Table Of Contents

 

UNITED STATES

SECURITIES AND EXHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )

 

 

Filed by the Registrant

Filed by a party other than the Registrant

 

 

Check the appropriate box:
	Preliminary Proxy Statement
	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
	Definitive Proxy Statement
	Definitive Additional Materials
	Soliciting Material Pursuant to 240.14a-12

 

M.D.C. Holdings, Inc.

 

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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M.D.C. HOLDINGS, INC.

4350 South Monaco Street, Suite 500

Denver, Colorado 80237

 

February 8, 2016

 

To Our Shareholders:

 

You are invited to attend the 2016 Annual Meeting of Shareholders (the "Meeting") of M.D.C. Holdings, Inc. (the "Company") to be held at 4350 South Monaco Street, 6^th Floor, Assembly Room, Denver, Colorado, on Tuesday, March 29, 2016, at 8:00 a.m., Mountain Time. The Notice of the Annual Meeting and the Proxy Statement, which follow this letter, describe the matters to be acted upon at the Meeting.

 

We are utilizing the rules of the Securities and Exchange Commission that allow us to furnish your proxy materials over the Internet, to lower the cost and environmental impact of our annual meeting. More details are included in the materials that follow.

 

Your vote is important. Please vote promptly, even if you plan to attend the meeting, by following the instructions in the Proxy Statement that was provided to you.

 

Sincerely,

 

 

Larry A. Mizel

Chairman of the Board

 

 

Important Notice Regarding the Availability of Proxy Materials

for the Shareholder Meeting to Be Held on March 29, 2016:

The Proxy Statement and the Annual Report on Form 10-K are available at:

www.rdgir.com/mdc-holdings-inc

 

 

Important Voting Information

 

Under New York Stock Exchange rules, unless you provide specific instructions, your broker is not permitted to vote on your behalf on the election of Directors and on any of the proposals other than ratification of the selection of the Company’s auditors. It is important that you provide specific instructions by completing and returning the broker’s Voting Instruction Form or following the instructions provided to you to vote your shares by telephone or the Internet.

 

 

 

 

M.D.C. HOLDINGS, INC.

4350 South Monaco Street, Suite 500

Denver, Colorado 80237

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To Our Shareholders:

 

The 2016 Annual Meeting of Shareholders (the "Meeting") of M.D.C. Holdings, Inc. (the "Company") will be held at 4350 South Monaco Street, 6^th Floor, Assembly Room, Denver, Colorado, on Tuesday, March 29, 2016, at 8:00 a.m., Mountain Time. Only shareholders of record at the close of business on February 5, 2016, the record date, will be entitled to vote. At the Meeting, we plan to consider and act upon the following matters:

 

1.	the election of Michael A. Berman, Herbert T. Buchwald and Larry A. Mizel as Class I Directors for three-year terms expiring in 2019;
2.	a non-binding advisory vote to approve the compensation of our named executive officers disclosed in this proxy statement;
3.	re-approval, for Section 162(m) purposes, of the performance criteria and the M.D.C. Holdings, Inc. 2011 Equity Incentive Plan previously approved by the shareholders;
4.	approval of an amendment to the shareholder approved M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors to authorize grants of Restricted Stock or Restricted Stock Units in lieu of Stock Options at an equivalent expense to the Company; and
5.	ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the 2016 fiscal year.

 

And such other business as properly may come before the Meeting and any postponements or adjournments thereof.

 

Our Board of Directors recommends that you vote FOR all Proposals.

 

Important Notice Regarding the Availability of Proxy Materials

for the Shareholder Meeting to Be Held on March 29, 2016:

The Proxy Statement and the Annual Report on Form 10-K are available at:

www.rdgir.com/mdc-holdings-inc

 

Management and the Board of Directors desire to have maximum representation at the Meeting and request that you vote promptly, even if you plan to attend the meeting.

 

BY ORDER OF THE BOARD OF DIRECTORS,

 

 

Joseph H. Fretz

Secretary

Denver, Colorado

February 5, 2016

 

 

M.D.C. HOLDINGS, INC.

4350 South Monaco Street, Suite 500

Denver, Colorado 80237

___________

 

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

 

March 29, 2016

___________

 

GENERAL INFORMATION

 

 

Why am I receiving these materials?

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board of Directors" or the "Board") of M.D.C. Holdings, Inc. (the "Company") to be used at the Annual Meeting of Shareholders of the Company (the "Meeting") to be held at our principal executive offices, 4350 South Monaco Street, 6^th Floor, Assembly Room, Denver, Colorado 80237, on Tuesday, March 29, 2016, at 8:00 a.m., Mountain Time, and any postponements or adjournments thereof. The record date for determining shareholders entitled to vote at the Meeting is February 5, 2016 (the “Record Date”). The Meeting is being held for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. Our shareholders are invited to attend the meeting and are encouraged to vote on the matters described in this Proxy Statement.

 

What proxy materials are being delivered?

 

We are utilizing the rules of the Securities and Exchange Commission ("SEC") that allow us to deliver proxy materials to our shareholders on the Internet. Under these rules, we are sending most of our shareholders a Notice of Internet Availability of Proxy Materials (the "Notice") instead of a full set of proxy materials. If you receive the Notice, you will not receive printed copies of the proxy materials unless you specifically request them. Instead, the Notice tells you how to access and review on the Internet all of the important information contained in the proxy materials. The Notice also tells you how to vote your proxy card on the Internet and how to request a printed copy of our proxy materials. We expect to mail, or provide the Notice and electronic delivery of, this Proxy Statement, the proxy card and the Notice of Annual Meeting (the "Proxy Materials") on or about February 12, 2016.

 

The Company's 2015 Annual Report on Form 10-K, which includes the Company's 2015 audited financial statements, will accompany these Proxy Materials. Except to the extent expressly referenced in this Proxy Statement, the Annual Report is not incorporated into this Proxy Statement.

 

Who is paying for this proxy solicitation?

 

The Company will pay the cost of solicitation. The Company also will reimburse bankers, brokers and others holding shares in their names or in the names of nominees or otherwise for reasonable out-of-pocket expenses incurred in sending the Proxy Materials to the beneficial owners of such shares. In addition to the original solicitation of proxies, solicitations may be made in person, by telephone or by other means of communication by Directors, officers and employees of the Company, who will not be paid any additional compensation for these activities.

 

We have retained the services of Alliance Advisors, LLC to solicit proxies. We will pay all reasonable costs associated with such firm, which we anticipate will cost approximately $13,000 plus costs and expenses.

 

 

Who is entitled to vote at or attend the Annual Meeting?

 

Holders of shares of the Company's common stock, $.01 par value, at the close of business on the Record Date are entitled to notice of, and to vote at, the Meeting. All shareholders of record and beneficial owners wishing to attend the Meeting must bring with them a government issued picture identification of themselves and check in at the registration desk at the meeting. Beneficial owners must also bring proof of ownership as described below. Attendees must comply with the rules of conduct available at the registration desk. A list of shareholders of record entitled to vote at the Meeting will be available for examination by any shareholder at the Meeting and for ten days prior to the Meeting at our principal executive offices.

 

Shareholders will have sufficient time immediately following the Annual Meeting, to ask questions of and have a dialogue with the Company’s Chairman and CEO, President and COO, and each of the members of the Board of Directors in attendance.

 

Shareholders of Record. If, on the Record Date, your shares were registered directly in your name with the Company's transfer agent, Continental Stock Transfer & Trust Company, then you are a shareholder of record. As a shareholder of record, you may vote in person at the meeting or vote by proxy.

 

Beneficial Owners. If, on the Record Date, your shares were not held in your name, but rather were held in an account at a brokerage firm, bank or other nominee (commonly referred to as being held in "street name"), or through our 401(k) savings plan, you are the beneficial owner of those shares. The organization holding your account is considered to be the shareholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other nominee regarding how to vote the shares held in your account. You are also invited to attend the Annual Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you obtain a valid legal proxy from your broker or other nominee and bring the legal proxy to the annual meeting. (Legal proxies are not available for shares held through our 401(k) savings plan; you must vote those shares as provided below.) If you want to attend the annual meeting, but not vote at the annual meeting, you must provide proof of beneficial ownership as of the Record Date, such as your most recent account statement prior to the Record Date.

 

How do I vote my shares?

 

By Telephone or the Internet. Shareholders can vote their shares via telephone or the Internet as instructed in the Notice of Internet Availability of Proxy Materials. The telephone and Internet procedures are designed to authenticate a shareholder's identity, allow shareholders to vote their shares and confirm that their instructions have been properly recorded. The telephone and Internet voting facilities will close at 11:59 p.m., Eastern Time, on March 28, 2016. (Participants in our 401(k) savings plan have an earlier deadline – see below.)

 

By Mail. Shareholders who receive a paper proxy card may vote by mail and should complete, sign and date their proxy card and mail it in the pre-addressed envelope that accompanied the delivery of the paper proxy card. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted. Beneficial shareholders (shares held in street name) may vote by mail by requesting a paper proxy card according to the instructions received from their broker or other agent, and then completing, signing and dating the voting instruction card provided by the broker or other agent and mailing it in the pre-addressed envelope provided.

 

401(k) Savings Plan. If your shares are held through our 401(k) savings plan, you will receive the Notice of Internet Availability of Proxy Materials, or copies of the Proxy Materials, and you are entitled to instruct the plan trustee how to vote the shares allocated to your account following the instructions described above. You must provide your instructions no later than 11:59 p.m., Eastern Time, on March 23, 2016.

 

 

At the Meeting.   Shares held in your name as the shareholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker or other agent that holds your shares, giving you the right to vote the shares, and you bring the legal proxy to the Annual Meeting.

 

What if I receive more than one Notice of Internet Availability of Proxy Materials?

 

If you receive more than one Notice, you hold shares in more than one name or shares in different accounts. To ensure that all of your shares are voted, you will need to vote separately by telephone or the Internet using the specific control number contained in each Notice that you receive.

 

Can I change my vote or revoke my proxy?

 

You can change your vote or revoke your proxy before the Meeting. You can do this by casting a later proxy through any of the available methods described above. If you are a shareholder of record, you can also revoke your proxy by delivering written notice of revocation to the Secretary of the Company, by presenting to the Company a later-dated proxy card executed by the person executing the prior proxy card or by attending the Meeting and voting in person. If you are a beneficial owner, you can revoke your proxy by following the instructions sent to you by your broker, bank or other agent.

 

How are votes counted?

 

Shares of common stock represented by properly executed proxy cards, or voted by proxy, by telephone or the Internet, and received in time for the Meeting will be voted in accordance with the instructions specified in the proxies. Unless contrary instructions are indicated in a proxy, the shares of common stock represented by such proxy will be voted FOR the election as Directors of the nominees named in this Proxy Statement and FOR all of the other proposals. If you grant a proxy (other than for shares held in our 401(k) savings plan), either of the officers named as proxy holders, Michael Touff and Joseph H. Fretz, or their nominees or substitutes, will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the Meeting or at any adjournment or postponement that may take place. If, for any unforeseen reason, any of our nominees is not available as a candidate for Director, the persons named as the proxy holder may vote your proxy for another candidate or other candidates nominated by our Board.

 

The trustee of the 401(k) savings plan will vote the number of shares of common stock allocated to each participant’s accounts as directed by the participant if the direction is received in time to be processed. The trustee will vote any shares with respect to which it does not receive timely directions so that the proportion of the shares voted in any particular manner on any matter is the same as the proportion of the shares with respect to which the trustee has received timely directions, unless contrary to ERISA.

 

The inspector of elections designated by the Company will use procedures consistent with Delaware law concerning the voting of shares, the determination of the presence of a quorum and the determination of the outcome of each matter submitted for a vote.

 

 

What are the voting requirements?

 

Each share of common stock issued and outstanding on the Record Date, other than shares held by the Company or a subsidiary, is entitled to one vote on each matter presented at the Meeting. As of the Record Date, 49,006,835 shares of common stock were issued, outstanding and entitled to vote.

 

The Company's By-Laws provide that the holders of one-third of the shares of common stock issued and outstanding and entitled to vote, present in person or represented by proxy, constitute a quorum for transacting business at the Meeting. Shareholders who are present in person or represented by proxy, whether they vote for, against or abstain from voting on any matter, will be counted for purposes of determining whether a quorum exists. Broker non-votes, described below, also will be counted as present for purposes of determining whether a quorum exists.

 

The affirmative vote of the holders of a plurality of the shares of common stock present in person or represented by proxy and entitled to vote at the Meeting will be required for the election of a nominee to the Board of Directors (which means that the three nominees who receive the most votes will be elected). The affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting is necessary to: (i) approve, on an advisory basis, the executive compensation practices disclosed in this proxy statement; (ii) re-approve the performance criteria and the material terms of the 2011 Equity Incentive Plan; (iii) approve the amendment to the 2011 Stock Option Plan for Non-Employee Directors; and (iv) ratify the appointment of the Company's auditor. Because your vote on executive compensation is advisory, it will not be binding upon the Company.

 

Rules of the New York Stock Exchange (“NYSE”) determine whether NYSE member organizations ("brokers") holding shares for an owner in street name may vote on a proposal without specific voting instructions from the owner. For certain types of proposals, the NYSE has ruled that that the “broker may vote” without specific instructions and on other types of proposals the “broker may not vote” without specific client instructions. A "broker non-vote" occurs when a proxy is received from a broker and the broker has not voted with respect to a particular proposal. The proposal to ratify the selection of the auditor is a “broker may vote” matter under the rules of the NYSE. As a result, brokers holding shares for an owner in street name may vote on the proposal even if no voting instructions are provided by the beneficial owner. The other proposals are “broker may not vote” matters. As a result, brokers holding shares for an owner in street name may vote on these proposals only if voting instructions are provided by the beneficial owner.

 

The following table reflects the vote required for the proposals and the effect of broker non-votes, withhold votes and abstentions on the vote, assuming a quorum is present at the Meeting:

 

 

					Effect of Broker Non-Votes,
Proposal			Vote Required		Withhold Votes and Abstentions
1.	Election of Directors		The three nominees who receive the most votes will be elected.		Broker non-votes and withhold votes have no effect.
2.	Advisory vote to approve executive compensation (Say on Pay)		Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting.		Broker non-votes have no effect; abstentions have the same effect as a vote against the proposal.
3.	Re-approval of the performance criteria and material terms of the 2011 Equity Incentive Plan		Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting.		Broker non-votes have no effect; abstentions have the same effect as a vote against the proposal.
4.	Approval of amendment to the 2011 Stock Option Plan for Non-Employee Directors		Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting.		Broker non-votes have no effect; abstentions have the same effect as a vote against the proposal.
5.	Selection of Auditor		Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting.		Broker non-votes have no effect; abstentions have the same effect as a vote against the proposal.

 

Management and the Board of Directors of the Company know of no other matters to be brought before the Meeting. If any other proposals are properly presented to the shareholders at the Meeting, the number of votes required for approval will depend on the nature of the proposal. Generally, under Delaware law and our By-Laws, the number of votes required to approve a proposal is the affirmative vote of a majority of the shares of common stock present in person or represented by proxy and entitled to vote at the Meeting. The proxy card gives discretionary authority to the proxy holders to vote on any matter not included in this Proxy Statement that is properly presented to the shareholders at the Meeting and any adjournments or postponements thereof. The persons named as proxies on the proxy card are Michael Touff, the Company's Senior Vice President and General Counsel, and Joseph H. Fretz, the Company’s Secretary and Corporate Counsel.

 

DELIVERY OF PROXY MATERIALS TO SHAREHOLDERS WITH SHARED ADDRESSES

 

The broker, bank or other nominee of any shareholder who is a beneficial owner, but not the record holder, of the Company's common stock may deliver only one copy of the proxy related materials to multiple shareholders sharing an address (a practice called "householding"), unless the broker, bank or nominee has received contrary instructions from one or more of the shareholders.

 

In addition, with respect to shareholders of record, in some cases, only one copy of the proxy related materials may be delivered to multiple shareholders sharing an address, unless the Company has received contrary instructions from one or more of the shareholders. Upon written or oral request, the Company will deliver free of charge a separate copy of each of the proxy related materials, as applicable, to a shareholder at a shared address to which a single copy was delivered. You can notify your broker, bank or other nominee (if you are not the record holder) or the Company (if you are the record holder) that you wish to receive a separate copy of such materials in the future, or alternatively, that you wish to receive a single copy of the materials instead of multiple copies. The Company's contact information for these purposes is: M.D.C. Holdings, Inc., telephone number: (303) 773-1100, Attn: Corporate Secretary, 4350 South Monaco Street, Suite 500, Denver, CO 80237.

 

 

ANNUAL REPORT ON FORM 10-K

 

The Company will provide without charge to each person solicited by this Proxy Statement, upon the request of that person, a copy of our Annual Report on Form 10-K (without exhibits) for our most recent fiscal year. Please direct that request in writing to Investor Relations, M.D.C. Holdings, Inc., 4350 S. Monaco Street, Denver, Colorado 80237.

 

CORPORATE GOVERNANCE

 

Director Independence

 

Each of Messrs. Raymond T. Baker, Michael A. Berman, David E. Blackford, Herbert T. Buchwald, Paris G. Reece III and David Siegel are independent. NYSE listing standards require that the Board of Directors be comprised of a majority of independent directors. SEC rules and NYSE listing standards require that audit committees be comprised solely of independent directors. NYSE listing standards also require that corporate governance/nominating committees and compensation committees be comprised solely of independent directors.

 

Under the NYSE listing standards, no director qualifies as "independent" unless the Board of Directors affirmatively determines that the director has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The NYSE listing standards also require that, in determining the independence of any director who will serve on the Company’s Compensation Committee, the Board of Directors consider all factors specifically relevant to determining whether the director has a relationship with the Company that is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including the source of compensation of such director and whether the director is affiliated with the Company (or a subsidiary or affiliate of a subsidiary).

 

The Board has adopted standards of independence to assist in determining whether a director of the Company ("Director") is independent. The standards are available on the investor relations section of the Company's website, www.mdcholdings.com.

 

The Company's Board of Directors has determined the independence of Directors based on a review conducted by the Corporate Governance/Nominating Committee. This determination included consideration of the Company’s investment in corporate fixed-income and preferred stock securities offered in the normal course of business by Zions Bancorporation (“Zions”), of which Mr. Blackford is an officer, and the deposit and payroll accounts the Company maintained at Zions’ subsidiary banks. The Board also considered the participation by Zions and a subsidiary bank in the Company’s revolving credit facility, in which there are several lenders. Mr. Blackford had no direct or indirect material interest in the foregoing transactions and the Board concluded that the amounts involved were not significant.

 

With respect to the determination of Mr. Reece’s independence, the Board considered that, until his retirement on August 1, 2008, he was the Executive Vice President and Chief Financial Officer of the Company. Mr. Reece is serving in a volunteer position as president of a non-profit organization (Cancer League of Colorado), which has received charitable contributions from the MDC/Richmond American Homes Foundation and some Company officers. The Board concluded that the amounts involved were not significant.

 

The Board determined that each of Messrs. Raymond T. Baker, Michael A. Berman, David E. Blackford, Herbert T. Buchwald, Paris G. Reece III and David Siegel have no material relationship with the Company, each is independent under the NYSE listing standards and each meets the foregoing standards of Director independence adopted by the Board, including for Audit and Compensation Committee membership. The Board also determined that each of the foregoing Directors meets the independence standards for Audit Committee membership under the rules of the SEC. The Board also determined that each of Messrs. Baker, Berman, Blackford, Buchwald and Siegel, but not Mr. Reece, is an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Section 162(m) regulations.

 

 

Frequent Meetings of the Board of Directors and Board Committees

 

The Board of Directors and the Audit Committee generally hold regular monthly meetings and additional meetings as necessary. The other Board committees hold meetings, as may be required. The following table shows the frequency of the Board and Board committee meetings over the last three years:

 

		2015				2014				2013
Board of Directors			12				12				15
Audit Committee			11				11				11
Compensation Committee			9				13				11
Corporate Governance/Nominating Committee			5				8				5
Legal Committee			10				8				10

 

Asset Management Committee

 

The Company has in place an Asset Management Committee ("AMC"). Currently, the AMC consists of three committees (for reviewing real estate and corporate transactions) and our Chief Operating Officer is a member of each of these committees. The AMC generally meets weekly to review all proposed real estate transactions and other proposed non-real estate transactions at or above certain thresholds. Transactions that exceed certain thresholds also are reviewed by an executive committee of senior officers and the Board of Directors.

 

Lead Director

 

By vote of the independent directors, Herbert T. Buchwald, an independent member of the Board, was elected Lead Director. The Lead Director presides at Board meetings if the Chairman and the Chief Operating Officer are not present and he approves the schedule of Board and committee meetings and the agendas and topics to be considered at Board and committee meetings. Among other things, he also approves information being sent to the Board, coordinates the activities of the various Board committees; advises the Chairman as to the quality, quantity and timeliness of the flow of information necessary to permit the independent Directors to effectively and responsibly perform their duties; coordinates the agenda for and presides at executive sessions of the independent Directors; acts as a liaison between the independent Directors and the Chairman of the Board as needed; is available for communication with major shareholders; facilitates the process of conducting Committee and Board self-evaluations; promotes effective practices to achieve a high standard of corporate governance; and provides guidance to the committee chairmen and independent Directors in the performance of their duties. A description of the role of the Lead Director is posted on the investor relations section of the Company's website, www.mdcholdings.com.

 

Corporate Governance/Nominating Committee

 

The Board of Directors has established a Corporate Governance/Nominating Committee, consisting of Mr. Siegel, who serves as its Chairman, and Messrs. Blackford and Buchwald. Each member of the committee is independent as defined in the listing standards of the NYSE. The organization, functions and responsibilities of the committee are described in the Corporate Governance/Nominating Committee charter, which is posted under the corporate governance documents on the investor relations section of the Company's website, www.mdcholdings.com. See also "Information Concerning the Board of Directors" below.

 

 

Corporate Governance Guidelines

 

Upon the recommendation of the Corporate Governance/Nominating Committee, the Board of Directors adopted a set of corporate governance guidelines to implement requirements of the NYSE. These guidelines, as amended, are posted under the corporate governance documents on the investor relations section of the Company's website, www.mdcholdings.com.

 

Hedging or Pledging of Company Stock

 

Our Directors and executive officers are prohibited from acquiring an interest in financial instruments intended to hedge or offset any decrease in the market value of the Company’s stock held directly or indirectly by that person. They also are required to inform the Company’s compliance committee and obtain pre-clearance prior to purchasing Company stock on margin, margining Company stock or pledging Company stock as collateral for a loan.

 

Clawback Policy

 

In January 2015, based in part on shareholder feedback, the Corporate Governance/Nominating Committee approved, a “Clawback” Policy, pending issuance by the SEC of final clawback regulations as mandated by the Dodd-Frank Act. The Company’s Clawback Policy authorizes the Company to recover compensation previously paid to Executive Officers of the Company that was based upon any metric contained in a financial statement that was filed with the U.S. Securities and Exchange Commission during the Company’s then-current fiscal year or during one of the three prior fiscal years, which metric was materially restated.

 

Equity Ownership Guidelines for Non-Employee Directors and for Executive Officers

 

In order to strengthen the financial alignment of the Company's Directors with the interests of the Company's shareholders, the Corporate Governance/Nominating Committee and the Board of Directors have established Equity Ownership Guidelines for Directors who are not employees of the Company. Under these guidelines, each Director is encouraged to acquire and maintain ownership of common stock with an acquisition value, measured at the time of acquisition, of not less than ten times the annual amount of the retainer paid for serving on the Board of Directors. The annual amount of the retainer currently is $60,000 resulting in a current stock ownership goal of $600,000 for those Directors who have not previously achieved the goal. The Directors who have not yet achieved the goal have agreed, upon their future exercise of stock options, to retain the shares they acquire, net of the exercise price and taxes, up to the number of shares necessary to achieve the goal. All Directors are in compliance with the Guidelines. Three of the six Non-Employee Directors have attained the stock ownership goal.

 

The Company’s executive officers as a group have historically maintained a high percentage of ownership of Company stock, especially when compared against other companies in the homebuilding industry. For example, Messrs. Mizel, Mandarich, Martin and Touff beneficially own shares totaling approximately 25.0% of the Company’s shares. See Beneficial Ownership of Common Stock – Ownership of Directors and Officers, below. Nonetheless, in response to feedback received from the investor community, the Company has adopted formal equity ownership guidelines for the executive officers in order to expressly evidence their continued financial alignment with the interests of the shareholders of the Company. Under the guidelines, each executive officer is encouraged to acquire and maintain ownership of common stock of the Company having an acquisition value of not less than the following multiple of the executive officer’s base annual salary:

 

Executive Officer	Multiple
CEO	5X
COO	5X
All Others	1X

 

 

To expedite achievement of the goal set forth above, each executive officer who has not yet achieved the goal agrees to retain the shares they acquire through restricted stock awards and the future exercise of employee stock options net of taxes and any option exercise price up to the number of shares necessary to achieve the goal. Messrs. Mizel, Mandarich, Martin and Touff have all achieved and maintain the stock ownership goal.

 

Regularly Scheduled Executive Sessions of Non-Management Directors

 

The Company's corporate governance guidelines provide for the non-management Directors to meet at regularly scheduled executive sessions without management present. All six of the Company's non-management Directors are independent, as discussed above. The Lead Director presides at the executive sessions. In 2015, four executive sessions were held.

 

Communications with the Board of Directors

 

Shareholders and other interested parties may contact the outside Directors and the Board of Directors by sending communications directly to any of the following persons:

 

(1)	Herbert T. Buchwald, Lead Director, P.O. Box 24649, Denver, CO 80224, Fax Number: (303) 355-2240.
(2)	Paris G. Reece III, Chairman, Audit Committee, 4350 S. Monaco Street, Denver, CO 80237, Fax Number: (303) 660-3631.
(3)	David Siegel, Chairman, Corporate Governance/Nominating Committee, 1800 Avenue of the Stars, Suite 900, Los Angeles, CA 90067-4276.

 

Any communications that come within the purview of a Board committee and/or the Board will be forwarded to the committee chair and the Lead Director, as applicable.

 

Committee Charters

 

The Board of Directors has adopted a charter for the Audit Committee, designed to comply with the applicable requirements of the NYSE listing standards and SEC regulations. The Board of Directors also has adopted charters for the Compensation Committee and the Corporate Governance/Nominating Committee, designed to comply with the applicable requirements of the NYSE listing standards, and a charter for the Legal Committee. These charters are posted under the corporate governance documents on the investor relations section of the Company's website, www.mdcholdings.com.

 

Corporate Code of Conduct

 

For many years, the Company has had in place a Corporate Code of Conduct designed to provide that all persons associated with the Company, including employees, officers and Directors, follow the Company's compliance program and legal and ethical obligations and conduct themselves accordingly. The Company’s employees, officers and Directors receive annual training on the Corporate Code of Conduct. The Corporate Code of Conduct includes, among other things, a code of ethics for senior financial officers and Audit Committee complaint procedures, as required by the Sarbanes-Oxley Act and SEC regulations. The Corporate Code of Conduct, the code of ethics for senior financial officers and the Audit Committee complaint procedures for handling confidential complaints regarding accounting or auditing matters are posted under the corporate governance documents on the investor relations section of the Company's website, www.mdcholdings.com.

 

 

BENEFICIAL OWNERSHIP OF COMMON STOCK

  

Ownership of Directors and Officers

 

Certain information, as of February 5, 2016, the Record Date, with respect to common stock beneficially owned by the Company's named executive officers, the nominees for election as Directors and the current Directors of the Company, furnished in part by each such person, appears below (unless stated otherwise, the named beneficial owner possesses the sole voting and investment power with respect to such shares). None of the shares beneficially owned by the executive officers and Directors have been pledged as security.

 

Name of Executive Officer/Director		Number of  Shares of  Common  Stock Owned Beneficially 1		Percent of Class 2
Raymond T. Baker		100,000		*
Michael A. Berman		175,000		*
David E. Blackford		158,550		*
Herbert T. Buchwald		191,348		*
David D. Mandarich		4,475,370		8.9%
Robert N. Martin		50,244		*
Larry A. Mizel		8,007,4803		15.9%
Paris G. Reece III		75,000		*
David Siegel		175,000		*
John M. Stephens (former officer)		0		*
Michael Touff		309,603		*
All current executive officers and Directors as a group (10 persons)		13,717,595		26.0%

 

*	Represents less than one percent of the shares of common stock outstanding and entitled to vote.
1	Includes, where applicable, shares of common stock owned by related individuals or entities over whose shares such person may be deemed to have beneficial ownership. Also includes the following shares of common stock subject to options that are exercisable or become exercisable within 60 days of the Record Date at prices ranging from $21.00 to $62.76 per share: Raymond T. Baker 100,000; Michael A. Berman 160,000; David E. Blackford 150,000; Herbert T. Buchwald 175,000; David D. Mandarich 1,400,000; Robert N. Martin, 20,000; Larry A. Mizel 1,400,000; Paris G. Reece III 75,000; David Siegel 175,000; and Michael Touff 167,918. As a group, the executive officers and Directors had the right to acquire within 60 days of the Record Date by the exercise of options an aggregate of 3,822,918 shares of common stock. The exercise prices of many of the stock options are significantly higher than the current market value of our common stock, i.e. “underwater.” See the Outstanding Equity Awards at December 31, 2015 table below.
2	The percentage shown is based on the number of shares of common stock outstanding and entitled to vote as of the Record Date. All shares of common stock that the person or group had the right to acquire within 60 days of the Record Date are deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by such person or group, but are not deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by any other person or group.
3	Mr. Mizel has sole voting power and sole investment power over 1,472,150 shares and shared voting power and shared investment power over 6,535,330 shares.

 

 

Ownership of Certain Beneficial Owners

 

The table below sets forth information with respect to those persons (other than the officers/Directors listed above) known to the Company, as of the Record Date, to have owned beneficially 5% or more of the outstanding shares of common stock. The information as to beneficial ownership is based upon statements filed by such persons with the SEC under Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended.

 

Name and Address of Beneficial Owner		Number of Shares of Common Stock Owned Beneficially				Percent of Class 1
BlackRock, Inc. 55 East 52nd Street New York, NY 10055			4,853,758	2			9.9	%
Dimensional Fund Advisors 6300 Bee Cave Road Austin, TX 78746			3,352,786	3			6.8	%
The TCW Group, Inc. 865 South Figueroa Street Los Angeles, CA 90017			3,067,741	4			6.3	%
State Street Corporation One Lincoln Street Boston, MA 02111			2,963,430	5			6.0	%
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355			2,452,886	6			5.0	%
Oppenheimer Funds, Inc. 225 Liberty Street New York, NY 10281			2,337,385	7			4.8	%
Piper Jaffray Companies 800 Nicollet Mall, Suite 800 Minneapolis, MN 55402			2,117,060	8			4.3	%

 

1	The percentage shown is based on the number of shares outstanding and entitled to vote as of the Record Date.
2	Schedule 13G/A filed with the SEC on January 26, 2016 disclosed that: BlackRock, Inc. has sole voting power over 4,762,768 shares, shared voting power over no shares, sole dispositive power over 4,853,758 shares and shared dispositive power over no shares.
3	Schedule 13G filed with the SEC on February 5, 2015 disclosed that: the Dimensional Fund Advisors have sole voting power over 3,215,836 shares, shared voting power over no shares, sole dispositive power over 3,352,786 shares and shared dispositive power over no shares.
4	Schedule 13G filed with the SEC on February 12, 2015 disclosed that: The TCW Group, Inc. has sole voting power over no shares, shared voting power over 132,736 shares, sole dispositive power over no shares and shared dispositive power over 3,067,741 shares.
5	Schedule 13G filed with the SEC on February 12, 2015 disclosed that: State Street Corporation has sole voting power over no shares, shared voting power over 2,963,430 shares, sole dispositive power over no shares and shared dispositive power over 2,963,430 shares.
6	Schedule 13G filed with the SEC on February 11, 2015 disclosed that: The Vanguard Group has sole voting power over 57,246 shares, shared voting power over no shares, sole dispositive power over 2,398,840 shares and shared dispositive power over 54,046 shares.
7	Schedule 13G filed with the SEC on February 4, 2016 disclosed that: Oppenheimer Funds, Inc. has sole voting power over no shares, shared voting power over 2,337,385 shares, sole dispositive power over no shares and shared dispositive power over 2,337,385 shares.
8	Schedule 13G/A filed with the SEC on February 17, 2015 disclosed that: the Piper Jaffray Companies have sole voting power over 1,906,713 shares, shared voting power over no shares, sole dispositive power over 2,117,060 shares and shared dispositive power over no shares.

 

No change in control of the Company has occurred since the beginning of the last fiscal year. The Company knows of no arrangement the operation of which, at a subsequent date, may result in a change in control of the Company.

 

 

PROPOSAL ONE

ELECTION OF DIRECTORS

 

The Company's Certificate of Incorporation provides for three classes of Directors with staggered terms of office, to be divided as equally as possible. Directors of each class serve for terms of three years until election and qualification of their successors or until their resignation, death, disqualification or removal from office.

 

Our Board has eight members, consisting of three Class I Directors whose terms expire in 2016, three Class II Directors whose terms expire in 2017 and two Class III Directors whose terms expire in 2018. At the Meeting, three Class I Directors are to be elected to three-year terms expiring in 2019. The nominees for the Class I Directors are Michael A. Berman, Herbert T. Buchwald and Larry A. Mizel. All of the nominees presently serve on the Board of Directors of the Company. Based on the recommendation of the Corporate Governance/Nominating Committee, the Board approved the nomination of Messrs. Berman, Buchwald and Mizel for election as Class I Directors.

 

Certain information, as of February 5, 2016, the Record Date, with respect to Messrs. Berman, Buchwald and Mizel, the nominees for election, and the continuing Directors of the Company, furnished in part by each such person, appears below:

 

 

Name		Age		Positions and Offices with the Company and Other Principal Occupations
NOMINEES:
				Class I Terms Expire in 2016
Michael A. Berman		65		Chairman, Applied Capital Management
Herbert T. Buchwald		84		Principal in the law firm of Herbert T. Buchwald, P.A. and President and Chairman of the Board of Directors of BPR Management Corporation
Larry A. Mizel		73		Chairman of the Board of Directors and Chief Executive Officer of the Company
CONTINUING DIRECTORS:
				Class II Terms Expire in 2017
David D. Mandarich		68		President and Chief Operating Officer of the Company
Paris G. Reece III		61		Private Investor and Community Volunteer
David Siegel		59		Partner, Irell & Manella LLP
				Class III Terms Expire in 2018
Raymond T. Baker		65		President of Gold Crown Management Company and Co-Director of the Gold Crown Foundation
David E. Blackford		67		President, Chief Executive Officer and Chairman of the Board of California Bank & Trust

 

Other Information Relating to Directors

 

Composition of the Board. The Company’s Board is composed of Directors who provide diverse experience and talent to our Company. Fifty percent of the Directors have Board tenure with the Company of ten years or less and twenty-five percent of the Directors have Board tenure of less than five years. New Directors bring a fresh perspective to our Board’s deliberations. Recognizing their importance, our three newest Directors have been selected to serve as Chairmen of the Audit, Compensation and Corporate Governance/Nominating Committees. The remaining Directors continue to provide their knowledge, experience and understanding of the Company’s approach to balancing risk and reward inherent in the homebuilding industry, which is fundamental to achieving long term shareholder value. The professional qualifications of the Directors include a diverse range of talents and experiences well-suited to guiding the Company in our challenging industry.

 

In addition, the dedication of the Board in conducting monthly meetings has provided the shareholders with unusual oversight and accountability. See Frequent Meetings of the Board of Directors and Board Committees, above.

 

The following is a brief description of the business experience during at least the past five years of each nominee for the Board of Directors of the Company and each of the continuing members of the Board. Their experience, qualifications, attributes or skills, set forth below, have led to the conclusion that each person should serve as a Director, in light of the registrant’s business and structure.

 

 

None of the business organizations identified below (excluding the Company and HomeAmerican Mortgage Corporation) are affiliates of the Company. None of the continuing Directors or Director nominees holds, or has held during the past five years, any directorship in any company with a class of securities registered pursuant to Section 12 of the Exchange Act, subject to the requirements of Section 15(d) of the Exchange Act or registered as an investment company under the Investment Company Act of 1940.

 

Raymond T. Baker has served as President of Gold Crown Management Company, a real estate asset management company from 1978 to present. He is the founder and has served as Co-Director of the Gold Crown Foundation since 1986. He also is a member of the Board of Directors of Alpine Banks of Colorado, Steele Street State Bank & Trust, and Land Title Guarantee Company. Mr. Baker is currently serving as Chairman of the Board of the Denver Metropolitan Major League Baseball Stadium District and Chairman of the Board of the Metropolitan Football Stadium District (Denver). From February 2004 until May 2007, he served as a director of Central Parking Corporation. He has over thirty-five years of experience in the real estate and banking industries. Mr. Baker became a member of the Company's Board of Directors in January 2012. He currently is the Chairman of the Compensation Committee and a member of the Audit Committee. His experience and knowledge of the real estate and banking industries directly complement and support the Company’s real estate activities and the financing of those activities.

 

Michael A. Berman has over thirty years of experience in the financial services industry. He is a member of Applied Capital Management, a private investment management firm located in Scottsdale, Arizona, and has served as its chairman from 2002 to date. From 2005 to 2006, he also served as the chief executive officer of First Ascent Capital, a financial services firm located in New York. From July 2006 until December 2008, he served as president and chief executive officer of Real Estate Equity Exchange, Inc. (Rex & Co.), a financial services firm located in San Francisco, California. From January 1990 to March 1999, Mr. Berman was employed by The Nomura Securities Co., Ltd. (Tokyo) group of companies, where he held several senior executive positions, including that of President and CEO of Nomura Holding America Inc. and Chairman of Capital America, Nomura's commercial real estate lending subsidiary. In April 2006, Mr. Berman became a Director of the Company and, in September 2006, he was appointed a director of HomeAmerican Mortgage Corporation ("HomeAmerican"), the Company's wholly owned mortgage lending subsidiary. Mr. Berman’s experience as a senior executive in corporate finance, in general, and the residential mortgage market, in particular, provide the Company with a valuable resource.

 

David E. Blackford has over thirty-five years of experience in the banking industry. He is employed by California Bank & Trust (CB&T), a leading California banking institution. Between 1998 and 2001, he was the bank’s managing director, serving on the board of directors and the Senior Loan Committee for Real Estate Finance. In May 2001 he was appointed chairman, president and chief executive officer of that bank, positions he currently holds. He also is an executive vice president of Zions Bancorporation, the parent company of CB&T. Prior to 1998, he served as an executive officer in several financial institutions, including Bank One and Valley National Bank. He joined the Company's Board of Directors in April 2001. Mr. Blackford currently is a member of the Corporate Governance/Nominating Committee and the Legal Committee. His experience and knowledge of historic and current institutional real estate lending practices, the regulatory process and the volatility of the credit markets provide a unique perspective to the Board.

 

Herbert T. Buchwald is a principal in the law firm of Herbert T. Buchwald, P.A. and president and chairman of the board of directors of BPR Management Corporation, a property management company located in Denver, Colorado, positions he has held for more than the past five years. Mr. Buchwald has been engaged in the acquisition, development and management of residential and commercial real estate in Florida, New Jersey and Colorado, through both publicly and privately held ventures for more than forty years. As an attorney, he has been admitted to practice before federal and state trial and appellate courts in Florida and Colorado. In addition, he holds an accounting degree and formerly was a practicing Certified Public Accountant. He has been a member of the Company's Board of Directors since March 1994. Since March 2007, he has served as the Lead Director. Mr. Buchwald is the Chairman of the Legal Committee, a member of the Audit, Compensation and Corporate Governance/Nominating Committees, and the Company's Audit Committee Financial Expert. The combination of his knowledge, experience and skills provide the Company with strong oversight of accounting, financial, regulatory and legal matters, as well as the operation of the Company's real estate businesses.

 

 

David D. Mandarich has been associated with the Company since 1977. He was elected President and Chief Operating Officer of the Company in June 1999, a position he currently holds. He previously had been elected Chief Operating Officer in March 1996, Co-Chief Operating Officer in September 1994 and Executive Vice President-Real Estate in April 1993. He was a Director from September 1980 until April 1989, and has been a Director continuously since March 1994. A skilled and experienced leader in the homebuilding industry, Mr. Mandarich provides the Board with the benefit of his judgment and his knowledge and understanding of the Company's homebuilding business and operations.

 

Larry A. Mizel founded the Company in 1972 and has served as a Director and Chairman of the Board since its inception. He was appointed Chief Executive Officer of the Company in 1988, a position he currently holds. Mr. Mizel has provided the Company with leadership and judgment, serving as the Chief Executive Officer and Chairman of the Board of Directors, and working to further the long-term interests of the Company's shareholders. One of the most experienced leaders in the homebuilding industry, his knowledge and foresight provides the Board with invaluable guidance.

 

Paris G. Reece III was formerly the Company’s Chief Financial Officer and Principal Accounting Officer, and retired on August 1, 2008. Since his retirement, Mr. Reece has performed consulting work and served in a volunteer position as the President of the Cancer League of Colorado, a leading non-profit organization that was established more than forty years ago to raise money for cancer research and patient care. He joined the Company's Board of Directors in May 2013. He currently is the Chairman of the Audit Committee. As a Certified Public Accountant (Texas, retired), a former Chief Financial Officer and a highly respected person within the homebuilding industry, Mr. Reece is uniquely qualified to provide the Company with strong oversight of accounting and financial matters, as well as the operation of the Company's homebuilding and financial services businesses.

 

David Siegel has been a partner in the law firm of Irell & Manella LLP for more than twenty years, where he leads that firm's securities litigation practice and formerly was the firm's Managing Partner.  Mr. Siegel's law practice, for which he is nationally recognized, is concentrated on securities class actions, corporate governance, risk management, SEC reporting standards and regulatory compliance.  Mr. Siegel has chaired and is a frequent speaker at various seminars on securities litigation, class actions, and trial techniques.  He has been named by his peers as one of the "Best Lawyers in Commercial Litigation" in The Best Lawyers in America guide.  Mr. Siegel has been a member of the Company's Board of Directors since June 2009.  He currently is the Chairman of the Corporate Governance/Nominating Committee and a member of the Legal Committee. Mr. Siegel's knowledge and experience in corporate governance and litigation matters provide the Company with significant guidance and oversight.

 

Unless otherwise specified, proxies will be voted FOR the election of Messrs. Berman, Buchwald and Mizel. Management and the Board of Directors are not aware of any reasons that would cause any of Messrs. Berman, Buchwald and Mizel to be unavailable to serve as Directors. If any of them become unavailable for election, discretionary authority may be exercised by the proxy holders named in the proxy to vote for a substitute candidate or candidates nominated by the Board of Directors.

 

The Board of Directors recommends a vote FOR the election of Messrs. Berman, Buchwald and Mizel as Directors.

 

 

INFORMATION CONCERNING THE BOARD OF DIRECTORS

 

During 2015, the Board of Directors held twelve meetings. The Directors also considered Company matters and participated in numerous communications with the Chairman of the Board of Directors and other officials of the Company wholly apart from the formal Board meetings. In 2015, all of the Company's Directors attended 96% or more of the aggregate number of meetings of the Board of Directors and the committees of the Board of Directors on which they served. Directors are expected to attend the Company's annual meeting of shareholders. To facilitate their attendance, the annual meetings typically are scheduled the same day as a monthly Board meeting. In 2015, all of the Directors attended the Annual Meeting.

 

Board Leadership and Risk Oversight

 

Larry A. Mizel serves as Chairman of the Board of Directors and the Chief Executive Officer of the Company. Mr. Mizel, who founded our Company, has served for forty-three years and is the largest shareholder of the Company. He provides effective leadership and guidance in the development of the Company's risk profile, pursuit of its strategic goals and recognition of business opportunities that present themselves.

 

Herbert T. Buchwald serves as the Company's independent Lead Director. The independent Lead Director presides at the executive sessions of the independent Directors and his authority also includes approving the schedule of Board and Committee meetings and the agendas and topics to be considered at the Board and Committee meetings, coordinating the activities of the various Committees of the Board, advising the Chairman as to the quality, quantity and timeliness of the flow of information from management; and coordinating and developing the agenda for executive sessions of the Board's independent Directors. See Corporate Governance – Lead Director, above.

 

The Board of Directors convenes on a monthly basis and is comprised of a majority of independent Directors. This independent majority and our regulatory governance practices, including periodic executive sessions of the independent Directors at which the Lead Director presides, provide an effective and independent oversight of management.

 

Our Board of Directors bears the responsibility for maintaining oversight over the Company’s management and exposure to risk. The Board, itself and through its Committees, regularly discusses our material risk exposure, the potential impact on the Company and the efforts of management to manage the risks that are identified. In meetings with Company management, the head of the internal audit department and the external independent auditors, the Audit Committee reviews regulatory, financial and accounting risk exposure, reserves and the Company’s internal controls. The Corporate Governance/Nominating Committee, with the guidance of corporate and outside counsel, considers the risks associated with corporate governance. The Compensation Committee considers risks associated with the elements contained in the Company’s compensation programs. The Legal Committee considers the risks that arise from material litigation, regulatory issues and other legal issues. Our Committees generally report to the Board on a monthly basis.

 

For the foregoing reasons, the Company has determined that its leadership structure is appropriate.

 

Audit Committee

 

The Audit Committee of the Board of Directors, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, consists of Messrs. Baker, Buchwald and Reece, who serves as Chairman. Each member of the Audit Committee is "independent" and "financially literate" in the judgment of the Board of Directors, as defined in the listing standards of the NYSE and the rules of the SEC. In addition, the Board of Directors has determined that Mr. Buchwald is an "audit committee financial expert" as defined by applicable SEC regulations. The Board believes that his experience and qualifications described above under "Other Information Relating to Directors" qualify him to act as the Committee's audit committee financial expert.

 

 

The Audit Committee met eleven times during 2015. The organization, functions and responsibilities of the Audit Committee are described in the restated charter for the Audit Committee, which is posted on the investor relations section of the Company's website, www.mdcholdings.com. The Audit Committee's functions include: assisting the Board in its oversight of the Company's compliance with legal and regulatory requirements, oversight of the Company's external auditors, review of the Company's financial statements, review of the annual audit plan and results of the audit, review of any significant modification in accounting policies, oversight of the duties of the Company's internal audit department and discussion of policies with respect to risk assessment and risk management.

 

Compensation Committee

 

The Compensation Committee consisted of Messrs. Buchwald, Berman and Baker, who served as Chairman. Due to time constraints, Mr. Berman withdrew from the Committee in July 2015. During 2015, the Compensation Committee met nine times. Each member of the committee is independent in the judgment of the Board of Directors, as defined in the listing standards of the NYSE as modified by that exchange in 2013. The Compensation Committee approves executive compensation plans, reviews salaries, bonuses and other forms of compensation for officers and key employees of the Company, establishes salary levels, benefits and other forms of compensation for employees and addresses other compensation and personnel matters as the Board of Directors from time to time may request. The organization, functions and responsibilities of the Compensation Committee are described in the Compensation Committee's restated charter, which is posted on the investor relations section of the Company's website, www.mdcholdings.com.

 

For a discussion of the Company's compensation philosophy and a description of the Company's processes and procedures for the consideration and determination of executive and director compensation, see "Compensation Processes and Procedures" and "Compensation Discussion and Analysis" below.

 

Corporate Governance/Nominating Committee

 

The Corporate Governance/Nominating Committee consists of Messrs. Blackford, Buchwald and Siegel, who serves as Chairman. Each member of the committee is independent in the judgment of the Board of Directors, as defined in the listing standards of the NYSE. During 2015, the committee met five times. The organization, functions and responsibilities of the Corporate Governance/Nominating Committee are described in the committee's charter, which is posted on the investor relations section of the Company's website, www.mdcholdings.com. The functions of the Corporate Governance/Nominating Committee include development of and recommendations as to corporate governance principles and the Company's Code of Conduct, identification of individuals qualified to become Board members, the review of Director independence, the selection process for Director nominees and oversight of the self-evaluations of the Board and the Audit, Compensation and Corporate Governance/Nominating Committees.

 

Procedures for nominating persons for election to the Board are contained in the Company's By-Laws and, accordingly, those procedures constitute the Company's policy with regard to the nomination and consideration of Director candidates recommended by shareholders. The Corporate Governance/Nominating Committee will consider candidates identified by shareholders following the procedures set forth in the By-Laws. There have been no changes to these procedures in the last year.

 

 

The By-Laws provide that nominations of persons for election to the Board of Directors may be made at a meeting of shareholders by any shareholder entitled to vote for the election of Directors and who complies with the notice procedures set forth in the By-Laws. Specifically, such nominations shall be made pursuant to timely notice in writing to the Secretary of the Company. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal offices of the Company not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 75 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such shareholder's notice shall set forth in writing:

 

(a)	as to each person whom the shareholder proposes to nominate for election or re-election as a Director:

 

	(i)	the name, age, business address and residence address of such person,
	(ii)	the principal occupation or employment of such person,
	(iii)	the class and number of shares of the Company which are beneficially owned by such person and
	(iv)	any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors pursuant to Rule 14(a) under the Securities Exchange Act of 1934 and any other applicable laws or rules or regulations of any governmental authority or of any national securities exchange or similar body overseeing any trading market on which shares of the Company are traded, and

 

(b)	as to the shareholder giving the notice:

 

	(i)	the name and record address of the shareholder and
	(ii)	the class and number of shares of the Company beneficially owned by the shareholder.

 

The chairman of the meeting will determine whether or not the nomination was made in accordance with the foregoing procedure. If it was, the nomination will be considered. If it was not, the chairman will declare it and the defective nomination will be disregarded.

 

The Corporate Governance/Nominating Committee believes that all candidates for the Board, including candidates recommended by shareholders, should have experience in appropriate areas and disciplines. While the Committee does not have a specific diversity policy, in identifying Director nominees and recommending candidates for nomination by the Board, the Committee considers and assesses, in addition to applicable requirements of law and of the NYSE, the diversity of the candidate's experience and qualifications, including business experience, specific expertise, strength of character, judgment, and other factors deemed appropriate in adding value to the composition of the Board. Other than for compliance with the procedures set forth in the By-Laws, there is no difference in the manner in which the Corporate Governance/Nominating Committee evaluates nominees for Director based on whether the nominee is recommended by a shareholder. At such times as may be appropriate, the Corporate Governance/Nominating Committee will lead the search for individuals qualified to become members of the Board, seeking candidates who have diversity of experience and qualifications in appropriate areas and disciplines. The Committee has authority to engage search firms to identify candidates for nomination to the Board.

 

 

Legal Committee

 

The Legal Committee consists of Mr. Buchwald, who serves as Chairman, and Messrs. Blackford and Siegel. All Legal Committee members are independent members of the Board of Directors. In 2015, the Legal Committee met ten times. The Legal Committee provides oversight and review of significant legal affairs of the Company, and it has been active in reviewing legal issues affecting the Company's business with the Company's inside and outside counsel. The organization, functions and responsibilities of the Legal Committee are described in the committee's charter, which is posted in the investor relations section of the Company's website, www.mdcholdings.com.

 

EXECUTIVE OFFICERS

 

Set forth below are the names and offices held by the executive officers of the Company as of the Record Date. The Board of Directors, after reviewing the functions performed by the Company's officers, has determined that, for purposes of Item 401 of SEC Regulation S-K, only these officers are deemed to be executive officers of the Company.

 

The executive officers of the Company hold office until their successors are duly elected and qualified or until their resignation, retirement, death or removal from office. Biographical information on Messrs. Mizel and Mandarich, who serve as Directors and executive officers of the Company, is set forth under "Election of Directors" above. Biographical information for Messrs. Martin and Touff is set forth below.

 

Name		Age		Offices Held as of February 5, 2016
Larry A. Mizel		73		Chairman of the Board of Directors and Chief Executive Officer
David D. Mandarich		68		President, Chief Operating Officer and a Director
Robert N. Martin		37		Senior Vice President, Chief Financial Officer and Principal Accounting Officer
Michael Touff		71		Senior Vice President and General Counsel

 

Robert N. Martin was appointed Senior Vice President, Chief Financial Officer and Principal Accounting Officer effective as of May 23, 2015. He joined the Company in 2002, and has since held a number of leadership roles within the company. He previously served as Vice President – Finance and Business Development. In April 2013, he was promoted to the position of Vice President of Finance and Corporate Controller. Over the last five years, Mr. Martin has had direct oversight of the Company's division and corporate accounting, tax, investor relations and finance, planning and analysis functions. Additionally, he has served on all three of the Company's asset management committees, which review and approve all new homebuilding projects and other significant company transactions, and has performed a key role in the Company's capital markets activities. He is an officer, director or both of many of the Company’s subsidiaries. Mr. Martin received a bachelor’s degree in Accounting and Computer Applications from the University of Notre Dame and is both a Certified Public Accountant and a CFA Charterholder.

 

Michael Touff was appointed Senior Vice President and General Counsel of the Company in July 1999, having been appointed previously as Vice President and General Counsel in December 1994. From August 1992 through December 1994, he was an officer in the law firm of Ireland, Stapleton, Pryor & Pascoe, P.C. Prior to August 1992, Mr. Touff was an officer in the law firm of Holmes & Starr, a Professional Corporation. Mr. Touff also is an officer, director or both of several of the Company's subsidiaries.

 

 

COMPENSATION PROCESSES AND PROCEDURES

 

Scope of Authority of Compensation Committee

 

The Compensation Committee has the authority to oversee all employee compensation levels, including benefits. Its goal is to have the Company develop compensation levels that will attract, retain, reward and motivate employees, that are competitive with those prevailing in the marketplace and are consistent with shareholder interests. The Committee also administers the Company's equity and other compensation plans, as they may be amended from time to time. The Committee may delegate the day-to-day administrative duties of these plans to Company officers, employees and agents.

 

The primary components of the Company's executive compensation have been: a base salary, annual performance-based bonuses and equity-based, long-term incentive awards. The Compensation Committee also has discretionary authority to award other forms of executive compensation.

 

The Compensation Committee reviews and establishes the base salaries for the executive officers annually. The base salaries of Mr. Mizel, the Chief Executive Officer, and Mr. Mandarich, President and Chief Operating Officer, were established in accordance with their employment agreements with the Company. The base salaries for Mr. Martin, Senior Vice President and Chief Financial Officer, and Mr. Touff, Senior Vice President and General Counsel, were established in the Committee's discretion.

 

Annual bonuses may be awarded to the Chief Executive officer and the President and Chief Operating Officer pursuant to the terms of the 2013 Performance-Based Plan, which was approved by the shareholders in 2013. Under the terms of that Plan, the Committee can only exercise negative discretion, and not positive discretion, regarding the amount of any awards payable under its terms. Annual bonuses for the Chief Financial Officer and General Counsel may be awarded based on each individual’s achievement of Key Performance Indicators (“KPIs”) established for his position.

 

The Compensation Committee also has discretionary authority to determine awards of stock options and/or restricted stock to the executive officers and may exercise that authority based on its subjective assessment and determination of the individual's performance, contributions to the Company and role in achieving the Company's results and objectives.

 

Historically, the Company's Board of Directors, and not the Compensation Committee, has exercised the authority to consider and determine Director compensation, including retainer and meeting fees. The Non-Employee Directors receive equity compensation pursuant to the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors approved by the shareholders in 2011 (the “2011 Director Plan”), under which each Non-Employee Director is granted options to purchase 25,000 shares of common stock annually. The options are fully vested on the date of the grant and exercisable six months thereafter.

 

 

Role of Executive Officers regarding Employee and Executive Compensation

 

Mr. Mizel and Mr. Mandarich, with the assistance of the Company’s human resources department, made recommendations to the Compensation Committee with respect to the structure of the compensation plans and proposals for compensation levels for Company employees, including executive officers. The resources and processes used in making these recommendations involve a review of employee performance with respect to established goals, and overall Company performance subjectively compared to other public homebuilders and the Company's business plan.

 

The Compensation Committee took these recommendations into account, together with a variety of other inputs, in its decision making process.

 

Role of Compensation Consultants

 

The Compensation Committee has the authority to retain outside counsel, consultants and other advisors to assist it in evaluating compensation or in otherwise discharging its duties and responsibilities. After consideration of independence factors as required by the NYSE, the Compensation Committee engaged Pearl Meyer & Partners to advise the Committee regarding the structuring of executive compensation for 2015. In October 2015, after consideration of the NYSE independence factors, the Compensation Committee engaged Compensation & Benefit Solutions, LLC (the “Consultant”) to advise the Committee regarding the structuring of executive compensation for the remainder of 2015, fiscal 2016 and the compensation disclosures to be included in this proxy statement. The Consultants also assisted the Committee in determining appropriate peers for purposes of comparing (but not benchmarking) market compensation, and provided other related services.

 

The Consultants have not provided any services to the Company other than the services provided to the Compensation Committee. After considering, among other matters, the absence of any business or personal relationship between the Consultant and any member of the Compensation Committee or any executive officer of the Company, the Compensation Committee has concluded the Consultants’ work does not raise any conflict of interest.

 

 

Executive Compensation Decision Making

 

The Compensation Committee conducted a series of meetings beginning in October 2015 and continuing through February 2016, at which time the Committee made determinations regarding 2015 executive officer compensation. The following table summarizes the roles of the Compensation Committee, the Consultant, and management in the executive officer compensation decision making:

 

Responsible Party	Roles and Responsibilities
Compensation Committee of the Board of Directors	●	Oversees all executive officer compensation levels, including benefits, having a goal to maintain compensation levels that are comparable to the marketplace and in conformity with shareholder interests.
The Committee currently is comprised of Independent Directors and reports to the Board.	●	Administers the Company's current equity and other compensation plans and any additional plans adopted by the Company.
	●	Reviews and approves corporate goals and objectives relevant to CEO compensation.
	●	Evaluates the CEO's performance in light of set goals and objectives, and determines and approves the CEO's compensation level based on this evaluation.
	●	Has authority to determine and approve non-CEO compensation.
	●	Makes recommendations to the Board with respect to incentive-compensation plans and equity-based plans.
	●	Produces a compensation committee report on executive compensation as required by the SEC to be included in the Company's annual proxy statement or annual report on Form 10-K filed with the SEC.
Consultant to the Compensation Committee	●	Provides advice and guidance on the appropriateness and competitiveness of our compensation programs relative to Company performance and market practice.
Compensation & Benefit Solutions, LLC, as an	●	Performs all functions at the direction of the Compensation Committee
independent Consultant retained directly by the	●	Attends Compensation Committee meetings (including executive sessions, as required).
Compensation Committee,	●	Provides advice and guidance regarding governance issues bearing on the executive compensation determinations.
provides consulting advice on matters of	●	Provides market data, as requested.
governance and executive compensation.	●	Consults on various compensation matters and compensation program designs and practices.
	●	Conducts an assessment of the risks arising from our compensation programs.
	●	Confers with the CEO on behalf of the Compensation Committee concerning compensation, incentives and goals.
	●	Assists in selection of the Company’s peers.
Chairman and CEO	●	Reviews performance of the other executive officers and makes recommendations to the Compensation Committee with respect to their compensation.
With the support of other members of the management team.	●	Confers with the Compensation Committee concerning design and development of compensation and benefit plans for Company employees.

 

 

Peer Data

 

The Compensation Committee utilized peer data as a tool when it considered incentives and compensation plan design. While peer data was reviewed and considered by the Committee, it was not utilized for benchmarking purposes. Rather, the peer group information was considered for broad subjective comparisons and not as an objective metric. The homebuilder peer group companies (the "Peer Group") referenced for these purposes consisted of: Lennar Corporation, D.R. Horton, Inc., CalAtlantic Group, Inc., Toll Brothers, Inc., Hovnanian Enterprises, Inc., KB Home, M/I Homes Inc., NVR, Inc., PulteGroup, Inc., Meritage Homes Corporation and Beazer Homes USA, Inc.

 

The Committee chose these companies because of their similarities to MDC's core business and markets, recognizing that their corporate structure, business strategies and risk profile may significantly vary from those of our Company. Significant differences between MDC and the Peer Group include (1) MDC’s strategic focus on risk management, including its land-light operating model and conservative use of debt, (2) MDC senior management’s high percentage of stock ownership -- they own approximately 20% of the Company’s outstanding stock (excluding options), the highest among the Peer Group members, and (3) the Company’s annual dividend yield of approximately 4.0%, which appreciably exceeds the closest Peer Group member.

 

The Compensation Committee recognizes that the total revenue, the market capitalization and risk profile of companies in the Peer Group may substantially vary. Nevertheless, the Committee believes that the companies in the Peer Group were appropriate for reference purposes since they compete for the same executive talent. The Compensation Committee refers to the Peer Group not only for compensation purposes, but also for business model and risk evaluation purposes, as discussed in more detail, below.

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

 

The Compensation Discussion and Analysis (“CD&A”) addresses:

 

●	Our compensation philosophy and objectives;
●	The background underlying CEO, COO and other executive compensation;
●	The elements of executive compensation;
●	The Compensation Committee’s 2015 executive compensation determinations; and
●	The underlying rationale for the Compensation Committee to select each element of compensation.

 

 

Executive Compensation Philosophy & Objectives

 

Our philosophy continues to utilize executive compensation to retain and reward executive leadership for purposes of creating sustainable long-term value for our shareholders. An important tool has been the use of long-term equity incentives, such as stock options and restricted stock awards, which allow our leadership team to benefit when shareholders benefit. Our consistent emphasis on long-term incentives has resulted in leadership team ownership of Company stock that is among the highest in our homebuilding Peer Group.

 

The homebuilding industry is highly cyclical, and it is important that executive compensation be balanced, to take that into account. The Compensation Committee (the “Committee”) believes that our Company’s executive compensation can best be aligned with the long-term interests of the shareholders by taking all of the following factors into account:

 

●	The tenure, experience and importance of our executive officers
●	Risk management and financial stability
●	Annual performance of the Company
●	The long-term prospects of the Company within the homebuilding industry

 

The Committee believes that incentive compensation should reflect the Company’s philosophy on risk management and financial stability, as well as short and long-term returns on shareholder equity. The Committee recognizes that most of the companies in the Peer Group strive to operate with a higher debt to equity ratio and a larger leveraged inventory of real estate. Our Company endeavors to avoid a higher risk exposure than the Peer Group with a goal of maintaining a three to four year supply of land.

 

The Committee believes that fair and appropriate executive compensation is in the best interests of the Company and its shareholders. The Committee seeks to establish “target” annual incentive levels based on performance goals that are transparent and directly aligned with the long-term interests of shareholders. The Committee considers the impact that annual goals may have on the Company’s overall risk profile and financial position, keeping in mind that the annual goals must also contribute to the long-term interests of the Company.

 

Based on shareholder input and the advice of its Consultant, as reflected in its determinations for 2015, the Committee also seeks to size awards to reflect the degree of accomplishment relative to the established performance goals by paying partial bonuses for partial accomplishments or by paying bonuses above target bonuses for performance that exceeds the performance goals, subject to a maximum threshold. Both target and maximum annual incentive levels are established to provide a competitive compensation program within the homebuilding industry. Further, the existence of the ROE Condition Precedent for the CEO and COO incentive awards ensures that minimum level of Company performance is achieved before any award can be earned.

 

 

Background underlying CEO, COO and other Executive Compensation

 

We believe that our ability to retain and motivate our executive officers with their exceptional skills, experience and capacity to succeed in our competitive industry has been essential to the success of our Company and a significant factor in creating long-term value for our shareholders. Our Chief Executive Officer, Larry A. Mizel, and our President and Chief Operating Officer, David D. Mandarich, the principals who have guided the Company for almost 44 years and 39 years, respectively, are senior veterans of the U.S. homebuilding industry. As a result of their leadership, which has primarily been focused on balancing risk and reward, mitigating potential losses and maintaining the financial integrity of the Company, we have experienced four years of solid financial results following the severe downturn in the homebuilding industry. Additionally, during 2015, both the average selling price and number of homes in our backlog increased significantly and we shifted focus more towards build-to-order sales which provide better margins. These results have established a solid baseline for the Company to build shareholder equity over the future years. The Compensation Committee believes that appropriately compensating our seasoned executives aptly serves to encourage and reward their continued service and is in the best interests of our shareholders.

 

The following are operational and financial highlights for 2015:

 

●	Net income increased to $65.8 million, or $1.34 per diluted share vs. net income of $63.1 million, or $1.29 per diluted share in 2014
●	Total homebuilding revenues rose by 13% year-over-year to $1.91 billion
●	Gross margin from home sales of 16.2% vs. 17.0% in 2014

–

Excluding impairments, gross margin from home sales rose by 160 basis points during the year, from 15.5% in the first quarter to 17.1% in the fourth quarter

 

●	2015 fourth quarter gross margin from home sales per home closed of $70,100, the highest level for any quarter in more than nine years
●	SG&A rate improved 10 basis points to 12.2%
●	Active subdivision count up 5% for the year to 167
●	Value of net new orders increased 25% year-over-year to $2.29 billion

 

–

Absorption rate, average active subdivisions, and average net order price all improved

 

●	Backlog dollar value at year end up 59% to $1.05 billion
●	Unsold homes in inventory at year end decreased by 51%
●	Acquired 4,752 lots in 94 communities, including 78 new communities
●	Ranked by the major rating agencies among the strongest companies in the industry
●	Maintained industry’s top dividend yield
●	Ranked #5 of 11 peers in total shareholder return

 

This CD&A discusses the compensation of our executive officers for fiscal year 2015. In 2015, the named executive officers were:

 

●	Larry A. Mizel, Chairman and CEO;
●	David D. Mandarich, President and Chief Operating Officer;
●	Robert N. Martin, Senior Vice President, Chief Financial Officer and Principal Accounting Officer; and
●	Michael Touff, Senior Vice President and General Counsel

 

 

Elements of Executive Compensation

 

Our executive compensation program, in which all of our executive officers participate, is comprised of three primary elements: (i) a base salary, (ii) an annual incentive bonus; and (iii) a long-term equity incentive award comprised of stock options. The following table describes each element and outlines its purpose:

 

Element of Executive  Officer Compensation	Description		Purpose
Base Salary	Minimum cash compensation based on the executive officer’s role at MDC and employment agreement, if any. Salary levels are evaluated annually and may be increased for length of service, competitive reasons or in recognition of a change in responsibilities.	●	Provide a degree of financial certainty and stability.
		●	Retention and attraction of executive talent.
		●	Recognize their experience, length of service, competitive market conditions and individual performance through periodic increases.
Annual Incentive Award	Awards for the Chief Executive Office (“CEO”) and Chief Operating Officer (“COO”) are made annually under the 2013 Performance-Based Compensation Plan. KPIs are established for the Chief Financial Officer (“CFO”) and General Counsel annually. The extent to which an award is earned and the amount is determined by the Compensation Committee depending upon individual’s and the Company’s performance against pre-established goals.	●	Motivate executive officers to achieve key annual goals and position the Company for longer-term success.
		●	Reward executive officers for individual performance and overall Company performance during the year.
Long-Term Equity Awards	Awards typically are granted annually under the Company’s 2011 Equity Incentive Plan. Each executive officer is eligible to receive an award at the discretion of the Compensation Committee based upon performance and long-term potential.	●	Provide an incentive for executive officers to achieve long-term, sustainable success for the Company and to create shareholder value.
		●	Attract, motivate, reward and retain executive talent.

 

In addition, based on their decades of service to the Company, Messrs. Mizel and Mandarich will receive medical insurance benefits, as more fully described under the “Medical Insurance Benefits” section below. The medical benefits were first established in 1997 and last modified in 2008. Messrs. Mizel and Mandarich were previously eligible for post-retirement pension benefits, which were terminated in 2013. The post-retirement pension benefits accrued to the termination date were distributed to them in October 2014. The “Post-Retirement Pension Benefits” section below provides further detail.

 

 

Consideration of Say on Pay Vote

 

The Compensation Committee considered the say on pay vote from the 2015 Annual Meeting, along with other investor feedback, in structuring the 2015 executive compensation.

 

The Compensation Committee undertakes an annual outreach effort to contact the major shareholders of the Company to seek their views concerning executive compensation, in general, and the compensation philosophy of the Committee, in particular. In the past few months, the Committee’s outreach effort extended to shareholders representing more than 40% of the Company’s unaffiliated shareholders.

 

By linking the 2015 Performance Goal to various financial metrics for the Company, the Committee determined that the annual bonus would be directly dependent on the actual defined performance specified by the Committee. The Committee strives to align the executive’s interest with the shareholders by balancing short-term objectives with long-term rewards. The Committee believes that short-term performance should be based on factors that the executives can directly influence. The Committee addresses long-term shareholder returns through long-term equity compensation.

 

The Consultant, on behalf of the Compensation Committee, contacted ISS and Glass Lewis to solicit their views concerning executive compensation and corporate governance. The Chairman of the Compensation Committee participated in the discussions. The results of the discussions were considered by the Committee in making its executive compensation determinations.

 

Elements of Compensation & Specific Compensation Decisions – 2015

 

Base Salary

 

The determination of base salary levels is a subjective assessment made by the Committee annually taking into consideration the following factors as a whole:

 

●	Experience and tenure
●	Base salary levels for comparable positions in the Peer Group
●	Individual and Company performance
●	Level of responsibility
●	The executive’s employment agreement (if any)
●	Communications with shareholders
●	Tax consequences under IRS Section 162(m)
●	The advice of its Consultant

 

The Compensation Committee determined to maintain the base salaries of Messrs. Mizel, Mandarich, and Touff unchanged from their 2014 levels. Their base salaries have remained unchanged for several years. Mr. Martin received an increase in his base salary during 2015 to $375,000 per year as a result of his promotion to CFO. The Committee believes that the base salary levels are appropriate in light of the factors above.

 

 

2015 Annual Incentive Bonus Awards

 

Chief Executive Officer and Chief Operating Officer

 

The shareholder-approved 2013 Performance-Based Plan was designed to retain, motivate and reward executives for their respective contributions in achieving the Company’s annual financial goals. The 2015 Performance Goal was established in accordance with the shareholder-approved plan.

 

Bonus Payment Cap

 

The 2015 Annual Bonus Incentive was subject to a $5 million cap (the “Bonus Cap”) established by the Compensation Committee based on its analysis of executive compensation by the Company’s peer group, combined with guidance from its Compensation Consultant and feedback from its shareholders.

 

In addition, any bonus earned in excess of $4 million would be paid in restricted stock shares vesting in equal amounts on each of December 31^st of 2018, 2019 and 2020. The Compensation Committee believes that remuneration of a portion of the bonus in form of restricted stock serves as a retention tool and reflects the alignment of interests between the CEO/COO and other shareholders.

 

Condition Precedent for Minimum Bonus

 

The Compensation Committee believes that there should be a substantial link between long-term shareholder value and return on equity. As such, the 2015 performance goal included a condition precedent for any bonus payment unless the consolidated adjusted pre-tax return* on the beginning equity exceeded 5.0% (the “ROE Condition”). The actual ROE was 8.8%, satisfying the ROE Condition, and as such, the CEO and COO were each eligible for a $2.4 million minimum bonus.

 

Additional Bonus Opportunity

 

Once the ROE Condition was met, the CEO and COO each had the opportunity to earn additional bonuses (the “Additional Bonus Opportunity”) as follows, subject to a maximum of $2.6 million:

 

Home Sales Revenue									Pre-Tax Diluted EPS*									Backlog									Strategic Goals
		Goal (in thousands)				Bonus					Goal				Bonus					Goal				Bonus				Goal		Bonus
Max		$	1,887,000			$	650,000		Max		$	2.25			$	650,000		Max			1,775			$	650,000		Max	3/3		$	950,000
Target		$	1,767,000			$	525,000		Target		$	2.15			$	525,000		Target			1,647			$	525,000		Target	2/3		$	650,000
Min		$	1,647,000			$	400,000		Min		$	2.06			$	400,000		Min			1,519			$	400,000		Min	1/3		$	400,000
Actual		$	1,848,000			$	525,000		Actual		$	2.20			$	525,000		Actual			2,332			$	650,000		Actual	3/3		$	950,000

 

* The calculation of Pre-Tax Income for the ROE Condition and Diluted Pre-Tax Earnings Per Share ("EPS") excluded expenses derived from the equity compensation, if any, awarded to the CEO adn COO in 2015.

 

Based in part on shareholder feedback, the additional bonus opportunities for 2015 were centered on the four distinct categories shown above, rather than utilizing only a single category (as was the case in 2014). The appropriateness of the categories selected for 2015, along with maximum, minimum, and target goal amounts, were carefully considered by the Compensation Committee given the Company’s emphasis on risk management, financial stability and long-term value. Specifically, with respect to the Home Sales Revenue, Pre-Tax Diluted EPS, and Backlog goals, the minimum performance criteria was established based on the prior year actual performance, with target levels set on the budgeted projections for 2015. Maximum performance goals were established to reflect what the Company would consider outstanding performance in light of the market conditions present in 2015. With respect to the Strategic Goals, the three goals and the Company’s achievement of those goals are provided below.

  

 

1.	Strategic goal requiring the Company to improve upon prior year customer satisfaction scores. The scores improved 3% year-over-year and this goal was achieved.
2.	Strategic goal requiring the Company’s relative credit rating to remain in the top 50% compared to its Peer Group was achieved.
3.	Strategic goal, in light of a challenging economic environment, requiring the Company to implement a strategy to deal with the negative effects of energy prices on the affected Northern Colorado housing market. The Company achieved this goal at it successfully devised and implemented a plan resulting in it exceeding its prior year performance in the Northern Colorado market according to relevant measures despite falling oil prices.

 

Based on the achievements in these categories, both the CEO and COO were eligible for $2.6 million related to the Additional Bonus Opportunity.

 

Total Shareholder Return Modifier

 

The Additional Bonus Opportunity was subject to modification based on the Company’s 2015 total shareholder return (“TSR”) relative to its homebuilder peer group (as defined in this Proxy Statement) as set forth below.

 

TSR Ranking	TSR Modifier
>75th percentile	1.2
Greater than or equal to 50th percentile but less than 75th percentile	1.1
Greater than or equal to 25th percentile but less than 50th percentile	1
Less than 25th percentile	0.9

 

TSR was not included as a component of prior year performance goals. It was included in the 2015 Performance Goal in large part based on shareholder feedback. Based on the Company’s 2015 TSR, the Company ranked at the 65th Percentile for TSR, and as the Additional Bonus Opportunity was eligible for a 1.1 TSR Modifier. However, the TSR Modifier was not applied since the bonus amount earned had already reached the Bonus Cap.

 

Total Annual Incentive Bonus for CEO and COO

 

Based on the elements described above, both the CEO and COO achieved a cash bonus of $4 million and a restricted stock bonus award of $1 million for their performance under the 2015 Annual Bonus Incentive, as calculated in the table below. The restricted stock bonus will be granted in 2016 and therefore will not be included in the executive’s Total Compensation for 2015.

 

 

Bonus Objective	Threshold Achieved		Bonus
Minimum Bonus Opportunity (Pre-Tax Return on Equity)	Met		$	2,400,000
Plus: Additional Bonus Opportunities
Home Sales Revenue	Target			525,000
Pre-Tax Diluted EPS	Target			525,000
Backlog	Max			650,000
Strategic Goals	3 of 3			950,000
Initial Bonus Opportunity			$	2,650,000
Times: TSR Multiplier				1.1
Calculated Additional Bonus Opportunity			$	2,915,000
Additional Bonus Opportunity Earned (lesser of $2.6 million or calculated amount)			$	2,600,000

  

 

Chief Financial Officer and General Counsel

 

The General Counsel (the “CLO”) and the CFO are not covered by the 2013 Performance-Based Plan. In the judgment of the Compensation Committee, these two positions are primarily responsible for accounting, finance, legal and regulatory compliance and their incentive compensation should not directly depend on the Company’s financial performance. Instead, the CLO and the CFO were awarded a bonus opportunity measured by specific goals established by the Committee, their attainment and a bonus payment commensurate with a percentage of their base pay. The Compensation Committee consults with the CEO and the COO, with regard to the CFO’s and the CLO’s achievements. For 2015, the Committee established the following KPIs.

 

Chief Financial Officer

 

●	Shareholder relations management and oversight
●	Timely and accurate handling of financial regulatory filings
●	Oversight of accounting, finance and treasury functions, including capital markets and bank financing transactions, if applicable
●	Successful completion of special projects

 

General Counsel

 

●	Litigation management
●	Regulatory compliance
●	Successful completion of special projects
●	Oversight of risk management

 

For 2015, the KPIs were weighted equally, with bonus amounts based on the level of performance achieved:

 

●	A target bonus of 100% of base salary if the Committee determined that each KPI was achieved.
●	A maximum bonus of 200% of base salary if the Committee determined that each KPI has been exceeded at a level doubling the targeted performance.
●	Other bonus levels as a percentage of base salary in the event some KPIs were achieved or exceeded and/or others were not achieved or were partially achieved, based on the proportionate KPI performance that was achieved.

 

Based on its evaluation of performance relative to the established KPIs, the Committee awarded Mr. Martin and Mr. Touff 2015 annual incentive bonuses of $375,000 and $353,279, respectively.

 

2015 Long-Term Equity Incentive Compensation

 

The Compensation Committee strongly believes in granting long-term equity awards that are performance based. On May 18, 2015, the Company granted a non-qualified stock option to each of the CEO and the COO for 1,000,000 shares of common stock under the Company’s 2011 Equity Incentive Plan. The terms of each option provide that, over a five year period, one third of the option shares will vest as of each of the third, fourth, and fifth anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any 20 out of 30 consecutive trading days closes at a price equal to or greater than 120% of the closing price on the date of grant (the “market-based condition”). The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was $28.45 and the expiration date of each option is May 18, 2025.

 

  

On January 26, 2015, the Compensation Committee awarded Mr. Touff a stock option award under the 2011 Equity Incentive Plan covering 25,000 shares. The option vests (becomes exercisable) as to 25% of the shares over four years commencing on the first anniversary date of the grant if he is employed on those dates.

 

On May 23, 2015, in conjunction with his appointment to CFO, the Compensation Committee awarded Mr. Martin a stock option award under the 2011 Equity Incentive Plan covering 15,000 shares and an award of 15,000 shares of restricted stock. The option vests (becomes exercisable) as to 25% of the shares over four years commencing on the first anniversary date of the grant if he is employed on those dates. The restriction on the restricted stock will lapse as to 33-1/3% of the shares on each of the third, fourth and fifth anniversaries of the date of grant.

 

Post-Retirement Pension Benefits

 

On October 18, 2013, the Company reached agreements (collectively, the “Second Amendments”) with the CEO and COO for the early termination, as of June 30, 2013, of the non-qualified retirement benefits contained in their respective employment agreements. Pursuant to the Second Amendments, the Company paid each of Messrs. Mizel and Mandarich, on October 20, 2014, a deferred lump sum in the amount of $14.8 million and $16.0 million, respectively, which was the benefit amount accrued by the Company as of June 30, 2013, without interest, in full satisfaction of their past, present and future non-qualified retirement benefits.

 

Medical Insurance Benefits

 

Under the terms of their employment agreements, the CEO and COO continue to be entitled to medical insurance benefits for the duration of each executive’s life (described in more detail below under “Employment Agreements”).

 

Other Compensation

 

Other compensation received by our executive officers for 2015 consists of their 401(k) employer contributions, incremental travel expenses incurred by the Company in support of not-for-profit organizations (as approved by the Board of Directors) and cell phone allowances.

 

The Board of Directors of the Company has determined that it is in the best interests of the Company for its CEO and its COO to take advantage of the Company's aircraft for non-Company purposes, when the aircraft is not being employed in the ordinary course of Company business. The CEO and the COO reimburse the Company for their non-Company use of the aircraft.

 

The objective of these benefits is to provide amenities to the CEO and COO that allow them to more efficiently utilize their time and to support them in effectively contributing to the success of the Company.

  

 

  

EMPLOYMENT AGREEMENTS

 

Messrs. Mizel and Mandarich

 

The Company entered into employment agreements with Mr. Mizel and Mr. Mandarich, which have been amended over time and most recently as of October 18, 2013. The agreements provide for the executives' continued employment with the Company: Mr. Mizel as Chairman and Chief Executive Officer, and Mr. Mandarich as President and Chief Operating Officer. The agreements specify a minimum base salary, incentive compensation and medical benefits during the executive's employment as well as medical benefits upon the executive's retirement, disability or termination.

 

On March 8, 2012, the employment agreements were amended to provide a double trigger on the non-equity vesting portions of the agreements’ change-in-control provision and to increase the percentage threshold in the change-in-control definition from 20% to 50%.

 

On October 18, 2013 the Company reached agreements (collectively, the “Second Amendments”) with the CEO and COO for the early termination, as of June 30, 2013, of the non-qualified retirement benefits contained in their respective employment agreements as described above.

 

Material terms of the employment agreements are summarized below.

 

Employment Term: The agreements automatically extend for two-year terms unless (1) the Company or the executive elects to terminate by six months written notice, or (2) the executive is terminated earlier. Neither party has given notice of termination.

 

Base Salaries: Mr. Mizel's base salary may not be less than $1,000,000 per year. Mr. Mandarich's base salary may not be less than $830,000 per year. The base salary for the executive may only be reduced below his prior year's base salary with the consent of the executive and the Company.

 

Incentive Compensation: The Company pays the executive annual incentive compensation pursuant to incentive compensation plans, which are performance-based. Details of the incentive plans are described more fully in "Compensation Processes and Procedures" and "Compensation Discussion and Analysis – Elements of Compensation" above.

 

Medical Insurance Benefits: The Company provides medical insurance benefits to Messrs. Mizel and Mandarich for the duration of their lives. This applies to each of them while he is employed and for the rest of his life after employment. The medical insurance coverage and benefits are at least comparable to those provided to the executive at the time the agreement was signed. The medical insurance benefits also provide comparable coverage for the executive's spouse for the duration of the executive's life and, if she survives the executive, for an additional sixty months after his death.

 

With the approval of Messrs. Mizel and Mandarich, the supplemental health insurance coverage previously provided to them was terminated at the end of 2010.

 

Long-Term Disability Benefits: The Company will provide the executive with long-term disability benefits. Under the benefits, the annual after-tax amount received by the executive would equal the after-tax amount of his base salary for the year in which he becomes disabled. This long-term disability benefit would be paid monthly until the earlier of the end of the executive's disability, prior to his becoming totally disabled. If the executive dies or becomes totally disabled during his employment, he or his estate will be entitled to receive all benefits earned under his performance-based plan and equity plans.

 

 

  

Vacation: The executive is entitled to receive six weeks of vacation each year without carryover from year to year.

 

Termination for Cause: The executive may be terminated for cause, as defined in their employment agreements. If either is terminated for cause, he will only be entitled to his base salary earned through the date of termination and will not be entitled to any other amounts under his employment agreement.

 

Termination Without Cause: If the executive is terminated without cause he will be entitled to receive:

 

●	an amount equal to his aggregate base salary during the three years prior to his termination; and

●	an amount equal to 300%, for Mr. Mizel, and 200%, for Mr. Mandarich, of the annual incentive compensation paid for the year prior to termination.

 

In addition, the executive's options and other rights under the equity plans would vest immediately and the executive, his spouse and his dependents would be entitled to continued medical benefits. Under the employment agreements, termination without cause includes the Company's election not to extend the term of the employment agreement and the Company's termination of the Performance-Based Plan.

 

Change in Control Provisions: If a change in control of the Company occurs, all of the options, dividend equivalents and other rights granted to Messrs. Mizel and Mandarich under the equity plans and other Company plans would accelerate and become exercisable immediately before the occurrence of the transaction that caused the change in control. If the transaction is not completed, the options would remain subject to the restrictions to which they were originally subject.

 

If a change in control occurs, followed within two years by a material change, the executive can terminate his employment (if he has not already been terminated) within thirty days of the material change. If the executive terminates his employment due to a change in control, then:

 

●	he will receive an amount equal to his aggregate base salary during the three years prior to his termination;

 

●	he will receive an amount equal to 300%, for Mr. Mizel, and 200%, for Mr. Mandarich, of the annual incentive compensation paid for the year prior to termination;

 

●	he will be entitled to the accelerated vesting of options and rights; and

 

●

if the change in control involved a two-tier tender offer, at the executive's election the Company will either: (1) pay the executive the difference between the exercise price of the otherwise unvested options and the price offered in the first tier; or (2) adjust the option terms to provide the executive with an equivalent value.

  

Excess Parachute Payments: Certain payments that Messrs. Mizel and Mandarich may receive could be subject to an excise tax as an "excess parachute payment" under the Internal Revenue Code. This could occur following a change in control, a material change, or through other payments made to the executives. In their employment agreements, Messrs. Mizel and Mandarich have agreed to be paid those amounts, if any, in annual installments and over the shortest period of time in which they may be paid and not be treated as "excess parachute payments."

 

 

  

Change in Control and Material Change Defined

 

A "change in control," which is defined more fully in the employment agreements, occurs when:

 

●

a report on Schedule 13D is filed with the SEC that discloses that any person is the beneficial owner of fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company. However, it will not be a change in control if that person is the Company or one of its subsidiaries, an employee benefit plan sponsored by the Company, or any Director as of the date of the employment agreements or his or her affiliate;

 

●

any person purchases securities through a tender offer or exchange offer if after the offer is completed the person in question is the beneficial owner of fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company. However, it will not be a change in control if that person is the Company or one of its subsidiaries, an employee benefit plan sponsored by the Company, or any Director as of the date of the employment agreements or his or her affiliate;

 

●	the Company's shareholders approve a consolidation or merger after which the Company would not be the continuing or surviving corporation;

 

●	the Company's shareholders approve a consolidation or merger in which shares of Company's common stock would be converted into cash, securities or other property;

 

●	the shareholders approve any sale, lease, exchange or other transfer of all or substantially all the assets of the Company; or

 

●

the majority of the Board of Directors ceases to be composed of Directors who were on the Board at the beginning of any twelve-month period. However, it will not be a change in control if the election or nomination of each new director was approved by the vote of two-thirds of the Directors in office who were directors at the beginning of that twelve month period.

  

A "material change," which is defined more fully in the employment agreements, occurs when:

 

●	the Company makes certain adverse changes in the executive's reporting relationship, titles, functions or duties;

 

●	the Company (without the executive’s consent) terminates the Performance-Based Plan or amends it to provide for reduced payments to the executive;

 

●	the Company assigns or reassigns the executive, without his written permission, to another place of employment 50 miles or more from his residence;

 

●	the Company reduces the executive's base salary, annual incentive compensation, retirement benefits, long-term incentive compensation, or the manner in which the compensation is determined, or breaches the employment agreement; or

 

●	a purchaser of all or substantially all of the Company's assets or any successor or assignee of the Company fails to assume the employment agreement.

  

See "Potential Payments Upon Termination or Change in Control" below for additional information.

 

 

  

Certain Other Change in Control Agreements

 

Mr. Touff entered into a change in control agreement with the Company effective July 30, 2008. The agreement will terminate on the earlier of termination of the Mr. Touff’s employment or the end of the current one-year term of the agreement. However, unless either party elects by notice in writing delivered to the other at least 90 days prior to December 31 of the current term, the term of the agreement will be renewed automatically for successive one-year terms. In addition, if the agreement has not been terminated prior to a change in control (as defined below), upon a change in control, the term of the agreement will extend automatically following such Change in Control for two years.

 

The definition of change in control is generally the same as the definition in the description of the employment agreements above.

 

For purposes of the agreement, a change in control event occurs if a change in control is followed by a material change within two years. A material change is defined in the agreements to occur if:

 

●	Mr. Touff’s employment is terminated without cause (as defined in the agreements);

 

●	the Company makes certain adverse changes in Mr. Touff 's reporting relationship, titles, functions or duties;

 

●	the Company assigns or reassigns Mr. Touff, without his written permission, to another place of employment more than fifty miles from his current place of employment;

 

●	the Company reduces Mr. Touff's base salary, annual or long-term incentive compensation, or the manner in which the compensation is determined unless the reduction applies to other officers of the Company; or

 

●	a purchaser of all or substantially all of the Company's assets or any successor or assignee of the Company fails to assume the agreement.

  

Pursuant to the agreement, if a change in control event occurs, Mr. Touff may elect within 90 days after the change in control event to terminate his employment, if not previously terminated by the Company, and to receive a change in control payment. The change in control payment equals two times the sum of: (i) Mr. Touff’s annual base salary in effect immediately prior to the change in control event, plus (ii) the amount of Mr. Touff’s last regular annual bonus, provided that the amount of the annual bonus shall not exceed 50% of the annual base salary in effect immediately prior to the change in control event.

 

If a change in control event occurs, Mr. Touff also would be entitled to continue to participate in the Company's employee benefit plans, policies and arrangements that provide insurance and medical benefits on the same basis as provided prior to the change in control event for a period of twelve months after the date of termination of his employment.

 

If a change in control as defined above occurs, all options, dividend equivalents and other rights granted to Mr. Touff under any Company equity incentive plan will be accelerated and become exercisable immediately prior to the closing of the change in control. If the change in control is not concluded, the election to exercise such options and other rights shall be of no effect and the options shall remain subject to their original restrictions.

 

Any amounts payable pursuant to the change in control agreement are in addition to any payments otherwise payable to Mr. Touff pursuant to any agreement, plan or policy of the Company. Certain payments that Mr. Touff may receive could be subject to an excise tax as an "excess parachute payment" under the Internal Revenue Code. This could occur following a change in control or a change in control event, either alone or together with other payments made to Mr. Touff. In the agreement, Mr. Touff has agreed to be paid those amounts, if any, in annual installments and over the shortest period of time in which they may be paid and not be treated as "excess parachute payments."

 

 

 

Mr. Martin has also entered into a change in control agreement with the Company effective May 23, 2015, which is substantially the same as Mr. Touff’s.

 

See "Potential Payments Upon Termination or Change in Control" below for additional information.

 

The Compensation Committee believes that the potential payments in these limited change in control circumstances fit well within the Company's overall compensation philosophy. The termination and change in control payments are calculated based on the base salaries and the annual bonuses paid to the executives. The Committee believes that the long-term interests of our shareholders are aligned with the executives in that their compensation is, in turn, aligned with the success of the Company. The potential change of control compensation varies with the compensation previously paid to the executive, affords stability to the Company's leadership and is consistent with the philosophy of the Committee to provide compensation that assures retention, incentive and reward to the executive team.

 

COMPENSATION COMMITTEE REPORT

 

The following Report of the Compensation Committee shall not be deemed to be "filed" with the SEC or to be subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. The report shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except that it will be deemed "furnished" in the Company's Annual Report on Form 10-K for 2015, but shall not be deemed incorporated by reference into any filing as a result of being furnished in the Annual Report.

 

The Compensation Committee hereby confirms that it has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

  

		COMPENSATION COMMITTEE
		Raymond T. Baker, Chairman
		Herbert T. Buchwald

  

 

  

2015 SUMMARY COMPENSATION TABLE

 

For the fiscal years ended December 31, 2015, 2014 and 2013, the following table summarizes the compensation of the Company’s named executive officers.

 

Name and Principal Position	Year		Salary ($)				Bonus ($)				Stock Awards ($) 1				Option Awards ($) 1				Non-Equity Incentive Plan Compensation ($) 2				Changes in Pension Value and Nonqualified Deferred Compensation Earnings ($) 3				All Other Compensation ($)				Total ($)
Larry A. Mizel,	2015		$	1,000,000			N/A				N/A				$	5,620,000			$	4,000,000			N/A				$	76,698			$	10,696,698
Chairman and CEO	2014		$	1,000,000			N/A				N/A				N/A				$	4,000,000			N/A				$	118,435			$	5,118,435
	2013		$	1,000,000			N/A				N/A				N/A				$	10,000,000			$	930,281			$	138,542			$	12,068,823
David D. Mandarich,	2015		$	830,000			N/A				N/A				$	5,620,000			$	4,000,000			N/A				$	5,574			$	10,455,574
President and Chief	2014		$	830,000			N/A				N/A				N/A				$	4,000,000			N/A				$	360			$	4,830,360
Operating Officer	2013		$	830,000			N/A				N/A				N/A				$	10,000,000			$	1,390,193			$	5,460			$	12,225,653
Robert N. Martin,	2015		$	341,923			$	375,000			$	525,693			$	74,472			N/A				N/A				$	5,948			$	1,323,036
Senior Vice President,
Chief Financial Officer and
Principal Financial Officer4
John M. Stephens,	2015		$	187,981			$	-			$	-			$	-			N/A				N/A				$	5,519			$	193,500
Senior Vice President,	2014		$	425,000			$	340,000			$	99,990			$	245,745			N/A				N/A				$	720			$	1,111,455
Chief Financial Offer and	2013		$	425,000			$	325,000			$	99,971			$	360,010			N/A				N/A				$	3,925			$	1,213,906
Principal Financial Officer5
Michael Touff,	2015		$	353,279			$	353,279			$	49,980			$	166,083			N/A				N/A				$	5,948			$	928,569
Senior Vice President	2014		$	353,279			$	400,000			$	49,995			$	245,745			N/A				N/A				$	720			$	1,049,739
and General Counsel	2013		$	353,279			$	400,000			$	50,000			$	360,010			N/A				N/A				$	5,820			$	1,169,109

 

¹ The amounts shown in the "Stock Awards" column and the "Option Awards" column are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For Messrs. Mizel and Mandarich in 2015, the option awards were market performance based, the awards were assigned a fair value of $5.62 per share on the date of grant using a Monte Carlo simulation model and will be expensed on a straight-line basis through the end of the 2016 second quarter. For a description of the assumptions used in valuing the awards, please see Note 21 (Stock Based Compensation) to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. Please see the "Grants of Plan-Based Awards" table below for more information about the awards granted in 2015.

 

² These non-equity incentive plan compensation amounts were paid in cash in accordance with the terms of the shareholder-approved Performance-Based Plan, as in effect for the year indicated, as compensation for that year's performance. The amounts were paid in the subsequent year.

 

³ This reflects the aggregate change for the year noted in the present value of accumulated Retirement Benefits and Medical Insurance Benefits provided for under Mr. Mizel's and Mr. Mandarich's respective employment agreements. These amounts do not represent realized compensation; rather, they represent accounting accruals related to the benefits required under Generally Accepted Accounting Principles (GAAP). As noted in the Post-Retirement Pension Benefits section above, the Company reached agreements on October 18, 2013 with the CEO and COO for the early termination, effective as of June 30, 2013, of the non-qualified retirement benefits contained in their respective employment agreements. Pursuant to the amendments, on October 20, 2014, the Company paid to each of Mr. Mizel and Mr. Mandarich a deferred lump sum in the amount of $14.8 million and $16.0 million respectively (the amounts accrued on the books of the Company through June 30, 2013) in full satisfaction of their past, present and future retirement benefits.

 

 

 

⁴ Mr. Martin's base salary of $375,000 (annualized) was determined as part an arm's length negotiation as part of his promotion to Senior Vice President, Chief Financial Officer and Principal Financial Officer on May 23, 2015. In addition, in connection with his appointment, Mr. Martin was granted a stock option covering 15,000 shares of common stock and an award of 15,000 shares of restricted stock. The stock option has a life of ten years and becomes exercisable as to 25% of the shares over four years, beginning on the first anniversary of the date of the award. The restriction on the restricted stock will lapse as to 33-1/3% of the shares on each of the third, fourth and fifth anniversaries of the date of grant.

 

⁵ Mr. Stephens concluded his employment with the Company effective at the close of business on May 22, 2015.

 

All Other Compensation

 

The table below provides a breakdown of all other compensation for 2015 for the named executive officers: 

 

Name		Non- Business Use of Aircraft				401(k) Match 3				Other 4				Total
Larry A. Mizel			--	1		$	5,200			$	71,498			$	76,698
David D. Mandarich			--	2		$	5,200			$	374			$	5,574
Robert N. Martin			--			$	5,200			$	748			$	5,948
John M. Stephens			--			$	5,200			$	319			$	5,519
Michael Touff			--			$	5,200			$	748			$	5,948

 

¹ The incremental costs of non-business use of the Company's aircraft are calculated as the total variable operating costs directly associated with non-business trips, which include fuel, pilot travel related costs, catering, landing fees, flight communications and trip-related maintenance (the “Incremental Costs”). For his non-business use of the aircraft in 2015, Mr. Mizel reimbursed the Company $214,000, which is an amount in excess of the Incremental Cost to the Company.

 

² For his non-business use of the aircraft in 2015, Mr. Mandarich reimbursed the Company $80,000, which is an amount in excess of the Incremental Cost to the Company.

 

³ Any 401(k) match paid by the Company in 2016 which will be based on 2015 401(k) deferrals will be made after filing this Proxy Statement. As such, they will be included in the 2017 Proxy Statement.

 

⁴ For Mr. Mizel, the amount shown for “Other” includes $70,750 of Incremental Costs incurred by the Company in support of Mr. Mizel's service to not-for-profit organizations as approved by the Company's Board. The remainder of the amount shown for Mr. Mizel and all of the amounts shown for the other NEOs represent cell phone allowances.

  

 

  

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

The following table provides information, as of December 31, 2015, with respect to the Company’s existing equity compensation plans.

 

Plan category		(a) Shares to be issued upon exercise of outstanding options, warrants and rights				(b) Weighted-average exercise price of outstanding options, warrants and rights				(c) Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a))
Equity compensation plans approved by shareholders			6,395,416				32.01				1,353,267
Equity compensation plans not approved by shareholders			--				--				--
Total			6,395,416				32.01				1,353,267

 

GRANTS OF PLAN-BASED AWARDS IN 2015

 

The following table sets forth certain information with respect to awards granted during 2015 to our named executive officers. All equity awards were made under the 2011 Equity Incentive Plan.

 

Name	Grant Date		Estimated Future Payouts Under Equity Incentive Plan Awards Target (#)				Exercise or Base Price of Option Awards ($/Sh)				Grant Date Fair Value of Stock and Option Award ($)
Larry A. Mizel	05/18/2015			1,000,000	1		$	28.45			$	5,620,000
David D. Mandarich	05/18/2015			1,000,000	1		$	28.45			$	5,620,000
Michael Touff	01/26/2015			25,000	2		$	24.99			$	166,083
Michael Touff	01/26/2015			2,000	3		N/A				$	49,980
Robert N. Martin	01/21/2015			4,019	3		N/A				$	99,993
Robert N. Martin	05/23/2015			15,000	4		$	28.38			$	74,472
Robert N. Martin	05/23/2015			15,000	5		N/A				$	425,700

 

¹ The terms of each option provide that, over a five year period, one third of the option shares will vest as of each of the third, fourth, and fifth anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any 20 out of 30 consecutive trading days closes at a price equal to or greater than 120% of the closing price on the date of grant. The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was $28.45 and the expiration date of each option is May 18, 2025.

 

² The option granted will become exercisable equally over four years, starting with the first anniversary of the grant date. The option granted was part of the executive’s 2014 compensation package.

 

³ The restricted stock awards will vest equally over three years, starting with the first anniversary of the grant date. The restricted stock awards granted were part of the applicable executive’s 2014 compensation package. Dividends are paid on the restricted stock.

 

⁴ The option granted will become exercisable equally over four years, starting with the first anniversary of the grant date. The option granted was the result of Mr. Martin’s promotion to Senior Vice President, Chief Financial Officer and Principal Financial Officer on May 23, 2015.

 

⁵ The restricted stock award will vest equally over three years, starting with the third anniversary of the grant date. Dividends are paid on the restricted stock. The restricted stock award granted was the result of Mr. Martin’s promotion to Senior Vice President, Chief Financial Officer and Principal Financial Officer on May 23, 2015.

 

 

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2015

 

The table below sets forth information with respect to all unexercised option and unvested restricted stock awards to our named executive officers that were outstanding as of December 31, 2015. Options will become exercisable as to unvested shares and restricted stock will vest (restrictions will lapse) if the named executive officer remains employed on the vesting date.

 

		Option Awards																Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)
Larry A. Mizel			90,000				-				57.05			12/29/2016					-				-
			90,000				-				62.76			12/29/2016					-				-
			90,000				-				38.01			12/20/2017					-				-
			90,000				-				41.81			12/20/2017					-				-
			90,000				-				29.45			12/30/2018					-				-
			90,000				-				32.40			12/30/2018					-				-
			90,000				-				31.04			12/31/2019					-				-
			90,000				-				34.14			12/31/2019					-				-
			90,000				-				28.86			12/30/2020					-				-
			90,000				-				31.75			12/30/2020					-				-
			500,000				-				24.50			3/8/2022					-				-
			-				1,000,000	1			28.45			5/18/2025					-				-
			-				-				-				-				20,000	2			510,600
David D. Mandarich			90,000				-				57.05			12/29/2016					-				-
			90,000				-				62.76			12/29/2016					-				-
			90,000				-				38.01			12/20/2017					-				-
			90,000				-				41.81			12/20/2017					-				-
			90,000				-				29.45			12/30/2018					-				-
			90,000				-				32.40			12/30/2018					-				-
			90,000				-				31.04			12/31/2019					-				-
			90,000				-				34.14			12/31/2019					-				-
			90,000				-				28.86			12/30/2020					-				-
			90,000				-				31.75			12/30/2020					-				-
			500,000				-				24.50			03/08/2022					-				-
			-				1,000,000	1			28.45			5/18/2025					-				-
			-				-				-				-				20,000	2			510,600

 

 

 

		Option Awards																Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)
Robert N. Martin			5,000				2,500	3			21.00			1/26/2022					-				-
			7,500				2,500	4			34.95			11/27/2022					-				-
			2,500				7,500	5			31.12			1/22/2024					-				-
			-				15,000	6			28.38			5/23/2025					-				-
			-				-				-				-				1,191	7			30,406
			-				-				-				-				3,213	8			82,028
			-				-				-				-				4,019	9			102,605
			-				-				-				-				15,000	10			382,950
Michael Touff			30,000				-				57.05			12/29/2016					-				-
			30,000				-				38.01			12/20/2017					-				-
			30,000				-				29.45			12/30/2018					-				-
			30,000				-				31.04			12/31/2019					-				-
			25,000				-				28.86			12/30/2020					-				-
			8,334				16,666	11			24.50			3/8/2022					-				-
			-				25,000	12			39.75			2/1/2023					-				-
			-				25,000	13			29.05			2/6/2024					-				-
							25,000	14			24.99			1/26/2025					-				-
			-				-				-				-				383	15			9,778
			-				-				-				-				838	16			21,394
			-				-				-				-				1,147	17			29,283
			-				-				-				-				2,000	18			51,060

 

¹ This option vests over a five year period, one third of the option shares will vest as of each of the third, fourth, and fifth anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any 20 out of 30 consecutive trading days closes at a price equal to or greater than 120% of the closing price on the date of grant. The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was $28.45.

 

² The restrictions on these shares lapse on February 9, 2016.

 

³ This option vests as to the remaining shares on January 26, 2016.

 

⁴ This option vests as to the remaining shares on November 27, 2016.

 

⁵ This option vests as to 33-1/3% of the shares covered thereby on each of January 22, 2016, 2017 and 2018.

 

⁶ This option vests as to 25% of the shares covered thereby on each of May 23, 2016, 2017, 2018 and 2019.

 

⁷ The restrictions on these shares lapse on January 26, 2016.

 

⁸ The restrictions on these shares lapse as to 50% of the shares covered thereby on each of January 22, 2016 and 2017.

 

⁹ The restrictions on these shares lapse as to 33-1/3% of the shares covered thereby on each of January 21, 2016, 2017 and 2018.

 

 

 

¹⁰ The restrictions on these shares lapse as to 33-1/3% of the shares covered thereby on each of May 23, 2017, 2018 and 2019.

 

¹¹ This option vests as to 50% of the shares covered thereby on each of March 8, 2016 and 2017.

 

¹² This option vests as to 33-1/3% of the shares covered thereby on each of February 1, 2016, 2017 and 2018.

 

¹³ This option vests as to 33-1/3% of the shares covered thereby on each of February 6, 2017, 2018 and 2019.

 

¹⁴ This option vests as to 25% of the shares covered thereby on each of January 26, 2016, 2017, 2018 and 2019.

 

¹⁵ The restrictions on these shares lapse on March 8, 2016.

 

¹⁶ The restrictions on these shares lapse on February 1, 2016.

 

¹⁷ The restrictions on these shares lapse as to 50% of the shares covered thereby on each of February 6, 2016 and 2017.

 

¹⁸ The restrictions on these shares lapse as to 33-1/3% of the shares covered thereby on each of January 26, 2016, 2017 and 2018.

 

OPTION EXERCISES AND STOCK VESTED IN 2015

 

The following table provides additional information about value realized by the named executive officers on option award exercises and restricted stock award vestings during the year ended December 31, 2015.

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($)				Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($)
Larry A. Mizel			-				-				40,000			$	1,056,800
David D. Mandarich			-				-				40,000			$	1,056,800
Michael Touff			-				-				1,794			$	46,403
John M. Stephens			25,000