CENTURY COMMUNITIES, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
SECURITIES EXCHANGE ACT OF 1934
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Filed by Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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CENTURY COMMUNITIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No:
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(3)
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Filing Party:
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(4)
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Date Filed:
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2019 ANNUAL MEETING OF
STOCKHOLDERS
PROXY STATEMENT
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8390 East Crescent Parkway, Suite 650
Greenwood Village, Colorado 80111
(303) 770-8300
FROM OUR CHAIRMAN OF THE BOARD
Dear Fellow Stockholder:
You are cordially invited to attend the 2019 Annual Meeting of Stockholders of Century Communities, Inc., a Delaware corporation, to be held at the
Hyatt Regency Denver Tech Center located at 7800 East Tufts Avenue, Denver, Colorado 80237, at 1:00 p.m. local time, on Wednesday, May 8, 2019.
At the Annual Meeting, you will be asked to consider and vote upon the following proposals: (1) to elect five directors to serve for the ensuing
year as members of the Board of Directors of Century; (2) to approve the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan; (3) to ratify the appointment of Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2019; (4) to approve, on an advisory basis, our executive compensation; and (5) to transact such other business as may properly come before the Annual Meeting or at any continuation,
postponement, or adjournment thereof. The accompanying Notice of 2019 Annual Meeting of Stockholders and proxy statement describe these matters in more detail. We urge you to read this information carefully.
The Board of Directors recommends a vote:
FOR
each of the five nominees for director named in the proxy statement and
FOR
the approval of the other proposals being submitted to a vote of stockholders.
Whether or not you attend the Annual Meeting in person, and regardless of the number of shares of Century common stock that you own, it is
important that your shares be represented and voted at the Annual Meeting. Therefore, I urge you to vote your shares of Century common stock via the Internet, by telephone, or by promptly marking, dating, signing, and returning the proxy card.
Voting over the Internet, by telephone, or by written proxy will ensure that your shares are represented at the Annual Meeting.
On behalf of the Board of Directors and management of Century, we thank you for your participation and continued support.
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Sincerely,
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Dale Francescon
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Chairman of the Board and
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Co-Chief Executive Officer
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March 27, 2019
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You can help us make a difference by eliminating paper proxy materials. With your consent, we will provide all future proxy materials
electronically. Instructions for consenting to electronic delivery can be found on your proxy card or at
www.proxyvote.com
. Your consent to
receive stockholder materials electronically will remain in effect until canceled.
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NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS
The 2019 Annual Meeting of Stockholders of Century Communities, Inc., a Delaware corporation, will be held on Wednesday, May 8, 2019, at 1:00 p.m.
local time at the Hyatt Regency Denver Tech Center located at 7800 East Tufts Avenue, Denver, Colorado 80237, for the following purposes:
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To elect five directors to serve as members of the Board of Directors of Century until the next annual meeting of stockholders and until their successors are duly elected and
qualified. The director nominees named in the proxy statement for election to the Board of Directors are: Dale Francescon, Robert J. Francescon, John P. Box, Keith R. Guericke, and James M. Lippman;
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To approve the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan;
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019;
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To approve, on an advisory basis, our executive compensation; and
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To transact such other business as may properly come before the Annual Meeting or at any continuation, postponement, or adjournment thereof.
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The proxy statement accompanying this Notice describes each of these items of business in detail. Only holders of record of our common stock at
the close of business on March 14, 2019 are entitled to notice of, to attend, and to vote at the Annual Meeting or any continuation, postponement, or adjournment thereof. A list of such stockholders will be available for inspection, for any purpose
germane to the Annual Meeting, at our principal executive offices during regular business hours for a period of no less than 10 days prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in person. To ensure your representation at the Annual Meeting, you are urged
to vote your shares of Century common stock via the Internet, by telephone, or by promptly marking, dating, signing, and returning the proxy card. If your shares of Century common stock are held by a bank, broker, or other agent, please follow the
instructions from your bank, broker, or other agent to have your shares voted.
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BY ORDER OF THE BOARD OF DIRECTORS
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David L. Messenger
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Chief Financial Officer and Secretary
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Greenwood Village, Colorado
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| March 27, 2019 |
TABLE OF CONTENTS
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Page
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1
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14
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23
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24
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27
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44
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46
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49
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66
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66
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78
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80
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81
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86
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I-1
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References in this proxy statement to:
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“Century,” “we,” “us,” “our,” or the “Company” refer to Century Communities, Inc.;
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“Board” refer to the Board of Directors of Century;
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“Annual Meeting” refer to our 2019 Annual Meeting of Stockholders; and
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“2018 Annual Report” or “2018 Annual Report to Stockholders” refer to our Annual Report on Form 10-K for the year ended December 31, 2018, being made available together with
this proxy statement.
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Information on our website and any other website referenced herein is not incorporated by reference into, and does not constitute a part of, this proxy statement.
We intend to make this proxy statement and our 2018 Annual Report available on the Internet and to commence mailing of the notice to all stockholders entitled to vote
at the Annual Meeting beginning on or about March 27, 2019. We will mail paper copies of these materials, together with a proxy card, within three business days of a request properly made by a stockholder entitled to vote at the 2019 Annual Meeting
of Stockholders.
PROXY STATEMENT SUMMARY
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This executive summary provides an overview of the information included in this proxy statement. We recommend that
you review the entire proxy statement and our 2018 Annual Report to Stockholders before voting.
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DATE AND TIME
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PROPOSALS
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Wednesday, May 8, 2019
1:00 p.m. (Mountain Time)
LOCATION
Hyatt Regency
Denver Tech Center
7800 East Tufts Avenue
Denver, CO 80237
RECORD DATE
Holders of record of our common stock at the close of business on
March 14, 2019
, are entitled to notice of, to attend, and to vote at the 2019 Annual Meeting of Stockholders or any continuation, postponement, or adjournment thereof.
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Proposal
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Board’s Vote
Recommendation |
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Proposal No. 1: Election of director
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FOR
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24
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Proposal No. 2:
Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan
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FOR
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27
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Proposal No. 3:
Ratification of appointment of independent registered public accounting firm
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FOR
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44
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Proposal No. 4:
Advisory vote on executive compensation
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FOR |
46
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Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held on Wednesday, May 8, 2019
This proxy statement and our 2018 Annual Report of Stockholders are available on the Internet, free of charge, at
www.proxyvote.com
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On this website, you will be able to access this proxy
statement, our 2018 Annual Report, and any amendments or supplements to these materials that are required to be furnished to stockholders. We encourage you to access and review all of the important information contained in the proxy materials
before voting.
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Century Communities, Inc.
– 2019 Proxy Statement 1
2018 BUSINESS HIGHLIGHTS
2018 was another year of strong revenue growth and earnings acceleration for Century, leading to our 16
th
consecutive year of profitability. In 2018, we also continued to execute on our strategy of dynamic growth by expanding our geographic footprint into a variety of new and attractive U.S. markets through
the acquisition of the remaining ownership interest of Wade Jurney Homes. Highlights of our financial, operational and strategic achievements for 2018, which drove our 2018 executive pay decisions, are below.
FINANCIAL
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$2.1
billion
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Revenue
Achieved $2.1 billion in home sales revenues, a
51%
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year-over-year
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$119.9
million
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Adjusted Net Income
Achieved a record $119.9 million, or $3.94 per share, a
69%
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year-over-year
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$227.9
million
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Adjusted EBITDA
Achieved a record $227.9 million, a
51%
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year-over-year
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$387.5
million
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Credit Facility Availability
Strengthened balance sheet and created flexibility with increased availability
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OPERATIONAL
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6,099
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Home Deliveries
Achieved 6,099 home deliveries, a
68%
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year-over-year
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5,657
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Net New Home Contracts
Achieved 5,657 net new home contracts, a
48%
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year-over-year
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2,181
homes
$669.5
million
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Backlog
Backlog
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65%
to 2,181 homes, with value of $669.5 million,
a
17%
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over end of prior year
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37,919
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Lots Owned and Controlled
Ended the year with 37,919 owned and controlled lots, a
23%
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over the end of the prior year
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STRATEGIC
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✓
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Increased Focus on Entry Level Price Point
Reduced average sales price of homes delivered and in backlog to $345,968 and $306,981, respectively
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✓
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Completed Acquisition of Wade Jurney Homes
Bolstered our offering of homes for first time buyers, strengthened our presence in the Southeast United States, and moved into the ranks of the Top 10 U.S.
homebuilders based on combined closings
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✓
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Completed Integration of UCP, Inc.
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✓
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Accelerated Financial Services Business
Achieved revenue of $31.7 million and pre-tax income of $8.8 million, compared to $9.8 million and $1.2 million, respectively, in prior year
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Please see Annex I for a reconciliation of non-GAAP financial measures to most comparable measures under U.S. generally
accepted accounting principles.
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Century Communities, Inc.
– 2019 Proxy Statement 2
CORPORATE GOVERNANCE
HIGHLIGHTS
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✓
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Annual election of all directors
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✓
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Robust Board and committee evaluations
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✓
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Majority of independent directors
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✓
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No poison pill
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✓
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Independent presiding director
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✓
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Annual say-on-pay vote
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✓
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Officer and director stock ownership requirements
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✓
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Double triggers for cash severance and accelerated vesting of equity upon a change in control
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✓
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Hedging, pledging, and stock option repricing prohibitions
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✓
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Robust clawback policy covering cash and equity incentive compensation paid to current and former executives
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STOCKHOLDER ENGAGEMENT
We are committed to a robust and proactive stockholder engagement program. The Board of Directors values the perspectives of our stockholders, and
feedback from stockholders on our business, corporate governance, executive compensation, and sustainability practices are important considerations for Board discussions throughout the year.
During 2018, our executives held more than 200 meetings with stockholders representing over 70 percent of shares outstanding, in total, including all
of our top 10 shareholders that are actively managed funds.
BOARD ENGAGEMENT
The Board of Directors maintains a process for stockholders and interested parties to communicate with the Board. Stockholders and interested parties
may contact the Board of Directors as provided below:
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WRITE
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CALL
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EMAIL
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ATTEND
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Corporate Secretary
Century Communities, Inc.
8390 E. Crescent Pkwy.
Suite 650
Greenwood Village, CO 80111
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Investor Relations
303-268-8398
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investorrelations@
centurycommunities.com
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Annual Meeting of Stockholders
Wednesday, May 8, 2019
Hyatt Regency Denver Tech Center
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Century Communities, Inc.
– 2019 Proxy Statement 3
BOARD DIVERSITY
The Board of Directors understands the importance of adding diverse, experienced talent to the Board in order to establish an array of experience and
strategic views. The Nominating and Corporate Governance Committee is committed to refreshment efforts to ensure that the composition of the Board and each of its committees encompasses a wide range of perspectives and knowledge.
BOARD NOMINEES
Below are the directors nominated for election by stockholders at the Annual Meeting for a one-year term. The Board recommends a vote “
FOR
” each of these nominees.
All director nominees listed below served during the fiscal year ended December 31, 2018, and attended at least 75% of the sum of all Board meetings
and committee meetings, as applicable.
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Director
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Age
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Serving Since
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Independent
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Committees
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Dale Francescon
(1)
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66
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2013
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No
(2)
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N/A
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Robert J. Francescon
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61
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2013
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No
(2)
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N/A
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John P. Box
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72
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2014
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Yes
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Audit, Compensation, Nominating and Corporate Governance
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Keith R. Guericke
(1)
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70
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2013
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Yes
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Audit, Compensation, Nominating and Corporate Governance
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James M. Lippman
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61
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2013
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Yes
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Audit, Compensation, Nominating and Corporate Governance
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Dale Francescon serves as Chairman of the Board of Directors. Because the Board endorses the concept of an independent, non-employee director being in a position of leadership,
Keith R. Guericke serves as the presiding independent director.
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Dale Francescon and Robert J. Francescon are not independent because they also serve as Century’s Co-Chief Executive Officers.
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Century Communities, Inc.
– 2019 Proxy Statement 4
BOARD AND COMMITTEE COMPOSITION
The Board of Directors has an Audit Committee, Compensation Committee, and a Nominating and Corporate Governance Committee. Below are our directors,
their committee memberships, and their 2018 attendance rates for Board and committee meetings.
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Director
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Board
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Audit
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Compensation
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Nominating and
Corporate Governance |
Attendance
Rate
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Dale Francescon
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100%
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Robert J. Francescon
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100%
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John P. Box
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Chair
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96%
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Keith R. Guericke
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Chair
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100%
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James M. Lippman
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●
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Chair
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83%
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KEY QUALIFICATIONS
The following are some of the key qualifications, skills, and experiences of our Board.
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Director
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CEO/Senior
Officer
Experience
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Financial/Finance
Experience
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Industry
Experience
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Sales/Marketing
Experience
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Corporate
Governance
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Dale Francescon
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●
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Robert J. Francescon
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John P. Box
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Keith R. Guericke
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James M. Lippman
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The lack of a mark for a particular item does not mean that the director does not possess that qualification, characteristic, skill, or experience.
We look to each director to be knowledgeable in these areas; however, the mark indicates that the item is a particularly prominent qualification, characteristic, skill, or experience that the director brings to the Board.
Century Communities, Inc.
– 2019 Proxy Statement 5
EXECUTIVE COMPENSATION PHILOSOPHY
Our executive compensation program is generally designed to attract, retain, motivate, and reward highly qualified and talented executive officers
that will enable us to drive long-term stockholder value.
The core principles of our executive compensation program include:
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✓
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Aligning the interests of our executives with those of our stockholders and linking pay to performance by providing compensation opportunities that are tied
directly to the achievement of financial performance goals and long-term stock price performance;
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✓
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Targeting fixed compensation at the market median; and
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✓
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Targeting performance-based award levels at the market median and setting maximum award levels, if earned, at or above the market 75th percentile, thereby
emphasizing performance-based compensation elements, with superior performance resulting in above-market pay, and underwhelming performance resulting in below-market pay.
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EXECUTIVE COMPENSATION BEST PRACTICES
Our compensation practices include many best practices that support our executive compensation objectives and principles and benefit our
stockholders.
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What We Do
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What We Don’t Do
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✓
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Structure our executive officer compensation so that a significant portion of pay is at risk
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No guaranteed salary increases or bonuses
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✓
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Emphasize long-term performance in our equity-based incentive awards
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No excessive perquisites
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✓
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Use a mix of performance measures and caps on payouts
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No repricing of stock options unless approved by stockholders
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✓
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Require minimum vesting periods on equity awards
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No discretionary bonuses
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✓
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Require double-trigger for equity acceleration upon a change of control
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No tax gross-ups
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✓
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Maintain a competitive compensation package
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No excise tax gross-ups
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✓
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Have robust stock ownership guidelines and stock retention requirements for executive officers
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No current payment of dividends on unvested awards
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✓
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Maintain a robust clawback policy covering cash and equity incentive compensation paid to current and former executives
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No short sales or derivative transactions in Century stock, including hedges
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✓
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Hold an annual say-on-pay vote
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No pledging of Century securities
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Century Communities, Inc.
– 2019 Proxy Statement 6
HOW WE PAY
Our executive compensation program consists of the following principal elements:
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✓
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Base salary
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✓
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Short-term cash incentive compensation, based on performance
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✓
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Long-term equity incentive compensation, in the form of performance share and restricted stock unit awards
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2018 EXECUTIVE COMPENSATION ACTIONS
2018 compensation actions and incentive plan outcomes based on performance are summarized below:
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Pay Element
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2018 Actions
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Base Salary
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·
Our Co-CEOs received
no base salary increases.
·
Our CFO received a
base salary increase of 15.8% to align to our target positioning in our peer group.
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Short-Term Incentive
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·
The target
short-term incentive award opportunity for each of our Co-CEOs was increased from 150% to 175% of base salary to align with our target positioning and remained at 100% of base salary for our CFO.
·
Performance metrics
were revenue (40%), EBITDA, as adjusted (40%), and closings (20%), in each case adjusted to exclude acquisitions, for our Co-CEOs, and revenue (30%), EBITDA as adjusted (30%), closings (15%), and individual goals (25%) for our CFO.
·
Payouts were between
the target and maximum payout level, based on fiscal 2018 performance.
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Long-Term Incentives
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·
The target long-term
incentive award opportunity for 2018 for each of our Co-CEOs was 250% of base salary and 220% of base salary for our CFO.
·
Our LTI program
consisted of 60% performance share unit awards and 40% time-vested restricted stock unit awards.
·
The PSU awards vest
and are paid out in shares of our common stock upon the achievement of a threshold three-year cumulative adjusted pre-tax income goal and will be subject to a one-year mandatory holding period.
·
The RSU awards vest
in three equal annual installments.
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Other Compensation Related Actions
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·
Over 92% of votes
cast at our 2018 Annual Meeting of Stockholders were in favor of our annual say-on-pay vote.
·
In October 2018, we
entered into amended and restated employment agreements with our Co-CEOs.
·
In November 2018, we
adopted a robust clawback policy covering cash and equity incentive compensation applicable to current and former executives.
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Century Communities, Inc.
– 2019 Proxy Statement 7
CENTURY COMMUNITIES AMENDED AND RESTATED 2017
OMNIBUS INCENTIVE PLAN
The Board has approved the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as the “amended 2017
plan”). The amended 2017 plan incorporates an amendment to the number of shares of Century common stock available for issuance under the plan by an additional 1.631 million shares. Our continuing ability to offer equity incentive awards under the
2017 plan is critical to our ability to attract, motivate and retain qualified personnel, particularly as we grow and in light of the highly competitive markets for employee talent in which we operate.
In addition, the amended 2017 plan reflects certain changes in light of the Tax Cuts and Jobs Act and its impact on Section 162(m) of the Internal
Revenue Code of 1986, as amended. We retained, however, the annual award limits and performance measures as part of good corporate governance. The amended 2017 plan also incorporates a more stringent limit on non-employee director awards limiting
overall non-employee director compensation to $400,000 per year or $600,000 in the case of a non-employee chairman of the board or lead director. Finally, the amended 2017 plan increases the limit on incentive stock options commensurate with the
overall share increase and expands the exceptions to the minimum vesting provision to allow for shares delivered in lieu of fully vested cash awards and vesting on director awards tied to the timing of the next annual meeting of stockholders which may
be less than one year from the date of grant so long as the annual meeting is more than 50 weeks after the preceding year’s annual meeting.
The Board recommends a vote “
FOR
” the
approval of the amended 2017 plan.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
2020 ANNUAL MEETING OF STOCKHOLDERS
We anticipate that our 2020 Annual Meeting of Stockholders will be held on Wednesday, May 6, 2020.
Important Dates for Stockholder Submissions
The following are important dates in connection with our 2020 Annual Meeting of Stockholders.
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Stockholder Action
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Submission Deadline
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Proposal Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934
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No later than November 26, 2019
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Nomination of a Candidate Pursuant to our Bylaws
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Between January 8, 2020, and February 7, 2020
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Proposal of Other Business for Consideration Pursuant to our Bylaws
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Between January 8, 2020, and February 7, 2020
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Century Communities, Inc.
– 2019 Proxy Statement 8
INFORMATION ABOUT THE ANNUAL MEETING
The Board of Directors of Century Communities, Inc. is using this proxy statement to solicit your proxy for use at our 2019 Annual Meeting of
Stockholders. The Board is soliciting proxies to give all stockholders of record an opportunity to vote on matters properly presented at the Annual Meeting.
We have elected to provide access to our proxy materials on the Internet. Accordingly, we are sending an Important Notice of Availability of Proxy
Materials for the Annual Meeting (which we refer to as the “Internet Notice”) to most of our stockholders of record and paper or electronic copies of the proxy materials to our remaining stockholders of record. Brokers and other nominees who hold
shares on behalf of beneficial owners will be sending their own similar notice. All stockholders may request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the
Internet Notice and on the website referred to in the Internet Notice, including an option to request paper copies on an ongoing basis. We will mail this proxy statement and 2018 Annual Report, together with a proxy card, to those stockholders
entitled to vote at the Annual Meeting who have properly requested paper copies of such materials, within three business days of such request.
WHEN AND WHERE WILL THE ANNUAL MEETING BE HELD?
The Annual Meeting will be held on Wednesday, May 8, 2019, at 1:00 p.m. local time, at the Hyatt Regency Denver Tech Center located at 7800 East
Tufts Avenue, Denver, Colorado 80237.
Directions to attend the Annual Meeting may be obtained by calling Investor Relations at (303) 268-8398.
WHAT ARE THE PURPOSES OF THE ANNUAL MEETING?
The purposes of the Annual Meeting are to vote on the following items described in this proxy statement:
|
Proposal
|
Item of Business
|
|
Proposal No. 1
|
Election of Directors
|
|
Proposal No. 2
|
Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan
|
|
Proposal No. 3
|
Ratification of Appointment of Independent Registered Public Accounting Firm
|
|
Proposal No. 4
|
Advisory Vote on Executive Compensation
|
There are no rights of appraisal or similar rights of dissenters arising from matters to be acted on at the meeting.
ARE THERE ANY MATTERS TO BE VOTED ON AT THE ANNUAL MEETING THAT ARE NOT INCLUDED IN THIS
PROXY STATEMENT?
|
|
We currently are not aware of any business that will be presented at the Annual Meeting other than as described in this proxy statement. If,
however, any other matter is properly brought at the Annual Meeting, or any continuation, postponement, or adjournment thereof, your proxy includes discretionary authority on the part of the individuals appointed to vote your shares or act on those
matters in accordance with their best judgment.
WHO CAN ATTEND THE ANNUAL MEETING?
All of our stockholders entitled to vote at the Annual Meeting may attend the Annual Meeting. If your shares are held in street name, however, you
may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy from the record holder of your shares.
Century Communities, Inc.
– 2019 Proxy Statement 9
Stockholders who wish to attend the Annual Meeting will be required to present verification of ownership of our common stock, such as a bank or
brokerage firm account statement, and will be required to present a valid government-issued picture identification, such as a driver’s license or passport, to gain admittance to the Annual Meeting. No cameras, recording equipment, electronic devices,
large bags, briefcases, or packages will be permitted in the Annual Meeting.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Holders of record of shares of our common stock, $0.01 par value, as of the close of business on March 14, 2019, the record date, will be entitled to
notice of and to vote at the Annual Meeting and any continuation, postponement, or adjournment thereof. At the close of business on the record date, there were 30,297,398 shares of our common stock issued and outstanding and entitled to vote. Each
share of our common stock is entitled to one vote on any matter presented to stockholders at the Annual Meeting.
HOW MANY SHARES MUST BE PRESENT?
A quorum must be present at the Annual Meeting for any business to be conducted. The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority in voting power of our capital stock issued and outstanding and entitled to vote on the record date will constitute a quorum. Your shares will be counted toward the quorum if you submit a proxy or vote at the Annual Meeting.
Shares represented by proxies marked “abstain” and “broker non-votes” also are counted in determining whether a quorum is present.
WHAT IF A QUORUM IS NOT PRESENT?
If a quorum is not present or represented at the scheduled time of the Annual Meeting, (i) the chairperson of the Annual Meeting or (ii) a majority
in voting power of the stockholders entitled to vote at the Annual Meeting, present in person or represented by proxy, may adjourn the Annual Meeting until a quorum is present or represented.
HOW DO I VOTE?
We recommend that stockholders vote by proxy even if they plan to attend the Annual Meeting and vote in person. If you are a stockholder of record,
there are three ways to vote by proxy:
| · |
by Telephone—You can vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card;
|
| · |
by Internet—You can vote over the Internet at
www.proxyvote.com
by following
the instructions on the Internet Notice or proxy card; or
|
| · |
by Mail—You can vote by mail by signing, dating, and mailing the proxy card, which you may have received by mail.
|
Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight
Savings Time, on May 7, 2019. If you vote through the Internet, you should be aware that you may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers, and that these costs must be borne by
you.
If your shares are held in the name of a bank, broker, or other holder of record, you will receive instructions on how to vote from the bank, broker,
or holder of record. You must follow the instructions of such bank, broker, or holder of record in order for your shares to be voted. Telephone and Internet voting also may be offered to stockholders owning shares through certain banks and brokers.
If your shares are not registered in your own name and you would like to vote your shares in person at the Annual Meeting, you should contact your bank, broker, or agent to obtain a legal proxy or the bank’s or broker’s proxy card and bring it to the
Annual Meeting in order to vote.
Century Communities, Inc.
– 2019 Proxy Statement 10
WHAT IS THE DIFFERENCE BETWEEN BEING A “RECORD HOLDER” AND HOLDING SHARES IN “STREET
NAME”?
A record holder holds shares in his or her name. Shares held in “street name” means that shares are held in the name of a bank or broker on a
person’s behalf.
CAN I VOTE IF MY SHARES ARE HELD IN “STREET NAME”?
Yes. If your shares are held by a bank or a brokerage firm, you are considered the “beneficial owner” of those shares held in “street name.” If
your shares are held in street name, these proxy materials are being forwarded to you by your bank or brokerage firm along with a voting instruction card. As the beneficial owner, you have the right to direct your bank or brokerage firm how to vote
your shares, and your bank or brokerage firm is required to vote your shares in accordance with your instructions.
WHAT ARE BROKER NON-VOTES?
Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular
proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares.
A broker is entitled to vote shares held for a beneficial owner on routine matters. The ratification of the appointment of Ernst & Young LLP as
our independent registered public accounting firm in Proposal No. 2 is a routine matter; and accordingly, a broker is entitled to vote shares held for a beneficial owner on that proposal, without instructions from such beneficial owner. On the other
hand, absent instructions from a beneficial owner, a broker is not entitled to vote shares held for such beneficial owner on non-routine matters. We believe, based on the rules of the New York Stock Exchange (NYSE), that the election of directors in
Proposal No. 1, the amendment to the Century Communities, Inc. 2017 Omnibus Incentive Plan in Proposal No. 2 and the advisory vote on executive compensation in Proposal No. 4 are non-routine matters; and accordingly, brokers do not have authority to
vote on such matters absent instructions from beneficial owners. Whether a voting proposal is ultimately determined routine or non-routine is determined by the NYSE. Accordingly, if beneficial owners desire not to have their shares voted by a broker
in a certain manner, they should give instructions to their brokers as to how to vote their shares.
Broker non-votes count for purposes of determining whether a quorum is present.
HOW DOES THE BOARD RECOMMEND I VOTE?
The Board recommends that you vote:
| · |
FOR
the election of Dale Francescon, Robert J. Francescon, John P. Box, Keith R. Guericke, and James M. Lippman to serve as members of the Board until the next annual meeting of stockholders and until their
successors are duly elected and qualified;
|
| · |
FOR
the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan;
|
| · |
FOR
the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and
|
| · |
FOR
the approval of the advisory vote on our executive compensation.
|
Century Communities, Inc.
– 2019 Proxy Statement 11
If you return a properly completed proxy card, or vote your shares by telephone or Internet, your shares of common stock will be voted on your behalf
as you direct. If not otherwise specified, the shares of common stock represented by the proxies will be voted in accordance with the Board’s recommendations.
WHAT IS THE REQUIRED VOTE FOR EACH PROPOSAL?
|
Proposal
|
Votes Required
|
Effect of Votes
Withheld / Abstentions |
Effect of
Broker Non- Votes |
|
|
Proposal No. 1
: Election of Directors
|
Plurality of votes cast. This means that the five nominees receiving the highest number of affirmative “FOR” votes will be elected as directors.
|
Votes withheld will have no effect.
|
Broker non-votes will have no effect.
|
|
|
Proposal No. 2
: Century Communities, Inc. Amended and
Restated 2017 Omnibus Incentive Plan
|
Affirmative vote of a majority of votes cast on the proposal.
|
Abstentions will have the effect of a vote against the proposal.
|
Broker non-votes will have no effect.
|
|
|
Proposal No. 3
: Ratification of Appointment of Independent
Registered Public Accounting Firm
|
Affirmative vote of the holders of a majority in voting power of the shares of common stock present in person or by proxy and entitled to vote thereon.
|
Abstentions will have the effect of a vote against the proposal.
|
We do not expect any broker non-votes on this proposal.
|
|
|
Proposal No. 4
: Advisory Vote on Executive Compensation
|
Affirmative vote of the holders of a majority in voting power of the shares of common stock present in person or by proxy and entitled to vote thereon.
|
Abstentions will have the effect of a vote against the proposal.
|
Broker non-votes will have no effect.
|
|
WHAT IF I DON’T SPECIFY HOW MY SHARES ARE TO BE VOTED?
|
|
If you submit a proxy but do not indicate any voting instructions, the persons named as proxies will vote in accordance with the recommendations of
the Board, as described above.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE INTERNET NOTICE OR SET OF PROXY
MATERIALS?
|
|
It means that your shares are held in more than one account at the transfer agent and/or with banks or brokers. Please vote all of your shares. To
ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating, and returning the enclosed
proxy card in the enclosed envelope.
Century Communities, Inc.
– 2019 Proxy Statement 12
CAN I REVOKE OR CHANGE MY VOTE?
|
|
Yes. If you are a registered stockholder, you may revoke your proxy or change your vote at any time before your shares are voted by one of the
following methods:
| · |
by submitting a duly executed proxy bearing a later date;
|
| · |
by granting a subsequent proxy through the Internet or telephone;
|
| · |
by giving written notice of such revocation to our Secretary; or
|
| · |
by voting in person at the Annual Meeting.
|
Written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:
Century Communities, Inc.
8390 East Crescent Parkway, Suite 650
Greenwood Village, Colorado 80111
Attention: Corporate Secretary
Your most recent proxy card or telephone or Internet proxy is the one that is counted. Your attendance at the Annual Meeting by itself will not
revoke your proxy unless you give written notice of revocation to the Secretary before your proxy is voted or you vote in person at the Annual Meeting.
If your shares are held in street name, you may change or revoke your voting instructions by following the specific directions provided to you by
your bank or broker, or you may vote in person at the Annual Meeting by obtaining a legal proxy from your bank or broker and submitting the legal proxy along with your ballot.
WHERE CAN I FIND THE VOTING RESULTS?
We plan to announce preliminary voting results at the Annual Meeting and will report the final results in a Current Report on Form 8-K, which we
intend to file with the Securities and Exchange Commission (SEC) within four business days after the Annual Meeting.
CAN I GET A PRINTED COPY OF THE PROXY MATERIALS?
Yes. We will mail this proxy statement and 2018 Annual Report, together with a proxy card, to those stockholders entitled to vote at the Annual
Meeting who have properly requested paper copies of such materials, within three business days of such request.
Century Communities, Inc.
– 2019 Proxy Statement 13
BEST PRACTICES
We have adopted several corporate governance best practices.
|
✓
|
Annual election of all directors
|
✓
|
Robust Board and committee evaluations
|
|
✓
|
Majority of independent directors
|
✓
|
No poison pill
|
|
✓
|
Independent presiding director
|
✓
|
Annual say-on-pay vote
|
|
✓
|
Officer and director stock ownership requirements
|
✓
|
Double triggers for cash severance and accelerated vesting of equity upon a change in control
|
|
✓
|
Hedging, pledging and stock option repricing prohibitions
|
✓
|
Robust clawback policy covering cash and equity incentive compensation paid to current and former executives
|
GUIDELINES
The Board of Directors has adopted Corporate Governance Guidelines covering, among other things, the duties and responsibilities of, and independence
standards applicable to, our directors and Board committee structures and responsibilities. Among the topics addressed in our Corporate Governance Guidelines are:
|
·
Role of directors
·
Selection of the Chairman of the
Board
·
Selection of new directors
·
Director qualifications
·
Care and avoidance of conflicts
·
Confidentiality
·
Other directorships
·
Director independence
·
Directors who change their present
job responsibility
·
Retirement and resignation policy
·
Director tenure
·
Board compensation
·
Separate sessions of independent
directors
·
Board and Board committee
self-evaluations
·
Strategic direction of the Company
·
Board access to management
|
·
Board materials
·
Board interaction with
institutional investors, analysts, press, and customers
·
Board orientation and continuing
education
·
Director attendance of annual
meetings of stockholders
·
Frequency of meetings
·
Selection of agenda items for
Board meetings
·
Number and names of Board
committees
·
Independence of Board committees
·
Assignment and rotation of
committee members
·
Evaluation of executive officers
·
Succession planning
·
Management development
·
Risk management
·
Prohibited loans
·
Communications with directors
|
From time to time, the Board, upon recommendation of the Nominating and Corporate Governance Committee, reviews and updates the Corporate Governance
Guidelines as it deems necessary and appropriate.
Century Communities, Inc.
– 2019 Proxy Statement 14
DIRECTOR INDEPENDENCE
Under the listing standards and rules of the NYSE, independent directors must comprise a majority of a listed company’s board of directors. In
addition, NYSE rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent. Audit committee members must also satisfy heightened
independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, and compensation committee members must satisfy heightened independence criteria set forth in the NYSE rules. Under the NYSE rules, a director will only qualify
as an “independent director” if the company’s board of directors affirmatively determines that the director has no material relationship with the company, either directly or indirectly, that would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
The Board has undertaken a review of its composition, the composition of its Board committees, and the independence of each director. Based upon
information requested from and provided by each of our directors concerning his background, employment, and affiliations, including family relationships with us, our senior management, and our independent registered public accounting firm, the Board
has determined that all but two of our directors, Dale Francescon and Robert J. Francescon, are independent directors under the standards established by the SEC and the NYSE. In making this determination, the Board considered the current and prior
relationships that each non-employee director has with Century and all other facts and circumstances the Board deemed relevant in determining their independence.
BOARD LEADERSHIP STRUCTURE
Our Corporate Governance Guidelines provide that the Board does not require the separation of the offices of the Chairman of the Board and the Chief
Executive Officers, and that the Board is free to choose its Chairman of the Board in any way that it deems best for the Company at any given point in time. Dale Francescon serves as Chairman of the Board and Co-Chief Executive Officer, and Robert J.
Francescon serves as Co-Chief Executive Officer and President. However, the Board endorses the concept of an independent director being in a position of leadership and, thus, as mentioned above, Keith R. Guericke serves as our presiding director.
The Board has determined that this current leadership structure is appropriate and in the best interests of the Company and its stockholders at this
time for several reasons, including: (i) Both Dale Francescon’s and Robert J. Francescon’s extensive knowledge of our Company, business, and industry, obtained through their 15 years of service to our Company and over 25 years of experience in the
homebuilding industry, which benefit Board leadership and the Board’s decision-making process through their active roles as Co-Chief Executive Officers, and in the case of Dale Francescon, Chairman of the Board; (ii) unification of Board leadership and
strategic direction as implemented by our management; and (iii) appropriate balance of risks relating to concentration of authority through the oversight of our independent and engaged presiding independent director and Board.
EXECUTIVE SESSIONS
Our non-management independent directors have the opportunity to meet in executive sessions without management to consider such matters as they deem
appropriate, such as reviewing the performance of management. Executive sessions of our independent directors are typically held in conjunction with regularly scheduled Board meetings.
Our independent directors have appointed an independent director (referred to as the “presiding director”) to preside over the executive sessions of
the independent directors. The main duties of the presiding director are to (i) preside at regularly scheduled executive sessions or other meetings of the independent directors; (ii) serve as liaison between the Chairman of the Board and the Co-Chief
Executive Officers, on the one hand, and the independent directors, on the other hand, by means of consulting with the Chairman of the Board and the Co-Chief Executive Officers as to agenda items for Board and committee meetings and advising them of
the outcome of such meetings, as necessary; and (iii) coordinate with Board committee chairs in the development and recommendations of Board and Board committee meeting agendas.
Century Communities, Inc.
–
2019 Proxy Statement 15
Keith R. Guericke serves as our presiding director.
COMMITTEES OF THE BOARD OF DIRECTORS
We currently have three standing committees of the Board: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance
Committee. The Board may establish other Board committees as it deems necessary or appropriate from time to time.
Below are our directors, their committee memberships and their 2018 attendance rates for Board and committee meetings.
|
Director
|
Board
|
Audit
|
Compensation
|
Nominating and
Corporate Governance
|
Attendance
Rate
|
|
Dale Francescon
|
●
|
100%
|
|||
|
Robert J. Francescon
|
●
|
100%
|
|||
|
John P. Box
|
●
|
●
|
●
|
●
Chair
|
96%
|
|
Keith R. Guericke
|
●
|
●
Chair
|
●
|
●
|
100%
|
|
James M. Lippman
|
●
|
●
|
●
Chair
|
●
|
83%
|
AUDIT COMMITTEE
The Audit Committee is comprised of our three independent directors, John P. Box, Keith R. Guericke, and James M. Lippman, each of whom the Board has
determined is “financially literate” under the rules of the NYSE and satisfies the heightened independence criteria for audit committee members set forth in Rule 10A-3 under the Securities Exchange Act of 1934 (Exchange Act). Mr. Guericke serves as
Chair of the Audit Committee. Mr. Guericke has been designated by the Board as our “audit committee financial expert,” as that term is defined in the rules of the SEC.
The Audit Committee, pursuant to its written charter, among other matters, oversees (i) our financial reporting, auditing, and internal control
activities; (ii) the integrity and audits of our financial statements; (iii) our compliance with legal and regulatory requirements; (iv) the qualifications and independence of our independent auditors; (v) the performance of our internal audit function
and independent auditors; and (vi) our overall risk exposure and management.
Duties of the Audit Committee also include:
| · |
annually review and assess the adequacy of the Audit Committee charter and the performance of the Audit Committee;
|
| · |
be responsible for the appointment, retention, and termination of our independent auditors, and determine the compensation of our independent auditors;
|
Century Communities, Inc.
– 2019 Proxy Statement 16
| · |
review with the independent auditors the plans and results of the audit engagement;
|
| · |
evaluate the qualifications, performance, and independence of our independent auditors;
|
| · |
have sole authority to approve in advance all audit and non-audit services by our independent auditors, the scope and terms thereof, and the fees therefor;
|
| · |
review the adequacy of our internal accounting controls; and
|
| · |
meet at least quarterly with our executive officers, internal audit staff, and our independent auditors in separate executive sessions.
|
The Audit Committee charter authorizes the Audit Committee to retain independent legal, accounting, and other advisors as it deems necessary to carry
out its responsibilities. The Audit Committee reviews and evaluates, at least annually, the performance of the Audit Committee, including compliance with its charter.
COMPENSATION COMMITTEE
The Compensation Committee is comprised of our three independent directors, John P. Box, Keith R. Guericke, and James M. Lippman, each of whom the
Board has determined satisfies the heightened independence criteria for compensation committee members under the NYSE rules. In addition, each of the Compensation Committee members is a “non-employee director” within the meaning of Rule 16b-3 under
the Exchange Act and a an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (Code). Mr. Lippman serves as Chair of the Compensation Committee.
The Compensation Committee, pursuant to its written charter, among other matters:
| · |
assists the Board in developing and evaluating potential candidates for executive officer positions and overseeing the development of executive succession plans;
|
| · |
administers, reviews, and makes recommendations to the Board regarding our compensation plans, including the Century Communities, Inc. 2017 Omnibus Incentive Plan, and
administers or oversees all such plans and discharges any responsibilities imposed on the Compensation Committee by such plans, including, without limitation, the grant of equity-based awards to officers and employees;
|
| · |
annually reviews and approves our corporate goals and objectives with respect to compensation for executive officers and, at least annually, evaluates each executive officer’s
performance in light of such goals and objectives to set his or her annual compensation, including salary, bonus, and equity and non-equity incentive compensation, subject to approval by the Board;
|
| · |
reviews and approves any employment, severance, change in control, retention, retirement, deferred compensation, perquisite, or similar compensatory agreements, plans,
programs, or arrangements with executive officers;
|
| · |
provides oversight of management’s decisions regarding the performance, evaluation, and compensation of other officers; and
|
| · |
reviews our incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk-taking, and reviews and discusses, at least annually, the
relationship between risk management policies and practices, business strategy, and our executive officers’ compensation.
|
Century Communities, Inc.
–
2019 Proxy Statement 17
The Compensation Committee charter authorizes the Compensation Committee to retain a compensation consultant, independent legal counsel, and other
advisors as it deems necessary or appropriate to carry out its responsibilities. During 2018, the Compensation Committee retained Frederic W. Cook & Co., Inc. (FW Cook) as its external compensation consultant to provide certain services related to
executive and non-employee director compensation.
The Compensation Committee considers analysis and advice from FW Cook when making compensation decisions and when making decisions on plan design.
Specifically, the Compensation Committee relies on FW Cook for, among other things:
| · |
reviewing total compensation strategy and pay levels for our executives;
|
| · |
examining our executive compensation program to ensure that it supports our business strategy;
|
| · |
performing competitive analyses of non-employee director compensation; and
|
| · |
providing advice with respect to our equity-based compensation plans.
|
The Compensation Committee may request information or advice directly from FW Cook and may direct our management to provide or solicit information.
A representative of FW Cook regularly interacts with our management and from time to time attends Compensation Committee meetings.
During 2018, FW Cook did not provide any services to the Company unrelated to executive or director compensation. After considering the relevant
factors, the Compensation Committee determined that no conflicts of interest have been raised in connection with the services FW Cook performed for the Compensation Committee in 2018.
The Compensation Committee reviews and evaluates, at least annually, the performance of the Compensation Committee, including compliance with its
charter.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee is comprised of our three independent directors, John P. Box, Keith R. Guericke, and James M.
Lippman. Mr. Box serves as Chair of the Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee, pursuant to its written charter, among other matters:
| · |
identifies individuals qualified to become members of the Board and ensures that the Board has the requisite expertise and its membership consists of persons with sufficiently
diverse and independent backgrounds;
|
| · |
develops and recommends to the Board for its approval qualifications for director candidates and periodically reviews these qualifications with the Board;
|
| · |
reviews the committee structure of the Board and recommends directors to serve as members or chairs of each Board committee;
|
| · |
reviews and recommends Board committee slates annually and recommends additional Board committee members to fill vacancies as needed;
|
Century Communities, Inc.
– 2019 Proxy Statement 18
| · |
develops and recommends to the Board a set of corporate governance guidelines and, at least annually, reviews such guidelines and recommends changes to the Board for approval
as necessary;
|
| · |
considers and oversees corporate governance issues as they arise from time to time and develops appropriate recommendations for the Board; and
|
| · |
oversees the annual self-evaluations of the Board, each Board committee, and management.
|
The Nominating and Corporate Governance Committee charter authorizes the Nominating and Corporate Governance Committee to retain a search firm or
other consultants to assist in the identification and evaluation of director candidates, including the sole authority to approve the search firm’s or other consultants’ fees and other retention terms. The Nominating and Corporate Governance Committee
also has authority to obtain advice and assistance from any outside legal expert or other advisors as it deems necessary or appropriate to carry out its responsibilities.
The Nominating and Corporate Governance Committee reviews and evaluates, at least annually, the performance of the Nominating and Corporate
Governance Committee, including compliance with its charter.
BOARD AND BOARD COMMITTEE MEETINGS; ATTENDANCE
The Board held 6 meetings during 2018. The Audit Committee held 8 meetings, the Compensation Committee held 6 meetings, and the Nominating and
Corporate Governance Committee held 4 meetings during 2018. All directors attended at least 75% of the combined total of (i) all Board meetings and (ii) all meetings of committees of the Board of which the director was a member during 2018.
We expect all of our directors to attend our annual meeting of stockholders and we customarily schedule a regular Board meeting on the same day as
our annual meeting. All directors serving at the time of our 2018 Annual Meeting of Stockholders held on May 9, 2018 were in attendance.
BOARD DIVERSITY
The Board of Directors understands the importance of adding diverse, experienced talent to the Board in order to establish an array of experience and
strategic views. The Nominating and Corporate Governance Committee is committed to refreshment efforts to ensure that the composition of the Board and each of its committees encompasses a wide range of perspectives and knowledge.
DIRECTOR QUALIFICATIONS AND NOMINATIONS PROCESS
The Board seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes, and skills, when taken
together, will allow the Board to satisfy its oversight responsibilities effectively. New directors are approved by the Board after recommendation by the Nominating and Corporate Governance Committee. In identifying candidates for director, the
Nominating and Corporate Governance Committee and the Board take into account the following: (i) the comments and recommendations of Board members regarding the qualifications and effectiveness of the existing Board, or additional qualifications that
may be required when selecting new Board members; (ii) the requisite expertise and sufficiently diverse backgrounds of the Board’s overall membership composition; (iii) the independence of outside directors and other possible conflicts of interest of
existing and potential members of the Board; and (iv) any other factors they consider appropriate. When considering whether directors and nominees have the experience, qualifications, attributes, and skills, taken as a whole, to enable the Board to
satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Nominating and Corporate Governance Committee and the Board focused primarily on the information discussed in each of the directors’ individual
biographies.
Century Communities, Inc.
– 2019 Proxy Statement 19
The Nominating and Corporate Governance Committee will consider director candidates recommended to it by our stockholders. Those candidates must be
qualified and exhibit the experience and expertise required of the Board’s own pool of candidates, as well as have an interest in our business, and demonstrate the ability to attend and prepare for Board, committee, and stockholder meetings. Any
candidate must state in advance his or her willingness and interest in serving on the Board. Candidates should represent the interests of all stockholders and not those of a special interest group. The Nominating and Corporate Governance Committee
will evaluate candidates recommended by stockholders using the same criteria it uses to evaluate candidates recommended by others as described above. A stockholder that desires to nominate a person for election to the Board at a meeting of
stockholders must follow the specified advance notice requirements contained in, and provide the specific information required by, our Bylaws, as described under “
Other
Matters—Stockholder Proposals and Director Nominations for 2020 Annual Meeting of Stockholders
” later in this proxy statement. During the fourth quarter of 2018, we made no material changes to the procedures by which stockholders may
recommend nominees to the Board as described in last year’s proxy statement.
BOARD ROLE IN RISK OVERSIGHT
Risk is inherent with every business. We face a number of risks, including financial (accounting, credit, interest rate, liquidity, and tax),
operational, political, strategic, regulatory, compliance, legal, competitive, and reputational risks. Our management is responsible for the day-to-day management of risks faced by us, while the Board, as a whole and through its committees, has
responsibility for the oversight of risk management. In its risk oversight role, the Board ensures that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board oversees risks through
the establishment of policies and procedures that are designed to guide daily operations in a manner consistent with applicable laws, regulations, and risks acceptable to us. Our Co-Chief Executive Officers are members of the Board and regularly
attend Board meetings and discuss with the Board the strategies and risks facing our Company.
One of the key functions of the Board is informed oversight of our risk management process. The Board administers this oversight function directly,
with support from its three standing committees (the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee), each of which addresses risks specific to its respective areas of oversight. In particular, the
Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management takes to monitor and control these exposures, including guidelines and policies to govern the process by which risk
assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. The Compensation Committee assesses and monitors
whether any of our compensation policies and programs have the potential to encourage excessive risk-taking. The Nominating and Corporate Governance Committee provides risk oversight with respect to corporate governance matters.
CODE OF BUSINESS CONDUCT AND ETHICS
The Board has adopted a Code of Business Conduct and Ethics that applies to our officers, directors, and any employees. Among other matters, our
Code of Business Conduct and Ethics is designed to deter wrongdoing and to promote the following:
| · |
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
|
| · |
full, fair, accurate, timely, and understandable disclosure in our communications with and reports to our stockholders, including reports filed with the SEC, and other public
communications;
|
| · |
compliance with applicable governmental laws, rules, and regulations;
|
| · |
prompt internal reporting of violations of the code to appropriate persons identified in the code; and
|
Century Communities, Inc.
– 2019 Proxy Statement 20
|
|
· |
accountability for adherence to our Code of Business Conduct and Ethics.
|
In November 2018, we amended and restated the Code of Business Conduct and Ethics to update, clarify and strengthen its provisions.
Any waiver of our Code of Business Conduct and Ethics for our executive officers, directors, or any employees may be made only by the Nominating and
Corporate Governance Committee and will be promptly disclosed as required by law and NYSE rules. We intend to satisfy the disclosure requirements of Item 5.05 of Form 8-K and applicable NYSE rules regarding amendments to or waivers from any provision
of our Code of Business Conduct and Ethics by posting such information in the “Investors—Corporate Governance—Governance Documents” section of our website located at
www.centurycommunities.com
.
COMPLAINT PROCEDURES
We maintain procedures to receive, retain, and treat complaints regarding accounting, internal accounting controls, or auditing matters and to allow
for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. A 24-hour, toll-free, confidential ethics hotline and a confidential web-based reporting tool are available for the
submission of concerns regarding these and other matters by any employee. Concerns and questions received through these methods relating to accounting, internal accounting controls, or auditing matters are promptly brought to the attention of the
Chair of the Audit Committee and are handled in accordance with procedures established by the Audit Committee. Complete information regarding our complaint procedures is contained within our Code of Business Conduct and Ethics, which is described
above and may be accessed on our website as noted above.
STOCKHOLDER ENGAGEMENT
We are committed to a robust and proactive stockholder engagement program. The Board values the perspectives of our stockholders, and feedback from
stockholders on our business, corporate governance, executive compensation, and sustainability practices are important considerations for Board discussions throughout the year. During 2018, our executives held more than 200 meetings with stockholders
representing over 70 percent of shares outstanding, in total, including all of our top 10 shareholders that are actively managed funds.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board maintains a process for stockholders and interested parties to communicate with the Board. Stockholders and interested parties may contact
our Board as provided below:
|
|
|
|
|
|
WRITE
|
CALL
|
EMAIL
|
ATTEND
|
|
Corporate Secretary
Century Communities, Inc.
8390 E. Crescent Pkwy.
Suite 650
Greenwood Village, CO 80111
|
Investor Relations
303-268-8398
|
investorrelations@
centurycommunities.com
|
Annual Meeting of Stockholders
Wednesday, May 8, 2019
Hyatt Regency Denver Tech Center
|
Management will initially receive and process communications before forwarding them to the addressee(s). We generally will not forward to the
directors a communication that is primarily commercial in nature, relates to an improper or irrelevant topic, or requests general information about the Company.
Century Communities, Inc.
–
2019 Proxy Statement 21
BOARD AND COMMITTEE SELF-EVALUATIONS
The Board recognizes that a thorough evaluation process is an important element of corporate governance and enhances the effectiveness of the full
Board and each committee. Therefore, each year, the Nominating and Corporate Governance Committee oversees the evaluation process to ensure that the full Board and each committee conduct an assessment of their performance and solicit feedback for
areas of improvement.
SUCCESSION PLANNING
The Board of Directors recognizes that one of its most important responsibilities is to ensure excellence and continuity in our senior leadership by
overseeing the development of executive talent and planning for the effective succession of our Co-Chief Executive Officers and the other members of our management team. This responsibility is reflected in the Company’s Corporate Governance
Guidelines, which provide for a review of CEO succession planning and management development, and the charter of the Compensation Committee, which requires the Compensation Committee to assist the Board in developing and evaluating potential candidates
for executive officer positions and overseeing the development of executive succession plans, which will include transitional leadership in the event of an unplanned vacancy.
In furtherance of the foregoing, the Co-Chief Executive Officers provide an annual succession planning report to the Compensation Committee, which
summarizes the overall composition of our senior leadership team, including their professional qualifications, tenure, and work experience. The report also identifies internal members of the management team who are viewed as potential successors to
the Co-Chief Executive Officers. Succession planning is also regularly discussed in executive sessions of the Board of Directors. Our directors become familiar with internal potential successors for key leadership positions through various means,
including the annual succession planning report and Board of Directors and committee meetings, and less formal interactions throughout the course of the year.
Additionally, the Board of Directors, with support and recommendations from the Nominating and Corporate Governance Committee, oversees the
succession of its members. To this end, at least once a year, in connection with the annual director nomination and re-nomination process, the Nominating and Corporate Governance Committee evaluates each director’s performance, relative strengths and
weaknesses, and future plans, including any personal retirement objectives and the potential applicability of the Company’s retirement policy for directors (which is set forth in the Company’s Corporate Governance Guidelines). As part of that
evaluation, the Nominating and Corporate Governance Committee also identifies areas of overall strength and weakness with respect to its composition and considers whether the Board of Directors as a whole possesses core competencies in the areas of
accounting and finance, industry knowledge, management experience, sales and marketing, strategic vision, compensation, and corporate governance, among others.
COMMITTEE CHARTERS AND OTHER INFORMATION
The charters of all three of our standing Board committees, Corporate Governance Guidelines and Code of Business Conduct and Ethics are available in
the “Investors—Corporate Governance—Governance Documents” section of our website located at
www.centurycommunities.com
. Printed copies of any of these are
available upon written request to Century Communities, Inc., 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111, Attention: Corporate Secretary.
Century Communities, Inc.
–
2019 Proxy Statement 22
We have three executive officers: Dale Francescon, Robert J. Francescon, and David L. Messenger. Below is information regarding our executive
officers as of March 14, 2019. There are no family relationships among any of our executive officers or directors, except for Dale Francescon and Robert J. Francescon, who are brothers.
|
Name
|
Age
|
Position with Century
|
||
|
Dale Francescon
|
66
|
Chairman of the Board and Co-Chief Executive Officer
|
||
|
Robert J. Francescon
|
61
|
Co-Chief Executive Officer, President, and Director
|
||
|
David L Messenger
|
48
|
Chief Financial Officer and Secretary
|
Dale Francescon
. Mr. Dale Francescon has served as
our Co-Chief Executive Officer since August 2002 and as the Chairman of our Board of Directors since April 2013. Mr. Dale Francescon possesses a broad background in all facets of operating a real estate company and has had direct responsibility for
the acquisition, financing, development, construction, sale, and management of various residential projects, including land development, single-family homes, townhomes, condominiums, and apartments. Mr. Dale Francescon has successfully managed the
Company, through successive profitable years, in various economic cycles, from inception in August 2002 to the present. Mr. Dale Francescon is licensed in the state of Colorado as a real estate broker (inactive) and in the state of California as an
attorney (inactive) and as a certified public accountant (inactive). Mr. Dale Francescon received his B.S. in Business Administration from the University of Southern California and a J.D. from Loyola University School of Law.
Robert J. Francescon
. Mr. Robert Francescon has
served as our Co-Chief Executive Officer since August 2002, as President since April 2013, and as a member of our Board of Directors since April 2013. Mr. Robert Francescon possesses a broad background in all facets of operating a real estate company
and has had direct responsibility for the acquisition, financing, development, architecture, construction, sale, and management of various residential projects, including land development, single-family homes, townhomes, condominiums, and apartments.
Mr. Robert Francescon has successfully managed the Company, through successive profitable years, in various economic cycles, from inception in August 2002 to the present. Mr. Robert Francescon also has management experience working in a variety of
financial institutions, including thrifts and the Federal Home Loan Mortgage Corporation. Mr. Robert Francescon received his B.S. in Business Administration from the University of Southern California.
David L. Messenger
. Mr. Messenger has served as our
Chief Financial Officer since June 2013. Mr. Messenger has extensive experience in finance and accounting for real estate companies. His direct responsibilities are overseeing all accounting, finance, capital markets, risk management, and financial
planning and analysis. Prior to his tenure at Century, Mr. Messenger was at UDR, Inc., a publicly traded multifamily real estate investment trust, from August 2002 to May 2012, most recently as Chief Financial Officer. From June 2012 to February
2013, Mr. Messenger served as an independent consultant for UDR, Inc. Mr. Messenger is licensed in the State of Virginia as a Certified Public Accountant (inactive) and is a member of the American Institute of Certified Public Accountants and the
Virginia Society of Certified Public Accountants. Mr. Messenger received a B.B.A. and M.A. in Accounting from the University of Iowa.
Century Communities, Inc.
– 2019 Proxy Statement 23
BOARD SIZE AND STRUCTURE
Our Bylaws provide that the Board shall consist of one or more members, with the number to be determined from time to time by the Board. The Board
has fixed the number of directors at five, and we currently have five directors serving on the Board. Each director holds office for a term of one year or until his or her successor is duly elected and qualified, subject to his or her earlier death,
resignation, disqualification, or removal.
CURRENT DIRECTORS AND BOARD NOMINEES
The Board currently consists of the following five members:
|
Dale Francescon
|
John P. Box
|
James M. Lippman
|
|
Robert J. Francescon
|
Keith R. Guericke
|
Based upon the recommendation of the Nominating and Corporate Governance Committee of the Board, the Board nominated each of our current five
directors named above for re-election at the Annual Meeting. The Board and the Nominating and Corporate Governance Committee believe that our current five directors collectively have the experience, qualifications, attributes, and skills to
effectively oversee the management of Century, including a high degree of personal and professional integrity, an ability to exercise sound business judgment on a broad range of issues, sufficient experience and background to have an appreciation of
the issues facing Century, a willingness to devote the necessary time to Board duties, a commitment to representing the best interests of Century and our stockholders, and a dedication to enhancing stockholder value. Three of our five directors are
independent within our director independence standards, which satisfy the listing standards for independence of the New York Stock Exchange and Rule 10A-3 under the Exchange Act.
Each director elected at the Annual Meeting will serve a one-year term until Century’s next annual meeting and until his or her successor is duly
elected and qualified or until his or her earlier death, resignation, disqualification, or removal. Unless otherwise instructed, the proxy-holders will vote the proxies received by them for the five nominees. If any nominee should become unavailable
for election prior to the Annual Meeting, an event that currently is not anticipated by the Board, the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board. Each nominee has agreed to serve if
elected, and the Board has no reason to believe that any nominee will be unable to serve.
INFORMATION ABOUT DIRECTOR NOMINEES
Set forth below are the names, ages, and positions of our current directors and director nominees as of March 14, 2019, and biographical information
for each nominee. Also below is a summary of the specific qualifications, attributes, skills, and experiences that led the Board to conclude that each nominee should serve on the Board at this time. There are no family relationships among any of our
directors or executive officers, except for Dale Francescon and Robert J. Francescon, who are brothers.
|
Name
|
Age
|
Position with the Company
|
|
Dale Francescon
|
66
|
Chairman of the Board and Co-Chief Executive Officer
|
|
Robert J. Francescon
|
61
|
Co-Chief Executive Officer, President, and Director
|
|
John P. Box
|
72
|
Independent Director
|
|
Keith R. Guericke
|
70
|
Independent Director
|
|
James M. Lippman
|
61
|
Independent Director
|
Century Communities, Inc.
– 2019 Proxy Statement 24
Dale Francescon
. Mr. Dale Francescon has served as
our Co-Chief Executive Officer since August 2002 and as the Chairman of our Board of Directors since April 2013. Mr. Dale Francescon possesses a broad background in all facets of operating a real estate company and has had direct responsibility for
the acquisition, financing, development, construction, sale, and management of various residential projects, including land development, single-family homes, townhomes, condominiums, and apartments. Mr. Dale Francescon has successfully managed the
Company, through successive profitable years, in various economic cycles, from inception in August 2002 to the present. Mr. Dale Francescon is licensed in the state of Colorado as a real estate broker (inactive) and in the state of California as an
attorney (inactive) and as a certified public accountant (inactive). Mr. Dale Francescon received his B.S. in Business Administration from the University of Southern California and a J.D. from Loyola University School of Law. Mr. Dale Francescon,
as a co-founder of Century, is qualified to serve as a director due to his familiarity with our history and day-to-day operations, his expertise in the homebuilding industry, and his more than 25 years of experience operating real estate companies.
In addition, as a result of his dual role as Chairman and Co-Chief Executive Officer, Mr. Dale Francescon provides unique insight into our future strategies, opportunities, and challenges and serves as a unifying element between the Board and our
management.
Robert J. Francescon
. Mr. Robert Francescon has
served as our Co-Chief Executive Officer since August 2002, as President since April 2013, and as a member of our Board of Directors since April 2013. Mr. Robert Francescon possesses a broad background in all facets of operating a real estate company
and has had direct responsibility for the acquisition, financing, development, architecture, construction, sale, and management of various residential projects, including land development, single-family homes, townhomes, condominiums, and apartments.
Mr. Robert Francescon has successfully managed the Company, through successive profitable years, in various economic cycles, from inception in August 2002 to the present. Mr. Robert Francescon also has management experience working in a variety of
financial institutions, including thrifts and the Federal Home Loan Mortgage Corporation. Mr. Robert Francescon received his B.S. in Business Administration from the University of Southern California. Mr. Robert Francescon, as a co-founder of
Century, is qualified to serve as a director due to his familiarity with our history and day-to-day operations, his management experience in various business enterprises, and his more than 25 years of experience as a senior executive within the
homebuilding industry. In addition, as a result of his dual role as director and Co-Chief Executive Officer, Mr. Robert Francescon provides unique insight into our future strategies, opportunities, and challenges and serves as a unifying element
between the Board and our management.
John P. Box.
Mr. Box is a director and has served on
the Board of Directors since May 2014. Mr. Box is a commercial real estate practitioner who has served as regional chairman of Newmark Knight Frank since 2013. Prior to his current role, from 1988 through 2012, Mr. Box was President and Chief
Executive Officer and owner of the Frederick Ross Company, the largest locally-owned commercial real estate service business in Colorado. Under his watch, the Frederick Ross Company diversified into several independent operating divisions and was
active in commercial brokerage, consulting, and property management. In addition, Mr. Box was Chief Executive Officer and principal owner of ARA (Apartment Realty Advisors) from 2002 through 2014, Denver’s largest apartment building and multifamily
land brokerage company. Mr. Box was recognized as honorary dean for 2002 by the University of Denver Franklin L. Burns School of Real Estate and Construction Management, and in 2001, he was awarded the 2000 NAIOP President’s Award for contributions to
the real estate community. Earlier in his career, Mr. Box was recognized four times by the Denver Board of REALTORS® as the recipient of the top commercial sales award for achieving the highest personal sales volume in the Denver area. Mr. Box served
as Board Chair from 2004-2010 for Regis University, where he currently serves as a life trustee, and as former board chair of ONCOR International, a worldwide affiliation of real estate companies. Mr. Box is qualified to serve as a director because of
his extensive leadership within the real estate industry, his relationships with many executives at real estate companies through the United States, and his proven ability to successfully grow and diversify a real estate business
.
Century Communities, Inc.
– 2019 Proxy Statement 25
Keith R. Guericke
. Mr. Guericke is a director and
has served on the Board of Directors since May 2013. Mr. Guericke has served as a director of the board of Essex Property Trust, Inc. (Essex) since June 1994. In 2002, Mr. Guericke was elected to the position of vice chairman of the board of Essex, a
position he still holds. He held the position of President and Chief Executive Officer of Essex from 1988 through 2010. Effective January 2011, Mr. Guericke retired from his position as an executive officer. Mr. Guericke joined Essex’s predecessor,
Essex Property Corporation, in 1977 to focus on investment strategies and portfolio expansion. Mr. Guericke prepared Essex for its initial public offering in 1994, and since then has overseen the significant growth of the Essex multifamily portfolio in
supply-constrained markets along the West Coast. Prior to joining Essex, Mr. Guericke began his career with Kenneth Leventhal & Company, a certified public accounting firm noted for its real estate expertise. Mr. Guericke is a member of NAREIT,
the National Multifamily Housing Council, and several local apartment industry groups. Mr. Guericke received his B.S. in Accounting from Southern Oregon College in 1971. Mr. Guericke is qualified to serve as a director because of his extensive
leadership experience at a publicly traded company, his expansive knowledge of the real estate industry, his strong relationships with many executives at real estate companies throughout the United States, and his expertise in accounting and finance.
James M. Lippman
. Mr. Lippman is a director and has
served on the Board of Directors since May 2013. Mr. Lippman founded JRK Property Holdings (JRK) in 1991 and currently serves as its Chairman and Chief Executive Officer. From an initial purchase of five multifamily properties, JRK has grown to a
national leader in the commercial real estate sector. In 2011, JRK was featured as the 25th largest Multifamily Owner and Manager in the U.S. by the National Multifamily Housing Council and ranked 27th in the nation by Multifamily Executive Magazine.
Mr. Lippman is actively involved with Cedar-Sinai Medical Center, where he serves on its board of directors, chairs its audit committee, and is a member of its executive committee, resource development committee, and executive compensation committee.
In addition, Mr. Lippman currently serves on the board of trustees of Union College. Mr. Lippman also worked on Wall Street for many years, where he traded equities, options, and commodities for proprietary investment accounts. Mr. Lippman earned a
B.A. in Economics and Political Science from Union College. Mr. Lippman is qualified to serve as a director because of his extensive leadership experience within the real estate industry, his financial management expertise, and his extensive contacts
with senior real estate executives throughout the United States.
BOARD RECOMMENDATION
The Board of Directors unanimously recommends that our stockholders vote “
FOR
” the election of Dale Francescon, Robert J. Francescon, John P. Box, Keith R. Guericke, and James M. Lippman to serve as members of the Board until the next annual meeting of stockholders and until their
successors are duly elected and qualified.
|
The Board Recommends a Vote FOR Each Nominee for Director
|
☑
|
Century Communities, Inc.
–
2019 Proxy Statement 26
BACKGROUND AND PROPOSED AMENDMENTS
On March 12, 2019, the Board of Directors, upon recommendation of the Compensation Committee, approved, subject to approval by our stockholders, the
Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as the “amended 2017 plan”). The amended 2017 plan incorporates an amendment to the number of shares of Century common stock available for issuance under the
plan by an additional 1.631 million shares. Our continuing ability to offer equity incentive awards under the 2017 plan is critical to our ability to attract, motivate and retain qualified personnel, particularly as we grow and in light of the highly
competitive markets for employee talent in which we operate.
In addition, the amended 2017 plan reflects certain changes in light of the Tax Cuts and Jobs Act and its impact on Section 162(m) of the Internal
Revenue Code of 1986, as amended (which we refer to as “Section 162(m)”). These changes essentially eliminate language in the 2017 plan that was included to allow us to qualify certain compensation as “performance-based compensation” under Section
162(m). We have retained, however, the annual award limits and performance measures as part of good corporate governance.
The amended 2017 plan also incorporates a more stringent limit on non-employee director awards. The proposed amended 2017 plan contains an overall
non-employee director compensation limit of $400,000 per year or $600,000 in the case of a non-employee chairman of the board or lead director.
Finally, the amended 2017 plan increases the limit on incentive stock options commensurate with the overall share increase and expands the exceptions
to the minimum vesting provision to allow for shares delivered in lieu of fully vested cash awards and vesting on director awards tied to the timing of the next annual meeting of stockholders which may be less than one year from the date of grant so
long as the annual meeting is more than 50 weeks after the preceding year’s annual meeting.
If our stockholders approve the amended 2017 plan, the amended 2017 plan will become effective as of the date of stockholder approval. If our
stockholders do not approve the amended 2017 plan, the 2017 plan, as currently in effect, will remain in effect until it terminates in accordance with its terms.
REASONS WHY YOU SHOULD VOTE IN FAVOR OF THE AMENDED 2017 PLAN
The Board recommends a vote “
FOR
”
approval of the amended 2017 plan because the Board believes the proposed amended 2017 plan is in the best interests of Century and our stockholders for the following reasons:
| · |
Attracts and retains talent
. Talented, motivated and effective employees,
non-employee directors and consultants are essential to executing our business strategies. Stock-based and annual cash incentive compensation has been an important component of total compensation for our executive officers and key employees
for many years because such compensation enables us to effectively recruit and retain qualified individuals while encouraging them to think and act like owners of Century. If our stockholders approve the amended 2017 plan, we believe we will
maintain our ability to offer competitive compensation packages to both attract new talent and retain our best performers.
|
Century
Communities, Inc.
– 2019 Proxy Statement 27
| · |
Consistent with our pay-for-performance compensation philosophy to increase stockholder
value
. We believe that stock-based compensation, by its very nature, is performance-based compensation. Over time, the most significant component of total compensation for our executives is incentive compensation in the form of
both stock-based and cash-based incentives that are tied to the achievement of business results. We use incentive compensation both to reinforce desired business results for our key employees and to motivate them to achieve those results.
|
| · |
Aligns director, employee and stockholder interests
. We currently provide
long-term incentives primarily in the form of restricted stock unit awards to our non-employee directors, executives and certain key employees and annual cash incentives to our executives and certain key employees. We believe our stock-based
compensation programs, along with our stock ownership guidelines for our non-employee directors and executives, and our annual cash incentive programs for employees, help align the interests of our non-employee directors and employees with
those of our stockholders. We believe our long-term stock-based incentives help promote long-term retention of our employees and encourage significant ownership of our common stock. We believe our annual cash incentives reinforce
achievement of our business performance goals by linking a significant portion of participants’ compensation to the achievement of these performance goals. If the amended 2017 plan is approved, we will be able to maintain these important
means of aligning the interests of our non-employee directors and employees with those of our stockholders.
|
| · |
Protects stockholder interests and embraces sound equity-based compensation practices
.
As described in more detail below under the heading “—
Summary of Sound Governance Features of the Amended 2017 Plan
,” the amended 2017 plan
includes a number of features that are consistent with protecting the interests of our stockholders and sound corporate governance practices.
|
SUMMARY OF SOUND GOVERNANCE FEATURES OF AMENDED 2017
PLAN
The Board and Compensation Committee believe that the amended 2017 plan contains several features that are consistent with protecting the interests
of our stockholders and sound corporate governance practices, including the following:
|
✓
|
No evergreen provision
|
✓
|
No liberal share counting
|
|
✓
|
Not excessively dilutive
|
✓
|
No discounted or reload stock options or SARs
|
|
✓
|
Minimum vesting and performance period requirements
|
✓
|
No liberal change in control definition
|
|
✓
|
Holding period requirements
|
✓
|
“Double-trigger” acceleration of vesting upon a change in control
|
|
✓
|
No dividend payments on unvested awards
|
✓
|
No tax gross-ups
|
|
✓
|
No re-pricing of “underwater” stock options or SARs, without stockholder approval
|
✓
|
Robust clawback policy covering cash and equity incentive compensation paid to current and former executives
|
|
✓
|
Limits on non-employee director awards
|
Century
Communities, Inc.
– 2019 Proxy Statement 28
BACKGROUND FOR SHARES AUTHORIZED FOR ISSUANCE
If the amended 2017 plan is approved, the maximum number of shares of common stock available for issuance under the amended 2017 plan will be equal
to the sum of 2,481,000 shares, plus (i) 575,984 shares of our common stock that were available for issuance under the Century Communities, Inc. First Amended & Restated 2013 Long-Term Incentive Plan (referred to as our “2013 plan”) as of the date
of stockholder approval of the 2017 plan, but not subject to outstanding awards and (ii) up to 690,182 shares that were subject to awards outstanding under the 2013 plan as of the date of stockholder approval of the 2017 plan that are subsequently
forfeited or cancelled or expire or otherwise terminate without the issuance of such shares. As of March 14, 2019, 959,381 shares of our common stock were subject to outstanding awards under the 2017 plan, assuming target performance under our PSU
awards, 395,361 shares of our common stock remained available for issuance under the 2017 plan, assuming target performance under our PSU awards, and 45,204 shares of our common stock remained subject to outstanding awards under the 2013 plan.
In setting the number of shares of common stock available for issuance under the amended 2017 plan, the Board and Compensation Committee considered a
number of factors, which are discussed further below, including:
| · |
Shares available under the 2017 plan and total outstanding equity-based awards and how long the shares available are expected to last;
|
| · |
Historical equity award granting practices, including our three-year average share usage rate (commonly referred to as “burn rate”); and
|
| · |
Potential dilution and overhang.
|
Shares Available and Outstanding Equity Awards
While the use of long-term incentives, in the form of equity awards, is an important part of our compensation program, we are mindful of our
responsibility to our stockholders to exercise judgment in the granting of equity awards. In setting the number of shares available for issuance under the amended 2017 plan, the Board and Compensation Committee also considered shares available under
the current 2017 plan and total outstanding equity awards and how long the shares available under the 2017 plan are expected to last. To facilitate the approval of the amended 2017 plan, set forth below is certain information about our shares of
common stock that may be issued under our equity compensation plans as of March 14, 2019.
As of March 14, 2019, we had 30,297,398 shares of common stock issued and outstanding. The market value of one share of common stock on March 14,
2019, as determined by reference to the closing price as reported on the NYSE, was $23.50.
As described in more detail in the table below, as of March 14, 2019:
| · |
395,361 shares remained available for issuance under the 2017 plan, assuming target performance under our PSU awards; and
|
| · |
No stock options and 1,004,585 shares underlying full value awards (such as restricted stock unit and performance share unit awards) were outstanding under the 2017 plan and
our prior 2013 plan.
|
Century
Communities, Inc.
– 2019 Proxy Statement 29
Historical Equity Award Granting Practices
In setting the number of shares authorized for issuance under the amended 2017 plan, the Board and Compensation Committee also considered the
historical number of equity awards granted under the 2017 plan and 2013 plan in the past three full fiscal years. The following table sets forth information regarding awards granted and earned, and the annual burn rate for each of the last three
fiscal years.
|
2018
|
2017
|
2016
|
|||
|
Stock options granted
|
0
|
0
|
0
|
||
|
Restricted stock awarded
|
0
|
0
|
0
|
||
|
Restricted stock units awarded
|
335,063
|
459,873
|
514,200
|
||
|
Performance share units awarded, assuming target performance
|
107,463
|
0
|
0
|
||
|
Weighted average basic common shares outstanding during fiscal year
|
30,084,913
|
24,280,871
|
20,679,189
|
||
|
Burn rate
|
1.47%
|
1.89%
|
2.49%
|
The Board and Compensation Committee also considered our three-year average burn rate (2016 to 2018) of approximately 1.95%, which is lower than the
industry thresholds established by certain major proxy advisory firms. Based on historical granting practices and the recent trading price of our common stock, we expect the amended 2017 plan to cover awards for approximately three years. However, we
cannot predict our future equity grant practices, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under the amended 2017 plan could last for a shorter or longer time.
Potential Dilution and Overhang
In setting the number of shares authorized for issuance under the amended 2017 plan, the Board and Compensation Committee also considered the
potential dilution and overhang that would result by approval of the amended 2017 plan, including the policies of certain institutional investors and major proxy advisory firms.
Potential dilution is calculated as shown below:
|
Potential dilution
|
=
|
Total outstanding award shares divided by total number of
outstanding shares + total outstanding award shares
|
Total outstanding award shares include shares to be issued on exercise or settlement of outstanding equity awards, assuming target performance.
Potential overhang is calculated as shown below:
|
Potential overhang
|
=
|
Total potential award shares divided by total number of
outstanding shares + total outstanding award shares
|
Total potential award shares include shares underlying equity awards that may be made under the amended 2017 plan plus total outstanding award
shares, assuming target performance.
As of March 14, 2019, potential dilution was 3.2% and potential overhang was 4.5%. If the amended 2017 plan is approved, potential dilution will be
3.2% and potential overhang will be 9.7%.
Century
Communities, Inc.
– 2019 Proxy Statement 30
SUMMARY OF THE AMENDED 2017 PLAN FEATURES
The major features of the amended 2017 plan are summarized below. The amended 2017 plan is substantially similar to the 2017 plan except for the
amendments as previously described. The summary is qualified in its entirety by reference to the full text of the amended 2017 plan, a copy of which may be obtained upon request to our Corporate Secretary at 8390 East Crescent Parkway, Suite 650,
Greenwood Village, Colorado 80111, by telephone at (303) 770-8300, or by e-mail at InvestorRelations@CenturyCommunities.com. A copy of the amended 2017 plan also has been filed electronically with the SEC as an appendix to this proxy statement and is
available through the SEC’s website at
www.sec.gov.
|
Purpose
|
The purpose of the amended 2017 plan is to advance the interests of Century and our stockholders by enabling Century and our subsidiaries to attract and
retain qualified individuals to perform services, provide incentive compensation for such individuals in a form that is linked to the growth and profitability of Century and increases in stockholder value, and provide opportunities for equity
participation that align the interests of recipients with those of our stockholders.
|
|
Administration
|
The Compensation Committee administers the amended 2017 plan. All members of the Compensation Committee are “non-employee directors” within the meaning of
Rule 16b-3 under the Exchange Act and “independent” under the NYSE rules.
|
|
Delegation
|
To the extent permitted by applicable law, the Compensation Committee may delegate to one or more of its members or to one or more officers of Century such
administrative duties or powers, as it may deem advisable, including the grant of certain awards to employees, other than Section 16 officers, non-employee directors, or 10% stockholders of Century.
|
|
No-Repricing
|
The Compensation Committee may not, except as described below under “—
Adjustments
,”
without prior approval of our stockholders, seek to effect any re-pricing of any previously granted “underwater” option or SAR by: (i) amending or modifying the terms of the option or SAR to lower the exercise price or grant price; (ii)
canceling the underwater option or SAR in exchange for (A) cash; (B) replacement options or SARs having a lower exercise price or grant price; or (C) other awards; or (iii) repurchasing the underwater options or SARs and granting new awards
under the amended 2017 plan. An option or SAR will be deemed to be “underwater” at any time when the fair market value of the common stock is less than the exercise price of the option or the grant price of the SAR.
|
|
Shares Authorized
|
Subject to adjustment (as described below), the maximum number of shares of our common stock available for issuance under the amended 2017 plan is 2,481,000
shares, plus (i) 575,984 shares of our common stock that were available for issuance under our prior 2013 plan as of the date of stockholder approval of the 2017 plan, but not subject to outstanding awards and (ii) up to 690,182 shares that
were subject to awards outstanding under the 2013 plan as of the date of stockholder approval of the 2017 plan that are subsequently forfeited or cancelled or expire or otherwise terminate without the issuance of such shares.
No more than 2,481,000 shares may be granted as incentive stock options.
|
Century
Communities, Inc.
– 2019 Proxy Statement 31
|
Share Counting
|
Shares that are issued under the amended 2017 plan or that are subject to outstanding awards are applied to reduce the maximum number of shares remaining
available for issuance to the extent they are used; provided, however, that the full number of shares subject to a stock-settled SAR or other stock-based award are counted against the shares authorized for issuance, regardless of the number
of shares actually issued. Furthermore, any shares withheld to satisfy tax withholding obligations on awards issued under the amended 2017 plan, any shares withheld to pay the exercise price or grant price of awards under the amended 2017
plan and any shares not issued or delivered as a result of the “net exercise” of an outstanding option or settlement of a SAR in shares are counted against the shares authorized for issuance under the amended 2017 plan and are not available
again for grant under the amended 2017 plan. Any shares subject to awards settled in cash will again be available for issuance under the amended 2017 plan. Any shares repurchased by Century on the open market using the proceeds from the
exercise of an award will not increase the number of shares available for future grant of awards. Any shares related to awards granted under the amended 2017 plan, and shares related to awards granted under the 2017 plan and 2013 plan, that
terminate by expiration, forfeiture, cancellation or otherwise without the issuance of the shares, will be available again for grant under the amended 2017 plan and correspondingly increase the total number of shares available for issuance
under the amended 2017 plan. To the extent permitted by applicable law, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by Century or a subsidiary or otherwise
will not be counted against shares available for issuance pursuant to the amended 2017 plan. The shares available for issuance under the amended 2017 plan may be authorized and unissued shares or treasury shares.
|
|
Annual Award Limits
|
The following limits are per participant per fiscal year.
·
500,000 shares subject to stock options and SARs;
·
500,000 shares subject to restricted stock awards, restricted stock
units and deferred stock units;
·
$15,000,000 in performance
awards denominated in cash or 750,000 shares of common stock for performance awards denominated in shares;
·
$15,000,000 in annual performance cash awards;
·
$15,000,000 in other cash-based awards; and
·
500,000 shares granted under other stock-based awards.
|
|
Non-Employee Director Limits
|
The sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards
Board Accounting Standards Codification Topic 718, or any successor thereto) of awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year may not exceed $400,000 (increased to
$600,000 with respect to any non-employee director serving as Chairman of the Board or Lead Independent Director or in the fiscal year of a non-employee director's initial service as a non-employee director). Any compensation that is deferred
counts towards this limit for the year in which the compensation is first earned, and not a later year of settlement.
|
Century
Communities, Inc.
– 2019 Proxy Statement 32
|
Adjustments
|
In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend (including a spin off) or other similar change in the corporate structure or shares of common stock of Century, the Compensation Committee will make the appropriate adjustment or
substitution. These adjustments or substitutions may be to the number and kind of securities and property that may be available for issuance under the amended 2017 plan. In order to prevent dilution or enlargement of the rights of
participants, the Compensation Committee may also adjust the number, kind, and exercise price of securities or other property subject to outstanding awards.
|
|
Minimum Vesting Requirements
|
The amended 2017 plan provides that no awards will vest earlier than one year from the grant date and any awards that vest upon the attainment of performance
goals will have a minimum performance period of one year.
There is an exception with respect to shares of common stock that do not exceed 5% of the total number of shares of common stock authorized for awards under
the amended 2017 plan. There is also an exception for shares delivered in lieu of fully vested cash awards and awards to non-employee directors that vest on the earlier of the one year anniversary of the date of grant or the next annual
meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting.
|
|
Holding Period
|
Any net shares of common stock received by an executive officer participant in connection with the vesting or settlement of an award under the amended 2017
plan must be held by such participant for at least 12 months after such vesting or settlement, or if earlier, termination of employment or satisfaction of Century’s stock ownership guidelines, if applicable and as in effect from time to time.
In addition, the Committee may in its discretion impose a more restrictive holding period on an award in an individual award agreement similar to the one-year
mandatory holding period that commences after the vesting of certain PSU awards granted to executives in April 2018, which one-year mandatory holding period supersedes and replaces the holding period provided in the plan. This holding period
lapses only upon a termination due to death or disability or in connection with a change in control.
|
|
Eligible Participants
|
Awards may be granted to employees, non-employee directors and consultants of Century or any of its subsidiaries. A “consultant” is one who renders services
that are not in connection with the offer and sale of our securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for our securities. As of March 14, 2019, 1,334 employees, three
non-employee directors and approximately 200 independent consultants would have been eligible to participate in the amended 2017 plan had it been approved by our stockholders at such time.
|
|
Types of Awards
|
The amended 2017 plan will permit us to grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock
units, deferred stock units, performance awards, annual performance cash awards, non-employee director awards, other cash-based awards and other stock based awards. Awards may be granted either alone or in addition to or in tandem with any
other type of award.
|
Century
Communities, Inc.
– 2019 Proxy Statement 33
|
Stock Options
|
Stock options entitle the holder to purchase a specified number of shares of our common stock at a specified price, which is called the exercise price,
subject to the terms and conditions of the stock option grant. The amended 2017 plan permits the grant of both non-statutory and incentive stock options. Incentive stock options may be granted solely to eligible employees of Century or its
subsidiary. Each stock option granted under the amended 2017 plan must be evidenced by an award agreement that specifies the exercise price, the term, the number of shares underlying the stock option, the vesting and any other conditions.
The exercise price of each stock option granted under the amended 2017 plan must be at least 100% of the fair market value of a share of our common stock as of the date the award is granted to a participant. Fair market value is the closing
price of our common stock, as reported on the NYSE. The closing price of our common stock, as reported on the NYSE, on March 14, 2019, was $23.50 per share. The Compensation Committee will fix the terms and conditions of each stock option,
subject to certain restrictions, such as a ten-year maximum term.
|
|
Stock Appreciation Rights
|
A stock appreciation right, or SAR, is a right granted to receive payment of cash, stock or a combination of both, equal to the difference between the fair
market value of shares of our common stock and the grant price of such shares. Each SAR granted must be evidenced by an award agreement that specifies the grant price, the term, and such other provisions as the Compensation Committee may
determine. The grant price of a SAR must be at least 100% of the fair market value of our common stock on the date of grant. The Compensation Committee will fix the term of each SAR, but SARs granted under the amended 2017 plan will not be
exercisable more than 10 years after the date the SAR is granted.
|
|
Restricted Stock Awards, Restricted Stock Units and Deferred Stock Units
|
Restricted stock awards, restricted stock units, or RSUs, and/or deferred stock units may be granted under the amended 2017 plan. A restricted stock award is
an award of common stock that is subject to restrictions on transfer and risk of forfeiture upon certain events, typically including termination of service. RSUs or deferred stock units are similar to restricted stock awards except that no
shares are actually awarded to the participant on the grant date. Deferred stock units permit the holder to receive shares of common stock or the equivalent value in cash or other property at a future time as determined by the Compensation
Committee. The Compensation Committee will determine, and set forth in an award agreement, the period of restriction, the number of shares of restricted stock awards or the number of RSUs or deferred stock units granted, the time of payment
for deferred stock units and other such conditions or restrictions.
|
|
Performance Awards
|
Performance awards, in the form of cash, shares of common stock, other awards or a combination of both, may be granted under the amended 2017 plan in such
amounts and upon such terms as the Compensation Committee may determine. The Compensation Committee shall determine, and set forth in an award agreement, the amount of cash and/or number of shares or other awards, the performance goals, the
performance periods and other terms and conditions. The extent to which the participant achieves his or her performance goals during the applicable performance period will determine the amount of cash and/or number of shares or other awards
earned by the participant. At any time during a performance period of more than one fiscal year, the Compensation Committee may, in its discretion, cancel a portion of, or scale back, unvested performance awards under certain circumstances
set forth in the amended 2017 plan, including that the performance goals for the performance period cannot be achieved at the maximum levels established at the time of grant.
|
Century
Communities, Inc.
– 2019 Proxy Statement 34
|
Annual Performance Cash Awards
|
Annual performance cash awards may be granted under the amended 2017 plan in such amounts and upon such terms as the Compensation Committee may determine,
based on the achievement of specified performance goals for annual periods or other time periods as determined by the Compensation Committee. The Compensation Committee will determine the target amount that may be paid with respect to an
annual performance award, which will be based on a percentage of a participant’s actual annual base compensation at the time of grant. The Compensation Committee may establish a maximum potential payout amount with respect to an annual
performance award in the event performance goals are exceeded by an amount established by the Compensation Committee at the time performance goals are established. The Compensation Committee may establish measurements for prorating the
amount of payouts for achievement of performance goals at less than or greater than the target payout but less than the maximum payout.
|
|
Non-Employee Director Awards
|
The Compensation Committee at any time and from time to time may approve resolutions providing for the automatic grant to non-employee directors of
non-statutory stock options, SARs or full value awards. The Compensation Committee may also at any time and from time to time grant on a discretionary basis to non-employee directors non-statutory stock options, SARs or full value awards.
In either case, any such awards may be granted singly, in combination, or in tandem, and may be granted pursuant to such terms, conditions and limitations as the Compensation Committee may establish in its sole discretion consistent with the
provisions of the amended 2017 plan. The Compensation Committee may permit non-employee directors to elect to receive all or any portion of their annual retainers, meeting fees or other fees in restricted stock, RSUs, deferred stock units or
other stock-based awards in lieu of cash. Any awards granted to non-employee directors under the amended 2017 plan must be made by a committee consisting solely of directors who are “independent directors” under the NYSE rules and will not
be subject to management’s discretion.
|
|
Other Cash-Based Awards and Other Stock-Based Awards
|
Consistent with the terms of the 2017 plan, other cash-based awards that are not annual performance cash awards and other stock-based awards may be granted to
participants in such amounts and upon such terms as the Compensation Committee may determine.
|
|
Performance Measures
|
The performance goals selected by the Compensation Committee may be based on any one or more performance measures, including those listed in the amended 2017
plan. Any of the performance measures can be used in an algebraic formula (e.g., averaged over a period), combined into a ratio, compared to a budget or standard, compared to previous periods or other formulaic combinations. Any of the
performance measures specified in the amended 2017 plan may be used to measure the performance of Century or any subsidiary, as a whole, or any division or business unit, product or product group, region or territory, or any combination
thereof, as the Compensation Committee deems appropriate. Performance measures may be compared to the performance of a peer group or a published or special index that the Compensation Committee deems appropriate or, with respect to share
price, various stock market indices. The Compensation Committee also may provide for accelerated vesting of any award based on the achievement of performance goals.
The Compensation Committee may amend or modify the vesting criteria (including any performance goals, performance measures or performance periods) of any
outstanding awards based in whole or in part on the financial performance of Century (or any subsidiary or division, business unit or other sub-unit thereof) in recognition of unusual or nonrecurring events affecting Century or the financial
statements of Century or of changes in applicable laws, regulations or accounting principles, whenever the Compensation Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the
benefits or potential benefits intended to be made available under the amended 2017 plan.
|
Century
Communities, Inc.
– 2019 Proxy Statement 35
|
Dividend Equivalents
|
With the exception of stock options and SARs, awards under the amended 2017 plan may, in the Compensation Committee’s discretion, earn dividend equivalents
with respect to the cash or stock dividends or other distributions that would have been paid on the shares of our common stock covered by such award had such shares been issued and outstanding on the dividend payment date. However, no
dividends may be paid on unvested awards. Such dividend equivalents will be converted to cash or additional shares of our common stock by such formula and at such time and subject to such limitations as determined by the Compensation
Committee.
|
|
Termination of Employment or Other Service
|
The amended 2017 plan provides for certain default rules in the event of a termination of a participant’s employment or other service. These default rules may
be modified in an award agreement. If a participant’s employment or other service with Century is terminated for cause, then all outstanding awards held by such participant will be terminated and forfeited. In the event a participant’s
employment or other service with Century is terminated by reason of death, disability or retirement, then:
·
All outstanding stock options
(excluding non-employee director options in the case of retirement) and SARs held by the participant will, to the extent exercisable, remain exercisable for a period of one year after such termination, but not later than the date the stock
options or SARs expires;
·
All outstanding stock options
and SARs that are not exercisable will be terminated and forfeited;
·
All outstanding but unvested
restricted stock awards, RSUs, performance awards, other cash-based awards and other stock-based awards held by the participant will terminate and be forfeited. However, with respect to any awards that vest based on the achievement of
performance goals, if a participant’s employment or other service with Century or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in
no event less than one year), the Compensation Committee may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and
only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance
period; and
·
If the effective date of such
termination is before the end of the time period to which an annual performance cash award relates, then any such annual performance cash award held by a participant will terminate and be forfeited, but if the effective date of such
termination is on or after the end of the time period to which an annual performance cash award relates, then any such annual performance cash award held by a participant will be paid to the participant in accordance with the payment terms
of such award.
|
Century
Communities, Inc.
– 2019 Proxy Statement 36
|
In the event a participant’s employment or other service with Century is terminated by reason other than for cause, death, disability or retirement, then:
·
All outstanding stock options
(including non-employee director options) and SARs held by the participant that then are exercisable will remain exercisable for three months after the date of such termination, but will not be exercisable later than the date the stock
options or SARs expires; and
·
All outstanding unvested
restricted stock awards, performance awards, annual performance cash awards, other cash-based awards and other stock-based awards will be terminated and forfeited. However, with respect to any awards that vest based on the achievement of
performance goals, if a participant’s employment or other service with Century or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in
no event less than one year), the Compensation Committee may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and
only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance
period.
|
|
|
Modification of Rights upon Termination
|
Upon a participant’s termination of employment or other service with Century or any subsidiary, the Compensation Committee may, in its sole discretion (which
may be exercised at any time on or after the grant date, including following such termination) cause stock options or SARs (or any part thereof) held by such participant as of the effective date of such termination to terminate, become or
continue to become exercisable or remain exercisable following such termination of employment or service, and restricted stock, RSUs, performance awards, annual performance cash awards, non-employee director awards, other cash-based awards
and other stock-based awards held by such participant as of the effective date of such termination to terminate, vest or become free of restrictions and conditions to payment, as the case may be, following such termination of employment or
service, in each case in the manner determined by the Compensation Committee; provided, however, that (a) no stock option or SAR may remain exercisable beyond its expiration date; and (b) any such action by the Compensation Committee
adversely affecting any outstanding award will not be effective without the consent of the affected participant, except to the extent the Compensation Committee is authorized by the amended 2017 plan to take such action.
|
|
Forfeiture and Recoupment
|
If a participant is determined by the Compensation Committee to have taken any action while providing services to Century or after termination of such
services, that would constitute “cause” or an “adverse action,” as such terms are defined in the amended 2017 plan, all rights of the participant under the amended 2017 plan and any agreements evidencing an award then held by the participant
will terminate and be forfeited. The Compensation Committee has the authority to rescind the exercise, vesting, issuance or payment in respect of any awards of the participant that were exercised, vested, issued or paid, and require the
participant to pay to Century, within 10 days of receipt of notice, any amount received or the amount gained as a result of any such rescinded exercise, vesting, issuance or payment. Century may defer the exercise of any stock option or SAR
for up to six months after receipt of notice of exercise in order for the Compensation Committee to determine whether “cause” or “adverse action” exists. Century is entitled to withhold and deduct future wages to collect any amount due.
|
Century
Communities, Inc.
– 2019 Proxy Statement 37
|
In addition, if Century is required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial
reporting requirement under the securities laws, then any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 will reimburse Century for the amount of any award
received by such individual under the amended 2017 plan during the 12 month period following the first public issuance or filing with the Securities and Exchange Commission, as the case may be, of the financial document embodying such
financial reporting requirement. Century also may seek to recover any award made as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other clawback, forfeiture or recoupment provision
required by applicable law or under the requirements of any stock exchange or market upon which Century’s common stock is then listed or traded or any policy adopted by Century, including the Clawback and Forfeiture Policy adopted by Century
in 2018.
|
|
|
Effect of Change in Control; Double Trigger Acceleration of Vesting
|
Generally, a change in control will mean:
·
The acquisition, other than
from Century, by any individual, entity or group of beneficial ownership of 50% or more of the then outstanding shares of common stock;
·
The consummation of a
reorganization, merger or consolidation of Century with respect to which all or substantially all of the individuals or entities who were the beneficial owners of common stock immediately prior to the transaction do not, following the
transaction, beneficially own more than 50% of the outstanding shares of common stock of the corporation resulting from the transaction; or
·
A complete liquidation or
dissolution of Century or the sale or other disposition of all or substantially all of the assets of Century.
Without limiting the authority of the Compensation Committee to adjust awards as discussed under “—
Plan Administration
” and “—
Adjustments
,” if a change in control of Century occurs, then, unless
otherwise provided in the award or other agreement, if an award is continued, assumed or substituted by the successor entity, the award will not vest or lapse solely as a result of the change of control but will instead remain outstanding
under the terms pursuant to which it has been continued, assumed or substituted and will continue to vest or lapse pursuant to such terms.
If the award is continued, assumed or substituted by the successor entity and within two years following the change in control the participant is either
terminated by the successor entity without “cause” or, if the participant is an executive officer of Century, resigns for “good reason,” each as defined in the amended 2017 plan, then:
·
All outstanding stock options
and SARs held by such participant will vest and become immediately exercisable and will remain exercisable until the earlier of the expiration of its full specified term or the first anniversary of the date of termination or resignation;
·
All restrictions imposed on
restricted stock, RSUs or deferred units that are not performance-based held by such participant will lapse;
|
Century
Communities, Inc.
– 2019 Proxy Statement 38
|
·
All vested and earned awards
that are performance-based held by such participant for which the performance period has been completed as of the date of such termination or resignation but have not yet been paid will be paid in cash or shares and at such time as provided
in the award agreement; and
·
All performance-based awards
for which the performance period has not been completed as of the date of such termination or resignation held by such participant will immediately vest and be earned in full and paid out with respect to each performance goal based on
actual performance achieved through the date of termination or resignation with the manner of payment to be made in cash or shares as provided in the award agreement within 30 days following the date of termination or resignation.
If a change in control of Century occurs, any outstanding awards that are not continued, assumed or substituted with equivalent awards by the successor entity
will be subject to the following rules:
·
All outstanding stock options
and SARs will vest and become immediately exercisable and the Compensation Committee will either (i) give a participant a reasonable opportunity to exercise the stock option or SAR before the resulting change in control or (ii) pay the
participant the difference between the exercise price for the stock option or grant price for the SAR and the consideration provided to other similarly situated stockholders in the change in control, provided that if the exercise or grant
price exceeds the consideration in the change in control, the stock option or SAR will be canceled and terminated without payment;
·
All restrictions imposed on
restricted stock, RSUs or deferred units that are not performance-based will lapse;
·
All vested and earned awards
that are performance-based for which the performance period has been completed as of the date of the change in control but have not yet been paid will be paid in cash or shares and at such time as provided in the award agreement; and
·
All performance-based awards
for which the performance period has not been completed as of the date of the change in control will immediately vest and be earned in full and paid out with respect to each performance goal based on actual performance achieved through the
date of the change in control with the manner of payment to be made in cash or shares as provided in the award agreement within 30 days following the date of the change in control, but if payment is made in shares, the Compensation
Committee may in its discretion provide the holder the consideration provided to other similarly situated stockholders in the change in control.
The amended 2017 plan also provides the Compensation Committee authority and flexibility to convert performance-based awards into time-based awards in
connection with a change in control.
|
Century
Communities, Inc.
– 2019 Proxy Statement 39
|
Term, Termination and Amendment
|
Unless sooner terminated by the Board, the amended 2017 plan will terminate at midnight on May 7, 2029. No award will be granted after termination of the
amended 2017 plan, but awards outstanding upon termination of the amended 2017 plan will remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the amended 2017 plan.
Subject to certain exceptions, the Board has the authority to terminate and the Compensation Committee has the authority to amend the amended 2017 plan or any
outstanding award agreement at any time and from time to time. No amendments to the amended 2017 plan will be effective without approval of Century’s stockholders if: (a) stockholder approval of the amendment is then required pursuant to
Section 422 of the Code, the rules of the primary stock exchange on which the common stock is then traded, applicable U.S. state and federal laws or regulations and the applicable laws of any foreign country or jurisdiction where awards are,
or will be, granted under the amended 2017 plan; or (b) such amendment would: (i) modify the restrictions on re-pricing; (ii) materially increase benefits accruing to participants; (iii) increase the aggregate number of shares of common stock
issued or issuable under the amended 2017 plan; (iv) increase any limitation set forth in the amended 2017 plan on the number of shares of common stock which may be issued or the aggregate value of awards which may be made, with respect to
any type of award to any single participant during any specified period; (v) modify the eligibility requirements for participants in the amended 2017 plan; or (vi) reduce the minimum exercise price or any option or grant price of any SAR. No
termination or amendment of the amended 2017 plan or an award agreement shall adversely affect in any material way any award previously granted under the amended 2017 plan without the written consent of the participant holding such award.
|
FEDERAL INCOME TAX INFORMATION
The following is a general summary, as of the date of this proxy statement, of the federal income tax consequences to participants and Century of
transactions under the amended 2017 plan. This summary is intended for the information of stockholders considering how to vote at the annual meeting and not as tax guidance to participants in the amended 2017 plan, as the consequences may vary with
the types of grants made, the identity of the participant and the method of payment or settlement. This summary does not address the effects of other federal taxes or taxes imposed under state, local or foreign tax laws. Participants are encouraged
to seek the advice of a qualified tax advisor regarding the tax consequences of participation in the amended 2017 plan.
Incentive Stock Options
. With respect to incentive
stock options, generally, the stock option holder is not taxed, and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock option so long as the requirements of Section 422 of the Code continue to be met. If the
stock option holder meets the employment requirements and does not dispose of the shares of our common stock acquired upon exercise of an incentive stock option until at least one year after date of the exercise of the stock option and at least two
years after the date the stock option was granted, gain or loss realized on sale of the shares will be treated as long-term capital gain or loss. If the shares of our common stock are disposed of before those periods expire, which is called a
disqualifying disposition, the stock option holder will be required to recognize ordinary income in an amount equal to the lesser of (i) the excess, if any, of the fair market value of our common stock on the date of exercise over the exercise price,
or (ii) if the disposition is a taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, we will generally be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the stock
option holder, assuming that a deduction is allowed under Section 162(m) of the Code.
Century
Communities, Inc.
– 2019 Proxy Statement 40
Non-Statutory Stock Options
. The grant of a stock
option that does not qualify for treatment as an incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a taxable event for the stock option holder. Upon exercise of the stock option, the stock option
holder will generally be required to recognize ordinary income in an amount equal to the excess of the fair market value of our common stock acquired upon exercise (determined as of the date of exercise) over the exercise price of the stock option, and
we will be entitled to a deduction in an equal amount in the same tax year, assuming that a deduction is allowed under Section 162(m) of the Code. At the time of a subsequent sale or disposition of shares obtained upon exercise of a non-statutory
stock option, any gain or loss will be a capital gain or loss, which will be either a long-term or short-term capital gain or loss, depending on how long the shares have been held.
SARs.
The grant of an SAR will not cause the
participant to recognize ordinary income or entitle us to a deduction for federal income tax purposes. Upon the exercise of an SAR, the participant will recognize ordinary income in the amount of the cash or the value of shares payable to the
participant (before reduction for any withholding taxes), and we will receive a corresponding deduction in an amount equal to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section 162(m) of the Code.
Restricted Stock, RSUs, Deferred Stock Units and Other
Stock-Based Awards
. The federal income tax consequences with respect to restricted stock, RSUs, deferred stock units, performance shares and performance stock units, and other stock unit and stock-based awards depend on the facts and
circumstances of each award, including, in particular, the nature of any restrictions imposed with respect to the awards. In general, if an award of stock granted to the participant is subject to a “substantial risk of forfeiture” (
e.g.
, the award is conditioned upon the future performance of substantial services by the participant) and is nontransferable, a taxable event occurs when the
risk of forfeiture ceases or the awards become transferable, whichever first occurs. At such time, the participant will recognize ordinary income to the extent of the excess of the fair market value of the stock on such date over the participant’s
cost for such stock (if any), and the same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. Under certain circumstances, the participant, by making an election under Section 83(b) of the Code, can
accelerate federal income tax recognition with respect to an award of stock that is subject to a substantial risk of forfeiture and transferability restrictions, in which event the ordinary income amount and our deduction will be measured and timed as
of the grant date of the award. If the stock award granted to the participant is not subject to a substantial risk of forfeiture or transferability restrictions, the participant will recognize ordinary income with respect to the award to the extent of
the excess of the fair market value of the stock at the time of grant over the participant’s cost, if any, and the same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. If a stock unit award or other
stock-based award is granted but no stock is actually issued to the participant at the time the award is granted, the participant will recognize ordinary income at the time the participant receives the stock free of any substantial risk of forfeiture
(or receives cash in lieu of such stock) and the amount of such income will be equal to the fair market value of the stock at such time over the participant’s cost, if any, and the same amount is then deductible by us, assuming that a deduction is
allowed under Section 162(m) of the Code.
Annual Performance Cash Awards and Other Cash-Based Awards
.
Annual performance cash awards and other cash-based awards will be taxable as ordinary income to the participant in the amount of the cash received by the participant (before reduction for any withholding taxes), and we will receive a corresponding
deduction in an amount equal to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section 162(m) of the Code.
Withholding Obligations
. We are entitled to withhold
and deduct from future wages of the participant, to make other arrangements for the collection of, or to require the recipient to pay to us, an amount necessary for us to satisfy the recipient’s federal, state or local tax withholding obligations with
respect to awards granted under the 2017 plan. Withholding for taxes may be calculated based on the maximum applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a negative accounting impact on Century. The
Compensation Committee may permit a participant to satisfy a tax withholding obligation by withholding shares of common stock underlying an award, tendering previously acquired shares, delivery of a broker exercise notice or a combination of these
methods.
Century
Communities, Inc.
– 2019 Proxy Statement 41
Code Section 409A
. A grant may be subject to a 20%
penalty tax, in addition to ordinary income tax, at the time the grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not
satisfied.
Code Section 162(m)
. Pursuant to Section 162(m) of
the Code, the annual compensation paid to an individual who is a “covered employee” is not deductible to the extent it exceeds $1 million. The Tax Cut and Jobs Act, signed into law on December 22, 2017 (the Tax Act), amended Section 162(m), effective
for tax years beginning after December 31, 2017, (i) to expand the definition of a “covered employee” to include any person who was the Chief Executive Officer or the Chief Financial Officer at any time during the year and the three most highly
compensated officers (other than the Chief Executive Officer or the Chief Financial Officer) who were employed at any time during the year whether or not the compensation is reported in the Summary Compensation Table included in our proxy statement for
our Annual Meeting of Stockholders; (ii) to treat any individual who is considered a covered employee at any time during a tax year beginning after December 31, 2106, as remaining a covered employee permanently; and (iii) to eliminate the
performance-based compensation exception to the $1 million deduction limit (with a transition provision continuing the performance-based exception for certain compensation covered by a written binding contract in existence on November 2, 2017).
Excise Tax on Parachute Payments
. Unless otherwise
provided in a separate agreement between a participant and Century, if, with respect to a participant, the acceleration of the vesting of an award or the payment of cash in exchange for all or part of an award, together with any other payments that
such participant has the right to receive from Century, would constitute a “parachute payment” then the payments to such participant will be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax
imposed by Section 4999 of the Code. Such reduction, however, will only be made if the aggregate amount of the payments after such reduction exceeds the difference between the amount of such payments absent such reduction minus the aggregate amount of
the excise tax imposed under Section 4999 of the Code attributable to any such excess parachute payments. If such provisions are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute payment” pursuant to Section
4999 of the Code, we will be denied a deduction with respect to such excess parachute payment pursuant to Section 280G of the Code.
NEW PLAN BENEFITS
It is not presently possible to determine the benefits or amounts that will be received by or allocated to participants under the amended 2017 plan
or would have been received by or allocated to participants for the last completed fiscal year if the amended 2017 plan had then been in effect because awards under the amended 2017 plan will be made at the discretion of the Compensation Committee.
Further, since any automatic awards to our non-employee directors will depend on the non-employee directors’ continued service and the Board’s discretion to vary the type and terms of those awards in the future, it is not possible to determine the
exact number of shares of our common stock that will be subject to such awards. However, under the policy currently in effect, each person serving as a non-employee director on the date of each annual meeting of stockholders will receive RSUs valued
at $120,000.
Century
Communities, Inc.
– 2019 Proxy Statement 42
AWARDS PREVIOUSLY GRANTED UNDER 2017 PLAN
|
|
As of March 14, 2019, we had granted restricted stock unit and performance share unit awards, assuming target performance, under the 2017 plan as
follows:
|
Name and Position
|
Number of Shares
Underlying
Restricted Stock Units |
|
Number of Shares
Underlying
Performance Share Units |
|
|
Dale Francescon
Chairman and Co-Chief Executive Officer
|
254,939
|
94,095
|
||
|
Robert J. Francescon
President and Co-Chief Executive Officer
|
254,939
|
94,095
|
||
|
David L. Messenger
Chief Financial Officer and Secretary
|
107,923
|
53,768
|
||
|
Executive Group
|
617,801
|
241,958
|
||
|
Non-Employee Director Group
|
23,340
|
0
|
||
|
All Other Employee Group
|
500,180
|
0
|
||
|
Total
|
1,141,321
|
241,958
|
BOARD RECOMMENDATION
|
|
The Board of Directors unanimously recommends that our stockholders vote “
FOR
” approval of the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan.
|
The Board Recommends a Vote FOR Proposal No. 2
|
☑
|
Century
Communities, Inc.
– 2019 Proxy Statement 43
APPOINTMENT
|
|
The Audit Committee appoints our independent registered public accounting firm, or independent auditor. In this regard, the Audit Committee
evaluates the qualifications, performance, and independence of our independent auditor and determines whether to re-engage the current auditor. As part of its evaluation, the Audit Committee considers, among other factors, the quality and efficiency
of the services provided by the independent auditor, including the performance, technical expertise, and industry knowledge of the lead audit partner and the audit team assigned to our account; the overall strength and reputation of the audit firm;
the auditor’s national capabilities relative to our business; the auditor’s knowledge of our operations; and the auditor’s fees. Upon consideration of these and other factors, the Audit Committee has appointed Ernst & Young LLP (E&Y) to
serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
Stockholder ratification of the selection of E&Y as our independent registered public accounting firm is not required by our Bylaws or
otherwise. However, the Board is submitting the appointment of E&Y to the stockholders for ratification as a matter of corporate practice. If our stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to
retain E&Y. Even if the selection is ratified by our stockholders, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the best interests of Century and our stockholders.
A representative of E&Y is expected to be present at the Annual Meeting and will have an opportunity to make a statement if he or she so
desires and will be available to respond to appropriate questions.
AUDIT, AUDIT-RELATED, TAX, AND OTHER FEES
|
|
The fees billed for professional services provided by E&Y in 2018 and 2017 were:
|
Type of Fees
|
2018
|
2017
|
|||||
|
Audit Fees
|
$
|
1,370,000
|
$
|
1,684,790
|
|||
|
Audit-Related Fees
|
0
|
0
|
|||||
|
Tax Fees
|
0
|
0
|
|||||
|
All Other Fees
|
2,130
|
2,130
|
|||||
|
Total Fees
|
$
|
1,372,130
|
$
|
1,686,920
|
|||
In the above table, in accordance with the definitions of the SEC, “Audit Fees” consisted of fees for the audit of our consolidated financial statements included in our 2018 Annual Report, reviews of the unaudited
financial statements included in our Quarterly Reports on Form 10-Q, and consultation concerning financial accounting and reporting standards, as well as services normally provided in connection with statutory and regulatory filings or engagements,
comfort letters, consents, and assistance with documents filed with the SEC. Audit Fees also included fees for the audit of the effectiveness of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. For
2017, Audit Fees also included fees associated with our senior note and equity offerings and our merger with UCP. “Audit-Related Fees” consisted of fees for assurance and related services, including fees for services performed related to due
diligence on acquisitions. “Tax Fees” consisted of fees billed for permissible tax consulting, planning, and compliance services. “All Other Fees” consisted of subscription fees for Internet-based professional literature.
Century
Communities, Inc.
– 2019 Proxy Statement 44
PRE-APPROVAL POLICIES AND PROCEDURES
|
|
The Audit Committee is responsible for selecting, appointing, evaluating, compensating, retaining, and overseeing the work of our independent
registered public accounting firm. In recognition of this responsibility, the Audit Committee has established policies and procedures in its charter regarding pre-approval of any audit and non-audit service provided to Century by our independent
registered public accounting firm and the fees and terms thereof. Briefly, any audit or non-audit service provided to us by our independent registered public accounting firm must be pre-approved by the Audit Committee or the Chair of the Audit
Committee.
The Audit Committee considered the compatibility of the provision of other services provided by E&Y with the maintenance of its independence.
The Audit Committee approved all audit and non-audit services provided by E&Y in 2018 and 2017.
AUDIT COMMITTEE REPORT
|
|
The Audit Committee issued the following report for inclusion in this proxy statement and our 2018 Annual Report:
| 1. |
The Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2018, with management of Century Communities,
Inc., and with Century Communities, Inc.’s independent registered public accounting firm, Ernst & Young LLP.
|
| 2. |
The Audit Committee has discussed with Ernst & Young LLP those matters required by Public Company Accounting Oversight Board (PCAOB) Auditing Standard 1301
(Communications with Audit Committees).
|
| 3. |
The Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by the PCAOB regarding Ernst & Young LLP’s
communications with the Audit Committee concerning the accountant’s independence and has discussed with Ernst & Young LLP its independence from Century Communities, Inc., and its management.
|
| 4. |
Based on the review and discussions referenced to in paragraphs 1 through 3 above, the Audit Committee recommended to the Board that the audited consolidated financial
statements for the year ended December 31, 2018, be included in the Annual Report on Form 10-K for that year for filing with the SEC.
|
AUDIT COMMITTEE
Keith R. Guericke, Chair
John P. Box
James M. Lippman
BOARD RECOMMENDATION
|
|
The Board of Directors unanimously recommends that our stockholders vote “
FOR
” ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
|
The Board Recommends a Vote FOR Proposal No. 3
|
☑
|
Century
Communities, Inc.
– 2019 Proxy Statement 45
BACKGROUND
|
|
The Board is providing our stockholders with an advisory vote on our executive compensation pursuant to the Dodd-Frank Wall Street Consumer
Protection Act (Dodd-Frank Act) and Section 14A of the Exchange Act. This advisory vote, commonly known as a say-on-pay vote, is a non-binding vote on the compensation paid to our named executive officers as set forth in this proxy statement.
At our 2018 Annual Meeting of Stockholders, our stockholders had the opportunity to vote on an advisory say-on-pay proposal and a say-on-frequency
proposal. Over 92% of the votes cast were in favor of our say-on-pay proposal and our stockholders voted overwhelmingly in favor of an annual say-on-pay vote.
In designing the compensation program for 2018, the Compensation Committee considered the results of the 2018 say-on-pay vote, our ongoing dialogue
with stockholders, internal considerations such as consistency from year to year, and an evaluation of peer practices. After consideration, the Compensation Committee concluded that, for 2018, it was appropriate to maintain the existing compensation
mix for our executives. Our 2018 compensation program continued to tie the majority of our executives’ compensation to performance metrics that support the Company’s growth strategy.
WHY YOU SHOULD VOTE IN FAVOR OF OUR SAY-ON-PAY VOTE
|
|
Our executive compensation program is generally designed to attract, retain, motivate, and reward highly qualified and talented executive officers
that will enable us to drive long-term stockholder value. The underlying core principles of our executive compensation program include:
| · |
aligning the interests of our executives with those of our stockholders and linking pay to performance by providing compensation opportunities that are tied directly to the
achievement of financial performance goals and long-term stock price performance;
|
| · |
targeting fixed compensation between the market 25
th
percentile and the market median; and
|
| · |
targeting performance-based award levels between the 25
th
percentile and the market median
and setting maximum award levels at or above the market 75
th
percentile, thereby emphasizing performance-based compensation elements, with superior performance
resulting in above-market pay, and underwhelming performance resulting in below-market pay.
|
We believe this balance allows us to attract and retain the necessary executive talent while motivating and rewarding the accomplishment of annual
and long-term financial performance goals and maintaining an appropriate cost structure.
Century
Communities, Inc.
– 2019 Proxy Statement 46
Our compensation practices include many best pay practices that support our executive compensation objectives and principles and benefit our
stockholders.
|
What We Do
|
What We Don’t Do
|
|||
|
✓
|
Structure our executive officer compensation so that a significant portion of pay is at risk
|
|
No guaranteed salary increases or bonuses
|
|
|
✓
|
Emphasize long-term performance in our equity-based incentive awards
|
|
No excessive perquisites
|
|
|
✓
|
Use a mix of performance measures and caps on payouts
|
|
No repricing of stock options unless approved by stockholders
|
|
|
✓
|
Require minimum vesting periods on equity awards
|
|
No discretionary bonuses
|
|
|
✓
|
Require double-trigger for equity acceleration upon a change of control
|
|
No tax gross-ups
|
|
|
✓
|
Maintain a competitive compensation package
|
|
No excise tax gross-ups
|
|
|
✓
|
Have robust stock ownership guidelines and stock retention requirements for executive officers
|
|
No current payment of dividends on unvested awards
|
|
|
✓
|
Maintain a robust clawback policy covering cash and equity incentive compensation paid to current and former executives
|
|
No short sales or derivative transactions in Century stock, including hedges
|
|
|
✓
|
Hold an annual say-on-pay vote
|
|
No pledging of Century securities
|
|
We encourage our stockholders to read the “
Compensation
Discussion and Analysis
,” beginning on page 49, which describes in detail our executive compensation program and the executive compensation decisions made by the Compensation Committee in 2018, as well as the accompanying executive
compensation tables and narratives that provide detailed information on the compensation of our named executive officers.
We believe that our executive compensation program is competitive, focused on pay for performance, and strongly aligned with the long-term
interests of our stockholders. The Compensation Committee believes that executive compensation for 2018 was reasonable, appropriate, and justified by the performance of the Company and the result of a carefully considered approach.
PROPOSED RESOLUTION
|
|
The Board recommends that our stockholders vote in favor of the say-on-pay vote as set forth in the following resolution:
RESOLVED, that our stockholders approve, on an advisory basis, the compensation paid to our named executive officers, as disclosed pursuant to the
compensation disclosure rules of the SEC, including in the “
Compensation Discussion and Analysis
,” the accompanying compensation tables and the
corresponding narrative discussion and footnotes, and any related material disclosed in this proxy statement.
Stockholders are not voting to approve or disapprove the Board’s recommendation. As this is an advisory vote, the outcome of the vote is not
binding on us with respect to future executive compensation decisions, including those relating to our named executive officers, or otherwise. The Compensation Committee and Board expect to take into account the outcome of the vote when considering
future executive compensation decisions.
Century
Communities, Inc.
– 2019 Proxy Statement 47
NEXT SAY-ON-PAY VOTE
|
|
Consistent with the results from last year’s advisory vote on the frequency of the say-on-pay vote, the Board determined that we will conduct a
say-on-pay vote on an annual basis. Accordingly, the next say-on-pay vote will occur at our 2020 Annual Meeting of Stockholders.
BOARD RECOMMENDATION
|
|
The Board of Directors unanimously recommends that our stockholders vote “
FOR
” approval, on an advisory basis, of our executive compensation, or say-on-pay vote.
|
The Board Recommends a Vote FOR Proposal No. 4
|
☑
|
Century
Communities, Inc.
– 2019 Proxy Statement 48
INTRODUCTION
|
|
This Compensation Discussion and Analysis (CD&A) addresses the principles underlying our policies and decisions with respect to the
compensation of our executive officers who are named in the “Summary Compensation Table” and material factors relevant to these policies and decisions. This CD&A should be read together with the related tables and disclosures that follow.
Our named executive officers for the year ended December 31, 2018 are set forth below. We sometimes refer to these individuals collectively are our
named executive officers or “NEOs,” our Co-Chief Executive Officers collectively as our “Co-CEOs” and individually as our “Co-CEO” and our Chief Financial Officer as our “CFO.”
|
Named Executive Officer
|
Title
|
|
Dale Francescon
|
Chairman of the Board and Co-Chief Executive Officer
|
|
Robert J. Francescon
|
Co-Chief Executive Officer and President
|
|
David L. Messenger
|
Chief Financial Officer and Secretary
|
EXECUTIVE SUMMARY
|
|
Who We Are
Century Communities, Inc. is a top 10 national U.S. homebuilder. We are engaged in the development, design, construction, marketing and sale of
single-family attached and detached homes in 15 states across the West, Mountain, Texas and Southeast U.S. regions. We market and sell homes under both the Century Communities and Wade Jurney Homes brands. We also offer title, insurance, and
lending services in select markets.
Century
Communities, Inc.
– 2019 Proxy Statement 49
Fiscal 2018 Business Highlights
Highlights of our financial, operational and strategic achievements for 2018, which drove our 2018 executive pay decisions, are set forth below.
Some of these highlights include non-GAAP financial measures, the calculation of which are described in Annex I to this proxy statement.
FINANCIAL
|
$2.1
billion
|
Revenue
Achieved $2.1 billion in home sales revenues, a
51%
é
year-over-year, and exceeded targeted revenue, excluding acquisitions, by over 19%
|
|
$119.9
million
|
Adjusted Net Income
Achieved a record $119.9 million, or $3.94 per share, a
69%
é
year-over-year
|
|
$227.9
million
|
Adjusted EBITDA
Achieved $227.9 million in adjusted EBITDA, a
51%
é
year-over-year, and exceeded targeted
adjusted EBITDA, excluding incremental EBITDA as a result of acquisitions, transaction expenses and bonuses, by over 12%
|
|
$387.5
million
|
Credit Facility Availability
Strengthened balance sheet and created flexibility with increased availability
|
OPERATIONAL
|
6,099
|
Home Deliveries
Achieved 6,099 home deliveries, a
68%
é
year-over-year, and exceeded targeted
home deliveries, excluding acquisitions, by over 34%
|
|
5,657
|
Net New Home Contracts
Achieved 5,657 net new home contracts, a
48%
é
year-over-year
|
|
2,181
homes
$669.5
million
|
Backlog
Backlog
é
65%
to 2,181 homes, with value of $669.5 million, a
17%
é
over end of prior year
|
|
37,919
|
Lots Owned and Controlled
Ended the year with 37,919 owned and controlled lots, a
23%
é
over the
end of the prior year
|
STRATEGIC
|
✓
|
Increased Focus on Entry Level Price Point
Reduced average sales price of homes delivered and in backlog to $345,968 and $306,981, respectively
|
|
✓
|
Completed Acquisition of Wade Jurney Homes
Bolstered our offering of homes for first time buyers, strengthened our presence in the Southeast United States, and moved into the ranks of the Top 10 U.S.
homebuilders based on combined closings
|
|
✓
|
Completed Integration of UCP, Inc.
|
|
✓
|
Accelerated Financial Services Business
Achieved revenue of $41.7 million and pre-tax income of $8.8 million, compared to $9.8 million and $1.2 million, respectively, in prior year
|
Century
Communities, Inc.
– 2019 Proxy Statement 50
Fiscal 2018 Compensation Actions and Outcomes
One of our key executive compensation objectives is to link pay to performance by aligning the financial interests of our executives with those of
our stockholders and by emphasizing pay for performance in our compensation programs. 2018 compensation actions and incentive plan outcomes based on the performance described above are summarized below:
|
Pay Element
|
2018 Actions
|
|
Base Salary
|
·
Our Co-CEOs received no base salary increases.
·
Our CFO received a
base salary increase of 15.8% to align to our target positioning in our peer group.
|
|
Short-Term Incentive
|
·
The target short-term incentive (STI)
award opportunity for each of our Co-CEOs was increased from 150% to 175% of base salary to align with our target positioning and remained at 100% of base salary for our CFO.
·
Performance metrics were revenue (40%),
EBITDA, as adjusted (40%), and closings (20%), in each case adjusted to exclude acquisitions, for our Co-CEOs, and revenue (30%), EBITDA as adjusted (30%), closings (15%), and individual goals (25%) for our CFO.
·
Payouts were between the target and
maximum payout level, based on fiscal 2018 performance:
|
|
Metric*
|
Target
|
Maximum
|
Actual*
|
||||
|
Revenue
|
$1.81 bil.
|
$1.99 bil.
|
$
1.91 bil.
|
||||
|
EBITDA, as adjusted
|
$172.4 mil.
|
$189.6 mil.
|
$
193.4 mil.
|
||||
|
Closings
|
4,556
|
5,012
|
4,722
|
|
|
*Adjusted to exclude acquisitions
|
|
Long-Term Incentives
|
·
The target long-term incentive (LTI)
award opportunity for 2018 for each of our Co-CEOs was 250% of base salary and 220% of base salary for our CFO.
·
The 2018 LTI program consisted of 60%
performance share unit (PSU) awards and 40% time-vested restricted stock unit (RSU) awards. The PSU awards vest and are paid out in shares of our common stock upon the achievement of a threshold three-year (2018-2020) cumulative adjusted
pre-tax income goal and will be subject to a one-year mandatory holding period. The RSU awards vest in three equal annual installments.
·
Our NEOs also received an RSU award in
February 2018 as a payout under a prior year LTI program based primarily on the achievement of a previously established adjusted multi-year pre-tax income performance goal. Because the structure of our programs changed, the grant of these
awards was deemed to occur in 2018 (not at the earlier time when the performance metric was set), which resulted in a substantial increase in reported equity-based compensation for our NEOs in 2018 compared to 2017, even though the NEOs’
actual year-over-year compensation did not materially increase.
·
The February 2018 RSU award grant was
based on the achievement, at maximum with kicker payout level, of an adjusted pre-tax income goal for the two-year period ended December 31 2017.
|
|
Metric
|
Target
|
Maximum
|
Maximum with Kicker
|
Actual
|
|||||
|
Adjusted pre-tax income
|
$142.8 mil.
|
$159.9 mil.
|
$178.5 mil.
|
$196.1 mil.
|
Century
Communities, Inc.
– 2019 Proxy Statement 51
|
Pay Element
|
2018 Actions
|
|
|
·
Similarly, in February 2019, our NEOs
received an RSU award as a payout under a prior year LTI program based primarily on the achievement, at maximum with kicker payout level, of an adjusted pre-tax income goal for the three-year period ended December 31, 2018.
|
|
Metric
|
Target
|
Maximum
|
Maximum with Kicker
|
Actual
|
|||||
|
Adjusted pre-tax income
|
$225.1 mil.
|
$247.6 mil.
|
$281.4 mil.
|
$369.1 mil.
|
|
Other Compensation Related Actions
|
·
Over 92% of votes cast at our 2018
Annual Meeting of Stockholders were in favor of our annual say-on-pay vote.
·
In October 2018, we entered into
amended and restated employment agreements with our Co-CEOs.
·
In November 2018, we adopted a robust
clawback policy covering cash and equity incentive compensation paid to current and former executives.
|
COMPENSATION HIGHLIGHTS AND BEST PRACTICES
|
|
Our compensation practices include many best pay practices that support our executive compensation objectives and principles, and benefit our
stockholders.
|
What We Do
|
What We Don’t Do
|
||
|
✓
|
Structure our executive officer compensation so that a significant portion of pay is at risk
|
|
No guaranteed salary increases or bonuses
|
|
✓
|
Emphasize long-term performance in our equity-based incentive awards
|
|
No excessive perquisites
|
|
✓
|
Use a mix of performance measures and caps on payouts
|
|
No repricing of stock options unless approved by stockholders
|
|
✓
|
Maintain a robust clawback policy covering cash and equity incentive compensation paid to current and former executives
|
|
No discretionary bonuses
|
|
✓
|
Require double-trigger for equity acceleration upon a change of control
|
|
No tax gross-ups
|
|
✓
|
Maintain a competitive compensation package
|
|
No excise tax gross-ups
|
|
✓
|
Have robust stock ownership guidelines and stock retention requirements for executive officers
|
|
No pledging of Century securities
|
|
✓
|
Require minimum vesting periods on equity awards
|
|
No short sales or derivative transactions in Century stock, including hedges
|
|
✓
|
Hold an annual say-on-pay vote
|
|
No current payment of dividends on unvested awards
|
Century
Communities, Inc.
– 2019 Proxy Statement 52
COMPENSATION PHILOSOPHY
|
|
Given the small size of Century’s executive team, each executive has assumed responsibilities beyond what is generally found for similar executives
in comparable companies. Many of these additional responsibilities directly impact the growth of Century. Further, Century emphasizes performance-based compensation elements, with superior performance resulting in above-market pay, and
underwhelming performance resulting in below-market pay.
As such, the Compensation Committee has determined that fixed compensation (
i.e
., base salary) should be targeted at the market median, with performance-based incentive compensation opportunities resulting in total direct compensation that ranges from well below the market median to the top
quartile of the market (based on performance). The Compensation Committee has determined that target award levels will align total direct compensation at the market median, and maximum award levels, if earned, will align total direct compensation at
or above the market 75th percentile.
COMPETITIVE CONSIDERATIONS AND USE OF MARKET DATA
|
|
We strive to compensate our executive officers competitively relative to industry peers. To ensure reasonableness and competitiveness of our
executive compensation packages relative to the industry, the Compensation Committee regularly evaluates our peer group with the aid of our independent external compensation consultant and with input from management. Data from our peer group,
therefore, is considered in the compensation benchmarking process as one input in helping to determine appropriate pay levels.
In establishing compatibility between Century and the members of our peer group, the following three factors are considered:
|
Industry
|
Revenue
|
Market Capitalization
|
Based on these considerations, the following 11 companies in the “homebuilding” industry were selected as members of our peer group for purposes of
analyzing the market competitiveness of our 2018 executive compensation program.
|
AV Homes Inc.
|
LGI Homes, Inc.
|
Taylor Morrison Home Corporation
|
|
Beazer Homes USA, Inc.
|
M.D.C. Holdings, Inc.
|
TRI Pointe Group, Inc.
|
|
Hovnanian Enterprises, Inc.
|
M/I Homes, Inc.
|
William Lyon Homes
|
|
KB Home
|
Meritage Homes Corporation
|
All of these companies are public companies in the homebuilding industry whose business model involves development, design, construction of homes
and/or development of land and that have annual revenues and a market capitalization generally within a range of our annual revenues and market capitalization. We rank at the 42
nd
percentile of our peer group for revenue, 47
th
percentile for projected 2019 revenue and 31
st
percentile for market capitalization. In constructing this peer group, the Compensation Committee also considered whether companies disclosed Century as a peer, companies that appear in the peer groups of our peer
companies and companies of which Institutional Shareholder Services (ISS) considers a peer of ours in its latest voting recommendations report.
Century
Communities, Inc.
– 2019 Proxy Statement 53
SAY-ON-PAY VOTE
|
|
At our 2018 Annual Meeting of Stockholders, our stockholders had the opportunity to vote on an advisory say-on-pay proposal and a say-on-frequency
proposal. Over 92% of the votes cast were in favor of our say-on-pay proposal and our stockholders were overwhelmingly in favor of an annual say-on-pay vote.
In designing the compensation program for 2018, the Compensation Committee considered the results of the 2018 say-on-pay vote, our ongoing dialogue
with stockholders and investors, internal considerations such as consistency from year to year and an evaluation of peer practices. After consideration, the Compensation Committee concluded that, for 2018, it was appropriate to maintain the existing
compensation mix for our NEOs. Our 2018 compensation program continued to tie the majority of our NEOs’ compensation to performance metrics that support the Company’s growth strategy.
STOCKHOLDER ENGAGEMENT
|
|
While the Board is encouraged by the results of our 2018 say-on-pay vote where the vast majority of our stockholders supported our compensation
program design, the Board nonetheless continued to seek stockholder feedback throughout 2018. Over the course of the year, our executives held more than 200 meetings with stockholders representing over 70 percent of shares outstanding, in total,
including all of our top 10 shareholders that are actively managed funds. Members of management participated in each meeting. One of the objectives of these engagement sessions was to solicit feedback on aspects of our executive compensation
program. Stockholder feedback was relayed directly to the Compensation Committee and full Board, which considered that feedback while evaluating opportunities to further enhance our executive compensation programs.
ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
|
|
During 2018, our executive compensation program consisted of several key elements as described in the table below, as well as key characteristics
of, and purpose for, each element. The following table also describes any key 2018 changes to each of these elements.
|
Element
|
Key Characteristics
|
Purpose
|
Key 2018 Changes
|
|
Base Salary
(Fixed, Cash)
|
A fixed amount, paid in cash periodically throughout the year and reviewed annually and, if appropriate, adjusted.
|
Provides a source of fixed income that is market competitive and reflects scope and responsibility of the position held.
|
No base salary increases for our Co-CEOs.
Base salary increase of 15.8% for our CFO to align with our target positioning.
|
|
Short-Term Incentive (STI)
(Variable, Cash)
|
A variable, short-term element of compensation that is payable in cash based on achievement of key pre-established annual corporate financial goals, and for
our CFO, individual goals.
|
Motivates and rewards our executives for achievement of annual financial and other goals intended to achieve our annual business plan objectives.
|
The target STI award opportunity for each of our Co-CEOs was increased from 150% to 175% of base salary to align with our target positioning and remained at
100% for our CFO.
2018 performance metrics for our Co-CEOs were the same as 2017 and the same for our CFO. Our CFO also had individual performance metrics.
Payouts were between the target and maximum payout levels, based on fiscal 2018 performance.
|
Century
Communities, Inc.
– 2019 Proxy Statement 54
|
Element
|
Key Characteristics
|
Purpose
|
Key 2018 Changes
|
|
Long-Term Incentives (LTI)
(Variable, Restricted Stock Unit and Performance Share Unit Awards)
|
A variable, long-term element of compensation that is provided 60% in the form of PSU awards and 40% in the form of time-vested RSU awards.
|
Aligns the interests of our executives with our stockholders; encourages our executives to focus on long-term company financial performance measures that are
deemed strategically and operationally important to our Company; promotes retention of our executives; and encourages significant ownership of our common stock.
|
The target LTI award opportunity for each of our Co-CEOs was 250% of base salary (up from 150% last year) and 220% of base salary (up from 100% last year)
for our CFO.
We changed our LTI program in 2018 to consist of 60% PSU awards and 40% time-vested RSU awards. The PSU awards vest and are paid out in shares of our common
stock upon the achievement of a threshold three-year (2018-2020) cumulative adjusted pre-tax income goal and will be subject to a one-year mandatory holding period. The RSU awards vest in three equal annual installments.
The use of PSU awards led to a change in the accounting for our LTI program in 2018, resulting in a substantial increase in reported equity-based
compensation for our NEOs in 2018 compared to 2017, even though the NEOs’ actual year-over-year compensation did not materially increase. Due to the accounting change, our reported numbers in 2018 reflect grants for two years, and payouts
in RSUs related to 2016 LTI grants.
|
|
Perquisites
|
Includes an automobile and cell phone allowance, term life insurance, and aircraft time sharing arrangements.
|
Assists in allowing our executives to more efficiently utilize their time and support them in effectively contributing to our Company success.
|
No significant changes, except entered into aircraft time sharing agreements with our NEOs.
|
|
Retirement Benefits
|
Includes a defined contribution retirement plan with a discretionary Company match.
|
Provides an opportunity for employees to save and prepare financially for retirement.
|
No significant changes.
|
We describe each key element of our executive compensation program in more detail in the following pages, along with the compensation decisions
made in 2018. The compensation paid to our NEOs is governed, in part, by written employment agreements with them, which are described below under “
Executive
Compensation—Employment and Other Agreements.
”
Century
Communities, Inc.
– 2019 Proxy Statement 55
PAY FOR PERFORMANCE AND PAY MIX
We seek to motivate management to achieve improved financial performance of our Company through incentive plans that reward higher performance with
increased incentive payouts and hold management accountable for financial performance that falls below targeted levels by paying reduced or no incentive payouts. Accordingly, in general, our executive compensation program emphasizes variable,
at-risk, pay elements as a significant portion of each NEO’s total compensation package.
The breakdown of variable, at-risk, pay (broken out between target annual short-term incentives and long-term incentives) compared to fixed pay (
i.e
., base salary) reported for 2018 in the Summary Compensation Table for our Co-CEOs and CFO is as follows:
NAMED EXECUTIVE OFFICER COMPENSATION
Base Salary
Purpose
: Base salary is designed to compensate our
NEOs at a fixed level of compensation that provides some financial certainty and security for our NEOs, and also serves as a retention tool throughout the executive’s career.
Competitive Positioning
: In setting base salaries,
the Compensation Committee considers many factors, including each executive’s roles and responsibilities, unique skills, future potential with Century, salary levels for similar positions in our market and internal pay equity. While a Co-CEO
executive structure is not commonly found in the marketplace, we believe our leadership structure is appropriate in light of our historical growth and expected future development. Further, the small number of executive officers at Century and the
absence of other leadership positions within Century’s executive team, such as a Chief Operating Officer, that are otherwise generally found on the leadership teams of other companies, requires our executives to perform multiple roles and take on
additional responsibilities that would otherwise not be required of CEOs and CFOs. As such, when determining compensation amounts for the year, the Compensation Committee takes into account these factors and the fact that Century has two Co-CEOs who
each perform a broad range of duties which would generally be spread over a number of executive positions as described above.
Century
Communities, Inc.
– 2019 Proxy Statement 56
Our goal is to target the market median as our strategic target for base salary. We review each executive’s base salary and performance every year
to determine whether base salary should be adjusted. Along with individual performance, we also consider movement of salary in the market, as well as our financial results from the prior year to determine appropriate salary adjustments. Under their
employment agreements, the base salaries of our Co-CEOs may not be adjusted downward.
While the Compensation Committee applies general compensation concepts when determining the competitiveness of our executives’ salaries, the
Compensation Committee generally considers base salaries as being competitive when they are within approximately 10% of the stated market target.
2018 Review
: The Compensation Committee
reevaluated NEO compensation relative to the market data in early 2018 and determined to maintain the base salaries of our Co-CEOs, but increase the base salary of our CFO to bring his salary closer to the market median. The CFOs salary increase was
effective in April 2018.
|
Named Executive Officer
|
2017 Base Salary ($)
|
2018 Base Salary ($)
|
Change (%)
|
|
Dale Francescon
|
850,000
|
850,000
|
0.0%
|
|
Robert J. Francescon
|
850,000
|
850,000
|
0.0%
|
|
David L. Messenger
|
475,000
|
550,000
|
15.8%
|
Short-Term Incentive – Annual Cash Bonus
Purpose
: Our short-term incentive, or annual cash
bonus program, is designed to reward the achievement of specific annual financial and operational objectives. Annual cash bonuses are designed to incentivize our NEOs at a variable level of compensation based on Century’s performance, as well as, in
the case of our CFO, individual performance.
Competitive Positioning
: Our strategy is to target
between the market 25
th
percentile and market median for short-term incentives for performance that meets expected levels and to target total cash compensation (base
salary plus target STI) between the market 25
th
percentile and market median. We have established a range of possible payouts under the plan so that our competitive
position could be above or below our stated strategy based on performance outcomes.
2018 STI Awards
: For 2018, the threshold, target
and maximum STI opportunities for our NEOs were as follows:
|
Named Executive
Officer
|
Threshold
|
Target
|
Maximum
|
|
|
Dale Francescon
|
50% of target
|
175% of base salary
|
200% of target
|
|
|
Robert J. Francescon
|
|
50% of target
|
175% of base salary
|
200% of target
|
|
David L. Messenger
|
50% of target
|
100% of base salary
|
200% of target
|
|
The Compensation Committee determined to increase the target STI award opportunity for each of our Co-CEOs from 150% to 175% of base salary to
align with our target positioning. The target STI award opportunity for our CFO remained at 100% of base salary.
Century
Communities, Inc.
– 2019 Proxy Statement 57
The performance metrics that applied for the 2018 STI plan are described in the table below and are adjusted to exclude acquisitions.
|
Named Executive Officer
|
2018 Performance Metrics
|
|
Co-CEOs
|
40% revenue
40% EBITDA, as adjusted
20% closings
|
|
CFO
|
30% revenue
30% EBITDA, as adjusted
15% closings
25% individual performance goals: development and management of financial services earnings and management of audit and internal audit processes
|
In considering the performance metrics that should apply in calculating our Co-CEOs’ STI awards, the Compensation Committee determined that the
performance metrics should be based on overall Company performance as opposed to individual performance. The Compensation Committee furthermore determined that the most important measures of Company success, which should form the basis of our
Co-CEOs’ STI awards, were revenue, EBITDA, as adjusted, and number of closings. In considering the performance metrics that should apply in calculating our CFO’s STI award, the Compensation Committee determined that his STI award should be based, in
part, on the same Company performance metrics as our Co-CEOs to align the entire executive team, as well as individual performance goals. In 2017, our CFO’s performance metrics were revenue and individual performance goals.
The Company financial performance metrics, and the performance levels attached to each, as well as actual performance, are reflected in the
following table.
|
Company
Performance
Metric*
|
Threshold
|
Target
|
Maximum
|
Actual*
|
||||||||||||
|
Revenue
|
$
|
1.63 billion |
$
|
1.81 billion |
$
|
1.99 billion |
$
|
1.91 billion | ||||||||
|
EBITDA, as adjusted
(1)
|
$
|
155.2 million |
$
|
172.4 million |
$
|
189.6 million |
$
|
193.4 million | ||||||||
|
Closings
|
4,100
|
4,556
|
5,012
|
4,722
|
||||||||||||
| * |
Adjusted to exclude acquisitions
|
| (1) |
This is a non-GAAP financial measure. EBITDA, as adjusted is calculated by excluding interest expense, income tax expense, depreciation and amortization from net income and
also excluding incremental EBITDA as a result of the Wade Jurney Homes acquisition, transaction expenses and executive bonuses for 2018.
|
In determining the threshold, target and maximum goals for each performance metric, the Compensation Committee set the target for each metric using
Century’s projected business plan for 2018 (
i.e
., as the amount in the target business plan approved by the Board). Threshold was set at 90% of target,
and maximum was set at 110% of target. If the threshold level was not achieved with respect to a given performance metric, then no payout was made with respect to that metric.
For 2018, our NEOs earned cash bonuses based on maximum performance for adjusted EBITDA and closings and revenue between target and maximum
performance, and our CFO earned a cash bonus based on these same corporate metrics as well as individual goals, which were between target and maximum performance. This resulted in an STI award payout for each of our NEOs between the target and
maximum payouts.
Century
Communities, Inc.
– 2019 Proxy Statement 58
The table below shows the various levels of payout and the actual level of payout for STI cash awards made in February 2019 for each of our NEOs
for 2018 performance.
|
Named Executive
Officer
|
Threshold Payout
($)
|
Target Payout
($)
|
Maximum Payout
($)
|
Actual Payout
($)
|
|
Dale Francescon
|
743,750
|
1,487,500
|
2,975,000
|
2,506,812
|
|
Robert J. Francescon
|
743,750
|
1,487,500
|
2,975,000
|
2,506,812
|
|
David L. Messenger
|
275,000
|
550,000
|
1,100,000
|
951,686
|
Long-Term Incentives – 2018 Program
Purpose
: Our long-term incentive program is
designed to reward NEOs for the achievement of specific financial objectives, recognize their efforts on our behalf, and provide an additional incentive and retention element to their overall compensation package. Our LTI program is also intended to
align the interests of our executives with our stockholders.
Competitive Positioning
: We target between the
market median with our target LTI program and at or above market 75
th
percentile for above-target performance.
LTI Awards and Plan Mechanics
: The target LTI
award opportunity for each of our Co-CEOs was 250% of base salary and approximately 220% of base salary for our CFO for 2018. Our LTI program for 2018 consisted of a mix of PSU and RSU awards. The PSU and RSU awards were granted under the Century
Communities, Inc. 2017 Omnibus Incentive Plan and represent the right to receive Century common stock upon vesting. The PSU awards will vest and be paid out in shares of our common stock upon the achievement of cumulative adjusted pre-tax income
goals over three years and the RSU awards will vest and be paid out in shares of our common stock in three equal annual installments. Once paid out, the shares underlying the PSU awards will be subject to a mandatory one-year holding period.
2018 LTI Award Opportunity:
For the 2018 LTI
awards, the Compensation Committee first determined a target LTI value for each executive based on a percentage of base salary and then delivered 60% of this value in PSU awards and 40% in time-based RSU awards.
|
Performance-based (60%)
|
Time-based (40%)
|
||||||
|
Named Executive
Officer |
Threshold
(50%)
|
Target
(100%) |
Above
Target (200% for Co-CEOs and 150% for CFO) |
Maximum
(250% for Co- CEOs and 200% for CFO) |
Number of
RSUs |
Total
Target LTI Value |
|
|
Dale Francescon
|
20,895 shares
($630,000)
|
41,791 shares
($1,260,000)
|
83,582 shares
($2,520,000)
|
104,477 shares
($3,150,000)
|
27,860 shares
($840,000)
|
$2,100,000
|
|
|
Robert J. Francescon
|
20,895 shares
($630,000)
|
41,791 shares
($1,260,000)
|
83,582 shares
($2,520,000)
|
104,477 shares
($3,150,000)
|
27,860 shares
($840,000)
|
$2,100,000
|
|
|
David L. Messenger
|
11,940 shares
($360,000)
|
23,880 shares
($720,000)
|
35,820 shares ($1,080,000)
|
47,761 shares
($1,440,000)
|
15,920 shares
($480,000)
|
$1,200,000
|
|
Consistent with prior years, the performance metric for the PSU awards is cumulative adjusted pre-tax income for the three-year period ending
December 31, 2021. The RSU awards will vest and be paid out in shares of our common stock in three equal annual installments. Once paid out, the shares underlying the PSU awards will be subject to a mandatory one-year holding period.
Century
Communities, Inc.
– 2019 Proxy Statement 59
Long-Term Incentives – Payouts from 2016 Grants
Background
: As described above, under our 2018 LTI
program, our NEOs received a mix of PSU awards and time-vested RSU awards. The use of PSU awards led to a change in the accounting for our LTI program, resulting in a substantial increase in reported equity-based compensation for our NEOs in 2018
compared to 2017, even though the NEOs’ actual year-over-year compensation did not materially increase. As a result of the accounting treatment for the PSU and time-vested RSU awards, the entire grant date fair values of these awards are included in
the “Stock Awards” column of the Summary Compensation Table, amounting to approximately $2.1 million for each of our Co-CEOs and $1.2 million for our CFO. Under our prior accounting treatment, the PSU awards would have been reported in a future year.
Each of our NEOs also received an RSU award in February 2018 as a payout from our 2016 LTI program based primarily on the achievement of a previously established adjusted multi-year pre-tax income performance goal for the two years ended December 31,
2017. Under the accounting rules, the payout of the 2016 LTI grant in RSU awards was deemed to occur in 2018 (not at the earlier time when the performance metric was set), which resulted in an additional $2.0 million in grant date fair value
included in the “Stock Awards” column of the Summary Compensation Table for each of our Co-CEOs and $800,000 for our CFO. Due to this transition in how we account for our LTI program, the reported equity compensation component of our NEOs’ total
compensation increased substantially in 2018 compared to prior years, even though the NEOs’ year-over-year actual compensation did not materially increase. Because of the three-year performance period of our prior LTI program, the grant of
time-based RSU awards in February as payouts of prior LTI programs will continue through 2020, resulting in inflated equity compensation numbers each year through 2020, with normalization occurring in 2021.
2018 LTI Award as Payout from 2016 LTI Award
. As
part of our prior LTI program, in February 2018, the Compensation Committee granted RSU awards as payouts under our prior LTI program. For the these RSU awards, the Compensation Committee had established the following threshold, target, maximum and
maximum with kicker LTI award opportunities for our Co-CEOs and CFO:
|
Named Executive
Officer |
Threshold
|
Target
|
Maximum
|
Maximum with
Kicker |
|
Dale Francescon
|
50% of target
|
100% of base salary
|
200% of target
|
250% of target
|
|
Robert J. Francescon
|
50% of target
|
100% of base salary
|
200% of target
|
250% of target
|
|
David L. Messenger
|
50% of target
|
66.6% of base salary
|
200% of target
|
250% of target
|
The performance-based metric used for the February 2018 RSU award grants was adjusted pre-tax income. However, as part of our plan to transition
to three-year performance periods, the performance period was over two years and was cumulative adjusted pre-tax income for the two years ended December 31, 2017. In February 2018, the Compensation Committee granted RSU awards to our NEOs based on
our achieved two-year cumulative adjusted pre-tax income for 2016 and 2017 in comparison to the following pre-established performance levels:
|
Performance Metric
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Maximum with Kicker ($)
|
Actual ($)
|
|
Adjusted pre-tax income
(1)
|
128.5 million
|
142.8 million
|
159.9 million
|
178.5 million
|
196.1 million
|
________________________
| (1) |
This is a non-GAAP financial measure. Adjusted pre-tax income is calculated by excluding bonus expense, acquisition expense, purchase accounting adjustment and impairments.
|
Because our achieved two-year cumulative adjusted pre-tax income exceeded the pre-established maximum with kicker performance level, our NEOs
received an actual LTI award based on maximum with kicker performance. While the Compensation Committee has discretion in the grant of these awards and reserved the right to factor in additional performance criteria, this discretion was not
exercised and no additional adjustments were made to these RSU award grants. The table below shows the various levels of LTI award opportunities and the actual LTI award value and number of RSUs earned by each of our NEOs in February 2018.
Century
Communities, Inc.
– 2019 Proxy Statement 60
|
Named Executive
Officer
|
Threshold
LTI
Award
Value ($)
|
Target LTI
Award
Value ($)
|
Maximum
LTI Award
Value ($)
|
Maximum
with Kicker
LTI Award
Value ($)
|
Actual
LTI
Award
Value ($)
|
Number
of RSUs
(#)
|
|
Dale Francescon
|
400,000
|
800,000
|
1,600,000
|
2,000,000
|
2,000,007
|
65,574
|
|
Robert J. Francescon
|
400,000
|
800,000
|
1,600,000
|
2,000,000
|
2,000,007
|
65,574
|
|
David L. Messenger
|
150,000
|
300,000
|
600,000
|
750,000
|
749,995
|
24,590
|
These RSU awards vested on the one-year anniversary of the grant date.
2019 LTI Award as Payout from 2016 LTI Award.
As
part of our prior LTI program, in February 2019, the Compensation Committee granted RSU awards as payouts under our prior LTI program. For these RSU awards, the Compensation Committee had established the following threshold, target, maximum and
maximum with kicker LTI award opportunities for our Co-CEOs and CFO:
|
Named Executive Officer
|
Threshold
|
Target
|
Maximum
|
Maximum with
Kicker |
|
Dale Francescon
|
50% of target
|
150% of base salary
|
200% of target
|
250% of target
|
|
Robert J. Francescon
|
50% of target
|
150% of base salary
|
200% of target
|
250% of target
|
|
David L. Messenger
|
50% of target
|
100% of base salary
|
200% of target
|
250% of target
|
The performance-based metric used for the February 2019 RSU award grants was cumulative adjusted pre-tax income for the three years ended December
31, 2018 in comparison to the following pre-established performance levels:
|
Performance Metric
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Maximum with
Kicker ($) |
Actual ($)
|
|
Adjusted pre-tax income
(1)
|
202.6 million
|
225.1 million
|
247.6 million
|
281.4 million
|
369.1 million
|
________________________
| (1) |
This is a non-GAAP financial measure. Adjusted pre-tax income is calculated by excluding bonus expense, acquisition expense, purchase accounting adjustment and impairments.
|
Because our achieved three-year cumulative adjusted pre-tax income exceeded the pre-established maximum with kicker performance level, our NEOs
received an actual LTI award based on maximum with kicker performance. While the Compensation Committee has discretion in the grant of these awards and reserved the right to factor in additional performance criteria, this discretion was not
exercised and no additional adjustments were made to these RSU award grants. The table below shows the various levels of LTI award opportunities and the actual LTI award value and number of RSUs earned by each of our NEOs in February 2019.
|
Named Executive Officer
|
Threshold
LTI
Award
Value ($)
|
Target LTI
Award
Value ($)
|
Maximum
LTI Award
Value ($)
|
Maximum
with Kicker
LTI Award
Value ($)
|
Actual
LTI
Award
Value ($)
|
Number
of RSUs
(#)
|
|
Dale Francescon
|
600,000
|
1,200,000
|
2,400,000
|
3,000,000
|
3,000,000
|
126,636
|
|
Robert J. Francescon
|
600,000
|
1,200,000
|
2,400,000
|
3,000,000
|
3,000,000
|
126,636
|
|
David L. Messenger
|
225,000
|
450,000
|
900,000
|
1,125,000
|
1,125,000
|
47,488
|
These RSU awards will vest on the one-year anniversary of the grant date.
Century
Communities, Inc.
– 2019 Proxy Statement 61
Long-Term Incentives – Supplemental Adjusted Summary Compensation Table
As previously discussed, due to the transition in how we account for our LTI program, the reported equity compensation component of our NEOs’ total
compensation increased substantially in 2018 compared to prior years, even though the NEOs’ year-over-year actual compensation did not materially increase. The following is summary compensation information for our NEOs, assuming the grant date fair
values of their February 2018 RSU award payouts under our prior LTI program were not included in the “Stock Awards” column. Given this adjustment, the information presented in the table below does not meet SEC requirements for the Summary
Compensation Table. This information is supplemental to, and not a substitute for, the compensation information reported in the Summary Compensation Table. Stockholders are advised to read this Adjusted Summary Compensation Table in conjunction with
the Summary Compensation Table, beginning on page 66 of this proxy statement.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
All Other
Compensation
($)
|
Total
($)
|
|
Dale Francescon
|
2018
|
850,000
|
0
|
2,099,978
|
2,506,812
|
81,558
|
5,538,348
|
|
Chairman of the Board and Co-Chief Executive Officer
|
2017
2016
|
839,453
789,583
|
0
0
|
1,275,006
2,400,000
|
2,550,000
2,318,868
|
61,396
78,000
|
4,725,855
5,586,451
|
|
|
|||||||
|
Robert J. Francescon
|
2018
|
850,000
|
0
|
2,099,978
|
2,506,812
|
81,420
|
5,538,210
|
|
Co-Chief Executive
|
2017
|
839,453
|
0
|
1,275,006
|
2,550,000
|
61,258
|
4,725,717
|
|
Officer and President
|
2016
|
789,583
|
0
|
2,400,000
|
2,318,868
|
78,000
|
5,586,451
|
|
|
|||||||
|
David L. Messenger
|
2018
|
525,000
|
0
|
1,149,965
|
951,686
|
7,002
|
2,633,653
|
|
Chief Financial Officer and Secretary
|
2017
2016
|
469,727
444,792
|
0
0
|
474,992
900,000
|
950,000
900,000
|
13,570
24,000
|
1,908,289
2,268,792
|
Other Benefits
In 2018, our NEOs had the opportunity to participate in a qualified defined contribution retirement plan on the same basis as our other employees.
We believe this plan provides an opportunity for our executives to plan for and meet their retirement savings needs. We do not provide any pension arrangements, nonqualified defined contribution or other deferred compensation plans.
We provide our NEOs with modest perquisites to attract and retain them and to allow them to more efficiently utilize their time and to support them
in effectively contributing to the success of our Company. The perquisites provided to our NEOs during 2018 included an automobile and cellular telephone allowance and, in the case of our Co-CEOs, reimbursements for term life insurance. When it is
not being used for Company purposes, the NEOs may use the corporate aircraft for non-Company purposes. In the event of such use, the NEOs are required to reimburse the Company at a lease rate equal to the aggregate incremental per hour cost of each
flight pursuant to the terms of their aircraft time sharing agreements. We believe these benefits are an important part of our overall compensation program and help us accomplish our goal of attracting, retaining, and rewarding top executive talent.
Century
Communities, Inc.
– 2019 Proxy Statement 62
EMPLOYMENT AGREEMENTS, SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS, AND POST-TERMINATION RESTRICTIONS
We have entered into employment agreements with each of our NEOs. These employment agreements are described under “
Executive Compensation —Employment and Other Agreements
.” The purpose of these agreements is to define the essential terms of these executives’ employment relationships in a manner
that will protect our business and other interests and the interests of the executive, including in the event his employment is terminated upon certain events. The severance provisions in the agreement are intended to induce these executives to
continue employment with our Company and to retain them and provide consideration to them for certain restrictive covenants that apply following a termination of employment. Additionally, we entered into these agreements because they provide us
valuable protection by subjecting these executives to restrictive covenants that prohibit the disclosure of confidential information during and following their employment and limit their ability to engage in competition with us or otherwise interfere
with our business relationships following a termination of their employment. The receipt of any severance by these executives is conditioned upon his execution of a release of claims.
In October 2018, we amended and restated the employment agreements with our Co-CEOs, the primary purpose of which was to modify the definition of
“retirement” to extend by two years (to November 1, 2020) the earliest date after which the executive may terminate employment for retirement and receive certain benefits in connection therewith so as to avoid a requirement to recognize immediately
the full stock-based accounting expense associated with equity awards held by such executives. We also made certain other changes to these agreements, including extending the term by two years by imposing a new five-year term; reflecting their
current base salaries and annual bonus opportunities and revising their cash severance provisions.
To encourage continuity, stability and retention when considering the potential disruptive impact of an actual or potential corporate transaction,
we have established change in control arrangements, including provisions in our employment agreements with our NEOs. These provisions provide our NEOs certain payments and benefits in the event of a termination of their employment in connection with
a change in control. These additional payments and benefits will not be triggered just by a change in control, but require a termination event not within the control of the executive, and thus are known as “double trigger” change in control
arrangements. These “double trigger” change in control protections are intended to induce executives to accept or continue employment with our Company, provide consideration to executives for certain restrictive covenants that apply following
termination of employment, and provide continuity of management in connection with a threatened or actual change in control transaction. If the employment of one of our NEOs is terminated by Century without cause or by him for good reason 24 months
following or in the case of our Co-CEOs, within six months preceding, a change in control, the executive will be entitled to receive a severance payment and certain benefits. The receipt of any severance is conditioned upon the executive’s execution
of a release of claims.
We believe these change in control arrangements with our NEOs are an important part of our executive compensation program in part because they
mitigate some of the risk for executives working in a smaller public company where there is a meaningful likelihood that the company may be acquired. Change in control benefits are intended to attract and retain qualified executives who, absent
these arrangements and in anticipation of a possible change in control of our Company, might consider seeking employment alternatives to be less risky than remaining with our Company through the transaction. We believe that relative to our Company’s
overall value, our potential change in control benefits are relatively small and are aligned with current peer company practices.
Century
Communities, Inc.
– 2019 Proxy Statement 63
RISK ASSESSMENT
As a result of our assessment on risk in our compensation programs, we concluded that our compensation policies, practices, and programs and
related compensation governance structure, work together in a manner so as to encourage our executives (and other employees) to pursue growth strategies that emphasize stockholder value creation, but not to take unnecessary or excessive risks that
could threaten the value of our Company. For more information on this assessment, see the discussions under “
Executive Compensation
—
Risk Assessment of Compensation Policies, Practices and Programs
.”
CLAWBACK POLICY
In November 2018, we adopted a new robust clawback policy pursuant to which we may recover cash and equity incentive compensation from current or
former officers in the event a financial metric used to determine the vesting or payment of incentive compensation to an executive was calculated incorrectly and resulted in a financial restatement.
EXECUTIVE STOCK OWNERSHIP GUIDELINES
We have established stock ownership guidelines that are intended to further align the interests of our NEOs with those of our stockholders. A
stock ownership target for each of our NEOs has been set at that number of shares of our Century common stock with a value equal to a multiple of the NEO’s annual base salary. All of our NEOs are in compliance with our stock ownership guidelines.
|
Named Executive Officer
|
Stock Ownership Target
as a Multiple of Base Salary
|
In Compliance?
|
|
Dale Francescon
|
6x
|
Yes
|
|
Robert J. Francescon
|
6x
|
Yes
|
|
David L. Messenger
|
3x
|
Yes
|
TAX CONSIDERATIONS
Prior to the enactment of the Tax Cuts and Jobs Act (Tax Act), in designing our executive compensation program, we considered the deductibility of
executive compensation under Code Section 162(m). The Tax Act, among other things, repealed the exemption from Code Section 162(m)’s deduction limit for “performance-based” compensation for taxable years beginning after December 31, 2017. Some of
our compensation plans were designed with the intention of satisfying the requirements for “performance-based” compensation as defined in Code Section 162(m) prior to the effective date of the Tax Act so that such awards would be exempt from the Code
Section 162(m) deduction limitation. While we designed these plans to operate in this manner, the Compensation Committee may administer the plans in a manner that does not satisfy such requirements in order to achieve a result that the Compensation
Committee determines to be appropriate, including by revising performance goals and/or adjustment events as needed to ensure our pay practices continue to align with performance. In addition, despite the Compensation Committee’s efforts to structure
performance-based compensation in a manner intended to be exempt from the Code Section 162(m) deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Code Section 162(m) in fact will.
Regardless of the changes to Section 162(m) as a result of the Tax Act, consistent with our executive compensation philosophy of linking pay to performance and aligning executive interests with those of our stockholders, we currently expect that we
will continue to structure our executive compensation program so that a significant portion of total executive compensation is linked to the performance of our Company.
Century
Communities, Inc.
– 2019 Proxy Statement 64
HOW WE MAKE COMPENSATION DECISIONS
There are several elements to our executive compensation decision-making, which we believe allow us to most effectively implement our compensation
philosophy. The Compensation Committee, its independent external compensation consultant and management all have a role in decision-making for executive compensation.
The following table summarizes their roles and responsibilities:
|
Responsible Party
|
Roles and Responsibilities
|
|
Compensation Committee
(Comprised solely of independent directors and reports to the Board of Directors)
|
·
Oversees all aspects of our
executive compensation program.
·
Annually reviews and approves our
corporate goals and objectives relevant to Co-CEO compensation.
·
Evaluates each Co-CEO’s performance
in light of such goals and objectives, and determines and approves his compensation based on this evaluation.
·
Determines and approves all
executive officer compensation, including salary, bonus and equity and non-equity incentive compensation.
·
Administers our equity and incentive
compensation plans and reviews and approves all equity awards and executive incentive payouts.
·
Reviews our incentive compensation
arrangements to confirm that incentive pay does not encourage unnecessary risk-taking.
·
Evaluates market competitiveness of each
executive’s compensation.
·
Evaluates proposed changes to our
executive compensation program.
·
Assists the Board in developing and
evaluating potential candidates for executive officer positions and overseeing the development of executive succession plans.
·
Has sole authority to hire
consultants, approve their fees and determine the nature and scope of their work.
|
|
Independent External Compensation Consultant
(Frederic W. Cook & Co., Inc.)
(Independent under NYSE listing standards and reports to the Compensation Committee)
|
·
Provides advice and guidance on the
appropriateness and competitiveness of our executive compensation program relative to our performance and market practice.
·
Reviews total compensation strategy and pay levels for executives.
·
Examines our executive compensation program to ensure that each element
supports our business strategy.
·
Assists in selection of peer companies and gathering competitive market data.
·
Provides advice with respect to our equity-based compensation plans.
|
|
Co-Chief Executive Officers
(With the support of other members of the management team)
|
·
Review performance of other executive
officers and make recommendations with respect to their compensation.
·
Confer with the Compensation Committee
and compensation consultant concerning design and development of compensation and benefit plans.
·
Provide no input or recommendations with
respect to their own compensation.
|
Century
Communities, Inc.
– 2019 Proxy Statement 65
The Compensation Committee has reviewed and discussed the foregoing “
Compensation Discussion and Analysi
s” with our management. Based on this review and these discussions, the Compensation Committee has recommended to the Board of Directors that the “
Compensation Discussion and Analysis
” be included in this proxy statement and in our Annual Report on Form 10-K for the year ended December 31, 2018.
|
COMPENSATION COMMITTEE
James M. Lippman, Chair
John P. Box
Keith R. Guericke
|
SUMMARY COMPENSATION TABLE
The table set forth below summarizes the compensation information for each of the individuals who served as a “principal executive officer” or
“principal financial officer” during 2018. Our Co-CEOs and CFO are our only executive officers.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
(1)
|
Stock
Awards
($)
(2)
|
Non-Equity
Incentive Plan Compensation ($) (3) |
All Other
Compensation ($) (4) |
Total
($)
|
|
Dale Francescon
|
2018
|
850,000
|
0
|
4,099,985
|
2,506,812
|
81,558
|
7,538,355
|
|
Chairman of the Board and Co-Chief Executive Officer
|
2017
2016
|
839,453
789,583
|
0
0
|
1,182,500
2,249,998
|
2,550,000
2,318,868
|
61,396
78,000
|
4,633,349
5,436,449
|
|
|
|||||||
|
Robert J. Francescon
|
2018
|
850,000
|
0
|
4,099,985
|
2,506,812
|
81,420
|
7,538,217
|
|
Co-Chief Executive
|
2017
|
839,453
|
0
|
1,182,500
|
2,550,000
|
61,258
|
4,633,211
|
|
Officer and President
|
2016
|
789,583
|
0
|
2,249,998
|
2,318,868
|
78,000
|
5,436,449
|
|
|
|||||||
|
David L. Messenger
|
2018
|
525,000
|
0
|
1,949,965
|
951,686
|
7,002
|
3,433,653
|
|
Chief Financial Officer and Secretary
|
2017
2016
|
469,727
444,792
|
0
0
|
442,496
850,002
|
950,000
900,000
|
13,570
24,000
|
1,875,793
2,218,794
|
| (1) |
We did not pay any discretionary bonuses or bonuses that are subjectively determined to any NEOs in any of the years presented. Annual cash bonuses, reported in the
“Non-Equity Incentive Plan Compensation” column, are based on performance, which is measured against pre-established performance goals.
|
| (2) |
Amounts reported for 2018 represent the grant date fair value of RSU and PSU awards granted to our NEOs, computed in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718. These are not amounts paid to or realized by the NEOs. We caution that the amounts reported in the table for stock awards and, therefore, total compensation, may not represent the
amounts that each NEO will actually realize from the awards. Whether, and to what extent, an NEO realizes value will depend on a number of factors, including Company performance and stock price. The grant date fair value of the PSU awards
assumes target levels of performance. The grant date fair value of the PSU awards assuming maximum levels of performance are as follows: Mr. Dale Francescon ($3,149,982); Mr. Robert Francescon ($3,149,982) and Mr. Messenger ($1,439,994).
|
Each of our NEOs also received an RSU award in February 2018 as a payout under our 2016 LTI program based primarily on the achievement of a
previously established adjusted multi-year pre-tax income performance goal for the two years ended December 31, 2017. Under the accounting rules, the grant of the February 2018 RSU awards was deemed to occur in 2018 (not at the earlier time when the
performance metric was set), which resulted in an additional $2.0 million in grant date fair value included in the “Stock Awards” column for each of our Co-CEOs and $800,000 for our CFO.
Century
Communities, Inc.
– 2019 Proxy Statement 66
|
Name
|
2016 LTIP
Payout ($)
|
2018 LTI
Award ($)
|
Total ($)
|
|
Dale Francescon
|
2,000,007
|
2,099,978
|
4,099,985
|
|
Robert J. Francescon
|
2,000,007
|
2,099,978
|
4,099,985
|
|
David L. Messenger
|
749,995
|
1,199,971
|
1,949,965
|
| (3) |
Amounts reported represent payouts under our short-term incentive plan and for each year reflect the amounts earned for that year but paid during the following year. See “
Compensation Discussion and Analysis—Named Executive Officer Compensation—Short-Term Incentive—Annual Cash Bonus
” for a description of our short-term
incentive plan.
|
| (4) |
Amounts reported in this column for 2018 include:
|
|
Name
|
Company
Match
Contributions
401(k) ($)
|
Auto and Cell
Phone
Allowance
($)
|
Life Insurance
Premiums
($)
|
Other
(1)
($)
|
Total Other
Compensation ($)
|
|
Dale Francescon
|
500
|
30,000
|
30,396
|
20,662
|
81,558
|
|
Robert J. Francescon
|
500
|
30,000
|
30,258
|
20,662
|
81,420
|
|
David L. Messenger
|
1,002
|
6,000
|
—
|
—
|
7,002
|
The “Other” column consists of legal fees paid by Century in connection with the negotiation of the Co-CEOs’ amended and restated employment
agreements.
EMPLOYMENT AND OTHER AGREEMENTS
Co-CEO Employment Agreements
In October 2018, we entered into an amended and restated employment agreement with each of our Co-Chief Executive Officers, Dale Francescon and
Robert J. Francescon, which has an initial five-year term and provides for automatic one-year extensions thereafter. These agreements contain customary confidentiality provisions as well as non-competition and non-solicitation provisions.
These agreements provide for an initial annual base salary of $850,000; an annual cash performance bonus opportunity at threshold equal to 87.5% of
annual base salary, at target equal to 175% of annual base salary, and at maximum equal to 350% of annual base salary; participation in our equity incentive plans; reimbursement of up to $2,500 per month for term life insurance premiums; and a $2,500
per month automobile and cell phone allowance.
No severance benefits are payable if we terminate the executive’s employment for cause or if he resigns voluntarily and without good reason and
other than by reason of retirement. If we terminate the executive’s employment due to his disability, or his employment terminates due to his death or retirement, he or his estate will be entitled to receive (i) a pro rata amount of his annual
incentive bonus for the fiscal year in which employment terminated calculated based on actual performance; (ii) a pro rata amount of the equity awards for the fiscal year or performance period in which employment terminated based on target
performance, unless actual performance exceeds target based on proration of the performance goals through the last day of the calendar quarter preceding the termination date; (iii) the immediate vesting of all equity awards granted to him not then
based on performance; and (iv) our payment for up to 18 months of that portion of his COBRA premiums that exceeds what he would have paid if he were an active employee. For purposes of the agreements, “retirement” means the executive’s voluntary
termination of his employment provided the executive: (a) has reached (or will reach on or after the termination date) the age of 60 along with at least 20 years of employment with us (for purposes of the agreements, each executive’s employment with
us is deemed to have commenced on November 1, 2000); and (b) provides us with notice of his intent to retire at least 90 days in advance of the termination date. If we terminate the executive’s employment without cause or if he terminates his
employment for good reason, he will be entitled to (i) a lump sum cash severance payment equal to two times his annual base salary; (ii) a lump sum cash payment equal to the greater of either two times his average annual bonus for the three preceding
fiscal years or two times his potential target bonus for the year in which the termination date occurs; (iii) the immediate vesting of all equity awards, including grants for the year of termination based on target performance, and for other
performance-based equity awards, determined at the greater of target or actual performance achieved against a proration of the original performance goals through the last day of the calendar quarter preceding the termination date; and (iv) our
payment for up to 18 months of that portion of his COBRA premiums that exceeds the amount he would have paid as an active employee. If we terminate the executive’s employment without cause or if he terminates his employment for good reason, within
six months preceding or within 24 months following a “change in control” (as defined in the agreements), in addition to the other payments described above (but in lieu of the payment in clauses (i) and (ii) above), the executive will receive a lump
sum cash severance payment equal to three times his base salary and a lump sum cash payment equal to the greater of: (A) three times his potential target bonus for the year in which the termination date occurs; or (B) three times his average annual
bonus for the three completed fiscal years immediately preceding the termination date. To the extent that any change in control payment or benefit would be subject to the “golden parachute” excise tax under Code Section 4999, the payments will be
reduced to an amount that will not subject the executive to the excise tax if the reduction results in him receiving a greater amount on a net after tax basis than would be received if he received the payment and benefits and paid the excise tax.
The severance payments and benefits provided for above are conditioned upon our receipt of a release of claims from the executive.
Century
Communities, Inc.
– 2019 Proxy Statement 67
CFO Employment Agreement
In November 2017, we entered into an employment agreement with our CFO, David L. Messenger. This agreement has an initial term of three years and
provides for automatic one-year extensions thereafter. Mr. Messenger’s agreement contains customary confidentiality provisions as well as non-competition and non-solicitation provisions.
This agreement provides for an initial annual base salary of $475,000 (which was subsequently raised to $550,000 for 2018); an annual cash
performance bonus opportunity at threshold equal to 50% of annual base salary, at target equal to 100% of annual base salary, and at maximum equal to 200% of annual base salary; participation in our equity incentive plans; and a $500 per month
automobile and cell phone allowance.
No severance benefits are payable if we terminate Mr. Messenger’s employment for cause or if he resigns voluntarily and without good reason. In
addition, any outstanding equity awards granted to him will be paid in accordance with their terms. If we terminate Mr. Messenger’s employment due to his disability or if his employment terminates due to his death, he or his estate will be entitled
to receive (i) the prorated amount of the annual incentive bonus for the fiscal year his employment terminated based on actual performance for that year, provided he was employed for at least 50% of the year; (ii) the prorated amount of the equity
awards he would have received for the fiscal year his employment terminated calculated based on target performance, provided he was employed for at least 50% of the performance period; (iii) the immediate vesting of all unvested equity awards granted
to him that vest based on the passage of time; and (iv) our payment for up to 18 months of that portion of the executive’s COBRA premiums that exceeds what he would have paid as an active employee. If we terminate Mr. Messenger’s employment without
cause or if he terminates his employment for good reason, he will be entitled to (i) a cash severance payment equal to his annual base salary payable as salary continuation over 12 months; (ii) the prorated amount of his annual incentive bonus for
the fiscal year his employment terminated calculated based on actual performance; (iii) the prorated amount of the equity awards for the fiscal year his employment terminated, based on target; (iv) the immediate vesting of all equity awards granted
to him that vest based on the passage of time; and (v) our payment for up to 18 months of that portion of his COBRA premiums that exceeds what he would have paid if he were an active employee. If we terminate Mr. Messenger’s employment without cause
or if he terminates his employment for good reason within 24 months following a “change in control” (as defined in the agreement), in addition to the other payments described above (but in lieu of the cash severance and prorated annual bonus
payments), Mr. Messenger will receive an amount equal to two times his annual base salary plus two times the greater of his target annual bonus for the year in which termination occurs or the average of his annual bonuses paid to him for the three
completed fiscal years immediately preceding the termination date. To the extent that any change in control payment or benefit would be subject to the “golden parachute” excise tax under Code Section 4999, the payments will be reduced to an amount
that will not subject him to the excise tax if the reduction results in him receiving a greater amount on a net after tax basis than would be received if he received the payment and benefits and paid the excise tax. The severance payments and
benefits provided for above are conditioned upon our receipt of a release of claims from Mr. Messenger.
Century
Communities, Inc.
– 2019 Proxy Statement 68
Other Agreements
In January 2018, we entered into aircraft time sharing agreements with Dale Francescon, Robert J. Francescon, and David L. Messenger, which govern
their personal use of the Company’s aircraft during their employment and their reimbursement of the Company for the costs of any such use. The lease rate payable by the executives thereunder equals the aggregate incremental per hour cost of each
flight, as such cost is described in the agreements. Use of the aircraft by the executives is subject to prior approval of the Co-Chief Executive Officers, and is at all times subordinate to use by the Company. Each of the agreements has an initial
term of one year, and provides for automatic one-year extensions thereafter, unless (i) either party provides the other with at least 30 days’ prior written notice of non-renewal, or (ii) the agreement is terminated on shorter notice as provided
therein.
Century
Communities, Inc.
– 2019 Proxy Statement 69
GRANTS OF PLAN-BASED AWARDS DURING 2018
The table below provides information concerning grants of plan-based awards to each of our NEOs during the year ended December 31, 2018.
Non-equity incentive plan awards were granted to our NEOs under our annual short-term incentive plan, the material terms of which are described under “
Compensation
Discussion and Analysis—Named Executive Officer Compensation—Short-Term Incentive-Annual Cash Bonus.
” Stock awards (in the form of RSU and PSU awards) were granted under our stockholder-approved plan, the Century Communities, Inc. 2017
Omnibus Incentive Plan. The material terms of these awards are described under “
Compensation Discussion and Analysis—Named Executive Officer
Compensation—Long-Term Incentives
” and in the notes to the table below.
|
|
Estimated Future Payouts under
Non-Equity Incentive Plan Awards (1) |
Estimated Future Payouts under
Equity Incentive Plan Awards
(2)
|
All Other
Stock
|
Grant
|
||||||||||||||
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Awards:
Number of Shares of Stock or Units (3) (#) |
Date Fair
Value
Stock and Option Awards (4)
($)
|
|||||||||
|
Dale Francescon
|
||||||||||||||||||
|
Cash award
|
—
|
743,750
|
1,487,500
|
2,975,000
|
||||||||||||||
|
RSU award
|
02/07/18
|
65,574
|
2,000,007
|
|||||||||||||||
|
RSU award
|
04/19/18
|
27,860
|
839,979
|
|||||||||||||||
|
PSU award
|
04/19/18
|
20,895
|
41,791
|
104,477
|
1,259,999
|
|||||||||||||
|
Robert J. Francescon
|
||||||||||||||||||
|
Cash award
|
—
|
743,750
|
1,487,500
|
2,975,000
|
||||||||||||||
|
RSU award
|
02/07/18
|
65,574
|
2,000,007
|
|||||||||||||||
|
RSU award
|
04/19/18
|
27,860
|
839,979
|
|||||||||||||||
|
PSU award
|
04/19/18
|
20,895
|
41,791
|
104,477
|
1,259,999
|
|||||||||||||
|
David L. Messenger
|
||||||||||||||||||
|
Cash award
|
—
|
275,000
|
550,000
|
1,100,000
|
||||||||||||||
|
RSU award
|
02/07/18
|
24,590
|
749,995
|
|||||||||||||||
|
RSU award
|
04/19/18
|
15,920
|
479,988
|
|||||||||||||||
|
PSU award
|
04/19/18
|
11,940
|
23,880
|
47,761
|
719,982
|
|||||||||||||
______________________
| (1) |
Amounts reported represent potential future payouts under our short-term incentive plan. Actual payouts under this plan are reflected in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table.
|
| (2) |
Amounts reported represent the range of PSU award payouts for the 2018 to 2020 performance period. The range includes an “above target” payout which would result in the
following payouts: Dale Francescon (83,582); Robert J. Francescon (83,582); and David L. Messenger (35,820). Information regarding the PSU awards is set forth under “
Compensation Discussion and Analysis—Named Executive Officer Compensation—Long-Term Incentives
.”
|
| (3) |
Amounts reported represent RSU awards. The RSU awards granted on February 7, 2018 were payouts under our prior LTI program upon the achievement of a performance metric that
was established in March 2016 and will vest and become issuable on the one-year anniversary of the grant date, subject to the executive’s continued employment with us. The RSU awards granted on April 19, 2018 are part of our 2018 LTI
program and will vest and become issuable in equal installments on the first, second, and third year anniversaries of the grant date, subject to the executive’s continued employment with us.
|
| (4) |
Amounts reported represent the grant date fair value of the RSU and PSU awards granted to our NEOs, computed in accordance with FASB ASC Topic 718, based on the closing price
of our common stock on the grant dates of February 7, 2018 ($30.50), and April 19, 2018 ($30.15), as reported by the NYSE, and assuming target levels of performance for the PSU awards. The RSU and PSU awards will vest upon certain
terminations of employment and upon a change in control if the award is not continued, assumed, or substituted with equivalent awards by the successor entity.
|
As previously discussed, the use of PSU awards led to a change in the accounting for our LTI program, resulting in a substantial increase in
reported equity-based compensation for our NEOs in 2018 compared to 2017, even though the NEOs’ actual year-over-year compensation did not materially increase.
Century
Communities, Inc.
– 2019 Proxy Statement 70
OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2018
The following table sets forth information with respect to all outstanding unvested RSU awards and PSU awards held by our NEOs as of December 31,
2018. No other equity awards were held by our NEOs as of December 31, 2018.
|
|
Stock Awards as of December 31, 2018
|
|||||||
|
Name
|
Number of Shares or
Units of Stock That Have Not Vested
(#)
|
Market Value of Shares
or Units of Stock that Have Not Vested (1)
($)
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (2)
(#)
|
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested (3) ($) |
||||
|
Dale Francescon
|
||||||||
|
RSU awards
(4)
|
156,422
|
2,699,844
|
||||||
|
PSU award
|
20,895
|
360,648
|
||||||
|
Robert J. Francescon
|
||||||||
|
RSU awards
(4)
|
156,422
|
2,699,844
|
||||||
|
PSU award
|
20,895
|
360,648
|
||||||
|
David L. Messenger
|
||||||||
|
RSU awards
(5)
|
64,252
|
1,108,990
|
||||||
|
PSU award
|
11,940
|
206,084
|
||||||
______________________
| (1) |
Amounts reported represent the value of RSU awards based on the number of shares of Century common stock underlying the RSU awards that have not vested multiplied by the
closing price of our common stock on December 31, 2018 ($17.26), as reported by the NYSE.
|
| (2) |
Amounts reported represent the number of PSU awards that were in progress based on actual levels of performance for 2018 and threshold levels of performance for 2019 and
2020. The 2018 to 2020 PSU awards will vest, if at all, solely based on the accomplishment of the performance goal established for the three-year performance period, which will end on December 31, 2020. In addition, the PSU awards will
vest upon certain terminations of employment and upon a change in control if the award is not continued, assumed, or substituted with equivalent awards by the successor entity.
|
| (3) |
Amounts reported represent the value of PSU awards that were in progress based on the closing price of our common stock on December 31, 2018 ($17.26), as reported by the NYSE.
|
| (4) |
Comprised of 27,860 unvested shares underlying an RSU award granted on April 19, 2018, 65,574 unvested shares underlying an RSU award granted on February 7, 2018, 10,059
unvested shares underlying an RSU award granted on March 17, 2017, and 52,929 unvested shares underlying an RSU award granted on February 10, 2016. Each of these awards vests in equal installments on the first, second, and third year
anniversaries of the respective grant dates, subject to the executive’s continued employment with us, except the RSU award granted on February 7, 2018 vests one year from the anniversary of the grant date. The RSU awards will vest upon
certain terminations of employment and upon a change in control if the award is not continued, assumed, or substituted with equivalent awards by the successor entity.
|
| (5) |
Comprised of 15,920 unvested shares underlying an RSU award granted on April 19, 2018, 24,590 unvested shares underlying an RSU award granted on February 7, 2018, 3,747
unvested shares underlying an RSU award granted on March 17, 2017, and 19,995 unvested shares underlying an RSU award granted on February 10, 2016. Each of these awards vests in equal installments on the first, second, and third year
anniversaries of the respective grant dates, subject to the executive’s continued employment with us, except the RSU award granted on February 7, 2018 vests one year from the anniversary of the grant date. The RSU awards will vest upon
certain terminations of employment and upon a change in control if the award is not continued, assumed, or substituted with equivalent awards by the successor entity.
|
Century
Communities, Inc.
– 2019 Proxy Statement 71
OPTION EXERCISES AND STOCK VESTED DURING 2018
The table below provides information regarding stock awards (in the form of RSU awards and restricted stock awards) that vested for each of our
NEOs during the year ended December 31, 2018. No PSU awards held by our NEOs vested and no option awards were exercised or outstanding during the year ended December 31, 2018.
|
|
Stock Awards
|
||||
|
Name
|
Number of
Shares Acquired
on Vesting
(1)
(#)
|
Value Realized on Vesting
(2)
($)
|
|||
|
Dale Francescon
|
|||||
|
RSU awards
|
93,672
|
2,689,859
|
|||
|
Restricted stock awards
|
43,988
|
1,429,610
|
|||
|
Robert J. Francescon
|
|||||
|
RSU awards
|
93,672
|
2,689,859
|
|||
|
Restricted stock awards
|
43,988
|
1,429,610
|
|||
|
David L. Messenger
|
|||||
|
RSU awards
|
35,263
|
1,012,565
|
|||
|
Restricted stock awards
|
11,730
|
381,225
|
|||
______________________
| (1) |
The number of shares acquired upon vesting reflects the gross number of shares acquired or becoming non-forfeitable absent netting of any shares surrendered or sold to satisfy
tax withholding requirements.
|
| (2) |
The value realized on vesting represents the gross number of shares acquired or that became non-forfeitable multiplied by the closing sale price of our common stock on the
vesting date or the last trading day prior to the vesting date if the vesting date was not a trading day, as reported by the NYSE.
|
Century
Communities, Inc.
– 2019 Proxy Statement 72
|
POTENTIAL POST-TERMINATION AND CHANGE IN
CONTROL PAYMENTS
|
Employment Agreements
As previously described, the employment agreements with each of our NEOs contains severance provisions, including in connection with a change in
control, intended to induce these executives to continue employment with our Company and to retain them and provide consideration to them for certain restrictive covenants that apply following a termination of employment. The receipt of any
severance by these executives is conditioned upon his execution of a release of claims. These employment agreements are described under “
Executive Compensation
—Employment and Other Agreements
.”
Other Change in Control Arrangements
The Century Communities, Inc. 2017 Omnibus Incentive Plan under which awards have been granted to our NEOs contains “change in control”
provisions. Under the plan, without limiting the authority of the Compensation Committee to adjust awards, if a “change in control” of Century (as defined in the plan) occurs, then, unless otherwise provided in the award or other agreement, if an
award is continued, assumed, or substituted by the successor entity, the award will not vest or lapse solely as a result of the change of control but will instead remain outstanding under the terms pursuant to which it has been continued, assumed, or
substituted and will continue to vest or lapse pursuant to such terms. If the award is continued, assumed, or substituted by the successor entity and within two years following the change in control the executive is either terminated by the
successor entity without “cause” or, if the executive is an executive officer of Century, resigns for “good reason,” each as defined in the plan, or if outstanding awards that are not continued, assumed, or substituted with equivalent awards by the
successor entity in connection with the change in control, then:
| · |
all restrictions imposed on restricted stock, RSU awards, or deferred units that are not performance-based held by such participant will lapse;
|
| · |
all vested and earned awards that are performance-based held by such participant for which the performance period has been completed as of the date of such termination,
resignation or change in control, as applicable, but have not yet been paid, will be paid in cash or shares and at such time as provided in the award agreement; and
|
| · |
all performance-based awards for which the performance period has not been completed as of the date of such termination, resignation or change in control, as applicable, held
by such participant will immediately vest and be earned in full and paid out with respect to each performance goal based on actual performance achieved through the date of termination, resignation or change in control, as applicable, with
the manner of payment to be made in cash or shares, as provided in the award agreement, within 30 days following the date of termination, resignation or change in control, as applicable, and provided that if payment in the change in control
transaction is made in shares, the Compensation Committee may in its discretion provide the holder the consideration provided to other similarly situated stockholders in the change in control.
|
Century Communities, Inc.
– 2019 Proxy Statement 73
Potential Payments to Named Executive Officers
The table below shows potential payments to our NEOs, not otherwise earned, under various scenarios involving a termination of employment,
including in connection with a change in control, and upon a change in control without a termination of employment, assuming a December 31, 2018 termination date. All equity awards are valued at the closing price of our common stock on as of
December 31, 2018 ($17.26), as reported by the NYSE.
|
Name
|
Benefit
|
Termination
without Cause or for Good Reason Outside a Change in Control
($)
|
Termination
without Cause or for Good Reason in Connection with a Change in Control
($)
|
Voluntary
Termination/ Retirement (1)
($)
|
Death or
Disability
($)
|
Change in
Control (2)
($)
|
||||||
|
Dale Francescon
|
Severance Pay
(3)
|
1,700,000
|
2,550,000
|
—
|
—
|
—
|
||||||
|
Incentive Pay
(4)
|
4,245,912
|
6,368,868
|
—
|
—
|
—
|
|||||||
|
RSU Award Vesting
|
2,699,844
|
2,699,844
|
—
|
2,699,844
|
—
|
|||||||
|
PSU Award Vesting
(5)
|
721,313
|
721,313
|
—
|
240,432
|
—
|
|||||||
|
LTI Award Vesting
(6)
|
3,892,500
|
3,892,500
|
—
|
3,595,000
|
—
|
|||||||
|
Other Benefits
(7)
|
31,997
|
31,997
|
—
|
31,997
|
—
|
|||||||
|
Robert J. Francescon
|
Severance Pay
(3)
|
1,700,000
|
2,550,000
|
—
|
—
|
—
|
||||||
|
Incentive Pay
(4)
|
4,245,912
|
6,368,868
|
—
|
—
|
—
|
|||||||
|
RSU Award Vesting
|
2,699,844
|
2,699,844
|
—
|
2,699,844
|
—
|
|||||||
|
PSU Award Vesting
(5)
|
721,313
|
721,313
|
—
|
240,432
|
—
|
|||||||
|
LTI Award Vesting
(6)
|
3,892,500
|
3,892,500
|
—
|
3,595,000
|
—
|
|||||||
|
Other Benefits
(7)
|
43,787
|
43,787
|
—
|
43,787
|
—
|
|||||||
|
David L. Messenger
|
Severance Pay
(8)
|
550,000
|
1,100,000
|
—
|
—
|
—
|
||||||
|
Incentive Pay
(9)
|
—
|
1,633,333
|
—
|
—
|
—
|
|||||||
|
RSU Award Vesting
|
1,108,990
|
1,108,990
|
—
|
1,108,990
|
—
|
|||||||
|
PSU Award Vesting
(10)
|
137,390
|
137,390
|
—
|
—
|
—
|
|||||||
|
LTI Award Vesting
(11)
|
450,000
|
450,000
|
—
|
450,000
|
—
|
|||||||
|
Other Benefits
(7)
|
39,378
|
39,378
|
—
|
39,378
|
—
|
| (1) |
While the Co-CEOs are entitled to certain benefits under their employment agreements in the event of a retirement, neither executive currently meets the definition of
retirement in their agreement to be entitled to such benefits.
|
| (2) |
Assumes equity awards are continued, assumed, or substituted with equivalent awards by the successor entity. If the equity awards are not continued, assumed, or substituted
with equivalent awards by the successor entity, then the RSU awards will become immediately vested and issuable, resulting in a value of $2,699,844 in the case of the Co-CEOs and $1,108,990 in the case of the CFO, and the PSU awards will
automatically vest based on actual performance, resulting in a value of $360,648 in the case of the Co-CEOs and $206,084 in the case of the CFO.
|
| (3) |
Represents: (a) two times the executive’s base salary in the event of a termination without cause or for good reason outside a change in control; and (b) three times the
executive’s base salary in the event of a termination without cause or for good reason in connection with a change in control.
|
| (4) |
Represents: (a) the greater of: (i) the sum of two times the executive’s target annual bonus for the year in which the date of termination occurs; or (ii) the sum of two times
the executive’s average annual bonus for the three completed fiscal years immediately preceding the date of termination in the event of a termination without cause or for good reason outside a change in control; and (b) the greater of: (i)
the sum of three times the executive’s target annual bonus for the year in which the date of termination occurs; or (ii) the sum of three times the executive’s average annual bonus for the three completed fiscal years immediately preceding
the date of termination in the event of a termination without cause or for good reason in connection with a change in control. In the case of a termination due to death, disability or retirement, the executive is entitled to his prorated
target or actual earned 2018 bonus, whichever is higher, and which amount ($2,506,812) is not included since it was earned as of December 31, 2018.
|
Century Communities, Inc.
– 2019 Proxy Statement 74
| (5) |
Represents the value of shares of our common stock that the executive would have been entitled to receive as payout of the PSU awards for the 2018 to 2020 performance period.
In the event of a termination without cause or for good reason outside the context of or in connection with a change in control, the value is based on the greater of (a) the number of PSU award shares at target, and (b) the number of PSU
award shares based on actual performance and performance goals prorated to the last day of the calendar quarter preceding the executive’s termination. In the event of a termination due to death or disability, the value is based on the
greater of (a) the prorated number of PSU award shares at target, and (b) the prorated number of PSU award shares based on actual performance and performance goals prorated to the last day of the calendar quarter preceding the executive’s
termination.
|
| (6) |
Represents: (a) full payout of 2016-2018 LTI awards assuming maximum with kicker performance and full payout of 2017-2019 LTI awards assuming target performance in the event
of a termination without cause or for good reason outside the context of or in connection with a change in control; and (b) full payout of 2016-2018 LTI awards assuming maximum with kicker performance and prorated payout of 2017-2019 LTI
awards assuming target performance in the event of a termination due to death or disability.
|
| (7) |
Represents our portion of the applicable COBRA premium for 18 months of continued coverage under our medical benefits plan.
|
| (8) |
Represents: (a) the executive’s current base salary in the event of a termination without cause or for good reason outside a change in control; and (b) two times the
executive’s annual base salary in the event of a termination without cause or for good reason in connection with a change in control.
|
| (9) |
Represents two times the higher of: the executive’s target annual bonus for the year in which the date of termination occurs or the average annual bonus paid to the executive
for the three completed fiscal years immediately preceding the date of termination, in the event of a termination without cause or for good reason in connection with a change in control. In the case of a termination without cause or for
good reason outside a change in control or due to death or disability, the executive is entitled to his prorated actual earned 2018 bonus ($951,686), which amount is not included in the table since it was earned as of December 31, 2018.
|
| (10) |
Represents the value of the prorated number of shares of our common stock the executive would have been entitled to receive as payout of the PSU awards for the 2018 to 2020
performance period at target.
|
|
(11)
|
Represents full payout of 2016-2018 LTI award assuming target performance and no payout of 2017-2019 LTI awards since as of December 31, 2018 the executive
was employed for less than 50% of the performance period.
|
Century Communities, Inc.
–
2019 Proxy Statement 75
|
CEO PAY RATIO DISCLOSURE
|
Under Section 953(b) of the Dodd-Frank Act and Item 402(u) of SEC Regulation S-K, we are required to provide the ratio of the annual total
compensation of each of Dale Francescon, our Co-CEO, and Robert J. Francescon, our Co-CEO, to the median of the annual total compensation of all employees of our company (other than our Co-CEOs). This ratio is a reasonable estimate calculated in a
manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for identifying the “median employee” and calculating the pay ratio based on that employee's annual total compensation
allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Accordingly, the pay ratio reported by other companies may not be
comparable to the pay ratio reported by us, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their pay ratios.
For 2018:
| · |
the annual total compensation of our Co-CEOs was $7,517,693, in the case of Dale Francescon, and $7,517,555, in the case of Robert J. Francescon;
|
| · |
the annual total compensation of the employee identified at median of our Company (other than our Co-CEOs), was $94,381;
|
| · |
based on this information, the ratio of the annual total compensation of each of our Co-CEOs to the annual total compensation of our median employee (identified in accordance
with SEC rules and as described in greater detail below) was estimated to be 80:1; and
|
| · |
excluding the portion of equity-based compensation attributable to the 2016 LTI payouts ($2.0 million), the CEO pay ratio is 58:1.
|
To identify our median employee and to calculate the annual total compensation of our median employee and that of our co-CEOs, we used the
following methodology, assumptions, and estimates:
| · |
Selection of Determination Date and Employee Population
.
As permitted under SEC rules, we selected December 31, 2018 as the date to identify our employee population and “median employee”. We determined that, as of December 31, 2018, our entire employee population, excluding our Co-CEOs, consisted
of 1,377 total employees. In determining this population, we considered the employees of our subsidiaries and all of our employees other than our Co-CEOs, whether employed on a full-time, part-time, temporary, or seasonal basis. We did
not include any contractors or other non-employee workers in our employee population.
|
| · |
Identification of Median Employee
. To identify the “median
employee” from our employee population, we selected W-2 earnings as the most appropriate measure of compensation. To make them comparable, the W-2 earnings for newly hired permanent employees who had worked less than a year were
annualized.
|
| · |
Calculation of Annual Total Compensation
. We then
calculated annual total compensation for this median employee and each of our Co-CEOs using the same methodology we use for our named executive officers as set forth in our Summary Compensation Table included under “—
Summary Compensation Table
.”
|
Century Communities, Inc. – 2019 Proxy
Statement 76
|
COMPENSATION RISK ASSESSMENT
|
As a result of our annual assessment on risk in our compensation programs, we concluded that our compensation policies, practices, and programs and
related compensation governance structure work together in a manner so as to encourage our employees, including our NEOs, to pursue growth strategies that emphasize stockholder value creation, but not to take unnecessary or excessive risks that could
threaten the value of our company. As part of our assessment, we noted in particular the following:
| · |
annual base salaries for employees are not subject to performance risk and, for most non-executive employees, constitute the largest part of their total compensation;
|
| · |
performance-based, or at risk, compensation awarded to our employees, which for our higher-level employees constitutes the largest part of their total compensation, is
appropriately balanced between annual and long-term performance and cash and equity compensation and utilizes several different performance measures and goals that are drivers of long-term success for our Company and stockholders, and has
appropriate maximums; and
|
| · |
a significant portion of performance-based compensation is in the form of long-term equity incentives, which do not encourage unnecessary or excessive risk because they
generally have a three-year performance period or vest over a three-year period of time, thereby focusing our employees on our long-term interests.
|
As a matter of best practice, we will continue to monitor our compensation policies, practices, and programs to ensure that they continue to align
the interests of our employees, including in particular our executive officers, with those of our long-term stockholders while avoiding unnecessary or excessive risk.
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
|
None of the members of Compensation Committee has or had any relationship requiring disclosure under Item 404 of SEC Regulation S-K or has ever
been an officer or employee of Century or any of our subsidiaries. None of our executive officers serves, or in the past has served, as a member of the Compensation Committee, or other committee serving an equivalent function, of any entity that has
one or more executive officers who serve as members of the Board or the Compensation Committee.
Century Communities, Inc.
– 2019 Proxy Statement 77
|
OVERVIEW
|
Our non-employee director compensation program generally is designed to attract and retain experienced and knowledgeable directors and to provide
equity-based compensation to align the interests of our directors with those of our stockholders. In 2018, our non-employee director compensation was comprised of equity compensation, in the form of annual RSU awards, and cash compensation, in the
form of annual retainers. Each of these components is described in more detail below. Dale Francescon and Robert J. Francescon, as employee directors, do not receive any additional compensation for their service as directors.
|
DIRECTOR COMPENSATION PROCESS
|
The Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to review and recommend to the Board any
proposed changes in non-employee director compensation. In connection with such review, the Compensation Committee is assisted in performing its duties by our Human Resources Department and also engages an independent external compensation
consultant to provide analysis regarding non-employee director compensation.
During 2018, the Compensation Committee engaged FW Cook to review our non-employee director compensation. FW Cook’s review consisted of, among
other things, analysis of board compensation trends and a competitive assessment based on a selected group of companies operating in the United States that are similarly situated to us from a revenue and market capitalization perspective. The peer
group used for this analysis was the same peer group used for the executive compensation analysis. The Compensation Committee considered this data in determining whether to recommend any changes to our non-employee director compensation program.
Overall, the review by FW Cook showed that our non-employee director compensation program was aligned with market trends from a design perspective and aligned with our target positioning from a compensation level standpoint, other than certain Board
committee chair roles and the equity component. Accordingly, on May 9, 2018, the Board of Directors, upon recommendation of the Compensation Committee, approved the following changes to our non-employee director compensation program during 2018:
| · |
increase the additional cash retainer to be paid to the Chair of the Audit Committee from $14,000 to $15,000;
|
| · |
increase the additional cash retainer to be paid to the Chair of the Compensation Committee from $10,000 to $12,500;
|
| · |
increase the Black-Scholes value of the annual restricted stock unit awards to be granted to each non-employee director who is initially elected or re-elected by the
Company’s stockholders at each annual meeting of stockholders from $100,000 to $120,000 and change the vesting of such annual restricted stock unit awards from a 3-year ratable vesting to a 1-year cliff vesting; and
|
| · |
change the stock ownership guideline for each director from 3 times the director’s annual Board cash retainer to 5 times the director’s annual Board cash retainer.
|
Century Communities, Inc.
– 2019 Proxy Statement 78
|
DIRECTOR COMPENSATION PROGRAM
|
The following table sets forth our non-employee director compensation program for 2018.
|
2018
(Before May 9, 2018)
($)
|
2018
(After May 9, 2018)
($)
|
|
|
Board Member Retainer
|
75,000
|
75,000
|
|
Audit Committee Chair Premium
|
14,000
|
15,000
|
|
Audit Committee Member Retainer
|
11,000
|
11,000
|
|
Compensation Committee Chair Premium
|
10,000
|
12,500
|
|
Compensation Committee Member Retainer
|
10,000
|
10,000
|
|
Nominating and Corporate Governance Committee Chair Premium
|
10,000
|
10,000
|
|
Nominating and Corporate Governance Committee Member Retainer
|
10,000
|
10,000
|
|
Annual RSU Award
|
100,000
|
120,000
|
The annual RSU award for 2018 was granted under the Century Communities, Inc. 2017 Omnibus Incentive Plan and vests in full on the one-year
anniversary of the grant date, subject to continued service on the Board. The number of shares of our common stock underlying each annual RSU award is determined by dividing the $120,000 equity value by the closing price of our common stock on the
date of grant.
We also reimburse our non-employee directors for reasonable out-of-pocket expenses incurred in connection with the performance of their duties as
directors, including, without limitation, travel expenses in connection with their attendance in-person at Board and Board committee meetings.
|
SUMMARY DIRECTOR COMPENSATION TABLE FOR 2018
|
The following table sets forth information concerning the compensation of our non-employee directors during the year ended December 31, 2018. Each
of Dale Francescon and Robert J. Francescon is not compensated separately for his service as a director, and his compensation is discussed under “
Executive
Compensation
.”
|
Name
|
Fees Earned or
Paid in Cash
($)
|
Stock
Awards
(1)(2)
($)
|
All Other
Compensation (3)
($)
|
Total
($)
|
||||
|
John P. Box
|
116,000
|
119,970
|
—
|
235,970
|
||||
|
Keith R. Guericke
|
120,000
|
119,970
|
—
|
239,970
|
||||
|
James M. Lippman
|
118,500
|
119,970
|
—
|
238,470
|
| (1) |
The amounts reflected represent the grant date fair value of RSU awards for 3,927 shares computed in accordance with FASB ASC Topic 718.
|
| (2) |
As of December 31, 2018, each director held unvested RSU awards for 8,401 shares.
|
| (3) |
We do not provide perquisite and other personal benefits to our non-employee directors.
|
Century Communities, Inc.
– 2019 Proxy Statement 79
|
POLICIES AND PROCEDURES FOR REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS
|
Our Code of Business Conduct and Ethics outlines the principles, policies, and values that govern the activities of Century, including with respect
to conflicts of interest. It is specifically required by our Code of Business Conduct and Ethics that any transaction involving a conflict of interest be approved by a vote of a majority of Century’s disinterested and independent directors. Our
Chief Financial Officer is generally responsible for overseeing and monitoring compliance with respect to transactions involving conflicts of interest. On any new related party transactions, if the party involved in the transaction is a member of
the Board of Directors, such member of the Board is required to recuse or abstain from involvement in the decision. In addition, the charter of our Audit Committee requires the Audit Committee to approve or ratify all related party transactions. On
a quarterly basis, the Board reviews all existing related party transactions and any new transactions that are brought to the attention of either management or the Board.
|
TRANSACTIONS WITH RELATED PERSONS
|
For the period beginning on January 1, 2018, to the date of this proxy statement, the following are our current arrangements with a related party:
Employment and Other Agreements with Named Executive Officers
We have entered into an employment agreement with each of our Co-Chief Executive Officers, Dale Francescon and Robert J. Francescon, and our Chief
Financial Officer, David L. Messenger. These agreements were entered into with these individuals in connection with their capacities as officers, and provide for salary, bonus, and other benefits, including the grant of equity awards, and severance
upon a termination of employment under certain circumstances. In January 2018, we entered into aircraft time sharing agreements with our Co-Chief Executive Officers, Dale Francescon and Robert J. Francescon, and our Chief Financial Officer, David L.
Messenger. Please see the sections above entitled “
Executive Compensation—Employment and Other Agreements
” for a description of these agreements.
Indemnification Agreements
We have entered into an indemnification agreement with each of our directors, Co-Chief Executive Officers, and Chief Financial Officer. These
agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us and to advance expenses incurred as a result of any proceeding against them as
to which they could be indemnified. We believe that the limitation of liability provision in our charter and the indemnification agreements will facilitate our ability to continue to attract and retain qualified individuals to serve as directors and
officers.
Other Related Party Transactions
We intend to hire James Francescon, the son of Robert J. Francescon, our Co-Chief Executive Officer, as Corporate Vice President commencing on or
about April 30, 2019. Pursuant to the terms of his offer letter, Mr. James Francescon will receive annual compensation of $159,000, including base salary and monthly auto/cell allowance, and is eligible to earn an annual discretionary bonus. Mr.
James Francescon’s annual compensation is commensurate with that of his peers. In addition, Mr. James Francescon has committed to purchase a Century Communities home for approximately $1.1 million at a closing to be held at the end of March 2019.
Century Communities, Inc.
– 2019 Proxy Statement 80
SIGNIFICANT BENEFICIAL OWNERS
|
|
The table below sets forth information as to entities that have reported to the SEC or have otherwise advised us that they are a beneficial owner,
as defined by the SEC’s rules and regulations, of more than five percent of our outstanding common stock.
|
Class of Securities
|
Name and Address of
Beneficial Owner
|
Number of Shares Beneficially Owned
|
Percent of Class
(1)
|
|
Common Stock
|
Long Pond Capital, LP
(2)
527 Madison Avenue, 15
th
Floor
New York, NY 10022
|
2,608,876
|
8.6%
|
|
Common Stock
|
Dimensional Fund Advisors LP
(3)
Building One
6300 Bee Cave Road
Austin, TX 78746
|
2,583,310
|
8.5%
|
|
Common Stock
|
BlackRock, Inc.
(4)
55 East 52nd Street
New York, NY 10055
|
2,147,738
|
7.1%
|
|
Common Stock
|
Dale Francescon
(5)
8390 East Crescent Parkway, Suite 650
Greenwood Village, CO 80111
|
2,137,341
|
7.1%
|
|
Common Stock
|
Robert J. Francescon
(6)
8390 East Crescent Parkway, Suite 650
Greenwood Village, CO 80111
|
1,975,370
|
6.5%
|
|
Common Stock
|
Oaktree Value Equity Holdings, L.P., et al.
(7)
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
|
1,819,003
|
6.0%
|
| (1) |
Percent of class is based on 30,297,398 shares of our common stock outstanding as of our record date, March 14, 2019.
|
| (2) |
Based solely on information contained in a Schedule 13G of Long Pond Capital, LP, a hedge fund, filed with the SEC on February 14, 2019, reflecting beneficial ownership as of
December 31, 2018, with shared investment discretion with respect to 2,608,876 shares and shared voting power with respect to 2,608,876 shares. Investment discretion and voting power are shared with Long Pond Capital GP, LLC, the general
partner of Long Pond Capital, LP, and John Khoury, the principal of Long Pond Capital, LP. Any of the parties may direct the vote of these shares.
|
| (3) |
Based solely on information contained in a Schedule 13G of Dimensional Fund Advisors LP, an investment adviser, filed with the SEC on February 8, 2019, reflecting beneficial
ownership as of December 31, 2018, with sole investment discretion with respect to 2,583,310 shares and sole voting authority with respect 2,493,313 shares. Dimensional Fund Partners LP does not have shared voting or dispositive power over
any of the shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company
Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts, and separate accounts (such investment companies, trusts, and accounts, collectively referred to as the Funds). In certain cases,
subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser, and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively,
Dimensional) may possess voting and/or investment power over the shares that are owned by the Funds and may be deemed to be the beneficial owner of the shares held by the Funds. However, all shares are owned by the Funds. Dimensional
disclaims beneficial ownership of such shares.
|
Century
Communities, Inc.
– 2019 Proxy Statement 81
| (4) |
Based solely on information contained in a Schedule 13G of BlackRock, Inc., a parent holding company, filed with the SEC on February 4, 2019, reflecting beneficial ownership
as of December 31, 2018, with sole investment discretion with respect to 2,147,738 shares and sole voting authority with respect 2,085,337 shares. BlackRock, Inc. does not have shared voting or dispositive power over any of the shares.
|
| (5) |
Based in part on information contained in a Schedule 13G/A filed by Dale Francescon with the SEC on February 13, 2019, reflecting beneficial ownership as of December 31,
2018. Includes 293,263 shares of our common stock directly owned by Dale Francescon, 250,000 shares of common stock held by the Dale Francescon Roth IRA and 1,579,762 shares of our common stock beneficially owned through Dale Francescon’s
ownership interest in DF Century, LLC, an entity controlled by him. Also includes 14,316 shares of common stock issuable upon the vesting of restricted stock unit awards within 60 days of March 14, 2019.
|
| (6) |
Based in part on information contained in a Schedule 13G/A filed by Robert J. Francescon with the SEC on February 13, 2019, reflecting beneficial ownership as of December 31,
2018. Includes 218,261 shares of our common stock directly owned by Robert J. Francescon, 250,000 shares of common stock held by the Robert J. Francescon Roth IRA and 1,492,793 shares of our common stock beneficially owned through Robert
J. Francescon’s ownership interest in RJF Century, LLC, an entity controlled by him. Also includes 14,316 shares of common stock issuable upon the vesting of restricted stock unit awards within 60 days of March 14, 2019.
|
| (7) |
Based solely on information contained in a Schedule 13G/A that was jointly filed with the SEC on February 9, 2018, by Oaktree Value Equity Holdings, L.P., Oaktree Value Equity
Fund GP, L.P., Oaktree Value Equity Fund GP Ltd., Oaktree Value Equity Fund-SP, L.P., Oaktree Value Equity Fund-SP GP, L.P., Oaktree Capital Management, L.P., Oaktree Holdings, Inc., Oaktree Fund GP I, L.P., Oaktree Capital I, L.P., OCM
Holdings I, LLC, Oaktree Holdings, LLC, Oaktree Capital Group, LLC, and Oaktree Capital Group Holdings GP, LLC (collectively, the Oaktree Entities), reflecting beneficial ownership as of December 31, 2018. Aggregate beneficial ownership
reported by the Oaktree Entities is based on the direct ownership of 1,819,003 shares by Oaktree Value Equity Holdings, L.P. Oaktree Value Equity Holdings, L.P. beneficially owns more than 5% of the outstanding shares of our common stock.
|
Century
Communities, Inc.
– 2019 Proxy Statement 82
SECURITY OWNERSHIP BY MANAGEMENT
|
|
The table below sets forth information known to us regarding the beneficial ownership of our common stock as of March 14, 2019, by:
| · |
each of our directors;
|
| · |
each of the individuals named in the “Summary Compensation Table” under “
Executive
Compensation
” beginning on page 66; and
|
| · |
all of our directors and executive officers as a group.
|
To our knowledge, each person named in the table has sole voting and investment power with respect to all of the securities shown as beneficially
owned by such person, except as otherwise set forth in the notes to the table and subject to community property laws, where applicable. The number of shares beneficially owned represents the number of shares the person “beneficially owns,” as
determined by the rules of the SEC. The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power. A stockholder is also deemed to be, as of any date, the beneficial
owner of all securities that such stockholder has the right to acquire within 60 days after that date through (i) the vesting of restricted stock units or the exercise of any option, warrant, or right; (ii) the conversion of a security; (iii) the
power to revoke a trust, discretionary account, or similar arrangement; or (iv) the automatic termination of a trust, discretionary account, or similar arrangement.
|
Class of Securities
|
Name of Beneficial Owner
|
Title/Position
|
Number of Shares Beneficially Owned
(1)
|
Percent of Class
(2)
|
|
Common Stock
|
Dale Francescon
(3)
|
Chairman of the Board and
Co-Chief Executive Officer
|
2,137,341
|
7.1%
|
|
Common Stock
|
Robert J. Francescon
(4)
|
Co-Chief Executive Officer,
President, and Director
|
1,975,370
|
6.5%
|
|
Common Stock
|
John P. Box
|
Director
|
34,867
|
*
|
|
Common Stock
|
Keith R. Guericke
|
Director
|
21,950
|
*
|
|
Common Stock
|
James M. Lippman
|
Director
|
23,367
|
*
|
|
Common Stock
|
David L. Messenger
|
Chief Financial Officer and Secretary
|
131,929
|
*
|
|
Common Stock
|
All directors and executive officers as a group (6 persons)
|
4,324,824
|
14.2%
|
| * |
Indicates beneficial ownership of less than 1% of the total outstanding common stock.
|
| (1) |
Includes for the persons listed below the following shares of common stock issuable upon the vesting of restricted stock unit awards within 60 days of March 14, 2019:
|
|
Name
|
Number of Restricted Stock Units
|
|
Dale Francescon
|
14,316
|
|
Robert J. Francescon
|
14,316
|
|
John P. Box
|
7,117
|
|
Keith R. Guericke
|
7,117
|
|
James M. Lippman
|
7,117
|
|
David L. Messenger
|
7,180
|
Century
Communities, Inc.
– 2019 Proxy Statement 83
| (2) |
Percent of class is based on 30,297,398 shares of our common stock outstanding as of our record date, March 14, 2019.
|
| (3) |
Based in part on information contained in a Schedule 13G/A filed by Dale Francescon with the SEC on February 13, 2019, reflecting beneficial ownership as of December 31,
2018. Includes 293,263 shares of our common stock directly owned by Dale Francescon, 250,000 shares of common stock held by the Dale Francescon Roth IRA and 1,579,762 shares of our common stock beneficially owned through Dale Francescon’s
ownership interest in DF Century, LLC, an entity controlled by him. See also note (1) above.
|
| (4) |
Based in part on information contained in a Schedule 13G/A filed by Robert J. Francescon with the SEC on February 13, 2019, reflecting beneficial ownership as of December 31,
2018. Includes 218,261 shares of our common stock directly owned by Robert J. Francescon, 250,000 shares of common stock held by the Robert J. Francescon Roth IRA and 1,492,793 shares of our common stock beneficially owned through Robert
J. Francescon’s ownership interest in RJF Century, LLC, an entity controlled by him. See also note (1) above.
|
STOCK OWNERSHIP GUIDELINES
|
|
We have established stock ownership guidelines that are intended to further align the interests of our directors and named executive officers with
those of our stockholders. The stock ownership guidelines for our non-employee directors and named executive officers are as follows:
|
Position
|
Guideline
|
|
Non-Employee Director
|
5x annual cash retainer
|
|
Co-Chief Executive Officers
|
6x annual base salary
|
|
Other Named Executive Officers
|
3x annual base salary
|
Each director and named executive officer has five years from the date of appointment or hire or, if the ownership multiple has increased during
his tenure, five years from the date established in connection with such increase to reach his stock ownership targets. Until the applicable stock ownership target is achieved, each director and Co-Chief Executive Officer subject to the guidelines
is required to retain an amount equal to 100% of the net shares received as a result of the vesting of restricted stock awards or restricted stock unit awards, and other named executive officers are required to retain an amount equal to 60% of the
net shares received as a result of the vesting of restricted stock awards or restricted stock unit awards. All of our directors and named executive officers are in compliance with our stock ownership guidelines.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
|
Section 16(a) of the Exchange Act requires our executive officers, directors, and persons who own more than 10% of a registered class of our equity
securities to file reports of ownership and changes in ownership with the SEC and the NYSE. Executive officers, directors, and greater than 10% stockholders are required to furnish us with copies of all Section 16(a) forms they file. To our
knowledge, based on the information furnished by the reporting persons, we believe that all Section 16(a) filing requirements applicable to our executive officers, directors, and greater than 10% stockholders were complied with on a timely basis
during the year ended December 31, 2018, except that each of Dale Francescon, Robert J. Francescon, David L. Messenger, and Scott Dixon filed one late report on Form 4 reporting the vesting and withholding of shares received pursuant to the vesting
of restricted stock units.
Century
Communities, Inc.
– 2019 Proxy Statement 84
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
|
|
The table below provides information about our common stock that may be issued under our equity compensation plans as of December 31, 2018.
|
Plan Category
|
Number of Securities to
be Issued upon Exercise of Outstanding Options, Warrants, and Rights (a) |
Weighted-
Average Exercise
Price of Outstanding Options, Warrants, and Rights (b) |
Number of Securities
Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
|||||||||
|
Equity compensation plans approved by security holders
|
696,400
|
(1)
|
$
|
0.00
|
(2)
|
993,947
|
||||||
|
Equity compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||||
|
Total
|
696,400
|
(1)
|
$
|
0.00
|
(2)
|
993,947
|
||||||
| (1) |
Amount includes 377,344 shares of our common stock issuable upon the vesting of RSU awards granted under the Century Communities, Inc. 2017 Omnibus Incentive Plan, 211,594
shares of our common stock issuable upon the vesting of RSU awards granted under the Century Communities, Inc. First Amended & Restated 2013 Long-Term Incentive Plan, and 107,462 outstanding PSU awards under the 2017 plan, assuming a
maximum level of achievement. The actual number of shares that will be issued under the PSU awards is determined by the level of achievement of a performance goal.
|
| (2) |
RSU and PSU awards do not have exercise prices and, therefore, have been excluded from the weighted-average exercise price calculation in column (b).
|
Century
Communities, Inc.
– 2019 Proxy Statement 85
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2020 ANNUAL MEETING OF STOCKHOLDERS
|
|
Date of 2020 Annual Meeting of Stockholders
We anticipate that our 2020 Annual Meeting of Stockholders (2020 Annual Meeting) will be held on Wednesday, May 6, 2020.
Proposals Pursuant to Rule 14a-8
Pursuant to Rule 14a-8 under the Exchange Act, our stockholders may present proper proposals for inclusion in the proxy statement and for
consideration at our next annual meeting of stockholders. To be eligible for inclusion in the 2020 proxy statement, a proposal must be received by us no later than November 26, 2019, and must otherwise comply with Rule 14a-8. While the Board will
consider stockholder proposals, we reserve the right to omit from the proxy statement stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
Nominations and Proposals Pursuant to Our Bylaws
Under our Bylaws, a stockholder wishing to nominate a candidate for election to the Board, or propose other business for consideration, at the 2020
Annual Meeting of Stockholders is required to give written notice of such stockholder’s intention to make such a nomination or proposal to our Corporate Secretary at our principal executive offices at 8390 East Crescent Parkway, Suite 650, Greenwood
Village, Colorado 80111, Attention: Corporate Secretary. In order for a stockholder proposal for director nominations or other business, outside of Rule 14a-8 under the Exchange Act, to come before the 2020 Annual Meeting of Stockholders, such
notice of nomination or proposal must be made in accordance with our Bylaws, which require appropriate notice to us of the nomination or proposal not less than 90 days nor more than 120 days prior to the date of such Annual Meeting of Stockholders.
A notice of nomination or proposal is also required to contain specific information as required by our Bylaws. A nomination which does not comply with the requirements of our Bylaws may not be considered. The Nominating and Corporate Governance
Committee will consider validly nominated director candidates and will provide its recommendations to the Board. In general, to be timely, we must receive the notice of nomination or proposal not later than the 90
th
day nor earlier than the 120
th
day prior to the date of the first anniversary of the 2019 Annual Meeting. In
this regard, we must receive the notice of nomination or proposal no earlier than January 8, 2020, and no later than February 7, 2020.
COST OF SOLICITATION OF PROXIES
|
|
The Board of Directors is soliciting proxies for the Annual Meeting from our stockholders. We will bear the entire cost of soliciting proxies from
our stockholders. In addition to the solicitation of proxies by delivery of the Internet Notice or this proxy statement by mail, we will request that brokers, banks, and other nominees that hold shares of our common stock, which are beneficially
owned by our stockholders, send Internet Notices, proxies, and proxy materials to those beneficial owners and secure those beneficial owners’ voting instructions. We will reimburse those record holders for their reasonable expenses. Although we
currently do not intend to hire a proxy solicitor to assist in the solicitation of proxies, we reserve the right to do so if we believe it would be in the best interests of Century and our stockholders. If we engage a proxy solicitor, we expect the
fees to be approximately $5,000, plus out-of-pocket expenses. We may use several of our regular employees, who will not be specially compensated, to solicit proxies from our stockholders, either personally or by Internet, telephone, facsimile, or
special delivery letter.
Century
Communities, Inc.
– 2019 Proxy Statement 86
HOUSEHOLDING OF PROXY MATERIALS
|
|
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means
extra convenience for stockholders and cost savings for companies. A number of banks and brokers with account holders who are our stockholders will be householding our proxy materials. A single proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your bank or broker that it will be householding communications to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your bank or
broker, direct your written request to Century Communities, Inc., 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111, Attention: Investor Relations, or contact Investor Relations by telephone at (303) 268-8398. Stockholders who
currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their bank or broker.
INCORPORATION BY REFERENCE
|
|
Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, which might incorporate future filings made by us under those statutes, the Audit Committee Report under “
Proposal No. 2. Ratification of Appointment of
Independent Registered Public Accounting Firm
” will not be incorporated by reference into any of those prior filings, nor will any such report be incorporated by reference into any future filings made by us under those statutes. In
addition, information on our website, other than this proxy statement, notice, and form of proxy, is not part of the proxy soliciting materials and is not incorporated herein by reference.
COPIES OF 2018 ANNUAL REPORT
|
|
Our 2018 Annual Report, including our Annual Report on Form 10-K, including the financial statements and the financial statement
schedules thereto, for the year ended December 31, 2018, are available without charge upon written request to: Century Communities, Inc., 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111, Attention: Investor Relations. Our
2018 Annual Report is also available on our website at
www.centurycommunities.com
.
Your vote is important.
Please promptly vote your
shares of Century common stock by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials or, if you received a paper or electronic copy of our proxy materials, by completing, signing, dating, and returning
your proxy card or by Internet or telephone voting as described on your proxy card.
|
|
By Order of the Board of Directors
|
|
|
|
David L. Messenger
|
|
|
Chief Financial Officer
and Secretary
|
Greenwood Village, Colorado
March 27, 2019
Century
Communities, Inc.
– 2019 Proxy Statement 87
In this proxy statement, we use certain non-GAAP financial measures, including Adjusted EBITDA and adjusted net income and adjusted net income per
diluted share. These non-GAAP financial measures are presented to provide stockholders additional information to facilitate the comparison of our past and present operations. We believe these non-GAAP financial measures provide useful information
to investors because they are used to evaluate our performance on a comparable year-over-year basis. These non-GAAP financial measures are not in accordance with, or an alternative for, measures calculated in accordance with U.S. generally accepted
accounting principles (GAAP) and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles.
Accordingly, the calculation of our non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial
measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP. These measures should only be used to evaluate our financial results in conjunction with the
corresponding GAAP measures. Accordingly, we qualify our use of non-GAAP financial information in a statement when non-GAAP financial information is presented.
ADJUSTED EBITDA
|
|
The following table presents EBITDA and Adjusted EBITDA for the years ended December 31, 2018 and 2017. Adjusted EBITDA is a non-GAAP financial
measure we use as a supplemental measure in evaluating operating performance. We define Adjusted EBITDA as consolidated net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense, (iv)
depreciation and amortization expense, and (v) adjustments resulting from the application of purchase accounting for acquired work in process inventory related to business combinations. We believe Adjusted EBITDA provides an indicator of general
economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, and items considered to be non-recurring. Accordingly, our management believes that this measurement is
useful for comparing general operating performance from period to period. Adjusted EBITDA should be considered in addition to, and not as a substitute for, consolidated net income in accordance with GAAP as a measure of performance. Our
presentation of Adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our Adjusted EBITDA is limited as an analytical tool, and should not be considered in isolation or
as a substitute for analysis of our results as reported under GAAP.
|
Year ended December 31,
|
||||||||
|
2018
|
2017
|
|||||||
|
Net income
|
$
|
96,455
|
$
|
50,295
|
||||
|
Income tax expense
|
32,075
|
33,869
|
||||||
|
Interest in cost of home sales revenues
|
48,692
|
32,898
|
||||||
|
Interest expense (income)
|
3
|
(3
|
)
|
|||||
|
Depreciation and amortization expense
|
12,032
|
6,973
|
||||||
|
EBITDA
|
189,257
|
124,032
|
||||||
|
Purchase price accounting for acquired work in process inventory
|
38,112
|
15,625
|
||||||
|
Purchase price accounting for investment in unconsolidated subsidiaries outside basis
|
60
|
915
|
||||||
|
Acquisition expense
|
437
|
9,905
|
||||||
|
Adjusted EBITDA
|
$ | 227,866 | $ | 150,477 | ||||
I-1
ADJUSTED NET INCOME
|
|
Adjusted net income per diluted share is a non-GAAP financial measure that we believe is useful to management, investors and other users of our
financial information in evaluating our operating results and understanding our operating trends without the effect of certain non-recurring items. We believe excluding certain non-recurring items provides more comparable assessment of our financial
results from period to period. Adjusted net income per diluted share is calculated by excluding the effect of acquisition costs and purchase price accounting for acquired work in process from the calculation of reported net income per share.
|
Year ended December 31,
|
||||||||
|
2018
|
2017
|
|||||||
|
Numerator
|
||||||||
|
Net income
|
$
|
96,455
|
$
|
50,295
|
||||
|
Less: Undistributed earnings allocated to participating securities
|
(59
|
)
|
(384
|
)
|
||||
|
Net income allocable to common stockholders
|
$
|
96,396
|
$
|
49,911
|
||||
|
Denominator
|
||||||||
|
Weighted average common shares outstanding - basic
|
30,084,913
|
24,280,871
|
||||||
|
Dilutive effect of restricted stock units
|
306,433
|
274,638
|
||||||
|
Weighted average common shares outstanding - diluted
|
30,391,346
|
24,555,509
|
||||||
|
Earnings per share:
|
||||||||
|
Basic
|
$
|
3.20
|
$
|
2.06
|
||||
|
Diluted
|
$
|
3.17
|
$
|
2.03
|
||||
|
Adjusted Earnings per share
|
||||||||
|
Numerator
|
||||||||
|
Income before income tax expense
|
$
|
128,530
|
$
|
84,164
|
||||
|
Purchase price accounting for acquired work in process inventory
|
38,112
|
15,625
|
||||||
|
Gain on previously held interest in WJH
|
(7,219
|
)
|
—
|
|||||
|
Acquisition expense
|
437
|
9,905
|
||||||
|
Adjusted income before income tax expense
|
159,860
|
109,694
|
||||||
|
Income tax expense, adjusted
(1)
|
(39,965
|
)
|
(38,612
|
)
|
||||
|
Adjusted net income
|
119,895
|
71,082
|
||||||
|
Less: Undistributed earnings allocated to participating securities
|
(74
|
)
|
(543
|
)
|
||||
|
Adjusted net income allocable to common stockholders
|
$
|
119,821
|
$
|
70,539
|
||||
|
Denominator - Diluted
|
30,391,346
|
24,555,509
|
||||||
|
Adjusted diluted earnings per share
|
$
|
3.94
|
$
|
2.87
|
||||
| (1) |
For the year ended December 31, 2018, the tax rate used in adjusted net income was 25%. This rate is
inclusive of our estimated annual rate offset by certain discrete items not associated with acquisitions.
For the year ended December 31, 2017, the Company’s GAAP tax rate was utilized.
|
I-2
CENTURY COMMUNITIES, INC.
AMENDED AND RESTATED 2017 OMNIBUS INCENTIVE PLAN
(Effective May 8, 2019)
Table of Contents
|
1
|
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|
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|
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|
7
|
||
|
10
|
||
|
13
|
||
|
13
|
||
|
15
|
||
|
16
|
||
|
17
|
||
|
19
|
||
|
20
|
||
|
20
|
||
|
21
|
||
|
23
|
||
|
23
|
||
|
27
|
||
|
27
|
||
|
31
|
||
|
32
|
||
|
33
|
||
|
33
|
||
|
34
|
||
|
34
|
||
|
34
|
CENTURY COMMUNITIES, INC.
AMENDED AND RESTATED 2017 OMNIBUS INCENTIVE PLAN
AMENDED AND RESTATED 2017 OMNIBUS INCENTIVE PLAN
The purpose of the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan (this “
Plan
”) is to advance the interests of Century Communities, Inc., a Delaware corporation (the “
Company
”), and its
stockholders by enabling the Company and its Subsidiaries to attract and retain qualified individuals to perform services for the Company and its Subsidiaries, providing incentive compensation for such individuals that is linked to the growth and
profitability of the Company and increases in stockholder value and aligning the interests of such individuals with the interests of its stockholders through opportunities for equity participation in the Company. The original version of this Plan
initially became effective upon its approval by the Company’s stockholders on May 10, 2017 (the “
Initial Effective Date
”) and at that time replaced the Century
Communities, Inc. 2013 Long-Term Incentive Plan, as amended and restated (the “
Prior Plan
”), although awards outstanding under the Prior Plan as of the Initial
Effective Date remained outstanding in accordance with their terms. After the Initial Effective Date, no more grants of awards were made under the Prior Plan. This Plan has been approved by the Board and shall become effective upon approval by the
stockholders of the Company on May 8, 2019 (the “
Effective Date
”) and shall affect only Awards granted on or after the Effective Date; provided, however, the limits in
Section 4 of this Plan shall apply to all Awards granted on or after the Initial Effective Date.
The following terms will have the meanings set forth below, unless the context clearly otherwise requires. Terms defined elsewhere in this Plan
will have the same meaning throughout this Plan.
2.1
“
Adverse Action
” means any action or conduct by a Participant that the Committee, in its sole discretion, determines to be injurious, detrimental, prejudicial or adverse to the interests
of the Company or any Subsidiary, including: (a) disclosing confidential information of the Company or any Subsidiary to any person not authorized by the Company or Subsidiary to receive it, (b) engaging, directly or indirectly, in any commercial
activity that in the judgment of the Committee competes with the business of the Company or any Subsidiary or (c) interfering with the relationships of the Company or any Subsidiary and their respective employees, independent contractors,
customers, prospective customers and vendors.
2.2
“
Affiliate
” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such Person where “control” will have the
meaning given such term under Rule 405 of the Securities Act.
2.3
“
Annual Award Limit
” or “
Annual Awards Limits
” have the meaning set forth in Section 4.4.
2.4
“
Annual Performance Cash Awards
” has the meaning set forth in Section 10.1 of this Plan.
2.5
“
Applicable Accounting Standard
” means generally accepted accounting principles in the United States, International Financial Reporting Standards or such other accounting principles or
standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.
2.6
“
Applicable Law
” means any applicable law, including without limitation, (a) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (b)
corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state, local or foreign; and (c) rules of any securities exchange, national market system or automated quotation system on which the shares of
Common Stock are listed, quoted or traded.
2.7
“
Award
” means, individually or collectively, an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit, Deferred Stock Unit, Performance Award, Annual Performance
Cash Award, Non-Employee Director Award, Other Cash-Based Award or Other Stock-Based Award, in each case granted to an Eligible Recipient pursuant to this Plan.
2.8
“
Award Agreement
” means either: (a) a written or electronic (as provided in Section 24.8) agreement entered into by the Company and a Participant setting forth the terms and provisions
applicable to an Award granted under this Plan, including any amendment or modification thereof, or (b) a written or electronic (as provided in Section 24.8) statement issued by the Company to a Participant describing the terms and provisions of
such an Award, including any amendment or modification thereof.
2.9
“
Board
” means the Board of Directors of the Company.
2.10
“
Broker Exercise Notice
” means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares
of Common Stock to pay all or a portion of the exercise price of the Option or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver shares of Common Stock to be issued upon such exercise
directly to such broker or dealer or its nominee.
2.11
“
Cash-Based Award
” means an Award made pursuant to this Plan that is denominated in cash.
2.12
“
Cause
” means, unless otherwise provided in an Award Agreement, (a) “Cause” as defined in any employment, consulting, severance or similar agreement between the Participant and the Company
or one of its Subsidiaries or Affiliates (an “
Individual Agreement
”), or (b) if there is no such Individual Agreement or if it does not define Cause: (i) dishonesty,
fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Subsidiary; (ii) any unlawful or criminal activity of a serious nature; (iii) any intentional and deliberate breach of a
duty or duties that, individually or in the aggregate, are material in relation to the Participant’s overall duties; (iv) any material breach by a Participant of any employment, service, confidentiality, non-compete or non-solicitation agreement
entered into with the Company or any Subsidiary; or (v) before a Change in Control, such other events as will be determined by the Committee. Before a Change in Control, the Committee will, unless otherwise provided in an Individual Agreement, have
the sole discretion to determine whether “Cause” exists with respect to subclauses (i), (ii), (iii), (iv) or (v) above, and its determination will be final.
2.13
“
Change in Control
” means, unless otherwise provided in an Award Agreement or any Individual Agreement, an event described in Section 17.1 of this Plan.
2.14
“
Code
” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be deemed to include a reference to any applicable regulations thereunder
and any successor or amended section of the Code.
2
2.15
“
Committee
” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee comprised solely of directors designated by the Board to administer this Plan
who are (a) “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, and (b) “independent directors” within the meaning of the rules of The New York Stock Exchange (or other applicable exchange or market on which the Common
Stock may be traded or quoted). The members of the Committee will be appointed from time to time by and will serve at the discretion of the Board. If the Committee does not exist or cannot function for any reason, the Board may take any action
under this Plan that would otherwise be the responsibility of the Committee, except as otherwise provided in this Plan. Any action duly taken by the Committee will be valid and effective, whether or not the members of the Committee at the time of
such action are later determined not to have satisfied the requirements of membership provided herein.
2.16
“
Common Stock
” means the common stock of the Company, par value $0.01 per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed
in accordance with Section 4.5 of this Plan.
2.17
“
Company
” means Century Communities, Inc., a Delaware corporation, and any successor thereto as provided in Section 24.6 of this Plan.
2.18
“
Consultant
” means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to the Company or any Subsidiary that: (a) are not in connection
with the offer and sale of the Company’s securities in a capital raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.
2.19
[Intentionally deleted]
2.20
“
Deferred Stock Unit
”
means a right granted to an Eligible Recipient pursuant to Section 8
of this Plan to receive shares of Common Stock (or the equivalent value in cash or other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by
the Committee in the case of voluntary deferral elections.
2.21
“
Director
” means a member of the Board.
2.22
“
Disability
” means, unless otherwise provided in an Award Agreement, with respect to a Participant who is a party to an Individual Agreement, which agreement contains a definition of
“disability” or “permanent disability” (or words of like import) for purposes of termination of employment thereunder by the Company, “disability” or “permanent disability” as defined in the most recent of such agreements; or in all other cases,
means the disability of the Participant such as would entitle the Participant to receive disability income benefits pursuant to the long-term disability plan of the Company or Subsidiary then covering the Participant or, if no such plan exists or
is applicable to the Participant, the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code.
2.23
“
Dividend Equivalents
” has the meaning set forth in Section 3.2(l) of this Plan.
2.24
“
Effective Date
” means May 8, 2019 or such later date as this Plan is approved by the Company’s stockholders.
2.25
“
Eligible Recipients
” means all Employees, all Non-Employee Directors and all Consultants.
3
2.26
“
Employee
” means any individual performing services for the Company or a Subsidiary and designated as an employee of the Company or a Subsidiary on the payroll records thereof. An
Employee will not include any individual during any period he or she is classified or treated by the Company or Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting or temporary agency or any other
entity other than the Company or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company or Subsidiary during such period.
An individual will not cease to be an Employee in the case of: (a) any leave of absence approved by the Company, or (b) transfers between locations of the Company or between the Company or any Subsidiaries. For purposes of Incentive Stock Options,
no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company or a Subsidiary, as applicable, is not
so guaranteed, then three (3) months following the ninety-first (91st) day of such leave, any Incentive Stock Option held by a Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Non-Statutory
Stock Option. Neither service as a Director nor payment of a Director’s fee by the Company will be sufficient to constitute “employment” by the Company.
2.27
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended. Any reference to a section of the Exchange Act herein will be deemed to include a reference to any applicable rules
and regulations thereunder and any successor or amended section of the Exchange Act.
2.28
“
Fair Market Value
” means, with respect to the Common Stock, as of any date: (a) the closing sale price of the Common Stock as of such date at the end of the regular trading session, as
reported by The New York Stock Exchange, the Nasdaq Stock Market, NYSE American or any national securities exchange on which the Common Stock is then listed (or, if no shares were traded on such date, as of the next preceding date on which there
was such a trade); (b) if the Common Stock is not so listed, admitted to unlisted trading privileges or reported on any national exchange, the closing sale price as of such date at the end of the regular trading session, as reported by the OTC
Bulletin Board, OTC Markets or other comparable quotation service (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote); or (c) if the Common Stock is not so listed or
reported, such price as the Committee determines in good faith in the exercise of its reasonable discretion, and consistent with the definition of “fair market value” under Section 409A of the Code. If determined by the Committee, such
determination will be final, conclusive and binding for all purposes and on all persons, including the Company, the stockholders of the Company, the Participants and their respective successors-in-interest. No member of the Committee will be
liable for any determination regarding the fair market value of the Common Stock that is made in good faith.
2.29
“
Full Value Award
” means an Award other than in the form of an Option or Stock Appreciation Right, and which is settled by the issuance of shares of Common Stock.
2.30
“
Good Reason
” means, unless otherwise provided in an Award Agreement, the assignment to the Participant of any duties materially inconsistent in any respect with the Participant’s position
(including a material negative change regarding the Participant’s status, offices, titles or reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a material diminution in such position,
authority, duties or responsibilities (but not occurring solely as a result of the Company’s ceasing to be a publicly traded entity) existing immediately prior to the date of the Change in Control, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant;
provided
,
however
, “Good Reason” will not be deemed to exist unless (a) written notice of termination on account thereof is given by the Participant to the Company no later
than sixty (60) days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises; (b) if there exists (without regard to this clause (b)) an event or condition that constitutes Good Reason, the
Company will have thirty (30) days from the date notice of such a termination is given to cure such event or condition and, if the Company does so, such event or condition will not constitute Good Reason hereunder and (c) if not cured, the
Participant must resign from employment for a Good Reason event or condition within sixty (60) days following the last day of the Company’s cure period. Any good faith determination of “Good Reason” made by the Committee will be conclusive. The
Participant’s mental or physical incapacity following the occurrence of an event described in above clauses will not affect the Participant’s ability to terminate employment for Good Reason.
4
2.31
“
Grant Date
” means the date an Award is granted to a Participant pursuant to this Plan and as determined pursuant to Section 5 of this Plan.
2.32
“
Incentive Stock Option
” means a right to purchase Common Stock granted to an Employee pursuant to Section 6 of this Plan that is designated as and intended to meet the requirements of an
“incentive stock option” within the meaning of Section 422 of the Code.
2.33
“
Individual Agreement
” has the meaning set forth in Section 2.12 of this Plan.
2.34
“
Individual Performance Goals
” has the meaning set forth in Section 10.4 of this Plan.
2.35
“
Individual Performance Participants
” has the meaning set forth in Section 10.4 of this Plan.
2.36
“
Initial Effective Date
” has the meaning set forth in Section 1 of this Plan.
2.37
“
Maximum Payout
” has the meaning set forth in Section 10.3 of this Plan.
2.38
“
Non-Employee Director
” means a Director who is not an Employee.
2.39
“
Non-Employee Director Award
” means any Non-Statutory Stock Option, Stock Appreciation Right or Full Value Award granted, whether singly, in combination, or in tandem, to an Eligible
Recipient who is a Non-Employee Director, pursuant to such applicable terms, conditions and limitations as the Board or Committee may establish in accordance with this Plan, including any Non-Employee Director Option.
2.40
“
Non-Employee Director Option
” means a Non-Statutory Stock Option granted to a Non-Employee Director pursuant to Section 11 of this Plan.
2.41
“
Non-Statutory Stock Option
” means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of this Plan that is not intended to meet the requirements of or
does not qualify as an Incentive Stock Option.
2.42
“
Option
” means an Incentive Stock Option or a Non-Statutory Stock Option, including a Non-Employee Director Option.
2.43
“
Other Cash-Based Award
” means an Award, denominated in cash, not otherwise described by the terms of this Plan, granted pursuant to Section 12 of this Plan.
2.44
“
Other Stock-Based Award
” means an Award, denominated in Shares, not otherwise described by the terms of this Plan, granted pursuant to Section 12 of this Plan.
5
2.45
“
Participant
” means an Eligible Recipient who receives one or more Awards under this Plan.
2.46
“
Participation Factor
” has the meaning set forth in Section 10.2 of this Plan.
2.47
“
Performance Award
” means a right granted to an Eligible Recipient pursuant to Section 9 of this Plan to receive an amount of cash, number of shares of Common Stock, or a combination of
both, contingent upon and the value of which at the time it is payable is determined as a function of the extent of the achievement of one or more Performance Goals during a specified Performance Period or the achievement of other objectives during
a specified period.
2.48
“
Performance-Based Compensation
” means compensation under an Award the amount of which, or the entitlement to which, is contingent on the satisfaction of pre-established Performance Goals
relating to a Performance Period.
2.49
“
Performance Goals
” mean with respect to any applicable Award, one or more targets, goals or levels of attainment required to be achieved in terms of the specified Performance Measures
during the specified Performance Period, as set forth in the related Award Agreement.
2.50
“
Performance Measure Element
” has the meaning set forth in Section 13.1 of this Plan.
2.51
“
Performance Measures
” mean: (a) any one or more of the measures described in Section 13.1 of this Plan on which the Performance Goals are based and which measures are approved by the
Company’s stockholders pursuant to this Plan; and (b) any performance measures as determined by the Committee in its sole discretion and set forth in the applicable Award Agreement for purposes of determining the applicable Performance Goal.
2.52
“
Performance Period
” means the period of time, as determined by the Committee, during which the Performance Goals must be met in order to determine the degree of payout or vesting with
respect to an Award.
2.53
“
Period of Restriction
” means the period when a Restricted Stock Award or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of
time, the achievement of Performance Goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Section 8 of this Plan.
2.54
“
Person
” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental
authority or any other entity of whatever nature.
2.55
“
Plan
” means the Century Communities, Inc. 2017 Omnibus Incentive Plan, as may be amended from time to time.
2.56
“
Plan Year
” means the Company’s fiscal year.
2.57
“
Previously Acquired Shares
” means shares of Common Stock that are already owned by the Participant or, with respect to any Award, that are to be issued to the Participant upon the grant,
exercise, vesting or settlement of such Award.
2.58
“
Prior Plan
” means the Century Communities, Inc. 2013 Long-Term Incentive Plan, as amended and restated.
6
2.59
“
Restricted Stock Award
” means an award of Common Stock granted to an Eligible Recipient pursuant to Section 8 of this Plan that is subject to the restrictions on transferability and the
risk of forfeiture imposed by the provisions of such Section 8.
2.60
“
Restricted Stock Unit
” means an award denominated in shares of Common Stock granted to an Eligible Recipient pursuant to Section 8 of this Plan.
2.61
“
Retirement
,” means, unless otherwise defined in the Award Agreement or in an Individual Agreement between the Participant and the Company or one of its Subsidiaries or Affiliates,
“Retirement” as defined from time to time for purposes of this Plan by the Committee or by the Company’s chief human resources officer or other person performing that function or, if not so defined, means voluntary termination of employment or
service by the Participant on or after the date the Participant reaches age fifty-five (55) with the present intention to leave the Company’s industry or to leave the general workforce.
2.62
“
Scale Back
” has the meaning set forth in Section 9.6.
2.63
“
Securities Act
” means the Securities Act of 1933, as amended. Any reference to a section of the Securities Act herein will be deemed to include a reference to any applicable rules and
regulations thereunder and any successor or amended section of the Securities Act.
2.64
“
Separation from Service
” has the meaning set forth in Section 17.2(b) of this Plan.
2.65
“
Stock Appreciation Right
” means a right granted to an Eligible Recipient pursuant to Section 7 of this Plan to receive a payment from the Company, in the form of shares
of Common Stock, cash or a combination of both, equal to the difference between the Fair Market Value of one or more shares of Common Stock and the grant price of such shares under the terms of such Stock Appreciation Right.
2.66
“
Stock-Based Award
” means any Award, denominated in Shares, made pursuant to this Plan, including Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred
Stock Units, Performance Awards or Other Stock-Based Awards.
2.67
“
Subsidiary
” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, an interest of more than fifty percent (50%)
by reason of stock ownership or otherwise.
2.68
“
Successor
” has the meaning set forth in Section 17.1 of this Plan.
2.69
“
Target Payout
” has the meaning set forth in Section 10.2 of this Plan.
2.70
“
Tax Date
” means the date any withholding or employment related tax obligation arises under the Code or any Applicable Law for a Participant with respect to an Award.
2.71
“
Tax Laws
” has the meaning set forth in Section 24.9 of this Plan.
3.1
The Committee
. The Plan will be administered by the Committee. The Committee will act by majority approval of the members at a meeting or by unanimous written consent, and a majority of
the members of the Committee will constitute a quorum. The Committee may exercise its duties, power and authority under this Plan in its sole discretion without the consent of any Participant or other party, unless this Plan specifically provides
otherwise. The Committee will not be obligated to treat Participants or Eligible Recipients uniformly, and determinations made under this Plan may be made by the Committee selectively among Participants or Eligible Recipients, whether or not such
Participants and Eligible Recipients are similarly situated. Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of this Plan will be final, conclusive and binding for all purposes and on
all persons, and no member of the Committee will be liable for any action or determination made in good faith with respect to this Plan or any Award granted under this Plan.
7
3.2
Authority of the Committee
. In accordance with and subject to the provisions of this Plan, the Committee will have full and exclusive discretionary power and authority to take such
actions as it deems necessary and advisable with respect to the administration of this Plan, including the following:
(a)
To
designate the Eligible Recipients to be selected as Participants;
(b)
To
determine the nature, extent and terms of the Awards to be made to each Participant, including the amount of cash or number of shares of Common Stock to be subject to each Award, any exercise price or grant price, the manner in which Awards will
vest, become exercisable, settled or paid out and whether Awards will be granted in tandem with other Awards, and the form of Award Agreement, if any, evidencing such Award;
(c)
To
determine the time or times when Awards will be granted;
(d)
To
determine the duration of each Award;
(e)
To
determine the terms, restrictions and other conditions to which the grant of an Award or the payment or vesting of Awards may be subject;
(f)
To
construe and interpret this Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration and in so doing, to correct any defect, omission, or inconsistency in this Plan or in an Award Agreement,
in a manner and to the extent it will deem necessary or expedient to make this Plan fully effective;
(g)
To
determine Fair Market Value in accordance with Section 2.28 of this Plan;
(h)
To
amend this Plan or any Award Agreement, as provided in this Plan;
(i)
To
adopt subplans or special provisions applicable to Awards regulated by the laws of a jurisdiction other than, and outside of, the United States, which except as otherwise provided in this Plan, such subplans or special provisions may take
precedence over other provisions of this Plan;
(j)
To
authorize any person to execute on behalf of the Company any Award Agreement or any other instrument required to effect the grant of an Award previously granted by the Committee;
(k)
To
determine whether Awards will be settled in shares of Common Stock, cash or in any combination thereof;
8
(l)
To
determine whether Awards will be adjusted for dividend equivalents, with “Dividend Equivalents” meaning a credit, made at the discretion of the Committee, to the account of a Participant in an amount equal to the cash dividends paid on one share of
Common Stock for each share of Common Stock represented by an Award held by such Participant, subject to Section 14 of this Plan and any other provision of this Plan and which Dividend Equivalents may be subject to the same conditions and
restrictions as the Awards to which they attach and may be settled in the form of cash, shares of Common Stock, or in any combination of both; and
(m)
To
impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any shares of Common Stock, including restrictions
under an insider trading policy, stock ownership guidelines, restrictions as to the use of a specified brokerage firm for such resales or other transfers and other restrictions designed to increase equity ownership by Participants or otherwise
align the interests of Participants with the Company’s stockholders.
3.3
Delegation
. To the extent permitted by Applicable Law, the Committee may delegate to one or more of its members or to one or more officers of the Company or any Subsidiary or to one or
more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to
any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize one or more directors of the Company or one or more officers of the Company to do one or both of the following on the same
basis as can the Committee: (a) designate Eligible Recipients to be recipients of Awards pursuant to this Plan; and (b) determine the size of any such Awards;
provided
,
however
, that (x) the Committee will not delegate such responsibilities to any such director(s) or officer(s) for any Awards granted to an Eligible Recipient: (i)
who is a Non-Employee Director, or who is subject to the reporting and liability provisions of Section 16 under the Exchange Act, or (ii) to whom authority to grant or amend Awards has been delegated hereunder;
provided
,
further
; that any delegation of administrative authority will only be permitted to the extent it is
permissible under Applicable Law; (y) the resolution providing such authorization will set forth the type of Awards and total number of each type of Awards such director(s) or officer(s) may grant; and (z) such director(s) or officer(s) will report
periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. At all times, the delegate appointed under this Section 3.3 will serve in such capacity at the pleasure of the Committee.
3.4
No Re-pricing
. Notwithstanding any other provision of this Plan other than Section 4.5 of this Plan, the Committee may not, without prior approval of the Company’s stockholders, seek to
effect any re-pricing of any previously granted, “underwater” Option or Stock Appreciation Right by: (a) amending or modifying the terms of the Option or Stock Appreciation Right to lower the exercise price or grant price; (b) canceling the
underwater Option or Stock Appreciation Right in exchange for (i) cash; (ii) replacement Options or Stock Appreciation Rights having a lower exercise price or grant price; or (iii) other Awards; or (c) repurchasing the underwater Options or Stock
Appreciation Rights and granting new Awards under this Plan. For purposes of this Section 3.4, an Option or Stock Appreciation Right will be deemed to be “underwater” at any time when the Fair Market Value of the Common Stock is less than the
exercise price of the Option or grant price of the Stock Appreciation Right.
3.5
Participants Based Outside of the United States
. In addition to the authority of the Committee under Section 3.2(i) and notwithstanding any other provision of this Plan, the Committee
may, in its sole discretion, amend the terms of this Plan or Awards with respect to Participants resident outside of the United States or employed by a non-U.S. Subsidiary in order to comply with local legal requirements, to otherwise protect the
Company’s or Subsidiary’s interests or to meet objectives of this Plan, and may, where appropriate, establish one or more sub-plans (including the adoption of any required rules and regulations) for the purposes of qualifying for preferred tax
treatment under foreign tax laws. The Committee will have no authority, however, to take action pursuant to this Section 3.5: (a) to reserve shares of Common Stock or grant Awards in excess of the limitations provided in Section 4.1 of this Plan;
(b) to effect any re-pricing in violation of Section 3.4 of this Plan; (c) to grant Options or Stock Appreciation Rights having an exercise price or grant price less than one hundred percent (100%) of the Fair Market Value of one share of Common
Stock on the Grant Date in violation of Section 6.3 or Section 7.3 of this Plan; or (d) for which stockholder approval would then be required pursuant to Section 21.3 of this Plan.
9
4.1
Maximum Number of Shares Available
. Subject to adjustment as provided in Section 4.5 of this Plan, the maximum number of shares of Common Stock that will be available for issuance under
this Plan will be the sum of:
(a)
2,481,000
shares of Common Stock; plus
(b)
the
number of shares of Common Stock remaining available for issuance under the Prior Plan but not subject to outstanding awards as of the Initial Effective Date; plus
(c)
the
number of additional shares of Common Stock subject to awards outstanding under the Prior Plan as of the Initial Effective Date but only to the extent that such outstanding awards are forfeited, cancelled, expire or otherwise terminate without the
issuance of such shares of Common Stock after the Initial Effective Date.
4.2
Limits on Incentive Stock Options and Non-Employee Director Awards
. Notwithstanding any other provisions of this Plan to the contrary and subject to adjustment as provided in Section 4.5
of this Plan,
(a)
the
maximum aggregate number of shares of Common Stock that will be available for issuance pursuant to Incentive Stock Options under this Plan will be 2,481,000
shares;
and
(b)
the
sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to
a Non-Employee Director as compensation for services as a Non-Employee Director during any fiscal year of the Company may not exceed $400,000 (increased to $600,000 with respect to any Non-Employee Director serving as Chairman of the Board or Lead
Independent Director or in the fiscal year of a non-employee Director's initial service as a Non-Employee Director) (with any compensation that is deferred counting towards this limit for the year in which the compensation is first earned, and not
a later year of settlement).
10
4.3
Accounting for Awards
. Shares of Common Stock that are issued under this Plan or that are subject to outstanding Awards will be applied to reduce the maximum number of shares of Common
Stock remaining available for issuance under this Plan;
provided
,
however
, that
the full number of shares of Common Stock subject to a stock-settled Stock Appreciation Right or other Stock-Based Award will be counted against the shares authorized for issuance under this Plan, regardless of the number of shares actually issued
upon settlement of such Stock Appreciation Right or other Stock-Based Award. Furthermore, any shares of Common Stock withheld to satisfy tax withholding obligations on Awards issued under this Plan, any shares of Common Stock withheld to pay the
exercise price or grant price of Awards under this Plan and any shares of Common Stock not issued or delivered as a result of the “net exercise” of an outstanding Option pursuant to Section 6.5 or settlement of a Stock Appreciation Right in shares
of Common Stock pursuant to Section 7.7 will be counted against the shares of Common Stock authorized for issuance under this Plan and will not be available again for grant under this Plan. Shares of Common Stock subject to Awards settled in cash
will again be available for issuance pursuant to Awards granted under the Plan. Any shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award will not increase the number of shares of
Common Stock available for future grant of Awards. Any shares of Common Stock related to Awards granted under this Plan or under the Prior Plan that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of the shares
of Common Stock, will be available again for grant under this Plan and correspondingly increase the total number of shares of Common Stock available for issuance under this Plan under Section 4.1. To the extent permitted by Applicable Law, shares
of Common Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or a Subsidiary pursuant to Section 22 of this Plan or otherwise will not be counted against
shares of Common Stock available for issuance pursuant to this Plan. The shares of Common Stock available for issuance under this Plan may be authorized and unissued shares or treasury shares.
4.4
Annual Awards Limits
. The following limits (each an “
Annual Award Limit
” and, collectively, “
Annual Award Limits
”), as adjusted pursuant to Section 4.5, will apply to grants of Awards under this Plan:
(a)
The
maximum aggregate number of shares of Common Stock subject to Options and Stock Appreciation Rights granted to any one Participant in any one Plan Year will be 500,000 shares.
(b)
The
maximum aggregate number of shares of Common Stock subject to Restricted Stock Awards, Restricted Stock Units and Deferred Stock Units granted to any one Participant in any one Plan Year will be 500,000 shares.
(c)
The
maximum aggregate dollar amount or number of shares of Common Stock granted with respect to Performance Awards to any one Participant in any one Plan Year may not exceed $15,000,000 or 750,000 shares, determined as of the date of payout.
(d)
The
maximum aggregate dollar amount granted with respect to Annual Performance Cash Awards to any one Participant in any one Plan Year may not exceed $15,000,000, determined as of the date of payout.
(e)
The
maximum aggregate dollar amount granted with respect to Other Cash-Based Awards to any one Participant in any one Plan Year may not exceed $15,000,000, determined as of the date of payout.
(f)
The
maximum aggregate number of shares of Common Stock granted with respect to Other Stock-Based Awards to any one Participant in any one Plan Year may not exceed 500,000 shares, determined as of the date of payout.
In applying the foregoing Annual Award Limits, (i) all Awards of the specified type granted to the same person in the same Plan Year will be
aggregated and made subject to one limit; (ii) the Share limits applicable to Options and Stock Appreciation Rights refer to the number of Shares underlying such Awards; (iii) the Share limit under clause (b), (c) or (f) refers to the maximum number
of Shares that may be delivered, or the value of which could be paid in cash or other property, under an Award or Awards of the type specified in clause (b), (c) or (f) assuming a maximum payout; (iv) Awards other than Cash-Based Awards that are
settled in cash will count against the applicable share limit under clause (a), (b), (c) or (f) and not against the dollar limit under clause (d) or (e); and (v) the dollar limit under clause (d) or (e) refers to the maximum dollar amount payable
under an Award or Awards of the type specified in clause (d) or (e) assuming a maximum payout.
11
4.5
Adjustments to Shares and Awards
.
(a)
In the
event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin off) or any other
similar change in the corporate structure or shares of Common Stock the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate
adjustment or substitutions (which determination will be conclusive) as to: (i) the number and kind of securities or other property (including cash) available for issuance or payment under this Plan, including the sub-limits set forth in Section
4.2 of this Plan and the Annual Award Limits set forth in Section 4.4 of this Plan, and (ii) in order to prevent dilution or enlargement of the rights of Participants, the number and kind of securities or other property (including cash) subject to
outstanding Awards and the exercise price of outstanding Awards;
provided
,
however
,
that this Section 4.5 will not limit the authority of the Committee to take action pursuant to Section 17 of this Plan in the event of a Change in Control. The determination of the Committee as to the foregoing adjustments and/or substitutions, if
any, will be final, conclusive and binding on Participants under this Plan.
(b)
Notwithstanding
anything else herein to the contrary, without affecting the number of shares of Common Stock reserved or available hereunder, the limits in Section 4.2 of this Plan and the Annual Award Limits in Section 4.4 of this Plan, the Committee may
authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with
the rules under Sections 422, 424 and 409A of the Code, as and where applicable.
4.6
Minimum Vesting Requirements on Awards
. Notwithstanding any other provision of the Plan to the contrary, but subject to Sections 4.5 and 17 of the Plan, equity-based Awards granted under
the Plan will vest no earlier than the one-year anniversary of the date the Award is granted and any Awards under this Plan which vest upon the attainment of Performance Goals will provide for a Performance Period of at least one (1) year;
provided, however, that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to five percent (5%) of the shares of Common Stock available pursuant to Section 4.1 above may be granted to any one or more eligible
Directors, Consultants or Employees without respect to such minimum vesting condition. Nothing in this Section 4.6 shall preclude the Committee from taking action, in its sole discretion, to accelerate the vesting of any Award in connection with or
following a Participant’s death, disability, termination of employment or service or otherwise, or the consummation of a Change in Control. This Section 4.6 will be inapplicable to (i) substitute Awards granted pursuant to Section 22 of this Plan,
(ii) s
hares delivered in lieu of fully vested cash Awards and (iii) Awards to Non-Employee Directors that vest on the earlier of the one year anniversary of the
date of grant or the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting
.
4.7
Limitations Applicable to Section 16 Persons
. Notwithstanding any other provision of this Plan, if a Participant is subject to Section 16 of the Exchange Act, this Plan, the Award, and
the Award Agreement will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application
of such exemptive rule, and such additional limitations will be deemed to be incorporated by reference into such Award to the extent permitted by Applicable Law.
12
4.8
Holding Period
. Any net shares of Common Stock received by a Participant who is an executive officer of the Company in connection with the vesting or settlement of an Award under this
Plan must be held by the Participant for at least twelve (12) months after such vesting or settlement, or if earlier, termination of employment or satisfaction of the Company’s stock ownership guidelines, as in effect from time to time. For
purposes of this Section 4.8, “net shares” means those shares of Common Stock that remain after shares of Common Stock are sold or netted to pay the exercise price of Options or grant price of Stock Appreciation Rights (if applicable) and any
applicable withholding or estimated taxes associated with an Option, Restricted Stock Award, Restricted Stock Unit, Deferred Stock Unit, or other Stock-Based Award under this Plan.
Participants in this Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are
expected to contribute to the achievement of the objectives of the Company or its Subsidiaries. Eligible Recipients may be granted from time to time one or more Awards, singly or in combination or in tandem with other Awards, as may be determined by
the Committee in its sole discretion. Awards will be deemed to be granted as of the date specified in the grant resolution of the Committee, which date will be the Grant Date of any related Award Agreement with the Participant.
6.1
Grant
. An Eligible Recipient may be granted one or more Options under this Plan, and such Options will be subject to such terms and conditions, consistent with the other provisions of
this Plan, as may be determined by the Committee in its sole discretion. Incentive Stock Options may be granted solely to eligible Employees of the Company or a Subsidiary. The Committee may designate whether an Option is to be considered an
Incentive Stock Option or a Non-Statutory Stock Option. To the extent that any Incentive Stock Option (or portion thereof) granted under this Plan ceases for any reason to qualify as an “incentive stock option” for purposes of Section 422 of the
Code, such Incentive Stock Option (or portion thereof) will continue to be outstanding for purposes of this Plan but will thereafter be deemed to be a Non-Statutory Stock Option. Options may be granted to an Eligible Recipient for services provided
to a Subsidiary only if, with respect to such Eligible Recipient, the underlying shares of Common Stock constitute “service recipient stock” within the meaning of Treas. Reg. Sec. 1.409A-1(b)(5)(iii) promulgated under the Code.
6.2
Award Agreement
. Each Option grant will be evidenced by an Award Agreement that will specify the exercise price of the Option, the maximum duration of the Option, the number of shares of
Common Stock to which the Option pertains, the conditions upon which an Option will become vested and exercisable, and such other provisions as the Committee will determine which are not inconsistent with the terms of this Plan. The Award
Agreement also will specify whether the Option is intended to be an Incentive Stock Option or a Non-Statutory Stock Option.
6.3
Exercise Price
. The per share price to be paid by a Participant upon exercise of an Option granted pursuant to this Section 6 will be determined by the Committee in its sole discretion
at the time of the Option grant;
provided
,
however
, that such price will not be
less than one hundred percent (100%) of the Fair Market Value of one share of Common Stock on the Grant Date (one hundred and ten percent (110%) of the Fair Market Value if, at the time the Incentive Stock Option is granted, the Participant owns,
directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company).
13
6.4
Exercisability and Duration
. An Option will become exercisable at such times and in such installments and upon such terms and conditions as may be determined by the Committee in its sole
discretion at the time of grant, including (a) the achievement of one or more of the Performance Goals; or that (b) the Participant remain in the continuous employment or service with the Company or a Subsidiary for a certain period;
provided
,
however
, that no Option may be exercisable after ten (10) years from the
Grant Date (five (5) years from the Grant Date in the case of an Incentive Stock Option that is granted to a Participant who owns, directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company). Notwithstanding the foregoing, if the exercise of an Option that is exercisable in accordance with its terms is prevented by the provisions of Section 19 of this Plan, the Option
will remain exercisable until thirty (30) days after the date such exercise first would no longer be prevented by such provisions, but in any event no later than the expiration date of such Option.
6.5
Payment of Exercise Price
.
(a)
The
total purchase price of the shares of Common Stock to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order);
provided
,
however
, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payments to be made, in whole or in
part, by (i) tender of a Broker Exercise Notice; (ii) by tender, either by actual delivery or attestation as to ownership, of Previously Acquired Shares; (iii) a “net exercise” of the Option (as further described in paragraph (b), below); (iv) by a
combination of such methods; or (v) any other method approved or accepted by the Committee in its sole discretion. Notwithstanding any other provision of this Plan to the contrary, no Participant who is a Director or an “executive officer” of the
Company within the meaning of Section 13(k) of the Exchange Act will be permitted to make payment with respect to any Awards granted under this Plan, or continue any extension of credit with respect to such payment with a loan from the Company or a
loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
(b)
In the
case of a “net exercise” of an Option, the Company will not require a payment of the exercise price of the Option from the Participant but will reduce the number of shares of Common Stock issued upon the exercise by the largest number of whole
shares that has a Fair Market Value on the exercise date that does not exceed the aggregate exercise price for the shares exercised under this method. Shares of Common Stock will no longer be outstanding under an Option (and will therefore not
thereafter be exercisable) following the exercise of such Option to the extent of (i) shares used to pay the exercise price of an Option under the “net exercise,” (ii) shares actually delivered to the Participant as a result of such exercise and
(iii) any shares withheld for purposes of tax withholding pursuant to Section 16 of this Plan.
(c)
For
purposes of such payment, Previously Acquired Shares tendered or covered by an attestation will be valued at their Fair Market Value on the exercise date of the Option.
6.6
Manner of Exercise
. An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in this Plan and in the Award Agreement
evidencing such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company at its principal executive office (or to the Company’s designee as may be established from time
to time by the Company and communicated to Participants) and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 6.5 of this Plan.
14
7.1
Grant
. An Eligible Recipient may be granted one or more Stock Appreciation Rights under this Plan, and such Stock Appreciation Rights will be subject to such terms and conditions,
consistent with the other provisions of this Plan, as may be determined by the Committee in its sole discretion. Stock Appreciation Rights may be granted to an Eligible Recipient for services provided to a Subsidiary only if, with respect to such
Eligible Recipient, the underlying shares of Common Stock constitute “service recipient stock” within the meaning of Treas. Reg. Sec. 1.409A-1(b)(5)(iii) promulgated under the Code.
7.2
Award Agreement
. Each Stock Appreciation Right will be evidenced by an Award Agreement that will specify the grant price of the Stock Appreciation Right, the term of the Stock
Appreciation Right, and such other provisions as the Committee will determine which are not inconsistent with the terms of this Plan.
7.3
Grant Price
. The grant price of a Stock Appreciation Right will be determined by the Committee, in its discretion, at the Grant Date;
provided
,
however
, that such price may not be less than one hundred percent (100%) of the Fair Market Value of one share of
Common Stock on the Grant Date.
7.4
Exercisability and Duration
. A Stock Appreciation Right will become exercisable at such times and in such installments as may be determined by the Committee in its sole discretion at the
time of grant;
provided
,
however
, that no Stock Appreciation Right may be
exercisable after ten (10) years from its Grant Date. Notwithstanding the foregoing, if the exercise of a Stock Appreciation Right that is exercisable in accordance with its terms is prevented by the provisions of Section 19 of this Plan, the Stock
Appreciation Right will remain exercisable until thirty (30) days after the date such exercise first would no longer be prevented by such provisions, but in any event no later than the expiration date of such Stock Appreciation Right.
7.5
Manner of Exercise
. A Stock Appreciation Right will be exercised by giving notice in the same manner as for Options, as set forth in Section 6.6 of this Plan, subject to any other terms
and conditions consistent with the other provisions of this Plan as may be determined by the Committee in its sole discretion.
7.6
Settlement
. Upon the exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(a)
The
excess of the Fair Market Value of a share of Common Stock on the date of exercise over the per share grant price; by
(b)
The
number of shares of Common Stock with respect to which the Stock Appreciation Right is exercised.
7.7
Form of Payment
. Payment, if any, with respect to a Stock Appreciation Right settled in accordance with Section 7.6 of this Plan will be made in accordance with the terms of the
applicable Award Agreement, in cash, shares of Common Stock or a combination thereof, as the Committee determines.
15
8.1
Grant
. An Eligible Recipient may be granted one or more Restricted Stock Awards, Restricted Stock Units or Deferred Stock Units under this Plan, and such Awards will be subject to such
terms and conditions, consistent with the other provisions of this Plan, as may be determined by the Committee in its sole discretion. Restricted Stock Units will be similar to Restricted Stock Awards except that no shares of Common Stock are
actually awarded to the Participant on the Grant Date of the Restricted Stock Units. Restricted Stock Units and Deferred Stock Units will be denominated in shares of Common Stock but paid in cash, shares of Common Stock or a combination of cash and
shares of Common Stock as the Committee, in its sole discretion, will determine, and as provided in the Award Agreement.
8.2
Award Agreement
. Each Restricted Stock Award, Restricted Stock Unit or Deferred Stock Unit grant will be evidenced by an Award Agreement that will specify the type of Award, the period(s)
of restriction, the number of shares of restricted Common Stock, or the number of Restricted Stock Units or Deferred Stock Units granted, and such other provisions as the Committee will determine that are not inconsistent with the terms of this
Plan.
8.3
Conditions and Restrictions
. Subject to the terms and conditions of this Plan, including Sections 4.6 and 4.8 of this Plan, the Committee will impose such conditions or restrictions on a
Restricted Stock Award, Restricted Stock Units or Deferred Stock Units granted pursuant to this Plan as it may deem advisable including a requirement that Participants pay a stipulated purchase price for each share of Common Stock underlying a
Restricted Stock Award, Restricted Stock Unit or Deferred Stock Unit, restrictions based upon the achievement of specific Performance Goals, time-based restrictions on vesting following the attainment of the Performance Goals, time-based
restrictions, restrictions under Applicable Laws or holding requirements or sale restrictions placed on the shares of Common Stock by the Company upon vesting of such Restricted Stock Award, Restricted Stock Units or Deferred Stock Units.
8.4
Voting Rights
. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by Applicable Law, as determined by the
Committee, Participants holding a Restricted Stock Award granted hereunder will be granted the right to exercise full voting rights with respect to the shares of Common Stock underlying such Restricted Stock Award during the Period of Restriction.
A Participant will have no voting rights with respect to any Restricted Stock Units or Deferred Stock Units granted hereunder.
8.5
Dividend Rights
.
(a)
Unless
otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by Applicable Law, as determined by the Committee, Participants holding a Restricted Stock Award granted hereunder will have
the same dividend rights as the Company’s other stockholders. Notwithstanding the foregoing any such dividends as to a Restricted Stock Award that is subject to vesting requirements will be subject to forfeiture and termination to the same extent
as the Restricted Stock Award to which such dividends relate and the Award Agreement may require that any cash dividends be reinvested in additional shares of Common Stock subject to the Restricted Stock Award and subject to the same conditions and
restrictions as the Restricted Stock Award with respect to which the dividends were paid. In no event will dividends with respect to Restricted Stock Awards that are subject to vesting be paid or distributed until the vesting provisions of such
Restricted Stock Award lapse.
16
(b)
Unless
otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by Applicable Law, as determined by the Committee, prior to settlement or forfeiture, any Restricted Stock Units or Deferred
Stock Unit awarded under this Plan may, at the Committee’s discretion, carry with it a right to Dividend Equivalents. Such right entitles the Participant to be credited with any amount equal to all cash dividends paid on one share of Common Stock
while the Restricted Stock Unit or Deferred Stock Unit is outstanding. Dividend Equivalents may be converted into additional Restricted Stock Units or Deferred Stock Units and may (and will, to the extent required below) be made subject to the
same conditions and restrictions as the Restricted Stock Units or Deferred Stock Units to which they attach. Settlement of Dividend Equivalents may be made in the form of cash, in the form of shares of Common Stock, or in a combination of both.
Dividend Equivalents as to Restricted Stock Units or Deferred Stock Units will be subject to forfeiture and termination to the same extent as the corresponding Restricted Stock Units or Deferred Stock Units as to which the Dividend Equivalents
relate. In no event will Participants holding Restricted Stock Units or Deferred Stock Units receive any Dividend Equivalents on such Restricted Stock Units or Deferred Stock Units until the vesting provisions of such Restricted Stock Units or
Deferred Stock Units lapse.
8.6
Enforcement of Restrictions
. To enforce the restrictions referred to in this Section 8, the Committee may place a legend on the stock certificates representing Restricted Stock Awards
referring to such restrictions and may require the Participant, until the restrictions have lapsed, to keep the stock certificates, together with duly endorsed stock powers, in the custody of the Company or its transfer agent, or to maintain
evidence of stock ownership, together with duly endorsed stock powers, in a certificateless book entry stock account with the Company’s transfer agent. Alternatively, Restricted Stock Awards may be held in non-certificated form pursuant to such
terms and conditions as the Company may establish with its registrar and transfer agent or any third-party administrator designated by the Company to hold Restricted Stock Awards on behalf of Participants.
8.7
Lapse of Restrictions; Settlement
. Except as otherwise provided in this Plan, including without limitation this Section 8 or Section 4.8 and 18.4 of this Plan, shares of Common Stock
underlying a Restricted Stock Award will become freely transferable by the Participant after all conditions and restrictions applicable to such shares have been satisfied or lapse (including satisfaction of any applicable tax withholding
obligations). Upon the vesting of a Restricted Stock Unit, the Restricted Stock Unit will be settled, subject to the terms and conditions of the applicable Award Agreement, (a) in cash, based upon the Fair Market Value of the vested underlying
shares of Common Stock, (b) in shares of Common Stock or (c) a combination thereof, as provided in the Award Agreement, except to the extent that a Participant has properly elected to defer income that may be attributable to a Restricted Stock Unit
under a Company deferred compensation plan or arrangement.
8.8
Section 83(b) Election for Restricted Stock Award
. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award, the Participant must
file, within thirty (30) days following the Grant Date of the Restricted Stock Award, a copy of such election with the Company and with the Internal Revenue Service, in accordance with the regulations under Section 83 of the Code. The Committee
may provide in the Award Agreement that the Restricted Stock Award is conditioned upon the Participant’s making or refraining from making an election with respect to the award under Section 83(b) of the Code.
9.1
Grant
. An Eligible Recipient may be granted one or more Performance Awards under this Plan, and such Awards will be subject to such terms and conditions, consistent with the other
provisions of this Plan, as may be determined by the Committee in its sole discretion, including the achievement of one or more Performance Goals.
17
9.2
Award Agreement
. Each Performance Award will be evidenced by an Award Agreement that will specify the amount of cash, shares of Common Stock, other Awards, or combination of both to be
received by the Participant upon payout of the Performance Award, any Performance Goals upon which the Performance Award is subject, any Performance Period during which any Performance Goals must be achieved and such other provisions as the
Committee will determine which are not inconsistent with the terms of this Plan.
9.3
Vesting
. Subject to the terms of this Plan, the Committee may impose such restrictions or conditions, not inconsistent with the provisions of this Plan, to the vesting of such
Performance Awards as it deems appropriate, including the achievement of one or more of the Performance Goals.
9.4
Earning of Performance Award Payment
. Subject to the terms of this Plan and the Award Agreement, after the applicable Performance Period has ended, the holder of Performance Awards will
be entitled to receive payout on the value and number of Performance Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved and such
other restrictions or conditions imposed on the vesting and payout of the Performance Awards has been satisfied.
9.5
Reassignment
. If prior to the end of a Performance Period, but after the conclusion of one year of the Performance Period, a Participant holding Performance Awards is reassigned to a
position with the Company or any Subsidiary, and that position is not eligible to participate in such a Performance Award, but the Participant does not terminate employment or service with the Company or any Subsidiary, as the case may be, the
Committee may, in its sole discretion: (a) cause shares of Common Stock to be delivered or payment made with respect to the Participant’s Performance Award in accordance with Section 9.7 of this Plan, but only if otherwise earned for the entire
Performance Period or (b) cause shares of Common Stock to be delivered or payment made with respect to the Participant’s Performance Award in accordance with Section 9.7 of this Plan, but only if otherwise earned for the entire Performance Period
and only with respect to the portion of the applicable Performance Period completed at the date of such reassignment, with proration based on the number of months or years such Participant served in the prior position during the Performance Period.
9.6
Committee Discretion to Scale Back Awards
. At any time during a Performance Period of more than one fiscal year, the Committee may, in its discretion, cancel a portion of a Performance
Award prior to the conclusion of the Performance Period (a “
Scale Back
”), provided that:
(a)
the
Performance Award has not yet vested;
(b)
based
on financial information contained in the financial statements or similar internal reports of the Company or any Subsidiary, as the case may be, the Committee determines that the Performance Goals for the Performance Period cannot be achieved at
the maximum levels established at the time of grant;
(c)
once a
Performance Award is Scaled Back, it may not again be increased to add or recover a Performance Award that was canceled; and
(d)
Performance
Awards canceled in a Scale Back will again be available to the Committee for grant of new Performance Awards for any future Performance Period. This provision will not be used in any manner that could have the effect of repricing a previous
Performance Award.
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9.7
Form and Timing of Performance Award Payment
. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Awards will be entitled to
receive payment on the value and number of Performance Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved. Payment of earned
Performance Awards will be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Awards in the form of cash, in shares of Common
Stock or other Awards (or in a combination thereof) equal to the value of the earned Performance Awards at the close of the applicable Performance Period. Payment of any Performance Award will be made as soon as practicable after the Committee has
determined the extent to which the applicable Performance Goals have been achieved and not later than the fifteenth (15
th
) day of the third (3
rd
) month immediately following the later of the end of the Company’s fiscal year in which the Performance Period ends and any additional vesting restrictions are
satisfied or the end of the calendar year in which the Performance Period ends and any additional vesting restrictions are satisfied, except to the extent that a Participant has properly elected to defer payment that may be attributable to a
Performance Award under a Company deferred compensation plan or arrangement. The determination of the Committee with respect to the form and time of payment of Performance Awards will be set forth in the Award Agreement pertaining to the grant of
the Performance Award. Any shares of Common Stock or other Awards issued in payment of earned Performance Awards may be granted subject to any restrictions deemed appropriate by the Committee, including that the Participant remain in the
continuous employment or service with the Company or a Subsidiary for a certain period.
9.8
Dividend Rights
. Participants holding Performance Awards granted under this Plan may receive cash dividends or Dividend Equivalents based on the dividends declared on shares of Common
Stock that are subject to such Performance Awards during the period between the date that such Performance Awards are granted and the date such Performance Awards are settled; provided, however, that such cash dividends or Dividend Equivalents may
not be paid out until the vesting provisions of such Performance Award lapse.
10.1
Grant
. Subject to such terms and conditions, consistent with the other provisions of this Plan, as may be determined by the Committee in its sole discretion, the Committee, at any time
and from time to time, may grant to Eligible Recipients Awards denominated in cash in such amounts and upon such terms as the Committee may determine, based on the achievement of specified Performance Goals for annual periods or other time periods
as determined by the Committee (the “
Annual Performance Cash Awards
”).
10.2
Target Payout
. The target amount that may be paid with respect to an Annual Performance Cash Award (the “
Target
Payout
”) may be determined by the Committee pursuant to Section 13.2 of this Plan and may be based on a percentage of a Participant’s actual annual base compensation at the time of grant (“
Participation Factor
”), within the range established by the Committee for each Participant and subject to adjustment as provided in the second to last sentence of this Section 10.2. The Chief Executive
Officer may approve modifications to the Participation Factor for any Participant, if such modification is based on level of responsibility. The Committee may establish curves, matrices or other measurements for prorating the amount of payments
for achievement of Performance Goals at less or greater than the Target Payout.
10.3
Maximum Payout
. The Committee also may establish a maximum potential payout amount (the “
Maximum Payout
”)
with respect to an Annual Performance Cash Award in the event Performance Goals are exceeded by an amount established by the Committee at the time Performance Goals are established. The Committee may establish curves, matrices or other
measurements for prorating the amount of payments for achievement of Performance Goals at greater than the Target Payout but less than the Maximum Payout.
19
10.4
Individual Performance Goals
. At the time an Annual Performance Cash Award is granted, the Committee may provide for an increase in the Target Payout and the Maximum Payout (as either
may be prorated in accordance with Sections 10.2 and 10.3 of this Plan) for selected Participants (“
Individual Performance Participants
”) to reflect the achievement
of individual performance goals (“
Individual Performance Goals
”) established at that time by the Committee. The Committee will have the discretion to reduce by an
amount up to 100% the amount that would otherwise be paid under the payout formula to an Individual Performance Participant based on the Committee’s evaluation of the individual’s achievement of the Individual Performance Goals.
10.5
Payment
. Payment of any earned Annual Performance Cash Awards will be made as soon as possible after the Committee has determined the extent to which the applicable Performance Goals and
Individual Performance Goals have been achieved and not later than the fifteenth (15
th
) day of the third (3
rd
) month immediately following the later of the end of the Company’s fiscal year in which the Performance Period ends or the end of the calendar year in which the Performance Period ends, except to the extent that a
Participant has properly elected to defer payment that may be attributable to an Annual Performance Cash Award under a Company deferred compensation plan or arrangement.
11.1
Automatic and Non-Discretionary Awards to Non-Employee Directors
. Subject to such terms and conditions, consistent with the other provisions of this Plan, the Committee at any time and
from time to time may approve resolutions providing for the automatic grant to Non-Employee Directors of Non-Employee Director Awards granted under this Plan and may grant to Non-Employee Directors such discretionary Non-Employee Director Awards on
such terms and conditions, consistent with the other provisions of this Plan, as may be determined by the Committee in its sole discretion, and set forth in an applicable Award Agreement. Such Non-Employee Director Awards will not be subject to
management’s discretion.
11.2
Deferral of Award Payment; Election to Receive Award in Lieu of Retainers
. The Committee may permit Non-Employee Directors the opportunity to defer the payment of an
Award pursuant to such terms and conditions as the Committee may prescribe from time to time. In addition, the Committee may permit Non-Employee Directors to elect to receive, pursuant to the procedures established by the Board or a committee of
the Board, all or any portion of their annual retainers, meeting fees, or other fees in Restricted Stock, Restricted Stock Units, Deferred Stock Units or other Stock-Based Awards as contemplated by this Plan in lieu of cash.
12.1
Other Cash-Based Awards
. Subject to such terms and conditions, consistent with the other provisions of this Plan, as may be determined by the Committee in its sole
discretion, the Committee, at any time and from time to time, may grant Other Cash-Based Awards to Eligible Recipients not otherwise described by the terms of this Plan in such amounts and upon such terms as the Committee may determine.
20
12.2
Other Stock-Based Awards
. Subject to such terms and conditions, consistent with the other provisions of this Plan, as may be determined by the Committee in its sole discretion, the
Committee may grant Other Stock-Based Awards to Eligible Recipients not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted shares of Common Stock) in such amounts and subject to such terms and
conditions as the Committee will determine. Such Awards may involve the transfer of actual shares of Common Stock to Participants as a bonus or in lieu of obligations to pay cash or deliver other property under this Plan or under other plans or
compensatory arrangements, or payment in cash or otherwise of amounts based on the value of shares of Common Stock, and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United
States.
12.3
Value of Other Cash-Based Awards and Other Stock-Based Awards
. Each Other Cash-Based Award will specify a payment amount or payment range as determined by the Committee. Each Other
Stock-Based Award will be expressed in terms of shares of Common Stock or units based on shares of Common Stock, as determined by the Committee. The Committee may establish Performance Goals in its discretion for any Other Cash-Based Award or any
Other Stock-Based Award. If the Committee exercises its discretion to establish Performance Goals for any such Awards, the number or value of Other Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend
on the extent to which the Performance Goals are met.
12.4
Payment of Other Cash-Based Awards and Other Stock-Based Awards
. Payment, if any, with respect to an Other Cash-Based Award or an Other Stock-Based Award will be made in accordance with
the terms of the Award, in cash for any Other Cash-Based Award and in cash or shares of Common Stock for any Other Stock-Based Award, as the Committee determines, except to the extent that a Participant has properly elected to defer payment that
may be attributable to an Other Cash-Based Award or Other Stock-Based Award under a Company deferred compensation plan or arrangement.
13.1
Performance Measures
. The Performance Goals may include one or more specified objective Performance Measures that are based on any of the following Performance Measure elements as
determined by the Committee (each, a “
Performance Measure Element
”): sales and revenue measures: gross revenue, sales allowances, net revenue, invoiced revenue,
collected revenue, revenues from new products, bad debts, home closings, orders, backlog, annual or multi-year “net-back” sales”; expense measures: direct material costs, direct labor costs, indirect labor costs, direct manufacturing costs,
indirect manufacturing costs, cost of goods sold, sales, general and administrative expenses, operating expenses, non-cash expenses, tax expense, non-operating expenses, total expenses; profitability and productivity measures: gross margin, net
operating income, EBITDA (earnings before interest, taxes, depreciation and amortization), EBIT (earnings before interest and taxes), net operating income after taxes (NOPAT), net income, net income before taxes, net cash flow, net cash flow from
operations, maintenance or improvement of profit margins; asset utilization and effectiveness measures: cash, excess cash, accounts receivable, inventory (WIP or finished goods), inventory days on hand, days sales outstanding, current assets,
working capital, total capital, fixed assets, total assets, change in net assets, standard hours, plant utilization, purchase price variance, manufacturing overhead variance; debt and equity measures: accounts payable, current accrued liabilities,
total current liabilities, total debt, debt principal payments, net current borrowings, total long-term debt, credit rating, retained earnings, total preferred equity, total common equity, total equity, cash-to-debt, interest coverage, liquidity;
stockholder and return measures: earnings per share (diluted and fully diluted), stock price, dividends, shares repurchased, total return to stockholders, price/earnings ratio, market capitalization, book value, debt coverage ratios, return on
assets, return on equity, return on invested capital, economic profit (for example, economic value added); customer and market measures: customer satisfaction, customer retention, customer service/care, brand awareness and perception, market share,
warranty rates, product quality, inventory, strategic business objectives, introduction of new products, procurement of land/well located lots, mortgage capture rates, acquisition/entrance into new markets, land and other asset acquisitions,
strategic asset sales or acquisitions, improvements in capital structure; organizational and employee measures: headcount, employee performance, employee productivity, standard hours, employee engagement/satisfaction, employee turnover, employee
diversity, safety, satisfactory completion of major project or organizational initiative, supervision of litigation. Any Performance Measure Element can be a Performance Measure. In addition, any of the Performance Measure Element(s) can be used
in an algebraic formula (
e.g
., averaged over a period, combined into a ratio, compared to a budget or standard, compared to previous periods or other
formulaic combinations) based on the Performance Measure Elements to create a Performance Measure. Any Performance Measure(s) may be used to measure the performance of the Company or Subsidiary as a whole or any division or business unit of the
Company, product or product group, region or territory, or Subsidiary, or any combination thereof, as the Committee may deem appropriate. Any Performance Measure(s) can be compared to the performance of a peer group or published or special index
that the Committee, in its sole discretion, deems appropriate, or the Company may select any Performance Measure(s) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any
Award based on the achievement of Performance Goals pursuant to any Performance Measure(s) specified in this Section 13.1.
21
13.2
Establishment of Performance Goals
. Unless otherwise determined by the Committee, any Award that is intended to qualify as Performance-Based Compensation will be granted, and Performance
Goals for such an Award will be established, by the Committee in writing not later than ninety (90) days after the commencement of the Performance Period to which the Performance Goals relate;
provided
,
however
, that the outcome is substantially uncertain at the time the Committee establishes the Performance Goal; and
provided
further
that in no event will a Performance Goal be considered to be
pre-established if it is established after twenty-five percent (25%) of the Performance Period (as scheduled in good faith at the time the Performance Goal is established) has elapsed.
13.3
Certification of Payment
. Before any payment is made in connection with any Award that is intended to qualify as Performance-Based Compensation, the Committee must certify in writing, as
reflected in the minutes, that the Performance Goals established with respect to such Award have been achieved.
13.4
Evaluation of Performance
. The Committee may provide in any such Award Agreement including Performance Goals, or in applicable resolutions, that any evaluation of performance may include
or exclude any event that occurs during a Performance Period as determined appropriate by the Committee, including: (a) items related to a change in accounting principles; (b) items relating to financing activities; (c) expenses for restructuring
or productivity initiatives; (d) other non-operating items; (e) items related to acquisitions; (f) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (g) items related to the disposal
of a business or segment of a business; (h) items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; (i) items attributable to any stock dividend, stock split, combination or
exchange of stock occurring during the Performance Period; (j) any other items of significant income or expense which are determined to be appropriate adjustments; (k) items relating to unusual or extraordinary corporate transactions, events or
developments; (l) items related to amortization of acquired intangible assets; (m) items that are outside the scope of the Company’s core, on-going business activities; (n) items related to acquired in-process research and development; (o) items
relating to changes in tax laws; (p) items relating to major licensing or partnership arrangements; (q) items relating to asset impairment charges; (r) items relating to gains or losses for litigation, arbitration and contractual settlements; (s)
foreign exchange gains and losses; or (t) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.
22
13.5
Adjustment of Performance Goals, Performance Periods or other Vesting Criteria
. Subject to Section 13.6 of this Plan, the Committee may amend or modify the vesting criteria (including
any Performance Goals, Performance Measures or Performance Periods) of any outstanding Awards based in whole or in part on the financial performance of the Company (or any Subsidiary or division, business unit or other sub-unit thereof) in
recognition of unusual or nonrecurring events (including the events described in Sections 13.4 or 4.5(a) of this Plan) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations or accounting
principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of
the Committee as to the foregoing adjustments, if any, will be final, conclusive and binding on Participants under this Plan.
13.6
Adjustment of Performance-Based Compensation
. The Committee retains the discretion to adjust Awards that are intended to qualify as Performance-Based Compensation either upward or
downward, either on a formula or discretionary basis or any combination, as the Committee determines.
13.7
Committee Discretion
. In the event that applicable tax or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder
approval of such changes, the Committee will have sole discretion to make such changes without obtaining stockholder approval. In addition, the Committee may grant Performance Awards based on Performance Measures other than those set forth in
Section 13.1 of this Plan.
Subject to the provisions of this Plan and any Award Agreement, any Participant selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on shares of Common Stock that are subject to any Award (including any Award that has been deferred), to be credited as of dividend payment dates, during the period between the date the Award is granted and the date
the Award is exercised, vests, settles, is paid or expires, as determined by the Committee. Such Dividend Equivalents will be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as
may be determined by the Committee and the Committee may provide that such amounts (if any) will be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested. Notwithstanding the foregoing, the Committee may not
grant Dividend Equivalents based on the dividends declared on shares of Common Stock that are subject to an Option or Stock Appreciation Right; and further, no dividend or Dividend Equivalents will be paid out with respect to any unvested Awards.
15.1
Termination Due to Cause
. Unless otherwise expressly provided by the Committee in its sole discretion in an Award Agreement or the terms of an Individual Agreement between the
Participant and the Company or one of its Subsidiaries or Affiliates or a plan or policy of the Company applicable to the Participant specifically provides otherwise, and subject to Sections 15.4 and 15.5 of this Plan, in the event a Participant’s
employment or other service with the Company and all Subsidiaries is terminated for Cause:
(a)
All
outstanding Options and Stock Appreciation Rights held by the Participant as of the effective date of such termination will be immediately terminated and forfeited;
23
(b)
All
outstanding but unvested Restricted Stock Awards, Restricted Stock Units, Performance Awards Other Cash-Based Awards and Other Stock-Based Awards held by the Participant as of the effective date of such termination will be terminated and forfeited;
and
(c)
All
other outstanding Awards to the extent not vested will be immediately terminated and forfeited.
15.2
Termination Due to Death, Disability or Retirement
. Unless otherwise expressly provided by the Committee in its sole discretion in an Award Agreement between the Participant and the
Company or one of its Subsidiaries or Affiliates or the terms of an Individual Agreement or a plan or policy of the Company applicable to the Participant specifically provides otherwise, and subject to Sections 15.4, 15.5 and 17 of this Plan, in
the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability of a Participant, or in the case of a Participant that is an Employee, Retirement:
(a)
All
outstanding Options (excluding Non-Employee Director Options in the case of Retirement) and Stock Appreciation Rights held by the Participant as of the effective date of such termination or Retirement will, to the extent exercisable as of the date
of such termination or Retirement, remain exercisable for a period of one (1) year after the date of such termination or Retirement (but in no event after the expiration date of any such Option or Stock Appreciation Right) and Options and Stock
Appreciation Rights not exercisable as of the date of such termination or Retirement will be terminated and forfeited;
(b)
All
outstanding unvested Restricted Stock Awards held by the Participant as of the effective date of such termination or Retirement will be terminated and forfeited;
(c)
All
outstanding unvested Restricted Stock Units, Performance Awards, Other Cash-Based Awards and Other Stock-Based Awards held by the Participant as of the effective date of such termination or Retirement will be terminated and forfeited;
provided
,
however
, that with respect to any such Awards the vesting of which is based
on the achievement of Performance Goals, if a Participant’s employment or other service with the Company or any Subsidiary, as the case may be, is terminated prior to the end of the Performance Period of such Award, but after the conclusion of a
portion of the Performance Period (but in no event less than one year), the Committee may, in its sole discretion, cause shares of Common Stock to be delivered or payment made (except to the extent that a Participant has properly elected to defer
income that may be attributable to such Award under a Company deferred compensation plan or arrangement) with respect to the Participant’s Award, but only if otherwise earned for the entire Performance Period and only with respect to the portion of
the applicable Performance Period completed at the date of such event, with proration based on the number of months or years that the Participant was employed or performed services during the Performance Period. The Committee will consider the
provisions of Section 15.5 of this Plan and will have the discretion to consider any other fact or circumstance in making its decision as to whether to deliver such shares of Common Stock or other payment, including whether the Participant again
becomes employed; and
(d)
If the
effective date of such termination or Retirement is before the end of the Performance Period to which an Annual Performance Cash Award relates, then any such Annual Performance Cash Award held by a Participant will be terminated and forfeited; and
if the effective date of such termination or Retirement is on or after the end of the Performance Period to which an Annual Performance Cash Award relates, then any such Annual Performance Cash Award held by a Participant will be paid to the
Participant in accordance with the payment terms of such Award.
24
15.3
Termination for Reasons Other than Death, Disability or Retirement
. Unless otherwise expressly provided by the Committee in its sole discretion in an Award Agreement or the terms of an
Individual Agreement between the Participant and the Company or one of its Subsidiaries or Affiliates or a plan or policy of the Company applicable to the Participant specifically provides otherwise, and subject to Sections 15.4, 15.5 and 17 of
this Plan, in the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated for any reason other than for Cause or death or Disability of a Participant, or in the case of a Participant that is an
Employee, Retirement:
(a)
All
outstanding Options (including Non-Employee Director Options) and Stock Appreciation Rights held by the Participant as of the effective date of such termination will, to the extent exercisable as of such termination, remain exercisable for a period
of three (3) months after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right) and Options and Stock Appreciation Rights not exercisable as of such termination will be terminated and forfeited.
(b)
All
outstanding unvested Restricted Stock Awards held by the Participant as of the effective date of such termination will be terminated and forfeited;
(c)
All
outstanding unvested Restricted Stock Units, Performance Awards, Annual Performance Cash Awards, Other Cash-Based Awards and Other Stock-Based Awards held by the Participant as of the effective date of such termination will be terminated and
forfeited;
provided
,
however
, that with respect to any such Awards the vesting
of which is based on the achievement of Performance Goals, if a Participant’s employment or other service with the Company or any Subsidiary, as the case may be, is terminated by the Company without Cause prior to the end of the Performance Period
of such Award, but after the conclusion of a portion of the Performance Period (but in no event less than one year), the Committee may, in its sole discretion, cause Shares to be delivered or payment made (except to the extent that a Participant
has properly elected to defer income that may be attributable to such Award under a Company deferred compensation plan or arrangement) with respect to the Participant’s Award, but only if otherwise earned for the entire Performance Period and only
with respect to the portion of the applicable Performance Period completed at the date of such event, with proration based on the number of months or years that the Participant was employed or performed services during the Performance Period.
15.4
Modification of Rights upon Termination
. Notwithstanding the other provisions of this Section 15, upon a Participant’s termination of employment or other service with the Company or any
Subsidiary, as the case may be, the Committee may, in its sole discretion (which may be exercised at any time on or after the Grant Date, including following such termination) cause Options or Stock Appreciation Rights (or any part thereof) held by
such Participant as of the effective date of such termination to terminate, become or continue to become exercisable or remain exercisable following such termination of employment or service, and Restricted Stock, Restricted Stock Units, Deferred
Stock Units, Performance Awards, Annual Performance Cash Awards, Non-Employee Director Awards, Other Cash-Based Awards and Other Stock-Based Awards held by such Participant as of the effective date of such termination to terminate, vest or become
free of restrictions and conditions to payment, as the case may be, following such termination of employment or service, in each case in the manner determined by the Committee;
provided
,
however
, that (a) no Option or Stock Appreciation Right may remain exercisable beyond its expiration date; (b) the Committee may not take any action not permitted
pursuant to Section 13.6 of this Plan; and (c) any such action by the Committee adversely affecting any outstanding Award will not be effective without the consent of the affected Participant (subject to the right of the Committee to take whatever
action it deems appropriate under Section 4.5, 15.5, 17 or 21 of this Plan).
25
15.5
Additional Forfeiture Events
.
(a)
Effect of Actions Constituting Cause or Adverse Action
. Notwithstanding anything in this Plan to the contrary and in addition to the other rights of the Committee under
this Plan, including this Section 15.5, if a Participant is determined by the Committee, acting in its sole discretion, to have taken any action that would constitute Cause or an Adverse Action during or after the termination of employment or other
service with the Company or a Subsidiary, irrespective of whether such action or the Committee’s determination occurs before or after termination of such Participant’s employment or other service with the Company or any Subsidiary and irrespective
of whether or not the Participant was terminated as a result of such Cause or Adverse Action, (i) all rights of the Participant under this Plan and any Award Agreements evidencing an Award then held by the Participant will terminate and be
forfeited without notice of any kind, and (ii) the Committee in its sole discretion will have the authority to rescind the exercise, vesting or issuance of, or payment in respect of, any Awards of the Participant that were exercised, vested or
issued, or as to which such payment was made, and to require the Participant to pay to the Company, within ten (10) days of receipt from the Company of notice of such rescission, any amount received or the amount of any gain realized as a result of
such rescinded exercise, vesting, issuance or payment (including any dividends paid or other distributions made with respect to any shares of Common Stock subject to any Award). The Company may defer the exercise of any Option or Stock
Appreciation Right for a period of up to six (6) months after receipt of the Participant’s written notice of exercise or the issuance of share certificates upon the vesting of any Award for a period of up to six (6) months after the date of such
vesting in order for the Committee to make any determination as to the existence of Cause or an Adverse Action. The Company will be entitled to withhold and deduct from future wages of the Participant (or from other amounts that may be due and
owing to the Participant from the Company or a Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligations. Unless otherwise provided by the Committee in an applicable Award Agreement,
this Section 15.5(a) will not apply to any Participant following a Change in Control.
(b)
Forfeiture or Clawback of Awards Under Applicable Law and Company Policy
. If the Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, then any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley
Act of 2002 will reimburse the Company for the amount of any Award received by such individual under this Plan during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission, as the case may be,
of the financial document embodying such financial reporting requirement. The Company also may seek to recover any Award made as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other clawback,
forfeiture or recoupment provision required by Applicable Law or under the requirements of any stock exchange or market upon which the shares of Common Stock are then listed or traded. In addition, all Awards under this Plan will be subject to
forfeiture or other penalties pursuant to any clawback or forfeiture policy of the Company, as in effect from time to time (including, but not limited to, the Company’s Clawback and Forfeiture Policy as adopted in 2018), and such forfeiture and/or
penalty conditions or provisions as determined by the Committee and set forth in the applicable Award Agreement.
26
16.1
General Rules
. The Company is entitled to (a) withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the
Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, foreign, state and local withholding and employment related tax requirements attributable to an
Award, including the grant, exercise, vesting or settlement of, or payment of dividends with respect to, an Award or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (b) require the Participant promptly
to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to an Award. When withholding shares of Common Stock for taxes is effected under this Plan, it will be
withheld only up to an amount based on the maximum statutory tax rates in the Participant’s applicable tax jurisdiction or such other rate that will not trigger a negative accounting impact on the Company.
16.2
Special Rules
. The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any
withholding or employment related tax obligation described in Section 16.1 of this Plan by withholding shares of Common Stock underlying an Award, by electing to tender, or by attestation as to ownership of, Previously Acquired Shares, by delivery
of a Broker Exercise Notice or a combination of such methods. For purposes of satisfying a Participant’s withholding or employment-related tax obligation, shares of Common Stock withheld by the Company or Previously Acquired Shares tendered or
covered by an attestation will be valued at their Fair Market Value on the Tax Date.
17.1
Definition of Change in Control
. Unless otherwise provided in an Award Agreement or Individual Agreement between the Participant and the Company or one of its Subsidiaries or Affiliates,
a “
Change in Control
” will mean the occurrence of any of the following:
(a)
The
acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent (50%) or more of either the then outstanding shares of Common Stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, but
excluding, for this purpose, any such acquisition by the Company or any of its Subsidiaries, or any employee benefit plan (or related trust) of the Company or its Subsidiaries, or any entity with respect to which, following such acquisition, more
than fifty percent (50%) of, respectively, the then outstanding equity of such entity and the combined voting power of the then outstanding voting equity of such entity entitled to vote generally in the election of all or substantially all of the
members of such entity's governing body is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Common Stock and voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of Common Stock of the Company or the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors, as the case may be; or
(b)
The
consummation of a reorganization, merger or consolidation of the Company, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Common Stock and voting
securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively,
the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization,
merger or consolidation; or
27
(c)
a
complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.
17.2
Continuation, Assumption or Substitution of Outstanding Awards; Treatment Upon Subsequent Termination
. In the event of a Change in Control, the surviving or successor organization (or a
parent or subsidiary thereof) (the “
Successor
”) may continue, assume or substitute equivalent awards (with such adjustments as may be required or permitted by
Section 4.5 of this Plan). The Successor may elect to continue, assume or substitute only some Awards or portions of Awards. A substitute equivalent award must (i) have a value at least equal to the value of the Award being substituted; (ii) relate
to a publicly-traded equity security of the Successor involved in the Change in Control or another entity that is affiliated with the Company or the Successor following the Change in Control; (iii) be the same type of award as the Award being
substituted; (iv) be vested to the extent vested at the time of and as a result of the Change in Control and (v) have other terms and conditions (including vesting, exercisability and effect of termination within two (2) years following a Change in
Control) that are not less favorable to the Participant than the terms and conditions of the Award being substituted, in each case, as determined by the Committee (as constituted prior to the Change in Control) in its sole discretion. If an Award
is continued, assumed or substituted by the Successor and within two (2) years following a Change in Control the Participant (i) is terminated by the Successor (or an Affiliate thereof) without Cause or (ii) if the Participant is an executive
officer of the Company (who is subject to reporting under Section 16 of the Exchange Act) or was an executive officer of the Company immediately prior to the Change in Control and resigns for Good Reason, the following rules will apply to the
continued, assumed or substituted Awards, unless otherwise specifically provided in the applicable Award Agreement:
(a)
Any
and all Options and Stock Appreciation Rights will vest and become immediately exercisable as of the termination or resignation and will remain exercisable until the earlier of the expiration of its full specified term or the first anniversary of
the date of such termination or resignation.
(b)
All
restrictions imposed on Restricted Stock, Restricted Stock Units or Deferred Units that are not performance-based will lapse. Such Restricted Stock Units and Deferred Stock Units will be settled and paid in cash or shares of Common Stock as
provided in the Award Agreement. If such Restricted Stock Units or Deferred Stock Units are exempt from the requirements of Section 409A of the Code, the Restricted Stock Units or Deferred Stock Units will be paid within thirty (30) days following
the termination or resignation. If such Restricted Stock Units or Deferred Stock Units are subject to the requirements of Section 409A of the Code, then the Restricted Stock Units or Deferred Stock Units will be paid within the thirty (30) day
period following the Participant’s separation from service (within the meaning of Section 409A of the Code) (a “
Separation from Service
”);
provided
,
however
, that if at the time of the Participant’s Separation from Service, such Participant
is a “specified employee” (within the meaning of Code Section 409A), then payment will be suspended, except as permitted under Code Section 409A, until the first business day after the earlier of (i) the date that is six (6) months after the date
of the Participant’s Separation from Service or (ii) the Participant’s death.
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(c)
All
vested and earned Awards that are performance-based for which the Performance Period has been completed as of the date of such termination or resignation but have not yet been paid will be paid in cash or Shares and at such time as provided in the
Award Agreement. All performance-based Awards for which the Performance Period has not been completed as of the date of such termination or resignation will immediately vest and be earned in full, and paid out with respect to each Performance Goal
based on actual performance achieved through the date of such termination or resignation with the manner of payment to be made in cash or Shares as provided in the Award Agreement within thirty (30) days following the date of such termination or
resignation. If such Awards are subject to the requirements of Section 409A of the Code, then the Awards will be paid within the thirty (30) day period following the Participant’s Separation from Service;
provided
,
however
, that if at such time, such Participant is a “specified employee” (within the meaning of Code Section
409A), then payment will be suspended, except as permitted under Code Section 409A, until to the first business day after the earlier of (i) the date that is six (6) months after the date of the Separation from Service or (ii) the Participant’s
death.
17.3
No Continuation, Assumption or Substitution of Outstanding Awards; Dissolution or Liquidation
. In the event of a Change in Control, any outstanding Awards that are not continued, assumed
or substituted with equivalent awards by the Successor pursuant to Section 17.2 of this Plan, or in the case of a dissolution or liquidation of the Company, all Awards, will be subject to the following rules, in each case effective immediately
prior to such Change in Control but conditioned upon the completion of such Change in Control:
(a)
Any
Options and Stock Appreciation Rights will be fully vested and exercisable and the Committee will either (1) give a Participant a reasonable opportunity to exercise the Option and Stock Appreciation Right before the transaction resulting in the
Change in Control (including cashless exercise by a Participant) or (2) pay the Participant the difference between the exercise price for such Option or the grant price for such Stock Appreciation Right and the per Share consideration provided to
other similarly situated stockholders in such Change in Control;
provided
,
however
,
that if the exercise price of such Option or the grant price of such Stock Appreciation Right exceeds the aforementioned consideration provided, then the Option or Stock Appreciation Right will be canceled and terminated without any payment. In
either case, such Option or Stock Appreciation Right will be cancelled. The Committee will not be obligated to treat all Options and Stock Appreciation Rights subject to this Section 17.3 in the same manner. The exercise of any Option or Stock
Appreciation Right whose exercisability is accelerated as provided in this Section 17.3 will be conditioned upon the consummation of the Change in Control and will be effective only immediately before such consummation.
(b)
All
restrictions imposed on Restricted Stock, Restricted Stock Units or Deferred Stock Units that are not performance-based will lapse. Such Restricted Stock Units or Deferred Stock Units will be settled and paid in cash or shares of Common Stock as
provided in the Award Agreement. If Restricted Stock Units or Deferred Stock Units are exempt from the requirements of Section 409A of the Code, then the Restricted Stock Units or Deferred Stock Units will be paid within thirty (30) days following
the Change in Control. If Restricted Stock Units or Deferred Stock Units are subject to the requirements of Section 409A of the Code, then the time of payment will depend on whether the Change in Control is a distribution event under Treasury
Regulation § 1.409A-3(a)(5) (a “
409A Change in Control
”). If the Change in Control is a 409A Change in Control, then the Restricted Stock Units or Deferred Stock
Units subject to the requirements of Section 409A of the Code will be paid within the thirty (30) day period following the Change in Control. If the Change in Control is not a 409A Change in Control, Restricted Stock Units or Deferred Stock Units
subject to the requirements of Section 409A of the Code will be paid as of the earlier of the time specified in the Award Agreement or within the thirty (30) day period following the date the Participant has a Separation from Service following such
Change in Control;
provided
,
however
, that if at the time of the Participant’s
Separation from Service, such Participant is a “specified employee” (within the meaning of Code Section 409A), then payment will be suspended, except as permitted under Code Section 409A, until the first business day after the earlier of (i) the
date that is six (6) months after the date of the Participant’s Separation from Service or (ii) the Participant’s death.
29
(c)
All
vested and earned Awards that are performance-based for which the Performance Period has been completed as of the date of the Change in Control but have not yet been paid will be paid in cash or Shares and at such time as provided in the Award
Agreement. All performance-based Awards for which the Performance Period has not been completed as of the date of the Change in Control will immediately vest and be earned in full, and paid out with respect to each Performance Goal based on actual
performance achieved through the date of such Change in Control with the manner of payment to be made in cash or Shares as provided in the Award Agreement as soon as reasonably practicable after the Change in Control, but no later than within
thirty (30) days following the date of the Change in Control;
provided
,
however
that if any such payment is to be made in Shares, the Committee may in its discretion, provide such holders the consideration provided to other similarly situated shareholders in such Change in Control.
17.4
Alternative Special Treatment of Performance-Based Awards
. Notwithstanding Section 17.2 and 17.3 above, in the event of a Change in Control, the Committee, may decide in its discretion
that, in lieu of treatment under Section 17.2 or 17.3 above, with respect to any outstanding Performance Awards, (i) the Performance Period will end as of the date immediately prior to such Change in Control and the Committee will determine the
extent to which the Performance Goals applicable to such Performance Award have been satisfied at such time, (ii) the portion of such Performance Award that is deemed to have been earned pursuant to clause (i) above will be converted into a
time-vesting Award of equivalent value to which any service vesting requirements applicable to the predecessor Performance Award will continue to apply and (iii) the converted time-vesting Award will be paid or settled on the settlement date or
dates as provided under the terms of the predecessor Performance Award that would have applied had a Change in Control not occurred;
provided
however
, that if within two (2) years following a Change in Control the Participant (i) is terminated by the Successor (or an Affiliate thereof) without Cause or (ii) if
the Participant is an executive officer of the Company (who is subject to reporting under Section 16 of the Exchange Act) or was an executive officer of the Company immediately prior to the Change in Control and resigns for Good Reason, any service
vesting requirements applicable to any such converted Award will be deemed to have been met and such converted Award will be immediately paid or settled upon such termination. The Committee will not be obligated to treat all Performance Awards
subject to this Section 17.4 in the same manner.
17.5
Limitation on Change in Control Payments
. Notwithstanding anything in this Section 17 to the contrary, if, with respect to a Participant, the acceleration of the vesting of an Award or
the payment of cash in exchange for all or part of a Stock-Based Award (which acceleration or payment could be deemed a “payment” within the meaning of Section 280G(b)(2) of the Code), together with any other “payments” that such Participant has
the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a
“parachute payment” (as defined in Section 280G(b)(2) of the Code), then the “payments” to such Participant pursuant to Section 17.2 of this Plan will be reduced (or acceleration of vesting eliminated) to the largest amount as will result in no
portion of such “payments” being subject to the excise tax imposed by Section 4999 of the Code;
provided
,
however
, that such reduction will be made only if the aggregate amount of the payments after such reduction exceeds the difference between (a) the amount of such payments absent such reduction minus (b) the aggregate
amount of the excise tax imposed under Section 4999 of the Code attributable to any such excess parachute payments; and
provided,
further
that such payments will be reduced (or acceleration of vesting eliminated) by first reducing or eliminating payments or benefits the full value of which are required to be recognized as
contingent upon a Change in Control (determined in accordance with Treasury Regulation § 1.280G-1, Q/A-24), followed by reducing or eliminating payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in
each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from such date. Notwithstanding the foregoing sentence, if a Participant is subject to a separate agreement with the Company or a Subsidiary
that expressly addresses the potential application of Section 280G or 4999 of the Code, then this Section 17.5 will not apply and any “payments” to a Participant pursuant to Section 17 of this Plan will be treated as “payments” arising under such
separate agreement;
provided
,
however
, such separate agreement may not modify
the time or form of payment under any Award that constitutes deferred compensation subject to Section 409A of the Code if the modification would cause such Award to become subject to the adverse tax consequences specified in Section 409A of the
Code.
30
17.6
Exceptions
. Notwithstanding anything in this Section 17 to the contrary, individual Award Agreements or Individual Agreements between a Participant and the Company or one of its
Subsidiaries or Affiliates may contain provisions with respect to vesting, payment or treatment of Awards upon the occurrence of a Change in Control, and the terms of any such Award Agreement or Individual Agreement will govern to the extent of any
inconsistency with the terms of this Section 17. The Committee will not be obligated to treat all Awards subject to this Section 17 in the same manner. The timing of any payment under this Section 17 may be governed by any election to defer receipt
of a payment made under a Company deferred compensation plan or arrangement.
18.1
Employment
. Nothing in this Plan or an Award Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of any
Eligible Recipient or Participant at any time, nor confer upon any Eligible Recipient or Participant any right to continue employment or other service with the Company or any Subsidiary.
18.2
No Rights to Awards
. No Participant or Eligible Recipient will have any claim to be granted any Award under this Plan.
18.3
Rights as a Stockholder
. Except as otherwise provided in the Award Agreement, a Participant will have no rights as a stockholder with respect to shares of Common Stock covered by any
Stock-Based Award unless and until the Participant becomes the holder of record of such shares of Common Stock and then subject to any restrictions or limitations as provided herein or in the Award Agreement.
18.4
Restrictions on Transfer
.
(a)
Except
pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by subsections (b) and (c) below, no right or interest of any Participant in an Award prior to the exercise (in the case of Options or Stock
Appreciation Rights) or vesting, issuance or settlement of such Award will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of
law or otherwise.
31
(b)
A
Participant will be entitled to designate a beneficiary to receive an Award upon such Participant’s death, and in the event of such Participant’s death, payment of any amounts due under this Plan will be made to, and exercise of any Options or
Stock Appreciation Rights (to the extent permitted pursuant to Section 15 of this Plan) may be made by, such beneficiary. If a deceased Participant has failed to designate a beneficiary, or if a beneficiary designated by the Participant fails to
survive the Participant, payment of any amounts due under this Plan will be made to, and exercise of any Options or Stock Appreciation Rights (to the extent permitted pursuant to Section 15 of this Plan) may be made by, the Participant’s legal
representatives, heirs and legatees. If a deceased Participant has designated a beneficiary and such beneficiary survives the Participant but dies before complete payment of all amounts due under this Plan or exercise of all exercisable Options or
Stock Appreciation Rights, then such payments will be made to, and the exercise of such Options or Stock Appreciation Rights may be made by, the legal representatives, heirs and legatees of the beneficiary.
(c)
Upon a
Participant’s request, the Committee may, in its sole discretion, permit a transfer of all or a portion of a Non-Statutory Stock Option, other than for value, to such Participant’s child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, any person sharing such Participant’s household (other than a tenant or employee), a trust in which any of
the foregoing have more than fifty percent (50%) of the beneficial interests, a foundation in which any of the foregoing (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own
more than fifty percent (50%) of the voting interests. Any permitted transferee will remain subject to all the terms and conditions applicable to the Participant prior to the transfer. A permitted transfer may be conditioned upon such
requirements as the Committee may, in its sole discretion, determine, including execution or delivery of appropriate acknowledgements, opinion of counsel, or other documents by the transferee.
(d)
The
Committee may impose such restrictions on any shares of Common Stock acquired by a Participant under this Plan as it may deem advisable, including minimum holding period requirements in addition to those under Section 4.8 of this Plan, restrictions
under applicable federal securities laws, under the requirements of any stock exchange or market upon which the Common Stock is then listed or traded, or under any blue sky or state securities laws applicable to such shares or the Company’s insider
trading policy.
18.5
Non-Exclusivity of this Plan
. Nothing contained in this Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any
limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable.
Notwithstanding any other provision of this Plan or any Award Agreements entered into pursuant to this Plan, the Company will not be required to
issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Awards granted under this Plan, unless (a) there is in effect with respect to such
shares a registration statement under the Securities Act and any applicable securities laws of a state or foreign jurisdiction or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b)
there has been obtained any other consent, approval or permit from any other U.S. or foreign regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the
receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.
32
It is intended that all Awards issued under this Plan be in a form and administered in a manner that will comply with the requirements of
Section 409A of the Code, or the requirements of an exception to Section 409A of the Code, and the Award Agreements and this Plan will be construed and administered in a manner that is consistent with and gives effect to such intent. The Committee
is authorized to adopt rules or regulations deemed necessary or appropriate to qualify for an exception from or to comply with the requirements of Section 409A of the Code. With respect to an Award that constitutes a deferral of compensation subject
to Code Section 409A: (a) if any amount is payable under such Award upon a termination of service, a termination of service will be treated as having occurred only at such time the Participant has experienced a Separation from Service; (b) if any
amount is payable under such Award upon a Disability, a Disability will be treated as having occurred only at such time the Participant has experienced a “disability” as such term is defined for purposes of Code Section 409A; (c) if any amount is
payable under such Award on account of the occurrence of a Change in Control, a Change in Control will be treated as having occurred only at such time a “change in the ownership or effective control of the corporation or in the ownership of a
substantial portion of the assets of the corporation” as such terms are defined for purposes of Code Section 409A, (d) if any amount becomes payable under such Award on account of a Participant’s Separation from Service at such time as the
Participant is a “specified employee” within the meaning of Code Section 409A, then no payment will be made, except as permitted under Code Section 409A, prior to the first business day after the earlier of (i) the date that is six months after the
date of the Participant’s Separation from Service or (ii) the Participant’s death, and (e) no amendment to or payment under such Award will be made except and only to the extent permitted under Code Section 409A.
21.1
Generally
. Subject to other subsections of this Section 21 and Sections 3.4 and 21.3 of this Plan, the Board at any time may suspend or terminate this Plan (or any portion thereof) or
terminate any outstanding Award Agreement and the Committee, at any time and from time to time, may amend this Plan or amend or modify the terms of an outstanding Award. The Committee’s power and authority to amend or modify the terms of an
outstanding Award includes the authority to modify the number of shares of Common Stock or other terms and conditions of an Award, extend the term of an Award, accept the surrender of any outstanding Award or, to the extent not previously exercised
or vested, authorize the grant of new Awards in substitution for surrendered Awards;
provided
,
however
that the amended or modified terms are permitted by this Plan as then in effect, including without limitation Section 3.4 of this Plan and that any Participant adversely affected by such amended or modified terms has consented to such amendment or
modification.
21.2
Stockholder Approval
. No amendments to this Plan will be effective without approval of the Company’s stockholders if: (a) stockholder approval of the amendment is then required pursuant
to Section 422 of the Code, the rules of the primary stock exchange or stock market on which the Common Stock is then traded, applicable state corporate laws or regulations, applicable federal laws or regulations, and the applicable laws of any
foreign country or jurisdiction where Awards are, or will be, granted under this Plan; or (b) such amendment would: (i) modify Section 3.4 of this Plan; (ii) materially increase benefits accruing to Participants; (iii) increase the aggregate number
of shares of Common Stock issued or issuable under this Plan; (iv) increase any limitation set forth in this Plan on the number of shares of Common Stock which may be issued or the aggregate value of Awards which may be made, in respect of any type
of Award to any single Participant during any specified period; (v) modify the eligibility requirements for Participants in this Plan; or (vi) reduce the minimum exercise price or grant price as set forth in Sections 6.3 and 7.3 of this Plan.
33
21.3
Awards Previously Granted
. Notwithstanding any other provision of this Plan to the contrary, no termination, suspension or amendment of this Plan may adversely affect any outstanding
Award without the consent of the affected Participant;
provided
,
however
, that
this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 3.4, 4.5, 13.5, 15, 17, 20 or 21.4 of this Plan.
21.4
Amendments to Conform to Law
. Notwithstanding any other provision of this Plan to the contrary, the Committee may amend this Plan or an Award Agreement, to take effect retroactively or
otherwise, as deemed necessary or advisable for the purpose of conforming this Plan or an Award Agreement to any present or future law relating to plans of this or similar nature, and to the administrative regulations and rulings promulgated
thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 21.4 to any Award granted under this Plan without further consideration or action.
The Committee may grant Awards under this Plan in substitution for stock and stock-based awards held by employees of another entity who become
employees of the Company or a Subsidiary as a result of a merger or consolidation of the former employing entity with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the former employing
corporation. The Committee may direct that the substitute Awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.
This Plan is effective as of the Effective Date. This Plan will terminate at midnight on the day before the ten (10) year anniversary of the
Effective Date, and may be terminated prior to such time by Board action. No Award will be granted after termination of this Plan, but Awards outstanding upon termination of this Plan will remain outstanding in accordance with their applicable terms
and conditions and the terms and conditions of this Plan.
| 24. |
Miscellaneous
.
|
24.1
Usage
. In this Plan, except where otherwise indicated by clear contrary intention, (a) any masculine term used herein also will include the feminine, (b) the plural will include the
singular, and the singular will include the plural, (c) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term, and (d) “or” is used in the inclusive sense of
“and/or”.
24.2
Unfunded Plan
. Participants will have no right, title or interest whatsoever in or to any investments that the Company or its Subsidiaries may make to aid it in meeting its obligations
under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal
representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company or any Subsidiary under this Plan, such right will be no greater than the right of an unsecured general creditor of
the Company or the Subsidiary, as the case may be. All payments to be made hereunder will be paid from the general funds of the Company or the Subsidiary, as the case may be, and no special or separate fund will be established and no segregation
of assets will be made to assure payment of such amounts except as expressly set forth in this Plan.
34
24.3
Relationship to Other Benefits
. Neither Awards made under this Plan nor shares of Common Stock or cash paid pursuant to such Awards under this Plan will be included as “compensation” for
purposes of computing the benefits payable to any Participant under any pension, retirement (qualified or non-qualified), savings, profit sharing, group insurance, welfare, or benefit plan of the Company or any Subsidiary unless provided otherwise
in such plan.
24.4
Fractional Shares
. No fractional shares of Common Stock will be issued or delivered under this Plan or any Award. The Committee will determine whether cash, other Awards or other
property will be issued or paid in lieu of fractional shares of Common Stock or whether such fractional shares of Common Stock or any rights thereto will be forfeited or otherwise eliminated by rounding up or down.
24.5
Governing Law; Mandatory Jurisdiction
. Except to the extent expressly provided herein or in connection with other matters of corporate governance and authority (all of which will be
governed by the laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation, administration and effect of this Plan and any rules, regulations and actions relating to this Plan will be governed by and construed
exclusively in accordance with the laws of the State of Delaware, notwithstanding the conflicts of laws principles of any jurisdictions. Unless otherwise expressly provided in an Award Agreement, the Company and recipients of an Award under this
Plan hereby irrevocably submit to the jurisdiction and venue of the Federal or State courts of the States of Colorado and Delaware relative to any and all disputes, issues and/or claims that may arise out of or relate to this Plan or any related
Award Agreement. The Company and recipients of an Award under this Plan further agree that any and all such disputes, issues and/or claims arising out of or related to this Plan or any related Award Agreement will be brought and decided in the
Federal or State courts of the States of Colorado or Delaware, with such jurisdiction and venue selected by and at the sole discretion of the Company.
24.6
Successors
. All obligations of the Company under this Plan with respect to Awards granted hereunder will be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business or assets of the Company.
24.7
Construction
. Wherever possible, each provision of this Plan and any Award Agreement will be interpreted so that it is valid under the Applicable Law. If any provision of this Plan or
any Award Agreement is to any extent invalid under the Applicable Law, that provision will still be effective to the extent it remains valid. The remainder of this Plan and the Award Agreement also will continue to be valid, and the entire Plan
and Award Agreement will continue to be valid in other jurisdictions.
24.8
Delivery and Execution of Electronic Documents
. To the extent permitted by Applicable Law, the Company may: (a) deliver by email or other electronic means (including posting on a Web
site maintained by the Company or by a third party under contract with the Company) all documents relating to this Plan or any Award hereunder (including prospectuses required by the Securities and Exchange Commission) and all other documents that
the Company is required to deliver to its security holders (including annual reports and proxy statements), and (b) permit Participants to use electronic, internet or other non-paper means to execute applicable Plan documents (including Award
Agreements) and take other actions under this Plan in a manner prescribed by the Committee.
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24.9
No Representations or Warranties Regarding Tax Effect
. Notwithstanding any provision of this Plan to the contrary, the Company and its Subsidiaries, the Board, and the Committee neither
represent nor warrant the tax treatment under any federal, state, local, or foreign laws and regulations thereunder (individually and collectively referred to as the “
Tax Laws
”)
of any Award granted or any amounts paid to any Participant under this Plan including, but not limited to, when and to what extent such Awards or amounts may be subject to tax, penalties, and interest under the Tax Laws.
24.10
Indemnification
. Subject to any limitations and requirements of Delaware law, each individual who is or will have been a member of the Board, or a Committee appointed by the Board, or an
officer or Employee of the Company to whom authority was delegated in accordance with Section 3.3 of this Plan, will be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and
against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit or proceeding against him or her, provided he or she will
give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his/her own behalf. The foregoing right of indemnification will not be exclusive of any other rights of
indemnification to which such individuals may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or pursuant to any agreement with the Company, or any power that the Company may have to
indemnify them or hold them harmless.
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TABLE OF CONTENTS
PROXY STATEMENT SUMMARYCORPORATE GOVERNANCEEXECUTIVE OFFICERSPROPOSAL NO. 1: ELECTION OF DIRECTORSPROPOSAL NO. 2: CENTURY COMMUNITIES, INC. AMENDED AND RESTATED 2017 OMNIBUS INCENTIVE PLANPROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPROPOSAL NO. 4: ADVISORY VOTE ON EXECUTIVE COMPENSATIONCOMPENSATION DISCUSSION AND ANALYSISCOMPENSATION COMMITTEE REPORTEXECUTIVE COMPENSATIONDIRECTOR COMPENSATIONCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSSTOCK OWNERSHIPOTHER MATTERSANNEX I- RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES I-1