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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant []
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
KAUFMAN AND BROAD HOME CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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__________
NOTICE OF 1997
KAUFMAN AND BROAD HOME CORPORATION
ANNUAL MEETING OF
STOCKHOLDERS
and
PROXY STATEMENT
__________
KAUFMAN [LOGO] BROAD
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KAUFMAN AND BROAD HOME CORPORATION
10990 Wilshire Boulevard
Los Angeles, California 90024
(310) 231-4000
------------------------
BRUCE KARATZ
Chairman and Chief Executive Officer
------------------------
February 28, 1997
Dear Fellow Stockholder:
Your officers and directors join me in inviting you to attend the Annual Meeting
of Stockholders of Kaufman and Broad Home Corporation at 9:00 a.m. on April 3,
1997 at the Company's corporate headquarters in Los Angeles, California.
The matters expected to be acted on at the meeting are described in detail in
the attached Notice of Annual Meeting of Stockholders and Proxy Statement. In
addition to specific agenda items, by attending the meeting you will have an
opportunity to hear about our plans for the future and to meet your officers and
directors. Whether or not you plan to attend, please sign and date the enclosed
Proxy Card and return it as soon as possible in the envelope provided to ensure
that your shares will be represented.
We look forward to seeing you on April 3rd.
Sincerely,
/s/ BRUCE KARATZ
BRUCE KARATZ
Chairman and Chief Executive Officer
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LOGO
KAUFMAN AND BROAD HOME CORPORATION
------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held April 3, 1997
To the Holders of the Common Stock
of Kaufman and Broad Home Corporation:
The Annual Meeting of Stockholders of Kaufman and Broad Home Corporation (the
"Company") will be held on Thursday, April 3, 1997 at 9:00 a.m. local time
at the Company's corporate headquarters, 10990 Wilshire Boulevard,
7th Floor, Los Angeles, California for the following purposes:
(1) To elect three Class II Directors, each to serve for a
term of three years; and
(2) To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on February 18, 1997 as
the record date for
determination of holders of Common Stock entitled to notice of, and to vote at,
the meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED.
YOUR PROMPT RETURN OF THE PROXY CARD WILL ENSURE THAT YOUR SHARES
ARE REPRESENTED AT THE MEETING AND WILL SAVE THE COMPANY THE
ADDITIONAL EXPENSE OF SOLICITING PROXIES.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ KIMBERLY N. KING
KIMBERLY N. KING
Corporate Secretary and
Associate Counsel
Los Angeles, California
February 28, 1997
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LOGO
KAUFMAN AND BROAD HOME CORPORATION
10990 Wilshire Boulevard
Los Angeles, California 90024
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 3, 1997
------------------------
GENERAL INFORMATION
Your Board of Directors furnishes this Proxy Statement in connection with its
solicitation of your proxy in the form enclosed to be used at the Company's
Annual Meeting of Stockholders which will be held on Thursday, April 3, 1997
(the "Annual Meeting"), at the time and place and for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. A copy of the
Company's Annual Report to Stockholders for the fiscal year ended November 30,
1996, including audited financial statements, is also being mailed to
stockholders concurrently with this Proxy Statement. It is anticipated that the
mailing to stockholders of this Proxy Statement, and the enclosed Proxy Card,
will commence on or about February 28, 1997.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend, please date, sign and promptly return your Proxy Card in the
envelope provided. You may revoke your proxy at any time prior to its exercise
at the Annual Meeting by written notice to the Company's Secretary, and, if you
attend the Annual Meeting, you may vote your shares in person.
Only holders of record of the 38,818,951 shares of Common Stock outstanding at
the close of business on February 18, 1997 will be entitled to vote at the
Annual Meeting. Each holder of Common Stock is entitled to one vote for each
share held. There is no right to cumulative voting.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
Annual Meeting. All shares of Common Stock represented by valid proxies received
pursuant to this solicitation and not revoked will be voted in accordance with
the choices specified. Where no specification is made with respect to any item
submitted to a vote, such shares will be voted for the election as directors of
the Company of the three persons named under "Election of Directors" on pages 3
and 4. Since the proxy confers discretionary authority to vote upon other
matters that properly may come before the meeting, shares represented by signed
proxies returned to the Company will be voted in accordance with the judgment of
the person or persons voting the proxies on any other matters that properly may
be brought before the meeting. With
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regard to the election of directors, votes may be cast in favor or withheld;
votes that are withheld will be excluded entirely from the vote and will have no
effect. Under the rules of the New York Stock Exchange, Inc., brokers who hold
shares in street name for customers have the authority to vote on certain items
when they have not received instructions from beneficial owners. Brokers that do
not receive instructions are entitled to vote on the election of directors.
Under applicable Delaware law, a broker non-vote will have no effect on the
outcome of the election of directors.
The persons named as proxies on the enclosed Proxy Card are Bruce Karatz,
Chairman and Chief Executive Officer, Barton P. Pachino, Senior Vice President
and General Counsel, and Kimberly N. King, Corporate Secretary and Associate
Counsel.
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ELECTION OF DIRECTORS
------------------------
At the Annual Meeting, the Board of Directors will present as nominees and
recommend to the stockholders that each of the three persons listed below be
elected as Class II Directors to serve for a three-year term ending at the 2000
Annual Meeting of Stockholders. Should any of these nominees become unable to
serve as a director, the persons named on the enclosed Proxy Card will, unless
otherwise directed, vote for the election of such other person as the present
Board of Directors may recommend in place of such nominee.
The Board of Directors has nominated three candidates to stand for re-election
as Class II Directors. A brief summary of each nominee's principal occupation,
business affiliations and other information follows.
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ANTOINE JEANCOURT-GALIGNANI, age 60,
was named Chairman and Chief
Executive Officer of Assurances
Generales de France, one of France's
largest insurance companies, in 1994.
From 1981 through 1993, he served as
the Chairman and Chief Executive
Officer of Banque Indosuez. He joined
Banque Indosuez in 1979 as President,
and was named Chairman in 1981. Prior
to joining Banque Indosuez, he was
Executive Vice President of Credit
Agricole. Mr. Jeancourt-Galignani is
a director of Bouygues, Total,
Societe Generale, Paribas,
Pinault-Printemps-Redoute and
Aachener und Munchener (AMB); he also
serves as the Chairman of the
Supervisory Board of Euro Disney
S.C.A. He is a graduate of l'Ecole
Nationale d'Administration (l'ENA).
Mr. Jeancourt-Galignani has been a
director of the Company since 1989.
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BRUCE KARATZ, age 51, has been
President, Chief Executive Officer
and a director of the Company since
1986, and was named Chairman in 1993.
From 1980 until the formation of the
Company in 1986, Mr. Karatz was
President of Kaufman and Broad
Development Group. He joined the
Company's predecessor in 1972, and
from 1976 through 1980 he was
President of its French homebuilding
subsidiary. Mr. Karatz is a director
of Honeywell Inc., National Golf
Properties, Inc., and Smith's Food &
Drug Centers, Inc. Among his civic
and professional activities, Mr.
Karatz is a trustee of the RAND
Corporation; a member of the Council
on Foreign Relations, the Board of
the National Park Foundation, and the
University of Southern California Law
Center Board of Councilors; and
Co-Chairman of the Mayor's Alliance
for a Safer L.A.
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CHARLES R. RINEHART, age 50, is
Chairman and Chief Executive Officer
of H. F. Ahmanson & Company and its
principal subsidiary, Home Savings of
America. Mr. Rinehart joined H. F.
Ahmanson in 1989, where he also
currently serves on the Executive
Committee of the Board of Directors.
From 1983 to 1989, Mr. Rinehart
served as President of Avco Financial
Services, where he was appointed
Chief Executive Officer in 1985. Mr.
Rinehart is a director of the Federal
Home Loan Bank of San Francisco and
the Los Angeles World Affairs
Council. His civic and professional
activities include memberships in
Fannie Mae's National Advisory
Council, the Thrift Institution
Advisory Council, the Los Angeles
Business Advisory Council, the
Casualty Actuarial Society, and the
Tustin Public Schools Foundation
Campaign Committee. He also serves on
the Advisory Committee of Drug Use is
Life Abuse and is a Fellow of the
American Academy of Actuaries. Mr.
Rinehart was elected as a director by
the Board in 1996.
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The other directors of the Company and their respective principal occupations,
business affiliations and other information for at least the past five years are
as follows.
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RONALD W. BURKLE, age 44, is the
Managing Partner and majority owner
of The Yucaipa Companies, a private
investment firm and the controlling
shareholder of Ralphs Grocery
Co./Food 4 Less Supermarkets, Cala
Foods, Dominick's Finer Foods and
Falley's. Mr. Burkle is Chairman of
these companies and is Chief
Executive Officer of Smith's Food &
Drug Centers, Inc. Mr. Burkle's
community affiliations include
serving as Chairman of D.A.R.E.
America and serving on the boards of
the Western NIS Enterprise Fund, the
U.S. Small Business Advisory Council
and the Executive Board for the
Medical Sciences of UCLA. He is a
member of the board of Claremont
University Center, the Museum of
Contemporary Art and the Los Angeles
Music Center. In addition, Mr. Burkle
serves on the board of the Food
Employers Council in California and
he is the founder and trustee of the
Ralphs/Food 4 Less Foundation. Mr.
Burkle has been a director of the
Company since 1995, and his term
expires in 1998.
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JANE EVANS, age 52, is President and
Chief Operating Officer of SmartTV.
From 1991 to 1995 she served as Vice
President and General Manager, Home
and Personal Services Division, U S
West Communications, Inc. From 1987
to 1989 she was a general partner of
Montgomery Securities, and from 1989
until 1991 she was President and
Chief Executive Officer of the
InterPacific Retail Group. Ms. Evans
serves as a director of Philip Morris
Companies, Inc., Edison Brothers
Stores, Inc., Georgia Pacific, and
BancOne-Arizona. Ms. Evans' term
expires in 1999. She has been a
director since 1993.
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DR. RAY R. IRANI, age 62, is Chairman
and Chief Executive Officer of
Occidental Petroleum Corporation
("Occidental"). He joined Occidental
in 1983 as Chairman and Chief
Executive Officer of Occidental
Chemical Corporation, an Occidental
subsidiary, and as Executive Vice
President of Occidental. In 1984 he
was elected to the Board of Directors
of Occidental and was named President
and Chief Operating Officer. He
assumed the responsibilities of
Chairman and Chief Executive Officer,
in addition to President, in 1990.
Dr. Irani has served as Chairman of
Canadian Occidental Petroleum, an
Occidental affiliate, since 1986 and
as a director since 1984. An Honorary
Fellow of the American Institute of
Chemists, Dr. Irani is a director of
the National Association of
Manufacturers, the American Petroleum
Institute, the National Committee on
United States-China Relations, Cedars
Bank (formerly Bank Audi), and the
Jonsson Cancer Center
Foundation/UCLA. He is a member of
The President's Export Council, the
National Petroleum Council, the
Scientific Research Society of
America, the American Chemical
Society, and the Industrial Research
Institute. He is a trustee of the
University of Southern California and
serves on the CEO Board of Advisors
of the University's School of
Business Administration. He is also a
trustee of the American University of
Beirut, and St. John's Health Center.
Dr. Irani has been a director of the
Company since 1992, and his term
expires in 1998.
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JAMES A. JOHNSON, age 53, has been
Chairman and Chief Executive Officer
of Fannie Mae since 1991, and served
as its Vice Chairman from 1990 until
his election to his present position.
Prior to joining Fannie Mae, Mr.
Johnson served as Managing Director
of Lehman Brothers, an investment
banking firm, from 1985 until 1989.
He is Chairman of The John F. Kennedy
Center for the Performing Arts,
Chairman of The Brookings Institution
and is a member of the Council on
Foreign Relations. He serves on the
boards of Fannie Mae, The Dayton
Hudson Corporation, United HealthCare
Corporation, the Alliance to Save
Energy, The Enterprise Foundation,
the National Housing Endowment, the
National Alliance to End
Homelessness, Carnegie Corporation of
New York and Carnegie Endowment for
International Peace. Mr. Johnson has
been a member of the Board of
Directors since 1992. His term
expires in 1999.
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GUY NAFILYAN, age 52, has been
President and Chief Executive Officer
of Kaufman and Broad France, the
Company's operation based in Paris,
France, and Executive Vice President
and President of European Operations
of the Company since April 1992. He
was a Senior Vice President of the
Company from 1987 to 1992, and from
1983 through 1987 he was President of
Kaufman and Broad, S.A. (the
predecessor to Kaufman and Broad
France). Mr. Nafilyan's term expires
in 1998, and he has been a director
of the Company since 1987.
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LUIS G. NOGALES, age 53, has been
Chairman and Chief Executive Officer
of Embarcadero Media, Inc., a media
acquisition firm specializing in
Spanish language radio stations,
since 1992. From 1990 through 1993,
he was President of Nogales Partners,
and from 1989 to 1990 he was General
Partner in Nogales Castro Partners,
both media acquisition firms. From
1986 to 1988, Mr. Nogales was
President of Univision, the nation's
largest Spanish language television
network, and from 1983 to 1986 he was
Chairman and Chief Executive Officer
of United Press International. He is
a director of Adolph Coors Company
and Southern California Edison
Company; a member of the Inter-
American Dialogue; a trustee of The
Ford Foundation and Vice President of
the Board of Trustees of Stanford
University. Mr. Nogales has been a
director of the Company since 1995.
His term expires in 1998.
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SANFORD C. SIGOLOFF, age 66, has been
Chairman, President and Chief
Executive Officer of Sigoloff &
Associates, Inc. since 1989 and in
1994 was appointed to the California
State Board of Education by
California Governor Pete Wilson. Mr.
Sigoloff was President and Chief
Executive Officer of L. J. Hooker
Corporation from 1989 to 1992, and
was Chairman, President and Chief
Executive Officer of Wickes
Companies, Inc., a retail and
wholesale merchandiser, from 1982 to
1988. Mr. Sigoloff was a Presidential
appointee to the United States
Holocaust Memorial Council in
Washington, D.C. from 1988 through
1994 and is a Fellow in the American
College of Bankruptcy. Mr. Sigoloff
is a director of ChatCom, Inc.,
Digital Video Systems, Inc.,
SunAmerica Inc., Movie Gallery, Inc.
and Wickes PLC-London, England. Among
his many civic involvements, Mr.
Sigoloff is a director of the
National Conference of Christians and
Jews and the Center Theater Group; a
trustee of the UCLA Foundation, the
Medical Centers of Cedars-Sinai and
Chaim Sheba; a member of the
Executive Committee of the City of
Hope and the Executive Board and the
Board of Governors of The American
Jewish Committee; and a national
trustee and Vice President of the
National Jewish Center for Immunology
and Respiratory Medicine. He has been
a director of the Company or its
predecessor company since 1979. His
term as a director expires in 1999.
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THE BOARD AND ITS COMMITTEES
------------------------
The Company's Board of Directors held five regular and one telephonic meeting
during the fiscal year ended November 30, 1996. Management also periodically
conferred with directors between meetings regarding Company affairs. During
1996, all directors attended 75% or more of the total aggregate number of
meetings of the Board of Directors and meetings of the committees of the Board
on which they served, except Mr. Jeancourt-Galignani.
The committees of the Board of Directors consist of the Personnel,
Compensation and Stock Plan Committee, the Audit and Compliance Committee, the
Nominating and Corporate Governance Committee and the Executive Committee.
PERSONNEL, COMPENSATION AND STOCK PLAN COMMITTEE
The Personnel, Compensation and Stock Plan Committee reviews and makes
recommendations regarding compensation and other employment benefits for the
Company's officers and other members of senior management. The committee also
reviews and approves all awards made under the Company's employee stock plans,
the annual merit increase guidelines for base salaries for all employees and all
officer nominations. Throughout fiscal 1996, the members of the committee were
Messrs. Burkle, Irani, and Johnson. Mr. Johnson is Chairman. Mr. Rinehart was
elected to the committee in December 1996. The committee held three meetings
during fiscal 1996; members were also periodically consulted by management to
discuss compensation or personnel issues between meetings. See the "Personnel,
Compensation and Stock Plan Committee Report on Executive Compensation" (the
"Compensation Committee Report") at pages 14--17.
AUDIT AND COMPLIANCE COMMITTEE
The function of the Audit and Compliance Committee is to approve the selection
of, and review all services performed by, the Company's independent auditors; to
meet, consult with, and receive reports from the Company's independent auditors,
its financial and accounting staff and its internal audit department; and to
review and take action, or make recommendations to the Board of Directors, with
respect to the scope of the audit procedures, accounting practices, and internal
accounting and financial controls of the Company. The committee held three
meetings during fiscal 1996. The committee is comprised of Ms. Evans and Messrs.
Jeancourt-Galignani, Nogales and Sigoloff. Mr. Sigoloff serves as Chairman.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee is responsible for
recommending director candidates for the Board, setting policies regarding and
evaluating existing directorships, recommending assignments to the committees of
the Board and recommending director compensation. The committee also considers
and makes recommendations to the Board concerning issues of corporate
governance. Throughout fiscal 1996, the members of the committee were Ms. Evans
and Messrs. Irani and Johnson. Dr. Irani is Chairman of the committee, which met
three times during the year. Mr. Nogales was elected to the committee in
December 1996.
The Nominating and Corporate Governance Committee will consider qualified
nominees for director nominated by stockholders. Stockholders wishing to make
such recommendations should
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submit the name of the candidate and the candidate's background and
qualifications to the committee, c/o the Secretary of the Company, 10990
Wilshire Boulevard, Los Angeles, California 90024 not later than January 1 of
the year in which the proposed candidate is to be considered for nomination.
EXECUTIVE COMMITTEE
The Executive Committee has the authority of the Board of Directors between
meetings of the Board of Directors except to the extent that such authority may
be limited by the Company's Bylaws (which do not currently provide for any such
limitation) or by applicable law. Messrs. Karatz and Sigoloff serve on the
committee, of which Mr. Sigoloff is Chairman. The committee did not meet in
1996, but acted periodically by written consent.
COMPENSATION PAID TO BOARD MEMBERS
Directors who are employees of the Company receive no additional compensation
for their service on the Board of Directors. Directors who are not employees of
the Company are paid a quarterly retainer of $5,000, plus $1,500 for each Board
of Directors and $1,000 for each committee meeting attended. If two committee
meetings are attended on the same day, only $500 is paid for attendance at the
second committee meeting. Additionally, each committee chairman receives a
quarterly retainer of $1,250. Directors may defer all or a portion of their fees
until a later specified event, such as retirement. Directors are reimbursed for
travel and other expenses related to attendance at Board of Directors and
committee meetings.
In March 1996, pursuant to the Company's 1993 Director Stock Plan, each
non-employee director who was a director of the Company immediately following
the 1996 Annual Meeting of Stockholders, and who had served as a director for a
specified period of time immediately prior to such meeting, received an annual
grant of 500 shares of the Company's Common Stock.
With a view toward further aligning the compensation of the Company's
directors with the equity interests of the Company's stockholders, as well as
simplifying director compensation by using one form of equity security, in
September 1996 the Board adopted the Kaufman and Broad Home Corporation
Non-Employee Directors Stock Unit Plan (the "Directors Stock Unit Plan"), and
simultaneously terminated the Kaufman and Broad Home Corporation 1993 Director
Stock Plan and the Kaufman and Broad Home Corporation Directors Restricted Stock
Plan. Under the Directors Stock Unit Plan, each director will receive an annual
grant of 1,200 deferred Common Stock units ("Stock Units") as of each Annual
Meeting of Stockholders, 500 of which Stock Units are intended to replace the
annual grant of 500 shares of Common Stock previously awarded to directors under
the 1993 Director Stock Plan. Similar to the election that was made available to
directors under the former Directors Restricted Stock Plan, under the Directors
Stock Unit Plan directors may also elect to receive all or a portion of their
Board retainers and meeting fees in Stock Units rather than in cash. Directors
who make this election receive Stock Units valued at 110% of the cash fees to
which they would otherwise have been entitled. On the date of the adoption of
the Directors Stock Unit Plan, (i) each director received a one time grant of
700 Stock Units and (ii) all shares of restricted Common Stock held by directors
under the Directors Restricted Stock Plan were canceled and directors were
credited with an equivalent number of Stock Units. The shares of Common Stock
represented by the Stock Units will be distributed in-kind or in cash, at the
election of the participating director, when he or she retires or otherwise
leaves the Board. Directors earn the equivalent of cash dividends on, but do not
have
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voting or investment power with respect to, the shares of Common Stock
represented by the Stock Units.
In furtherance of the Company's overall support for charitable giving, and in
acknowledgment of the service of the Company's directors, in 1995 the Company
established the Directors' Legacy Program. Under the program, when a director
dies, the Company will donate up to $500,000 (in $50,000 increments) to no more
than five charitable organizations or educational institutions of the director's
choice. All directors may participate in the program. Directors vest in the
program in five equal annual installments of $100,000; a director must serve on
the Board for five consecutive years to be fully vested in the program. To be
eligible to receive a donation, a recommended organization must be an
educational institution or charitable organization and must qualify to receive
tax-deductible donations under the Internal Revenue Code. The program is funded
by life insurance contracts maintained by the Company on the lives of the
participating directors. This funding is structured such that the life insurance
proceeds are expected to equal or exceed the cost to the Company of maintaining
the program. The program has no direct compensation value to directors or their
families because they do not receive any direct cash or tax savings.
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BENEFICIAL OWNERSHIP OF COMPANY STOCK
------------------------
DIRECTORS AND MANAGEMENT
The following information is furnished as of February 18, 1997 to indicate the
beneficial ownership of the Company's Common Stock by each director and each of
the executive officers named in the Summary Compensation Table (the "Named
Executive Officers") individually, and by all directors and all executive
officers as a group. Unless otherwise indicated, beneficial ownership is direct
and the person indicated has sole voting and investment power. No director or
executive officer owns more than 1% of the Company's Common Stock, other than
Mr. Karatz who owns 3.3%. As a group, all directors and executive officers of
the Company own an aggregate of 4.3% of the Company's Common Stock.
AMOUNT AND NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(A-D)
-------------------------------------------------
Ronald W. Burkle 4,811
Jane Evans 3,636
Dr. Ray R. Irani 14,853
Antoine Jeancourt-Galignani 7,007
James A. Johnson 19,916
Bruce Karatz 1,299,643
Guy Nafilyan 135,000
Luis G. Nogales 1,918
Charles R. Rinehart 1,546
Sanford C. Sigoloff 25,152
Michael F. Henn 40,000
Lisa G. Kalmbach 24,101
Albert Z. Praw 24,522
All directors and executive
officers as a group (20 persons) 1,664,080
-------------------------------------------------
(a) Included are Stock Units granted to directors under the Directors Stock Unit
Plan, and upon termination of the Non-Employee Directors Retirement Plan in
1995, in the following amounts: Mr. Burkle, 4,311; Ms. Evans, 2,136; Dr.
Irani, 2,853; Mr. Jeancourt-Galignani, 5,007; Mr. Johnson, 6,916; Mr.
Nogales, 1,418; Mr. Rinehart, 1,546; and Mr. Sigoloff, 9,852.
(b) Included are shares of Common Stock subject to acquisition within 60 days of
February 18, 1997 through the exercise of stock options granted under the
Company's employee stock plans in the following amounts: Mr. Karatz,
1,125,968; Mr. Nafilyan, 41,000; Mr. Henn, 20,000; Ms. Kalmbach, 22,850; Mr.
Praw, 16,000; and the executive officers as a group, 1,290,068. No
non-employee director holds stock options.
(c) Included are a total of 183,888 shares of restricted Common Stock granted
under the Company's employee stock plans. Mr. Karatz holds 112,500 and Mr.
Nafilyan holds 56,250 shares of restricted Common Stock granted in 1991.
These shares vest in twelve equal annual installments, the first of which
vested in 1994; full vesting will occur in the year 2005. Mr. Karatz also
holds 10,131 shares of restricted Common Stock granted in 1997. These shares
were earned pursuant to a performance-based incentive compensation formula
in Mr. Karatz' employment agreement and will vest, subject to certain
conditions, following his retirement at age 55 or older. In all cases,
executives must be employed by the Company at the time of vesting to receive
the shares of Common Stock.
(d) Included are shares of Common Stock held in certain trusts as follows: Mr.
Henn holds 20,000 shares of Common Stock in a trust of which he is
co-trustee and has a contingent beneficial interest and over which he shares
voting and investment power; and Mr. Praw holds 8,522 shares of Common Stock
in a trust of which he is the sole trustee and sole beneficiary and over
which he exercises sole voting and investment power.
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BENEFICIAL OWNERS OF MORE THAN 5 PERCENT
Based on filings made under Section 13(g) of the Securities Exchange Act of
1934, as amended, as of February 18, 1997 the only entities known to be
beneficial owners of more than 5% of the Company's Common Stock were as follows.
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL OF
OWNER OWNERSHIP (A-B) CLASS
-------------------------------------------------------
Franklin Resources, Inc. 4,851,100 12.5%
777 Mariners Island Boulevard
San Mateo, CA 94404
FMR Corp. 4,659,339 12.0%
82 Devonshire Street
Boston, MA 02109
-------------------------------------------------------
(a) Pursuant to the amendment to Schedule 13G dated February 12, 1997 filed with
the Securities and Exchange Commission, direct and indirect advisory
subsidiaries of Franklin Resources, Inc. have sole voting and dispositive
power with respect to an aggregate of 4,851,000 shares of the Company's
Common Stock as follows: Templeton Global Advisors Limited ("TGAL"),
3,853,000; Templeton Investment Counsel, Inc., 771,000; Franklin Advisers,
Inc., 104,000; Templeton Management Limited, 94,500; accounts advised by
TGAL under a subadviser agreement, 26,000; and Templeton Investment
Management (Australia) Limited, 2,600.
(b) Pursuant to the amendment to Schedule 13G dated February 11, 1997 filed by
FMR Corp. with the Securities and Exchange Commission, 4,508,804 of the
shares reported are beneficially owned by Fidelity Management & Research
Company, an investment adviser and a wholly-owned subsidiary of FMR Corp.,
as a result of acting as investment advisor to various investment companies,
and as to which shares FMR Corp. and Mr. Edward C. Johnson 3d exercise sole
dispositive power but no voting power. The remaining 150,535 of the shares
reported are beneficially owned by Fidelity Management Trust Company, a bank
and a wholly-owned subsidiary of FMR Corp., as to which each of Edward C.
Johnson 3d and FMR Corp. has sole dispositive power, has sole voting power
with respect to 64,335 shares and has no voting power with respect to 86,200
shares.
13
18
PERSONNEL, COMPENSATION AND STOCK PLAN
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
------------------------
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's executive compensation philosophy is generally to reward
contributions that increase the value of the Company. Accordingly, the design,
structure and administration of executive officer compensation is intended to:
- - Link compensation to the creation of stockholder value;
- - Reward contributions that further the Company's mission by aligning individual
performance objectives with the Company's performance objectives;
- - Balance compensation elements to achieve short-term business plans and
long-term strategic objectives; and
- - Attract, retain and motivate executives of the highest quality.
Of these objectives, the Personnel, Compensation and Stock Plan Committee (the
"Committee" or the "Compensation Committee") places greatest emphasis on
rewarding executive officers based on the Company's performance. The
Compensation Committee believes that the use of performance-based cash bonuses
and long-term incentives, evidence the Company's commitment to a vital and
explicit link between executive officer compensation and the creation of
stockholder value.
The process utilized by the Compensation Committee in determining executive
officer compensation takes into account both qualitative and quantitative
factors. In determining compensation in 1996, the Committee utilized pre-tax
income as the quantitative indicator of performance. The Committee also
appreciates the importance of achievements that may be difficult to quantify,
and accordingly recognizes qualitative factors, such as the successful
implementation of major projects and the assumption of additional
responsibilities.
The Company's performance substantially improved in 1996 over 1995. Although
market conditions continued to be difficult in two of the Company's principal
markets, California and France, improved results were achieved through the
execution of four major strategies set out by the Company at the beginning of
1996: increased non-California U.S. expansion; improved return on investment;
aggressive inventory and debt reduction; and improved operating margin. As part
of its non-California expansion strategy, during the year the Company purchased
San Antonio, Texas-based Rayco, Ltd. This acquisition, together with other
expansion operations, brought the level of the Company's domestic business
outside of California to nearly 50% by year-end. As a result of the strategies
undertaken by the Company in 1996, total revenues increased 28% over 1995,
earnings per share (excluding the non-cash charge for impairment of long-lived
assets) increased 64% over 1995, unit deliveries increased 30% over 1995, and
year-end backlog value increased 76% over 1995.
COMPENSATION COMPONENTS
The primary components of executive compensation are base salary, annual cash
incentives and long-term incentives. Each component plays an important role in
the Company's overall approach to compensation.
14
19
Base salaries provide a necessary element of stability in the Company's total
compensation program, and as such, are not subject to significant variability.
Base salaries for executive officers are established in light of the
responsibilities and contributions of each position and the competitive market
for comparable talent.
Annual cash incentives are a significant component of executive officer
compensation. Through extensive use of cash incentives, the Committee links a
substantial portion of annual compensation for key executives directly to the
Company's objectives and profitability. Annual cash incentives are based upon
achievement of specific measures of Company performance as well as the
Committee's assessment of the executive's performance.
Long-term incentive compensation, including the opportunity for significant
stock ownership or cash compensation tied to the Company's performance over a
period of years, is a fundamental mechanism through which the Company aligns
stockholder and executive interests. Long-term incentive compensation primarily
takes the form of stock-based awards under the Company's 1988 Employee Stock
Plan and the Performance-Based Incentive Plan for Senior Management. Most awards
are in the form of stock options or shares of restricted Common Stock that vest
over a period of years. In 1996, the Compensation Committee also made awards of
performance units ("Performance Units") under a new Unit Performance Program
(the "UPP") for key managers.
The following describes how the Named Executive Officers as a group were paid
in 1996. Please see the compensation tables at pages 22-24 for a detailed
presentation of compensation earned by the Named Executive Officers in 1996. The
specifics of Chief Executive Officer compensation are addressed separately in
this report.
Base Salaries. The Compensation Committee authorized a 4% increase in base
salaries for all Company employees in 1996, which increase was determined by the
Company's improved performance, and by general reference to national trends
across industries. Base salaries for the Named Executive Officers were
consistent with the Company-wide increase, except for Mr. Karatz who received no
increase from his salary at the end of fiscal 1995 and Ms. Kalmbach who received
a greater increase upon her promotion in September 1996. See "Employment
Agreements and Change in Control Arrangements" at page 20 for a further
discussion of Ms. Kalmbach's promotion and her new employment agreement.
Annual Cash Incentive Awards. Key operational officers, including Mr. Karatz and
Ms. Kalmbach, earned annual cash incentive awards based upon a specific
percentage of the Company's (or a particular business unit's) pre-tax,
preincentive income ("PPI"). Annual incentive bonuses for certain other
executives, including Messrs. Nafilyan and Praw, were determined in the
discretion of the Compensation Committee based on the achievement of specific
objectives and/or the Committee's assessment of their job performance. Mr.
Henn's annual incentive award was determined by a combination of a percentage
participation in the Company's PPI and the Committee's assessment of his job
performance.
Because cash incentive compensation paid to the Company's executive officers
is largely determined by the Company's performance, executive officers earned
more cash incentive compensation in 1996 than they did in 1995 as a result of
the Company's improved performance. Of the total cash compensation paid to the
Named Executive Officers in 1996, 49% was from incentives determined by the
Company's performance.
15
20
Long-Term Incentive Compensation. As shown in the table entitled "Option/SAR
Grants in Last Fiscal Year" on page 23, in early 1996 the Compensation Committee
made stock option grants to each of the Named Executive Officers. In September
1996, the Committee made an additional, special grant of 25,000 stock options to
each of Ms. Kalmbach and Mr. Praw upon their respective promotions to Senior
Vice President, Regional General Manager. Stock option grants are made to
executives to increase their individual ownership interest in the Company and to
further align their interests with stockholders. The awards also encourage
retention of key executive talent.
In 1996, the Compensation Committee also implemented the UPP. This new
incentive compensation program is intended to motivate senior management toward
improving the Company's long-term performance by providing substantially higher
risk long-term incentive compensation which, in turn, offers executives a
corresponding opportunity to earn higher returns. Participants in the UPP
include all executive officers, division presidents and certain other senior
managers. Generally, the value of Performance Units awarded under the UPP will
be realized, if at all, three years after the date of grant. In 1996, the
Committee made a grant to participating executives of Performance Units which
will vest in three years, as well as a one-time grant of Performance Units which
will vest in two years with an opportunity to earn a two-thirds pay-out. This
one-time grant with a shortened cycle was awarded in view of the fact that the
Committee did not make any a similar long-term incentive awards in 1995.
The value of Performance Units awarded under the UPP is measured over the
period that the Performance Unit is outstanding by (i) the Company's cumulative
earnings per share ("EPS") and (ii) the average return on investment ("ROI") of
the specific operations for which the participating executive is responsible.
The weighting of both factors, as well as the individual performance targets for
each executive, are established on an annual basis by the Compensation
Committee. For all awards made in 1996, EPS will determine 75% of the award and
ROI will determine 25% of the award. Awards paid, if any, may be paid in cash or
in stock or stock equivalents, at the discretion of the Committee. See
"Long-Term Incentive Plans -- Awards in Last Fiscal Year" at page 24 for the
Performance Units granted to each Named Executive Officer in 1996.
In determining the number of long-term incentive awards made to each of the
Named Executive Officers in 1996, the Compensation Committee assessed the
executive's actual and anticipated contribution to the Company's business, as
well as the executive's total proposed compensation for the year.
Compensation of Chief Executive Officer in 1996. In keeping with the Company's
compensation objectives, Mr. Karatz' compensation is largely driven by cash and
stock-based incentives that are directly tied to the Company's financial
performance.
Mr. Karatz is employed under an agreement that went into effect at the
beginning of fiscal 1996. Pursuant to his agreement, Mr. Karatz received a base
salary of $650,000 in 1996 and an annual incentive bonus of cash and restricted
Common Stock, the amount of which was determined by a formula based on the
Company's PPI. See "Employment Agreements and Change in Control Arrangements" at
page 19 for a detailed description of Mr. Karatz' incentive compensation
formula. All incentive compensation paid to Mr. Karatz under his employment
agreement is made under and subject to the limitations set forth in the Kaufman
and Broad Home Corporation Performance-Based Incentive Plan for Senior Man-
16
21
agement, which was approved by the Company's stockholders in 1995 and is
designed to qualify incentive compensation in excess of $1 million paid to the
Named Executive Officers for a tax deduction under Section 162(m) of the
Internal Revenue Code ("Section 162(m)"). Under his employment agreement Mr.
Karatz is also entitled to receive other benefits afforded to other executives
of the Company and, accordingly, in 1996 Mr. Karatz received a discretionary
award of 50,000 stock options and 500 Performance Units under the UPP in
accordance with the principles described above.
Because the incentive compensation formula in Mr. Karatz' new agreement
reduced his annual cash incentive compensation in favor of performance-
contingent awards of restricted Common Stock, Mr. Karatz earned 29% less cash
compensation in 1996 under his new agreement than he would have earned under his
former employment agreement.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Company intends to comply with the requirements of Section 162(m) with
respect to maintaining tax deductibility for all executive compensation, except
in circumstances when 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).
PERSONNEL, COMPENSATION AND STOCK PLAN COMMITTEE
The Compensation Committee is responsible for setting the compensation direction
of the Company. The Committee establishes and monitors all executive
compensation programs, including those covering the Named Executive Officers.
For each of the Company's executive officers, the Committee determines annual
base salary, annual cash bonus awards, and long-term incentive awards. The
Committee also approves all officer nominations and determines annual merit
increase guidelines for all Company employees. The Committee is composed
entirely of non-employee directors.
This report is respectfully submitted by the members of the Committee:
James A. Johnson, Chairman
Ronald W. Burkle
Dr. Ray R. Irani
Mr. Rinehart was elected to the Committee after the close of the Company's
1996 fiscal year. Accordingly, Mr. Rinehart is not included in the list of
Committee members who have submitted the above Compensation Committee Report for
fiscal 1996.
The above Compensation Committee Report and the Common Stock Price Performance
graph set forth on page 18 shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
17
22
KAUFMAN AND BROAD HOME CORPORATION
COMMON STOCK PRICE PERFORMANCE
------------------------
The graph below compares the cumulative total return(a) of Kaufman and Broad
Home Corporation, the S&P 500 Index and the S&P Homebuilding Index. The Dow
Jones Home Construction Index is presented for informational purposes only.
Measurement Period Kaufman and Dow Jones S&P Home
(Fiscal Year Covered) Broad S&P 500 Home Const. Building
1991 100 100 100 100
1992 118 154 118 157
1993 156 199 130 186
1994 101 112 132 128
1995 105 161 181 208
1996 106 162 231 197
---------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---------------------------------------------------------------------------------------
Kaufman and Broad Home
Corporation $100 $118 $156 $101 $105 $106
---------------------------------------------------------------------------------------
S&P 500 Index $100 $118 $130 $132 $181 $231
---------------------------------------------------------------------------------------
Dow Jones Home Construction
Index(b) $100 $157 $186 $128 $209 $197
---------------------------------------------------------------------------------------
S&P Homebuilding Index(b) $100 $154 $199 $112 $161 $162
---------------------------------------------------------------------------------------
The above graph is based upon the Common Stock and index prices calculated as
of the last trading day before December 1st for each of the last five fiscal
year-end periods. The Company's November 29, 1996 closing Common Stock price on
the New York Stock Exchange was $12.875 per share. On February 18, 1997, the
Company's Common Stock closed at $14.125 per share. The performance of the
Company's Common Stock depicted in the graph above represents past performance
only and is not indicative of future performance.
(a) Total return assumes $100 invested at market close on November 29, 1991 in
Kaufman and Broad Home Corporation, the S&P 500 Index, the Dow Jones Home
Construction Index and the S&P Homebuilding Index, including reinvestment of
dividends.
(b) The three companies that comprise the S&P Homebuilding Index are: Pulte
Corporation, Centex Corporation, and the Company. The six companies that
comprise the Dow Jones Home Construction Index include the foregoing
companies, as well as: Standard Pacific Corp., The Ryland Group, Inc., and
Clayton Homes, Inc.
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23
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
------------------------
EMPLOYMENT AGREEMENTS
Since the beginning of fiscal 1996, Mr. Karatz has been employed under an
agreement which provides for a six-year term and which will thereafter be
automatically renewed for a one-year period each December 1, subject to the
right of Mr. Karatz or the Company to terminate on six months' prior notice. In
the event Mr. Karatz' employment is terminated prior to expiration of the
agreement as a result of a "change of ownership" of the Company or termination
of his employment without cause, he will receive a payment equal to two times
his average annual compensation for the prior three fiscal years. Mr. Karatz is
entitled to receive similar benefits in the event his employment is terminated
as a result of death or disability.
The annual incentive bonus formula in Mr. Karatz' employment agreement
provides him with an opportunity to earn an annual cash incentive bonus in an
amount equal to 1.25% of the Company's PPI. The formula further provides that no
such bonus will be paid in any year in which the Company does not achieve a
specified pre-tax return on equity and, if paid, such bonus may not exceed a
specified dollar amount. The bonus formula in the agreement also includes an
opportunity to earn an annual award of restricted Common Stock. The number of
shares of restricted Common Stock awarded each year, if any, is determined by
dividing (i) the product of .50% times the Company's PPI in excess of
$50,000,000 by (ii) the average trading price of the Company's Common Stock on
the date of grant. No annual bonus of restricted Common Stock will be awarded to
Mr. Karatz in any year in which the Company does not generate PPI exceeding the
above-stated level and, if such level is exceeded, there is a specified limit on
the number of shares that may be awarded. The shares of restricted Common Stock
will vest, subject to certain conditions following his retirement at age 55 or
older.
Under his agreement, Mr. Karatz is entitled to a minimum annual base salary of
$650,000, which is subject to annual adjustment in the discretion of the Board
of Directors. Mr. Karatz is also entitled to a nonqualified retirement
arrangement pursuant to which he will receive an annual pension of $492,000,
payable for 25 years, if he continues in the employment of the Company until age
60. If Mr. Karatz retires before or after age 60, he will be entitled to a
lesser or greater amount, as the case may be, pursuant to an actuarially defined
formula based on the returns from continuing annual contributions by the Company
to a retirement trust. Based on this formula, if Mr. Karatz retires after age
60, his annual pension will increase by varying amounts, but at an average
annual rate of 13.7%. The retirement arrangement is structured so that upon Mr.
Karatz' death, the Company will recover 105% of the after-tax cost to the
Company of his retirement benefit. The retirement arrangement also contemplates
certain benefits prior to retirement in the event of death, disability, or a
"change in control" of the Company.
In accord with French law, Mr. Nafilyan does not have an employment agreement
with the Company.
Mr. Henn is employed under an agreement with the Company dated June 7, 1994,
pursuant to which he receives a specified base salary which is subject to annual
adjustment in the discretion of the Compensation Committee. Mr. Henn's annual
19
24
incentive compensation is determined, in part, by a formula based on the
Company's PPI and, in part, by a discretionary award based on his performance up
to a specified percentage of his base salary.
During most of fiscal 1996, Ms. Kalmbach was employed under an agreement with
the Company dated April 6, 1992 and Mr. Praw was employed under an agreement
with the Company dated February 20, 1994. Each of their agreements provided for
a specified base salary which was subject to adjustment in the discretion of the
Compensation Committee. Ms. Kalmbach's agreement provided for an annual
incentive compensation award based on a specified percentage of the PPI of the
Company's South Bay division, of which she was President. Mr. Praw's agreement
provided for a discretionary annual incentive compensation award based on his
performance up to a specified percentage of his base salary.
As of September 1, 1996, the Company's senior management team was restructured
through the appointment of three Senior Vice President, Regional General
Managers to oversee the Company's operations on a regional basis. The three new
Senior Vice President, Regional General Managers are: Glen Barnard (Central
Region), Lisa Kalmbach (North Region) and Albert Praw (South Region).
Accordingly, Ms. Kalmbach and Messrs. Barnard and Praw entered into new
employment agreements reflecting their respective promotions. Each agreement
provides for a specified base salary that became effective as of their September
1, 1996 promotions. Under the new employment agreements, Ms. Kalmbach's base
salary was increased from $140,000 to $250,000 and Mr. Praw's base salary was
reduced from $312,000 to $250,000. Each agreement also provides for an annual
incentive compensation award for fiscal 1997 and subsequent fiscal years.
(Incentive compensation awards paid to Ms. Kalmbach and Mr. Praw in fiscal 1996
were based on the provisions under their prior employment agreements.) Beginning
in fiscal 1997, Ms. Kalmbach's annual incentive compensation award will be
determined by a formula based on the PPI of the Company's North Region
operations. Mr. Praw's annual incentive compensation will be determined, in
part, by a discretionary award based on his performance up to a specified
percentage of his base salary and, in part, by a formula based on the PPI of the
Company's South Region operations. The employment agreements for Ms. Kalmbach
and Mr. Praw further provide that any incentive compensation earned as a result
of their PPI-based formulas may be increased or decreased by a specified
percentage based on their respective operation's ROI performance. In the event
their cash compensation exceeds a specified level, or their incentive
compensation is increased as a result of the ROI performance of the operations
for which they are responsible, such compensation will be paid in shares of
restricted Common Stock rather than in cash.
Under their respective employment agreements, Mr. Karatz, Ms. Kalmbach and
Messrs. Henn and Praw are also eligible to receive other benefits and
compensation generally afforded to Company executives, including the receipt of
discretionary stock option grants and other awards under the Company's employee
stock plans. Other than Mr. Karatz, no executive's employment agreement contains
a change in control provision.
CHANGE IN CONTROL ARRANGEMENTS
Under the 1988 Employee Stock Plan and the Performance-Based Incentive Plan for
Senior Management, all outstanding stock options will become fully exercisable
and all restrictions on outstanding shares of restricted Common Stock or other
awards shall lapse upon a "change of ownership" of the Company. A change in
ownership will be deemed to occur if (i) current members of the Board of
Directors or other directors elected by three-
20
25
quarters of the current members or their respective replacements (excluding
certain individuals who took office in connection with an acquisition of 20% or
more of the Company's voting securities or in connection with an election
contest) cease to represent a majority of the Board or (ii) the Board determines
that a change in control has occurred. The UPP provides that upon a change of
ownership, each outstanding Performance Unit will be paid in cash at the target
level. The Directors Stock Unit Plan provides that upon a change of ownership,
all outstanding Stock Units will be paid in cash or shares of Common Stock, in
accord with the prior election made by each participating director. The
Directors' Legacy Program provides that upon a change of ownership of the
Company, all participating directors shall become immediately vested under the
program, and the Company shall create an irrevocable trust into which it shall
transfer sufficient assets (including the directors' life insurance policies) to
make the designated charitable contributions for the participating directors.
The Company also maintains a non-qualified Executive Deferred Compensation
Plan. From 1985 to 1992, pursuant to the plan Messrs. Karatz and Nafilyan
deferred receipt of a certain amount of pre-tax income, plus a Company matching
contribution, until retirement, termination or certain other events, including a
"change in control." A change in control is defined in the plan to include the
acquisition by a person or "group" (as defined) of 25% or more of the Company's
voting power, a transaction which results change in a majority of the
then-incumbent Board or the Company ceasing to be publicly owned. No new
contributions to the Executive Deferred Compensation Plan may be made, but the
Company continues to pay interest on prior contributions still held in the plan.
21
26
EXECUTIVE COMPENSATION
------------------------
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the total compensation
earned by each of the Named Executive Officers for the fiscal years ended
November 30, 1994, 1995 and 1996.
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------ RESTRICTED UNDERLYING
FISCAL OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(A) AWARDS($)(B) SARS(#) COMPENSATION($)(C)
----------------------------------------------------------------------------------------------------------------
Bruce Karatz 1996 $650,000 $ 976,413 -0- $140,565 50,000 $ 53,503
Chairman and Chief 1995 608,333 830,533 -0- -0- 50,000 52,191
Executive Officer 1994 600,000 1,339,249 -0- -0- -0- 39,223
- -----------------------------------------------------------------------------------------------------------------
Guy Nafilyan 1996 316,000 163,000 -0- -0- 20,000 $ 4,028
Executive Vice 1995 312,000 100,000 -0- -0- 30,000 4,359
President 1994 248,400 100,000 -0- -0- -0- 862
and President
of European
Operations
- -----------------------------------------------------------------------------------------------------------------
Michael F. Henn 1996 311,000 214,698 -0- -0- 20,000 $ 17,160
Senior Vice 1995 300,000 150,553 -0- -0- 20,000 9,240
President
and Chief 1994(d) 118,269 150,000 -0- -0- 20,000 -0-
Financial Officer
- -----------------------------------------------------------------------------------------------------------------
Lisa G. Kalmbach 1996 143,090 505,587 -0- -0- 35,000 $ 7,685
Senior Vice 1995 120,000 379,606 -0- -0- 10,000 7,200
President,
Regional General 1994 118,750 501,147 -0- -0- -0- 9,794
Manager
- -----------------------------------------------------------------------------------------------------------------
Albert Z. Praw 1996 311,000 187,200 -0- -0- 45,000 $ 17,075
Senior Vice 1995 300,000 162,000 -0- -0- 40,000 5,790
President,
Regional General 1994(d) 232,895 170,000 -0- -0- -0- -0-
Manager
- -----------------------------------------------------------------------------------------------------------------
(a) The Named Executive Officers listed in this table receive certain personal
benefits; however, such benefits do not exceed the lesser of $50,000 or 10%
of such officer's salary and bonus for any of the years reported.
(b) As part of his 1996 compensation, Mr. Karatz received a grant of 10,131
shares of restricted Common Stock pursuant to the performance-based
incentive compensation formula in his employment agreement. The shares of
restricted Common Stock vest upon Mr. Karatz' retirement at age 55 or
thereafter. The value of the award is based on the average trading price of
the Company's Common Stock on the New York Stock Exchange on the date of
grant (February 6, 1997).
(c) These amounts represent the Company's aggregate contributions to the
Company's 401(k) Savings Plan, Supplemental Non-Qualified Deferred
Compensation Plan and the amount of interest earned on the Executive
Deferred Compensation Plan at a rate in excess of 120% of the applicable
federal rate. In fiscal 1996, the Named Executive Officers accrued the
following respective amounts under such plans: Mr. Karatz $9,000, $30,000
and $14,503; Mr. Nafilyan -0-, -0- and $4,028; Mr. Henn $9,000, $8,160
and -0-; Ms. Kalmbach $7,685, -0- and -0-; and Mr. Praw $9,000, $8,075
and -0-.
(d) The amounts set forth in the table for fiscal 1994 for Messrs. Henn and Praw
represent less than a full year's compensation. Mr. Henn joined the Company
on July 11, 1994 and Mr. Praw joined the Company on March 7, 1994. Neither
Mr. Henn's nor Mr. Praw's base salary was increased in fiscal 1995.
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27
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT
NUMBER OF PERCENT OF TOTAL ASSUMED RATE OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(C)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(A) FISCAL YEAR ($/SH)(B) DATE 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------
Bruce Karatz 50,000 7.52% $14.560 1/24/11 $785,460 $2,313,037
Guy Nafilyan 20,000 3.00 14.560 1/24/11 314,184 925,215
Michael F. Henn 20,000 3.00 14.560 1/24/11 314,184 925,215
Lisa G. Kalmbach 10,000 1.50 14.560 1/24/11 157,092 462,607
25,000 3.76 13.125 9/25/11 354,023 1,042,535
Albert Z. Praw 20,000 3.00 14.560 1/24/11 314,184 925,215
25,000 3.76 13.125 9/25/11 354,023 1,042,535
- --------------------------------------------------------------------------------
(a) All options granted in 1996 are for shares of Common Stock and, except for
the 25,000 option grants to Ms. Kalmbach and Mr. Praw, are exercisable in
cumulative 20% installments commencing one year from the date of grant, with
full vesting occurring on the fifth anniversary of the date of grant. The
grants of 25,000 options to each of Ms. Kalmbach and Mr. Praw are
exercisable in cumulative 33 1/3% installments commencing one year from the
date of grant, with full vesting occurring on the third anniversary of the
date of grant. Vesting may be accelerated upon certain events related to a
change of ownership in the Company.
(b) All options were granted at market value on the date of grant. The term
"market value" as used with respect to this table was computed as the
average of the high and low stock prices for the Company's Common Stock on
the New York Stock Exchange on the date of grant. The exercise price and tax
withholding obligations related to exercise may be paid by delivery of
already owned shares or by withholding a number of the underlying shares,
subject to certain conditions.
(c) Gains are net of the option exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation over
the 15-year term of the options. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common Stock,
overall stock market conditions, as well as the optionholders' continued
employment through the vesting period. The amounts reflected in this table
may not necessarily be achieved, or may be exceeded.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR END(#) FISCAL YEAR END($)(B)
ACQUIRED ON VALUE ---------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($)(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------
Bruce Karatz 0 $ 0 1,105,968 110,000 $8,472,180 $ 0
Guy Nafilyan 0 0 31,000 54,000 0 0
Michael F. Henn 0 0 12,000 48,000 0 0
Lisa G.
Kalmbach 0 0 18,850 49,000 4,116 0
Albert Z. Praw 0 0 8,000 77,000 2,000 8,000
- --------------------------------------------------------------------------------
(a) Represents the difference between the market value of the Company's Common
Stock at exercise minus the exercise price of the options.
(b) Represents the difference between the $12.875 closing price of the Company's
Common Stock on November 29, 1996 on the New York Stock Exchange and the
exercise price of the options.
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LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table provides information on long-term incentive awards granted
in 1996 to the Named Executive Officers under the UPP. See also the Compensation
Committee Report at page 16.
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES, UNITS OR OTHER PERIOD PRICE-BASED PLANS
OTHER UNTIL MATURATION ------------------------------------------
NAME RIGHTS(#)(A) OR PAYOUT THRESHOLD($)(B) TARGET($) MAXIMUM($)
- ---------------------------------------------------------------------------------------------------------
Bruce Karatz 200 12/1/95 - 11/30/97 $ 87,500 $ 200,000 $300,000
300 12/1/95 - 11/30/98 131,250 300,000 450,000
Guy Nafilyan 100 12/1/95 - 11/30/97 43,750 100,000 150,000
150 12/1/95 - 11/30/98 65,625 150,000 225,000
Michael F. Henn 100 12/1/95 - 11/30/97 43,750 100,000 150,000
150 12/1/95 - 11/30/98 65,625 150,000 225,000
Lisa G. Kalmbach 50 12/1/95 - 11/30/97 21,875 50,000 75,000
75 12/1/95 - 11/30/98 32,813 75,000 112,500
Albert Z. Praw 100 12/1/95 - 11/30/97 43,750 100,000 150,000
150 12/1/95 - 11/30/98 65,625 150,000 225,000
- ---------------------------------------------------------------------------------------------------------
(a) In 1996, the Company established the UPP and awarded Performance Units
thereunder for the 1996-1998 performance period, as well as for a transition
cycle represented by the 1996-1997 performance period. Performance Units
represent the opportunity to receive an award payable in cash or shares of
Common Stock, the amount of which will be determined by the Company's
cumulative EPS (weighted at 75%) and average ROI (weighted at 25%) during
the applicable period. The target amount will be earned if a specified,
targeted cumulative EPS and average ROI are achieved for the period. For the
Named Executive Officers, the threshold amount, equal to 43.75% of the
target amount, will be earned at the achievement of a specified minimum
cumulative EPS and average ROI for the period. Achievement of either the
specified minimum cumulative EPS or average ROI, but not both, would result
in a smaller payout than the threshold amounts shown in the above table. The
maximum amount, equal to 150% of the target amount, will be earned if the
specified maximum cumulative EPS and average ROI for the period are achieved
or exceeded.
(b) No award will be made upon the vesting of a Performance Unit if neither the
specified minimum cumulative EPS nor the specified minimum average ROI was
achieved for the applicable performance period.
24
29
OTHER MATTERS
------------------------
COMPENSATION COMMITTEE INTERLOCKS
In the ordinary course of its business, the Company's mortgage banking
subsidiary sells mortgages it has originated to Fannie Mae. The Company believes
that terms under which it sells mortgages to Fannie Mae are similar to those
afforded to other companies in the mortgage origination business. Mr. James A.
Johnson is Chairman and Chief Executive Officer of Fannie Mae and is Chairman of
the Compensation Committee.
RELATED PARTY TRANSACTIONS
Through its mortgage banking subsidiary, the Company offers home mortgage loans
to its employees and directors. These mortgage loans are made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers and do not involve
more than the normal risk of collectability. Such loans are typically promptly
sold to third-party mortgage purchasers.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Based upon its review of Forms 3, 4 and 5 and any amendments thereto furnished
to the Company in compliance with Section 16 of the Securities Exchange Act of
1934, as amended, all such Forms were filed on a timely basis by the Company's
reporting persons during fiscal 1996, except for Forms 4 inadvertently filed two
days late for Messrs. Burkle, Johnson and Sigoloff reporting a grant of
restricted Common Stock in lieu of their cash fees for service on the Board of
Directors.
FINANCIAL STATEMENTS
The Company's audited consolidated financial statements and notes thereto,
including selected financial information and management's discussion and
analysis of financial condition and results of operations for the fiscal year
ended November 30, 1996 are included at pages 26 through 49 of the Company's
1996 Annual Report to Stockholders, which is being mailed to stockholders
concurrently with this Proxy Statement. Additional copies of the Annual Report
are available without charge upon request. The financial statements, the report
of independent auditors thereon, selected financial information, and
management's discussion and analysis of financial condition and results of
operations in the Annual Report are incorporated by reference herein.
INDEPENDENT ACCOUNTANTS
The firm of Ernst & Young LLP served as the Company's independent auditors for
fiscal 1996. This firm has advised the Company that it has no direct or indirect
financial interest in the Company. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, with the opportunity to make a
statement, should they desire to do so, and will be available to respond to
appropriate questions from stockholders.
OTHER BUSINESS
The Board of Directors knows of no business other than that described herein
that will be presented for consideration at the Annual Meeting. If, however,
other business shall properly come before the Annual Meeting, the persons named
in the enclosed form of proxy intend to vote the shares represented by properly
delivered proxies on such matters in accordance with their judgment in the best
interest of the Company.
25
30
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received by the Company for inclusion in
the Proxy Statement and form of proxy for that meeting no later than November 3,
1997.
COST AND METHOD OF PROXY SOLICITATION
The entire cost of preparing, assembling, printing and mailing the Notice of
Meeting, this Proxy Statement, and the proxy itself, and the cost of soliciting
proxies relating to the meeting will be borne by the Company. In addition to use
of the mails, proxies may be solicited by officers, directors, and other regular
employees of the Company by telephone, facsimile, or personal solicitation, and
no additional compensation will be paid to such individuals. The Company will,
if requested, reimburse banks, brokerage houses, and other custodians, nominees
and certain fiduciaries for their reasonable expenses incurred in mailing proxy
material to their principals. The Company will use the services of Corporate
Investor Communications, Inc., a professional soliciting organization, to assist
in proxy solicitation and in distributing proxy materials to institutions,
brokerage houses, custodians, nominees and other fiduciaries. The Company
estimates the costs for such services will not exceed $5,000.
By Order of the Board of Directors,
Kimberly N. King
Corporate Secretary and
Associate Counsel
February 28, 1997
Los Angeles, California
26
31
KAUFMAN [LOGO] BROAD
Kaufman and Broad Home Corporation
10990 Wilshire Boulevard
Los Angeles, California 90024
32
PROXY
KAUFMAN AND BROAD HOME CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 3, 1997
The undersigned hereby appoints Bruce Karatz, Barton P. Pachino and Kimberly N.
King, and each of them, as proxies with full power to substitution and
revocation, to vote all of the shares of Kaufman and Broad Home Corporation
Common Stock the undersigned is entitled to vote at the Kaufman and Broad Home
Corporation Annual Meeting of Stockholders to be held on April 3, 1997, or at
any adjournment thereof, upon the Proposal set forth on the reverse side of
this Proxy and described in the accompanying Proxy Statement, and upon such
other business as may properly come before the meeting or any adjournment
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED,
IT WILL BE VOTED FOR PROPOSAL 1 AND ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
33
Please mark ___
your vote as
indicated in X
this example. ___
FOR WITHHOLD
(except AUTHORITY
marked to to vote for
THE BOARD OF DIRECTORS RECOMMENDS the contrary) nominees listed
A VOTE FOR:
___ ___
1. ELECTION OF DIRECTORS in Class II
Nominees: Antoine Jeancourt-Galignani,
Bruce Karatz ___ ___
Charles R. Rinehart
(INSTRUCTION: to withhold authority to vote
for any individual nominee, strike a line
through the nominee's name in the list
above.)
The undersigned hereby acknowledges receipt
of the Notice of Annual Meeting and Proxy
Statement for such meeting, dated
February 28, 1997.
________ When signing as attorney, executor,
/ administrator, trustee or guardian, please give
/ full title. If more than one trustee, all
/ should sign. All joint owners should sign. If
/ a corporation, sign in full corporate name by
President, or other authorized officer. If a
partnership, sign in partnership name by
authorized person.
IMPORTANT INFORMATION IS CONTAINED ON THE OTHER
SIDE OF THIS CARD. PLEASE READ BOTH SIDES OF
THIS CARD, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
Signature(s)_________________________________________ Date ______________, 1997
(Please sign EXACTLY as your name appears hereon.)
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -