[ LOGO ]
TOLL BROTHERS, INC.
3103 Philmont Avenue
Huntingdon Valley, PA 19006
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on Wednesday, March 5, 1997
The Annual Meeting of Shareholders (the
"Meeting") of Toll Brothers, Inc. (the "Company")
will be held on Wednesday, March 5, 1997, at
10:00 a.m., at the offices of the Company, 3103
Philmont Avenue, Huntingdon Valley, Pennsylvania
19006, for the following purposes:
1. To elect three directors to hold
office until the 2000 Annual Meeting of
Shareholders and until their respective
successors are duly elected and qualified.
(The terms of office of the other directors
do not expire until 1998 or 1999.)
2. To elect one director to hold
office until the 1999 Annual Meeting of
Shareholders and until his respective
successor is duly elected and qualified.
3. To consider and act upon proposed
amendments to the Toll Brothers, Inc. Cash
Bonus Plan.
4. To consider and act upon a
proposed amendment to the Company's Stock
Option and Incentive Stock Plan (1995).
5. To consider and act upon the
selection of Ernst & Young LLP as the
Company's independent auditors for the 1997
fiscal year.
6. To transact such other business as
may properly come before the Meeting.
The Board of Directors has fixed the close
of business on January 14, 1997 as the record
date for the Meeting. Only shareholders of
record at that time are entitled to notice of and
to vote at the Meeting and any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Board
of Directors of the Company. Reference is made
to the attached proxy statement for further
information with respect to the business to be
transacted at the Meeting. The Board of
Directors urges you to sign, date and return the
enclosed proxy promptly, although you are
cordially invited to attend the Meeting in
person. The return of the enclosed proxy will
not affect your right to vote in person if you do
attend the Meeting.
BRUCE E. TOLL
Secretary
January 29, 1997
TOLL BROTHERS, INC.
3103 Philmont Avenue
Huntingdon Valley, PA 19006
PROXY STATEMENT
for
Annual Meeting of Shareholders
March 5, 1997
GENERAL
This proxy statement is furnished in
connection with the solicitation of proxies by
the Board of Directors of Toll Brothers, Inc., a
Delaware corporation (the "Company"), for use at
the Company's Annual Meeting of Shareholders (the
"Meeting"), which will be held on the date, at
the time and place, and for the purposes set
forth in the foregoing notice, and any
adjournment or postponement thereof. This proxy
statement, the foregoing notice and the enclosed
proxy are first being sent to shareholders of the
Company (the "Shareholders") on or about January
29, 1997.
The Board of Directors does not intend to
bring any matter before the Meeting except as
specifically indicated in the notice and does not
know of anyone else who intends to do so. If any
other matters properly come before the Meeting,
however, the persons named in the enclosed proxy,
or their duly constituted substitutes acting at
the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their
judgment on such matters. If the enclosed proxy
is properly executed and returned prior to voting
at the Meeting, the shares represented thereby
will be voted in accordance with the instructions
marked thereon. In the absence of instructions,
the shares will be voted "FOR" the nominees of
the Board of Directors in the election of the
three directors whose terms of office will extend
until the 2000 Annual Meeting of Shareholders and
until their respective successors are duly
elected and qualified, "FOR" the nominee of the
Board of Directors in the election of one
director whose term of office will extend until
the 1999 Annual Meeting of Shareholders and until
his respective successor is duly elected and
qualified, "FOR" the approval of proposed
amendments to the Toll Brothers, Inc. Cash Bonus
Plan (the "Cash Bonus Plan"), "FOR" the approval
of a proposed Amendment to the Company's Stock
Option and Incentive Stock Plan (1995) (the "1995
Plan") and "FOR" the approval of Ernst & Young
LLP as the Company's independent auditors for the
current fiscal year ending October 31, 1997.
Abstentions and broker non-votes (where a broker
or other record holder submits a proxy but does
not have authority to vote a customer's shares)
will be considered present for purposes of
establishing a quorum. Abstentions and broker
non-votes will not be treated as votes cast and,
thus, will not have the effect of a vote against
any of the proposals.
Any proxy may be revoked at any time prior
to its exercise by notifying the Secretary in
writing, by delivering a duly executed proxy
bearing a later date, or by attending the Meeting
and voting in person.
VOTING SECURITIES AND SECURITY OWNERSHIP
Shares Entitled to Vote and Required to Vote
At the close of business on December 31,
1996, there were 33,950,360 shares of the
Company's common stock (the "Common Stock")
outstanding. The record date fixed by the Board
of Directors for the determination of
Shareholders entitled to notice of and to vote at
the Meeting is the close of business on January
14, 1997. At the Meeting, such Shareholders will
be entitled to one vote for each share of Common
Stock owned at the record date. There is no
other class of voting securities outstanding.
The presence at the Meeting, in person or by
proxy, of persons entitled to cast the votes of a
majority of such outstanding shares of Common
Stock will constitute a quorum for consideration
of the matters expected to be voted on at the
Meeting. In the elections of directors,
Shareholders entitled to vote will not have
cumulative voting rights. A plurality of the
votes of the shares of outstanding Common Stock
present in person or represented by proxy at the
Meeting and entitled to vote is required to elect
the nominees of the Board of Directors for
director as set forth in Proposal One and
Proposal Two. The affirmative vote of the
holders of at least a majority of the outstanding
shares of Common Stock present in person or
represented by proxy at the Meeting and entitled
to vote is required to approve each of Proposals
Three, Four and Five.
Security Ownership of Principal Shareholders and
Management
The following table sets forth certain
information as of December 31, 1996 respecting
the holdings of: (i) each person who was known to
the Company to be the beneficial owner of more
than 5% of the Common Stock of the Company; (ii)
each director and nominee for director of the
Company and each executive officer named in the
Summary Compensation Table; and (iii) all
directors and executive officers of the Company
as a group. Each of the persons named in the
table below as beneficially owning the shares set
forth therein has sole voting power and sole
investment power with respect to such shares,
unless otherwise indicated.
Percent of
Name of Beneficial Owner Amount and Nature of Common
Beneficial Ownership (1) Stock (1)
Robert I. Toll........................... 6,456,485(2)(3) 18.8
Bruce E. Toll............................ 6,359,533(2) 18.5
FMR Corp................................. 2,600,489(4) 7.7
Firstar Corporation /Firstar Investment
Research & Management Company......... 1,718,800(5) 5.1
Zvi Barzilay............................. 339,500 1.0
Robert S. Blank.......................... 68,500 *
Richard J. Braemer....................... 78,500 *
Roger S. Hillas.......................... 81,500 *
Carl B. Marbach.......................... 66,200(6) *
Joel H. Rassman.......................... 167,500 *
Paul E. Shapiro.......................... 38,900 *
All directors and executive officers as a group
(9 persons).......................... 13,656,618(3)(6)(7) 38.3
* Less than 1%
(1) Shares issuable pursuant to options exercisable within
60 days of December 31, 1996 are deemed to be
beneficially owned; accordingly, information includes
the following number of shares of Common Stock
underlying options held by the following individuals,
and all directors and executive officers as a group:
Robert I. Toll and Bruce E. Toll, 465,250 shares each;
Mr. Barzilay, 334,000 shares; Messrs. Blank, Braemer
and Hillas, 67,500 shares each; Mr. Marbach, 62,500
shares; Mr. Rassman, 157,500; shares Mr. Shapiro,
37,500 shares and all directors and executive officers
as a group, 1,724,500 shares.
(2) The address for Robert I. Toll and Bruce E. Toll is c/o
Toll Brothers, Inc., 3103 Philmont Avenue, Huntingdon
Valley, Pennsylvania 19006.
(3) Includes 17,500 shares owned by the Robert and Jane
Toll Foundation of which Robert I. Toll is a trustee,
with dispositive power, as to which he disclaims
beneficial ownership.
(4) Based on a Schedule 13G of June 30, 1996 which states
that the address of FMR Corp. ("FMR") is 82 Devonshire
Street, Boston, Massachusetts 02109, that the amount of
shares is as of June 30, 1996 and that FMR has sole
voting power with respect to 22,989 shares and sole
investment power with respect to all shares indicated
as beneficially owned by it.
(5) Based on a Schedule 13G of December 31, 1995 which
states that the address of Firstar Corporation is 777
E. Wisconsin Avenue, Milwaukee, Wisconsin 53202, that
the amount of shares is as of December 31, 1995 and
that Firstar Corporation has sole voting power with
respect to 1,384,900 shares, shared voting power with
respect to 257,200 shares, sole dispositive power with
respect to 1,461,600 shares and shared dispositive
power with respect to 257,200 shares. In addition,
Firstar Investment Research Management Company
("Firstar Investment"), a wholly owned subsidiary of
Firstar Corporation, filed a Schedule 13G of December
31, 1995, that the Company believes is related to the
same shares of the Company's Common Stock as those
reported by Firstar Corporation, which states that the
address of Firstar Investment is 777 E. Wisconsin
Avenue, Milwaukee, Wisconsin 53202, that the amount of
shares is as of December 31, 1995 and that Firstar
Investment has sole voting power with respect to
599,100 shares, shared voting power with respect to
1,043,000 share, sole dispositive power with respect to
675,800 shares and shared dispositive power with
respect to 1,043,000 shares.
(6) Includes 2,350 shares beneficially owned by individual
retirement accounts for the benefit of Mr. Marbach and
his wife. Mr. Marbach disclaims beneficial ownership
of the 1,175 shares held by his wife's IRA.
(7) The Board of Directors, after reviewing the functions
of all of the Company's officers, both in terms of
designated function and functions actually performed,
has determined that, for purposes of Section 16 of the
Securities Exchange Act of 1934 and the rules
thereunder and Regulation S-K, only the Chief Executive
Officer, Chief Operating Officer, Executive Vice
President, and Senior Vice President and Chief
Financial Officer are deemed to be officers or
executive officers of the Company for reporting
purposes under such provisions, respectively.
PROPOSAL ONE
ELECTION OF THREE DIRECTORS FOR THE TERM
ENDING 2000
At the Meeting, the Shareholders will elect
three directors to hold office until the 2000
Annual Meeting of Shareholders and until their
respective successors have been duly elected and
qualified. The Company's Board of Directors is
divided into three classes serving staggered
three-year terms, with the term of one class of
directors expiring each year. The directors
whose three year terms of office expire at the
Meeting are Messrs. Robert S. Blank, Roger S.
Hillas and Paul E. Shapiro.
The Board of Directors has nominated Messrs.
Robert S. Blank, Roger S. Hillas and Paul E.
Shapiro to serve again as directors until the
2000 Annual Meeting of Shareholders and until
their respective successors have been duly
elected and qualified. Such nominees have
indicated a willingness to continue to serve as
directors. Should a nominee become unavailable
to accept election as a director, the persons
named in the enclosed proxy will vote the shares
which such proxy represents for the election of
such other person as the Board of Directors may
recommend.
The nominees for election as the directors
to be elected at the Meeting (including Joel H.
Rassman, the nominee described below in "Proposal
Two - Election of One Director for the Term
Ending in 1999") and the directors whose terms of
office continue after the Meeting, together with
certain information about them, are set forth
below:
Director Term
Name Age Since Expires Positions with the Company
Robert I. Toll...... 56 1986 1999 Chairman of the Board of
Directors and Chief
Executive Officer
Bruce E. Toll....... 53 1986 1999 President, Chief Operating
Officer, Secretary and
Director
Zvi Barzilay........ 50 1994 1998 Executive Vice President
and Director
Robert S. Blank..... 56 1986 1997 Director
Richard J. Braemer.. 55 1986 1998 Director
Roger S. Hillas..... 69 1988 1997 Director
Carl B. Marbach..... 55 1991 1998 Director
Joel H. Rassman..... 51 1996 1997 Senior Vice President,
Treasurer, Chief
Financial Officer and
Director
Paul E. Shapiro..... 55 1993 1997 Director
Robert I. and Bruce E. Toll, who are
brothers, co-founded the Company's predecessors'
operations in 1967 and have been members of the
Board of Directors since the Company's inception
in May 1986. Both are also members of the Stock
Option Committee, which administers the Company's
Amended and Restated Stock Option Plan (1986)
(the "1986 Plan") and the 1995 Plan, the Shelf
Terms Committee and the Compensation Committee of
the Board of Directors. Their principal
occupations since the Company's inception have
been related to their various homebuilding and
other real estate related activities.
Zvi Barzilay became a member of the Board of
Directors in June 1994. Mr. Barzilay joined the
Company in 1980 and held the position of
Executive Vice President-Operations of the
Company from September 1989 until October 1992
when he was appointed to the position of
Executive Vice President of the Company.
Robert S. Blank became a member of the Board
of Directors in September 1986. For more than
five years, Mr. Blank has been a partner in
Whitcom Partners, a partnership with offices in
New York City, which owns and operates newspapers
and cable television systems and formerly owned
and operated broadcast television stations and
radio stations, in some cases in partnership with
others. Mr. Blank is a member of the
Subordinated Debt-Repurchase Authorization
Committee. Mr. Blank is a member of the Board of
Directors of Devon Group, Inc., a publicly traded
reporting company.
Richard J. Braemer became a member of the
Board of Directors in September 1986. Since
January 1994, Mr. Braemer has been a partner in
the Philadelphia law firm of Ballard, Spahr,
Andrews & Ingersoll. From May 1992 to December
1993, Mr. Braemer was a shareholder in the
Philadelphia law firm of Hangley Connolly Epstein
Chicco Foxman & Ewing, P.C. For more than five
years prior to May 1992, Mr. Braemer was a
shareholder or partner in the Philadelphia law
firm of Braemer Abelson & Hitchner, and its
predecessors. Mr. Braemer is a member of the
Subordinated Debt-Repurchase Authorization
Committee. Mr. Braemer is a member of the Board
of Directors of Advanta Corp., a publicly traded
reporting company.
Roger S. Hillas became a member of the Board
of Directors in April 1988. From July 1988 until
December 1992, Mr. Hillas was chairman and chief
executive officer of Meritor Savings Bank, a
publicly traded reporting company; since that
time, he has been retired. In December 1992,
Meritor Savings Bank was taken over by the
Federal Deposit Insurance Corporation. Prior to
July 1988, Mr. Hillas was chairman of PNC
Financial Corp. and of Provident National Bank.
Mr. Hillas is a member of the Subordinated Debt-Repurchase Authorization
Committee. Mr. Hillas is a member of the Board of Directors of P.H.
Glatfelter Company, Consolidated Rail
Corporation, VF Corporation and The Bon-Ton
Stores, Inc., each of which is a publicly traded
reporting company.
Carl B. Marbach became a member of the Board
of Directors in December 1991 and is a member of
the Compensation Committee, the Audit Committee,
the Compensation Committee for Key Executives and
Non-Employee Directors, and the Shelf Terms
Committee. Since January 1995, Mr. Marbach has
been President of Internetwork Publishing Corp.,
an electronic publisher, which he founded. From
September 1992 to December 1994, Mr. Marbach was
the President of M-2 Systems, Inc., a consulting
firm which he founded. For more than five years
prior to September 1992, Mr. Marbach had been
President of Professional Press, a suburban
Philadelphia-based publisher of computer
periodicals and books, of which he was the
founder.
Joel H. Rassman became a member of the Board
of Directors in September 1996. Mr. Rassman
joined the Company in 1984 as Senior Vice
President, Treasurer and Chief Financial Officer
of the Company.
Paul E. Shapiro became a member of the Board
of Directors in December 1993 and is a member of
the Audit Committee and the Compensation
Committee for Key Executives and Non-Employee
Directors. Since January 1994, Mr. Shapiro has
been an Executive Vice President/Chief
Administrative Officer/General Counsel of Marvel
Entertainment Group, Inc., a publicly traded
reporting company. In December 1996, Marvel
Entertainment Group, Inc. filed a Chapter 11
bankruptcy petition. From March 1991 to December
1993, Mr. Shapiro was a shareholder of the West
Palm Beach, Florida law firm of Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quental and was
of counsel to that firm until January 1, 1996.
Meetings and Committees of the Board of Directors
The Board of Directors held five meetings
(four formal meetings and one telephonic meeting)
during the Company's last fiscal year and also
acted by unanimous consent in writing.
The Board of Directors currently has an
Audit Committee, a Stock Option Committee, a
Compensation Committee, a Compensation Committee
for Key Executives and Non-Employee Directors, a
Subordinated Debt-Repurchase Authorization
Committee and a Shelf Terms Committee. The Audit
Committee held four formal meetings during the
last fiscal year, of which two were attended by
the Company's independent auditors, to discuss
the scope of the annual audit and questions of
accounting policy and internal control. The
Stock Option Committee held three formal meetings
during the Company's last fiscal year. During
the Company's last fiscal year, the Compensation
Committee for Key Executives and Non-Employee
Directors which administers the Cash Bonus Plan,
the 1986 Plan, the 1995 Plan and the Key
Executive and Non-Employee Directors Stock Option
Plan (1993) (the "1993 Plan"), held one formal
meeting and one telephonic meeting. The
Subordinated Debt-Repurchase Authorization
Committee and the Shelf Terms Committee each held
one formal meeting during the Company's last
fiscal year.
Compensation of Directors
Non-employee directors receive $4,000 for
each full-day meeting that they attend, $2,000
for each half-day meeting that they attend, and
$1,500 for each telephonic Board of Directors
meeting or committee meeting in which they
participate. In addition, each non-employee
director receives an annual grant of options for
15,000 shares of the Company's Common Stock under
the 1993 Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING
"FOR" ROBERT S. BLANK, ROGER S. HILLAS AND PAUL E. SHAPIRO FOR
DIRECTOR.
PROPOSAL TWO
ELECTION OF ONE DIRECTOR FOR THE TERM
ENDING 1999
At the Meeting, the Shareholders will elect
one director to hold office until the 1999 Annual
Meeting of Shareholders and until his respective
successor has been duly elected and qualified.
The Board of Directors has nominated Mr.
Joel H. Rassman to serve as a director until the
1999 Annual Meeting of Shareholders and until his
respective successor has been duly elected and
qualified. Mr. Rassman was elected a director by
the Board of Directors on September 12, 1996 to
serve until the 1997 Annual Meeting and until his
successor is duly elected and qualified. Mr.
Rassman has indicated a willingness to continue
to serve as a director. Should the nominee
become unavailable to accept election as a
director, the persons named in the enclosed proxy
will vote the shares which such proxy represents
for the election of such other person as the
Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" JOEL H. RASSMAN FOR DIRECTOR.
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO CASH BONUS
PLAN
In January 1990, the Board of Directors
decided that salary, bonus and option grants for
the Company's Chief Executive Officer and Chief
Operating Officer should be determined pursuant
to objective measurements, including appropriate
performance criteria, in addition to compensation
that reflected market rates for comparable
executives. Commencing January 1, 1995, the
Board of Directors determined that the formula
for increasing the base salaries for Messrs.
Toll should be based on no less than the increase
in the Consumer Price Index (as defined, using
U.S. Department of Labor definitions) and no more
than the average percentage increase in
compensation of the five highest percentage
compensation increases of the Company's next ten
most highly compensated employees other than
Messrs. Toll for the adjustment year. Cash
bonuses for Messrs. Toll in addition to such
annual salaries also have been determined since
1990 based on certain formulae relating to the
Company's income before income taxes and
shareholders' equity as described below.
The Company's outside directors adopted the
Cash Bonus Plan in December 1993, as further
amended in February 1994, and the Shareholders
approved the Cash Bonus Plan at the 1994 Annual
Meeting. In general, the Cash Bonus Plan is
intended to continue the previous bonus program
for Robert I. Toll, Chairman of the Board and
Chief Executive Officer and Bruce E. Toll,
President and Chief Operating Officer, within the
requirements of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), so
that amounts payable under the Cash Bonus Plan
will be "performance-based" compensation and
therefore will be exempt from the limitations on
deductibility under Section 162(m). The Board of
Directors continues to believe that the Cash
Bonus Plan will assist the Company in motivating
and retaining employees of superior ability,
industry and loyalty, without limiting the
Company's ability to take a tax deduction for
such compensation. The Cash Bonus Plan is
administered by the Compensation Committee for
Key Executives and Non-Employee Directors, which
committee is currently comprised of Messrs. Carl
B. Marbach and Paul E. Shapiro.
The Compensation Committee for Key
Executives and Non-Employee Directors amended the
Cash Bonus Plan on May 29, 1996, subject to
Shareholder approval (which is the subject matter
of this Proposal Three) and subject further to
Shareholder approval of Proposal Four (see
"Proposal Four - Approval of Amendment to the
Company's Stock Option and Incentive Stock Plan
(1995)"), to provide that (i) all bonus payments
made under the Cash Bonus Plan with respect to
the Cash Bonus Plan years ending October 31,
1996, October 31, 1997 and October 31, 1998 shall
be paid in the form of shares of Common Stock,
which payments shall be in the form of an award
under the terms of the 1995 Plan; (ii) the number
of shares of Common Stock awarded pursuant to the
aforementioned provisions of the Cash Bonus Plan
shall be determined by dividing the dollar amount
of each bonus (as determined in accordance with
the Cash Bonus Plan) by $17.125 (the fair market
value of a share of Common Stock, determined as
of May 29, 1996 in accordance with the provisions
for determination of fair market value as set
forth in the 1995 Plan); and (iii) the
Compensation Committee for Key Executives and
Non-Employee Directors shall have the discretion
to terminate the application of the provisions of
the Cash Bonus Plan described in subparagraphs
(i) and (ii) above at any time, effective no
sooner than six months after such decision to
terminate is made by the Compensation Committee
for Key Executives and Non-Employee Directors, in
which event all bonuses payable on or after the
effective date of such termination shall be
payable in cash only. In addition, the Cash
Bonus Plan subsequently was amended to clarify
that, upon receipt of a request by both
participants in the Cash Bonus Plan (based on
their concerns regarding adverse tax consequences
to them), the Compensation Committee for Key
Executives and Non-Employee Directors may, in its
sole discretion, provided that such action will
not cause any increase in the amount or value of
a bonus that would otherwise be payable under the
Cash Bonus Plan, suspend the application of the
provisions described in subparagraphs (i) and
(ii) above, in which event all bonuses payable
under the Cash Bonus Plan shall be payable only
in cash until such time as the Compensation
Committee for Key Executives and Non-Employee
Directors determines to reinstate such provisions. The amendments
to the Cash Bonus Plan described in this paragraph constitute the
amendments for which Shareholder approval is being sought in Proposal
Three.
The material features of the Cash Bonus Plan
are as follows:
1. Participants and Amount of Cash Bonus.
The sole current participants in the Cash Bonus
Plan are Robert I. Toll, Chairman of the Board
and Chief Executive Officer and Bruce E. Toll,
President and Chief Operating Officer. Under
the Cash Bonus Plan, each of Robert I. Toll and
Bruce E. Toll is entitled to receive a bonus
equal to the sum of (a) 1.5% of the Company's
income before income taxes (as defined in the
Cash Bonus Plan) in excess of 10% and up to 20%
of shareholders' equity (as defined in the Cash
Bonus Plan) of the Company as of the end of the
preceding fiscal year, plus (b) 2.0% of the
Company's income before income taxes in excess of
20% and up to 30% of shareholders' equity of the
Company as of the end of the preceding fiscal
year, plus (c) 2.25% of the Company's income
before income taxes in excess of 30% of
shareholders' equity of the Company as of the end
of the preceding fiscal year.
2. Administration. The definitions of the
applicable measurements for the cash bonus
described in Paragraph 1, above, are as set forth
in the Cash Bonus Plan. Subject to the foregoing
and other provisions of the Cash Bonus Plan, a
committee, consisting of at least two members of
the Board of Directors (currently Carl B. Marbach
and Paul E. Shapiro), administers the Plan and,
together with the Audit Committee (currently Carl
B. Marbach and Paul E. Shapiro), determines
whether the various targets under the Cash Bonus
Plan have been met.
3. Term of Plan. The Cash Bonus Plan
provides that the Cash Bonus Plan became
effective as of November 1, 1993 and shall
continue until terminated by the Board of
Directors.
4. Amendments to the Plan. The Cash Bonus
Plan may be terminated or revoked by the Company
at any time and amended by the Company from time
to time, provided that neither the termination,
revocation or amendment of the Plan may, without
the written approval of the participants,
reduce the amount of a bonus payment that is due,
but has not yet been paid, and no changes may be
made that would increase the amount of bonuses
determined under the formula described in
Paragraph 1, above, shall be effective without
approval by the committee and without disclosure
to and approval by the Shareholders in a separate
vote prior to payment of such bonuses. In
addition, the Cash Bonus Plan may be modified or
amended by the committee, as it deems
appropriate, in order to comply with any rules,
regulations or other guidance promulgated by the
Internal Revenue Service with respect to
applicable provisions of the Code as they relate
to the exemption for "performance-based
compensation" under the limitations on the
deductibility of compensation imposed under
Section 162(m) and any other applicable
provisions of the Code.
5. Tax Aspects of the Plan. The Cash
Bonus Plan is designed to maintain the
deductibility of compensation for the Cash Bonus
Plan participants, currently the Company's chief
executive officer and chief operating officer,
under the limitation of Section 162(m). The
recipients of bonuses under the Cash Bonus Plan
will pay Federal income tax on such bonuses at
ordinary income rates, which currently are at a
maximum rate of 39.6%. The participant is
required to make appropriate arrangements with
the Company for satisfaction of any Federal,
state or local income tax withholding
requirements and Social Security or other tax
requirements applicable to the accrual or payment
of benefits under the Cash Bonus Plan. If no
other arrangements are made, the Company may
provide, at its discretion, for any withholding
and tax payments as may be required.
The following table sets forth the benefits
or amounts that were received by or allocated to
the persons listed below under the Cash Bonus
Plan for the last completed Company fiscal year.
CASH BONUS PLAN BENEFITS
Name and Position Dollar Value *
Robert I. Toll, Chairman of the Board and
Chief Executive Officer...............................$1,306,013
Bruce E. Toll, President and Chief
Operating Officer.....................................$1,306,013
Executives as a Group...................................$2,612,026
* As of January 15, 1997. Assumes bonuses are
paid in shares of Common Stock pursuant to the
terms of the Cash Bonus Plan and the 1995 Plan as
amended in accordance with this Proposal Three
and Proposal Four, discussed below. If paid in
cash under the existing Cash Bonus Plan, the
value of the bonuses would be $1,146,938 for
Robert I. Toll and $1,146,938 for Bruce E. Toll.
At October 31, 1996 the fair market value of the
bonus Award shares was $1,146,938 for each of
Robert I. Toll and Bruce E. Toll.
The affirmative vote of the holders of a
majority of the Company's Common Stock present at
the meeting in person or by proxy and the
approval by Shareholders of the Amendment to the
1995 Plan described below (see "Proposal Four -
Proposed Amendment to the Company's Stock Option
and Incentive Plan (1995)"), are required for the
proposed amendments to the Cash Bonus Plan to
become effective. Unless both Proposal Three and
Proposal Four are approved by the Shareholders,
the proposed amendments to the Cash Bonus Plan
and the 1995 Plan will not become effective. The
Company has been advised that it is the intention
of Robert I. Toll and Bruce E. Toll to vote the
shares of Common Stock they beneficially own in
favor of Proposals Three and Four. If they do
so, it is likely that Proposals Three and Four
will be adopted by the Shareholders. See "Voting
Securities and Security Ownership - Security
Ownership of Principal Shareholders and
Management."
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" PROPOSAL THREE
PROPOSAL FOUR
APPROVAL OF THE AMENDMENT TO COMPANY'S
STOCK OPTION AND
INCENTIVE STOCK PLAN (1995)
The 1995 Plan was adopted by the Board of
Directors in January, 1995, and subsequently was
approved by the Shareholders at the 1995 Annual
Meeting. The 1995 Plan effectively replaced the
1986 Plan, which was expiring. As the Company's
principal stock option and incentive plan, it is
intended to serve, along with the 1993 Plan, as
an additional incentive to all employees and
directors of the Company and its affiliates (as
defined) to devote themselves to the future
success of the Company by providing them with an
opportunity to increase their proprietary
interest in the Company through the receipt of
options to purchase the Company's Common Stock
("Options") and/or through incentive stock awards
involving the transfer or issuance of shares of
the Company's Common Stock subject to conditions
of forfeiture ("Awards"). The 1995 Plan was
structured to comply with the applicable
provisions of the Securities and Exchange Act of
1934, as amended, and Rule 16b-3 thereunder.
Each Option granted under the 1995 Plan is
intended to be an incentive stock option ("ISO")
within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended (the
"Code"), for federal income tax purposes, except
to the extent (i) any such ISO grant would exceed
the maximum grant limitations set forth in
Paragraph 7 below, (ii) any Option is
specifically designated at the time of grant as
not being an ISO, and (iii) any Option is granted
to Robert I. Toll or Bruce E. Toll (the
"Executives") under the formula grant provisions
set forth in Paragraph 10 below. No Option
granted to a person who is not an employee of the
Company or an affiliate on the date such Option
is granted, will be an ISO.
In the opinion of the Board of Directors of
the Company, the ability to grant Options and
make Awards to employees and non-employee members
of the Board of Directors of the Company permits
the Company to recognize the contributions made
to the Company by such persons and provides them
with an additional incentive to enter into or
remain in the employ of the Company or on the
Board of Directors and to devote themselves to
the Company's success by providing them with an
opportunity to acquire or increase their
proprietary interest in the Company.
The Board of Directors, upon the
recommendation of the Compensation Committee for
Key Executives and Non-Employee Directors, which
administers the 1995 Plan, has proposed to amend
the 1995 Plan, subject to Shareholder approval
(which is the subject of this Proposal Four) and
subject further to Shareholder approval of
Proposal Three (See "Proposal Three - Approval of
Amendments to Cash Bonus Plan"), to permit Awards
under the 1995 Plan to Executives to the extent
an Award is required to be granted to an
Executive pursuant to the proposed terms of the
Cash Bonus Plan, as described above in "Proposal
Three - Approval of Amendments to Cash Bonus
Plan." The amendment described in this paragraph
constitutes the amendment of the 1995 Plan for
which Shareholder approval is being sought in
this Proposal Four.
The key provisions of the 1995 Plan are
summarized below.
1. Shares Subject to the 1995 Plan. The
maximum number of shares of Common Stock of the
Company which were available for the grant of
Options and Awards under the 1995 Plan in the
1995 calendar year, in which the 1995 Plan was
approved by the Shareholders, was 2,000,000. For
each subsequent calendar year, the maximum number
of shares of Common Stock available for the grant
of Options and Awards under the 1995 Plan is
equal to the sum of (i) the number of shares of
Common Stock available for Options and Awards
under the 1995 Plan in the immediately preceding
year which were not covered by Options and Awards
granted in such year and (ii) two percent (2%) of
the number of shares of Common Stock outstanding
(including treasury shares) as of the first day
of the subsequent year. Notwithstanding the
foregoing, in no event shall (x) more than
2,500,000 shares of Common Stock be available in
the aggregate for the issuance of Common Stock
pursuant to ISOs granted under the 1995 Plan, and
(y) more than 2,500,000 shares of Common Stock be
available for the grant of Options and Awards in
any single calendar year. Additionally,
notwithstanding anything to the contrary
otherwise contained in the 1995 Plan, no employee
shall be granted Options to purchase more than
1,000,000 shares of Common Stock during any
single calendar year. The amount of shares
issuable with respect to Options and Awards
granted under the 1995 Plan is subject to
adjustment in the event of a stock dividend,
stock split and certain other capital
adjustments. As of January 15, 1997, the
aggregate market value of the 3,355,023 shares of
Common Stock for which Option and Awards have
been granted or may be granted was $65,422,949.
2. Administration. The 1995 Plan is
administered by the Board of Directors of the
Company or a committee of the Board of Directors
(in either case referred to hereinafter as the
"Committee"), provided, however, that the
Compensation Committee for Key Executives and
Non-Employee Directors administers the 1995 Plan
with respect to Options granted to the
Executives. Except with respect to Options which
may or are required to be granted to the
Executives, the Committee has the authority to
determine to whom and the times at which Options
and Awards shall be granted, the number of shares
of the Company's Common Stock subject to Options
or Awards granted and the price and other terms
and conditions thereof.
3. Eligibility. All employees and
directors of the Company and its affiliates (as
defined) are eligible to receive Options and
Awards under the 1995 Plan; provided, however,
that the Executives are only eligible to be
granted Options pursuant to special provisions
summarized in Paragraph 10 below, and, provided
further, that the Executives are not eligible to
receive Awards except to the extent an Award is
required to be granted to an Executive pursuant
to the terms of the Cash Bonus Plan. There are
currently approximately 900 persons who are
eligible to participate in the 1995 Plan.
4. Term of 1995 Plan. The 1995 Plan was
effective January 31, 1995. No Option or Award
may be granted under the 1995 Plan after January
31, 2005.
5. Term of Options. All Options terminate
on the earliest of: (a) the expiration of the
term specified in the document granting the
Option, which shall not exceed (i) 10 years (for
an ISO) or 10 years and one day (for a non-qualified stock option)
from the date of grant or (ii) 5 years (for an ISO) from the date of grant
if the optionee owns, directly or by attribution
under the Code, shares possessing more than 10%
of the total combined voting power of all classes
of stock of the Company or its affiliates (as
defined); (b) the expiration of three months (or
such shorter period as the Committee may select)
from the date the optionee's employment
terminates for any reason other than disability,
death or a "Change of Control;"(c) the expiration
of one year from the date on which the optionee's
employment terminates due to such optionee's
disability or death; (d) the date set by the
Committee to be an accelerated expiration date in
the event of a "Change of Control;" (e) the date
set by the Committee to be an accelerated
expiration date after a finding by the Committee
that a change in the financial accounting
treatment for Options from that in effect on the
date the 1995 Plan was adopted adversely affects
or, in the determination of the Committee, may
adversely affect in the foreseeable future, the
Company; and (f) a finding by the Committee that
the optionee has breached his employment or
service contract with the Company or an affiliate
(as defined) or has been engaged in any sort of
disloyalty to the Company.
Notwithstanding the foregoing period
limitations described under clauses (b)-(f)
above, the Committee may extend the period during
which an Option may be exercised to a date no
later than the date of expiration of the term
specified in the document granting the Option.
In addition, non-qualified stock options
granted or to be granted to the Executives have
further limitations on their term, as described
in Paragraph 10 below.
6. Option Price. The exercise price of
Options will be at least 100% of the fair market
value of the Company's Common Stock subject to
the Option on the date the Option is granted; or
in the case of an ISO, at least 110% of the fair
market value of the Company's Common Stock on the
date the Option is granted if the recipient owns,
directly or by attribution under the Code, shares
possessing more than 10% of the total combined
voting power of all classes of stock of the
Company or an affiliate (as defined).
7. Maximum Grant. Any ISO granted under
the 1995 Plan will limit the number of shares of
the Company's Common Stock for which an optionee
first may exercise the Option in any calendar
year to shares of the Company's Common Stock with
an aggregate fair market value, determined at the
time the Option is granted, not to exceed
$100,000. The $100,000 exercise limit for any
calendar year shall be reduced by the fair market
value of shares of the Company's Common Stock for
which the optionee was granted an ISO (determined
at the time of such ISO grant) under any other
plan of the Company or affiliate (as defined)
that first becomes exercisable in such calendar
year. In addition, no director, except for the
Executives, may receive Options to purchase, in
the aggregate, more than 450,000 shares of the
Company's Common Stock under the 1995 Plan.
8. Payment. An Option holder may pay for
shares covered by an Option in cash, by certified
check payable to the order of the Company or by
such other mode of payment as the 1995 Plan
Committee may approve, including payment through
a broker in accordance with certain federal laws,
or payments in whole or in part in shares of the
Company's common stock held by the Optionee for
more than one year. Notwithstanding the
foregoing, the Board of Directors, in its sole
discretion, may refuse to accept shares of Common
Stock in payment of the Option exercise price.
9. Option Document; Restriction on
Transferability. All Options, with the exception
of those granted to the Executives pursuant to
the provisions summarized in Paragraph 10 below,
will be evidenced by a written Option document
containing provisions consistent with the 1995
Plan. No Option granted under the 1995 Plan may
be transferred, except by will, by the laws of
descent and distribution or, in the case of a
non-qualified stock Option, pursuant to a
qualified domestic relations order as defined by
the Code or in Title I of the Employee Retirement
Income Security Act of 1974, as amended.
10. Special Provisions for Grant of Options
to the Executives. Options will be granted to
the Executives and will become exercisable under
the 1995 Plan only in accordance with the
following terms:
A. Each Executive was granted by the
Board of Directors an Option to purchase
50,000 shares of Common Stock, effective on
November 1, 1996, and will be granted an
Option to purchase 50,000 shares of Common
Stock on each of November 1, 1997 and
November 1, 1998.
B. For each fiscal year during the
period from November 1, 1995 to October 31,
1998 in which the "Pre-Tax Return on Equity"
is at least 20%, each Executive will be
granted an Option, 60 days after the end of
such fiscal year, but no later than the last
business day of the calendar year in which
such fiscal year ends (or if the Company's
net income before income taxes and
extraordinary items has not at that time
been determined by its independent auditors,
then ten days after the Company announces
its net income before income taxes and
extraordinary items for such fiscal year),
to purchase 30,000 shares plus 1,250 shares
for each additional one percent by which the
"Pre-Tax Return on Equity" exceeds 20% (but
no more than an aggregate of 75,000 shares
in any fiscal year). The 1995 Plan defines
"Pre-Tax Return on Equity" as the percentage
of shareholders' equity of the Company (as
defined) as of the beginning of the
applicable fiscal year represented by the
Company's net income before income taxes and
extraordinary items for such fiscal year.
C. For the three fiscal year period
commencing November 1, 1994 and ending
October 31, 1997, if the "After-Tax Return
on Equity" is equal to at least 45%, each
Executive will be granted an Option, 60 days
after the end of such three fiscal year
period, but no later than the last business
day of the calendar year in which such three
fiscal year period ends (or if the Company's
net income after income taxes has not at
that time been determined by its independent
auditors, then ten days after the Company
announces its net income after income taxes
for the last fiscal year in the period) to
purchase 100,000 shares plus 2,500 shares
for each one percent by which the "After-Tax
Return on Equity" exceeds 45% (but no more
than an aggregate of 200,000 shares for such
three year period). The 1995 Plan defines
"After-Tax Return on Equity" as the
percentage of shareholders' equity of the
Company (as defined) as of October 31, 1994
represented by the Company's cumulative
consolidated net income (or loss) for the
three fiscal years beginning November 1,
1994 and ending October 31, 1997.
D. For each consecutive two year
period, commencing on each of March 1, 1995,
1996 and 1997 in which the "Increase in
Common Stock Value" is at least equal to
40%, each Executive will be granted an
Option, ten business days following the end
of each such two year period, to purchase
30,000 shares plus 1,250 shares for each
one percent by which the "Increase in Common
Stock Value" exceeds 40% (but no more than
an aggregate of 100,000 shares for any such
two year period). The 1995 Plan defines
"Increase in Common Stock Value" as the
increase, if any, between the fair market
value per share of Common Stock at the
beginning of each such period and the fair
market value at the end of each such period,
expressed as a percentage of the fair market
value per share of Common Stock at the
beginning of each such period.
All Options granted to the Executives will
be non-qualified stock options. All Options
granted to the Executives are immediately
exercisable, except for those Options granted
under A above which do not vest or become
exercisable until one year from the date of
grant. All Options granted under A, B, C and D
above are independent of each other and Options
may be granted under any or all such provisions,
to the extent earned.
If an Executive ceases to be chief executive
officer or chief operating officer, as
applicable, during any such period in respect of
which Options may be granted pursuant to the
foregoing provisions, (i) he shall not be granted
any additional Options under A, B, C and D above
unless all events establishing his entitlement to
one or more such grants of Options, other than
the grant itself, have occurred prior to his
ceasing to be chief executive officer or chief
operating officer, as applicable, and (ii) shall
not be permitted to exercise his Options granted
under A above if such Options were not
exercisable by the Executive when he ceased to be
chief executive officer or chief operating
officer, as applicable. Thus, such Options
described under A, B, C and D above are not
affected by the Executive's membership on the
Committee, but are affected by the Executive's
service as chief executive officer or chief
operating officer, as applicable. In addition,
the term provisions described in Paragraph 5
above, also apply to Options granted to the
Executives.
11. Award Agreements; Restrictions and
Conditions of Forfeiture. All Awards shall be
evidenced by a written award agreement containing
provisions consistent with the 1995 Plan
including the purchase price, if any, which
applies to the Award. The Committee may specify
in an Award agreement any conditions under which
the recipient of the Award shall be required to
convey to the Company the shares of Common Stock
covered by the Award. All restrictions shall
lapse or terminate with respect to shares covered
by the Award upon the death or disability (as
defined in the Code) of the recipient of the
Award. The recipient of the Award shall have all
the rights of a Shareholder with respect to the
shares of Common Stock covered thereby, including
the right to vote such shares and receive
dividends and other distributions paid or made
with respect thereto, except to the extent
otherwise provided by the Committee or in the
Award agreement. Upon a finding by the Committee
that the recipient of the Award has breached his
employment or service contract with the Company
or an affiliate or has been engaged in any sort
of disloyalty to the Company, the recipient of
the Award shall automatically forfeit all shares
of Common Stock granted pursuant to an Award for
which the Company has not yet delivered the share
certificates or any restrictions applicable to
such shares have not yet lapsed.
12. Provisions Relating to a "Change of
Control." In the event of a "Change of Control,"
the Committee may take whatever action with
respect to outstanding Options or Awards that
have been granted that it deems necessary or
desirable, including accelerating the expiration
or termination date of the Options to a date no
later than 30 days after notice of such
acceleration is given to the holders of Options.
In addition, in the event of a "Change of
Control," all outstanding Options granted
pursuant to the 1995 Plan will become immediately
exercisable in full and any restrictions
applicable to shares of Common Stock issued
pursuant to Awards granted under the 1995 Plan
shall lapse.
A "Change of Control" will occur under the
1995 Plan upon requisite Shareholder approval
(or,
if such approval is not required, the approval of
the Board of Directors) of a plan of liquidation
or dissolution or the sale of substantially all
of the assets of the Company. Subject to certain
exemptions, a "Change of Control" will also occur
upon requisite approval by the Company and the
other constituent corporation's stockholders (or,
if such approval is not required, by the
applicable boards of directors) of the merger or
consolidation of the Company with or into such
other constituent corporation. In addition, a
"Change of Control" will occur if certain
entities, persons or groups specified in the 1995
Plan (not including persons owning in excess of
20% of the Company's outstanding shares of Common
Stock at the time of the adoption of the 1995
Plan by the Board of Directors) have become
beneficial owners of or have obtained voting
control over more than 50% of the Company's
outstanding shares of Common Stock, or on the
first date upon which a majority of the Board of
Directors consist of persons who have been
members of the Board of Directors for less than
24 months, unless the nomination for election of
each new director who was not a director at the
beginning of such period was approved by a vote
of at least two-thirds of the directors then
still in office who were directors at the
beginning of such period.
13. Amendments to an Option Document,
Awards and the 1995 Plan. Subject to the
provisions of the 1995 Plan, the Board of
Directors may amend an Option or Award document
subject to the Option holder's or Award
recipient's consent if the amendment is not
favorable to the Option holder or Award recipient
and is not being made pursuant to provisions of
the 1995 Plan relating to a Change of Control.
The Board of Directors may amend the 1995 Plan
from time to time in such manner as it may deem
advisable. However, the Board of Directors may
not, without the approval by vote of the majority
of the outstanding voting stock of the Company,
within 12 months before or after the Board of
Director's adoption of the amendment, with
respect to all Options other than Options granted
to the Executives, change the class of
individuals eligible to receive an ISO, extend
the expiration date of the 1995 Plan, decrease
the minimum exercise price of an ISO granted
under the 1995 Plan or increase the maximum
number of shares of Common Stock as to which
Options may be granted under the 1995 Plan. In
addition, provisions of the 1995 Plan relating to
the Executives that determine (i) which
Executives shall be granted Options; (ii) the
number of shares of Common Stock subject to such
Options; (iii) the exercise price; and (iv) the
timing of grants of Options, shall not be amended
more than once every six months, other than to
comport with changes in the Code or the Employee
Income Security Act of 1974, as amended, if
applicable.
14. Tax Aspects of the 1995 Plan. The
following discussion is intended to briefly
summarize the general principles of Federal
income tax law applicable to Options and Awards
granted under the 1995 Plan.
A recipient of an ISO will not recognize
taxable income upon either the grant or exercise
of the ISO. The Option holder will recognize
long-term capital gain or loss on a disposition
of the shares acquired upon exercise of an ISO,
provided the Option holder does not dispose of
those shares within two years from the date the
ISO was granted or within one year after the
shares were transferred to such Option holder.
Currently, for regular federal income tax
purposes, long-term capital gain is taxed at a
maximum rate of 28%, while ordinary income may be
subject to a maximum effective rate of 39.6%. If
the Option holder satisfies both of the foregoing
holding periods, then the Company will not be
allowed a deduction by reason of the grant or
exercise of an ISO.
As a general rule, if the Option holder
disposes of the shares before satisfying both
holding period
requirements (a "disqualifying disposition"), the
gain recognized by the Option holder on the
disqualifying disposition will be taxed as
ordinary income to the extent of the difference
between (a) the lesser of the fair market value
of the shares on the date of exercise or the
amount received for the shares in the
disqualifying disposition, and (b) the adjusted
basis of the shares, and the Company will be
entitled to a deduction equal to such amount.
The gain (if any) in excess of the amount
recognized as ordinary income on a disqualifying
disposition will be long-term or short-term
capital gain, depending on the length of time the
Option holder held the shares prior to the
disposition.
The amount by which the fair market value of
a share at the time of exercise exceeds the
exercise price will be included in the
computation of such Option holder's "alternative
minimum taxable income" in the year the Option
holder exercises the ISO. Currently, the maximum
alternative minimum tax rate is 28%. If an
Option holder pays alternative minimum tax with
respect to the exercise of an ISO, then the
amount of such tax paid will be allowed as a
credit against regular tax liability in
subsequent years. The Option holder's basis in
the shares for purposes of the alternative
minimum tax will be adjusted when income is
included in alternative minimum taxable income.
A recipient of a non-qualified stock option
will not recognize taxable income at the time of
grant, and the Company will not be allowed a
deduction by reason of the grant. Such an Option
holder will recognize ordinary income in the
taxable year in which the Option holder exercises
the Option, in an amount equal to the excess of
the fair market value of the shares received upon
exercise at the time of exercise of such Option
over the exercise price of such Option, and the
Company will be allowed a deduction in that
amount. Upon disposition of the shares which had
been subject to the Option, an Option holder will
recognize long-term or short-term capital gain or
loss, depending upon the length of time the
shares were held prior to disposition, equal to
the difference between the amount realized on
disposition and the Option holder's basis in the
shares which had been subject to the Option
(which basis ordinarily is the fair market value
of the shares which had been subject to the
Option on the date the Option was exercised).
Any shares of Common Stock subject to an
Award will be treated as acquired by the Award
recipient in connection with the performance of
services. Such shares are likely to be
considered to be subject to a "substantial risk
of forfeiture" until the restrictions imposed on
such Award recipient, if any, lapse. Assuming
the restrictions represent a "substantial risk of
forfeiture", an Award recipient will recognize
ordinary compensation income in each year in
which the restrictions on the shares (if any)
lapse, equal to the fair market value of the
shares as to which such restrictions lapse. The
fair market value of the shares at the time the
restrictions lapse will generally be the then-current market price. An Award
recipient's basis for determining gain or loss on a subsequent
disposition of such shares will be the amount
which the Award recipient included in income when
the restrictions lapsed. Any gain or loss
recognized on a disposition of the stock
generally will be long-term or short-term capital
gain or loss depending on the length of time the
shares have been held after the date the stock
vested.
The general rule described above does not
apply if an Award recipient elects, under Section
83(b) of the Code, to recognize the fair market
value of the shares awarded without taking into
account the restrictions on such stock. Where
such an election is made, the Award recipient is
not required to recognize additional income when
the shares vests. The basis for determining gain
or loss on a disposition of such shares will be
the amount included in income pursuant to the
Code Section 83(b) election. The gain or loss
recognized on a disposition will be long or
short-term capital gain or loss depending on the
length of time the shares are held after the date
the Award was granted. If an Award recipient
forfeits any shares under the provisions of the
1995 Plan, the Award recipient will not be
entitled to deduct such a forfeiture as a loss
even though the Award recipient included an
amount in income by virtue of a Code Section
83(b) election.
An Award recipient who files an election
with the Internal Revenue Service to include the
fair market value of any shares in gross income
while they are still subject to restrictions must
furnish the Company with a copy of such election
together with the amount of any federal, state,
local or other taxes required to be withheld to
enable the Company to claim an income tax
deduction with respect to such election.
The Company will be entitled to a deduction
in an amount equal to the income recognized by
the Award recipient when the restrictions on such
stock lapse (or upon the earlier recognition of
income where an any employee has made a Code
Section 83(b) Election).
Whenever the Company proposes or is required
to deliver or transfer shares in connection with
the exercise of an Option or pursuant to an Award
under the 1995 Plan, the Company has the right to
require the Option holder or the recipient of the
Award to remit or otherwise make available to the
Company an amount sufficient to satisfy any
federal, state and/or local withholding tax
requirements prior to the delivery or transfer of
any certificate or certificates for such shares
or to take whatever action it deems necessary to
protect its interest with respect to tax
liabilities in connection with the issuance of
such shares. The Committee may establish such
requirements and procedures which it deems
appropriate with respect to the shares of the
Company's Common Stock available for the grant of
Options or Awards to satisfy any federal, state
and/or local withholding tax requirements which
arise in connection with the delivery or transfer
of such shares.
The following table sets forth the benefits
or amounts that were received by or allocated to
the persons listed below under the 1995 Plan for
the Company's last completed fiscal year except
as noted below. The dollar value of the Awards
set forth below has been calculated based on the
fair market value of the Common Stock on January
15, 1997; such Awards are subject to shareholder
approval. The dollar value of the Option grants
set forth below has been calculated based on the
difference between the fair market value of the
Common Stock on the date of grant and January 15,
1997:
1995 PLAN BENEFITS
Dollar Value Number Dollar Value Number
Name of Awards of Awards of Options of Options
Robert I. Toll............... $1,306,013 66,975(1) $118,750 96,250(2)
Chairman of the Board
and Chief Executive Officer
Bruce E. Toll................ $1,306,013 66,975(1) $118,750 96,250(2)
President, Chief Operating
Officer and Secretary
Zvi Barzilay N/A 0 N/A 0
Executive Vice President
Joel H. Rassman N/A 0 N/A 0
Senior Vice President,
Chief Financial Officer,
Treasurer and Nominee
for Director
Executive Officer Group...... $2,612,026 133,950(1) $237,500 192,500(2)
Non-Executive Officer
Director Group............ N/A 0 N/A 0
Wayne S. Patterson........... N/A 0 0 35,000
Senior Vice President
(Non-Executive Officer)
All Non-Executive Officers and
Employees as a Group......... N/A 0 $ 21,250(3) 451,750
(1) Subject to Shareholder approval of Proposal Three and
Proposal Four. If Proposals Three and Four are not
approved by the Shareholders of the Company, each of
Messrs. Toll will receive a cash bonus, under the
existing Cash Bonus Plan, of $1,146,938. At October
31, 1996 the fair market value of the bonus Award
shares was $1,146,938 for each of Robert I. Toll and
Bruce E. Toll.
(2) 50,000 options were granted to each of Messrs. Toll on
November 1, 1996 and 46,250 options were granted to
each of Messrs. Toll on December 30, 1996 for the
fiscal year ended October 31, 1996. All such grants
were issued pursuant to the 1995 Plan.
(3) Represents the difference between the fair market value
of the Common Stock on the date of grant and January
15, 1997 on 10,000 shares of Common Stock. The fair
market value on the date of grant for the remaining
441,750 shares exceeded the fair market value on
January 15, 1997.
The affirmative vote of the holders of a
majority of the Company's Common Stock present at
the Meeting in person or by proxy and the approval by
Shareholders of the amendments to the Cash Bonus
Plan described above (see "Proposal Three -
Proposed Amendments to the Company's Cash Bonus
Plan") are required for the proposed amendment to
the 1995 Plan to become effective. Unless both
Proposal Four and Proposal Three are approved by
the Shareholders, the proposed amendments to the
1995 Plan and the Cash Bonus Plan will not become
effective. The Company has been advised that
Robert I. Toll and Bruce E. Toll intend to vote
the shares of Common Stock they beneficially own
in favor of the approval of the proposed
amendment to the 1995 Plan. If they do so, it is
likely that the proposed amendment to the 1995
Plan will be approved by the Shareholders. See
"Voting Securities and Security Ownership --
Security Ownership of Principal Shareholders and
Management."
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE APPROVAL OF PROPOSAL FOUR
PROPOSAL FIVE
APPROVAL OF THE COMPANY'S INDEPENDENT AUDITORS
The Company's Board of Directors recommends
that the Shareholders consider and approve a
proposal to select Ernst & Young LLP, which
served as the Company's independent auditors for
the last fiscal year, to serve as the Company's
independent auditors for the current fiscal year
ending October 31, 1997. A representative of
Ernst & Young LLP is expected to be present at
the Meeting, will have the opportunity to make a
statement if such representative desires to do so
and will be available to respond to appropriate
questions of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
PROPOSAL FIVE
INTERESTS OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON
If Proposals Three and Four are approved by
the Shareholders and become effective, all bonus
payments made under the Cash Bonus Plan to Robert
I. Toll, Chairman of the Board of Directors and
Chief Executive Officer, and Bruce E. Toll,
President, Chief Operating Officer, Secretary and
Director, with respect to the Cash Bonus Plan
years ending October 31, 1996, October 31, 1997
and October 31, 1998 will be paid in the form of
an Award of shares of Common Stock under the
terms of the 1995 Plan, and the number of shares
of Common Stock so awarded will be determined
based on the fair market value of a share of
Common Stock as of May 29, 1996. To the extent
that the fair market value of a share of the
Common Stock on the date that a bonus is paid in
stock exceeds the value of a share of Common
Stock on May 29, 1996, the bonus recipient will
receive stock with a fair market value that
exceeds the amount of the bonus if paid in cash
under the existing Cash Bonus Plan. Conversely,
if the fair market value of a share of the Common
Stock on the date that the bonus is paid in stock
is less than the value of a share of Common Stock
on May 29, 1996, the bonus recipient will receive
stock with a fair market value that is less than
the amount of the bonus if paid in cash under the
existing Cash Bonus Plan. If Proposals Three and
Four are approved, each of Messrs. Toll will
receive their bonuses, which would be $1,146,938
each under the existing Cash Bonus Plan, in
Common Stock with a fair market value of
$1,306,013 as of January 15, 1997. At October
31, 1996 the fair market value of the bonus Award
shares was $1,146,938 for each of Robert I. Toll
and Bruce E. Toll.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash and
noncash compensation for each of the last three
fiscal years awarded to or earned by the Chief
Executive Officer of the Company and the other
executive officers of the Company.
Long Term
Compensation
Awards
Name and Securities
Principal Fiscal Annual Compensation Underlying All Other
Position Year Salary Bonus Options(#) Compensation
($) ($)(1) ($)(2)
Robert I. Toll..... 1996 829,432 1,146,938 73,000 7,776
Chairman of the 1995 748,804 1,177,198 190,000 7,788
Board and Chief 1994 691,912 771,444 67,000 11,282
Executive Officer
Bruce E. Toll...... 1996 829,432 1,146,938 73,000 7,776
President, Chief 1995 748,804 1,177,198 190,000 7,788
Operating Officer 1994 691,912 771,444 67,000 11,282
and Secretary
Zvi Barzilay...... 1996 639,794 120,000 100,000 7,776
Executive Vice 1995 515,801 120,000 100,000 7,788
President (3) 1994 334,242 120,000 100,000 12,602
Joel H. Rassman.... 1996 509,212 120,000 50,000 7,776
Senior Vice 1995 461,908 120,000 50,000 7,788
President, 1994 361,164 120,000 50,000 12,610
Chief Financial
Officer and
Treasurer (3)(4)
(1) Cash bonuses for services rendered in fiscal years
1995 and 1994 have been listed in the year earned, but
were actually paid in subsequent years. If Proposals
Three and Four are approved by the Shareholders of the
Company, the cash bonuses listed for Messrs. Toll for
fiscal year 1996 will be paid in shares of Common Stock
pursuant to the terms of the Cash Bonus Plan and the
1995 Plan. If paid in shares of Common Stock (based on
conversion at $17.125 per share as set forth in the
Cash Bonus Plan) the value of the bonuses would be
$1,306,013, as of January 15, 1997. At October 31,
1996, the fair market value of the bonus award shares
was $1,146,938 for each of Robert I. Toll and Bruce E.
Toll.
(2) The compensation reported represents the Company's
contribution and matching payments under its 401(k)
salary deferred plan for each executive listed.
(3) Due to a change in the Company's methodology of
compensating certain executives, the bonuses awarded
Messrs. Barzilay and Rassman for fiscal 1994 were
reduced to $120,000 each, and their annual salary rate
commencing December 30, 1994 was increased to $555,000
for Mr. Barzilay and $485,000 for Mr. Rassman (see note
(1) above).
(4) Under the terms of an Agreement dated June 30, 1988
between the Company and Mr. Rassman, in the event of
Mr. Rassman's termination by the Company without cause
(as defined), any material reduction or material
adverse change (as defined) in Mr. Rassman's duties,
any failure by the Company to provide Mr. Rassman with
compensation, including salary and bonus, in an amount
less than $350,000 and the exercise of an election by
Mr. Rassman to terminate his employment or the removal
of fringe benefits (as defined), Mr. Rassman will
receive $250,000, and, in certain instances, an
additional amount equal to the difference between
$350,000 and his actual total compensation during a
specified period prior to his termination.
Option Grants in Last Fiscal Year
The following table provides information on option
grants in the fiscal year ended October 31, 1996 to the
named executive officers and information relating to
all outstanding common shares as of October 31, 1996.
Potential
Realizable
Value
at Assumed
Number of % of Total Annual
Securities Options Rates of
Underlying Granted to Exercise Stock Price
Options Employees Price Expira- Appreciation
Name Granted(#) in Fiscal ($/SH) tion for Option
Year(3) Date Term
5% 10%
Robert I. Toll(1)(4)... 30,000 3.56% 18.0000 10/31/05 $ 339,603 $ 860,621
Robert I. Toll(1)(4)... 43,000 5.10 17.3125 10/28/06 468,173 1,186,442
Bruce E. Toll(1)(4).... 30,000 3.56 18.0000 10/31/05 339,603 860,621
Bruce E. Toll(1)(4).... 43,000 5.10 17.3125 10/28/06 468,173 1,186,442
Zvi Barzilay(2)........ 100,000 11.86 20.2500 12/19/05 1,273,512 3,227,328
Joel H. Rassman(2)..... 50,000 5.93 20.2500 12/19/05 636,756 1,613,664
All Outstanding
Common Shares(5)...33,918,606 N/A N/A N/A $404,023,207 $1,023,874,132
- -------------------------
(1) Options granted in fiscal 1996 become fully exercisable
on the first anniversary of the date of the grant.
(2) Options granted in fiscal 1996 become exercisable
starting on the first anniversary of the grant, with
25% becoming exercisable at that time and 25% becoming
exercisable on each of the second, third and fourth
anniversary dates.
(3) The Company granted options representing 768,450 shares
of Common Stock to employees and 75,000 shares to non-employee
directors in fiscal 1996.
(4) Issued pursuant to formula grant provisions of the 1986
Plan. In addition, pursuant to the grant provisions of
the 1995 Plan, options for 50,000 shares of Common
Stock were granted on November 1, 1996 and options for
46,250 shares of Common Stock were granted on December
30, 1996 to each of Robert I. Toll and Bruce E. Toll.
(5) Illustrates the aggregate appreciation in value of all
shares of Common Stock outstanding on October 31, 1996
based on the assumed 5% and 10% rates of appreciation
that produced the realizable value of the options
granted to executive officers shown in this table
(measured from the dates of grant of the options to
their expiration, on a weighted average basis).
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
The following table sets forth certain information with regard
to the aggregated option exercises in the fiscal year ended October
31, 1996 and the option values as of the end of that year for the
chief executive officer and other executive officers of the Company.
Value of
Number of Unexercised
Unxercised In-The-Money
Options at Options at
October 31, October 31,
Shares 1996(#) 1996($)(1)
Acquired on Value Exercisable(E) Exercisable(E)
Name Exercise(#) Realized($) Unexercisable(U) Unexercisable
Robert I. Toll None N/A 346,000(E) 1,671,125(E)
73,000(U)(2) 0(U)
Bruce E. Toll None N/A 346,000(E) 1,671,125(E)
73,000(U)(2) 0(U)
Zvi Barzilay 28,000 326,375 259,000(E) 979,250(E)
150,000(U) 359,375(U)
Joel H. Rassman 25,000 248,125 120,000(E) 459,063(E)
75,000(U) 179,688(U)
_____________________
(1) Based upon the difference between the exercise price
of the option and the closing price of $17.125 per
share of the Company's Common Stock as reported on
the New York Stock Exchange on October 31, 1996.
(2) See note (4) to table under "Option Grants in Last Fiscal Year".
Compensation Committee Interlocks and Insider
Participation
The Compensation Committee of the Board of
Directors currently consists of Robert I. Toll,
Bruce E. Toll and Carl B. Marbach. Robert I. Toll
is the Company's Chairman of the Board and Chief
Executive Officer and Bruce E. Toll is the Company's
President and Chief Operating Officer. In naming
these individuals to the Compensation Committee, the
Board decided that salary, bonus and option grants
for the Company's Chief Executive Officer and Chief
Operating Officer should be determined pursuant to
certain objective measurements of the Company's
performance and base salary percentage increases for
other executives of the Company and that the
Company's Chief Executive Officer and Chief
Operating Office should have the primary roles in
determining compensation for the Company's other
executive officers.
In order to help provide for an orderly market in
the Company's Common Stock in the event of the death
of either Robert I. Toll or Bruce E. Toll (the
"Tolls"), or both of them, the Company and the Tolls
have entered into agreements in which the Company
has agreed to purchase from the estate of each of
the Tolls $10 million of the Company's Common Stock
(or a lesser amount under certain circumstances),
at a price equal to the greater of fair market value
(as defined) or book value (as defined). Further,
the Tolls have agreed to allow the Company to
purchase $10 million of life insurance on each of
their lives. In addition, the Tolls granted the
Company, at no cost to it, an option to purchase up
to an additional $30 million (or a lesser amount
under certain circumstances) of Common Stock from
each of their estates. The agreements expire in
October 2005.
In addition to the performance of their duties
for the Company, Messrs. Robert I. Toll and Bruce E.
Toll have engaged, and continue to engage, in
certain other businesses in real estate. These
businesses include the purchase, sale and management
of townhome, apartment, condominium, commercial and
industrial real estate projects for rental. The
Company leases, at what it believes to be
competitive market rates certain office space from
a business controlled by Messrs. Robert I. Toll and
Bruce E. Toll. During the last fiscal year, the
Company paid such business approximately $26,500.
The Company has engaged the services of a company
owned by Robbi Toll, the wife of Bruce E. Toll, the
President and Chief Operating Officer of the
Company, to perform interior design work for a
number of its communities' model homes. The Company
paid $358,495 during the last fiscal year to this
company for interior design services. The Company
believes that these transactions were entered into
on a competitive basis.
During the past fiscal year, the Company
purchased a number of vehicles with an aggregate
purchase price of $148,138 from an auto dealership
which was owned by Bruce E. Toll. The Company
believes that the purchases were at competitive
prices.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
Basic Policy Considerations
The Company's compensation policies with respect
to its executive officers, as established by the
Compensation Committee of the Board of Directors
and the Compensation Committee for Key Executives
and Non-Employee Directors (collectively, the
"Compensation Committee" or the "Committee"),
continue to be based on the principles that
compensation should, to a significant extent, be
reflective of the financial performance of the
Company, and that a significant portion of
executive officers' compensation should provide
long-term incentives. Executive compensation is
set at levels that are sufficiently competitive so
that the Company may attract, retain and motivate
the highest quality individuals to contribute to
the Company's goals and objectives and its overall
financial success. Methods of compensation are
designed to provide incentives for performance that
result in continuing improvements in the Company's
financial results or condition, over both the
short-term and the long-term, and to assure
continued service to the Company. Stock options
constitute payment of a significant portion of
incentive compensation, which causes the ultimate
interests of the executives to be aligned with the
interests of the Shareholders in increasing the
value of their investment. Each executive
officer's compensation is based largely upon both
individual and Company performance.
The compensation program is comprised of two
elements: annual salary and possible short-term
incentive awards in the form of cash bonuses, and
a long-term incentive program (namely, stock
options) based on stock ownership and performance.
The details of this compensation program, with
specific discussion of the programs applicable to
the Chief Executive Officer and the Chief Operating
Officer are set out below.
Annual Compensation
For salary levels other than those for the Chief
Executive Officer and the Chief Operating Officer,
the Committee establishes annual salaries by
evaluating individual performance and considering
marketplace valuations of comparable executives,
although salary determinations have not been based
upon any specific constant criteria.
Executives other than the Chief Executive
Officer and the Chief Operating Officer are
eligible for annual incentive bonuses granted at
the discretion of the Committee. These awards are
not intended to be in addition to market level
compensation but instead are designed to make a
significant part of an executive's annual
compensation dependant on the Committee's
assessment of the executive's performance. Factors
the Committee considers include the Company's
overall financial results, as well as the
individual's contributions to the Company's
economic and strategic objectives, the efforts
required and expended by the individual, the
individual's abilities to develop, execute and
implement short-term and long-term corporate goals
and the executive's role in maximizing Company
profitability, managing costs and reducing the
impact of economic and demographic restrictions on
Company performance. The Committee continues to be
cognizant of its competitors' results of
operations, including earnings, margins, return on
equity and other factors, all of which, when
considered in the context of the Company's
comparative results, contribute to the
determination of compensation for the Company's
executives. Since executive performance
constitutes such a major factor in the Company's
success, such incentive bonuses prior to 1994
generally represented approximately 30% or more of
total annual cash compensation for executive
officers; however, in order to remain competitive
at the base salary level for executive officers
(other than the Chief Executive Officer and Chief
Operating Officer) the ratio between salary and
bonus was changed in 1994 by shifting a portion of
the bonus factor to base salary (see note (3) to
table under "Summary Compensation Table").
Long Term Compensation - Stock Options
The stock option component of the executive
officers' compensation package has been designed to
provide incentives for the enhancement of
shareholder value, since the full benefit of stock
option grants will not be realized unless there has
been appreciation in per share values over several
years. In this regard, options have been granted
at fair market value on the date of grant and
generally vest over a number of years, usually not
less than two years, with significant restrictions,
for a typical period of three years, on the
executive's ability to exercise the options and
sell the shares received without the consent of the
respective stock option committee. As with the
grant of incentive cash bonuses, no constant
criteria are used year after year; instead, the
Committee makes a determination of the
effectiveness of the executive and the level of
contributions to the Company's success. Because
the options are granted at fair market value
relative to the date of grant, any value which
ultimately accrues to the executives is based
entirely on the Company's performance, as perceived
by investors who establish the price for the Common
Stock.
1996 Compensation For Chief Executive Officer And
Chief Operating Officer
Messrs. Robert I. Toll and Bruce E. Toll
continue to be viewed by the Board of Directors to
have the primary roles in determining compensation
for the Company's executive officers other than
themselves. Accordingly, the Board decided, in
1990, that salary, bonus and option grants for
Messrs. Robert I. Toll and Bruce E. Toll should be
determined pursuant to objective measurements,
including appropriate performance criteria and
market rates for comparable executives. Commencing
January 1, 1995, the Board of Directors determined
that the formula for increasing the base salaries
of Messrs. Robert I. Toll and Bruce E. Toll should
be based on no less than the increase in the
Consumer Price Index (as defined, using U.S.
Department of Labor definitions) and no more than
the average percentage increase in compensation of
the five highest percentage compensation increases
of the Company's next ten most highly compensated
employees, other than Messrs. Robert I. Toll and
Bruce E. Toll, for the adjustment year. Since
1990, cash bonuses for Messrs. Robert I. Toll and
Bruce E. Toll in addition to such annual salaries
also have been determined based on the formula
contained in the Company's Cash Bonus Plan approved
by shareholders in 1992. Under the Cash Bonus
Plan, each of Robert I. Toll and Bruce E. Toll is
entitled to receive a bonus equal to the sum of (a)
1.5% of the Company's income before income taxes
(as defined in the Cash Bonus Plan) in excess of
10% and up to 20% of shareholders' equity (as
defined in the Cash Bonus Plan) of the Company as
of the end of the preceding fiscal year, plus (b)
2.0% of the Company's income before income taxes in
excess of 20% and up to 30% of shareholders' equity
of the Company as of the end of the preceding
fiscal year, plus (c) 2.25% of the Company's income
before income taxes in excess of 30% of
shareholders' equity of the Company as of the end
of the preceding fiscal year. This method of
compensation ties the compensation of these
executive officers to the Company's performance.
Accordingly, in the past five years, this method
generated, a substantial bonus in 1992, a bonus in
1993 that was twice the size of the bonus for 1992,
a bonus in 1994 that was approximately 42% higher
than the bonus for 1993, a bonus in 1995 that was
53% higher than the bonus for 1994 and a bonus in
1996 that was slightly less than the bonus in 1995.
The Board of Directors and Messrs. Robert I. Toll
and Bruce E. Toll, subject to Shareholder approval,
have agreed that all bonuses payable under the Cash
Bonus Plan for the three years ended October 31,
1996, October 31, 1997 and October 31, 1998 shall
be made in the form of awards of Common Stock. See
"Proposal Three - Approval of Amendments to Cash
Bonus Plan" and "Proposal Four - Approval of
Amendment to the Company's Stock Option and
Incentive Stock Plan (1995)." With respect to
stock option grants under amendments to the
Company's 1986 Plan, approved by Shareholders in
1992, in addition to a grant of 30,000 shares on
April 6, 1992 and annual grants of 30,000 shares on
November 1, 1992 and ending on November 1, 1995,
Messrs, Robert I. Toll and Bruce E. Toll received
option grants based upon the Company achieving
certain annual pre-tax return on equity and
triennial after-tax return on equity. In 1995, the
Shareholders approved the Company's 1995 Plan
whereby Messrs. Robert I. Toll and Bruce E. Toll
each will receive an annual option award of 50,000
shares commencing November 1, 1996 and ending on
November 1, 1998 and additional option grants if
certain defined targets for the Company's pre-tax
return on equity, after-tax return on equity and
increase in common stock value, over one year,
three year and two year fiscal periods,
respectively, are met.
COMPENSATION COMMITTEE
(As Defined)
OF THE BOARD OF
DIRECTORS
Robert I. Toll
Bruce E. Toll
Carl B. Marbach
Paul E. Shapiro
PERFORMANCE GRAPH
The following graph compares the five year
cumulative total return of the Company's Common
Stock, assuming reinvestment of dividends, with the
S & P 500 Index and the S & P Homebuilding Index:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG TOLL BROTHERS, INC., THE S&P 500 INDEX AND
THE S&P HOMEBUILDING INDEX
Toll Brothers, Inc. S & P 500 Index S & P Homebuilding
1991 100 100 100
1992 136 149 110
1993 238 219 126
1994 166 121 131
1995 270 164 166
1996 257 158 206
* $100 invested on 10/31/91 in Stock or Index - including reinvestment of
dividends. Fiscal year ended October 31.
Compliance with Section 16(a)
of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of
1934, and the regulations thereunder, requires the
Company's officers and directors and persons who
own more than ten percent of a registered class of
the Company's equity securities (collectively, the
"reporting persons") to file reports of ownership
and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with
copies of these reports. Based on the Company's
review of the copies of these reports received by
it, and written representations received from
reporting persons, the Company believes that all
filings required to be made by the reporting
persons for the period November 1, 1995 through
October 31, 1996 were made on a timely basis.
Certain Transactions
The Company entered into an agreement in October
1993 to acquire a parcel of land in Pennsylvania
(the "Parcel") from various persons and entities
directly and indirectly related to Robert S. Blank,
a director (collectively, "Sellers"). The purchase
price for the Parcel is approximately $7 million
net of the Sellers' required contribution towards
the cost of a common sewer plant. The Sellers, who
had previously owned a 60% interest in the Parcel
and adjoining properties, acquired the remaining
40% minority interest in the Parcel and the
adjoining properties from a third party in November
1992 after the 40% holder had refused to invest
additional funds to pursue needed approvals, which
appeared likely to involve litigation. The
Sellers' purchase price for the 40% minority
interest was based on a value of $5 million for
100% of the Parcel and the adjoining properties.
The Company has been advised that no portion of the
$2 million price paid by the Sellers for the 40%
minority interest was specifically allocated to the
Parcel as distinguished from the adjoining
properties; moreover, due to differences among the
Parcel and the adjoining properties, including a
variety of approval problems, which ultimately
resulted in litigation only as to the adjoining
properties, any attempt to estimate such a specific
allocation would be speculative. The transaction
was approved by separate actions of both the Audit
Committee and the Board of Directors (Mr. Blank
having withdrawn from the meetings). The Audit
Committee and the Board, basing their
determinations upon comparable sales of property in
the area, the competitive price for the Parcel
compared to market and the attractiveness of the
area for home building purposes, determined that
the transaction was fair to the Company and was
entered into in good faith. The Company acquired
the Parcel in January 1996.
Ballard, Spahr, Andrews & Ingersoll, the law
firm of which Director Richard J. Braemer is a
partner, acted as counsel to the Company in various
matters during fiscal 1996 and was paid aggregate
fees of $127,838 during that period.
For information regarding certain other
transactions, see "Compensation Committee
Interlocks and Insider Participation," elsewhere in
this proxy statement.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented
at the 1998 Annual Meeting of Shareholders must be
received by the Company at the address appearing on
the first page of this proxy statement by October
1, 1997 in order to be considered for inclusion in
the Company's proxy statement and form of proxy
relating to that meeting.
SOLICITATION OF PROXIES
The enclosed form of proxy is being solicited on
behalf of the Company's Board of Directors. The
Company will bear the cost of the solicitation of
proxies for the Meeting, including the cost of
preparing, assembling and mailing proxy materials,
the handling and tabulation of proxies received,
and charges of brokerage houses and other
institutions, nominees and fiduciaries in
forwarding such materials to beneficial owners.
In addition to the mailing of the proxy
material, such solicitation may by made in person
or by telephone, telegraph or telecopy by
directors, officers or regular employees of the
Company, or by a professional proxy solicitation
organization engaged by the Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON WHOSE PROXY IS BEING SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH
PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULE THERETO) AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR ITS MOST RECENT FISCAL
YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO
JOSEPH R. SICREE, DIRECTOR OF INVESTOR RELATIONS,
AT THE ADDRESS OF THE COMPANY APPEARING ON THE
FIRST PAGE OF THIS PROXY STATEMENT.