SCHEDULE 14a
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PACIFIC GREYSTONE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
PACIFIC GREYSTONE CORPORATION
6767 FOREST LAWN DRIVE, SUITE 300
LOS ANGELES, CALIFORNIA 90068
___________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1997
___________________
Dear Stockholders:
The annual meeting of stockholders of Pacific Greystone Corporation (the
"Company") will be held at the Universal City Hilton & Towers, 555 Universal
City Terrace Parkway, Universal City, California 91608 on Thursday, May 8, 1997,
at 9:00 a.m., to consider and vote on the following matters described in this
Notice and the enclosed Proxy Statement:
(1) The election of two (2) members to the Board of Directors for a term
of three (3) years; and
(2) Such other matters as may properly come before the meeting or any
adjournment or adjournments thereof.
Enclosed is a Proxy Statement describing the matters to be voted upon at
the annual meeting. Please read it carefully and then sign, complete and return
your Proxy as promptly as possible. If you receive more than one Proxy because
your shares are registered in different names or addresses, each such Proxy
should be signed and returned to assure that all your shares will be voted.
BY ORDER OF THE
BOARD OF DIRECTORS,
ROBERT W. GARCIN,
SECRETARY
March 21, 1997
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY. THANK YOU.
1538-PS97
PACIFIC GREYSTONE CORPORATION
6767 FOREST LAWN DRIVE, SUITE 300
LOS ANGELES, CALIFORNIA 90068
___________________
PROXY STATEMENT
FOR ANNUAL MEETING TO BE HELD ON MAY 8, 1997
___________________
GENERAL INFORMATION
The Board of Directors has fixed Monday, March 10, 1997, at the close of
business, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting. Only holders of record of shares of
common stock at the close of business on that date are entitled to vote. The
stock transfer books will not be closed.
THE ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY IN CONNECTION WITH THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY
8, 1997. THE PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED THEREIN. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR
THE NOMINEES OF THE BOARD. A Proxy may be revoked at any time before it is
exercised by delivering written notice of such revocation to the Secretary of
the Company prior to the annual meeting or by voting by ballot at the annual
meeting. The cost of soliciting proxies will be borne by the Company.
Solicitation will be made primarily by mail, however regular employees of the
Company, without additional remuneration, may solicit proxies by telephone,
telegram and in person. The proxy materials will be mailed to stockholders of
record beginning on or about March 24, 1997.
The Annual Report of the Company, including audited consolidated balance
sheets of the Company as of December 31, 1996 and 1995 and audited consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ending December 31, 1996, accompanies this Proxy Statement.
The common stock constitutes the only class of securities of the Company
authorized to vote at the annual meeting. As of the close of business on March
10, 1997, there were 14,959,741 shares of common stock outstanding. Each share
is entitled to one vote. Under the Company's Certificate of Incorporation and
applicable law, a stockholder is not entitled to cumulate his or her votes in
the election of directors.
Votes cast by proxy or in person at the annual meeting will be counted by
the person(s) appointed by the Company to act as election inspector(s) for the
meeting. The election inspector(s) will treat shares represented by proxies
that "withhold authority to vote" as shares that are present and entitled to
vote for purposes of determining the presence of a quorum, the election of
directors or the outcome of certain other matters.
The election inspector(s) will treat shares referred to as "broker
non-votes" as shares present and entitled to vote for purposes of determining
the presence of a quorum. However, as to any matter as to which the broker has
physically indicated on the proxy that the broker does not have discretionary
authority to vote the shares, those shares will be treated as not present and
not entitled to vote with respect to that matter (even though those shares are
considered entitled to vote for quorum purposes and may be entitled to vote on
other matters).
Any unmarked proxies, including those submitted by brokers or nominees,
will be voted as indicated in the accompanying Proxy and as summarized elsewhere
in this Proxy Statement.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, Class I, Class II and
Class III. Generally, each director (other than those directors elected to fill
vacancies on the Board) serves until the date of the third annual meeting
following the annual meeting at which such director is elected and until his or
her successor is elected and qualified. The term of office for each of the
Class II and Class III directors ends on the date of the annual meetings in 1998
and 1999, respectively, and the election and qualification of their respective
successors occurs on the same dates.
Two directors of Class I are to be elected at the 1997 annual meeting, each
to hold office until the annual meeting in 2000, and until their respective
successors are elected and qualified. Proxies cannot be voted for a greater
number of persons than the number of nominees named. If any of the nominees
below is unable to serve or for good cause will not serve, it is expected the
proxies will be voted for such other person or persons as the Board of Directors
may recommend, and the proxy confers discretionary authority to do so.
Election of each of the nominees will require the affirmative vote of a
majority (assuming the presence of a quorum) of the shares of the Company's
common stock entitled to vote and present in person or represented by proxy at
the meeting. Proxies solicited by the Board will be voted for each of the
nominees listed below unless the stockholder otherwise specifies in the proxy.
FIRST
YEAR
NAME AGE* PRINCIPAL OCCUPATION CLASS ELECTED
---- ---- -------------------- ----- -------
DIRECTORS TO BE
ELECTED AT THE
1997 ANNUAL
MEETING
David Kaplan 52 Principal with Autumn Hill I 1994
Group
Reuben S. 49 Managing Director of E.M. I 1991
Leibowitz Warburg, Pincus & Co., LLC
OTHER DIRECTORS
OF THE COMPANY
Sidney Lapidus 59 Managing Director of E.M. II 1994
Warburg, Pincus & Co., LLC
John D. Santoleri 33 Managing Director of E.M. II 1991
Warburg, Pincus & Co., LLC
Jack R. Harter 65 Chairman, President and Chief III 1991
Executive Officer of the
Company
Antonio B. Mon 51 Vice Chairman and Chief III 1991
Financial Officer of the
Company
- ---------------
* As of January 31, 1997.
2
DAVID KAPLAN is a principal with the Autumn Hill Group, an investment
banking and advisory firm specializing in homebuilder services since January
1996. From 1991 to 1995, Mr. Kaplan was a principal with Victor Capital Group,
L.P. From 1976 to 1991, he was associated with The Harlan Company, Inc. Mr.
Kaplan currently serves on the board of directors of F.P.A., a New Jersey based
public homebuilder.
REUBEN S. LEIBOWITZ has been a Managing Director of E.M. Warburg, Pincus &
Co., LLC ("Warburg Pincus") since 1984. Prior to 1984, Mr. Leibowitz was a
partner at Spicer and Oppenheim, Certified Public Accountants. Mr. Leibowitz
currently serves on the boards of directors of Chelsea GCA Realty, Inc. and
Grubb & Ellis Company.
SIDNEY LAPIDUS has been a Managing Director of Warburg Pincus since 1974
and has been with Warburg Pincus since 1967. Mr. Lapidus currently serves on
the boards of directors of Renaissance Communications Corp., Panavision Inc.,
Caribiner International, Inc. and Grubb & Ellis Company, as well as a number of
private companies.
JOHN D. SANTOLERI has been a Managing Director of Warburg Pincus since
January 1996 and has been with Warburg Pincus since 1989. From 1985 to 1989, he
was associated with The Harlan Company. Mr. Santoleri currently serves on the
boards of directors of Chelsea GCA Realty, Inc., Grubb & Ellis Company and
several private companies.
JACK R. HARTER, a co-founder of the Company, has been its Chairman,
President and Chief Executive Officer since the Company's inception in 1991.
For the 34 years prior to that, Mr. Harter held increasingly more responsible
positions at M.J. Brock and Sons, Inc., a major California homebuilder, where,
from 1985 through 1991, he was President. For the period 1986 through 1991,
Mr. Harter was also an officer of The Ryland Group, Inc.
ANTONIO B. MON, a co-founder of the Company, has been its Vice Chairman and
Chief Financial Officer since the Company's inception in 1991. Prior to that,
Mr. Mon was an officer of The Ryland Group, Inc. from 1986 to 1989 and from 1989
through 1991 was president of Ryland Ventures, Inc. During 1985, Mr. Mon was
Executive Vice President and Chief Financial Officer of M.J. Brock and Sons,
Inc. During the period 1978 through 1984, he held various positions at CIGNA
Corporation where, among other activities, he was responsible for CIGNA's
investment in M.J. Brock and Sons, Inc.
DIRECTORS COMPENSATION
The Company's outside board member is paid a $3,000 quarterly retainer plus
$850 for each meeting attended. All other directors serve without compensation.
The Company has adopted an Amended and Restated 1995 Eligible Directors
Stock Option Plan (the "Director Plan"). The purpose of the Director Plan is to
promote the success of the Company by providing an additional means through the
grant of stock options to attract, motivate and retain experienced and
knowledgeable Eligible Directors (as defined below). The Director Plan provides
that upon becoming an Eligible Director, the director will receive an option to
purchase 5,000 shares of common stock and that annually thereafter, the Eligible
Director will automatically receive an option to purchase an additional 1,000
shares of common stock, in each case at an exercise price equal to the market
price of the common stock on the date of grant. The Board of Directors has
authorized 75,000 shares of common stock for issuance under the Director Plan.
Stock options granted under the Director Plan will expire five years after the
date of grant. If a person's service as a member of the Board of Directors
terminates, any unexercisable portion of the option shall immediately terminate
and the exercisable portion of the option will terminate six months after the
date of termination or the earlier expiration of the option by its terms.
Options generally vest over a three-year period. Upon a Change in Control Event
(as defined in the Director Plan), the options will become fully exercisable.
"Eligible Director" means a
3
member of the Board of Directors of the Company who, as of the applicable date
of grant, is not (i) an officer or employee of the Company or any subsidiary, or
(ii) a person to whom equity securities of the Company or an affiliate have been
granted or awarded within the prior year under or pursuant to any other plan of
the Company or an affiliate that provides for the grant or award of equity
securities, or (iii) an affiliate, associate or employee of either Warburg or
Jennings Holdings (USA). On August 3, 1995, stock options with respect to
14,282 shares were granted to David Kaplan pursuant to the Director Plan. A
portion of these stock options were first exercisable on August 3, 1996 and all
these options expire August 2, 2000.
COMMITTEES OF THE BOARD OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors may establish
committees from time to time. An Audit Committee and a Compensation Committee
have been established.
The Audit Committee reviews the Company's annual audit and meets with the
Company's independent auditors to review the Company's internal controls and
financial management practices. David Kaplan currently serves as the sole
member of the Board's Audit Committee. The Compensation Committee recommends
compensation for certain of the Company's personnel to the Board. The
Compensation Committee currently consists of Reuben S. Leibowitz and David
Kaplan.
The Board of Directors met four times in 1996 and the Audit Committee and
Compensation Committee each met one time in 1996.
EXECUTIVE COMPENSATION
The following table sets forth a summary of annual and long-term
compensation awarded to, earned by, or paid to the Chief Executive Officer of
the Company and each of the four most highly compensated executive officers of
the Company (other than the Chief Executive Officer) whose total annual salary
and bonus for the year ended December 31, 1996 was in excess of $100,000:
SUMMARY COMPENSATION TABLE(1)
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
------------- -------------------
OTHER ANNUAL RESTRICTED ALL OTHER
NAME COMPENSATION STOCK SECURITIES COMPEN-
AND ($) AWARDS($) UNDERLYING SATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (2)(3)(4) (5) OPTIONS # ($)(6)
------------------ ---- --------- -------- --------- --------- --------- -------
Jack R. Harter 1996 $ 450,000 $613,541 $ 31,753 -- 180,714 $ 77,072
Chairman, President and 1995 425,000 482,000 23,964 -- -- 77,064
Chief Executive Officer 1994 400,000 536,000 44,816 -- -- 52,310
Antonio B. Mon 1996 400,000 545,370 33,552 -- 118,481 77,046
Vice-Chairman and 1995 375,000 425,000 22,818 -- -- 77,076
Chief Financial Officer 1994 350,000 469,000 27,314 -- -- 52,310
Steven G. Delva 1996 187,900 177,216(7) 16,000 2,250
Division President, 1995 184,198 109,058(7) 1,716 1,144 -- 2,145
South Bay 1994 167,785 214,486(7) 5,674 8,510 -- 2,310
David M. Kitnick 1996 167,184 252,108(7) -- -- 16,000 2,250
Division President, 1995(8) 3,665 -- -- -- -- --
Phoenix 1994 -- -- -- -- -- --
Todd J. Palmaer 1996 154,631 207,615(7) 189 16,000 2,055
Division President, 1995 141,590 21,785 163 26,000 1,751
Coastal Valley 1994 85,339 23,494(7) -- -- -- 1,250
(FOOTNOTES ON NEXT PAGE)
4
- ---------------
(1) Amounts presented include cash compensation earned and received by
executive officers as well as amounts earned but deferred at the election
of those officers.
(2) The amounts included in this column do not include the value of certain
perquisites which for each named individual do not exceed the lower of
$50,000 or 10% of their respective aggregate salary and bonus compensation
for either of the years reported.
(3) The amounts presented for certain officers include that portion of interest
earned on deferred compensation accounts above 120% of the applicable
federal rate. Mr. Harter and Mr. Mon also received payments to reimburse
for their taxes relating to certain employee benefits provided by the
Company as follows: Mr. Harter, $14,076 in 1996, $14,347 in 1995 and
$13,077 in 1994; and Mr. Mon $7,698 in 1996, $7,342 in 1995 and $5,706
in 1994.
(4) During 1994 and 1995, stock awards were issued to the named executives.
The dollar value of the vested portion of these awards was based on the
number of shares granted multiplied by the stock price. The stock price
was determined by an outside appraisal as of the grant date in 1994 and
based upon a recent stock transaction in 1995. For 1994, the number and
dollar value of shares are as follows: Mr. Harter -- 20,974 shares
($31,428); Mr. Mon -- 13,743 shares ($20,593); and Mr. Delva -- 3,786
shares ($5,674). For 1995, Mr. Delva received 942 shares with a dollar
value of $1,716. No stock awards were issued in 1996.
(5) All restrictions on the stock lapsed in 1996. The dollar value of the
award of restricted stock in 1994 was determined by an outside appraisal as
of the grant date and in 1995 by a recent stock transaction.
(6) Includes contributions to a defined contribution plan on behalf of each
named officer. Additionally, in 1996, 1995 and 1994, the Company
contributed $75,000, $75,000 and $50,000, respectively, to a non-qualified
deferred compensation plan in each of Mr. Harter's and Mr. Mon's name in
accordance with their employment contracts.
(7) A portion of the bonus included in the table is payable over three years
and may be forfeited if the employee leaves the Company prior to the
scheduled payment date.
(8) Reflects compensation for only part of the year.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Messrs. Harter and Mon have employment agreements with the Company,
effective January 1, 1996, with terms of three years, subject to the right of
the employee to extend the term for one year, in each case unless earlier
terminated. The agreements provide for various benefits including a base salary
of $450,000 for 1996, $475,000 for 1997, $500,000 for 1998 and, if applicable,
$525,000 for 1999 for Mr. Harter and $400,000 for 1996, $425,000 for 1997,
$450,000 for 1998 and, if applicable, $475,000 for 1999 for Mr. Mon. Messrs.
Harter and Mon will also each receive annual deferred compensation of $75,000.
The agreements provide that Messrs. Harter and Mon are entitled to bonuses
ranging from 50% to over 150% of their respective base salaries if certain
targeted levels of consolidated pretax income of the Company established by the
Compensation Committee are met. Messrs. Harter and Mon will also be entitled to
such other or additional bonuses as the Company's Board of Directors deems
appropriate. At the end of Mr. Mon's employment agreement, if the Company and
Mr. Mon do not enter into a new employment agreement, the Company will employ
Mr. Mon as a consultant for a three-year period at an annual compensation of
$150,000.
Under each employment agreement, in the event of a termination of the
employee's employment without cause, his Total Disability (as defined in the
agreements) or the employee resigns for "good reason" (as defined in the
agreements, which includes a resignation by the employee within nine months of,
among other events, a "change in control" (as defined below)), the employee is
entitled to receive, in addition to salary and bonuses accrued to the date of
termination, all amounts payable under the agreement as though such termination,
Total Disability or resignation for good reason had not occurred, in equal
5
monthly installments through December, 1999. A "change in control" occurs under
the agreements upon (i) approval by the stockholders of the Company of the
dissolution or liquidation of the Company; (ii) approval by the stockholders of
the Company of an agreement to merge or consolidate, or otherwise reorganize,
with or into one or more entities not a subsidiary of the Company, as a result
of which less than 50% of the outstanding voting securities of the surviving or
resulting entity immediately after the reorganization are, or will be, owned,
directly or indirectly, by stockholders of the Company immediately before such
reorganization (assuming for purposes of such determination that there is no
change in the record ownership of the Company's securities from the record date
for such approval until such reorganization and that such record owners hold no
securities of the other parties to such reorganization, but including in such
determination any securities of the other parties to such reorganization held by
affiliates of the Company); (iii) approval by the stockholders of the Company of
the sale, lease, conveyance or other disposition of all or substantially all of
the Company's business and/or assets to a person or entity which is not a wholly
owned subsidiary of the Company; (iv) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), but excluding any person described in and satisfying the conditions of
Rule 13d-1(b)(1) thereunder), other than a person who is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of more than 20% of the
outstanding shares of common stock of the Company at the time of the execution
of the employment agreements (or an affiliate, successor, heir, descendent or
related party of or to any such person), becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 25% of the combined voting
power of the Company's then outstanding securities entitled to then vote
generally in the election of directors of the Company; or (v) a majority of the
Board of Directors of the Company not being comprised of Continuing Directors.
For purposes of this definition, "Continuing Directors" are persons who were (A)
members of the Board of Directors of the Company on the date of the employment
agreements or (B) nominated for election or elected to the Board of Directors of
the Company with the affirmative vote of at least a majority of the directors
who were Continuing Directors at the time of such nomination or election.
INCENTIVE COMPENSATION PLAN
The Company has established an incentive compensation plan for its
corporate and divisional management personnel (the "Incentive Compensation
Plan"). This plan generally provides for payments expressed as a percentage of
a participant's base compensation upon achievement of pre-agreed financial and
qualitative objectives. The bonus percentages are established annually by the
Compensation Committee of the Board of Directors. Bonuses can be tiered
depending upon individual, profit center and Company performance. Generally,
performance criteria are based on achievements of annual budgets, return on
equity and assets and, to a lesser degree, on subjective evaluations of
performance and individual relative contribution to the Company's goals and
objectives. A portion of any bonus over a specific amount will be paid out by
the Company over a three-year period and is subject to forfeiture if the
employee leaves the Company prior to the scheduled payment date.
STOCK OPTIONS
The Company's 1996 Stock Option and Award Plan (the "Plan") provides for
various types of stock incentives, including stock options, restricted shares,
stock appreciation rights, stock bonuses and performance shares. The only
awards to date have been stock options. The Plan provides for acceleration of
vesting of awards upon a Change in Control Event (as defined in the Plan). A
maximum of 825,000 shares of common stock (subject to certain anti-dilution
adjustments) may be issued pursuant to grants and awards under the Plan.
6
The following table sets forth the options granted to executive officers
named in the Summary Compensation Table during 1996:
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING GRANTED TO GRANT
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION DATE
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE PRESENT
---- ----------- ------------ --------- ---- Value($)(1)
-----------
Jack R. Harter 180,714 30.4% $13.00 6/20/06 $ 773,456
Antonio B. Mon 118,481 19.9% 13.00 6/20/06 507,099
Steven G. Delva 16,000 2.7% 13.00 6/24/06 57,120
David M. Kitnick 16,000 2.7% 13.00 6/24/06 57,120
Todd J. Palmaer 16,000 2.7% 13.00 6/24/06 57,120
________________
(1) The fair value for these options was estimated at the date of grant using a
Black-Scholes option valuation model with the following weighted-average
assumptions: risk-free interest rates of 6.11%; dividend yields of 0%;
volatility factors of the expected market price of the Company's common
stock of .384; and a weighted-average expected life of the options of three
years. The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that require the input of
highly subjective assumptions including the expected stock price
volatility. Since the Company's stock options have characteristics
significantly different from those of traded options, and since changes in
the subjective input assumption can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock options.
No options were exercised during 1996. The following table shows for each
of the executive officers named in the Summary Compensation Table the number of
unexercised options outstanding at December 31, 1996. None of the outstanding
options were "in-the-money" options as of that date.
NNUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
AT FY-END(#)
EXERCISABLE(E)/
NAME UNEXERCISABLE(U)
---- ---------------
Jack R. Harter 180,714(E)
Antonio B. Mon 118,481(E)
Steven G. Delva 16,000(U)
David M. Kitnick 16,000(U)
Todd J. Palmaer 16,000(U)
7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Leibowitz and Kaplan.
The compensation for Messrs. Harter and Mon was and will be set pursuant to
their employment agreements. See "Employment Contracts and Termination of
Employment and Change-In-Control Agreements" above. Prior to establishing the
Compensation Committee, the compensation levels and individual objectives for
bonuses under the Incentive Compensation Plan (see "Incentive Compensation Plan"
above) for the other executive officers of the Company were set by Mr. Harter.
CERTAIN TRANSACTIONS
Mr. Kaplan, a director of the Company, is a principal with Autumn Hill
Group. The Company engaged Autumn Hill Group to assist in the development of
the Company's long-term strategic plan. The Company paid $85,000 to Autumn Hill
Group for consulting services rendered in 1996.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE COMPANY
PERFORMANCE GRAPH INCLUDED IN THIS PROXY STATEMENT SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE
EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS
REPORT OR THE COMPANY PERFORMANCE GRAPH BY REFERENCE THEREIN, AND SHALL NOT BE
DEEMED SOLICITING MATERIAL OR OTHERWISE DEEMED FILED UNDER EITHER OF SUCH ACTS.
REPORT OF THE COMPENSATION COMMITTEE
In determining the compensation levels of all executive officers, the
Compensation Committee considers the contributions of individual executive
officers, the performance and prospects of the Company over time, and the
desirability of attracting and retaining highly capable and experienced
executives. The Company is committed to maintaining a pay program that helps
attract and retain the best people in the industry.
The primary components of executive compensation are base salary, annual
incentive bonus and long-term incentives through stock options. Each component
plays an important role in the Company's overall approach to compensation.
The Company establishes base salaries for its executives by comparing their
base salaries with base salaries for competitive positions in the market. In
order to attract and retain the best people, the Company sets the base salary of
its executive officers above the average base salary for competitive companies.
It has been the Company's policy to place a significant percentage of total
executive compensation "at risk," principally through the award of annual cash
bonuses pursuant to the Company's incentive compensation plan (the "Incentive
Plan"). One-half of the bonuses above certain levels for executive officers,
other than Mr. Harter and Mr. Mon, are payable over three years and are
forfeited if the executive leaves the Company prior to the scheduled payment
date. This is intended to encourage executives to continue in the employ of the
Company.
The Incentive Plan generally provides for payments expressed as a
percentage of the executive's base compensation upon achievement of financial
and qualitative objectives established by
8
the Compensation Committee. The bonus percentages are established annually by
the Compensation Committee and range from 0% to 200%. Bonuses can be tiered
depending upon individual, profit center and/or Company performance. Generally,
performance criteria are based on achievements of annual budgets, return on
equity and assets and, to a lesser degree, on subjective evaluations of
performance and individual relative contribution to the Company's goals and
objectives. In 1996, bonuses under the Incentive Plan for executive officers
named in the Summary Compensation Table ranged from 94% to 151% of their
respective base salary, based upon the degree of attainment of the established
targets.
After the Company's initial public offering in June of 1996, the Company
awarded stock options to each of its executive officers. These awards were made
to increase the individual ownership interest of the executive officers in the
Company and to further align their interest with the Company's stockholders.
The awards also encourage retention of key executives.
The 1996 compensation for Mr. Harter, the Chief Executive Officer of the
Company, was set by an employment agreement between Mr. Harter and the Company.
See "Employment Contracts and Termination of Employment and Change in Control
Arrangements." During 1996, Mr. Harter received a bonus under the Incentive
Plan equal to approximately 136% of his base salary as a result, in part, of the
Company's approximately 90% increase in pretax income and the Company's record
year in both homes closed and net new home orders. In 1996 Mr. Harter also
received an award of options to acquire 180,714 shares of common stock of the
Company at an initial exercise price of $13.00 per share, the price offered to
the public in the Company's initial public offering in June 1996. This award
took into account Mr. Harter's contributions to the growth of the Company since
its formation in 1991 and was intended to reward him for those contributions and
to more closely link his interests with those of the Company's other
stockholders. 1996 was the first year where stock options could be used as an
effective element of compensation since the Company's common stock was not
publicly traded until June 1996.
The Company intends to comply with the requirements of Section 162(m) of
the Internal Revenue Code with respect to maintaining tax deductibility for all
executive compensation, except in circumstances where the Compensation Committee
believes that such compliance would not be in the best interests of the Company
or its stockholders. The Company believes that all executive officer
compensation paid in 1996 met the deductibility requirements of Section 162(m).
Compensation Committee of the Board
of Directors
Reuben Leibowitz
David Kaplan
9
COMPANY PERFORMANCE
The following graph indicates the performance of the cumulative total
return to stockholders of the Company's common stock during the period from June
20, 1996 (the date on which the Company's common stock became publicly traded)
in comparison to the cumulative total return on the Standard & Poor's 500 Index
and the Standard & Poor's Homebuilding Index. The graph covers the period from
June 20, 1996 through February 28, 1997.
[GRAPH]
S&P
PACIFIC S&P 500 HOMEBUILDING
GREYSTONE INDEX INDEX
--------- ----- -----
06/20/96 $100 $100 $100
06/30/96 97 101 98
09/30/96 80 104 96
12/31/96 85 112 106
02/28/97 109 119 118
- ------------------
Assumes $100 invested on June 20, 1996 in the Company's common stock, the
Standard & Poor's 500 Index and the Standard & Poor's Homebuilding Index and
assumes reinvestment of dividends. No cash dividends have ever been declared on
the Company's common stock.
10
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of March 10, 1997, by (i) all those
known by the Company to be beneficial owners of more than 5% of the Company's
outstanding common stock, (ii) each director of the Company and named executive
officer of the Company named in the Summary Compensation Table and (iii) all
directors and executive officers of the Company as a group.
Number of Shares Percent
---------------- -------
Warburg, Pincus Investors, L.P.(1)
466 Lexington Avenue
New York, New York 10017 . . . . . . 8,411,854 56.2%
Jack R. Harter (2) . . . . . . . . . . . 543,667 3.6%
Antonio B. Mon (3) . . . . . . . . . . . 349,157 2.3%
Steven G. Delva . . . . . . . . . . . . . 31,438 *
David M. Kitnick . . . . . . . . . . . . 1,000 *
Todd J. Palmaer . . . . . . . . . . . . . 14,282 *
Sidney Lapidus (1) . . . . . . . . . . . -- *
Reuben S. Leibowitz (1) . . . . . . . . . -- *
John D. Santoleri (1) . . . . . . . . . . -- *
David Kaplan (4) . . . . . . . . . . . . 4,761 *
All directors and executive officers
as a group (18 persons) (5) . . . 1,157,987 7.6%
- ---------------
* Less than one percent
(1) The sole general partner of Warburg, Pincus Investors, L.P. ("Investors")
is Warburg, Pincus & Co., a New York general partnership ("WP"). E.M.
Warburg, Pincus & Co., LLC, a New York limited liability company ("Warburg
Pincus"), manages Investors. The members of Warburg Pincus are
substantially the same as the partners of WP. Lionel I. Pincus is the
managing partner of WP and the managing member of Warburg Pincus and may be
deemed to control both WP and Warburg Pincus. WP, as the sole general
partner of Investors, has a 20% interest in the profits of Investors.
Sidney Lapidus, Reuben S. Leibowitz and John D. Santoleri, directors of the
Company, are Members and Managing Directors of Warburg Pincus. As such,
Messrs. Lapidus, Leibowitz and Santoleri may be deemed to have an indirect
pecuniary interest (within the meaning of Rule 16a-1 under the Securities
Exchange Act of 1934 (the "Exchange Act")) in an indeterminate portion of
the stock beneficially owned by Investors. Messrs. Lapidus, Leibowitz and
Santoleri disclaim "beneficial ownership" of the shares owned by Investors
within the meaning of Rule 13d-3 under the Exchange Act. Investors has
entered into an agreement with the Company pursuant to which Investors has
agreed that, so long as it owns more than 50% of the aggregate voting power
of the Company, Investors will vote shares representing up to 50% of the
aggregate voting power of the Company on any matter in its discretion and
will vote any additional shares in the same proportion as the shares voted
by the other stockholders on that matter. That agreement provides that it
may be terminated only with the approval of a majority of the directors of
the Company who are not officers, employees or partners of Investors or the
Company and under certain other specified circumstances.
11
(2) Includes 180,714 shares of common stock subject to options exercisable
within 60 days after March 10, 1997. Does not include 148,252 shares of
common stock held by irrevocable trusts for the benefit of his daughters,
over which Mr. Harter has no dispositive power.
(3) Includes 118,481 shares of common stock subject to options exercisable
within 60 days after March 10, 1997. Does not include 111,546 shares of
common stock held by an irrevocable trust for the benefit of his children,
over which Mr. Mon has no dispositive power.
(4) Constitutes shares of common stock subject to options exercisable within 60
days after March 10, 1997.
(5) See footnotes (1) through (4).
INDEPENDENT AUDITORS
Ernst & Young LLP was selected as the Company's independent auditors for
1996 and for the current year, having served in that capacity since 1991. It is
expected that a representative of Ernst & Young LLP will be present at the
annual meeting. Such representative will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders proposals, if any, which may be considered for inclusion in
the Company's proxy materials for the 1998 Annual Meeting must be received by
the Company at its headquarters office not later than November 18, 1997, and
must satisfy the conditions established by the Securities and Exchange
Commission for shareholder proposals to be included in the Company's Proxy
materials for that meeting.
12
OTHER MATTERS
The Board of Directors has no present intention to present to the meeting
for action any matters other than those described above and matters incident to
the conduct of the meeting. If any other business comes before the meeting or
any adjournment thereof (including but not limited to matters of which the Board
of Directors is currently unaware) for which specific authority has not been
solicited from the stockholders, then to the extent permitted by law, including
the rules of the Securities and Exchange Commission, the Proxy grants to the
persons named therein the discretionary authority to vote thereon in accordance
with their best judgment.
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT FOR 1996 TO THE SECURITIES
AND EXCHANGE COMMISSION WILL BE PROVIDED WITHOUT CHARGE TO ANY STOCKHOLDER UPON
WRITTEN REQUEST ADDRESSED TO THE COMPANY, 6767 FOREST LAWN DRIVE, SUITE 300, LOS
ANGELES, CALIFORNIA 90068, ATTENTION: MELISSA L. KELLY.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY.
BY ORDER OF THE
BOARD OF DIRECTORS,
ROBERT W. GARCIN,
SECRETARY
March 21, 1997
13
PACIFIC GREYSTONE CORPORATION
6767 Forest Lawn Drive, Suite 300
Los Angeles, California 90068
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Jack R. Harter, Antonio B. Mon and Robert
W. Garcin, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse hereof, all shares of common stock of Pacific Greystone
Corporation (the "Company") held of record by the undersigned on March 10, 1997
at the Annual Meeting of Stockholders to be held on May 8, 1997 and any
adjournment or adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO THE ELECTION OF DIRECTORS, THIS PROXY WILL BE
VOTED FOR EACH OF THE NOMINEES LISTED ON THE REVERSE HEREOF.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-------------
/x/ Please mark votes as in this example.
1. Election of Directors
NOMINEES: David Kaplan and Reuben S. Leibowitz
FOR WITHHELD
/ / / /
/ /
--------------------------------------------
FOR BOTH NOMINEES EXCEPT AS NOTED ABOVE
2. Upon such other matters as may properly come before the meeting or any
adjournment or adjournments thereof.
Receipt of the Notice of Annual Meeting of Stockholders and accompanying
Proxy Statement is hereby acknowledged.
MARK HEREFOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should
give full title as such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
Signature: Date:
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Signature: Date:
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