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o | 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. | |
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Items of Business | Board Recommendation | |||
Elect ten directors, each to serve for a one-year term | FOR | |||
Advisory vote to approve named executive officer compensation | FOR | |||
Approve the KB Home 2014 Equity Incentive Plan | FOR | |||
Ratify the appointment of our independent registered public accounting firm | FOR |
Time and Date: | 9:00 a.m., Pacific Time, on Thursday, April 3, 2014. | |||||
Location: | KB Home Corporate Office, 10990 Wilshire Boulevard, Los Angeles, CA 90024. | |||||
Items of Business: | (1) Elect ten directors, each to serve for a one-year term; | |||||
(2) Advisory vote to approve named executive officer compensation; | ||||||
(3) Approve the KB Home 2014 Equity Incentive Plan; and | ||||||
(4) Ratify the appointment of our independent registered public accounting firm. | ||||||
The accompanying Proxy Statement describes these items in more detail. We have not received notice of any other matters that may be properly presented at the meeting. | ||||||
Record Date: | You can vote at the meeting and at any postponement or adjournment of the meeting if you were a stockholder of record on February 7, 2014. | |||||
Voting: | Please vote as soon as possible, even if you plan to attend the meeting, to ensure that your shares will be represented. You do not need to attend the meeting to vote if you vote before the meeting. If you are a holder of record, you may vote your shares via the Internet, by telephone or by mail. If your shares are held by a broker or financial institution, you must vote your shares as instructed by that broker or financial institution. | |||||
Annual Report: | Copies of our Annual Report on Form 10-K for the fiscal year ended November 30, 2013 (the “Annual Report”), including audited financial statements, are being made available to stockholders concurrently with the accompanying Proxy Statement. We anticipate that these materials will first be made available on or about February 21, 2014. | |||||
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on April 3, 2014: Our Proxy Statement and Annual Report are available at www.kbhome.com/investor/proxy. | ||||||
Table of Contents | |
General Information |
What is the purpose of this Proxy Statement? Your Board of Directors (the “Board”) is furnishing this Proxy Statement to you to solicit your proxy for our 2014 Annual Meeting. The items of business for the meeting are described in the accompanying Notice of 2014 Annual Meeting of Stockholders. This Proxy Statement contains information to help you decide how you want your shares to be voted. We anticipate that this Proxy Statement and a form of proxy or voting instruction form will first be made available on or about February 21, 2014. Who can vote? Holders of record of the 83,744,528 shares of common stock that were outstanding at the close of business on the record date (February 7, 2014) are entitled to one vote for each share held. The trustee of our Grantor Stock Ownership Trust (the “GSOT”) will vote the 10,501,844 shares the GSOT held on the record date based on the instructions received from our employees who hold unexercised common stock options under our employee equity compensation plans. Accordingly, a total of 94,246,372 shares are entitled to vote at the 2014 Annual Meeting. There is no right to cumulative voting. Who is a “Holder of Record”? If your shares are registered directly in your name with our transfer agent, Computershare Inc., you are considered the “holder of record” of those shares. If your shares are held in a stock brokerage account or by a financial institution or other holder of record, you are a beneficial owner of those shares held in “street name.” If you are a beneficial owner, this Proxy Statement will use the term “broker” to describe the person or institution that is the holder of record of your shares. | Attending the 2014 Annual Meeting | |||
Date: | Thursday, April 3, 2014. | |||
Place: | KB Home Corporate Office 10990 Wilshire Boulevard Los Angeles, CA 90024. | |||
Entry: | You must have an admission ticket and valid identification, as described below under the heading “Other Matters.” A professional business dress code will be observed. Parking is available at the meeting location. You may be subject to a security check. | |||
Note: | No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the meeting. Additional rules of conduct will apply at the meeting. | |||
Proxy Solicitation Costs We will pay the cost to solicit proxies for the 2014 Annual Meeting. In addition to this Proxy Statement, our officers, directors and other employees may solicit proxies personally, in writing or by telephone, facsimile, email or other means for no additional compensation. We will, if requested, reimburse banks, brokerage houses and other custodians, nominees and certain fiduciaries for their reasonable expenses in providing material to their principals. We have hired Georgeson Inc., a professional soliciting organization, to assist us in soliciting proxies and distributing proxy materials. For its services, we will pay Georgeson a fee of $9,000, plus reimbursement of out-of-pocket expenses. |
Voting Information |
Quorum Requirement: | For stockholders to take action at the 2014 Annual Meeting, a majority of the shares of our common stock outstanding on the record date must be present or represented at the meeting. Abstentions and “broker non-votes” are counted for this purpose. | |
Broker Non-Votes: | A “broker non-vote” arises when a broker does not receive instructions from a beneficial owner and does not have the discretionary authority to vote on an item of business. For the 2014 Annual Meeting, we understand that brokers have discretionary authority to vote only on ratifying the appointment of our independent registered public accounting firm. Therefore, if you are a beneficial owner, you must instruct your broker on how you want your shares to be voted on the other items of business for the 2014 Annual Meeting in order for your shares to be counted for those items. | |
Proxy Voting: | Holders of record may vote by proxy via the Internet, by telephone or by mail as described in the form of proxy or voting instruction form. If you are a beneficial owner, your broker should send you proxy voting materials and instructions, and may do so electronically. | |
Voting in Person: | Holders of record (or someone designated by a signed legal proxy) may vote in person at the 2014 Annual Meeting. If you are a beneficial owner, you must obtain a legal proxy from your broker and present it with your ballot. Voting at the 2014 Annual Meeting will replace any prior proxy voting. | |
Voting By Named Proxies: | The named proxies for the 2014 Annual Meeting — Jeffrey T. Mezger and Brian J. Woram (or their duly authorized designees) — will follow submitted proxy voting instructions. They will vote as the Board recommends as to any submitted instructions that do not direct how to vote on any item, and will vote on any other matters properly presented at the 2014 Annual Meeting in their judgment, including on any motion to postpone or adjourn all or any portion of the 2014 Annual Meeting. | |
Closing of Polls: | Polls will close shortly after the 2014 Annual Meeting is called to order. Holders of record may vote via the Internet and by telephone until 11:59 p.m., Eastern Time, on April 2, 2014. Proxy voting instructions for shares held by the KB Home Common Stock Fund in our 401(k) Savings Plan or the GSOT must be received by 11:59 p.m., Eastern Time, on April 1, 2014. Each broker sets proxy voting deadlines for its beneficial owners. | |
Changing Your Vote: | Holders of record may revoke voting instructions at any time before polls close by submitting a later vote (i) in person at the 2014 Annual Meeting, (ii) via the Internet, by telephone or by mail before the above-listed deadlines, or (iii) to our Corporate Secretary at the address listed below under the heading “Communicating with the Board” by our close of business on April 2, 2014. If you are a beneficial owner, you must contact your broker to revoke any prior voting instructions. There are no dissenters’ rights or rights of appraisal as to any item to be acted upon at the 2014 Annual Meeting. | |
Election of Directors: | To be elected, each director nominee must receive a majority of votes cast in favor (i.e., the votes cast for a nominee’s election must exceed the votes cast against the nominee’s election). Shares that are not present or represented at the 2014 Annual Meeting and abstentions will not affect the election outcome. | |
Voting on Other Items: | Other items of business will be considered approved based upon the affirmative vote of a majority of shares of our common stock present or represented, and entitled to vote thereon, at the 2014 Annual Meeting. Abstentions from voting on these other items of business will have the same effect as an “against” vote. Broker non-votes will have no effect on the voting results for these other items of business. | |
Inspectors of Elections: | We have engaged our transfer agent to count the votes and to act as an independent inspector of election. William A. (Tony) Richelieu, our Corporate Secretary, will also act as an inspector of election. |
Corporate Governance and Board Matters |
• | We report our political contributions to the Nominating/Governance Committee and in our public Sustainability Report. |
• | Our charter documents do not require any supermajority votes, and we have only one class of voting securities. |
Role of the Board of Directors The Board is elected by our stockholders to oversee the management of our business and to assure that the long-term interests of our stockholders are being served. The Board carries out this role subject to Delaware law and our Certificate of Incorporation, By-laws and Corporate Governance Principles. Corporate Governance Principles Our Corporate Governance Principles provide a framework within which we conduct our business and pursue our strategic goals. The Nominating/Governance Committee regularly reviews our Corporate Governance Principles. On October 10, 2013, the Board, on the Nominating/Governance Committee’s recommendation, reaffirmed the terms of our Corporate Governance Principles without any changes. Ethics Policy We expect all of our directors and employees to follow the highest ethical standards when representing KB Home and our interests. To this end, all employees, including our senior executives, and our directors must comply with our Ethics Policy. The Audit Committee regularly reviews our Ethics Policy, and approved changes to it that became effective as of October 31, 2013. The changes updated certain standards of conduct, and clarified standards for employee personal use of KB Home service providers. Executive Sessions of Non-Employee Directors The non-employee directors meet in executive session at each of the Board’s regular meetings. Any non-employee director can request additional executive sessions. Stephen F. Bollenbach, the Non-Executive Chairman of the Board, schedules and chairs the executive sessions. | Board Membership As of the date of this Proxy Statement, the Board has eleven members. Except for Mr. Mezger, our President and Chief Executive Officer (“CEO”), no director is a KB Home employee. Board Committees The Board has three standing Committees: • Audit and Compliance (the “Audit Committee”) • Management Development and Compensation (the “Compensation Committee”) • Nominating and Corporate Governance (the “Nominating/Governance Committee”) The Board appoints the members of and has adopted a charter for each Board Committee. The Board and each Board Committee conduct an annual evaluation of their respective performance. Mr. Mezger does not serve on any Board Committees. Board Meetings and Attendance The Board and its Committees hold regular meetings on a set schedule and may hold interim meetings and act by written consent from time to time as necessary or appropriate. The Board held five meetings during our 2013 fiscal year. Mr. Bollenbach, as the Non-Executive Chairman of the Board, presides over all meetings at which he is present. In our 2013 fiscal year, each director attended at least 75% of the meetings of the Board and the Board Committees on which he or she served during his or her period of service on the Board. We expect directors to attend our annual stockholder meetings. All directors serving at the time attended our 2013 Annual Meeting of Stockholders, which was held on April 4, 2013. |
Director | Audit Committee | Compensation Committee | Nominating/Governance Committee |
Barbara T. Alexander | X | ||
Stephen F. Bollenbach | X | X | |
Timothy W. Finchem | X | X | |
Dr. Thomas W. Gilligan | X | ||
Kenneth M. Jastrow, II | Chair | ||
Robert L. Johnson | X | ||
Melissa Lora | Chair | X | |
Michael G. McCaffery | Chair | ||
Luis G. Nogales | X | X | |
Michael M. Wood (a) | X | ||
Number of Meetings: | 7 | 6 | 4 |
(a) | Mr. Wood was appointed to the Audit Committee on January 22, 2014, the date on which he was elected to the Board, and has served on the Audit Committee since that date. |
Compensation Committee. The Board has delegated its oversight of risks that may arise from our employee compensation arrangements, plans, programs and policies to the Compensation Committee. In carrying out its risk oversight role, the Compensation Committee conducts with our management on an annual basis an overall assessment of our primary employee compensation plans and programs that identifies potential design and implementation risks of those plans and programs, including potential risks relative to relevant business risk areas identified in our annual overall enterprise risk management assessment. The Compensation Committee also carries out its risk oversight role on an ongoing basis through its review and, to the degree appropriate, specific approval of our compensation arrangements, plans, programs and policies as they are being developed by our senior human resources personnel. The Compensation Committee Chair reports to the Board regarding material risks as deemed appropriate. Based on this oversight approach and the identified mitigating factors noted in the box nearby, we do not believe that our present employee compensation arrangements, plans, programs and policies are likely to have a material adverse effect on us. | Mitigating Factors of Compensation Risks | |
• Balanced and competitive mix of salaries, benefits, and annual and long-term incentives aligned with our operational and strategic goals that are designed to attract, retain and motivate a talented team to achieve optimal performance. • The Compensation Committee’s and its outside consultant’s guidance in developing our compensation arrangements, plans, programs and policies, and the Compensation Committee’s review and approval of them. • Our equity-based award grant policy (described below under the heading “Equity-Based Award Grant Policy”), and the compensation clawback provisions in our CEO’s Employment Agreement. • The Compensation Committee’s review of our performance and of individual executives’ performance, and appropriate use of discretion to balance and/or contain performance-based compensation payable pursuant to applicable preset objective standards. | ||
The Compensation Committee (a) is responsible for (i) the evaluation and compensation of our CEO; (ii) the compensation of our senior executives (other than our CEO), which consists of our CEO’s direct reports and any designated “executive officers” (as that term is defined in Rule 3b-7 of the Securities Exchange Act of 1934); (iii) oversight of our efforts to attract, develop, promote and retain qualified senior executives; and (iv) the evaluation and determination of non-employee director compensation and benefits; (b) oversees the preparation of the compensation discussion and analysis to be included in our annual proxy statement, recommends to the Board whether to so include the compensation discussion and analysis, and provides an accompanying report to be included in our annual proxy statement; (c) advises the Board on any non-binding vote or similar advisory action by stockholders to approve senior executive compensation; and (d) is charged with the duties and responsibilities in its charter. |
Executive Officer and Non-Employee Director Compensation Processes and Procedures. The Compensation Committee exercises the Board’s authority under our By-laws to fix executive officer and non-employee director compensation. Under this authority, the Compensation Committee annually reviews and approves the goals and objectives relevant to our CEO’s compensation, evaluates his performance in light of those goals and objectives and other criteria, and, either as a committee or together with the other independent directors (as directed by the Board), determines and approves our CEO’s compensation based on the evaluation. The Compensation Committee evaluates, in conjunction with our CEO, the performance of our senior executives, and reviews and approves their compensation. | Compensation Committee Interlocks and Insider Participation |
All current Compensation Committee members served throughout our 2013 fiscal year, and no member was part of a “compensation committee interlock” as described under SEC rules. In addition, none of our executive officers served as a director or member of the compensation committee of another entity that would constitute a “compensation committee interlock.” |
Nominating/Governance Committee. The Nominating/Governance Committee (a) is responsible for (i) providing oversight of our corporate governance policies and practices; (ii) identifying, evaluating and recommending to the Board individuals who are qualified to become directors as described in the box nearby; and (iii) performing ongoing assessments of the Board’s size, operations, structure, needs and effectiveness; (b) reviews and makes recommendations to the Board on proposed changes to our Certificate of Incorporation, By-laws and Corporate Governance Principles; (c) periodically assesses and recommends action with respect to stockholder rights plans and other stockholder protections; (d) reviews and approves “related party transactions,” as further described below under the heading “Certain Relationships and Related Party Transactions;” and (e) is charged with the duties and responsibilities in its charter. The Nominating/Governance Committee has retained professional search firms from time to time to assist it with recruiting potential director candidates to the Board based on criteria the Nominating/Governance Committee provides to each such firm. These firms help identify, evaluate and select director candidates and are typically paid an agreed upon fee plus expenses for their work. Current directors or other persons may recommend candidates to the Nominating/Governance Committee. Mr. Wood was recommended as a candidate by a current director prior to his election to the Board on January 22, 2014. A professional search firm was not involved in recruiting him to the Board. Any security holder may recommend a director candidate for the Nominating/Governance Committee’s consideration by submitting the candidate’s name and qualifications to us in care of our Corporate Secretary at the address listed below under the heading “Communicating with the Board.” Director candidates recommended by a security holder are considered in the same manner as any other recommended candidates. | Consideration of Director Candidates |
The Nominating/Governance Committee considers director candidates at regular or special meetings and at any point during the year. In addition to the general qualifications described below under the heading “Director Qualifications,” and the attributes described below in the box titled “Selected Director Attributes,” the Nominating/Governance Committee considers a director candidate’s diversity of background and personal experience. In this context, diversity may encompass race, ethnicity, national origin and gender, geographic residency, educational and professional history, community or public service, expertise or knowledge base and/or other tangible and intangible aspects of a candidate in relation to the personal characteristics of current directors and other potential director candidates. There is no formal policy as to how diversity of background and personal experience is applied, and a candidate’s background and personal experience, while important, do not necessarily outweigh other attributes or factors considered in evaluating any particular candidate. | |
• | any transaction in which the total amount involved is less than or equal to $120,000; |
• | the employment and compensation (a) of a director or executive officer if the individual’s compensation is reported in our annual proxy statement, or (b) of any other executive officer who is not an immediate family member of one of the |
• | any transaction that would not (a) need to be reported under federal securities laws, (b) be deemed to impair a director’s independence under our Corporate Governance Principles or (c) be deemed to be a conflict of interest under our Ethics Policy; and |
• | any transaction where an individual’s interest therein arises solely from ownership of our common stock and all holders of our common stock received the same benefit on a pro-rata basis. |
Director Qualifications We believe our directors should possess the highest personal and professional ethics, integrity, judgment and values, and be committed to representing the long-term interests of our stockholders. Our directors should also have an inquisitive and objective perspective, and be able and willing to dedicate the time necessary to Board and Board Committee service. The Nominating/Governance Committee and the Board determined that each individual whom the Board will present at the 2014 Annual Meeting as a director nominee possesses these characteristics. In addition, the Nominating/Governance Committee regularly evaluates the skills and characteristics of current and potential directors, and may consider the attributes noted in the box nearby, among others. Through its evaluation, the Nominating/Governance Committee identified for the Board certain specific skills and qualifications possessed by each director nominee that supported the Board’s determination that each should serve as directors. These qualifications are described below along with other biographical information for each director nominee under the heading “Election of Directors.” | Selected Director Attributes |
• Personal qualities, accomplishments and reputation in the business community. • Financial literacy, financial and accounting expertise and significant business, academic or government experience in leadership positions or at senior policy-making levels. • Geographical representation in areas relevant to our business. • Diversity of background and personal experience. • Fit of abilities and personality with those of current and potential directors in building a Board that is effective, collegial and responsive to the needs of our business. • Independence and an absence of conflicting time commitments. |
Director Compensation |
Under the Director Plan, our non-employee directors are entitled to receive an annual Board retainer, an annual grant of stock options and stock units, and Board Committee-related retainers. Non-employee directors are also entitled to receive meeting fees under certain circumstances, and may elect to receive any cash retainers and meeting fees in the form of stock units. Cash retainers are paid in equal quarterly installments over a Director Year. A “Director Year” is the period between our annual meetings of stockholders. Accordingly, the 2013-2014 Director Year began on April 4, 2013. |
Annual compensation items correspond to a Director Year, and non-employee directors who are elected during a Director Year are entitled to pro-rated annual compensation based on the period remaining in the Director Year of election. The annual grant of stock options and stock units is made on the date of each annual meeting of stockholders to the non-employee directors serving on the Board on that date. A non-employee director who is elected during a Director Year receives a pro-rated grant of stock options and stock units on the date of the director’s first day of service on the Board. |
• Annual Board Retainer: | $80,000 |
• Annual Grant of Stock Options and Stock Units: | Each valued at $67,500 on the date of grant |
• Annual Board Committee Chair Retainers: | $25,000 (Audit Committee) |
$18,000 (Compensation Committee) | |
$10,000 (Nominating/Governance Committee) | |
• Annual Board Committee Member Retainers: | $10,000 (Audit Committee) |
$7,000 (Compensation Committee) | |
$5,000 (Nominating/Governance Committee) | |
Name(a) | Fees Earned or Paid in Cash ($)(b) | Stock Awards ($)(c) | Option Awards ($)(c) | All Other Compensation ($)(d) | Total ($) | ||||||||||
Ms. Alexander | $ | 90,000 | $ | 67,500 | $ | 67,500 | $ | 591 | $ | 225,591 | |||||
Mr. Bollenbach | 300,000 | 147,500 | 67,500 | 3,263 | 518,263 | ||||||||||
Mr. Finchem | — | 159,500 | 67,500 | 21,799 | 248,799 | ||||||||||
Dr. Gilligan | 90,000 | 67,500 | 67,500 | 547 | 225,547 | ||||||||||
Mr. Jastrow | 90,000 | 67,500 | 67,500 | 18,848 | 243,848 | ||||||||||
Mr. Johnson | 81,250 | 72,500 | 67,500 | 2,181 | 223,431 | ||||||||||
Ms. Lora | — | 177,500 | 67,500 | 16,857 | 261,857 | ||||||||||
Mr. McCaffery | — | 165,500 | 67,500 | 18,632 | 251,632 | ||||||||||
Mr. Nogales | 97,000 | 67,500 | 67,500 | 6,166 | 238,166 |
(a) | Mr. Wood was elected to the Board on January 22, 2014 and therefore did not serve on the Board during our 2013 fiscal year. Pursuant to the Director Plan, for the remaining period of the 2013-2014 Director Year, which ends on the date of our 2014 Annual Meeting, Mr. Wood will be paid $20,000 in cash (consisting of pro-rated Board and Audit Committee retainers). In addition, upon his election to the Board, Mr. Wood was granted 930 stock units and 2,221 stock options, based in each case on a pro-rated grant-date value of $16,875. |
(b) | Fees Earned or Paid in Cash. These amounts represent payments of Board and Board Committee-related retainers based on the elections of non-employee directors to receive such retainers in cash rather than in Director Plan stock units. The amount shown for Mr. Bollenbach also includes his Non-Executive Chairman of the Board retainer. |
(c) | Stock Awards and Option Awards. These amounts represent the aggregate grant-date fair value of the Director Plan stock unit and stock option awards granted to our non-employee directors during our 2013 fiscal year, computed in accordance with Accounting Standards Codification Topic No. 718, “Compensation – Stock Compensation” (“ASC 718”), as described in Note 19. Employee Benefit and Stock Plans in the Notes to the Consolidated Financial Statements in our Annual Report, except that estimates of forfeitures related to service-based vesting conditions have been disregarded. Below are the |
Name | Stock Units (#) | Stock Options (#) | ||
Ms. Alexander | 3,260 | 7,241 | ||
Mr. Bollenbach | 7,124 | 7,241 | ||
Mr. Finchem | 7,703 | 7,241 | ||
Dr. Gilligan | 3,260 | 7,241 | ||
Mr. Jastrow | 3,260 | 7,241 | ||
Mr. Johnson | 3,501 | 7,241 | ||
Ms. Lora | 8,572 | 7,241 | ||
Mr. McCaffery | 7,993 | 7,241 | ||
Mr. Nogales | 3,260 | 7,241 |
Name | Stock Units (#) | Stock Options (#) | Total Holdings (#) | |||
Ms. Alexander | 6,311 | 44,804 | 51,115 | |||
Mr. Bollenbach | 45,884 | 134,946 | 180,830 | |||
Mr. Finchem | 71,405 | 46,193 | 117,598 | |||
Dr. Gilligan | 8,378 | 17,732 | 26,110 | |||
Mr. Jastrow | 70,706 | 46,193 | 116,899 | |||
Mr. Johnson | 30,253 | 84,186 | 114,439 | |||
Ms. Lora | 94,823 | 57,413 | 152,236 | |||
Mr. McCaffery | 70,494 | 160,195 | 230,689 | |||
Mr. Nogales | 83,300 | 48,323 | 131,623 | |||
Mr. Wood | 930 | 2,221 | 3,151 |
(d) | All Other Compensation. These amounts represent dividend payments with respect to Director Plan stock units during our 2013 fiscal year and premium payments of $16,390, $13,545, $13,545 and $9,960 we paid for the life insurance policies we maintain with respect to Messrs. Finchem, Jastrow and McCaffery and Ms. Lora, respectively, in connection with the Directors’ Legacy Program, which is described below. Non-employee directors with larger Director Plan stock unit holdings based on their tenure and compensation elections received greater dividend payments. In our 2013 fiscal year, we paid a total of $69,829 in premiums for the life insurance policies we maintain to fund charitable donations under the Directors’ Legacy Program, including for the policies maintained with respect to Messrs. Finchem, Jastrow and McCaffery and Ms. Lora and participants who are former directors. Some of the life insurance policies we maintain for the Directors’ Legacy Program did not require premium payments to be made in our 2013 fiscal year. Premium payments, where required, vary depending on participants’ respective ages and other factors. The total dollar amount payable under the Directors’ Legacy Program at November 30, 2013, with all participating directors having vested in the full donation amount, was $15.4 million. |
Election of Directors |
Stephen F. Bollenbach, age 71, is our Non-Executive Chairman of the Board. He was the Co-Chairman and Chief Executive Officer of Hilton Hotels Corporation, a hotel developer and operator, positions he held from May 2004 and February 1996, respectively. He retired from Hilton in October of 2007. Prior to joining Hilton, Mr. Bollenbach was Senior Executive Vice President and Chief Financial Officer for The Walt Disney Company from 1995 to 1996. Before Disney, Mr. Bollenbach was President and Chief Executive Officer of Host Marriott Corporation from 1993 to 1995, and served as Chief Financial Officer of Marriott Corporation from 1992 to 1993. From 1990 to 1992, Mr. Bollenbach was Chief Financial Officer of the Trump Organization. Mr. Bollenbach serves as a director of Time Warner Inc., Macy’s, Inc. and Mondelēz International, Inc. He previously served as a director of American International Group Inc., and Harrah’s Entertainment, Inc. Mr. Bollenbach joined the Board in 2007 and has since served as its Non-Executive Chairman. Mr. Bollenbach has several years of experience and expertise as a senior corporate executive and public company board member, including as a lead independent director, and has demonstrated exemplary leadership as Non-Executive Chairman of the Board. | ||
Timothy W. Finchem, age 66, has been Commissioner of the PGA TOUR, a membership organization for professional golfers, since 1994. He joined the TOUR staff as Vice President of Business Affairs in 1987, and was promoted to Deputy Commissioner and Chief Operating Officer in 1989. Mr. Finchem served in the White House as Deputy Advisor to the President in the Office of Economic Affairs in 1978 and 1979, and in the early 1980’s, co-founded the National Marketing and Strategies Group in Washington, D.C. He joined the Board in 2005. Mr. Finchem has demonstrated success in broadening the popularity of professional golf among the demographic groups that make up our core homebuyers, and has experience in residential community development. He also has a substantial presence in Florida, one of our key markets. | ||
Dr. Thomas W. Gilligan, age 59, has served as the Dean of the McCombs School of Business at The University of Texas at Austin since 2008. Prior to his appointment at the McCombs School of Business, Dr. Gilligan held several key administrative roles at the Marshall School of Business at the University of Southern California (USC), including as interim Dean, as the Vice-Dean of Undergraduate Education, as director of the Ph.D. program, and as the Chair of the Finance and Business Economics Department. Dr. Gilligan holds the Centennial Chair in Business Education Leadership. He received his B.A. in 1979 at the University of Oklahoma and his Ph.D. in Economics at Washington University in 1984. He taught Economics at the California Institute of Technology (1984-1987) and during his tenure at USC he held visiting appointments at Stanford University (1989-1990 and 1994) and Northwestern University (1995-1996). He has served as a consultant to businesses in the entertainment, agriculture, service and construction industries, dealing with antitrust and contract issues, as well as pricing strategies. He was the recipient of a National Fellowship at the Hoover Institution of War and Peace and was a staff economist at the Council of Economic Advisers in the White House (1982-1983). He also served in the United States Air Force from 1972-1976. Dr. Gilligan has deep knowledge of and significant academic credentials in the fields of finance, economics and business administration, and brings extensive leadership skills and experience from his many years of service as a dean at two of the premier post-graduate business schools in the country. In addition, he is well-known and highly regarded, professionally and personally, in both Texas and Southern California, which are key markets for us. | ||
Kenneth M. Jastrow, II, age 66, is Non-Executive Chairman, Forestar Group Inc., a real estate and natural resources company. Mr. Jastrow is also a director of MGIC Investment Corporation and Genesis Energy, LLC, the general partner of Genesis Energy, L.P., a publicly traded master limited partnership. He joined the KB Home Board in 2001. Mr. Jastrow has several years of experience and leadership in the paper, building products, forestry, real estate and mortgage lending industries, providing critical perspective in businesses that impact the homebuilding industry, and on sustainability practices. He also brings a significant knowledge of corporate governance matters from his service on a number of public company boards, and has a substantial presence in Texas, a key market for us. | ||
Robert L. Johnson, age 67, is founder and chairman of The RLJ Companies, an innovative business network that owns or holds interests in a diverse portfolio of companies in the consumer financial services, private equity, real estate, hospitality, professional sports, film production, gaming, and automobile dealership industries. Prior to forming The RLJ Companies, Mr. Johnson was founder and chief executive officer of Black Entertainment Television (BET), which was acquired by Viacom Inc. in 2001. He continued to serve as chief executive officer of BET until 2006. In July 2007, Mr. Johnson was named by USA Today as one of the 25 most influential business leaders of the past 25 years. Mr. Johnson currently serves on the board of directors or trustees of the Lowe’s Companies, Inc., RLJ Entertainment, Inc., RLJ Lodging Trust, and Strayer Education, Inc. He previously served as a director of RLJ Acquisition, Inc. He joined the Board in 2008. Mr. Johnson has significant experience in real estate, finance, mortgage banking and brand-building enterprises and a unique and diverse background in a number of industry sectors. He also has a substantial presence in Washington D.C. and the mid-Atlantic region, which is an important market for us. | ||
Melissa Lora, age 51, is the President of Taco Bell International and the Global Chief Financial and Development Officer of Taco Bell Corp., a quick service restaurant chain. Ms. Lora joined Taco Bell Corp. in 1987 and since 2001 has served as Chief Financial Officer. Prior to that, she was Regional Vice President and General Manager from 1998 to 2000 for Taco Bell’s operations throughout the Northeastern United States. She joined the Board in 2004. Ms. Lora is very knowledgeable of and has substantial experience and expertise in financial matters as well as in managing real estate assets. She has made significant contributions to the work of the Audit Committee since joining the Board and has provided strong leadership as its Chair since 2008. |
Michael G. McCaffery, age 60, is the Chairman of Makena Capital Management, an investment management firm. From December 2005 to December 2013, he was the Chief Executive Officer of Makena Capital Management. From 2000 to 2006, Mr. McCaffery was President and CEO of the Stanford Management Company (SMC), which was established in 1991 to manage Stanford University’s financial and real estate investments. Previous to joining SMC, Mr. McCaffery was President and Chief Executive Officer of Robertson Stephens Investment Bankers from January 1993 to December 1999, and also served as Chairman from January 2000 to December 2000. He previously served as a director of Thomas Weisel Partners Group, Inc. and Venture Lending & Leasing V Inc., and as a trustee of RS Investment Trust. He joined the Board in 2003. Mr. McCaffery has a broad array of business, investment and real estate experience and recognized expertise in financial matters, as well as a demonstrated commitment to good corporate governance. | ||
Jeffrey T. Mezger, age 58, has been our President and Chief Executive Officer since November 2006. Prior to becoming President and Chief Executive Officer, Mr. Mezger served as our Executive Vice President and Chief Operating Officer, a position he assumed in 1999. From 1995 until 1999, Mr. Mezger held a number of executive posts in our southwest region, including Division President, Arizona Division, and Senior Vice President and Regional General Manager over Arizona and Nevada. Mr. Mezger joined us in 1993 as president of the Antelope Valley Division in Southern California. He joined the Board in 2006. He is a member of the Executive Board of the USC Lusk Center for Real Estate, is a member of the Policy Advisory Board for the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley Haas School of Business, serves as Vice Chairman of the Policy Advisory Board for the Harvard Joint Center for Housing Studies and was the founding Chairman of the Executive Committee for the Leading Builders of America. In 2012, Mr. Mezger was inducted into the California Homebuilding Foundation Hall of Fame. As our CEO, Mr. Mezger has demonstrated dedicated and effective leadership, and ownership of our business strategy and its results. He has also established himself as a leading voice in the industry through his 36 years of experience in the public homebuilding sector. | ||
Luis G. Nogales, age 70, has been the Managing Partner of Nogales Investors, LLC, a private equity investment firm, since 2001. He was Chairman and Chief Executive Officer of Embarcadero Media, Inc. from 1992 to 1997, President of Univision Communications, Inc., from 1986 to 1988, and Chairman and Chief Executive Officer of United Press International from 1983 to 1986. He is a director or trustee of Southern California Edison Co., Edison International and Cedars-Sinai Medical Center. He joined the Board in 1995. He previously served as a director or trustee of Arbitron Inc., Golden West Broadcasters, Levi Strauss & Co., Lucky Stores, The Bank of California, Coors Brewing Company, Kaufman & Broad S.A. (France), Stanford University, The Ford Foundation, U.S. World Cup Soccer Committee, the Mayo Clinic Trust, and the Pacific Council on International Policy. Mr. Nogales has substantial depth of experience in media and marketing enterprises and with business operations management and financial investments drawn from a diverse background and involvement in an array of industries. His long-time service on the Board has provided critical knowledge of our operations and corporate history. | ||
Michael M. Wood, age 66, is Founder and Chairman of Redwood Investments LLC, a Washington, DC investment company established in 2005 and concentrating in media, real estate and alternative energy. From 2006-2009, Mr. Wood was the U.S. Ambassador to Sweden where he made cooperation between the U.S. and Sweden in alternative energy technology his top priority. In recognition for this work, in 2009, the King of Sweden bestowed on Mr. Wood the insignia of Commander Grand Cross, Order of the Polar Star, a medal given by Sweden’s Royal Family to people of foreign birth who make significant contributions to Sweden. Prior to becoming ambassador, Mr. Wood was co-founder and CEO of Hanley Wood LLC, the leading media company in the construction industry and one of the ten largest business-to-business media companies in the U.S. Mr. Wood is also Chairman of CSP Business Media, LLC, a private business-to-business publishing company serving the convenience retailing, restaurant, and on-the-go food industries, and serves on the Board of Trustees for The American-Scandinavian Foundation in New York and the Board of Directors of Capital Partners for Education in Washington, DC. Mr. Wood has extensive knowledge of the homebuilding industry and significant experience in real estate and alternative energy investing, providing substantial insight and expertise with respect to our business operations and longstanding commitment to sustainability. He is also a prominent and respected professional in Washington DC, an important market for us, and has a distinguished policymaking background. |
Ownership of KB Home Securities |
Non-Employee Directors | Amount and Nature of Beneficial Ownership(a - f) | Percent of Class | ||
Ms. Alexander | 32,411 | * | ||
Mr. Bollenbach | 45,884 | * | ||
Mr. Finchem | 71,405 | * | ||
Dr. Gilligan | 8,378 | * | ||
Mr. Jastrow | 67,446 | * | ||
Mr. Johnson | 30,253 | * | ||
Ms. Lora | 96,866 | * | ||
Mr. McCaffery | 70,494 | * | ||
Mr. Nogales | 90,700 | * | ||
Mr. Wood | 930 | * | ||
Named Executive Officers | ||||
Jeffrey T. Mezger | 4,975,841 | 5.0 | % | |
Jeff J. Kaminski | 280,194 | * | ||
Brian J. Woram | 324,276 | * | ||
Albert Z. Praw | 159,316 | * | ||
William R. Hollinger | 589,861 | * | ||
All directors and executive officers as a group (17 people) | 7,051,768 | 7.0 | % |
(a) | Included are the following shares of common stock that can be acquired within 60 days of February 14, 2014 through the exercise of stock options: Mr. Mezger 4,599,448; Mr. Kaminski 246,350; Mr. Woram 270,529; Mr. Praw 106,000; and Mr. Hollinger 486,316; and all current executive officers as a group 5,874,155. |
(b) | Included are shares of restricted common stock in the following amounts: Mr. Mezger 0; Mr. Kaminski 24,653; Mr. Woram 22,153; Mr. Praw 22,153; and Mr. Hollinger 12,135; and all current executive officers as a group 99,898. |
(c) | Included are the following Director Plan stock unit holdings of each non-employee director: Ms. Alexander 6,311; Mr. Bollenbach 45,884; Mr. Finchem 71,405; Mr. Gilligan 8,378; Mr. Jastrow 67,446; Mr. Johnson 30,253; Ms. Lora 94,823; Mr. McCaffery 70,494; Mr. Nogales 83,300; and Mr. Wood 930. |
(d) | Ms. Alexander holds 26,000 shares of our common stock in a trust in which she and her spouse are trustees and sole beneficiaries and over which they jointly exercise voting and investment power. She also has beneficial ownership of 100 shares of our common stock that are held by a family trust for which she is both a co-trustee and a beneficiary. |
(e) | Ms. Lora holds 2,043 shares of our common stock in a trust in which she and her spouse are trustees and sole beneficiaries and over which they jointly exercise voting and investment power. |
(f) | Mr. Wood holds the Director Plan stock units that comprise the ownership reflected in the above table in a trust in which he and his spouse are trustees and over which they jointly exercise voting and investment power, and he is the sole beneficiary as to the stock units. |
* | Indicates less than one percent ownership. |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||
BlackRock, Inc., et al. (a) | 9,624,749 | 11.5%(b) | ||
40 East 52nd Street, New York, NY 10022 | ||||
KB Home Grantor Stock Ownership Trust (c) | 10,501,844 | 11.1 | % | |
Wells Fargo Institutional Retirement and Trust Executive Benefits | ||||
One West Fourth Street, Winston-Salem, North Carolina 27101 | ||||
FMR LLC and Edward C. Johnson 3d (d) | 9,189,509 | 11.0%(b) | ||
82 Devonshire Street, Boston, Massachusetts 02109 | ||||
Odey Asset Management Group Ltd (e) | 5,278,310 | 6.3%(b) | ||
12 Upper Grosvenor Street, London, United Kingdom W1K 2ND | ||||
The Vanguard Group, Inc. (f) | 5,044,432 | 6.0%(b) | ||
100 Vanguard Blvd., Malvern, PA 19355 |
(a) | The stock holding information is based solely on an amendment to Schedule 13G dated January 8, 2014 that BlackRock, Inc., a parent holding company, filed with the SEC to report its beneficial ownership. Of the reported amount, BlackRock, Inc. subsidiaries, collectively, had sole voting power as to 9,383,520 shares and had sole dispositive power as to 9,624,749 shares, and subsidiary, BlackRock Fund Advisors, beneficially owned more than 5% of our outstanding shares. |
(b) | These beneficial ownership and percent of class figures are from the respective Schedule 13G filings by the listed beneficial owners and reflect their respective determinations as of December 31, 2013. |
(c) | The GSOT holds these shares pursuant to a trust agreement, with Wells Fargo Bank, N.A. as trustee. Both the GSOT and the trustee disclaim beneficial ownership of the shares. Under the trust agreement, our employees who hold unexercised common stock options under our employee equity compensation plans determine the voting of the GSOT shares. The number of GSOT shares that any one employee can direct the vote of depends on how many eligible employees submit voting instructions to the trustee. Employees who are also directors cannot vote GSOT shares; therefore, Mr. Mezger cannot direct the vote of any GSOT shares. If all eligible employees submit voting instructions, our other NEOs can direct the vote of the following amounts of GSOT shares: Mr. Kaminski 804,753; Mr. Woram 832,161; Mr. Praw 464,257; and Mr. Hollinger 1,256,628; and all current executive officers as a group (excluding Mr. Mezger) 3,916,524. |
(d) | The stock holding information is based solely on an amendment to Schedule 13G dated February 13, 2014 that FMR LLC, a parent holding company, filed with the SEC to report the beneficial ownership of FMR LLC and Mr. Edward C. Johnson 3d, FMR LLC’s chairman. Of the reported amount, Fidelity Management & Research Company (“Fidelity”), an investment adviser to various investment companies and an FMR LLC subsidiary, beneficially owns 8,774,609 shares. Each of Edward C. Johnson 3d and FMR LLC, through its control of Fidelity and the various investment companies, has sole dispositive power as to the 8,774,609 shares, and has sole voting power as to 300 shares. Fidelity votes its beneficially owned shares under guidelines established by such investment companies’ Boards of Trustees. Fidelity SelectCo, LLC (“SelectCo”), an FMR LLC subsidiary and an investment adviser to various investment companies, beneficially owns 414,600 shares, and each of Edward C. Johnson 3d and FMR LLC, through its control of SelectCo and the various investment companies, has sole dispositive power as to these shares. Strategic Advisers, Inc., an FMR LLC subsidiary and an investment adviser to individuals, beneficially owns 300 shares. |
(e) | The stock holding information is based solely on a Schedule 13G dated January 22, 2014 that Odey Asset Management Group Ltd, a parent holding company and investment adviser, filed with the SEC to report its beneficial ownership. Of the reported amount, Odey Asset Management Group Ltd had shared voting power and shared dispositive power of 5,278,310 shares with Odey Asset Management LLP, Odey Holdings AG and Mr. Crispin Odey. The shares represent holdings of Odey Asset Management LLP for the benefit of its investment advisory clients. Odey Asset Management Group Ltd is the managing member of Odey Asset Management LLP; Odey Holdings AG is the sole stockholder of Odey Asset Management Group Ltd; and Mr. Odey is the sole stockholder of Odey Holdings AG. Each of these persons disclaims beneficial ownership of the shares except to the extent of its or his pecuniary interest therein. |
(f) | The stock holding information is based solely on a Schedule 13G dated February 6, 2014 that Vanguard Group, Inc., an investment adviser to various investment companies (“VGI”), filed with the SEC to report its beneficial ownership. Of the reported amount, VGI had sole voting power as to 119,447 shares, had sole dispositive power as to 4,929,085 shares, and had shared dispositive power as to 115,347 shares. Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., each VGI subsidiaries, beneficially own 115,347 and 4,100 shares, respectively. |
Executive Compensation |
Michael G. McCaffery, Chair | Stephen F. Bollenbach | |
Timothy W. Finchem | Luis G. Nogales |
Compensation Discussion and Analysis |
• | Jeffrey T. Mezger, our President and Chief Executive Officer; |
• | Jeff J. Kaminski, our Executive Vice President and Chief Financial Officer; |
• | Brian J. Woram, our Executive Vice President and General Counsel; |
• | Albert Z. Praw, our Executive Vice President, Real Estate and Business Development; and |
• | William R. Hollinger, our Senior Vice President and Chief Accounting Officer. |
Metric | 2013 Fiscal Year Result | Prior-Year Comparison |
Net income | $40 million | Improvement of $99 million. Generated full-year net income for the first time since 2006 |
Total revenues | $2.10 billion | 34% increase |
Homebuilding operating margin (ratio of homebuilding operating income to homebuilding revenues) | 4.4% | 570 basis point improvement |
Homes delivered | 7,145 | 14% higher |
Average selling price | $291,700 | Up 18% |
Net order value | $2.16 billion | Growth of 24% |
Year-end lot count | 61,095 | 37% increase, reflecting investments of $1.14 billion in land and land development in 2013, up from $565 million in 2012 |
TSR (includes reinvested dividends) | 23%, third highest (84th percentile) in our peer group | Our 2012 fiscal year TSR of 98% was between the 25th and 50th percentile of our peer group |
• | No change in base salary; |
• | Based on above target and outstanding performance, an 80% formula-based annual cash incentive payout of 181.7% of his target payout amount, which was below his potential maximum amount under the 2013 fiscal year program; and |
• | Long-term equity awards with the majority of value consisting of PSUs that vest subject to three-year performance achievements, and the balance in stock options that only have value if our stock price rises. |
• | A more structured and formula-driven design for the annual incentive program in 2013 compared to prior years, with the majority of NEO annual incentive payouts determined solely by two financial metrics — a measure of pretax income and total revenues — and the balance of payouts determined by a mix of operational performance items and individual executive performance, all subject to the requirement that we generate a certain level of pretax income for any payouts to be made. |
• | Greater use of performance-based long-term incentives, including performance-based restricted stock units, that utilized a balanced set of absolute and relative performance measures and goals aligned with our business goals. |
• Limited Perquisites. We provide few perquisites to our NEOs and senior executives. Perquisites are limited to relocation assistance to recruit certain new hires, market-competitive supplemental medical and deferred compensation programs and certain death-related benefits, and, for a very few current senior executives, participation in a retirement plan that was closed in 2004. We do not provide any allowances or reimbursements for personal automobiles, automobile fuel cards and/or insurance, tax preparation or financial/estate planning services. | • No New Tax “Gross-Up” Benefits. In 2011, our Board approved a policy that no officer or employee who is hired or is promoted after April 7, 2011 will receive the tax “gross-up” payment benefit under our 2001 Change in Control Severance Plan (the “CIC Plan”) in connection with such hiring or promotion. Consistent with this policy, since April 7, 2011 we have not extended the benefit, or any other tax restoration benefit, to any newly hired or promoted officers or employees, or to any other officer or employee, who would have been eligible to receive it under the terms of the CIC Plan or otherwise. |
• Prohibition on Hedging/Pledging of Our Securities. Under our policy on transactions in company securities, our senior executives are prohibited from engaging in short sales of our securities and from buying or selling puts or calls on, or any other financial instruments that are designed to hedge or offset decreases or increases in the value of, our securities (including without limitation derivatives, prepaid variable forward contracts, equity swaps, collars and exchange funds). | • Compensation Clawbacks. Under his Employment Agreement, our CEO is required to repay certain compensation he receives if we are required to restate our financial results due to his misconduct, consistent with the Sarbanes-Oxley Act of 2002. In addition, we will recoup incentive-based compensation to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and any rules, regulations and listing standards issued under that act. |
• Severance Pay Limits. In response to our stockholders’ approval of an advisory proposal, in 2008 we adopted a policy under which we will obtain stockholder approval before paying severance benefits to an executive officer above 2.99 times the sum of the executive officer’s then-current base salary and target bonus under any severance arrangement made or materially changed after the policy was adopted. | • Equity-Based Award Grant Policy. Since 2007, all grants of equity-based compensation are subject to our equity-based award grant policy, which sets strict requirements as to the timing and manner in which equity-based awards are made, as well as certain internal controls over the grants of such awards. The policy is discussed below under the heading “Equity-Based Award Grant Policy.” |
• Stock Ownership Requirement. Our senior executives must comply with stock ownership requirements throughout the period of their employment with us. |
Metric | 2013 Result | 2012 Result | 2011 Result | 2013-2012 Improvement | 2013-2011 Improvement | ||||||
Total revenues | $ | 2,097,130 | $ | 1,560,115 | $ | 1,315,866 | 34% | 59% | |||
Operating income (loss) | $ | 101,194 | $ | (11,564 | ) | $ | (96,282 | ) | (a) | (a) | |
Pretax income (loss) | $ | 38,363 | $ | (79,053 | ) | $ | (181,168 | ) | (a) | (a) | |
Selling, general and administrative expenses (as a percentage of housing revenues) | 12.3% | 15.3% | 16.9% | 300 bps | 460 bps | ||||||
Homebuilding operating margin (ratio of homebuilding operating income (loss) to homebuilding revenues) | 4.4% | (1.3)% | (7.9)% | 570 bps | 1,230 bps | ||||||
Homes delivered | 7,145 | 6,282 | 5,812 | 14% | 23% | ||||||
Average selling price | $ | 291,700 | $ | 246,500 | $ | 224,600 | 18% | 30% | |||
Net order value | $ | 2,157,065 | $ | 1,733,146 | $ | 1,511,654 | 24% | 43% | |||
Ending backlog value | $ | 682,489 | $ | 618,626 | $ | 458,950 | 10% | 49% |
2013 Fiscal Year Annual Incentive Program Financial Performance Measures and Goals and Results | |||||
Financial Performance Measures | Performance Goals | Actual Result | |||
Threshold | Target | Maximum | |||
Adjusted Pretax Income* | $15.0 million | $42.5 million | $65.0 million | $75.3 million | |
Total revenues | $1.75 billion | $2.00 billion | $2.25 billion | $2.10 billion |
NEO | 2013 NEO Performance Contributions |
Mr. Mezger | Provided overall leadership that fundamentally drove our performance in 2013, including full-year profitability for the first time since 2006, 34% revenue growth, a 24% increase in net order value, and a $99 million improvement in net income. He also continued to effectively refine and oversee the execution of our long-term strategic re-positioning and growth initiatives, establishing a strong foundation for the future achievement of our top financial and operational goals; and further enhanced the KB Home brand and our competitive differentiation as a leading national company in environmental sustainability. Based on this exemplary performance, the Compensation Committee approved the maximum strategic performance component payout to Mr. Mezger of 40%. |
Mr. Kaminski | Led successful capital markets transactions, including our common stock offering and our senior notes issuances, and the establishment of a revolving credit agreement, which together strengthened our balance sheet and bolstered our liquidity to support our growth initiatives and improved our public debt maturity profile. He also continued to drive focus and oversight on improving the financial performance of our operating divisions through disciplined monthly reviews, among other steps. |
Mr. Woram | In 2013, major accomplishments included significant litigation outcomes and recoveries. He and his transactional team provided significant support to our substantial investments in land and land development during the year, and he continued to provide very strong oversight of the entire legal team. |
Mr. Praw | Continued to provide critical leadership of our operating divisions’ land investment activities in support of our community count growth objectives and to the development and execution of our overall asset optimization strategies. He also played a leading role in the successful resolution of the reorganization of our SouthEdge joint venture and the establishment of a new development plan for the associated Inspirada community, which preserved and enhanced the value of this strategic property. |
Mr. Hollinger | Played a primary and critical role in our continuing efforts to improve the profitability of the business. Worked collaboratively with our divisions and our IT department to evaluate new technology applications to improve business planning and reduce direct costs to the business. |
2013 Annual Incentive Program Payout Levels and Actual Awards | ||||||||||||||||
NEO | Threshold | Target | Maximum | Actual | ||||||||||||
Mr. Mezger | $ | 375,000 | $ | 1,500,000 | $ | 3,000,000 | $ | 2,725,500 | ||||||||
Mr. Kaminski | 150,000 | 600,000 | 1,200,000 | 952,200 | ||||||||||||
Mr. Woram | 135,000 | 540,000 | 1,080,000 | 800,820 | ||||||||||||
Mr. Praw | 131,250 | 525,000 | 1,050,000 | 780,675 | ||||||||||||
Mr. Hollinger | 76,000 | 304,000 | 608,000 | 503,728 |
NEO Long-Term Incentives Granted in 2013 | |||||
NEO | PSUs (#) | Restricted Stock (#) | Stock Options (#) | ||
Mr. Mezger | 100,000 | — | 150,000 | ||
Mr. Kaminski | 15,000 | 15,000 | 50,000 | ||
Mr. Woram | 12,500 | 12,500 | 39,000 | ||
Mr. Praw | 12,500 | 12,500 | 39,000 | ||
Mr. Hollinger | 7,000 | 7,000 | 21,500 |
Performance Measure | Performance | Target Award Multiplier |
Average Return on Equity | 20% | 200% |
15% | 100% | |
10% | 25% | |
Below 10% | 0% | |
Relative Revenue Growth (Adjustments to ranking levels and multipliers will be made if there are changes in the peer group size over time) | Rank | Target Award Multiplier |
First or Second | 200% | |
3 | 180% | |
5 | 140% | |
7 | 100% | |
9 | 60% | |
11 | 20% | |
Bottom 2 | 0% |
Our Peer Group | ||
• Beazer Homes • Lennar Corporation • Meritage Homes Corp. • Ryland Group | • DR Horton • MDC Holdings • NVR Incorporated • Standard Pacific | • Hovnanian Enterprises • M/I Homes • PulteGroup, Inc. • Toll Brothers |
Executive Position | Ownership Guideline |
CEO | 6.0 times base salary |
Executive Vice President | 2.0 times base salary |
Senior Vice President | 1.0 times base salary |
Name and Principal Position | Fiscal Year | Salary ($)(a) | Bonus ($)(b) | Stock Awards ($)(c) | Option Awards ($)(c) | Non-Equity Incentive Plan Compensation ($)(d) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(e) | Total ($) | ||||||||||||||||
Jeffrey T. Mezger President and Chief Executive Officer | 2013 | $ | 1,000,000 | $ | 500,000 | $ | 1,663,000 | $ | 1,044,660 | $ | 2,725,500 | $ | — | $ | 67,884 | $ | 7,001,044 | ||||||||
2012 | 1,000,000 | — | 2,475,000 | — | 1,250,000 | 800,763 | 66,859 | 5,592,622 | |||||||||||||||||
2011 | 1,000,000 | — | — | 1,779,331 | 1,950,000 | 1,153,277 | 63,671 | 5,946,279 | |||||||||||||||||
Jeff J. Kaminski Executive Vice President and Chief Financial Officer | 2013 | 570,833 | 260,000 | 498,900 | 348,220 | 952,200 | — | 45,848 | 2,676,001 | ||||||||||||||||
2012 | 550,000 | — | 525,000 | — | 450,000 | — | 41,469 | 1,566,469 | |||||||||||||||||
2011 | 550,000 | — | — | 317,738 | 400,000 | — | 117,607 | 1,385,345 | |||||||||||||||||
Brian J. Woram Executive Vice President and General Counsel | 2013 | 531,250 | 242,000 | 415,750 | 271,612 | 800,820 | — | 42,356 | 2,303,788 | ||||||||||||||||
2012 | 525,000 | — | 505,000 | — | 400,000 | — | 35,577 | 1,465,577 | |||||||||||||||||
2011 | 525,000 | — | — | 305,028 | 375,000 | — | 65,823 | 1,270,851 | |||||||||||||||||
Albert Z. Praw Executive Vice President, Real Estate and Business Development | 2013 | 510,417 | 100,000 | 415,750 | 271,612 | 780,675 | — | 12,376 | 2,090,830 | ||||||||||||||||
2012 | 500,000 | — | 505,000 | — | 400,000 | — | 9,890 | 1,414,890 | |||||||||||||||||
2011 | 125,000 | — | — | 381,285 | 100,000 | — | 684,953 | 1,291,238 | |||||||||||||||||
William R. Hollinger Senior Vice President and Chief Accounting Officer | 2013 | 371,250 | 260,000 | 232,820 | 149,735 | 503,728 | — | 31,519 | 1,549,052 | ||||||||||||||||
2012 | 365,000 | — | 275,000 | — | 300,000 | 187,232 | 30,327 | 1,157,559 | |||||||||||||||||
2011 | 365,000 | — | — | 152,514 | 300,000 | 261,360 | 28,346 | 1,107,220 |
(a) | Salary. Mr. Praw’s 2011 salary reflects a pro-rated amount, as he re-joined us as a full-time employee during that year. As discussed above under the heading “Base Salaries,” the annual base salaries of our NEOs other than the CEO were increased in July 2013 to the following levels: Mr. Kaminski $600,000; Mr. Woram $540,000; Mr. Praw $525,000; and Mr. Hollinger $380,000. |
(b) | Bonus. Except for Mr. Praw, the amounts in this column reflect the vesting and payout on October 7, 2013 of three-year restricted cash award grants. These payments and the bonus payment for Mr. Praw are discussed above under the heading “2013 Fiscal Year Annual Incentives and Bonus Payments.” |
(c) | Stock Awards and Option Awards. These amounts represent the aggregate grant-date fair value of stock awards (consisting of both restricted stock and PSUs) and option awards (consisting of stock options) computed in accordance with ASC 718, as described in Note 19. Employee Benefit and Stock Plans in the Notes to the Consolidated Financial Statements in our Annual Report, except that estimates of forfeitures related to service-based vesting conditions have been disregarded. They do not represent realized compensation. The 2013 stock awards represent the grant-date fair value of restricted stock and the probable award of shares of our common stock underlying the PSUs granted. The grant-date value of the PSUs awarded to our NEOs if maximum performance is achieved is as follows: Mr. Mezger $3,326,000; Mr. Kaminski $498,900; Mr. Woram $415,750; Mr. Praw $415,750; and Mr. Hollinger $232,820. |
(d) | Non-Equity Incentive Plan Compensation. These amounts are the annual incentive compensation payouts to the NEOs. |
(e) | All Other Compensation. The amounts shown consist of the following items: |
• | 401(k) Savings Plan and Deferred Compensation Plan Matching Contributions. The respective aggregate 2013, 2012 and 2011 fiscal year 401(k) Savings Plan and Deferred Compensation Plan matching contributions we made to our NEOs |
• | Premium Payments. The respective aggregate premiums we paid for our NEOs in our 2013, 2012 and 2011 fiscal years on supplemental medical expense reimbursement plans and life insurance policies, as described above under the heading “Other Benefits,” were as follows: Mr. Mezger $12,582, $11,856 and $8,971; Mr. Kaminski $11,099, $10,426 and $9,446; Mr. Woram $11,099, $10,426 and $9,446; Mr. Praw $10,614, $9,888 and $1,620; and Mr. Hollinger $7,816, $7,241 and $6,446. |
• | Relocation Assistance. In our 2011 fiscal year, Mr. Kaminski received $93,461, and Mr. Woram received $31,833 under their respective relocation reimbursement arrangements that we agreed to in connection with their hiring in 2010, which included in each case up to six months temporary housing and any personal income tax liability from relocation-related payments. |
• | Consulting Arrangement. For the first nine months of our 2011 fiscal year, Mr. Praw served as an outside consultant and received a total of $683,333 during that time under his consulting arrangement with us. |
Name | Grant Date(a) | Type of Award | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards(b) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(c) | |||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||
Mr. Mezger | 2/8/2013 | Annual Incentive | $ | 375,000 | $ | 1,500,000 | $ | 3,000,000 | |||||||||||||||||||
10/10/2013 | PSUs | 23,000 | 100,000 | 200,000 | $ | 1,663,000 | |||||||||||||||||||||
10/10/2013 | Stock Options | 150,000 | $ | 16.63 | 1,044,660 | ||||||||||||||||||||||
Mr. Kaminski | 2/8/2013 | Annual Incentive | 150,000 | 600,000 | 1,200,000 | ||||||||||||||||||||||
10/10/2013 | PSUs | 3,450 | 15,000 | 30,000 | 249,450 | ||||||||||||||||||||||
10/10/2013 | Restricted Stock | 15,000 | 249,450 | ||||||||||||||||||||||||
10/10/2013 | Stock Options | 50,000 | 16.63 | 348,220 | |||||||||||||||||||||||
Mr. Woram | 2/8/2013 | Annual Incentive | 135,000 | 540,000 | 1,080,000 | ||||||||||||||||||||||
10/10/2013 | PSUs | 2,875 | 12,500 | 25,000 | 207,875 | ||||||||||||||||||||||
10/10/2013 | Restricted Stock | 12,500 | 207,875 | ||||||||||||||||||||||||
10/10/2013 | Stock Options | 39,000 | 16.63 | 271,612 | |||||||||||||||||||||||
Mr. Praw | 2/8/2013 | Annual Incentive | 131,250 | 525,000 | 1,050,000 | ||||||||||||||||||||||
10/10/2013 | PSUs | 2,875 | 12,500 | 25,000 | 207,875 | ||||||||||||||||||||||
10/10/2013 | Restricted Stock | 12,500 | 207,875 | ||||||||||||||||||||||||
10/10/2013 | Stock Options | 39,000 | 16.63 | 271,612 | |||||||||||||||||||||||
Mr. Hollinger | 2/8/2013 | Annual Incentive | 76,000 | 304,000 | 608,000 | ||||||||||||||||||||||
10/10/2013 | PSUs | 1,610 | 7,000 | 14,000 | 116,410 | ||||||||||||||||||||||
10/10/2013 | Restricted Stock | 7,000 | 116,410 | ||||||||||||||||||||||||
10/10/2013 | Stock Options | 21,500 | 16.63 | 149,735 |
(a) | Grant Date. The date shown for each award is the date the Compensation Committee approved the award. |
(b) | Estimated Possible Payouts Under Equity Incentive Plan Awards. If there is a payout of the PSUs, “Threshold” represents the lowest possible payout if threshold performance is achieved for each performance measure, and “Maximum” reflects the highest possible payout (200% of the target number of shares granted). The performance measures are described above under the heading “Long-Term Incentives.” If threshold performance is not achieved on both measures, the NEOs will not receive any payout of the PSUs. |
(c) | Grant Date Fair Value of Stock and Option Awards. The grant-date fair value for each award is computed in accordance with ASC 718, as described in footnote (c) to the Summary Compensation Table. The 2013 stock awards represent the grant-date fair value of restricted stock and the probable award of shares of our common stock underlying the PSUs granted as of the grant date. |
Name | Grant Date | Option Awards | Stock Awards | ||||||||||||||||||||||
Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(a) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(c) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c) | |||||||||||||||||
Mr. Mezger | 10/30/2001 | 431,122 | $ | 13.95 | 10/30/2016 | ||||||||||||||||||||
10/30/2001 | 68,878 | 13.95 | 10/30/2016 | ||||||||||||||||||||||
2/13/2002 | 102,090 | 20.07 | 2/13/2017 | ||||||||||||||||||||||
5/8/2002 | 44,516 | 25.63 | 5/8/2017 | ||||||||||||||||||||||
10/7/2002 | 400,000 | 21.51 | 10/7/2017 | ||||||||||||||||||||||
10/24/2003 | 74,667 | 33.24 | (d) | 10/24/2018 | |||||||||||||||||||||
10/24/2003 | 149,333 | 34.05 | (d) | 10/24/2018 | |||||||||||||||||||||
10/22/2004 | 80,750 | 40.90 | 10/22/2019 | ||||||||||||||||||||||
10/22/2004 | 119,250 | 40.90 | 10/22/2019 | ||||||||||||||||||||||
10/18/2005 | 75,000 | 63.77 | 10/18/2015 | ||||||||||||||||||||||
7/12/2007 | 325,050 | 36.19 | 11/30/2016 | (e) | |||||||||||||||||||||
7/12/2007 | 325,050 | 36.19 | 7/12/2017 | ||||||||||||||||||||||
10/4/2007 | 137,500 | 28.10 | 10/4/2017 | ||||||||||||||||||||||
10/1/2009 | 489,258 | 15.44 | 10/1/2019 | ||||||||||||||||||||||
8/13/2010 | 397,818 | 19.90 | 10/2/2018 | (f) | |||||||||||||||||||||
10/7/2010 | 240,000 | 11.06 | 10/7/2020 | ||||||||||||||||||||||
10/7/2010 | 260,000 | (g) | 11.06 | 10/7/2020 | |||||||||||||||||||||
11/9/2010 | 412,500 | 28.10 | 10/4/2017 | (f) | |||||||||||||||||||||
10/6/2011 | 223,333 | 111,667 | 6.32 | 10/6/2021 | |||||||||||||||||||||
10/6/2011 | 243,333 | 121,667 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 152,495 | $ | 2,673,237 | ||||||||||||||||||||||
10/10/2013 | 150,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||||
10/10/2013 | 100,000 | 1,753,000 | |||||||||||||||||||||||
Mr. Kaminski | 7/15/2010 | 45,017 | 11.26 | 7/15/2020 | |||||||||||||||||||||
10/7/2010 | 118,000 | 11.06 | 10/7/2020 | ||||||||||||||||||||||
10/6/2011 | 83,333 | 41,667 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 9,653 | $ | 169,217 | 17,868 | 313,226 | ||||||||||||||||||||
10/10/2013 | 50,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||||
10/10/2013 | 15,000 | 262,950 | 15,000 | 262,950 | |||||||||||||||||||||
Mr. Woram | 7/15/2010 | 79,529 | 11.26 | 7/15/2020 | |||||||||||||||||||||
10/7/2010 | 111,000 | 11.06 | 10/7/2020 | ||||||||||||||||||||||
10/6/2011 | 80,000 | 40,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 9,653 | 169,217 | 16,636 | 291,629 | |||||||||||||||||||||
10/10/2013 | 39,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||||
10/10/2013 | 12,500 | 219,125 | 12,500 | 219,125 | |||||||||||||||||||||
Mr. Praw | 10/18/2005 | 6,000 | 63.77 | 10/18/2015 | |||||||||||||||||||||
10/6/2011 | 100,000 | 50,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 9,653 | 169,217 | 16,636 | 291,629 | |||||||||||||||||||||
10/10/2013 | 39,000 | 16.63 | 10/10/2023 | ||||||||||||||||||||||
10/10/2013 | 12,500 | 219,125 | 12,500 | 219,125 |
Mr. Hollinger | 7/1/2002 | 58,058 | $ | 26.29 | 7/1/2017 | ||||||||||||||||||||
10/7/2002 | 60,000 | 21.51 | 10/7/2017 | ||||||||||||||||||||||
10/24/2003 | 9,334 | 33.24 | (d) | 10/24/2018 | |||||||||||||||||||||
10/24/2003 | 18,666 | 34.05 | (d) | 10/24/2018 | |||||||||||||||||||||
10/22/2004 | 24,000 | 40.90 | 10/22/2019 | ||||||||||||||||||||||
10/18/2005 | 6,000 | 63.77 | 10/18/2015 | ||||||||||||||||||||||
10/1/2009 | 68,147 | 15.44 | 10/1/2019 | ||||||||||||||||||||||
8/13/2010 | 79,564 | 19.90 | 10/2/2018 | (f) | |||||||||||||||||||||
10/7/2010 | 60,000 | 11.06 | 10/7/2020 | ||||||||||||||||||||||
11/9/2010 | 25,662 | 36.19 | 7/12/2017 | (f) | |||||||||||||||||||||
11/9/2010 | 36,885 | 28.10 | 10/4/2017 | (f) | |||||||||||||||||||||
10/6/2011 | 40,000 | 20,000 | 6.32 | 10/6/2021 | |||||||||||||||||||||
11/8/2012 | 5,135 | $ | 90,017 | 9,242 | $ | 162,012 | |||||||||||||||||||
10/10/2013 | 21,500 | 16.63 | 10/10/2023 | ||||||||||||||||||||||
10/10/2013 | 7,000 | 122,710 | 7,000 | 122,710 |
(a) | Number of Securities Underlying Unexercised Options-Unexercisable. Stock option awards generally vest in equal installment amounts over a three-year period. |
(b) | Market Value of Shares That Have Not Vested. The market value shown is based on the price of our common stock on November 30, 2013, which was $17.53. |
(c) | Equity Incentive Plan Awards: Number and Market Value of Unearned Units. The awards shown are the PSUs granted to our NEOs in 2012 and 2013, reflecting target award amounts as of November 30, 2013 and the market price of our common stock on November 30, 2013, which was $17.53. |
(d) | As a result of an internal review of our employee stock option grant practices in 2006, we adjusted the exercise prices of certain of our employee stock options in order to comply with Section 409A of the Code. The exercise price for a certain portion of the stock option grant made on October 24, 2003 was not adjusted. |
(e) | The expiration date for these stock options is set under Mr. Mezger’s Employment Agreement. |
(f) | Through participation in two exchange offers that we conducted in our 2010 fiscal year, these common stock options replaced cash-settled stock appreciation right awards that had been previously granted to the NEO as long-term incentives. Each common stock option has an exercise price equal to the replaced award’s exercise price, and the same number of underlying shares, vesting schedule and expiration date as each replaced award. The exchange offers did not include a re-pricing or any other changes impacting the value of the awards to the NEO, no additional grants or awards were made to the NEO, and the issuance of the common stock options did not result in any incremental fair value to the NEO. |
(g) | These are performance options that the Compensation Committee determined vested on January 23, 2014, and therefore all of these options vested on that date. |
Name | Option Awards | Stock Awards | ||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(a) | Value Realized on Vesting ($)(b) | |||||||
Mr. Mezger | — | $ | — | — | $ | — | ||||
Mr. Kaminski | — | — | 11,487 | 203,479 | ||||||
Mr. Woram | — | — | 16,594 | 300,358 | ||||||
Mr. Praw | — | — | 4,826 | 77,119 | ||||||
Mr. Hollinger | — | — | 2,567 | 41,021 |
(a) | Number of Shares Acquired on Vesting. The shares reported in this column represent restricted stock that vested in our 2013 fiscal year. For Messrs. Kaminski and Woram, the total number of acquired shares reflect the vesting of a three-year restricted stock grant on July 15, 2013 and the vesting of one-third of a restricted stock grant made on November 8, 2012. For the other NEOs, total number of acquired shares reflect the vesting of one-third of a restricted grant made on November 8, 2012. |
(b) | Value Realized on Vesting. The amount shown is the total gross dollar value realized upon the vesting of the restricted stock described above in footnote (a) to this table. Due to tax withholding obligations, however, the NEOs actually realized a lower total value. |
Name* | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments During Last Fiscal Year ($) | ||||
Mr. Mezger | Retirement Plan | 20 | $ | 9,300,477 | $ | — | ||
Mr. Hollinger | Retirement Plan | 26 | 2,066,773 | — |
(a) | Number of Years of Credited Service. These are as of the valuation date. As of November 30, 2013, each participating NEO is fully vested in his respective Retirement Plan benefit. |
(b) | Present Value of Accumulated Benefit. These amounts represent the actuarial present value of the total retirement benefit that would be payable to each respective NEO under the Retirement Plan as of November 30, 2013. The following key actuarial assumptions and methodologies were used to calculate this present value: the base benefit for each participant is assumed to begin as of the earliest possible date for each participant (generally the later of age 55 or the tenth anniversary of the commencement of participation); the base benefit is adjusted by past and future cost of living adjustments including a 1.5% increase for the fiscal year ending November 30, 2014 and an assumed 2.5% increase thereafter, until the last benefits are paid for each participant. The discount rate used to calculate the present value of the accumulated benefit shown in table was 4.25%. |
* | Messrs. Kaminski, Woram and Praw are not participants in the Retirement Plan. |
Name* | Executive Contributions in Last Fiscal Year ($)(a) | Registrant Contributions in Last Fiscal Year ($)(b) | Aggregate Earnings in Last Fiscal Year ($)(c) | Aggregate Withdrawals/ Distributions ($)(d) | Aggregate Balance at Last Fiscal Year End ($)(e) | ||||||||||
Mr. Mezger | $ | 40,000 | $ | 40,000 | $ | 234,926 | $ | — | $ | 1,216,172 | |||||
Mr. Kaminski | 17,125 | 17,125 | 8,389 | — | 74,015 | ||||||||||
Mr. Woram | 44,813 | 13,313 | 22,113 | — | 153,175 | ||||||||||
Mr. Hollinger | 37,125 | 11,467 | (11,035 | ) | 62,443 | 1,614,788 |
(a) | Executive Contributions in Last Fiscal Year. These amounts reflect compensation the NEOs earned in our 2013 fiscal year that they have voluntarily deferred and are included in the Summary Compensation Table. |
(b) | Registrant Contributions in Last Fiscal Year. These amounts are matching contributions we made to the NEOs’ voluntary contributions to our Deferred Compensation Plan and are included in the Summary Compensation Table. |
(c) | Aggregate Earnings in Last Fiscal Year. These amounts do not include any above-market or preferential earnings. Accordingly, these amounts are not reported in the Summary Compensation Table. |
(d) | Aggregate Withdrawals/Distributions. The amount reported for Mr. Hollinger reflects his receipt of a scheduled distribution from his Deferred Compensation Plan account in our 2013 fiscal year. |
(e) | Aggregate Balance at Last Fiscal Year End. These amounts reflect compensation the NEOs earned in our 2013 fiscal year or in prior years, but which they voluntarily elected to defer receipt, adjusted for changes in the value of their investments and distributions, if any. Messrs. Mezger and Hollinger are vested in the full amount of their respective balances. Mr. Kaminski is vested in $55,511 and Mr. Woram is vested in $135,407 of each of their aggregate balances. |
* | Mr. Praw did not make any Deferred Compensation Plan contributions in our 2013 fiscal year. |
• | a lump sum cash payment equal to 2.0 times the sum of his annual salary plus average annual bonus earned for the prior three years, with the total payment capped at $6,000,000; |
• | under certain circumstances, a pro-rated bonus for the year in which his employment terminates; |
• | health coverage that we pay for up to two years; |
• | with respect to equity compensation granted to him on or after February 28, 2007, (a) two years of additional service credited to compute equity vesting plus full vesting for any equity issued to him in lieu of cash bonuses, and (b) the earlier of 36 months and the original term duration of each equity grant to exercise any such outstanding equity; and |
• | performance shares paid as if the performance period closed on the termination date if the performance period would otherwise close in the next 24 months. |
• | full vesting of unvested equity granted to him on or after February 28, 2007, with earlier equity awards governed by their respective terms and conditions; |
• | performance shares paid as earned with the applicable performance period closing as of the date of the change in control; |
• | full vesting and lump sum cash payment of deferred compensation, retirement or other employee benefits per the relevant arrangements, provided that lump sum payments subject to Section 409A of the Code are permitted only as provided by the specific terms of those arrangements; |
• | if his employment is involuntarily terminated in connection with a change in control (generally, during the period starting three months before and ending twelve months after a change in control), payment of the same severance as provided above in the event of an involuntary termination of employment, except the applicable multiple is 3.0 times the sum of his annual salary and average bonus rather than 2.0 times and the total payment is capped at $12,000,000; under certain circumstances, a pro-rated bonus for the year in which his employment terminates; and health coverage that we pay for up to two years; and |
• | an additional amount to compensate for any excise taxes under Section 280G of the Code (“Section 280G”). |
• | the average of the annual cash bonuses, if any, paid to the participant for the three most recent completed fiscal years prior to the termination of the participant’s employment (or such shorter time as the participant has been employed). |
• | (i) 3.0 times base salary for participants entitled to a severance of 2.0 times the sum of base salary and average bonus, (ii) 2.5 times base salary for participants entitled to a severance of 1.5 times the sum of base salary and average bonus, and (iii) 2.0 times base salary for participants entitled to a severance of 1.0 times the sum of base salary and average bonus. |
• | if in the 18 month period following the change in control his employment is terminated other than for cause or disability, or he terminates his employment for good reason, a severance benefit equal to 2.0 times the sum of his average base salary and average actual annual cash bonus for the three fiscal years prior to the year in which the change in control occurs; |
• | accelerated vesting of any options and the lapse of any restricted period with respect to any restricted stock or other equity awards awarded to him; and |
• | full vesting in any benefits under our Death Benefit Only Plan (which is described below under the heading “Other Change in Control and Employment Termination Provisions”) if he participates in that plan. |
Post-Employment Payments — Mr. Mezger | ||||||||||||||||||||||||||||
Executive Payments and Benefits upon Termination or Change in Control | Voluntary Termination | Involuntary Termination for Cause | Involuntary Termination Without Cause/ Termination for Good Reason | Change in Control Without Termination(a) | Change in Control With Termination for Good Reason or Without Cause(a) | Death | Disability | |||||||||||||||||||||
Compensation: | ||||||||||||||||||||||||||||
Severance | $ | — | $ | — | $ | 7,950,000 | (b) | $ | — | $ | 10,933,333 | (c) | $ | — | $ | — | ||||||||||||
Long-term Incentives | ||||||||||||||||||||||||||||
Acceleration of Unvested Equity (d) | ||||||||||||||||||||||||||||
Stock Options | 4,432,874 | (e) | — | 4,432,874 | (e) | 4,432,874 | 4,432,874 | 4,342,874 | 4,342,874 | |||||||||||||||||||
PSUs | 1,056,282 | (e) | — | 2,825,732 | (f) | 2,825,732 | (f) | 2,825,732 | (f) | — | — |