, directly or indirectly, of more than fifty percent (50%) of the meaning set forthcombined voting power of the Company’s or the surviving entity’s voting stock resulting from that Business Combination (including, without limitation, an entity that as a result of that transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), in Section 13(b) hereof.
“Purchase Price” shallsubstantially the same proportions relative to each other as their Beneficial Ownership, immediately prior to that Business Combination, of the voting stock of the Company, (ii) no Person acquires Beneficial Ownership of twenty five percent (25%) or more of the combined voting power of the Company’s or the surviving entity’s voting stock resulting from that Business Combination (including, without limitation, an entity that as a result of that transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), and (iii) the Business Combination does not result in a Change in Control under subsection (c) below; provided that for purposes of this subsection (b), a Change in Control will not be deemed to have occurred as the meaning set forth in Section 4(a) hereof.
“Qualified Offer” shall mean an offer, determined byresult of any Person’s accumulation of Beneficial Ownership of twenty-five percent (25%) or more, but less than thirty-five percent (35%), of the combined voting power of the Company’s or the surviving entity’s voting stock resulting from that Business Combination so long as the Board approved the Business Combination; or
(c)Less than a majority of the members of the Board of Directors of the Company thator any entity resulting from a Business Combination are independentIncumbent Board Members; or (d)Consummation of a sale or other disposition of all or substantially all of the relevant offeror, to have eachassets of the following characteristicsCompany, except pursuant to a Business Combination that would not cause a Change in Control under subsection (b) above; or (e)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that would not cause a Change in Control under subsection (b) above For purposes of this Section 2.7, the meaning of (i) “Person” shall be based on the definition of person in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and 14(d) of the Act, and (ii) “Beneficial Ownership” shall be as such term is used in Rule 13d-3 under the Act. Incumbent Board Member means an individual who either is (a) a member of the Company’s Board as of the effective date of the adoption of this Plan or (b) a member who becomes a member of the Company’s Board subsequent to the date of the adoption of this Plan whose election, or nomination for election by the Company’s shareholders, was approved by a vote of a majority of the then Incumbent Board Members (either by a specific vote or by approval of the proxy statement of the Company in which that Person is named as a nominee for director, without objection to that nomination), but excluding, for that purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Act) with respect to the Common Stock: (i)election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a tenderPerson other than the Board of Directors. Notwithstanding anything in this Plan or exchange offer for allany Agreement to the contrary, to the extent any provision of this Plan or an Agreement would cause a payment of a 409A Award to be made because of the outstanding sharesoccurrence of Common Stock ata Change in Control, then such payment shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the sameper-share consideration; (ii) an offer that has commencedCompany’s assets” within the meaning of Rule14d-2(a) under the Securities Exchange Act of 1934,Code section 409A. Other Participant rights that are tied to a Change in Control, such as amended and in effect on the date of this Agreement (the “Exchange Act”); (iii) an offer that is conditioned on a minimum of at least a majority of the outstanding shares of the Common Stock being tendered and not withdrawn as of the offer’s expiration date, which conditionvesting, shall not be waivable; (iv) an offer pursuantaffected by this paragraph. 2.8“Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered and shall include all related regulations. 2.9“Committee” means the Compensation Committee of the Board, or the Board itself if no Compensation Committee exists. If such Compensation Committee exists, if and to the extent deemed necessary by the Board, such Compensation Committee shall consist of two or more directors, all of whom are (i) “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, and (ii) independent directors under the rules of any stock exchange on which the offeror has announced that it intends, as promptly as practicable upon successful completionCompany’s securities are traded. 2.10“Company” means Beazer Homes USA, Inc., a Delaware corporation, and its successors and assigns.
2.11[Intentionally omitted] 2.12“Director” means any individual who is a member of the offer, to consummateBoard; provided, however, that any individual who is both a second step transaction whereby all sharesmember of the CommonBoard and employed by the Company or any other entity constituting the Employer shall not be considered a Director for purposes of the Plan. 2.13“Disability” means, with respect to any Incentive Stock not tendered intoOption, a disability as determined under Code section 22(e)(3), and with respect to any other Award, a disability as determined under procedures established by the offer will be acquired using the same form and amount of consideration per share actually paid pursuantCommittee or in any Agreement; provided that to the offer, subjectextent any provision of this Plan or an Agreement would cause a payment of a 409A Award to stockholders’ statutory appraisal rights, if any; (v) an offer pursuant to which the Company and its stockholders have received an irrevocable written commitmentbe made because of the offerorParticipant’s Disability, then there shall not be a Disability that triggers payment until the date (if any) that the offer will remain open for not less than 60 days; and (vi) an offer at aper-share consideration, and on such other terms and conditions, that in each case are adequate and fair. An offer shall constitute a Qualified Offer if and only for so long as eachParticipant is disabled within the meaning of the foregoing requirements in clauses (i) through (vi) remain satisfied, and if any such requirement shall at any time thereafter fail to be satisfied such offer shall no longer constitute a Qualified Offer.Code section 409A(a)(2)(C). 2.14“Record Date”Effective Date” shall have the meaning set forthascribed to such term in Section 1.4 above. 2.15“Eligible Participant” means an employee of an Employer as well as any other natural person, including a Director or a person who provides bona fide services to an Employer, subject to any limitations as shall be determined by the Committee. 2.16“Employer” means the Company and any entity during any period that it is a “parent corporation” or a “subsidiary corporation” with respect to the Company within the meaning of Code sections 424(e) and 424(f). With respect to all purposes of the Plan, including but not limited to, the establishment, amendment, termination, operation and administration of the Plan, the Company shall be authorized to act on behalf of all other entities included within the definition of “Employer.” 2.17“Fair Market Value” means, on any given date: (a)if the Shares are listed on the NYSE on the given date, Fair Market Value on such date shall be the closing price for a Share on the NYSE on such date, or if no sale was reported on such date, on the last preceding day on which a sale was reported on the NYSE; (b)if the Shares are listed on a national or regional securities exchange other than the NYSE on the given date, Fair Market Value on such date shall be the closing price for a Share on the securities exchange on such date or, if no sale was reported on such date, on the last preceding day on which a sale was reported on such exchange; or (c)if neither (a) nor (b) applies on the given date, the fair market value of a Share on that date shall be determined in good faith by the Committee. For purposes of subsection (b) above, if Shares are not traded on the NYSE but they are traded on more than one securities exchange on the given date, then the following exchange shall be referenced to determine Fair Market Value: (i) the NASDAQ, or (ii) if shares are not traded on the NASDAQ, the largest exchange on which Shares are traded. Notwithstanding the foregoing, (i) in the recitalscase of this Agreement.“Right”an Option or SAR, Fair Market Value shall havebe determined in accordance with a definition of fair market value that permits the meaning set forthAward to be exempt from Code section 409A; and (ii) in the recitalscase of this Agreement.
“Rights Agent”an Option that is intended to qualify as an ISO under Code section 422, Fair Market Value shall havebe determined by the meaning set forthCommittee in accordance with the requirements of Code section 422.
2.18“409A Award” means each Award that is not exempt from Code section 409A.
2.19“Good Reason” means, “Good Reason” as defined under any written employment or service agreement applicable to the Participant at the time of the Participant’s termination or if no such employment or service agreement exists or if such employment or service agreement does not contain any such definition, “Good Reason” means the occurrence of any of the following conditions without the Participant’s consent: (a)a material diminution in the recitalsParticipant’s authority, duties or responsibilities from those that existed on the date immediately preceding the Change in Control; or (b)relocation of the Participant’s primary office to a location more than thirty-five (35) miles from the location of the Participant’s primary office on the date immediately preceding the Change in Control. Notwithstanding the foregoing, the occurrence of any of the events described above will not constitute Good Reason unless (i) the Participant gives the Company written notice within fifteen (15) days after the initial occurrence of an event that the Participant believes constitutes Good Reason and describes such event in the notice; (ii) the Company thereafter fails to cure any such event within fifteen (15) days after receipt of such notice; and (iii) the Participant’s termination as a result of such event occurs at least 31 days after the Company’s receipt of the notice referred to in clause (ii), but no more than 60 days after the initial occurrence of such event. The existence of “Good Reason” under this Agreement.Section 2.19 shall be determined in good faith by the Committee. 2.20“Rights Certificate”Incentive Stock Option” or “ISO” means an Option granted to an Eligible Participant under Article 5 of the Plan which is designated as an Incentive Stock Option and intended to meet the requirements of Code section 422. 2.21“Insider” shall mean an individual who is, on the relevant date, subject to the reporting requirements of Section 16(a) of the Act. 2.22“Long-Term Incentive Compensation Award” means an Award that is granted pursuant to Article 10 of the Plan. 2.23“Nonqualified Stock Option” or “NQSO” means an Option granted to an Eligible Participant under Article 5 of the Plan which is not intended to meet the requirements of Code section 422 or that otherwise does not meet such requirements. 2.24“NYSE” means the New York Stock Exchange. 2.25“Option” means an Incentive Stock Option or a Nonqualified Stock Option. An Option shall be designated as either an Incentive Stock Option or a Nonqualified Stock Option, and in the absence of such designation shall be a Nonqualified Stock Option. 2.26“Option Price” means the price at which a Share may be purchased by exercise of an Option. 2.27“Other Stock-Based Award” means any form of equity-based or equity-related award, other than an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Stock, or Performance Unit, that is granted pursuant to Article 9 of the Plan. 2.28“Participant” means an Eligible Participant to whom an Award has been granted. 2.29“Payment Date” shall have the meaning set forth in Section 3(a) hereof.“Rights Dividend Declaration Date” shall have the meaning set forth in the recitals of this Agreement.
“Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii) hereof.
“Section 13 Event” shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof.
“Stock Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.
“Subsidiary” shall mean, with reference to any Person, any Person of which a majority5.5 of the voting power of voting equity securities or equity interests is beneficially owned, directly or indirectly, by such Person or otherwise controlled by such Person.
“Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.
“Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.
“Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.
“Tax Benefits” shall mean the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, foreign tax credit carryovers, any loss or deduction attributable to a “net unrealizedPlan.
built-in
loss” within the meaning of Section 382 of the Code, and the Treasury Regulations promulgated thereunder, of the Company or any of its Subsidiaries.
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2.30“Treasury Regulations”Performance Share” means an Award under Article 8 of the Plan that is valued by reference to a Share, which value may be paid to the Participant by delivery of cash or Shares, or any combination thereof, as determined by the Committee, upon achievement of such performance objectives during the relevant performance period as the Committee shall mean final, temporaryestablish at the time of such Award or thereafter. 2.31“Performance Unit” means an Award under Article 8 of the Plan that has a value set by the Committee (or that is determined by reference to a valuation formula specified by the Committee), which value may be paid to the Participant by delivery of cash or Shares, or any combination thereof, as determined by the Committee, upon achievement of such performance objectives during the relevant performance period as the Committee shall establish at the time of such Award or thereafter. 2.32“Plan” means the Beazer Homes USA, Inc. Amended and proposed income taxRestated 2014 Long-Term Incentive Plan, as set forth in this document and as it may be amended from time to time. 2.33“Restricted Stock” means an Award of Shares under Article 7 of the Plan, which Shares are issued with such restriction(s) as the Committee, in its sole discretion, may impose. 2.34“Restricted Stock Unit” means an Award under Article 7 of the Plan that is valued by reference to a Share, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including without limitation, cash or Shares, or any combination thereof, and that has such restriction(s) as the Committee, in its sole discretion, may impose. 2.35“Restriction Period” means the period during which Restricted Stock or Restricted Stock Units are subject to one or more restrictions that will lapse based on the passage of time, the achievement of performance goals, or the occurrence of another event or events, as determined by the Committee and specified in the applicable Agreement. 2.36“SAR Price” means the amount that is subtracted from the Fair Market Value of a Share at the time of exercise of a SAR to determine the amount payable, if any, upon exercise of the SAR. 2.37“Share” means one share of common stock, par value $.001 per share, of the Company, as may be adjusted pursuant to the provisions of Section 4.3 of the Plan. 2.38“Stock Appreciation Right” or “SAR” means an Award granted under Article 6 which provides for an amount payable in Shares and/or cash, as determined by the Committee, equal to the excess of the Fair Market Value of a Share on the day the Stock Appreciation Right is exercised over the SAR Price.
Article 3 - Administration 3.1General. This Plan shall be administered by the Committee. 3.2Authority of the Committee.
(a)The Committee shall have the full and exclusive discretionary authority to (i) interpret, construe and administer the terms and intent of the Plan and any Agreement (as well as any other agreement or document related to the Plan or an Award), (ii) select the persons who are eligible to receive an Award, (iii) act in all matters pertaining to the granting of an Award and the contents of the Agreement evidencing the Award, including the determination of the size, form, terms, conditions and duration of each Award, and (iv) make any amendment to an Award or Agreement consistent with the provisions of the Plan. The Committee may adopt such rules, regulations promulgatedand procedures of general application for the administration of this Plan, as it deems appropriate. For the avoidance of doubt, the Committee shall have no authority to grant or amend any Award in a manner that contravenes the minimum vesting requirement set forth in Section 3.5 hereof. (b)The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Agreement in the manner and to the extent it shall deem desirable to address the matter. (c)In the event the Company shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Code,Plan as amended.“Triggering Event”it shall meandeem appropriate.
(d)In making any Section 11(a)(ii) Eventdetermination or in taking or not taking any Section 13 Event.APPOINTMENT OF RIGHTS AGENT
The Company hereby appointsaction under the Rights Agent to act as agent forPlan, the Committee may obtain and may rely on the advice of experts, including employees of the Company and the holdersprofessional advisors.
(e)All acts, determinations and decisions of the Rights (who,Committee made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in accordanceconnection with Section 3 hereof,the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall priorbe conclusive, final and binding upon all parties, including the Company, its stockholders, any Employer, Participants, Eligible Participants and their estates, beneficiaries and successors. 3.3Rules for Foreign Jurisdictions. Notwithstanding anything in the Plan to the Distribution Date also becontrary, the holdersCommittee may, in its sole discretion, (i) amend or vary the terms of the Common Stock)Plan in accordanceorder to conform such terms with the termsrequirements of each non-U.S. jurisdiction where an Eligible Participant is located or where an Eligible Participant’s Award rights are otherwise regulated (including changes related to obtaining favorable tax treatment and conditions hereof,avoiding unfavorable tax treatment) or in order to meet the goals and objectives of the Rights Agent hereby acceptsPlan; (ii) establish one or more sub-plans for these purposes; and (iii) establish administrative rules and procedures to facilitate the operation of the Plan in such appointment.The Companynon-U.S. jurisdictions. 3.4Delegation of Authority. The Committee may, in its discretion, at any time and from time to time, appointdelegate to one or more of the members of the Committee suchco-rights agents of its powers as it deems appropriate (provided that any such delegation shall be to at least two members of the Committee with respect to Awards to Insiders). Except with respect to Awards to Insiders, the Committee may, deem necessaryin its discretion, at any time and from time to time, delegate to one or desirable.ISSUE OF RIGHTS CERTIFICATES
Untilmore persons who are not members of the earlierCommittee any or all of its authority and discretion under Section 3.2 and 3.3, to the full extent permitted by law and the rules of any exchange on which Shares are traded.
3.5Agreements. Each Award granted under the Plan shall be evidenced by an Agreement, provided that Awards granted on or after November 1, 2016 shall be subject to a vesting period of not less than one year from the date of grant, except where vesting occurs due to (i) a Participant’s death or disability or (ii) with respect to Awards which in aggregate do not exceed five percent (5%) of the closetotal number of businessShares available under the Plan. Each Agreement shall be subject to and incorporate, by reference or otherwise, the applicable terms and conditions of the Plan, and may include any other terms and conditions, not inconsistent with the Plan, as determined by the Committee, including without limitation, provisions related to the consequences of termination of employment. A copy of the Agreement evidencing an Award shall be provided to the affected Participant, and the Committee may, but need not, require that the Participant sign a copy of the Agreement.
3.6Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as members of the Committee, the Company shall indemnify and hold harmless the members of the Committee against (i) reasonable expenses, including attorney’s fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted thereunder, (ii) all amounts paid by them in settlement thereof, provided such settlement is approved by independent legal counsel selected by the Company, and (iii) all amounts paid by them in satisfaction of a judgment in any such action, suit or proceeding, except as to matters as to which the Committee member has been negligent or engaged in misconduct in the performance of his duties (all amounts reimbursed hereunder are referred to as the “Reimbursement Expenses”); provided, that within 60 days after institution of any such action, suit or proceeding, a Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. In the performance of its responsibilities with respect to the Plan, the members of the Committee shall be entitled to rely upon, and no member of the Committee shall be liable for any action taken or not taken in good faith reliance upon, information and/or advice furnished by the Company’s officers or employees, the Company’s accountants, or the Company’s counsel. Article 4 - Shares Subject to the Plan 4.1Number of Shares. Subject to adjustment as provided in Section 4.3, the aggregate number of Shares which are available for issuance pursuant to Awards under the Plan is 5,550,000 Shares, inclusive of the 2,000,000 Shares initially reserved under the Incentive Plan and the 1,850,000 added to the Incentive Plan pursuant to the amendment approved by the Board on November 8, 2016 (the “Award Pool”). The Award Pool shall be available for all types of Awards granted under the Plan; there is no maximum number of Shares per type of Award. Such Shares shall be made available from Shares authorized but unissued or Shares held (or subsequently acquired) by the Company as treasury shares, including Shares purchased in the open market or in private transactions. The following rules shall apply for purposes of determining the number of Shares available for issuance under the Plan: (a)Each Option shall be counted as one Share subject to an Award and deducted from the Award Pool. (b)Each share of Restricted Stock, each Restricted Stock Unit that may be settled in Shares and each Other Stock-Based Award that may be settled in Shares shall be counted as one Share subject to an Award and deducted from the Award Pool. Restricted Stock Units and Other Stock-Based Awards that may not be settled in Shares shall not result in a deduction from the Award Pool.
(c)Each Performance Share that may be settled in Shares shall be counted as one Share subject to an Award, based on the tenth day afternumber of Shares that would be paid under the Performance Share for achievement of target performance, and deducted from the Award Pool. Each Performance Unit that may be settled in Shares shall be counted as a number of Shares subject to an Award, based on the number of Shares that would be paid under the Performance Unit for achievement of target performance, with the number determined by dividing the value of the Performance Unit at the time of grant by the Fair Market Value of a Share at the time of grant, and this number shall be deducted from the Award Pool. In both cases, in the event that the Award is later settled based on above-target performance, the number of Shares corresponding to the above-target performance, calculated pursuant to the applicable methodology specified above, shall be deducted from the Award Pool at the time of such settlement; in the event that the Award is later settled upon below-target performance, the number of Shares corresponding to the below-target performance, calculated pursuant to the applicable methodology specified above, shall be added back to the Award Pool. Performance Shares and Performance Units that may not be settled in Shares shall not result in a deduction from the Award Pool. (d)Each Stock Acquisition Date (or,Appreciation Right that may be settled in Shares shall be counted as one Share subject to an Award, regardless of the number of Shares actually delivered to a Participant, and deducted from the Award Pool. Stock Appreciation Rights that may not be settled in Shares shall not result in a deduction from the Award Pool. (e)If an Award granted under the Plan lapses, expires, terminates, is forfeited or otherwise cancelled without issuance of the Shares or the Award is settled in cash in lieu of Shares, such Shares shall again be available for issuance pursuant to an Award under the Plan and shall be added back to the Award Pool. However, if the tenth day aftertax withholding obligation, exercise price or purchase price under an Award is satisfied by the Company retaining Shares that otherwise would have been issued in settlement of the Award or by Shares tendered by the Participant (either by actual delivery or attestation), the number of Shares so retained or tendered shall not again be available for issuance pursuant to an Award under this Plan and shall not be added back to the Award Pool. In addition, any Shares that are purchased by the Company with proceeds from the exercise of an Award shall not be added back to the Award Pool. 4.2Individual Limits. Subject to adjustment as provided in Section 4.3, the following rules shall apply to Awards under the Plan. Sections 4.2(a) through (e) shall apply to Participants other than Directors, and Section 4.2(f) shall apply only to Directors. (a)Options and SARs. The maximum number of Options and Stock Acquisition Date occurs beforeAppreciation Rights that, in the Record Date,aggregate, may be granted in any one fiscal year to any one Participant shall be Seven Hundred Fifty Thousand (750,000). (b)Restricted Stock and Restricted Stock Units. The maximum number of Shares of Restricted Stock and Restricted Stock Units that, in the closeaggregate, may be granted in any one fiscal year to any one Participant shall be Two Hundred Fifty Thousand (250,000) Shares and Units. (c)Performance Units. The maximum number of businessPerformance Units (valued as of the grant date) that, in the aggregate, may be granted in any one fiscal year to any one Participant shall be Five Hundred Thousand (500,000), to the extent settled in Shares, or Three Million Dollars ($3,000,000), to the extent settled in cash. This limitation shall be applied based on the Record Date), or (ii)maximum amount that could be paid under the closeAward of businessPerformance Units. (d)Performance Shares and Other Stock-Based Awards. The maximum number of Performance Shares and Other Stock-Based Awards that, in the aggregate, may be granted in any one fiscal year to any one Participant shall be Five Hundred Thousand (500,000). This limitation shall be applied based on the tenth Business Day (ormaximum amount that could be paid under the Award of Performance Shares and Other Stock-Based Awards. (e)Long-Term Incentive Compensation Awards. The maximum Long-Term Incentive Compensation Awards that, in the aggregate, may be granted in any one fiscal year to any one Participant shall be Three Million Dollars ($3,000,000). This limitation shall be applied based on the maximum amount that could be paid under the Long-Term Incentive Compensation Awards. (f)Director Award Limits. The maximum fair value of Awards made in any one fiscal year to any Director shall not exceed $350,000, with fair value determined as of the Award grant date under applicable accounting standards.
4.3Adjustment of Shares. If any change in corporate capitalization, such later date as the Board of Directorsa stock split, reverse stock split, or stock dividend; or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off, of the Company shall determine prioror sale or other disposition by the Company of all or a portion of its assets, any other change in the Company’s corporate structure, or any distribution to such time as any Person becomes an Acquiring Person) after the date that a tender or exchange offer by any Personstockholders (other than an ordinary cash dividend) results in the outstanding Shares, or any Exempted Person, the Company, any Subsidiarysecurities exchanged therefore or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any employee benefit planother corporation; or new, different or additional shares or other securities of the Company or of any Subsidiaryother corporation being received by the holders of outstanding Shares; then the Committee shall make equitable adjustments, as it determines are necessary and appropriate, in: (a)the number and class of stock or other securities that comprise the Award Pool as set forth in Section 4.1; (b)the limitations on the aggregate number of Awards that may be granted in any one fiscal year to any one Participant as set forth in Section 4.2; (c)the number and class of stock or other securities subject to outstanding Awards, and which have not been issued or transferred under outstanding Awards; (d)the Option Price under outstanding Options, the SAR Price under outstanding Stock Appreciation Rights and the number of Shares to be transferred in settlement of outstanding Options and Stock Appreciation Rights; and (e)the terms, conditions or restrictions of any Award and Agreement, including the price payable for the acquisition of Shares. It is intended that, if possible, any adjustments contemplated above shall be made in a manner that satisfies applicable legal requirements, as well as applicable requirements with respect to taxation (including, without limitation and as applicable in the circumstances, Code section 424 and Code section 409A) and accounting (so as to not trigger any charge to earnings with respect to such adjustment). Without limiting the generality of the above, any good faith determination by the Committee as to whether an adjustment is required in the circumstances and the extent and nature of any such adjustment shall be final, conclusive and binding on all persons. Article 5 - Stock Options 5.1Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Eligible Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. The Committee shall have sole discretion in determining the number of Shares subject to Options granted to each Participant. The Committee may grant a Participant ISOs, NQSOs or a combination thereof, and may vary such Awards among Participants; provided that only Participants who are common law employees of the Employer may be granted ISOs. Notwithstanding anything in this Article 5 to the contrary, except for Options that are specifically designated as intended to be subject to Code section 409A, Options may only be granted to individuals who provide direct services on the date of grant of the Option to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest (within the meaning of Treasury Regulation § 1.409A-1(b)(5)(iii)(E)) in each entity in the chain.
5.2Option Price. The Option Price for each grant of an Option shall be determined by the Committee and shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. Notwithstanding the prior sentence, an Option may be granted with an Option Price that is less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted if such Option is granted in replacement for an award previously granted by an entity that is assumed by the Company in a business combination, provided that the Committee determines that such Option Price is appropriate to preserve the economic benefit of the replaced award and will not impair the exemption of the Option from Code section 409A. 5.3Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that the Committee may extend the term of any Option that would otherwise expire at a time when the Participant is not permitted by applicable law or Company policy to exercise such Option; and provided, further, that no Option shall be exercisable later than the tenth (10th) anniversary of its grant date. 5.4Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, including conditions related to the employment of or provision of services by the Participant to the Company or any Employer, which need not be the same for each grant or for each Participant. The Committee may provide in the Agreement for automatic accelerated vesting and other rights upon the occurrence of a Change in Control of the Company or upon the occurrence of other events as specified in the Agreement. 5.5Payment. Options shall be exercised by the delivery of an oral, written or electronic notice of exercise to the Company or its designated representative, setting forth the number of Shares with respect to which the Option is to be exercised and satisfying any requirements that the Committee may apply from time to time. Full payment of the Option Price must be made on or prior to the Payment Date, as defined below. The Option Price shall be payable to the Company in United States dollars either: (a) in cash; (b) cash equivalent approved by the Committee; (c) if approved by the Committee, by tendering previously acquired Shares (or delivering a certification or attestation of ownership of such Shares) having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the tendered Shares must have been held by the Participant for any period required by the Committee); (d) if approved by the Committee, by cashless exercise as permitted under Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions; (e) by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law, including a net exercise; or (f) by any combination of the above. “Payment Date” shall mean the date on which a sale transaction in connection with a cashless exercise (whether or not payment is actually made pursuant to a cashless exercise) would have settled in connection with the subject option exercise. 5.6Nontransferability of Options. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Except as otherwise provided in a Participant’s Agreement or otherwise determined at any time by the Committee, no NQSO granted under this Article 5 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
5.7Special Rules for ISOs. In no event shall any Participant who owns (within the meaning of Code section 424(d)) stock of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Person“parent” or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within“subsidiary” (within the meaning of Rule14d-2(a)Code section 424(e) or (f), respectively) be eligible to receive an ISO (i) at an Option Price less than one hundred ten percent (110%) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would become an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.As promptly as practicable following the Record Date, the Company shall send a copyFair Market Value of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, or issued subsequent to the Record Date, unless and until the Distribution Date shall occur, the Rights will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the earliest of the Distribution Date, the Expiration Date (as such term is defined in Section 7 hereof) or the redemption of the Rights pursuant to Section 23 hereof, the transfer of any certificates representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock.
Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company’s treasury) after the Record Date but prior to the earliest of the Distribution Date, the Expiration Date or the redemption of the Rights pursuant to Section 23 hereof. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear a legend substantially in the following form : “This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights
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Agreement between Beazer Homes USA, Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), dated as of November 14, 2019 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Rights Agent. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement, as in effectShare on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person whoISO is was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.” With respect to such certificates containing the foregoing legend, until the earlier of the (i) Distribution Dategranted, or (ii) that is exercisable later than the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holdersfifth (5th) anniversary date of Common Stock shall also be the registered holdersits grant date. The aggregate Fair Market Value of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates.
FORM OF RIGHTS CERTIFICATES
The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date or, in the case of RightsShares with respect to Common Stock issued or becoming outstanding afterwhich ISOs granted to a Participant are first exercisable in any calendar year under the Record Date,Plan and all other incentive stock option plans of the same date asEmployer) shall not exceed One Hundred Thousand Dollars ($100,000). For this purpose, Fair Market Value shall be determined with respect to a particular ISO on the date ofon which such ISO is granted.
5.8Dividends and Other Distributions. A Participant receiving Options shall not possess voting rights and shall accrue dividend equivalents on Options only to the share certificate evidencing such shares, andextent provided in the Agreement relating to the Award. Any rights to dividend equivalents on their face shall entitle the holders thereof to purchase such number of oneone-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per oneone-thousandth of a share, the “Purchase Price”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereofOptions shall be subject to adjustment as provided herein.Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially owned by any Person known to be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing plan, agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, agreement, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, or (iv) subsequent transferees of such Persons described in clause (i), (ii) or (iii) of this sentence , and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) a legend substantially in the following form: “The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement.” The absence of the foregoing legend on any Rights Certificate shall in no way affect any of the other provisions of this Agreement, including, without limitation, the provisions of Section 7(e).
COUNTERSIGNATURE AND REGISTRATION
The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President or any Executive Vice President or Senior Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested
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by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same forcerestrictions on vesting and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent shall keep, or cause to be kept, at its principal office or offices designatedpayment as the appropriate place for surrenderunderlying Award.
Article 6 - Stock Appreciation Rights 6.1Grant of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES
SARs. Subject to the terms and provisions of Section 4(b), Section 7(e), Section 14the Plan, SARs may be granted to Eligible Participants in such amounts and Section 27 hereof,upon such terms, and at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date or the redemption of the rights pursuant to Section 23 hereof, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of oneone-thousandths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 27 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. The Rights Agent shall promptly forward any such sum collected by it to the Company or to such Persons as the Company shall specify by written notice.Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS
Subject to Section 7(e) and Section 27 hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the
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certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of oneone-thousandth of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the close of business on November 14, 2022 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, (iii) the time at which all of the Rights (other than Rights that have become void pursuant to the provisions of Section 7(e) hereof) are exchanged for Common Stock or other assets or securities as provided in Section 27 hereof, (iv) the close of business on the effective date of the repeal of Section 382 or any successor statute if the Board of Directors of the Company determines that this Agreement is no longer necessary or desirable for the preservation of Tax Benefits, or (v) the close of business on the first day of a taxable year of the Company to which the Board of Directors of the Company determines that no Tax Benefits may be carried forward (the earliest of (i) and (ii) and (iii) and (iv) and (v) being herein referred to as the “Expiration Date”).
The Purchase Price for each oneone-thousandth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $50.00, and shall be subject to adjustment from time to time, as provided in Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per oneone-thousandth of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of oneone-thousandths of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of oneone-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be depositeddetermined by the transfer agent with the depositary agent) and the Company shall direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to, or upon the order of the registered holder of such Rights Certificate, registered in such name or names asCommittee. A Stock Appreciation Right may be designated by such holder, and (iv) after receipt thereof, deliver such cash described in clause (ii) hereof, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.
In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof.
Not withstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a) (ii) Event, any Rights beneficially owned by any Person known to be (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring
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Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing plan, agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, agreement, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), or (iv) subsequent transferees of such Persons described in clause (i), (ii) or (iii) of this sentence, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respectgranted to an Acquiring Person or any of its Affiliates, Associates or transferees hereunder.
Not withstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.
CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES
All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
RESERVATION AND AVAILABILITY OF CAPITAL STOCK
The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights.
So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/ or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.
The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Securities Act of 1933 (the “Act”) with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various statesEligible Participant in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period
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of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentencean Option granted under Article 5 of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable lawPlan or a registration statement shall not have been declared effective.
The Company covenants and agrees that it will take all such action as may be necessary to ensure that all oneone-thousandths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/ or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (or Units) (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid andnon-assessable.
The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates andgranted independently of any certificates for a number of oneone-thousandths of a share of PreferredOption. A Stock (or Common Stock and/ or other securities, as the case may be) upon the exercise of Rights. The CompanyAppreciation Right shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of oneone-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of oneone-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable byentitle the holder, of such Rights Certificate atwithin the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.
PREFERRED STOCK RECORD DATE
Each Person in whose name any certificate for a number of oneone-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was madeprovided;however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions orspecified period, to exercise any preemptive rights,the SAR and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS
The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(i) In the event the Company shall at any time after the date of this Agreement (A) declareexchange therefor a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a
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reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassificationprovided;however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock or capital stock, as the case may be, issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person shall become an Acquiring Person, then, promptly following the occurrence of such event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of oneone-thousandths of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of oneone-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment Shares”).
(iii) In the event that the number of shares of Common Stock which are authorized by the Company’s Certificate of Incorporation but not outstanding, subscribed for or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock, such as the Preferred Stock, which the Board of Directors of the Company has deemed to have essentially the same value or economic rights as shares of Common Stock (such shares of preferred stock being referred to as “Common Stock Equivalents”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Currentamount by which the Fair Market Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected byShare exceeds the Boardprovided;however, that ifSAR Price, times the Company shall not have made adequate provisionnumber of Shares with respect to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s rightSAR is exercised. A SAR granted in connection with an Option (a “Tandem SAR”) shall entitle the holder of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”), thenrelated Option, within the Company shall be obligated to deliver, uponperiod specified for the surrender for exercise of the Option, to surrender the unexercised Option, or a Rightportion thereof, and without requiringto receive in exchange therefore a payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash havehaving an aggregate value equal to the Spread. For purposesamount by which the Fair Market Value of a Share exceeds the preceding sentence,Option Price, times the term “Spread”number of Shares under the Option, or portion thereof, which is surrendered.
6.2Tandem SARs. Each Tandem SAR shall meanbe subject to the excess of (i)same terms and conditions as the Current Value over (ii) the Purchase Price. If the Board of Directors of the Company determines in good faith that it is likely that sufficient additional shares of Common Stock couldrelated Option, including limitations on transferability, and shall be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extendedexercisable only to the extent necessary, butsuch Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The grant of a Tandem SAR must be concurrent with the grant of the Option. 6.3Payment. The Committee shall have sole discretion to determine in each Agreement whether the payment with respect to the exercise of a SAR will be in the form of all cash, all Shares, or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined based on the Fair Market Value of a Share on the date of exercise. 6.4SAR Price. The SAR Price for each grant of a SAR shall be determined by the Committee and shall not morebe less than ninety (90) days afterone hundred percent (100%) of the Section 11(a)(ii) Trigger Date,Fair Market Value of a Share on the date the SAR is granted. Notwithstanding the prior sentence, a SAR may be granted with a SAR Price that is less than one hundred percent (100%) of the Fair Market Value of a Share on the date the SAR is granted if such SAR is granted in orderreplacement for an award previously granted by an entity that is assumed by the Company in a business combination, provided that the Company may seek stockholder approval forCommittee determines that such SAR Price is appropriate to preserve the authorizationeconomic benefit of the replaced award and will not impair the exemption of the SAR from Code section 409A. 6.5Duration of SARs. Each SAR shall expire at such additional shares (such thirty (30) day period,time as it may be extended, is herein called the “Substitution Period”). ToCommittee shall determine at the extenttime of grant; provided, however, that the Committee may extend the term of any SAR that would otherwise expire at a time when the Participant is not permitted by applicable law or Company policy to exercise such SAR; and provided, further, that no SAR shall be exercisable later than the tenth (10th) anniversary of its grant date.
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Company determines that action should6.6Exercise of SARs. SARs granted under the Plan shall be taken pursuantexercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, including conditions related to the first and/employment of or third sentencesprovision of this Section 11(a)(iii),services by the Participant with the Company (1) shallor any Employer, which need not be the same for each grant or for each Participant. The Committee may provide in the Agreement for automatic accelerated vesting and other rights upon the occurrence of a Change in Control of the Company or upon the occurrence of other events as specified in the Agreement. Upon exercise of a Tandem SAR, the number of Shares subject to Section 7(e) hereof,exercise under the related Option shall automatically be reduced by the number of Shares represented by the Option or portion thereof which is surrendered. SARs shall be exercised by the delivery of an oral, written or electronic notice of exercise to the Company or its designated representative, setting forth the number of Shares with respect to which the SAR is to be exercised and satisfying any requirements that such actionthe Committee may apply from time to time.
6.7Nontransferability of SARs. Except as otherwise provided in a Participant’s Agreement or otherwise determined at any time by the Committee consistent with securities and other applicable laws, rules and regulations, no SAR granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. 6.8Dividends and Other Distributions. A Participant receiving SARs shall apply uniformlynot possess voting rights and shall accrue dividend equivalents on SARs only to all outstanding Rights,the extent provided in the Agreement relating to the Award. Any rights to dividend equivalents on SARs shall be subject to the same restrictions on vesting and (2) may suspendpayment as the exercisabilityunderlying Award. Article 7 - Restricted Stock and Restricted Stock Units 7.1Grant of Restricted Stock/Unit. Subject to the terms and provisions of the Rights until the expiration of the Substitution PeriodPlan, Restricted Stock Awards and Restricted Stock Unit Awards may be granted to Eligible Participants in ordersuch amounts and upon such terms, and at any time and from time to seek such stockholder approval for such authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time, as the suspension is no longer in effect. For purposes of this Section 11(a) (iii), the value of each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a) (ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of the Common Stock on such date.In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock (“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase PriceCommittee. Awards of Restricted Stock/Units may be made either alone or in effect immediatelyaddition to or in tandem with other Awards granted under the Plan and may be current grants of Restricted Stock, deferred grants of Restricted Stock or Restricted Stock Units.
7.2Nontransferability. Except as otherwise provided in this Article 7 or an Agreement, Restricted Stock and Restricted Stock Units may not be sold, exchanged, transferred, pledged, or otherwise alienated or hypothecated or otherwise disposed of during the Restriction Period or, in the case of Restricted Stock Units, until the date of delivery of Shares or other payment with respect to the Restricted Stock Units (other than by will or by the laws of descent and distribution). Further, except as otherwise provided in the applicable Agreement, a Participant’s rights with respect to Shares of Restricted Stock or Restricted Stock Units shall be available during the Participant’s lifetime only to the Participant or the Participant’s legal representative. 7.3Certificates. Upon an Award of Restricted Stock to a Participant, Shares of Restricted Stock shall be registered in the Participant’s name. Certificates, if issued, may either be held in custody by the Company until the Restriction Period expires or until restrictions thereon otherwise lapse and/or be issued to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend and remaining subject to appropriate stop-transfer orders. If required by the Committee, the Participant shall deliver to the Company one or more stock powers endorsed in blank relating to the Restricted Stock. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such record date by a fraction, the numerator of whichRestriction Period, unrestricted certificates for such shares shall be delivered to the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible)provided;however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock or capital stock, as the case may be, issuable upon exercise of one Right. In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or evidences of indebtedness, or of subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stockprovided;however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock or capital stock, as the case may be, issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed.
Participant.
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(i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days immediately prior to such date,7.4Dividends and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following such dateOther Distributions. Except as provided;however, that in this Article 7 or in the event that the Current Market Price per share of the CommonAgreement, a Participant receiving a Restricted Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and theex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassificationAward shall not have, occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into accountex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New Yorksuch Restricted Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in theover-the-counter market or such other system then in use, or, if on any such date the shares of Common Stock are not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board shall be used. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive forAward, all purposes.
(ii) For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.For all purposes of this Agreement, the Current Market Price of a Unit shall be equal to the Current Market Price of one share of Preferred Stock divided by 1,000.
Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Priceprovided;however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearestone-thousandth of a share of Common Stock or other share of capital stock orone-ten millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date.
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If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.
All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of oneone-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of oneone-thousandths of a share of Preferred Stock (calculated to the nearestone-ten millionth of a share of Preferred Stock) obtained by:
multiplying (x) the number of oneone-thousandths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and
dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of oneone-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of oneone-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest oneone-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
Irrespective of any adjustment or change in the Purchase Price or the number of oneone-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per oneone-thousandth of a share and the number of oneone-thousandths of a share which were expressed in the initial Rights Certificates issued hereunder.
Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the number of oneone-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the
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Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid andnon-assessable such number of oneone-thousandths of a share of Preferred Stock at such adjusted Purchase Price.
In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of oneone-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of oneone-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustmentprovided;however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.
Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders.
The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates.
The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine or consolidate the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.
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CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained.
CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS, CASH FLOW OR EARNING POWER
In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement and in lieu of shares of Preferred Stock, such number of validly authorized and issued, fully paid,non-assessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of oneone-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such oneone-thousandths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event), and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price (determined pursuant to Section 11(d) (i) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event.
“Principal Party” shall mean:
in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and
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in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactionsprovided;however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, “Principal Party” shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value.
The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will:
prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement (A) to become effective as soon as practicable after such filing and (B) to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and
take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and
deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).
FRACTIONAL RIGHTS AND FRACTIONAL SHARES
The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in theover-the-counter market or such system then in use or, if on any such date the Rights are not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.
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The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of oneone-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of oneone-thousandth of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of oneone-thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of oneone-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of oneone-thousandth of a share of Preferred Stock shall be oneone-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise.
Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one (1) share of Common Stock shall be the closing price of one (1) share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.
The holder of a Right by the acceptance of the Rights expressly waives his or her right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.
RIGHTS OF ACTION
All rights of action in respect of this Agreement, except the rights of action that are given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.
AGREEMENT OF RIGHTS HOLDERS
Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock;
after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;
subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the
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Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and
not withstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligationprovided;however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.
RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER
No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of oneone-thousandths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company, or anyincluding the right to vote the Shares to the extent, if any, such Shares possess voting rights and the right to receive any dividends; provided, however, the Committee shall require that any dividends on such Shares of Restricted Stock shall be automatically deferred and reinvested in additional Restricted Stock subject to the same restrictions on vesting as the underlying Award, or that dividends and other distributions on Restricted Stock shall be paid to the Company for the electionaccount of directors orthe Participant and held pending and subject to the same restrictions on vesting as the underlying Award. A Participant receiving a Restricted Stock Unit Award shall not possess voting rights and shall accrue dividend equivalents on such Units only to the extent provided in the Agreement relating to the Award. Any rights to dividend equivalents on such Restricted Stock units shall be subject to the same restrictions on vesting as the underlying Award.
7.5Short-Term Deferral. To the extent an Award described in this Section is a 409A Award and is subject to a substantial risk of forfeiture within the meaning of Code section 409A (or will be granted upon the satisfaction of a condition that constitutes such a substantial risk of forfeiture), any matter submittedcompensation due under the Award (or pursuant to stockholdersa commitment to grant an Award) shall be paid in full not later than the 60th day following the date on which there is no longer such a substantial risk of forfeiture with respect to the Award (and the Participant shall have no right to designate the year of the payment), unless the Committee shall clearly and expressly provide otherwise at the time of granting the Award. Article 8 - Performance Shares and Units 8.1Grant of Performance Shares/Units. Subject to the terms and provisions of the Plan, Performance Shares and Performance Units may be granted to Eligible Participants in such amounts and upon such terms, and at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.CONCERNING THE RIGHTS AGENT
The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereundertime and from time to time, as shall be determined by the Committee.
8.2Value of Performance Shares/Units. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on demandthe date of grant. In addition to any non-performance terms applicable to the Award, the Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Shares, Performance Units or both, as applicable, that will be paid out to the Participant. For purposes of this Article 8, the time period during which the performance goals must be met shall be called a “Performance Period.” The Committee may, but is not obligated to, set such performance goals by reference to the performance measures set forth in Article 11. 8.3Earning of Performance Shares/Units. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agreesPerformance Shares/Units shall be entitled to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the partreceive a payout of the Rights Agent, for anything done or omittednumber and value of Performance Shares/Units earned by the Rights Agent in connection withParticipant over the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. In no case shall the Rights AgentPerformance Period, to be liable for special, indirect, incidental or consequential loss or damage.The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securitiesdetermined as a function of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.
MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidationextent to which the Rights Agentcorresponding performance goals have been achieved and any applicable non-performance terms have been met.
8.4Form and Timing of Payment of Performance Shares/Units. Subject to the terms of this Plan and the applicable Agreement, the Committee, in its sole discretion, may pay earned Performance Shares/Units in the form of cash or Shares or other Awards (or a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Shares/Units at the close of the applicable Performance Period. Any such Shares may be granted subject to any successor Rights Agentrestrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form and timing of payout of such Awards shall be a party, or any corporation succeedingset forth in the Agreement pertaining to the corporate trust, stock transfer or other shareholder services businessgrant of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.Award.
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In case at any time8.5Dividends and Other Distributions. A Participant receiving a Performance Share/Unit Award shall not possess voting rights and shall accrue dividend equivalents on such Performance Shares/Units only to the name ofextent provided in the Rights AgentAgreement relating to the Award. Any rights to dividend equivalents on Performance Shares/Units shall be changedsubject to the same restrictions on vesting and at such time anypayment as the underlying Award.
8.6Nontransferability. Except as otherwise provided in this Article 8 or the applicable Agreement, Performance Shares/Units may not be sold, exchanged, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior namedescent and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificatesdistribution. Article 9 - Other Stock Based Awards The Committee shall have the full forceauthority to specify the terms and provisions of other forms of equity-based or equity-related awards not described above that the Committee determines to be consistent with the purpose of the Plan and the interests of the Company. The Other Stock-Based Awards may provide for cash payments based in whole or in part on the value or future value of Shares, for the acquisition or future acquisition of Shares, or any combination of the foregoing. Notwithstanding the foregoing, where the value of an Other Stock-Based Award is based on the difference in the value of a Share at different points in time, the grant or exercise price will not be less than 100% of the Fair Market Value of the Shares on the date of grant unless the Other Stock-Based Award is granted in replacement for an award previously granted by an entity that is assumed by the Company in a business combination, provided that the Committee determines that the Other Stock-Based Award preserves the economic benefit of the replaced award. In addition, a Participant receiving an Other Stock-Based Award shall not possess voting rights and shall accrue dividend equivalents on an Other Stock-Based Award only to the extent provided in the Rights CertificatesAgreement relating to the Award. Any rights to dividend equivalents on an Other Stock-Based Award shall be subject to the same restrictions on vesting and inpayment as the underlying Award. Article 10 - Long-Term Incentive Compensation Awards Subject to the terms of this Agreement.DUTIES OF RIGHTS AGENT
The Rights Agent undertakesPlan, the duties and obligations imposed by this Agreement uponCommittee will determine all of the following terms and conditions by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, any Executive Vice President or any Senior Vice President of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct.
The Rights Agent shallLong-Term Incentive Compensation Award, including but not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.
The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly authorized and issued, fully paid andnon-assessable.
The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
The Rights Agent is hereby authorized and directed to accept instructions with respectlimited to the performance measures, performance period, the potential amount payable, and the timing of its duties hereunder frompayment, subject to the Chairmanfollowing: (a) the Committee must require that payment of all or any portion of the Board,amount subject to the Chief Executive Officer,Long-Term Incentive Compensation Award is contingent on the President, any Executive Vice Presidentachievement of one or Senior Vice Presidentmore performance measures during the period the Committee specifies, although the Committee may specify that all or a portion of the Company,performance measures subject to an Award are deemed achieved upon a Participant’s death, Disability or retirement, or such other circumstances as the Committee may specify; and (b) the performance period must relate to applya period of more than one fiscal year of the Company. The Long-Term Incentive Compensation Awards will be payable in cash and the Committee may provide Participants with the right to such officers for advicedefer all or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructionspart of any such officer.
Award. Article 11 - Performance Measures 11.1In General. The Committee may, in its discretion, include performance conditions in any Award.
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11.2Performance Measures. The Rights AgentCommittee may select performance measures for Awards granted to Eligible Participants from among the following: earnings, earnings per share, consolidated pre-tax earnings, net earnings, net income, operating income, EBIT (earnings before interest and anytaxes), EBITDA (earnings before interest, taxes, depreciation and amortization), gross margin, operating margin, profit margin, revenues, revenue growth, market value added, market share, economic value added, return measures (including but not limited to return on equity, return on investment, return on assets, return on net assets, and return on capital employed), total stockholder director, officerreturn, relative total stockholder return, profit, operating profit, economic profit, capitalized economic profit, after-tax profit, pre-tax profit, cash, cash flow measures (including but not limited to operating cash flow, free cash flow, and cash flow return), sales, sales volume, sales growth, assets, inventory turnover ratio, productivity ratios, Share price, cost, unit cost, expense ratios, charge-off levels, operating efficiency, operating expenses, improvement in or employeeattainment of the Rights Agent may buy, sellexpense levels, working capital, improvement in or deal in anyattainment of the Rightsworking capital levels, debt, debt to equity ratio, debt reduction, capital targets, consummation of acquisitions, dispositions, projects or other securities of the Companyspecific events or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconductprovided;however, reasonable care was exercised in the selection and continued employment thereof.
No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1transactions, and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company.
CHANGE OF RIGHTS AGENT
The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail. The Company may, in its sole discretion, remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be either (a) a legal business entity organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a legal business entity described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates.Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
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ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such formother metrics as may be approved by its Board of Directorsthe Committee from time to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and priortime.
Any performance measure may be applied to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or saleprovided;however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.REDEMPTION AND TERMINATION
The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the twentieth day following the Record Date), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a) (ii) Event until such time as the Company’s right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the “Current Market Price,” as defined in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors.
Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailedentity included in the manner herein provided shall be deemed given, whetherterm “Employer” in the aggregate, to a selection of these, to each as a whole or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.
NOTICE OF CERTAIN EVENTS
In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stockalternatively, or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or
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more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock, whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities.
NOTICES
Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent byfirst-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
Beazer Homes USA, Inc.
1000 Abernathy Road, Suite 260
Atlanta, Georgia 30328
Attention: Chief Executive Officer
Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent byfirst-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent byfirst-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
SUPPLEMENTS AND AMENDMENTS
Prior to the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an
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Acquiring Person or an Affiliate or Associate of an Acquiring Person)provided;however, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price, extends the Final Expiration Date, changes the Purchase Price or changes the number of oneone-thousandths of a share of Preferred Stock for which a Right is exercisable, and following the first occurrence of an event set forth in clauses (i) and (ii) of the first sentence of Section 23(a) hereof any supplement or amendment shall require the concurrence of a majority of the members of the Board of Directors of the Company. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock.
EXCHANGE
(i) The Company may, at its option, at any time after the Stock Acquisition Date, upon resolution by the Board of Directors of the Company, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement (such exchange ratio being hereinafter referred to as the “Section 27(a)(i) Exchange Ratio”). Notwithstanding the foregoing, the Company may not effect such exchange at any time after any Acquiring Person, together with all Affiliates and Associates of such Acquiring Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
(ii) The Company may, at its option, at any time after the Stock Acquisition Date, upon resolution by the Board of Directors of the Company, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio specified in the following sentence, as appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement. Subject to such adjustment, each Right may be exchanged for that number of shares of Common Stock obtained by dividing the Adjustment Spread (as defined below) by the then Current Market Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the earlier of (i) the date on which any Person becomes an Acquiring Person or (ii) the date on which a tender or exchange offer by any Person (other than an Exempted Person, the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiarybusiness unit of the Company or any Person organized, appointedother entity included in the term “Employer”, either individually, alternatively or establishedin any combination and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to results for previous years or to a designated comparison group of entities or to a published or stock market or other index, in each case as specified by the CompanyCommittee. The Committee shall specify the period over which the performance goals for a particular Award shall be measured.
11.3Committee Determination of Achievement of Performance Goals; Adjustments. The Committee shall determine whether the applicable performance goals have been met with respect to a particular Award and, if they have, the Committee shall so certify in writing and ascertain the amount payable under the applicable Award. The Committee is authorized to make adjustments in performance-based criteria or pursuant toin the terms and conditions of any such plan) is first publishedother Awards in recognition of unusual or sent or given within the meaning of Rule14d-4(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof such Person would be the Beneficial Owner of 4.95% or more of the shares of Common Stock then outstanding (such exchange ratio being the “Section 27(a)(ii) Exchange Ratio”). The “Adjustment Spread” shall equal (x) the aggregate market price on the date of such event of the number of Adjustment Shares determined pursuant to Section 11(a)(ii) minus (y) the Purchase Price.(iii) Notwithstanding anything contained in this Section 27(a) to the contrary, the Company may not exchange any Rights pursuant to this Section 27(a) unless such exchange is approved by a majority of the members of the Board of Directors of the Company.
Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 27 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Section 27(a)(i) Exchange Ratio or Section 27(a)(ii) Exchange Ratio, as the case may be. The Company shall promptly give public notice of any such exchangeprovided;however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not
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the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.
In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 27, the Company shall make adequate provision to substitute, to the extent that there are insufficient shares of Common Stock available (1) cash, (2) other equity securities of the Company, (3) debt securities of the Company, (4) other assets or (5) any combination of the foregoing, having an aggregate value per Right equal to (x) in the case of an exchange pursuant to Section 27(a)(i), the then current per share market price (determined pursuant to Section 11(d) hereof) of the Common Stock multiplied by the Section 27(a)(i) Exchange Ratio and (y) in the case of an exchange pursuant to Section 27(a)(ii), the Adjustment Spread, where such aggregate value has been determined by a majority of the members of the Board of Directors of the Company, after receiving advice from a nationally recognized investment banking firm. To the extent that the Company determines that any such substitution must be made, the Company shall provide, subject to Section 7(e) hereof, that such substitution shall apply uniformly to all outstanding Rights.
The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d) hereof) for the Trading Day immediately prior to the date of the exchange pursuant to this Section 27.
SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit ofnonrecurring events affecting the Company or the Rights Agent shall bindits financial statements (including, but not limited to, asset write-downs; litigation or claim judgments or settlements; reorganizations or restructuring programs; extraordinary, unusual, or nonrecurring items of gain or loss as defined under US generally accepted accounting principles; mergers, acquisitions or divestitures; and inure to the benefit of their respective successorsforeign exchange gains and assigns hereunder.
DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner,losses) or changes in applicable laws, regulations or accounting principles. Such adjustments shall be made in accordance with guidelines established by the last sentence of Rule13d-3(d)(1)(i)Committee at the time the performance-based Award is granted. The Committee shall also have the discretion to adjust downward the determinations of the General Rules and Regulationsdegree of attainment of the pre-established performance goals.
If applicable tax and/or securities laws permit Committee discretion to alter the governing performance measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. Article 12 - Beneficiary Designation To the extent permitted by the Committee, each Participant under the Exchange Act. The Board of DirectorsPlan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any vested but unpaid Award is to be paid in case of the Company (with, where specifically provided for herein,Participant’s death. In the concurrenceabsence of any such designation, vested but unpaid Awards outstanding at the Participant’s death shall be paid to the Participant’s estate. Article 13 - Deferrals The Committee may permit or require a majorityParticipant to defer such Participant’s receipt of the memberspayment of cash or the Boarddelivery of Directors ofShares that would otherwise be due to such Participant under any Award. If any such deferral election is required or permitted, the Company)Committee shall, have the exclusive powerin its sole discretion, establish rules and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board (with, where specifically providedprocedures for herein, the concurrence of a majority of the members of the Board of Directors of the Company)such deferrals. Any deferrals required or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or madepermitted by the Board (with, where specifically provided for herein, the concurrenceCommittee of a majority of the members of the Board of Directors of the Company) in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights.BENEFITS OF THIS AGREEMENT
Nothing in this AgreementAwards shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall
made in compliance with Code section 409A.
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14.1Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes or similar charges, domestic or foreign, required by law or regulation to be forwithheld with respect to any taxable event arising as a result of or in connection with this Plan or any Award. 14.2Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock or Restricted Stock Units, upon the achievement of performance goals related to Performance Shares or Performance Units, or upon any other taxable event arising as a result of or in connection with an Award granted hereunder that is settled in Shares, unless other arrangements are made with the consent of the Committee, Participants shall satisfy the withholding requirement by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to not more than the amount necessary to satisfy the Company’s withholding obligations at the maximum statutory withholding rates. All such withholding arrangements shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. Article 15 - Amendment and exclusive benefitTermination 15.1Amendment or Termination of Plan. The Committee may at any time terminate or from time to time amend the Plan in whole or in part, but no such action shall adversely affect in any material respect any rights or obligations with respect to any Awards previously granted under the Plan, unless a Participant who is adversely affected by such amendment consents in writing. The Company will obtain the approval of the stockholders before amending the Plan to the extent required by Code section 422 and/or the rules of the exchange upon which the Shares are traded or other applicable law. 15.2Amendment of Agreement. The Committee may, at any time, amend outstanding Agreements in a manner not inconsistent with the terms of the Plan; provided, however, if such amendment is adverse to the Participant in any material respect, as determined by the Committee, the amendment shall not be effective as to that Participant unless and until the Participant consents, in writing, to such amendment. To the extent not inconsistent with the terms of the Plan, the Committee may, at any time, amend an outstanding Agreement in a manner that is not unfavorable to the Participant without the consent of such Participant. Except to the extent provided in Section 4.3, the Committee shall not without the approval of the stockholders of the Company, (i) reduce the Rights Agentpurchase price or base price of any previously granted Option or SAR, (ii) cancel any previously granted Option or SAR in exchange for another Option or SAR with a lower purchase price or base price or (iii) cancel any previously granted Option or SAR in exchange for cash or another award if the purchase price of such Option or the base price of such SAR exceeds the Fair Market Value of a Share on the date of such cancellation, in each case other than in connection with a Change in Control.
15.3Recoupment of Compensation or Cancellation of Awards. Awards under the Plan shall be subject to any policy of recoupment of compensation adopted or amended from time to time by the Board or the Committee, including, without limitation, any policy it deems necessary or desirable to comply with the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (providing for recovery of erroneously awarded compensation), Section 304 of the Sarbanes-Oxley Act of 2002 (providing for forfeiture of certain bonuses and profits), and any implementing rules and regulations of the U.S. Securities and Exchange Commission and applicable listing standards of a national securities exchange adopted in accordance with either of these Acts which policy is incorporated into this Plan, the Awards and the registered holdersAgreements. The Committee may provide in the Agreement that if a Participant engages in any “detrimental activity” (as defined in the Agreement), the Committee may, notwithstanding any other provision in this Plan to the contrary, cancel, rescind, suspend, withhold or otherwise restrict or limit any unexpired, unexercised, unpaid or deferred Award and require the Participant to pay to the Company the fair market value of the compensation received by the Participant from the Award. Article 16 - Change in Control Except as otherwise provided in an employment, change in control or similar agreement with the Company that provides for the effect of a Change in Control (as defined in the Plan or in any such other agreement for similar transactions) on outstanding Awards (an “Outstanding Award”) granted under the Plan to a Participant, the Agreement may provide (in addition to other provisions) that upon a Change in Control the Committee shall have the authority to determine (which determination may be different for different types or grants of Outstanding Awards or for different groups of Participants) that Outstanding Awards: (a)will be continued by the Company (if the Company is the surviving entity); or (b)will be assumed by the surviving entity or its parent or subsidiary; or (c)will be substituted for by the surviving entity or its parent or subsidiary with an equivalent award for the Outstanding Award. If (a), (b) or (c) above do not apply to an Outstanding Award, the Agreement may provide that the Committee will in its discretion determine the impact of the Change in Control on the Outstanding Award, including the right to determine to fully vest Outstanding Awards that are not continued, assumed or substituted and to cash out Outstanding Awards. If subsections (a), (b), or (c) above apply to an Outstanding Award, the continued, assumed or substituted awards will provide (i) similar terms and conditions and preserve the same benefits as the Outstanding Award that is being continued or replaced, and (ii) that, in the event of the Participant’s involuntary termination without Cause or termination for Good Reason on, or within the two-year period following, the date of the Change in Control, the Outstanding Award (or substituted award) will fully vest and become immediately exercisable and/or nonforfeitable. The Agreement may contain such other provisions relating to the treatment of Outstanding Awards upon a Change in Control as the Committee determines are necessary or desirable. In the event that any acceleration of vesting or other action with respect to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Code section 4999 due to the characterization of such acceleration of vesting, action, payment or benefit as an “excess parachute payment” under Code section 280G, the Committee may in its discretion elect to reduce the amount payable with respect to an Award. Article 17 - Miscellaneous Provisions 17.1Restrictions on Shares. All certificates for Shares delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed and any applicable federal or state laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. In making such determination, the Committee may rely upon an opinion of counsel for the Company. Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan or make any other distribution of the benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity. 17.2Rights Certificates (and,of Stockholder. Except as provided otherwise in the Plan or in an Agreement, no Participant receiving an Award shall have any right as a stockholder with respect to any Shares covered by such Award (including but not limited to the right to vote the Shares) prior to the Distribution Date, registered holdersdate on which the Participant becomes the record holder of such Shares. 17.3No Implied Rights. Nothing in the Plan or any Agreement shall confer upon any Participant any right to continue in the service of the Common Stock)Employer, or to serve as a Director thereof, or interfere in any way with the right of the Employer to terminate the Participant’s employment or other service relationship at any time and for any reason. Unless agreed by the Board or the Committee, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan, severance program, or other arrangement of the Employer for the benefit of its employees. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Committee, be no greater than the right of an unsecured general creditor of the Company. 17.4Compliance with Code Section 409A.SEVERABILITY
At all times, this Plan, an Award and any Agreement shall be interpreted and operated (i) with respect to 409A Awards in accordance with the requirements of Code section 409A, and (ii) to maintain the exemptions from Code section 409A of Options, SARs and Restricted Stock and any Awards designed to meet the short-term deferral exception under Code section 409A. In addition, to the extent required to avoid a violation of the applicable rules under Code section 409A by reason of Code section 409A(a)(2)(B)(i), any payment under an Award shall be delayed until the earliest date of payment that will result in compliance with the rules of Code section 409A(a)(2)(B)(i) (regarding the required six-month delay for distributions to specified employees that are related to a separation from service). To the extent that a 409A Award provides for payment upon the recipient’s termination of employment as an employee or cessation of service as a Director, the 409A Award shall be deemed to require payment upon the individual’s “separation from service” within the meaning of Code section 409A. 17.5Successors. The terms of the Plan and all outstanding Awards shall be binding upon the Company, and its successors and assigns. 17.6Tax Elections. Each Participant agrees to promptly give the Committee a copy of any election made by such Participant under Code section 83(b) or any similar provision thereof. Notwithstanding the preceding sentence, the Committee may condition any Award on the Participant making or not making an election under Code section 83(b) with respect to the Award. 17.7Right of Setoff. The Company or an Employer may, to the extent permitted by applicable law, deduct from and setoff against any amounts payable in connection with any Award, such amounts as may be owed by the Participant to the Company or an Employer. 17.8No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award; in the discretion of the Committee, the Company shall forfeit the value of fractional shares or make cash payments in lieu of fractional Shares. 17.9Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
17.10Legal Construction. (a)Severability.If any term, provision covenant or restriction of this Plan or an Agreement is held by a court of competentor becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or other authoritywould disqualify the Plan or any Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be invalid, voidconstrued or unenforceable,deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of the terms, provisions, covenants and restrictions of thisPlan or the Agreement shall remain in full force and effecteffect. (b)Gender and Number. Where the context admits, words in any gender shall include the other gender, words in no way be affected, impaired or invalidatedprovided;however, that notwithstanding anythingthe singular shall include the plural and words in this Agreement to the contrary, if any such term, provision, covenant or restriction is heldplural shall include the singular. (c)Governing Law. To the extent not preempted by such court or authority to be invalid, void or unenforceablefederal law, the Plan and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the twentieth day following the date of such determination by the Board of Directors.GOVERNING LAW
This Agreement, each Right and each Rights Certificate issuedall Agreements hereunder shall be deemed to be a contract made underconstrued in accordance with and governed by the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts made and to be performed entirely within such state.
COUNTERPARTS
This Agreement may be executed inDelaware, excluding any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
DESCRIPTIVE HEADINGS
Descriptive headingsconflicts or choice or law rule or principle that might otherwise refer construction or interpretation of the several sectionsPlan or the Agreement (as applicable) to the substantive law of this Agreement are inserted for convenience onlyany other jurisdiction.
17.11Data Privacy; Transfer of Data. By accepting an Award, a Participant (a) explicitly and shall not controlunambiguously consents to the collection, use and transfer, in electronic or affect the meaning or constructionother form, of any of Participant’s personal data that is necessary to facilitate the provisions hereofimplementation, administration and management of the Award and the words “herein,” “hereof,” “hereby,” “hereto,” “hereunder” and words of similar import are references to this Agreement as a whole and not to any particular section or other provision hereof.EFFECTIVENESS
This Agreement shall become effective as of the close of business on November 14, 2019 (the “Effective Date”);providedPlan, (b) understands that notwithstanding anything herein to the contrary, the Board of Directors may, in its sole discretion, terminate this Agreement prior to the Effective Date following the occurrence of a “Distribution Date” as defined in that certain Section 382 Rights Agreement between the Company and American Stock Transfer & Trustany Employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, and details of all Awards or entitlements to Shares granted to Participant under the Plan or otherwise (“Data”), (c) understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued with respect to an Award may be deposited, and that these recipients may be located in Participant’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Participant’s country; (d) waives any data privacy rights Participant may have with respect to the Data; and (e) authorizes the Company LLC, dated as of November 6, 2016, and effective as of November 12, 2016.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
any Employer and its agents to store and transmit such information in electronic form.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
| | | | | | | | | | | | | | | Attest: | | | | BEAZER HOMES USA, INC. | | IN WITNESS WHEREOF, this Plan is executed this ___ day of November, 2019. | | | | | | By: | | | | | | By: | | | | | | | Name: | | | | | | Name: | | | | | Title: | | | | | | Title: | | | | | | Attest: | | | | AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC | | | | | | | By: | | | | | | By: | | | | | | | Name: | | | | | | Name: | | | | | Title: | | | | | | Title: | | |
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EXHIBIT A
Form of Designations, Preferences and Rights of Series A Junior Participating
Preferred Stock of Beazer Homes USA, Inc.
Section 1.Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” and the number of shares constituting such series shall be 100,000.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of Beazer Homes USA, Inc., a Delaware corporation (the “Company”), out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of allnon-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.001 per share, of the Company (the “Common Stock”) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Company shall at any time after November 14, 2016 (the “Rights Declaration Date”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Company shall declare a dividend or distribution on the outstanding shares of Series A Junior Participating Preferred Stock as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock);provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the outstanding shares of Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on ashare-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof.
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Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Company.
(c) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a “default period”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(c) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders,provided that such voting right shall not be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Company. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Paragraph (c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to such holder at such holder’s last address as the same appears on the books of the Company. Such meeting shall be called for a time not earlier than twenty (20) days and not later than sixty (60) days after such order or request, or in default of the calling of such meeting within sixty (60) days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders
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owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this Paragraph (c)(iii), no such special meeting shall be called during the period within sixty (60) days immediately preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Company if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Paragraph (c)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this Paragraph (c) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation orby-laws of the Company irrespective of any increase made pursuant to the provisions of Paragraph (c)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation orby-laws of the Company). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors.
(d) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock,provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation,
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dissolution or winding up) with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under Paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5.Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount equal to $1,000 per share of Series A Junior Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph (c) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “Adjustment Number”). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.
(c) In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7.Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other
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stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8.No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable.
Section 9.Amendment. The certificate of incorporation of the Company shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 10.Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.
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EXHIBIT B
[Form of Rights Certificate]
NOT EXERCISABLE AFTER NOVEMBER 14, 2019 OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]
Rights Certificate
BEAZER HOMES USA, INC.
This certifies that [ ], or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of November 14, 2019 (the “Rights Agreement”), between Beazer Homes USA, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability company (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on November 14, 2022 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, oneone-thousandth of a fully paid,non-assessable share of Series A Junior Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $50.00 per oneone-thousandth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of November 14, 2019 based on the Preferred Stock as constituted at such date. The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities, which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the
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Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of oneone-thousandths of a share of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.001 per Right at any time prior to the earlier of the close of business on (i) the tenth day following the Stock Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. In addition, the Rights may be exchanged, in whole or in part, for shares of the Common Stock, or shares of preferred stock of the Company having essentially the same value or economic rights as such shares. Immediately upon the action of the Board of Directors of the Company authorizing any such exchange, and without any further action or any notice, the Rights (other than Rights which are not subject to such exchange) will terminate and the Rights will only enable holders to receive the shares issuable upon such exchange. Under certain circumstances set forth in the Rights Agreement, the decision to redeem the Rights shall require the concurrence of a majority of the members of the Board of Directors of the Company.
No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of oneone-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.
Dated as of
| | | | | | | | | | | Attest: | | | | BEAZER HOMES USA, INC. | | | | | | | By: | | | | | | By: | | | | | | | Name: | | | | | | Name: | | | | | Title: | | | | | | Title: | | | | | | | | Countersigned: | | | | | | | BEAZER HOMES USA, INC. | | | | | | | Attest: | | | | AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC | | | | | By: | | | | | | | | | | | Authorized Officer | | | | | | | ATTEST: | | | | | | | | | | | | | | | | By: | | | | | | Secretary | | | |
| | | | | | By: | | | | | | By: | | | | | | | Name: | | | | | | Name: | | | | | Title: | | | | | | Title: | | |
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[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto (Please print name and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
| (1) | this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);
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| (2) | after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
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Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Rights Certificate.)
To: BEAZER HOMES USA, INC.:
The undersigned hereby irrevocably elects to exercise Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address):
If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address):
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
| (1) | the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);
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| (2) | after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
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NON-GAAP RECONCILIATION Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
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EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
On November 6, 2018, the Board of Directors of Beazer Homes USA, Inc. (the “Company”) approved the execution of a Section 382 Rights Agreement (the “Rights Agreement”) between the Company and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), and on February 6, 2019, the adoption of the Rights Agreement was approved by the stockholders of the Company. The Rights Agreement provides for a distribution of one preferred stock purchase right (a “Right”) for each share of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”) outstanding to stockholders of record at the close of business on November 14, 2019 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company a unit (a “Unit”) consisting of oneone-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), at a Purchase Price of $50.00 per Unit (the “Purchase Price”), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement.
The Board of Directors of the Company adopted the Rights Agreement in an effort to protect stockholder value by attempting to protect against a possible limitation on the Company’s ability to use its net operating loss carryforwards (the “NOLs”) to reduce potential future federal income tax obligations. The Company has experienced and continues to experience substantial operating losses, and under the Internal Revenue Code of 1986, as amended (the “Code”), and rules promulgated by the Internal Revenue Service, the Company may “carry forward” these losses in certain circumstances to offset any current and future earnings and thus reduce the Company’s federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, the Company believes that it will be able to carry forward a significant amount of NOLs, and therefore these NOLs could be a substantial asset to the Company. However, if the Company experiences an “Ownership Change,” as defined in Section 382 of the Code, its ability to use the NOLs will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.
A copy of the Rights Agreement is being filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form8-A. A copy of the Rights Agreement is available free of charge from the Company.This Summary of Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference.
Distribution Date; Acquiring Persons; Transfer of Rights. Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Rights Certificates will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a Distribution Date will occur upon the earlier of (i) ten (10) days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 4.95% or more of the outstanding shares of Common Stock (the “Stock Acquisition Date”) or (ii) ten (10) business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 4.95% or more of the outstanding shares of Common Stock. The definition of Acquiring Person excludes any Exempted Person (as defined below) and any person who would become an Acquiring Person solely as a result of an Exempted Transaction (as defined below). Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock certificates after the Record Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate.
As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date. Thereafter, the separate Rights Certificates alone will represent the Rights. Except as otherwise determined by the Board of Directors, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights.
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Exempted Persons. The following persons shall be “Exempted Persons” under the Rights Agreement:
(i) Any person who, together with all affiliates and associates of such person, is the beneficial owner of Common Stock, options and/or warrants exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding on November 14, 2019, will be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner of securities representing a percentage of Common Stock that exceeds byone-half of one percent (0.5%) or more the lowest percentage of Common Stock that such person had at any time since November 14, 2019, except solely (x) pursuant to equity compensation awards granted to such person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a redemption of shares of Common Stock by the Company.
(ii) In addition, any person who, together with all affiliates and associates of such person, becomes the beneficial owner of Common Stock, options and/or warrants exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock then outstanding as a result of a purchase by the Company or any of its subsidiaries of shares of Common Stock will also be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and will be deemed to be an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner, at any time after the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, of securities representing a percentage of Common Stock that exceeds byone-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such person had at any time since the date such person first became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, except solely (x) pursuant to equity compensation awards granted to such person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a redemption of shares of Common Stock by the Company.
(iii) In addition, any person who, together with all affiliates and associates of such person, is the beneficial owner of Common Stock, options and/or warrants exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership, as determined by the Board of Directors of the Company in its sole discretion, (x) would not jeopardize or endanger the availability of the Company of its NOLs or (y) is otherwise in the best interests of the Company, will be an Exempted Person. However, any such person will cease to be an Exempted Person if (A) such person ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock, or (B) after the date of such determination by the Board of Directors of the Company, such person, together with all affiliates and associates of such person, becomes the beneficial owner of securities representing a percentage of Common Stock that exceeds byone-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such person had at any time since the date such person first became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, except solely (I) pursuant to equity compensation awards granted to such person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (II) as a result of a redemption of shares of Common Stock by the Company, or (C) the Board of Directors of the Company, in its sole discretion, makes a contrary determination with respect to the effect of such person’s beneficial ownership (together with all affiliates and associates of such person) with respect to the availability to the Company of its NOLs.
A purchaser, assignee or transferee of the shares of Common Stock (or options or warrants exercisable for Common Stock) from an Exempted Person will not thereby become an Exempted Person, except that a transferee from the estate of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person shall be an Exempted Person so long as such transferee continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock.
Exempted Transactions. The following transactions shall be “Exempted Transactions” under the Rights Agreement: any transaction that the Board of Directors of the Company determines, in its sole discretion, is exempt from the Rights Agreement, which determination shall be made in the sole and absolute discretion of the Board
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of Directors prior to the date of such transaction, including, without limitation, if the Board of Directors determines that (i) neither the beneficial ownership of shares of Common Stock by any person, directly or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize or endanger the availability to the Company of the Company’s tax benefits or (ii) such transaction is otherwise in the best interests of the Company. In granting an exemption for an “Exempted Transaction”, the Board of Directors of the Company may require any person who would otherwise be an Acquiring Person to make certain representations or undertakings or to agree that any violation or attempted violation of such representations or undertakings will result in such consequences and subject to such conditions as the Board of Directors of the Company may determine in its sole discretion, including that any such violation shall result in such person becoming an Acquiring Person.
Excercisability; Expiration. The Rights are not exercisable until the Distribution Date and will expire on the earliest of (i) the close of business on November 14, 2022, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement, (iv) the repeal of Section 382 of the Code or any successor statute if the Board of Directors of the Company determines that the Rights Agreement is no longer necessary or desirable for the preservation of certain tax benefits, or (v) the beginning of a taxable year of the Company to which the Board of Directors of the Company determines that certain tax benefits may not be carried forward. At no time will the Rights have any voting power.
In the event that an Acquiring Person becomes the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company), having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price times the number of Units associated with each Right (initially, one). Notwithstanding any of the foregoing, following the occurrence of an Acquiring Person becoming such (a “Flip-In Event”), all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. However, Rights are not exercisable following the occurrence of aFlip-In Event until such time as the Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $50.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $100.00 worth of Common Stock (or other consideration, as noted above) for $50.00. If the Common Stock at the time of exercise had a market value per share of $5.00, the holder of each valid Right would be entitled to purchase twenty (20) shares of Common Stock for $50.00.
In the event that, at any time following the Stock Acquisition Date, (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Common Stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right to receive, upon exercise of the Right, common stock of the acquiring company having a value equal to two times the exercise price of the Right. The events set forth in this paragraph (a “Flip-Over Event”) and in the second preceding paragraph are referred to as the “Triggering Events.”
Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company as set forth above or in the event the Rights are redeemed.
Anti-Dilution Provisions. The Purchase Price payable, and the number of Units of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the Preferred Stock, or (iii) upon the distribution to
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holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise.
Exchange. At any time after the Stock Acquisition Date, the Board of Directors of the Company may exchange the Rights (other than Rights owned by an Acquiring Person), in whole or in part, at an exchange ratio equal to (i) a number of shares of Common Stock per Right with a value equal to the spread between the value of the number of shares of Common Stock for which the Rights may then be exercised and the Purchase Price or (ii) if prior to the acquisition by the Acquiring Person of 50% or more of the then outstanding shares of Common Stock, one share of Common Stock per Right (subject to adjustment).
Redemption. At any time until ten (10) days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. Immediately upon the action of the Board of Directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.
Amendments. Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board of Directors of the Company prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreementprovided;however, that no amendment to adjust the time period governing redemption shall be made at such time as the Rights are not redeemable.
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ANNEX I
NON-GAAP RECONCILIATION PAY RATIO
Reconciliation of Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, debt extinguishment, impairments and abandonments) to total Company net income, the most directly comparable GAAP measure, is provided for the period shown below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective capitalization, tax position and level of impairments. These EBITDA measures should not be considered alternatives to net income determined in accordance with GAAP as an indicator of operating performance. | | | | | | FISCAL YEAR ENDED SEPTEMBER 30, 20182019 (IN THOUSANDS) | | | Net loss | $ | (79,520) | | Net loss
| | $ (45,375)
| ExpenseBenefit from income taxes
| $ | 94,373
(37,245) | | Interest amortized to home construction and land sales expenses and capitalized interest impaired | $ | 91,331
108,941 | | Interest expense not qualified for capitalization | $ | 5,325
3,109 | | EBIT | $ | 145,654
(4,715) | | Depreciation and amortization and stock-based compensation amortization | $ | 24,065
25,285 | | EBITDA | $ | 169,719
20,570 | | Loss on extinguishment of debt | $ | 27,839
24,920 | | Inventory impairments and abandonments (a) | $ | 6,770
134,711 | | Joint venture impairment and abandonment charges
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| Adjusted EBITDA | $ | $ 204,669
180,201 | |
(a) CapitalizedIn periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the linesline above titled “Interest amortized to home construction and land sales expenses and capitalized interest impaired” and “Interest expense not qualified for capitalization.”impaired."
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      VOTE BY INTERNET—www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m., Eastern Time, on the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. BEAZER HOMES USA, INC. 1000 ABERNATHY ROAD, SUITE 260 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS ATLANTA, GA 30328 If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail
or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet 1 Investor Address Line 1 and, when prompted, indicate that you agree to receive or access proxy materials Investor Address Line 2 electronically in future years. Investor Address Line 3 1 1 OF Investor Address Line 4 VOTE BYPHONE—1-800-690-6903 Investor Address Line 5 Use any touch-tone telephone to transmit your voting instructions up until 11:59 John Sample p.m., Eastern Time, on the day before the meeting date. Have your proxy card in 1234 ANYWHERE STREET 2 hand when you call and then follow the instructions. ANY CITY, ON A1A 1A1 VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. PAGE 1 OF 2 x TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR each nominee named in 2 0 Proposal 1: 1. Election of Directors Nominees For Against Abstain 0000000000 1a. Elizabeth S. Acton 0 0 0 For Against Abstain 1b. Laurent Alpert 0 0 0 1i. Stephen P. Zelnak, Jr. 0 0 0 1c. Brian C. Beazer 0 0 0 The Board of Directors recommends you vote FOR Proposals 2, 3, 4 and 5. For Against Abstain 1d. Peter G. Leemputte 0 0 0 2. The ratification of the selection of Deloitte & Touche LLP by the 0 0 0 Audit Committee of our Board of Directors as our independent registered public accounting firm for the fiscal year ending September 1e. Allan P. Merrill 0 0 0 30, 2019; 1f. Peter M. Orser 0 0 0 3. Anon-binding advisory vote regarding the compensation paid to the 0 0 0 Company’s named executive officers, commonly referred to as a “Say on Pay” proposal; 1g. Norma A. Provencio 0 0 0 1h. Danny R. Shepherd 0 0 0 4. Amendment of the Company’s Amended and Restated Certificate of 0 0 0 Incorporation. For address change/comments, mark here. 0 5. A new Section 382 Rights Agreement to become effective upon the 0 0 0 17 . (see reverse for instructions) Yes No expiration of the Company’s existing Section 382 Rights Agreement. . 1 . 0 Please indicate if you plan to attend this meeting 0 0 NOTE: The proposals to be voted on may also include such other business as R1 may properly come before the meeting and any adjournments or postponements thereof. _ 1 Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 0000392201 SHARES CUSIP # JOB # SEQUENCE # Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
ANNUAL MEETING OF STOCKHOLDERS OF BEAZER HOMES USA, INC. February 6, 2019 Please date, sign and mail your proxy card in the envelope provided as soon as possible. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com BEAZER HOMES USA, INC. 1000 Abernathy Road Suite 260 Atlanta, Georgia 30328 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, having duly received the Notice of Annual Meeting and Proxy Statement of Beazer Homes USA, Inc., dated December [ ], 2018, hereby appoints Allan P. Merrill and Keith L. Belknap (each with full power to act alone and with power of substitution and revocation), to represent the undersigned and to vote, as designated on the reverse side, all shares of common stock of Beazer Homes USA, Inc., par value $.001, which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Beazer Homes USA, Inc. to be held at 8:30 a.m., Eastern Time, on Wednesday, February 6, 2019 at Beazer Homes USA, Inc.’s offices at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, and at any adjournments or postponements thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Address change/comments: . 17 . 1 . 0 R1 _ 2 0000392201 (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) (Continued and to be signed on reverse side)
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