def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Definitive Proxy Statement |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Soliciting Material Pursuant to §240.14a-12 |
KB HOME
(Name of Registrant as Specified In Its Charter)
KB HOME
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Date Filed:
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NOTICE OF 2008 KB HOME
ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
APRIL 3, 2008
KB
HOME
10990
Wilshire Boulevard
Los Angeles, California 90024
(310) 231-4000
Dear Fellow Stockholder:
Your officers and directors join me in inviting you to attend
the 2008 Annual Meeting of Stockholders of KB Home at
9:00 a.m. Pacific Daylight Time on April 3, 2008
at our headquarters in Los Angeles, California.
The expected items of business for the meeting are described in
detail in the attached Notice of 2008 Annual Meeting of
Stockholders and Proxy Statement. We also will discuss our 2007
results and our plans for the future.
We look forward to seeing you on April 3.
Sincerely,
Jeffrey T. Mezger
President and Chief Executive Officer
Notice
of 2008 Annual Meeting of Stockholders
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Time and
Date:
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9:00 a.m. Pacific Daylight Time on Thursday, April 3, 2008.
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Location:
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10990 Wilshire Boulevard, Los Angeles, CA 90024.
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Items of
Business:
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(1) Elect three directors, each to serve for a
one-year term;
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(2) Ratify the appointment of Ernst & Young
LLP as our independent registered public accounting firm for our
fiscal year ending November 30, 2008;
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(3) Consider two stockholder proposals, if properly
presented at the meeting; and
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(4) Transact any other business as may properly come
before the meeting or any adjournment or postponement of the
meeting.
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The accompanying Proxy Statement describes these items in more
detail. We have not received notice of any other matters that
may be properly presented at the meeting.
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Record Date:
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You can vote at the meeting and at any postponement or
adjournment of the meeting if you were a stockholder of record
on February 14, 2008.
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Attending the
Meeting:
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If you plan to attend the meeting, you may be asked to present
photo identification and you may be accompanied by only one
guest. If you hold your shares of our common stock in a
brokerage or similar account (in street name), you
will need to bring a statement reflecting the shares you owned
on February 14, 2008.
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Proxy
Voting:
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Whether or not you expect to attend the meeting, please
promptly complete and return the proxy card or voting
instruction card you received to ensure that your shares will be
represented. If you are a holder of record, you may also vote
by using the telephone number or via the Internet web site
address printed on your proxy card. If your shares are held in
street name, you must vote your shares in the manner prescribed
on the voting instruction card your broker or nominee provided
to you.
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Annual
Report:
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Copies of our Annual Report on Form 10-K for the fiscal
year ended November 30, 2007, including audited financial
statements, are being mailed to stockholders concurrently with
this Proxy Statement. We anticipate that the mailing will
commence on or about March 6, 2008.
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Internet
Availability of
Materials:
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This Notice of 2008 Annual Meeting of Stockholders and the
accompanying Proxy Statement, a sample proxy card and our Annual
Report on Form 10-K for the fiscal year ended
November 30, 2007 may be viewed, printed and
downloaded from the Internet at www.kbhome.com/investor/proxy.
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By
Order of The Board of Directors,
Wendy
C. Shiba
Executive
Vice President, General Counsel and
Corporate Secretary
Los
Angeles, California
March 5, 2008
Table
of Contents
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KB
HOME
10990
Wilshire Boulevard
Los Angeles, California 90024
Proxy
Statement
for
the
2008
Annual Meeting of Stockholders
To Be
Held April 3, 2008
General
Information
Why Did I
Receive This Proxy Statement?
Your Board of Directors is furnishing this Proxy Statement to
you to solicit your proxy to be voted at our 2008 Annual Meeting
of Stockholders. The Annual Meeting is scheduled for Thursday,
April 3, 2008, at the time and place and for the purposes
set forth in the accompanying Notice of 2008 Annual Meeting of
Stockholders. We anticipate that the mailing of this Proxy
Statement to stockholders will commence on or about
March 6, 2008.
Can I
Attend the Annual Meeting?
You are cordially invited to attend the Annual Meeting.
Please note that you may be asked to present photo
identification and be subject to a security check, and that no
cameras, recording equipment, electronic devices, large bags,
briefcases or packages will be permitted in the Annual Meeting.
Also, due to space constraints, you may be accompanied by only
one guest. Parking is available at the garage for the meeting
location, which is accessed from Veteran Avenue.
Who is
Entitled to Vote at the Annual Meeting?
Only holders of record of the 77,420,742 shares of our
common stock outstanding at the close of business on
February 14, 2008 are entitled to vote at the Annual
Meeting. Each holder of our common stock is entitled to one vote
for each share held. Our Grantor Stock Ownership Trust,
established to assist us in meeting certain of our obligations
to employees under our employee benefit plans, held
12,155,082 shares of our common stock for voting purposes
as of February 14, 2008. These shares will be voted by the
trustee of the Grantor Stock Ownership Trust in accordance with
instructions received from employees who participate in certain
of our employee benefit plans. There is no right to cumulative
voting.
Who is a
Holder of Record?
If your shares of our common stock are registered directly in
your name with our transfer agent, Mellon Investor Services LLC,
you are considered the holder of record of those
shares. If your shares are held in a stock brokerage account or
by a financial institution or other holder of record, you are
considered the beneficial owner of those shares held in
street name.
1
How Do I
Vote?
If you are a beneficial owner, you have the right to instruct
your broker, financial institution or other holder of record on
how to vote your shares of our common stock by using the voting
instruction card you received from them or by following their
particular telephone
and/or
Internet voting instructions.
If you are a holder of record, you may vote the proxy card you
received by mail, by telephone or via the Internet, as described
below:
Mail. Please promptly complete and
return your proxy card in the postage-paid envelope provided.
Telephone. Please call the toll-free
telephone number listed on your proxy card. Telephone voting
procedures have been established to verify your identity, to
allow you to provide proxy voting instructions and to confirm
that your instructions were accurately recorded. Please have
your proxy card available when you call.
Internet. Please visit the Internet web
site address listed on your proxy card. As with telephone
voting, Internet voting procedures have been established to
verify your identity and to confirm your voting instructions.
Please have your proxy card available when you visit the
Internet web site address.
Telephone and Internet voting will be available to holders of
record 24 hours each day until 11:59 p.m. Eastern
Daylight Time on April 2, 2008. If you use the toll-free
telephone number or the Internet to provide your proxy voting
instructions, you do not need to mail in your proxy card.
Revoking Your Proxy Vote. If you are a
holder of record, you may revoke your proxy voting instructions
made by mail, by telephone or via the Internet at any time
before the exercise of those instructions at the Annual Meeting.
To do so, you must send a revocation in writing to us in care of
the Corporate Secretary, KB Home, 10990 Wilshire Boulevard, Los
Angeles, California 90024.
If you are a beneficial owner, you may submit new voting
instructions by contacting your broker, financial institution or
other holder of record. You may also vote in person at the
Annual Meeting as described in the next paragraph.
Voting In Person at the Annual
Meeting. Whether you are a holder of record
or a beneficial owner, you may vote in person at the Annual
Meeting, even if you have previously provided proxy voting
instructions by mail, by telephone or via the Internet. If you
are a holder of record, you may also be represented by another
person at the Annual Meeting by executing a proper proxy
designating that person. If you are a beneficial owner of shares
of our common stock, you must obtain a legal proxy from your
broker, financial institution or other holder of record and
present it with your ballot to be able to vote in person at the
Annual Meeting.
What are
the Voting Requirements to Elect the Director Nominees and to
Approve Each of the Proposals in This Proxy Statement?
Under the laws of the State of Delaware, where we are
incorporated, stockholders may take action at the Annual Meeting
by voting their shares of our common stock as described above,
provided a quorum is present. At least a majority of the
outstanding shares of our common stock entitled to vote must be
present or represented at the Annual Meeting to establish a
quorum. Abstentions and broker non-votes are counted
as present and entitled to vote for purposes of establishing a
quorum.
A broker non-vote arises when a broker, financial
institution or other holder of record does not receive
instructions from a beneficial owner and does not have the
discretionary authority to vote on a particular item. Per
current New York Stock Exchange rules, brokers have
discretionary authority to vote on the election of directors and
on the ratification of the appointment of our independent
registered public accounting firm. Brokers do not, however, have
discretionary authority to vote on the stockholder proposals in
this Proxy Statement. Accordingly, broker non-votes will not be
considered entitled to vote for those proposals and will have no
effect on the outcome.
All shares of our common stock represented by valid proxies
received pursuant to this solicitation and not revoked will be
voted at the Annual Meeting in accordance with the proxy
instructions given.
2
Because a proxy confers discretionary authority to vote on other
matters that may properly come before the Annual Meeting, shares
of our common stock represented by valid proxies will be voted
in accordance with the judgment of Jeffrey T. Mezger, President
and Chief Executive Officer, and Wendy C. Shiba, Executive Vice
President, General Counsel and Corporate Secretary, who are the
persons named as proxies on the proxy cards for the Annual
Meeting, or their duly authorized designees.
Where no instruction is made on a signed proxy card with respect
to any item submitted to a vote at the Annual Meeting, the
shares of our common stock represented by the proxy card will be
voted (a) for the election as directors of the three
individuals named under the heading Election of
Directors on
pages 13-15
below, (b) for the ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for our fiscal year ending November 30,
2008, as discussed on page 16 below, and (c) against
the two stockholder proposals in this Proxy Statement, if
properly presented at the Annual Meeting, which are discussed on
pages 17-21 below.
Election of Directors. Per our Bylaws,
each director nominee must receive a majority of votes cast in
favor to be elected to the Board of Directors (i.e., the
votes cast for a nominees election must exceed the votes
cast against the nominees election). You may vote
for all director nominees or you may vote
against or abstain with respect to one
or more of the director nominees. Shares of our common stock
that are not present or represented at the Annual Meeting and
abstentions will not affect the outcome of the election of
directors.
Other Proposals in this Proxy
Statement. The affirmative vote of a majority
of the shares of our common stock present or represented at the
Annual Meeting and entitled to vote is required to ratify the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for our fiscal year ending
November 30, 2008 and to approve each of the stockholder
proposals in this Proxy Statement, if properly presented at the
Annual Meeting. You may vote for,
against, or abstain with respect to any
of these proposals. Abstentions will have the same effect as an
against vote.
Are the Notice of Annual Meeting, This Proxy Statement and
the 2007 Annual Report on
Form 10-K
Available Online?
Yes. The accompanying Notice of 2008 Annual Meeting of
Stockholders, this Proxy Statement, the Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007 and a sample
proxy card may be viewed, printed or downloaded from
http://www.kbhome.com/investor/proxy.
Who Will Pay for This Proxy Solicitation?
We will pay the entire cost of soliciting proxies. In addition
to use of the mail, proxies may be solicited by our officers,
directors and other employees by telephone, facsimile, email or
personal solicitation, and no additional compensation will be
paid to such individuals. We will, if requested, reimburse
banks, brokerage houses and other custodians, nominees and
certain fiduciaries for their reasonable expenses incurred in
mailing proxy material to their principals. We have hired
Georgeson Inc., a professional soliciting organization, to
assist us in proxy solicitation and in distributing proxy
materials to institutions, brokerage houses, custodians,
nominees and other fiduciaries. For these services, we will pay
Georgeson a fee of $8,500, plus reimbursement for out-of-pocket
expenses.
Who Will Count the Vote?
A representative of our transfer agent, Mellon Investor Services
LLC, will count the votes and act as an independent inspector of
election for the Annual Meeting. Ms. Shiba will also act as
an inspector of election.
3
Corporate
Governance and Board Matters
Role of
the Board of Directors
The Board of Directors (Board) is elected by our
stockholders to oversee the management of our business and to
assure that the long-term interests of our stockholders are
being served.
Director
Qualifications
We believe that our directors should possess the highest
personal and professional ethics, integrity, judgment and
values, and be committed to representing the long-term interests
of our stockholders. Directors should also have an inquisitive
and objective perspective, and be able and willing to dedicate
the time necessary to Board and Board Committee service.
The Nominating and Corporate Governance Committee of the Board
(Nominating/Governance Committee) regularly assesses
the skills and characteristics of current and potential
directors in view of the perceived needs of the Board at the
time an assessment is made and may consider the following
attributes, among others:
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personal qualities, accomplishments and reputation in the
business community;
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financial literacy, financial and accounting expertise and
significant business, academic or government experience in
leadership positions or at senior policy-making levels;
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geographical representation in areas relevant to our business;
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diversity of background and personal experience;
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fit of abilities and personality with those of current and
potential directors in building a Board that is effective,
collegial and responsive to the needs of our business; and
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independence and an absence of conflicting time commitments.
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Director
Independence
We believe that a substantial majority of our directors should
be independent. A director qualifies as independent unless the
Board determines that he or she has a material relationship with
us based on all relevant facts and circumstances. The Board
makes independence determinations annually based on information
supplied by directors and other sources, and on the prior review
and recommendation of the Nominating/Governance Committee.
The Boards independence determinations are guided by
certain categorical standards contained in our Corporate
Governance Principles. These standards are consistent with New
York Stock Exchange listing standards, the national securities
exchange on which our common stock is listed.
The Board has determined that all non-employee directors who
served during our 2007 fiscal year and all current director
nominees are independent under the Boards director
independence standards. Accordingly, Messrs. Stephen F.
Bollenbach, Ronald W. Burkle, Timothy W. Finchem, Kenneth M.
Jastrow, II, James A. Johnson, J. Terrence Lanni, Michael
G. McCaffery, Leslie Moonves, and Luis G. Nogales and
Ms. Melissa Lora are independent. Dr. Ray R. Irani,
who served on the Board until November 1, 2007, was also
independent. In addition, the Board has determined that all of
the Board Committees are entirely composed of independent
directors.
In making its independence determinations, the Board considered
various transactions for goods and services that we entered into
during our 2007 fiscal year with firms or organizations at which
some of our non-employee directors served as executive officers.
In each case, the transactions were in the ordinary course of
our business and the business of the counterpart firm or
organization and fell well within the categorical independence
standards
4
contained in our Corporate Governance Principles. In no case was
a non-employee director deemed to have a direct or indirect
material interest in the transactions. There were no
transactions in which any of our non-employee directors
participated in an individual capacity. The specific goods and
services consisted of: hotel rooms obtained in connection with
business travel and at standard market rates
(Mr. Bollenbach (who served as Chief Executive Officer of
Hilton Hotels Corporation through October 2007) and
Mr. Lanni (who serves as Chief Executive Officer of MGM
MIRAGE)); radio and billboard advertising expenditures at market
rates to promote our business (Mr. Moonves (who serves as
Chief Executive Officer of CBS Corporation)); building
materials purchased at market prices (for which we received
standard purchase rebates) for use in our homebuilding
operations (Mr. Jastrow (who served as Chief Executive
Officer of Temple-Inland Inc. through December 2007)); and event
fees at market rates paid in connection with business-related
activities (Mr. Finchem (who serves as Commissioner of the
PGA TOUR)).
Corporate
Governance Principles
In addition to containing our director independence standards,
our Corporate Governance Principles provide the framework within
which we conduct our business and pursue our strategic goals.
The Nominating/Governance Committee regularly reviews our
Corporate Governance Principles, and the full Board approves
changes as it deems appropriate. Our Corporate Governance
Principles are available on our website at
http://www.kbhome.com/investor/corporategovernance.
Ethics
Policy
We expect all of our directors and employees to follow the
highest ethical standards when representing KB Home and our
interests. To this end, all employees, including our senior
executive management, and our directors must abide by our Ethics
Policy. The Audit and Compliance Committee of the Board
(Audit Committee) regularly reviews our Ethics
Policy, and the full Board approves changes as it deems
appropriate. The Board approved amendments to our Ethics Policy
that became effective as of September 17, 2007. The Ethics
Policy is available on our website at
http://www.kbhome.com/investor/corporategovernance.
Board
Meetings, Membership and Attendance
The Board held 10 meetings in our 2007 fiscal year. As of the
date of this Proxy Statement, the Board has 11 members. In our
2007 fiscal year, each of our directors attended at least 75% of
the aggregate number of meetings of the Board and the Board
Committees on which he or she served. All directors are expected
to attend our annual meetings of stockholders. All directors who
were serving at the time attended our 2007 Annual Meeting of
Stockholders, which was held on April 5, 2007.
Board
Committees
The Board has three standing Board Committees: Audit; Management
Development and Compensation (Compensation
Committee); and Nominating/Governance. Each standing Board
Committee assists the Board in fulfilling its responsibilities,
as described below. The Board has adopted a charter for each
standing Board Committee. Each charter is available on our
website at
http://www.kbhome.com/investor/corporategovernance.
The chart below shows the members of the standing Board
Committees as of the date of this Proxy Statement and the number
of meetings each Board Committee held during our 2007 fiscal
year. Mr. Bollenbach, the Non-Executive Chairman of the
Board, serves as an ex officio member of each standing
Board Committee. Mr. Mezger, a
5
director and our President and Chief Executive Officer
(CEO), does not serve on any of the standing Board
Committees.
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Nominating/
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Audit
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Compensation
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Governance
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Mr. Burkle
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Mr. Finchem
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Mr. Jastrow
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Mr. Johnson
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X
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Mr. Lanni
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X
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Ms. Lora
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Mr. McCaffery
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X
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|
Mr. Moonves
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X
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*
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Mr. Nogales
|
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X
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X
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Number of Meetings:
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|
|
9
|
(a)
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7
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|
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5
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|
X = Member * = Chair
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(a) |
|
Includes quarterly conference calls with our management to
review our earnings releases prior to their issuance. |
Audit and Compliance Committee. The
Audit Committee represents and assists the Board in fulfilling
its responsibilities for oversight of our:
|
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|
corporate accounting and reporting practices, including the
quality and integrity of our financial statements and reports;
|
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|
internal control over financial reporting and disclosure
controls and procedures;
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|
audit process, including the qualifications, independence,
retention, compensation and performance of the independent
registered public accounting firm employed for the purpose of
preparing or issuing an audit report or performing audit,
review, attestation or other services for us, and the
performance of our internal audit department; and
|
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|
|
compliance with legal and regulatory requirements and management
of matters in which we have or may have material liability
exposure.
|
The Audit Committee also oversees the preparation of a report
for inclusion in our annual proxy statements and is charged with
the duties and responsibilities listed in its charter. The Audit
Committees report is included in this Proxy Statement on
page 54 below. The Audit Committee is a separately
designated standing audit committee as defined in
Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The Board has determined that each current member of the Audit
Committee is independent under our Corporate Governance
Principles, New York Stock Exchange listing standards and
Securities and Exchange Commission rules. The Board has also
determined that each current member of the Audit Committee is
financially literate under New York Stock Exchange listing
standards, and that Ms. Lora, an independent director,
qualifies as an audit committee financial expert
under Securities and Exchange Commission rules.
Management Development and Compensation
Committee. The Compensation Committee
represents and assists the Board with respect to:
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|
the evaluation and compensation of our CEO and his direct
reports;
|
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|
oversight and approval of the general design of our executive
compensation and benefit programs;
|
6
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|
our efforts to attract, develop, promote and retain qualified
senior executive talent; and
|
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|
the evaluation and determination of non-employee director
compensation.
|
The Compensation Committee oversees the preparation of the
compensation discussion and analysis to be included in our
annual proxy statements, recommends to the Board whether to so
include the compensation discussion and analysis, and provides
an accompanying report to be included in our annual proxy
statements. The compensation discussion and analysis for this
Proxy Statement is provided under the heading Compensation
Discussion and Analysis on pages 25-35 below. The
Compensation Committees accompanying report is on
page 25 below. The Compensation Committee is also charged
with the duties and responsibilities listed in its charter.
The Board has determined that each current Compensation
Committee member is independent under our Corporate Governance
Principles and New York Stock Exchange listing standards, is a
non-employee director under Securities and Exchange
Commission rules and is an outside director under
Internal Revenue Code Section 162(m).
Overview of Executive Officer and Non-Employee Director
Compensation Processes and Procedures. Under our
Bylaws, the Board has the authority to fix the compensation of
our executive officers and non-employee directors. The Board has
delegated this authority to the Compensation Committee to the
extent provided in the Compensation Committees charter. In
accordance with its charter, the Compensation Committee annually
reviews and approves the goals and objectives relevant to our
CEOs compensation, evaluates his performance in light of
those goals and objectives, and, either as a committee or
together with the other independent directors (as directed by
the Board), determines and approves our CEOs incentive
compensation based on the evaluation. The Compensation Committee
also evaluates, in conjunction with our CEO, the performance of
his direct reports and other senior executives, and reviews and
approves their compensation.
The Compensation Committee exercises the Boards authority
with respect to our employee compensation and benefits plans
(including our employee equity compensation plans) and policies,
except to the extent that the Board, in its discretion, reserves
its authority. This includes the authority to select eligible
participants, recommend and approve grants and awards, set
performance targets and other award eligibility criteria,
approve an aggregate incentive pool for any annual or long-term
incentive awards, interpret the plans terms, delegate
certain responsibilities and adopt or modify as necessary any
rules and procedures to implement the plans, including any rules
and procedures that condition the approval of grants and awards.
The Compensation Committee also periodically reviews our
compensation and benefit plans and, from time to time, will
recommend to the Board new plans or modifications to existing
plans. The Compensation Committees exercise of this
authority, including specific considerations applied and
determinations made, with respect to the compensation and
benefits awarded to our named executive officers under our plans
is discussed under the heading Compensation Discussion and
Analysis on pages 25-35 below.
The Compensation Committee, from time to time, reviews and makes
recommendations to the Board regarding non-employee director
compensation consistent with the goals of recruiting the highest
caliber directors to serve on the Board, aligning
directors and stockholders interests, and fairly
paying directors for the work required to serve stockholder
interests given our size, scope and complexity of operations.
In carrying out its duties with respect to executive officer and
non-employee director compensation, the Compensation Committee
seeks assistance from our management and an outside compensation
consultant it has engaged directly, Semler Brossy Consulting
Group LLC (Semler Brossy), as further described
under the heading Compensation Discussion and
Analysis on pages 25-35 below. Under its charter, the
Compensation Committee may delegate to a subcommittee or to our
management any duties and responsibilities as the Compensation
Committee deems to be appropriate and in our best interests.
However, under our Equity-Based Award Grant Policy, as further
described on page 35 below, the Compensation Committee
cannot delegate to our management the authority to grant
equity-based awards.
7
Compensation Committee Interlocks and Insider
Participation. Messrs. Lanni and Nogales
served on the Compensation Committee throughout our 2007 fiscal
year. Messrs. Finchem and McCaffery each joined the
Compensation Committee on April 5, 2007 and served through
the remainder of our 2007 fiscal year. Dr. Irani served as
the Chair of the Compensation Committee from the beginning of
our 2007 fiscal year until April 5, 2007, and then served
as a Compensation Committee member until November 1, 2007,
when he resigned from the Board. No member of the Compensation
Committee during our 2007 fiscal year was part of a
compensation committee interlock as described under
Securities and Exchange Commission rules. In addition, none of
our executive officers served as a director or member of the
compensation committee of another entity that would constitute a
compensation committee interlock.
Nominating and Corporate Governance
Committee. The Nominating/Governance
Committee represents and assists the Board in fulfilling its
responsibilities by:
|
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|
|
providing oversight of our corporate governance policies and
practices;
|
|
|
|
identifying, evaluating and recommending to the Board
individuals who are qualified to become directors, as further
described under the heading Consideration of Director
Candidates below; and
|
|
|
|
performing ongoing assessments of the Boards size,
operations, structure, needs and effectiveness.
|
The Nominating/Governance Committee also reviews and makes
recommendations to the Board on proposed changes to our Restated
Certificate of Incorporation and Bylaws, periodically assesses
and recommends action with respect to our stockholder rights
plan and other stockholder protections, reviews and approves or
ratifies (as applicable) transactions in which we participate
and in which certain related parties have a material interest
(as further discussed under the heading Certain
Relationships and Related Party Transactions on
page 56 below), and is charged with the other duties and
responsibilities listed in its charter.
The Board has determined that each current member of the
Nominating/Governance Committee is independent under our
Corporate Governance Principles and New York Stock Exchange
listing standards.
Consideration
of Director Candidates
The Nominating/Governance Committee is responsible for
identifying and evaluating director candidates on the
Boards behalf. Director candidates may come to the
attention of the Nominating/Governance Committee through current
Board members or other persons. Candidates are evaluated at
regular or special meetings of the Nominating/Governance
Committee, and may be considered at any point during the year.
The general qualifications for director candidates are described
under the heading Director Qualifications on
page 4 above.
The Nominating/Governance Committee has retained professional
search firms from time to time to assist it with recruiting
potential director candidates to the Board based on criteria the
Nominating/Governance Committee provides to the firm. These
firms help identify, evaluate and select director candidates and
are typically paid an agreed upon fee plus expenses for their
work. A professional search firm helped recruit
Mr. Bollenbach to the Board in 2007.
Any security holder may recommend a director candidate for the
Nominating/Governance Committees consideration by
submitting the candidates name and qualifications to us in
care of the Corporate Secretary at the address listed under the
heading Communications with the Board on the next
page. The Nominating/Governance Committee will consider director
candidates recommended by a security holder in the same manner
as it considers any other recommended candidates.
Executive
Sessions of Non-Employee Directors
As part of the Boards regularly scheduled meetings, the
non-employee directors meet in executive session. Any
non-employee director can request additional executive sessions.
Mr. Bollenbach, the Non-Executive Chairman of the Board, is
responsible for scheduling and chairing the executive sessions.
8
Communications
with the Board
Any interested party may write to the Board or to any of the
non-employee directors in care of our Corporate Secretary at KB
Home, 10990 Wilshire Boulevard, Los Angeles, California 90024.
The Corporate Secretary or the Assistant Corporate Secretary
reviews all such written correspondence promptly upon receipt
and will forward it, as they determine is appropriate, to a
Board Committee Chair, an individual director
and/or the
Chairman of the Board. Directors who receive such correspondence
determine, individually or with other directors
and/or our
management, whether and how to respond.
Director
Compensation
Overview. The Board sets non-employee
director compensation based on recommendations from the
Compensation Committee. The Compensation Committee has retained
Semler Brossy to assist it with designing our compensation and
benefit programs, including our non-employee director
compensation program. Non-employee director compensation is
currently provided under our 2003 Non-Employee Directors Stock
Plan (Director Plan). Mr. Mezger is not paid
for his service as a director.
Under the Director Plan, each non-employee director is entitled
to receive an $80,000 cash retainer paid in $20,000 quarterly
installments during a Director Year (the period between our
annual meetings of stockholders) and 4,000 stock units that are
granted on the date of each annual meeting of stockholders. Each
of the Chairs of the Compensation Committee and the
Nominating/Governance Committee is entitled to an additional
retainer of 600 stock units. The Chair of the Audit Committee is
entitled to an additional retainer of 1,000 stock units. A
non-employee director who joins the Board or who becomes a Board
Committee Chair during a Director Year is entitled to a
pro-rated amount of the applicable compensation provided under
the Director Plan based on the time remaining in the Director
Year.
To promote greater alignment of non-employee director and
stockholder interests, the Director Plan allows each
non-employee director to elect to receive his or her Director
Plan cash retainer in stock units or stock options, and to elect
to receive his or her stock unit grant (or Board Committee Chair
stock unit retainer grant, if applicable) in stock options. If a
non-employee director elects to receive the Director Plan cash
retainer in stock units, the director is granted an amount equal
to the shares of our common stock that can be purchased with
120% of the retainers value based on the common
stocks grant date closing price. The additional incentive
over the retainers cash value is intended to induce
non-employee directors to elect stock units. If a non-employee
director elects to the receive the Director Plan cash retainer
in stock options, the stock options are granted in an amount
equal to approximately four times the shares of our common stock
that can be purchased with the retainers value based on
the common stocks grant date closing price. In the
Boards judgment, the four-to-one ratio represents an
appropriate trade-off for selecting stock options in lieu of
cash. If a non-employee director elects to receive any stock
unit grants in stock options, the director is granted an amount
equal to four times the number of stock units, reflecting what
the Board believes is an appropriate trade-off for the greater
potential volatility in the value of a stock option over time.
Director Plan Stock Units. Each stock
unit provides a right to receive the fair market value of a
share of our common stock and a cash dividend equivalent payment
at the same time and in the same amount as any cash dividend
paid on our common stock. Based on each non-employee
directors election, Director Plan stock units will be paid
out in cash only, with the amount paid equal to the aggregate
stock units held multiplied by our common stocks closing
price on the last business day before the payment date. Director
Plan stock units are paid out when a non-employee director
leaves the Board.
Director Plan Stock Options. If
elected, all Director Plan stock options are granted to
non-employee directors on the date of our annual meetings of
stockholders with an exercise price equal to our common
stocks closing price on that date. The stock options are
fully vested when granted and have a
15-year
term. A non-employee director cannot exercise Director Plan
stock options until the earlier of (a) the directors
acquisition and continued ownership of at least
10,000 shares of our common stock
and/or
Director Plan stock units and (b) the date the director
leaves the Board. Director Plan stock options must be exercised
within one year of the date a non-employee director leaves the
Board. Based on each non-employee directors election,
Director Plan stock options will be paid
9
out in cash only, with the amount paid equal to the positive
difference between a stock options exercise price and the
closing price of our common stock on the applicable exercise
date. Accordingly, Director Plan stock options are equivalent in
nature to stock appreciation rights.
Chairman Retainer and One-Time Service
Payments. In recognition of his additional
responsibilities and service to the Board, Mr. Bollenbach,
the Non-Executive Chairman of the Board, is entitled to receive
an additional annual retainer of $300,000. Mr. Bollenbach
may keep any Chairman retainer payment he receives if he is
removed from the Board without cause. Also, in 2007 the Board
approved a one-time $50,000 cash bonus payment to each member of
an Audit Committee subcommittee that directed a review of
employee stock option grants (Review). This Review
is described in our Annual Report on
Form 10-K
for the fiscal year ended November 30, 2006. The
subcommittee members were Messrs. Finchem and McCaffery and
Ms. Lora.
Expenses. We pay the non-employee
directors expenses, including travel, accommodations and
meals, associated with attending all Board and Board Committee
meetings and each annual meeting of stockholders and any other
activities related to our business. They do not receive any
additional compensation for attending individual Board or Board
Committee meetings or for attending our annual meetings of
stockholders.
Our 2007 fiscal year non-employee director compensation is
provided in the following table.
Director
Compensation During Fiscal Year 2007
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|
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Fees Earned
|
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|
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|
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|
or Paid
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Stock
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|
|
Option
|
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|
|
All Other
|
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|
|
|
|
|
|
|
|
in Cash
|
|
|
|
Awards
|
|
|
|
Awards
|
|
|
|
Compensation
|
|
|
|
Total
|
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|
|
Name
|
|
|
($)(a)
|
|
|
|
($)(b)
|
|
|
|
($)(b)
|
|
|
|
($)(c)
|
|
|
|
($)
|
|
|
|
Mr. Bollenbach
|
|
|
$
|
225,000
|
|
|
|
$
|
0
|
|
|
|
$
|
108,755
|
|
|
|
$
|
0
|
|
|
|
$
|
333,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Burkle
|
|
|
|
33,320
|
|
|
|
|
(1,026,256
|
)
|
|
|
|
(2,606,087
|
)
|
|
|
|
0
|
|
|
|
|
(3,599,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Finchem
|
|
|
|
61,826
|
|
|
|
|
(88,739
|
)
|
|
|
|
0
|
|
|
|
|
16,390
|
|
|
|
|
(10,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jastrow
|
|
|
|
59,282
|
|
|
|
|
(829,849
|
)
|
|
|
|
0
|
|
|
|
|
13,545
|
|
|
|
|
(757,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Johnson
|
|
|
|
53,241
|
|
|
|
|
(1,364,321
|
)
|
|
|
|
(3,016,948
|
)
|
|
|
|
32,181
|
|
|
|
|
(4,295,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lanni
|
|
|
|
24,526
|
|
|
|
|
(453,505
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
(428,979
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Lora
|
|
|
|
72,112
|
|
|
|
|
(405,548
|
)
|
|
|
|
0
|
|
|
|
|
9,960
|
|
|
|
|
(323,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. McCaffery
|
|
|
|
66,102
|
|
|
|
|
(283,391
|
)
|
|
|
|
(214,288
|
)
|
|
|
|
13,545
|
|
|
|
|
(418,032
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Moonves
|
|
|
|
22,562
|
|
|
|
|
(393,014
|
)
|
|
|
|
0
|
|
|
|
|
16,390
|
|
|
|
|
(354,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Nogales
|
|
|
|
55,080
|
|
|
|
|
(1,420,962
|
)
|
|
|
|
(48,394
|
)
|
|
|
|
0
|
|
|
|
|
(1,414,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Non-Employee Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Irani
|
|
|
|
93,047
|
|
|
|
|
(1,738,968
|
)
|
|
|
|
(1,094,079
|
)
|
|
|
|
0
|
|
|
|
|
(2,740,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Fees Earned or Paid in Cash: Except as
discussed in this footnote, the amounts reported in this column
reflect the aggregate Director Plan stock unit dividend
equivalent payments paid to non-employee directors during our
2007 fiscal year. Non-employee directors who have accumulated
larger Director Plan stock unit holdings based on their tenure
and their annual elections received higher aggregate dividend
equivalent payments. The amount reported for Mr. Bollenbach
reflects only the portion of his $300,000 annual Chairman
retainer paid in our 2007 fiscal year. We will pay the remaining
$75,000 prior to the date of the Annual Meeting. The respective
amounts reported for Messrs. Finchem and McCaffery and
Ms. Lora also include the one-time $50,000 payment each
received for their service in directing the Review. The amount
reported for Dr. Irani also includes the pro-rated annual
cash retainer he was paid for his service in the
2007 Director Year corresponding to his resignation from
the Board on November 1, 2007. Dr. Irani was the only
non-employee director who |
10
|
|
|
|
|
elected to receive his 2007 Director Year annual retainer
in cash. The 2007 Director Year began on April 5,
2007, the date of our 2007 Annual Meeting of Stockholders, and
it ends on April 2, 2008. |
|
(b) |
|
Stock and Option Awards: The amounts reported
in each of these columns reflect the aggregate compensation
expense we recognized in our 2007 fiscal year for Director Plan
stock unit and stock option awards, respectively, computed in
accordance with Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based
Payment (SFAS 123(R)) (disregarding
estimates of forfeitures related to service-based vesting
conditions). Information used in determining these amounts can
be found in Note 15 of the Notes to the Consolidated
Financial Statements contained in our Annual Report on Form
10-K for the
fiscal year ended November 30, 2007. The negative values
reported in these columns are due to the decline in the market
price of our common stock between November 30, 2006 and
November 30, 2007. The Director Plan stock units and stock
options were granted on April 5, 2007, the date of our 2007
Annual Meeting of Stockholders. Listed below are the respective
Director Plan stock units and stock options granted to each
non-employee director in accordance with their elections and the
corresponding grant date fair value computed in accordance with
SFAS 123(R). |
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Grant Date
|
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|
Stock Units
|
|
|
Stock Options
|
|
|
Fair Value
|
|
|
Name
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Mr. Bollenbach
|
|
|
|
0
|
|
|
|
|
23,540
|
|
|
|
$
|
455,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Burkle
|
|
|
|
0
|
|
|
|
|
23,540
|
|
|
|
|
455,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Finchem
|
|
|
|
6,263
|
|
|
|
|
0
|
|
|
|
|
265,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jastrow
|
|
|
|
6,263
|
|
|
|
|
0
|
|
|
|
|
265,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Johnson
|
|
|
|
6,263
|
|
|
|
|
0
|
|
|
|
|
265,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lanni
|
|
|
|
6,863
|
|
|
|
|
0
|
|
|
|
|
291,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Lora
|
|
|
|
6,263
|
|
|
|
|
0
|
|
|
|
|
265,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. McCaffery
|
|
|
|
0
|
|
|
|
|
27,540
|
|
|
|
|
532,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Moonves
|
|
|
|
6,863
|
|
|
|
|
0
|
|
|
|
|
291,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Nogales
|
|
|
|
6,263
|
|
|
|
|
0
|
|
|
|
|
265,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Non-Employee Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Irani
|
|
|
|
2,334
|
|
|
|
|
0
|
|
|
|
|
99,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lanni received an additional 600 stock units for his
service as the Compensation Committee Chair and Mr. Moonves
received an additional 600 stock units for his service as the
Nominating/Governance Committee Chair. Mr. McCaffery
received 4,000 stock options for his service as Audit Committee
Chair by electing to receive his 1,000 stock unit retainer grant
in stock options. As required under the Director Plan,
Dr. Irani forfeited 1,666 stock units due to his
resignation from the Board on November 1, 2007. All other
stock unit and stock option amounts reflect the Director Plan
cash retainer and stock unit grant the non-employee directors
elected to receive in Director Plan stock units or, for
Messrs. Bollenbach, Burkle and McCaffery, in Director Plan
stock options. |
11
|
|
|
|
|
Listed below are each respective non-employee directors
aggregate Director Plan stock unit and stock option holdings as
of February 25, 2008. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Stock Units
|
|
|
Stock Options
|
|
|
Holdings
|
|
|
Name
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
Mr. Bollenbach
|
|
|
|
0
|
|
|
|
|
23,540
|
|
|
|
|
23,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Burkle
|
|
|
|
33,320
|
|
|
|
|
165,155
|
|
|
|
|
198,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Finchem
|
|
|
|
13,392
|
|
|
|
|
0
|
|
|
|
|
13,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jastrow
|
|
|
|
37,454
|
|
|
|
|
0
|
|
|
|
|
37,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Johnson
|
|
|
|
54,807
|
|
|
|
|
143,957
|
|
|
|
|
198,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lanni
|
|
|
|
26,242
|
|
|
|
|
0
|
|
|
|
|
26,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Lora
|
|
|
|
23,678
|
|
|
|
|
0
|
|
|
|
|
23,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. McCaffery
|
|
|
|
9,201
|
|
|
|
|
73,609
|
|
|
|
|
82,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Moonves
|
|
|
|
24,278
|
|
|
|
|
0
|
|
|
|
|
24,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Nogales
|
|
|
|
56,646
|
|
|
|
|
2,130
|
|
|
|
|
58,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upon his resignation from the Board on November 1, 2007,
and in accordance with his elections and the Director
Plans terms, we paid Dr. Irani $1,591,801 for the
61,507 stock units he held on November 1, 2007 based on the
$25.88 closing price of our common stock on that date.
Dr. Irani also held 37,628 Director Plan stock options
on November 1, 2007 with various exercise prices.
Dr. Irani exercised 36,182 of these Director Plan
stock options on January 18, 2008, and we paid him $186,760
in cash, the sum total of the respective positive differences
between the Director Plan stock options exercise prices
and the $18.52 closing price of our common stock on the exercise
date. Dr. Irani has until October 31, 2008 to exercise
his remaining 1,446 Director Plan stock options. If he
exercises his remaining Director Plan stock options, we will pay
Dr. Irani the sum total of the respective positive
differences between the Director Plan stock options
exercise prices and the closing price of our common stock on the
exercise date. |
|
(c) |
|
All Other Compensation: The amounts reported
in this column represent premium payments for the life insurance
policies we maintain to fund charitable donations under the
Directors Legacy Program, which is described below.
Messrs. Bollenbach and Lanni do not participate in the
program. No additional premium payments are currently required
for the program donations for each of Messrs. Burkle and
Nogales and Dr. Irani. In our 2007 fiscal year, we paid a
total of $201,214 in life insurance premiums for all
participants, including former directors. Premium payments vary
depending on participants respective ages and other
factors. The total dollar amount payable under the program at
November 30, 2007 was $15,700,000. If all current
participating directors were vested in the full donation amount,
the total dollar amount payable under the program at
November 30, 2007 would have been $17,300,000. |
Directors Legacy Program. We
established a Directors Legacy Program in 1995 to recognize our
and our directors interests in supporting worthy
educational institutions and other charitable organizations. In
making adjustments to our philanthropic activities, the Board
elected in 2007 to close the program to new participants.
Messrs. Bollenbach, Lanni and Mezger do not participate in
the program. Under the program, we will make a charitable
donation on each participating directors behalf of up to
$1,000,000 (up to $500,000 for a participating director who left
the Board before January 1, 1999). A participating director
may allocate the donation to up to five qualifying institutions
or organizations. Directors vest in the full donation in five
equal annual installments of $200,000, and therefore must serve
on the Board for five consecutive years to donate the maximum
amount. Donations are paid directly to designated organizations
after a participating directors death with proceeds from
the life insurance policies we maintain on each participating
directors life. Participating directors and their families
do not receive any proceeds, compensation or tax savings
associated with the program.
12
Proposals
To Be Voted On
Election
of Directors
At the Annual Meeting, the Board will present as nominees and
recommend to stockholders that Messrs. Bollenbach, Finchem
and Lanni each be elected as directors to serve for a one-year
term ending at our 2009 Annual Meeting of Stockholders. Each
nominee is currently a director, has consented to being
nominated and has agreed to serve as a director if elected.
Messrs. Finchem and Lanni are standing for re-election.
Mr. Bollenbach was appointed to the Board subsequent to our
2007 Annual Meeting of Stockholders. Should any of these
nominees become unable to serve as a director prior to the
Annual Meeting, the persons named as proxies on the proxy cards
for the Annual Meeting will, unless otherwise directed, vote for
the election of such other person as the Board may recommend in
place of such nominee.
Mr. Johnson has decided to retire from the Board effective
as of the date of the Annual Meeting, when his current term as a
director expires. On the date of the Annual Meeting, the Board
will have 10 members.
Vote
Required
Under our Bylaws, the election of each director nominee will
require a majority of votes cast at the Annual Meeting to be in
favor of the nominee (i.e., the votes cast for a
nominees election must exceed the votes cast against the
nominees election).
Consistent with this director election standard, our Corporate
Governance Principles require that each director nominee in an
uncontested election at an annual meeting of stockholders
receive more votes cast for than against his or her election or
re-election in order to be elected or re-elected to the Board.
An uncontested election is one in which no director
candidates on the ballot were nominated by a stockholder in
accordance with our Bylaws. This election is an uncontested
election.
Our Corporate Governance Principles also provide that a director
nominee who fails to win election or re-election to the Board in
an uncontested election is expected to tender his or her
resignation from the Board. If an incumbent director fails to
receive the required vote for election or re-election in an
uncontested election, the Nominating/Governance Committee will
act on an expedited basis to determine whether to accept the
directors resignation and will submit its recommendation
for prompt consideration by the Board. The Board expects the
director whose resignation is under consideration to abstain
from participating in any decision regarding that resignation.
The Nominating/Governance Committee and the Board may consider
any factors they deem relevant in deciding whether to accept a
directors resignation.
Your Board recommends a vote FOR the election to the Board of
each of the nominees.
13
A brief summary of each nominees principal occupation,
recent professional experience and their directorships at other
public companies, if any, is provided below.
|
|
|
|
|
Stephen F. Bollenbach, age 65, was the Co-Chairman
and Chief Executive Officer of Hilton Hotels Corporation,
positions he held from May 2004 and February 1996, respectively.
He retired from Hilton in October of 2007. Prior to joining
Hilton, Mr. Bollenbach was Senior Executive Vice President
and Chief Financial Officer for The Walt Disney Company from
1995 to 1996. Before Disney, Mr. Bollenbach was President
and Chief Executive Officer of Host Marriott Corporation from
1993 to 1995, and served as Chief Financial Officer of Marriott
Corporation from 1992 to 1993. From 1990 to 1992,
Mr. Bollenbach was Chief Financial Officer of the Trump
Organization. Mr. Bollenbach serves a director of
Harrahs Entertainment, Inc., Time Warner Inc.,
Macys, Inc. and American International Group, Inc.
Mr. Bollenbach joined the Board as Chairman in 2007.
|
|
|
|
|
|
Timothy W. Finchem, age 60, has been Commissioner of
the PGA TOUR since 1994. He joined the TOUR staff as Vice
President of Business Affairs in 1987, and was promoted to
Deputy Commissioner and Chief Operating Officer in 1989.
Mr. Finchem served in the White House as Deputy Advisor to
the President in the Office of Economic Affairs in 1978 and
1979, and in the early 1980s, co-founded the National
Marketing and Strategies Group in Washington, D.C. He
joined the Board in 2005.
|
|
|
|
|
|
J. Terrence Lanni, age 64, has been Chairman of
MGM MIRAGE since July 1995, and Chief Executive Officer from
June 1995 to December 1999, and since March 2000. Before joining
MGM MIRAGE, Mr. Lanni was President and Chief Operating
Officer of Caesars World, Inc. from April 1981 to February 1995.
Mr. Lanni has been a director since 2003.
|
Listed below are our other directors who will continue to serve
on the Board following the Annual Meeting and their respective
principal occupations, business affiliations and other
information for at least the past five years.
|
|
|
|
|
Ron Burkle, age 55, is the founder and managing
partner of The Yucaipa Companies, a private investment firm
based in Southern California. Yucaipa specializes in
acquisitions, mergers and management of large retail,
manufacturing and distribution companies. Mr. Burkle has
served as Chairman of the Board and controlling shareholder of
numerous companies including Alliance Entertainment,
Dominicks, Fred Meyer, Ralphs and Food4Less. He is
currently a member of the boards of Occidental Petroleum
Corporation and Yahoo! Inc. He has been a director since 1995
and his current term expires in 2010.
|
|
|
|
|
|
Kenneth M. Jastrow, II, age 60, currently
Non-Executive Chairman of Guaranty Financial Group Inc. and
Forestar Real Estate Group Inc., served as Chairman and Chief
Executive Officer of Temple-Inland Inc. from 2000 to 2007. Prior
to that, Mr. Jastrow served as President and Chief
Operating Officer in 1998 and 1999, Group Vice President from
1995 until 1998, and as Chief Financial Officer of Temple-Inland
from November 1991 until 1999. Mr. Jastrow is also a
director of MGIC Investment Corporation. He joined the Board in
2001 and his current term expires in 2009.
|
14
|
|
|
|
|
Melissa Lora, age 45, is the Chief Financial Officer
of Taco Bell Corp., a position that she has held since 2001.
Ms. Lora joined Taco Bell Corp. in 1987 and has held
various positions throughout the company, most recently acting
as Regional Vice President and General Manager from 1998 to 2000
for Taco Bells operations throughout the Northeastern
United States. Ms. Lora joined the Board in 2004 and her
current term expires in 2009.
|
|
|
|
|
|
Michael G. McCaffery, age 54, is the Chief Executive
Officer of Makena Capital Management. From 2000 to 2006,
Mr. McCaffery was President and CEO of the Stanford
Management Company (SMC), which was established in 1991 to
manage Stanford Universitys financial and real estate
investments. Previous to joining SMC, Mr. McCaffery was
President and Chief Executive Officer of Robertson Stephens
Investment Bankers from January 1993 to December 1999, and also
served as Chairman from January 2000 to December 2000.
Mr. McCaffery is a director of the Lucile Salter Packard
Childrens Hospital, Thomas Weisel Partners Group, Inc.,
Western Technology Ventures, Savvian, LLC and RS Investment
Trust, is a member of the Advisory Boards of Accel Ventures,
Silver Lake Partners and Stanford Universitys Graduate
School of Business, and serves as a trustee for the Rhodes
Trust. Mr. McCaffery was elected to the Board in 2003 and
his current term expires in 2009.
|
|
|
|
|
|
Jeffrey T. Mezger, age 52, has been our President
and Chief Executive Officer since November 2006. Prior to
becoming President and Chief Executive Officer, Mr. Mezger
served as our Executive Vice President and Chief Operating
Officer, a position he assumed in 1999. From 1995 until 1999,
Mr. Mezger held a number of executive posts in our
southwest region, including Division President, Phoenix
Division, and Senior Vice President and Regional General Manager
over Arizona and Nevada. Mr. Mezger joined us in 1993 as
president of the Antelope Valley Division in Southern
California. Mr. Mezger is a member of the executive board
of the USC Lusk Center for Real Estate, is on the Policy
Advisory Board for the Harvard Joint Center for Housing Studies,
is a member of the California Business Roundtable and is a
member of the Milken Institute California Advisory Council. He
is also a member of the NAHB High Production Builders Council
and has served as an officer on numerous boards of the NAHB.
Mr. Mezger has been a director since 2006 and his current
term expires in 2009.
|
|
|
|
|
|
Leslie Moonves, age 58, is President and Chief
Executive Officer and a Director of CBS Corporation and
most recently was Co-President and Co-Chief Operating Officer of
Viacom, which title he held from June 2004 to December 2005.
Mr. Moonves previously served as President and Chief
Executive Officer of CBS from 1998 to 2004, and served as its
Chairman from 2003 to 2005. He joined CBS in 1995 as President,
CBS Entertainment. Prior to that, Mr. Moonves was President
of Warner Bros. Television from 1993, when Warner Bros. and
Lorimar Television combined operations. From 1989 to 1993, he
was President of Lorimar Television. Mr. Moonves joined the
Board in 2004 and his current term expires in 2010.
|
|
|
|
|
|
Luis G. Nogales, age 64, is the Managing Partner of
Nogales Investors, LLC, a private equity investment firm. He was
Chairman and Chief Executive Officer of Embarcadero Media, Inc.
from 1992 to 1997, President of Univision Communications, Inc.,
from 1986 to 1988, and Chairman and Chief Executive Officer of
United Press International from 1983 to 1986. He is a director
of Southern California Edison Co., Edison International and
Arbitron Inc. Mr. Nogales has been a director since 1995
and his current term expires in 2010.
|
15
Proposal 2:
Ratification
of Independent Registered Public Accounting Firm
The Audit Committee has appointed Ernst & Young LLP as
our independent registered public accounting firm to audit our
consolidated financial statements for our fiscal year ending
November 30, 2008. During our 2007 fiscal year,
Ernst & Young LLP served as our independent registered
public accounting firm and also provided certain other
audit-related services. See Independent Auditor Fees and
Services on page 55 below. Representatives of
Ernst & Young LLP are expected to attend the Annual
Meeting, be available to respond to appropriate questions and,
if they desire, make a statement.
Although not required by our Restated Certificate of
Incorporation or Bylaws, we are seeking stockholder ratification
of Ernst & Young LLP as our independent registered
public accounting firm. As we have done in prior years, we are
doing so because we believe it is a matter of good corporate
governance. If Ernst & Young LLPs appointment is
not ratified, the Audit Committee will reconsider whether to
retain Ernst & Young LLP, but still may retain them.
Even if the appointment is ratified, the Audit Committee, in its
discretion, may change the appointment at any time during the
year if it determines that such a change would be in our and our
stockholders best interests.
Vote
Required
Approval of the ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for our fiscal year ending November 30,
2008 requires the affirmative vote of the majority of shares of
common stock present or represented, and entitled to vote
thereon, at the Annual Meeting.
Your Board recommends a vote FOR the ratification of the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for our fiscal year ending
November 30, 2008.
16
Proposal 3:
Stockholder
Proposal
The Massachusetts Laborers Pension Fund, 14 New England
Executive Park, Suite 200, P.O. Box 4000,
Burlington, MA
01803-0900,
the beneficial owner of 1,340 shares of our common stock,
has notified us that it intends to present a proposal at the
Annual Meeting. The proposal is set forth below, along with the
recommendation of the Board that you vote AGAINST the proposal.
We accept no responsibility for the accuracy of the proposal or
the proponents supporting statement.
Stockholder
Proposal
RESOLVED: That the shareholders of KB Home
(Company) request that the Board of Directors
Executive Compensation Committee adopt a Pay for Superior
Performance principle by establishing an executive compensation
plan for senior executives (Plan) that does the
following:
|
|
|
|
|
Sets compensation targets for the Plans annual and
long-term incentive pay components at or below the peer group
median;
|
|
|
|
Delivers a majority of the Plans target long-term
compensation through performance-vested, not simply time-vested,
equity awards;
|
|
|
|
Provides the strategic rationale and relative weightings of the
financial and non-financial performance metrics or criteria used
in the annual and performance-vested long-term incentive
components of the Plan;
|
|
|
|
Establishes performance targets for each Plan financial metric
relative to the performance of the Companys peer
companies; and
|
|
|
|
Limits payment under the annual and performance-vested long-term
incentive components of the Plan to when the Companys
performance on its selected financial performance metrics
exceeds peer group median performance.
|
Proponents
Supporting Statement
We feel it is imperative that executive compensation plans for
senior executives be designed and implemented to promote
long-term corporate value. A critical design feature of a
well-conceived executive compensation plan is a close
correlation between the level of pay and the level of corporate
performance. The pay-for-performance concept has received
considerable attention, yet all too often executive pay plans
provide generous compensation for average or below average
performance. We believe the failure to tie executive
compensation to superior corporate performance has fueled the
escalation of executive compensation and detracted from the goal
of enhancing long-term corporate value. We believe that the Pay
for Superior Performance principle presents a straightforward
formulation for senior executive incentive compensation that
will help establish more rigorous pay for performance features
in the Companys Plan. A strong pay and performance nexus
will be established when reasonable incentive compensation
target pay levels are established; demanding performance goals
related to strategically selected financial performance metrics
are set in comparison to peer company performance; and incentive
payments are awarded only when median peer performance is
exceeded.
We believe the Companys Plan fails to promote the Pay for
Superior Performance principle in several important ways. Our
analysis of the Companys executive compensation plan
reveals the following features that do not promote the Pay for
Superior Performance principle:
|
|
|
|
|
The company does not disclose whether it targets total
compensation at, above or below market median.
|
|
|
|
The company lists performance metrics for the annual incentive
plan but does not disclose any performance target information.
|
17
|
|
|
|
|
The company does not disclose the percentage breakdown of the
components of its long-term incentive compensation.
|
|
|
|
Stock options are fixed-price only.
|
|
|
|
Restricted stock awards do not contain any performance features.
|
|
|
|
Performance units are based only on internal targets, and those
targets are not disclosed.
|
We believe a plan designed to reward superior corporate
performance relative to peer companies will help moderate
executive compensation and focus senior executives on building
sustainable long-term corporate value. We urge shareholders to
vote FOR our proposal.
Recommendation
of the Board AGAINST the Proposal
Despite the title the proponent gives its compensation
principle, it does NOT establish a
pay-for-performance plan. Accordingly, your Board believes this
proposal does not serve the best interests of KB Home or its
stockholders and recommends a vote AGAINST it.
We share the proponents view that executive incentive
compensation should appropriately reward performance that
creates and sustains enterprise and stockholder value, and
believe that this view is reflected in our current executive
compensation philosophy and programs. These are discussed in
detail below under the heading Compensation Discussion and
Analysis.
However, by requiring us to set incentive compensation targets
at or below peer group median, we believe
implementing this proposal would seriously undermine incentive
pays role in promoting value creation. We also believe it
would severely impair our ability to attract, motivate and
retain high-caliber executive talent. Indeed, we cannot conceive
how offering to reward someone with just average or
below-average pay for delivering above-average results would
provide a true incentive for them to come to or stay with us, or
motivate them to deliver such results. This is particularly true
for exceptional executive talent in a highly competitive market
for top-performing individuals.
In this respect, the proposal essentially fails to accomplish
what its proponent asserts is a critical design feature of
a well-conceived executive compensation plan
a close correlation between the level of pay and the level
of corporate performance. In our view, restricting
incentive compensation to a level below the level of performance
required to earn it does not establish a close
correlation between pay and performance. Therefore, we
think the executive compensation approach in this proposal is
clearly not well-conceived, even from the view of
the proponents own standards.
We believe that our current executive compensation programs and
practices provide primarily performance-based pay consistent
with the proponents compensation principle,
while enabling us to remain competitive in attracting,
motivating and retaining quality executive talent. For instance,
as further discussed in the Compensation Discussion and
Analysis on pages 25-35 below, 80-to-90 percent of
the total compensation paid to our named executive officers is
variable and based on their achieving individual and company
performance goals. In addition, long-term incentive compensation
grants to our named executive officers for the two most recent
fiscal years consisted almost entirely of performance-vesting
awards. This included a restricted stock grant to the CEO that
vests only to the extent that our total stockholder return over
a three-year period achieves specified thresholds relative to a
peer group, and it may not vest at all if a specified minimum
threshold is not achieved. At the same time, we have retained a
solid management team that successfully achieved operational,
cash flow and other financial objectives in the 2007 fiscal year
during an unexpectedly severe downturn in the housing industry.
We also believe that the Compensation Discussion and
Analysis on pages 25-35 below, contains much of the
performance-based information the proponent claims is lacking in
our disclosures. This includes disclosure of (a) named
executive officer total compensation targets,
(b) performance target information, (c) the percentage
breakdown of long-term incentive compensation components, and
(d) the rationale behind the nature and mix of compensation
paid to the named executive officers.
18
Vote
Required
Approval of this stockholder proposal requires the affirmative
vote of the majority of shares of common stock present or
represented, and entitled to vote thereon, at the Annual
Meeting. However, the proposal is a request to the Board to
consider a matter. If the proposal passes, the Board may
consider, in its business judgment, whether to take the
requested action or not, but it is not legally obligated to do
so.
Your
Board recommends that you vote AGAINST this proposal.
Proposal 4:
Stockholder
Proposal
The Trowel Trades S&P 500 Index Fund, 1776 Eye Street,
N.W., 5th Floor, Washington, D.C. 20006, the
beneficial owner of 2,377 shares of our common stock, has
notified us that it intends to present a proposal at the Annual
Meeting. The proposal is set forth below, along with the
recommendation of the Board that you vote AGAINST the proposal.
We accept no responsibility for the accuracy of the proposal or
the proponents supporting statement.
Stockholder
Proposal
RESOLVED: that the shareholders of KB Home (the
Company) urge the Board of Directors to seek shareholder
approval of future severance agreements with senior executives
that provide benefits in an amount exceeding 2.99 times the sum
of the executives base salary plus bonus. Future
severance agreements include Employment Agreements
containing severance provisions, special retirement provisions
and agreements renewing, modifying or extending existing such
agreements. Benefits include lump-sum cash payments
(including payments in lieu of medical and other benefits); the
payment of any
gross-up
tax liability; the estimated present value of special retirement
provisions; any stock or option awards that are awarded under
any severance agreement; any prior stock or option awards as to
which the executives access is accelerated under the
severance agreement; fringe benefits; and consulting fees
(including reimbursable expenses) to be paid to the executive.
Proponents
Supporting Statement
In our opinion, severance agreements as described in this
resolution, commonly known as golden parachutes, are
excessive in light of the high levels of compensation enjoyed by
senior executives at the Company and U.S. corporations in
general.
The companys
10-Q
statement filed on April 9, 2007, showed the level of
shareholder support for this proposal
54,800,388 shares (85%) voted in favor of it,
9,235,575 shares (14%) opposed it and 352,797 shares
abstained.
The Companys
10-Q
statement filed on October 10, 2007, stated that in
response to this vote, the Companys Compensation Committee
has adopted an overall executive severance policy for
non-change of control situations that it believes is
consistent with the spirit of the proposal while still allowing
us to remain competitive in the market for executive
talent. (Emphasis supplied.) The statement also reveals
that: Furthermore, the vesting of all equity awards
and other long term incentive awards will continue to be
governed by the terms of those awards. (Emphasis
supplied.) The statement does not address whether gross up
payments for tax liabilities will be paid, although it expresses
concern over how our proposal defines benefits.
We respectfully disagree that these measures are consistent with
the spirit of our proposal. The exclusion of severance payments
in change of control situations is the most obvious departure.
The 2007 proxy statement reveals that if our Chief Executive
Officer is terminated following a change in control he
will be entitled to receive 300% of his salary plus 300% of his
average annual bonus for the prior three years, but in no event
more than $12 million.
19
For these reasons, we urge shareholders to vote in favor of this
proposal and send the Board of Directors a message that we want
meaningful reform of future severance agreements.
Recommendation
of the Board AGAINST the Proposal
Recently, your Board adopted a new severance policy that we
believe is substantially consistent with the advisory proposal.
This action was taken in response to stockholders approval
of this advisory proposal at our 2007 Annual Meeting of
Stockholders after careful consideration and a review of
executive severance policies at peer homebuilding companies and
other similarly sized public companies.
Severance payments under the new policy would be well below the
2.99 times limit in the advisory proposal: two times base salary
and average bonus for top executives, and one times base salary
and average bonus for certain other senior executives.
Importantly, the average bonus amount is limited to
the lower of (a) average bonus for the past three
fiscal years or (b) three times or two times base salary,
depending on seniority. The CEOs Employment Agreement
further limits his severance payment by capping the overall
amount at $6 million. If eligible for his severance payment
under his Employment Agreement, the CEO is also entitled to
receive a cash payment equal to a pro rata portion of his
average bonus for the past three fiscal years, with the pro rata
amount based on the number of calendar days he served as an
employee in the fiscal year in which an eligible termination
occurs divided by 365. However, he is not entitled to this cash
payment if our pre-tax income for the four fiscal quarters
immediately prior to the date his employment terminates, in the
aggregate, is negative.
This limited severance will not be paid to executives,
including the CEO, whose employment we terminate for cause or
who leave voluntarily.
This new policy applies to all executive employment terminations
other than those following a
change-in-control,
which remain governed by our existing
change-in-control
severance plan.
Severance under the
change-in-control
plan is limited to two times base salary and average bonus for
senior executives and one times base salary and average bonus
for other executives, multiples well below the 2.99 times limit
in the advisory proposal. Average bonus under the
change-in-control
plan is the average bonus earned for the past three fiscal years.
The
change-in-control
severance plan has a double-trigger, ensuring
that severance is not paid unless both of the following occur:
(a) there is a
change-in-control
and (b) within 18 months following that
change-in-control,
an executives employment is terminated other than for
cause or disability or the executive voluntarily leaves for good
reason.
The CEOs Employment Agreement has a more restrictive
double trigger for
change-in-control
severance. Severance is paid only if, as part of a
change-in-control,
the CEOs employment is terminated at the request of the
other party or as part of the merger or similar agreement
effecting the change in control. If this more restrictive double
trigger occurs, the CEO would be eligible to receive a severance
payment under this agreement equal to three times his base
salary and average annual bonus, with the overall payment capped
at $12 million.
These severance arrangements would not affect any rights that
our executives may have under other benefit plans, including
retirement, long-term incentive and stock plans. This is perhaps
the main difference between our current severance arrangements
and the type of policy outlined in the advisory proposal. If an
executives employment is terminated without cause, and if
the executives severance payment plus the value of the
executives other rights under our benefit plans exceeds
the advisory proposals 2.99 times cap, the advisory
proposals policy would require us to obtain stockholder
approval in order to pay the executive amounts the executive had
earned or was otherwise entitled to under these plans, including
stock plans already approved by stockholders. This potentially
punitive policy would devalue these benefits for all of our
executives because the benefits they earned through their
service to us could be forfeited anytime without any fault on
their part. This severe result is much more restrictive than the
typical severance arrangements offered by other companies that
compete with us for executive talent and would therefore hamper
our efforts to recruit and retain top-quality employees.
Perversely, the advisory proposal would
20
probably require us to increase executive compensation in order
to offset the higher forfeiture risk of the advisory
proposals policy.
Our severance arrangements are discussed in more detail in this
Proxy Statement under the heading Employment Agreements
and Potential Payments upon Termination of Employment or Change
in Control on
pages 44-47
below and these arrangements are filed with our periodic reports
to the SEC.
We have listened to our stockholders, carefully considered these
issues and believe the combination of the new severance policy
and the existing
change-in-control
severance policy represents a thoughtful and responsible
approach to severance arrangements.
Vote
Required
Approval of this stockholder proposal requires the affirmative
vote of the majority of shares of common stock present or
represented, and entitled to vote thereon, at the Annual
Meeting. However, the proposal is a request to the Board to
consider a matter. If the proposal passes, the Board may
consider, in its business judgment, whether to take the
requested action or not, but it is not legally obligated to do
so.
Your
Board recommends that you vote AGAINST this proposal.
21
Ownership
of KB Home Securities
Ownership
of Directors and Management
The following table lists, as of February 25, 2008, the
beneficial ownership of our common stock by each director and
each of the executive officers named in the Summary
Compensation Table on page 35 below, and by all
current directors and executive officers as a group. Except as
stated in footnote (c) to the table, beneficial ownership
is direct and each director and executive officer has sole
voting and investment power over his or her shares.
The non-employee directors equity-based holdings under the
Director Plan are set forth on page 12 above and are not
reflected in the table below.
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Amount and Nature
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of Beneficial
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Percent
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Non-Employee
Directors
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Ownership (a - c)
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of Class
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Mr. Bollenbach
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*
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Mr. Burkle
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1,000
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*
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Mr. Finchem
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*
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Mr. Jastrow
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*
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Mr. Johnson
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*
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Mr. Lanni
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*
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Ms. Lora
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2,043
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*
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Mr. McCaffery
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*
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Mr. Moonves
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*
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Mr. Nogales
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7,400
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*
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Named Executive Officers
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Jeffrey T. Mezger
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1,942,053
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2.1
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%
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Domenico Cecere
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186,789
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*
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William R. Hollinger
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259,404
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*
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Glen W. Barnard
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58,170
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*
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Kelly K. Masuda
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50,005
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*
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All directors and executive officers as a group
(17 people)
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2,517,364
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2.8
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%
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(a) |
|
Included are shares of common stock subject to acquisition
within 60 days of February 25, 2008 through the
exercise of stock options granted under our employee equity
compensation plans in the following amounts:
Mr. Mezger 1,520,606; Mr. Cecere 168,800;
Mr. Hollinger 174,058; Mr. Barnard 52,667;
Mr. Masuda 43,334; and all current executive officers
as a group 2,039,465. |
|
(b) |
|
Included are shares of restricted common stock in the following
amounts: Mr. Mezger 159,343;
Mr. Cecere 7,741; Mr. Hollinger 2,500;
Mr. Barnard 2,000; Mr. Masuda 2,000; and all current
executive officers as a group 173,584. |
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(c) |
|
Ms. Lora holds 2,043 shares of our common stock in a
trust in which she and her spouse are trustees and sole
beneficiaries and over which they jointly exercise voting and
investment power. |
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* |
|
Denotes less than one percent ownership. |
22
Beneficial
Owners of More Than Five Percent of Our Common Stock
The information below shows each person or entity known to us as
of February 25, 2008 to be the beneficial owner of more
than five percent of our common stock:
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Amount and Nature
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of Beneficial
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Percent
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Name and Address of
Beneficial Owner
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Ownership
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of Class
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KB Home Grantor Stock Ownership Trust (a)
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12,148,482
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13.6
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%
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Wachovia Executive Benefits Group
One West Fourth Street - NC 6251
Winston-Salem, North Carolina 27101
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FMR LLC and Edward C. Johnson 3d (b)
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11,589,788
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12.9
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%
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82 Devonshire Street
Boston, Massachusetts 02109
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AXA Financial, Inc., et al. (c)
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10,006,055
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11.2
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%
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1290 Avenue of the Americas
New York, NY 10104
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(a) |
The KB Home Grantor Stock Ownership Trust (GSOT)
holds all of the shares of our common stock reported above
pursuant to a trust agreement with Wachovia Bank, N.A., as
trustee, in connection with the prefunding of certain of our
obligations to employees under our employee benefit plans. Both
the GSOT and the trustee disclaim beneficial ownership of the
shares reported. The trustee has no discretion over the manner
in which the shares of our common stock held in the GSOT are
voted. The trust agreement for the GSOT provides that, as of any
given record date, employees who hold unexercised options under
our employee equity compensation plans will determine the manner
in which shares of our common stock held in the GSOT are voted.
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The trustee will vote the shares of our common stock held in the
GSOT in the manner directed by those eligible employees who
submit voting instructions for the shares. The number of shares
of our common stock as to which any one employee can direct the
vote will depend upon how many employees submit voting
instructions to the trustee. Employees who are also directors
are excluded from voting; accordingly, Mr. Mezger may not
direct the vote of any shares in the GSOT. If all eligible
employees submit voting instructions to the trustee, the other
named executive officers who are employed by us at the date of
the Annual Meeting will have the right to direct the vote of the
following amounts of the shares of our common stock held in the
GSOT (which, for each eligible named executive officer, include
both the stock options reported above in the Beneficial
Ownership of Directors and Management table and stock
options granted to them under our employee benefit plans that do
not vest within 60 days of February 25, 2008):
Mr. Cecere 1,114,047,
Mr. Hollinger 1,148,343,
Mr. Barnard 352,216, Mr. Masuda 293,514, and
all current executive officers as a group (excluding
Mr. Mezger) 2,908,119. The trust agreement for the GSOT
provides that all voting for the GSOT received by the trustee
will be held in confidence and will not be disclosed to any
person, including to us.
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(b) |
The stock holding information reported in the table above and in
this footnote is based solely on an amendment to
Schedule 13G dated February 14, 2008 that FMR LLC
filed with the Securities and Exchange Commission to report
beneficial ownership of FMR LLC (f/k/a FMR Corp.) and
Mr. Edward C. Johnson 3d, FMR LLCs Chairman, as of
December 31, 2007. The shares are beneficially owned by the
following direct or indirect wholly-owned subsidiaries of FMR
LLC: (i) Fidelity Management & Research Company
(11,530,567 shares), and (ii) Pyramis Global Advisors
Trust Company (53,921 shares); and by Fidelity
International Limited (5,300 shares), an entity of which
Edward C. Johnson 3d is Chairman and in which his family owns an
indirect interest. FMR LLC and Mr. Edward C. Johnson 3d
have sole dispositive power as to all of the shares reported,
and FMR LLC has sole voting power as to 59,221 shares.
|
23
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|
(c) |
The stock holding information reported in the table above and in
this footnote is based solely on amendment to Schedule 13G
dated February 14, 2008 that AXA Financial, Inc., et al.
filed with the Securities and Exchange Commission pursuant to a
joint filing agreement to report beneficial ownership as of
December 31, 2007. The shares are beneficially owned by the
following AXA Financial, Inc. subsidiaries: AllianceBernstein
L.P., an investment advisor, and AXA Equitable Life Insurance
Company, an insurance company and an investment advisor. Of the
amount reported as beneficially owned,
(i) AllianceBernstein L.P. had sole voting power as to
6,468,637 shares of our common stock, had shared voting
power as to 976,179 shares, had sole dispositive power as
to 10,003,800 shares and had shared dispositive power as to
16 shares; and (ii) AXA Equitable Life Insurance
Company had sole voting power as to 2,200 shares of our
common stock and had sole dispositive power as to
2,239 shares. AXA is a parent holding company for AXA
Financial, Inc. AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle and AXA Courtage Assurances Mutuelle, as a group
(collectively, Mutuelles AXA), are the parent
holding company that controls AXA. The address of Mutuelles AXA
is 26, rue Drouot, 75009 Paris, France. The address of AXA is
25, avenue Matignon, 75008 Paris, France.
|
Stock
Ownership Requirements
We have established stock ownership requirements for our
non-employee directors and senior management to better align
their interests with those of our stockholders. Our Corporate
Governance Principles require each of our non-employee directors
to own at least 5,000 shares of our common stock or common
stock equivalents within three years of joining the Board. Our
Executive Stock Ownership Policy applies to members of our
senior management team and requires executives at various levels
to own a number of shares whose value is equivalent to a range
of
one-to-five
times base salary. Executives are expected to demonstrate
meaningful progress toward satisfying their applicable
requirement and to comply fully within five years of becoming
subject to the policy, or be subject to consequences for
non-compliance. The policy, as it pertains to our named
executive officers, is discussed in additional detail under the
heading Equity Stock Ownership Policy on
page 34 below.
24
Executive
Compensation
Management
Development and Compensation Committee Report
The Management Development and Compensation Committee of the
Board of Directors has reviewed and discussed the following
Compensation Discussion and Analysis with KB Home
management. Based on this review and discussion, the Management
Development and Compensation Committee recommended to the Board
of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement.
Management Development and Compensation Committee
J. Terrence Lanni, Chairman
Timothy W. Finchem
Michael G. McCaffery
Luis G. Nogales
Compensation
Discussion and Analysis
Overview
We believe our KBnxt operational business model provides us with
a distinct competitive advantage over other homebuilders. This
disciplined, fact-based and process-driven approach to
homebuilding, founded on a constant and systematic assessment of
consumer preferences and market opportunities, is designed to
generate operational efficiencies and return on investment for
our business.
We also believe that our success depends on our having a
talented and dedicated workforce. Therefore, our compensation
and benefit programs aim to attract, motivate and retain the
best people and to maximize, through an appropriate investment
of resources, their contributions in creating enterprise and
stockholder value. To accomplish these goals, we design our
compensation and benefit arrangements to appropriately reward
the contributions our people make, taking into account the
following: their specific roles, responsibilities, experience
and skill sets; individual performance; the market rate for
comparable jobs; the existing business environment; and our
overall financial and operational results. We believe our
linking the compensation and benefits we provide to
contributions that enhance enterprise and stockholder value
establishes a clear alignment between the interests of our
employees and our stockholders. We also promote an alignment of
employee and stockholder interests by paying a greater
proportion of variable (i.e., performance-based) cash and
equity-based compensation to our employees as their specific
duties and responsibilities increase.
The above goals and considerations provide the basis for our
executive compensation philosophy and the specific compensation
and benefit arrangements we have with our named executive
officers (NEOs). Short- and long-term NEO
compensation is based primarily on each NEOs individual
performance in achieving meaningful financial
and/or
operational objectives and metrics that create and sustain
enterprise and stockholder value. NEO compensation and benefits
are also based on our overall financial results and on our
judgment of what we believe is necessary to attract, motivate
and retain high caliber individuals in a highly competitive
market for senior executive talent. In keeping with our focus of
aligning our compensation arrangements with stockholder
interests, a significant proportion of NEO compensation is
variable and equity-based in nature.
Executive Compensation Oversight. The
Compensation Committee, with support from our management and
outside advisors, oversees our executive compensation and
benefit programs, including the specific compensation and
benefit arrangements we have with our NEOs. The Compensation
Committee evaluates and, as necessary, adjusts these
compensation and benefit arrangements to ensure consistency with
our compensation and benefit programs goals.
25
Compensation Committee Role. In
addition to providing general oversight, the Compensation
Committee annually reviews and approves goals and objectives for
our CEO, evaluates our CEOs performance in light of those
goals and objectives, and determines and approves our CEOs
compensation based on that performance evaluation, as discussed
under the heading Overview of Executive Officer and
Non-Employee Director Compensation Processes and
Procedures on page 7 above. The Compensation
Committee also reviews and approves the compensation of the
other NEOs.
Compensation Committee Consultant
Role. Semler Brossy Consulting Group LLC
serves as the Compensation Committees independent
compensation consultant, providing advice and perspective to the
Compensation Committee on executive and non-employee director
compensation and benefits. Under the Compensation
Committees charter, and to maintain its independence and
avoid any conflict of interests, Semler Brossy may not work for
our management unless the Compensation Committee pre-approves
any such work, including fees.
CEO and Managements Role. The
Compensation Committee frequently asks for input and support
from our management, including our CEO, our Senior Vice
President, Human Resources and our Executive Vice President,
General Counsel and Secretary and their respective staffs,
particularly regarding compensation and benefit plan design and
implementation, feedback from employees, and compliance and
disclosure requirements. At the request of the Compensation
Committee, the CEO reviews and discusses the compensation of the
other NEOs and makes recommendations to the Compensation
Committee as to annual base salary and short- and long-term
incentive compensation awards. Our management is responsible for
implementing our compensation and benefit programs under the
Compensation Committees oversight. Our management has
recently retained a compensation consultant, Towers Perrin, for
the purpose of providing compensation and benefits related
information, analysis and support.
The following discussion provides additional information and
analysis regarding our executive compensation and benefits
program and the specific compensation and benefit arrangements
we have with our NEOs.
NEO
Compensation Elements Overview
|
|
|
|
|
Compensation Element
|
|
Purpose / Description
|
|
|
|
|
|
Base Salary |
|
Provide competitive fixed income for performance of
day-to-day
position responsibilities. Consists of semi-monthly cash
payments. |
|
Short-Term Incentives |
|
Build accountability and reward achievement of annual goals that
support short-term business objectives. Consists primarily of
cash payments made after the relevant fiscal year. |
|
Long-Term Incentives |
|
Promote retention and provide link between executive
compensation and stockholder value creation over a multi-year
period. Consists primarily of the following equity-based awards,
which are either cash-or stock-settled: |
|
Stock Options/Stock Appreciation
Rights (SARs) |
|
Provide compensation tied to the price of our common stock and
paid in stock or cash. The awards have no value if our common
stock price falls below the grant price. |
|
Restricted Stock/Phantom Shares |
|
Provide equity-based compensation tied to the performance of our
common stock price to promote retention and to mitigate cyclical
industry/market volatility associated with stock options/SARs. |
|
Executive Benefits |
|
The following provide competitive health and welfare support to
enhance recruitment and promote retention: |
|
Executive Life Insurance |
|
Provide a death benefit to an executives designated
beneficiary through company-owned and/or company-paid term life
insurance. |
26
|
|
|
Retirement Plan (closed) |
|
Contribute to financial security upon retirement through an
annuity benefit. Not all of our NEOs participate in this plan
and no new participants have been added to the plan since 2004. |
|
Deferred Compensation Plan |
|
Permits deferred receipt of earned compensation into a
non-qualified savings plan similar to our 401(k) Savings Plan.
Amounts deferred under this plan and the 401(k) Savings Plan are
eligible for a dollar-for-dollar company matching contribution
up to an aggregate amount of six percent of base salary. |
|
Executive Health Benefits |
|
Provide 100% reimbursement of
out-of-pocket
medical, dental and vision expenses. |
|
Discontinued Perquisites |
|
Perquisites previously made available to all NEOs included
automobile allowances, company-paid automobile fuel cards, and
reimbursement of expenses for automobile insurance, annual
financial planning and tax preparation services, and one-time
estate planning services. These perquisites were discontinued in
mid-2007. |
Mix of Compensation Elements. For our
NEOs, we maintain a mix of market-competitive fixed compensation
and benefits coupled with variable incentive pay that depends on
individual and company performance. As a result, the
compensation paid to each NEO can vary from the compensation
paid to other NEOs in a given year and from the compensation
paid to the same NEO in other years depending on individual
performance evaluations and our results of operations.
Individual performance evaluations are conducted as part of an
annual merit and salary review process that the Compensation
Committee oversees.
The Compensation Committee uses it own judgment when
establishing the mix of compensation elements it approves for
our NEOs in any given year, taking into account individual and
company performance and market survey data, rather than
following a set formula or a specific percentage allocation to
each element. Consistent with our focus on aligning our
compensation arrangements with stockholder interests, the
Compensation Committee has generally weighted NEO and other
senior executive compensation significantly toward variable,
performance-based short-term and long-term vehicles.
Reflecting the Compensation Committees approach, over the
past several years, approximately 90% of the CEOs and 80%
of other senior executives compensation has been variable
and based on individual and company performance. In our 2007
fiscal year, approximately 95% of the CEOs and 85% of
other senior executives compensation was variable and
based on performance because we granted a greater-than-usual
number of long-term incentive grants, as further discussed under
the heading CEO and Other NEO Compensation Decisions
on
pages 29-33
below.
Short-term variable compensation consists of cash incentives and
is used to reward performance in attaining current-year
objectives. Long-term variable compensation consists of
equity-based awards and is used to reward performance in
achieving multi-year strategic objectives and to motivate and
retain executives. To reflect the CEOs key role in setting
and executing long-term business strategies, the Compensation
Committee has generally awarded the CEO a higher proportion of
long-term incentives when compared to the other NEOs.
Our management has prepared tally sheets for the Compensation
Committee that set forth the mix of existing NEO compensation
components. The Compensation Committee used the tally sheets in
making decisions with respect to the compensation components.
Key
Considerations in 2007
In 2007, we faced challenging market conditions of unusual
severity. Several factors weighed on the entire housing
industry, including a persistent oversupply of new and resale
homes available for sale that reached historically high levels,
increased foreclosure activity, heightened competition for home
sales, reduced home affordability, turmoil in
27
the mortgage and credit markets, and decreased consumer
confidence in purchasing homes. These are discussed in greater
detail in our Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007.
The Compensation Committee established annual incentive
compensation objectives for our NEOs and other senior executives
shortly after the beginning of our 2007 fiscal year that were
generally designed to further the following business and
financial objectives in alignment with the strategic priorities
we had set for the year: (a) enhance our balance sheet;
(b) improve our gross and pre-tax margins; (c) adjust
our strategies to align with the market environment;
(d) optimize our land pipeline and reduce our inventory;
and (e) execute our KBnxt operational business model.
Given the difficult business environment, our strategic
priorities for 2007 were to solidify our financial position and
to reposition our business consistent with the disciplines of
our KBnxt operational business model. Based on these priorities,
we focused on generating cash flow during the year by converting
our backlog of sold homes into revenue and strategically
converting operating assets into cash, which enabled us to
reduce our debt levels. We also reviewed our market positions,
community counts and overhead requirements during the year and
curtailed our investments where it made financial or strategic
sense to do so, including consolidating or exiting
underperforming markets. In positioning our business for the
future, we intensified our focus on our core customer base by
introducing newly designed, smaller, more affordable homes in
our active communities at price points calibrated to median
income levels to attract these homebuyers, while continuing to
invest in our KB Home Studios to provide our homebuyers with a
customized approach that we believe uniquely differentiates us
from other homebuilders. We also took steps to reengineer our
home designs and restructure our supplier and subcontractor
relationships to lower production costs and cycle times.
These strategic initiatives and the sale of our French
operations near the recent market peak in that country yielded
tangible results in our 2007 fiscal year, including:
|
|
|
|
|
generating $1.2 billion of cash from operating activities;
|
|
|
|
reducing debt levels by $759 million at November 30,
2007 compared to the prior year;
|
|
|
|
improving our debt-to-capital ratio, net of cash, to 31% at
November 30, 2007 from 43% at November 30, 2006; and
|
|
|
|
increasing our cash balance by $625 million to
$1.3 billion at November 30, 2007.
|
The specific accomplishments of our NEOs with respect to these
objectives are discussed further on
pages 29-30
below.
Use of
Market Data
The Compensation Committee considers survey and peer group data
as one factor in setting NEO compensation. This information
gives the Compensation Committee a general sense of whether our
NEO compensation is reasonable and competitive relative to the
compensation paid to executives with similar responsibilities at
companies that we consider to be similar to us based on revenues
or nature of operations. Although comparisons to compensation
levels at other companies are helpful in assessing the overall
competitiveness of our compensation program to attract and
retain executive talent, the Compensation Committee does not
target compensation at any specified level within a general
industry or peer group. Other factors the Compensation Committee
considers in making NEO compensation decisions include
responsibilities unique to our business operations, individual
performance and the requirements of our KBnxt operational
business model.
In 2007, the Compensation Committee considered aggregated survey
data for general industry executive compensation published by
Towers Perrin, Mercer LLC and Watson Wyatt Data Services for
companies with annual revenues ranging from $2 billion to
$10 billion. The Compensation Committee considered this
survey data because it believes we compete against companies
both within and outside our own industry to fill many of our top
management positions.
28
The Compensation Committee also considered data from the public
companies listed below, which we consider to be our peer group.
Our peer group consists of companies that are engaged, as we
are, in high production home building. Our annual revenues
approximate the group median.
|
|
|
|
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Beazer Homes
|
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Lennar Corporation
|
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Ryland Group
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Centex Corporation
|
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MDC Holdings
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Standard Pacific
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DR Horton
|
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NVR Incorporated
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Toll Brothers
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Hovnanian Enterprises
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Pulte Homes
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|
CEO and
Other NEO Compensation Decisions
The terms of our CEOs compensation are governed by his
Employment Agreement dated February 28, 2007
(Employment Agreement). The Compensation Committee
and the Board approved the Employment Agreement following
Mr. Mezgers promotion from Executive Vice President
and Chief Operating Officer in November 2006. The Employment
Agreement was designed to motivate and retain our CEO, who
provided critically-needed leadership, strategic direction, and
stability by agreeing to assume the role following the abrupt
departure of key senior executives and during a period of
turbulent business conditions. The Board believes the Employment
Agreement provides compensation that is in line with CEO
compensation practices in the homebuilding industry.
In determining the level of base salary and the short- and
long-term incentives provided to our NEOs in 2007, the
Compensation Committee balanced our financial and operational
results given the existing business environment with individual
performance and the need to motivate and retain our executive
talent pool.
Base Salaries. Base salary is a fixed
element of compensation for our CEO and our other NEOs. The
Compensation Committee annually reviews and may approve base
salary adjustments based on projected market trends and our
performance. Base salaries were also adjusted in 2007 for
promotions when they occurred.
Our CEOs Employment Agreement sets his annual base salary
at no less than $1,000,000. The Board believes this is
appropriate given Mr. Mezgers lifelong experience in
the homebuilding industry and fourteen years with us, including
his seven-year tenure as our Chief Operating Officer preceding
his promotion to CEO. It also is consistent with the median of
CEO base salaries paid by our peer group.
Base salaries for the other NEOs reflect a number of factors,
including each NEOs experience and specific role in our
business, individual performance evaluations and expectations,
our current and expected financial results, equity of salary
relative to similar executives who are not NEOs, an assessment
of market rates with respect to each NEOs responsibilities
to ensure competitiveness, and our general budgetary guidelines
for base salary increases as set by the Compensation Committee.
For 2007, the Compensation Committee set annual base salary
merit increases for our NEOs other than the CEO of between three
and four percent. The Compensation Committee believes these
increases represent an appropriate balance between our recent
operational results, expected future business conditions and the
need to maintain competitive levels of pay to promote retention.
Additional one-time base salary increases were provided to
Messrs. Cecere and Hollinger in January 2007 in
consideration of their respective promotions.
Annual Incentives and Discretionary
Bonuses. In 2007, Mr. Mezger was
eligible for a performance-based annual incentive award based on
a specified percentage of our pre-tax, pre-incentive profit,
subject to the discretion of the Compensation Committee to
reduce the award to an amount ranging from $0 to
$17.5 million based on its subjective assessment of
Mr. Mezgers performance. Since pre-tax, pre-incentive
profit was not achieved, Mr. Mezger did not qualify for
this performance-based award.
In 2007, Mr. Mezger substantially exceeded objectives that
the Compensation Committee established for his first year as our
CEO: strengthen our balance sheet, improve our customer
satisfaction scores, streamline our overhead structure and
rebuild our senior executive team. In these areas, under
Mr. Mezgers leadership we: (a) generated
$1.2 billion of cash from our operations, reduced
year-over-year
debt levels by $759 million (26%) and improved our
year-over-year
ratio of debt to total capital, net of cash, to 31% from 43%;
(b) significantly improved our customer satisfaction
levels, as measured by J.D. Power and Associates, an
independent global
29
marketing information services firm; (c) achieved
year-over-year
reductions in overhead expenses (26%) and headcount (39%) and
restructured our operations to align with homebuilding market
conditions; and (d) streamlined and rebuilt our executive
leadership team by realigning our senior operations management
under the leadership of three regional executives and hiring the
Senior Vice President, Human Resources and the Executive Vice
President, General Counsel and Secretary.
Based on these accomplishments and his key role and significant
work in developing, leading and consummating the sale of our
French operations at a price near the market peak in that
country, which generated total gross cash proceeds of
$807 million, the Compensation Committee approved a
discretionary annual bonus for Mr. Mezger of
$6 million.
In 2007, each of our other NEOs was eligible for an annual
incentive based on his individual performance in achieving
specified objectives set by the Compensation Committee, up to
the following maximum amounts: Mr. Cecere $1,800,000,
Mr. Hollinger $875,000, Mr. Barnard $1,250,000 and
Mr. Masuda $743,750. However, the Compensation Committee
decided, in its discretion, to significantly reduce the actual
annual incentive payments to each of these NEOs in light of our
2007 financial results, as discussed below.
Messrs. Cecere, Hollinger and Masuda achieved their
specified performance objectives of: (a) increasing cash
flow by at least $750 million from the sale of our French
operations; (b) lowering incurred interest expense, net of
interest income, by $35 million while maintaining a
debt-to-capital
ratio, net of cash, of
45-50% at
fiscal year end; (c) generating more than $400 million
in free cash flow; and (d) reducing selling, general and
administrative expenses to ensure that they did not exceed 13.7%
as a percent of housing revenues. Based on their individual
performance in achieving these accomplishments, the Compensation
Committee approved the following annual incentive payments to
these NEOs: Mr. Cecere $400,000, Mr. Hollinger
$450,000, and Mr. Masuda $350,000.
Mr. Barnard achieved his specified performance objectives
of: (a) ensuring 75% of our operating divisions met or
exceeded their direct cost reduction goals, resulting in a
reduction of more than $50 million of direct costs;
(b) developing, expanding and implementing a direct-buy
model for building materials, capturing cost reductions;
(c) establishing formal, documented and approved market
strategies for each operating division; (d) improving the
execution of our KBnxt operational business model metrics by 25%
from their December 1, 2006 levels; (e) reducing
architecture expense by $1 million; and (f) ensuring
that 100% of any floor plans and specification levels were
consistent with KBnxt operational business model objectives.
Based on his individual performance in achieving these
accomplishments, the Compensation Committee approved an annual
incentive payment to Mr. Barnard of $600,000.
In April 2007, the Compensation Committee awarded one-time
bonuses of $350,000 to Mr. Hollinger and $100,000 to
Mr. Masuda to recognize the additional responsibilities and
duties that each assumed in connection with the Review and our
leadership transition at the end of 2006.
Because Mr. Freeds employment with us ended in July
2007, he did not receive any annual incentive-based compensation
for 2007. Upon his termination of employment, Mr. Freed
became entitled to an aggregate payment of $2,702,484
representing incentive compensation he earned in prior years. To
comply with Internal Revenue Code Section 409A, this
payment was made on February 1, 2008.
For our 2008 fiscal year, the Compensation Committee has
determined that the payment of annual incentive compensation to
our NEOs excluding Mr. Cecere, who has
announced his retirement will be subject to the
achievement of an objective performance goal based on the level
of our pre-tax income or loss for the year. For each NEO, the
Compensation Committee can, in its discretion, reduce or
eliminate the actual annual incentive compensation that the NEO
may earn based on its subjective assessment of the NEOs
performance against stated objectives for the year. The
Compensation Committee believes this approach appropriately
balances current market conditions with the need to retain and
motivate our NEOs to achieve sound financial and operational
results, while preserving the potential tax deductibility of NEO
compensation for our 2008 fiscal year.
Long-Term Incentives. We provide
long-term incentive awards to our NEOs to attract and retain
high-quality executives and to motivate them to achieve
financial and operational performance goals measured over a
multi-year
30
period. These awards consist primarily of grants of equity-based
vehicles that are settled in cash or stock and are designed to
align NEO and stockholder interests. In 2007, the Compensation
Committee, with input from Semler Brossy and our management,
established ranges of long-term incentive award values by
management level. In establishing these ranges, the Compensation
Committee considered the value of other compensation elements,
market practices, outstanding grants and potential future
realizable values of all long-term incentives. The Compensation
Committee determined individual NEO award values within these
ranges by considering the NEOs current and expected future
performance, internal equity by management level and the overall
cost of the grants. Individual award values determined the size
of the actual grants made to our NEOs based on the closing price
of our common stock on the date the awards were granted. These
long-term incentive grants are described under the headings
Grant Delayed from 2006 and October 2007
Grant below. Our CEO also received long-term incentive
awards in 2007 that were established under the terms of his
Employment Agreement, as described under the headings CEO
Promotion Grant and CEO Employment Agreement
Grants below.
Use of SARS and Phantom Shares. Except for
specific grants to our CEO described below, all long-term
incentive grants made in 2007 consisted of SARs and phantom
shares that are settled in cash only. The Compensation Committee
employed these cash-settled vehicles because we have a limited
number of shares currently available for grant under our
existing stockholder-approved equity compensation plans. The
SARs and phantom shares are designed to mirror the attributes of
stock options and restricted stock respectively, except that
both instruments are settled in cash. Each SAR, if it vests,
will provide a cash payment equal to the positive difference, if
any, between its grant price and the closing price of our common
stock on the exercise date, and will expire on the tenth
anniversary of its grant date. Each phantom share, if it vests,
will provide a cash payment equal to the closing price of our
common stock on the applicable vesting date, plus the cumulative
value of all cash dividends or other distributions paid in
respect of a share of our common stock from and including its
grant date through and including the vesting date.
CEO Promotion Grant. In conjunction with the
approval of his Employment Agreement, the Compensation Committee
approved a promotional stock option award to our CEO. Due to a
blackout necessitated by the Review, however, this award was
actually granted in July 2007. The promotional stock option
award was in the amount of 325,050 shares.
CEO Employment Agreement Grants. At the same
time as it granted the promotional stock option award, the
Compensation Committee granted to our CEO a long-term incentive
stock option award pursuant to the terms of his Employment
Agreement. This award was in the amount of 325,050 shares. The
Compensation Committee also granted to our CEO under his
Employment Agreement a long-term incentive award of 54,000
performance shares. The performance shares vest based on our
total stockholder return (TSR) over a three-year
period ending November 30, 2009, relative to our peer group
(as described on page 29 above) as follows:
|
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|
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|
Payout as a Percentage of
|
Relative TSR Percentile Ranking
|
|
Performance Shares Granted
|
|
|
<25th
percentile
|
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|
0
|
%
|
25-50th
percentile
|
|
|
25
|
%
|
50-75th
percentile
|
|
|
100
|
%
|
>75th
percentile
|
|
|
150
|
%
|
The amount of any cash dividends paid on our common stock during
the three-year performance period is equally and
contemporaneously paid to our CEO on the 54,000 performance
shares. Stock dividends or other non-cash dividends issued on or
in respect of our common stock will be equally and
contemporaneously issued on or in respect of the performance
shares, but will be held in escrow and subject to the
restrictions and forfeiture conditions imposed on the
performance shares.
Grant Delayed from 2006. Historically, our
annual long-term incentive awards have been made in October for
the subsequent fiscal year. Due to a blackout necessitated by
the Review, the awards that would have been made in October 2006
were delayed until July 2007. At that time, the Compensation
Committee granted to our NEOs other than the CEO a combination
of SARs and phantom shares, the amounts of which are included in
the Grants
31
of Plan-Based Awards During Fiscal Year 2007 table on
page 37 below. The Compensation Committee set as a
performance vesting condition for these SARs and phantom share
awards its determination that we achieved positive cash flow
from our operations in the second half of our 2007 fiscal year,
excluding the effects of the sale of our French operations. In
addition, to protect our cash flow, the maximum payout for each
SAR is capped at four times the exercise price. If the
performance condition is met, the phantom shares will vest in
full three years after the grant date and the SARs will vest in
equal annual installments over a three-year period.
Over-Cap Awards Delayed from
2006. The 2006 fiscal year annual incentive
compensation agreements for each of Messrs. Mezger, Cecere
and Hollinger limited the amount of their annual incentive award
payout for the year that could be paid in cash. The remaining
over-cap amounts would have been deferred into
three-year restricted stock granted in January 2007 when the
cash portion was paid. Due to a blackout necessitated by the
Review, the over-cap grant of restricted stock was
delayed until July 2007. The Compensation Committee granted
phantom shares in lieu of restricted stock in the following
amounts: Mr. Mezger 55,264, Mr. Cecere 15,751,
and Mr. Hollinger 1,037. These phantom shares vest in full
three years from date of grant.
October 2007 Grant. Our CEOs Employment
Agreement specifies that he is eligible to participate in our
equity compensation plans on terms and conditions that are
generally applicable to our other senior officers and is
eligible to receive equity grants from time to time, in each
case at the Compensation Committees discretion. Returning
to our traditional practice of granting long-term incentive
awards in October for the subsequent fiscal year, in October
2007, the Compensation Committee granted to our CEO 137,500
stock options and 412,500 SARs for his 2008 fiscal year
long-term incentive award. The Compensation Committee also
awarded 2008 fiscal year long-term incentive grants to our other
NEOs, consisting of a combination of SARs and phantom shares,
the amounts of which are included in the Grants of
Plan-Based Awards During Fiscal Year 2007 table on
page 37 below. The Compensation Committee set as a
performance vesting condition for these SARs and phantom share
awards its determination that we generated cash flow such that
the ratio of net debt (total debt less cash) to total
capitalization (the sum of net debt and total stockholders
equity) does not exceed 50% as of August 31, 2008. If the
performance condition is met, the phantom shares and SARs will
vest in the same manner as the phantom shares and SARs that were
granted in July 2007, as described under the heading Grant
Delayed from 2006 on page 31 above.
Unit Performance Program. For several years,
our long-term incentives have included performance unit grants
under our Unit Performance Program (UPP). Each
performance unit provides a payout to a recipient only if
specific goals set by the Compensation Committee are achieved at
the end of a three-year period with respect to the following two
performance metrics: (a) our cumulative diluted earnings
per share and (b) the average pre-tax return on investment
of the operations for which the recipient is responsible. If
applicable performance goals are achieved, the value of a
performance unit at the end of the three-year performance period
depends on the degree to which the performance goals are
exceeded and the Compensation Committees weighting of the
two performance metrics at the time the performance unit is
awarded. Recipients must remain employed with us for the entire
three-year period to which a performance unit relates to receive
a payout.
In October 2004, the Compensation Committee granted performance
units to each of our NEOs (other than Mr. Barnard) and to
other members of our senior management for the fiscal
2005-2007
performance period, which ended on November 30, 2007. The
cumulative diluted earnings per share metric determined 75% of
the value of these performance units and the average pre-tax
return on investment metric determined the remaining 25%. Based
on the results for the performance period, our NEOs received the
following payouts: Mr. Mezger $97,500, Mr. Cecere
$38,500, Mr. Hollinger $33,000, and Mr. Masuda $5,500.
Mr. Freed did not receive any payout with respect to these
performance units due to the termination of his employment with
us in July 2007.
The Compensation Committee did not make any new grants of
performance units under the UPP in 2006 or 2007. There is one
remaining grant of UPP performance units currently in effect,
with a performance period ending on November 30, 2008. All
current NEOs received performance units under that UPP grant.
Benefits. Most of our benefits are
provided to all employees, including our NEOs. During 2007, our
NEOs also (a) received a supplemental medical, dental and
vision benefit that reimbursed any
out-of-pocket
health care
32
expenses that qualify for a tax deduction under Internal Revenue
Service guidelines; (b) participated in the KB Home
Retirement Plan (except for Mr. Masuda), which is described
under the heading Retirement Programs below;
(c) were provided with a life insurance death benefit
payable to their designated beneficiaries (beginning in 2004,
only term life insurance, with a $750,000 benefit level, has
been made available to incoming eligible executives); and
(d) were entitled to participate in an unfunded
nonqualified Deferred Compensation Plan, which allows pre-tax
contributions of base salary and annual incentive compensation.
We provide a dollar-for-dollar match of Deferred Compensation
Plan and 401(k) Savings Plan contributions of up to an aggregate
amount of six percent of a participants base salary.
These benefits are offered to attract key executive talent,
promote retention and to compensate for contribution limits
applicable to our 401(k) Savings Plan. Our 401(k) Savings Plan
is available to all full-time employees with a similar
dollar-for-dollar match benefit. Messrs. Mezger and Cecere are
participants in a program under which they are credited with a
specific number of vacation hours that remains fixed throughout
their employment with us, regardless of actual vacation time
taken. When their employment with us ends, they are entitled to
receive a payout of these vacation hours that is based on their
then-current annual base salaries. This program is closed to new
participants.
Perquisites. Perquisites provided to
our NEOs previously included automobile allowances, company-paid
automobile fuel cards, and reimbursement of expenses for
automobile insurance, annual financial planning and tax
preparation services, and one-time estate planning services.
These perquisites were discontinued in 2007. Infrequently,
family members accompanied NEOs on business trips on an aircraft
we owned, subject to seat availability. We did not incur any
additional incremental cost in providing this benefit. On a
single occasion in 2007, we incurred incremental cost from a
personal use of our aircraft. We sold our aircraft in December
2007. From time to time, we also make available to our
employees, including our NEOs, for their personal use tickets to
certain sporting events that are purchased as a season
subscription for business purposes. We do not incur any
additional incremental costs with such use. In our 2007 fiscal
year, we paid legal expenses our CEO incurred in negotiating his
Employment Agreement.
Employment
Agreements and Post-Termination Payments
Employment Agreements and Severance
Arrangements. Mr. Mezger is the only NEO
with whom we have an employment agreement. His Employment
Agreement provides him with certain severance benefits,
discussed under the heading Employment Agreements and
Potential Payments upon Termination of Employment or Change in
Control on pages 44-47 below.
Following a review of executive severance policies at peer
homebuilding companies and other similarly sized public
companies, the Compensation Committee adopted an Executive
Severance Plan in 2007 for non-change in control situations. All
of our NEOs are currently participants under the plan. The plan
provides a specified severance benefit that varies by seniority,
as discussed further under the heading Employment
Agreements and Potential Payments upon Termination of Employment
or Change in Control on pages 44-47 below.
We also maintain a Change in Control Severance Plan (CIC
Plan) that provides certain severance benefits on a change
in control of us, as discussed further under the heading
Employment Agreements and Potential Payments upon
Termination of Employment or Change in Control on
pages 44-47 below. The objectives of the CIC Plan are to:
(a) enable and encourage our management to focus its
attention on obtaining the best possible deal for our
stockholders in a change in control scenario and to make
objective evaluations of all possible transactions, without
being distracted by the possible impact such transactions may
have on job security and benefits, (b) promote management
continuity, and (c) provide income protection in the event
of involuntary loss of employment.
Retirement Programs. Our 401(k) Savings
Plan, a defined contribution plan, is the only program we offer
to all full-time employees that provides post-employment
benefits. Our NEOs and certain other senior executives also
participate in our Deferred Compensation Plan, as discussed
above. Details of NEO deferrals under the Deferred Compensation
Plan are provided in the Non-Qualified Deferred
Compensation During Fiscal Year 2007 table on page 44
below.
We maintain a Retirement Plan for selected executives that is
now closed to new participants. Participation has been closed
since 2004. The Retirement Plan provides each vested participant
with a specific annual dollar amount
33
for 20 years commencing following the later of (a) the
participants reaching age 55, (b) the tenth
anniversary of the date the participant commenced his or her
participation, or (c) the termination of the
participants employment with us. Mr. Mezgers
original annual benefit amount under the Retirement Plan was
$450,000. For the other NEO participants (Mr. Masuda does
not participate), the original annual benefit amount under the
Retirement Plan was $100,000. For each participant, the annual
benefit amount is increased by annual
cost-of-living
adjustments, starting with the plan year ending
November 30, 2006. Vesting generally requires five years of
participation and, once vested, the participant is entitled to
his or her full benefit. Details of NEO participation in the
Retirement Plan are provided in the Pension Benefits
During Fiscal Year 2007 table on page 43 below.
Payments Due Upon Termination of Employment
and/or a
Change in Control. In addition to the
severance arrangements mentioned above, in the event of a change
in control of us there is accelerated vesting of any unvested
benefits under our Deferred Compensation Plan, our Retirement
Plan and certain of our employee benefit plans, including our
equity compensation plans. Further discussion of the payments to
which our NEOs may be entitled on termination of their
employment
and/or a
change in control of us is provided under the heading
Employment Agreements and Potential Payments upon
Termination of Employment or Change in Control on
pages 44-47 below.
Other
Material Tax and Accounting Implications of the Executive
Compensation Program
We generally structure our programs with the intent of complying
with the requirements of Internal Revenue Code
Section 162(m) in order to maintain federal tax
deductibility for executive compensation. Section 162(m)
generally disallows a tax deduction for compensation over
$1 million paid to our highest paid executives unless it is
qualifying performance-based compensation. The Compensation
Committee considers these tax consequences when determining the
mix of compensation paid to our NEOs and other senior
executives, and seeks to balance tax deductibility benefits with
the need to provide effective compensation packages. Although
the Compensation Committee believes that the majority of the
potential compensation payable to our NEOs and other senior
executives should be based on the achievement of qualified
performance-based targets, it will approve compensation that may
not be deductible under Section 162(m) where it believes it
is in our and our stockholders best interests to do so. In
2007, the Compensation Committee believed that it was in our
best interests to pay our CEO an annual discretionary bonus, as
discussed under the heading Annual Incentives and
Discretionary Bonuses on
pages 29-30
above, even though the payment was not deductible under
Section 162(m).
Other
Compensation Policies
Equity Stock Ownership Policy. We have
had an executive stock ownership policy since 1998. It is
designed to encourage, and has encouraged, our executives to
increase their ownership of our common stock over time and to
align their interests with our stockholders interests. In
February 2008, the Compensation Committee amended the policy, as
described below. The policy continues to encourage meaningful
long-term stock ownership as a key component of our executive
compensation program.
The policy identifies specific levels of stock ownership that
designated executives are expected to achieve, targeted from
one-to-five times base salary. The targeted stock ownership
levels for our NEOs range from two-to-five times base salary.
Designated executives have five years to achieve these ownership
levels and must make meaningful progress every year towards the
achievement of these ownership levels. Benchmark survey data and
multiples of average base salaries per level were used to
determine the ownership expected for each position. Share
ownership may include shares owned outright by a designated
executive, shares owned indirectly through our 401(k) Savings
Plan and 60% of unvested restricted stock grants or phantom
share rights. Phantom share rights are included due to the
limited number of shares currently available for grant under our
existing stockholder-approved equity compensation plans. Once
required ownership levels are achieved, they must be maintained
throughout the executives employment. Our policy provides
both financial incentives to achieve ownership requirements as
well as material consequences for non-compliance or failure to
make meaningful progress toward compliance. The Compensation
Committee may, from time to time, reevaluate and revise the
ownership requirements to account for material changes in stock
price. Our NEOs are currently in compliance with the policy or
have made meaningful progress towards compliance.
34
Equity-Based Award Grant Policy. On
February 1, 2007, the Compensation Committee adopted a
policy that governs the timing of equity-based awards and
establishes certain internal controls over the grant of
equity-based awards. The policy is designed to enhance the
process by which we grant equity-based awards, including stock
options SARs, phantom shares and restricted stock.
The policy requires all grants of equity-based awards, and their
terms, to be approved by the Compensation Committee (or the
Board). The policy does not permit any delegation of the
Compensation Committees (or the Boards) granting
authority to our management. The grant date of any equity-based
award will be the date on which the Compensation Committee met
to approve the grant unless a written resolution sets a later
date. The exercise price of any stock option award will not be
less than the closing price of our common stock on the New York
Stock Exchange on the grant date. All equity-based award grants
made in 2007 were made in compliance with the policy and were
approved at regular Compensation Committee meetings in July and
October 2007, as discussed under the heading Long-Term
Incentives on pages 30-32 above.
Recovery of Compensation. Under his
Employment Agreement, our CEO is required to repay certain bonus
and incentive- or equity-based compensation he receives if we
are required to restate our financial statements as a result of
his misconduct, consistent with Section 304 of the
Sarbanes-Oxley Act of 2002.
Summary
Compensation Table
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Change in
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Pension Value
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and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name and
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Fiscal
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Salary
|
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Principal Position
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Year
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($)
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($)(a)
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($)(b)
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($)(c)
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($)(d)
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($)(e)
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($)(f)
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($)
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|
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Jeffrey T. Mezger
|
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2007
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|
|
|
$
|
1,000,000
|
|
|
|
$
|
6,000,000
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|
|
|
$
|
4,181,624
|
|
|
|
$
|
3,743,258
|
|
|
|
$
|
97,500
|
|
|
|
$
|
388,632
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|
|
|
$
|
972,604
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|
|
$
|
16,383,618
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|
President and Chief Executive Officer
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Domenico Cecere
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|
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2007
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|
|
|
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595,834
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|
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|
|
0
|
|
|
|
|
376,181
|
|
|
|
|
90,560
|
|
|
|
|
438,500
|
|
|
|
|
86,362
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|
|
|
|
114,295
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|
|
|
|
1,701,732
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|
|
|
Executive Vice President and Chief Financial Officer
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William R. Hollinger
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2007
|
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|
|
|
347,083
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|
|
|
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350,000
|
|
|
|
|
123,273
|
|
|
|
|
107,703
|
|
|
|
|
483,000
|
|
|
|
|
83,116
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|
|
|
|
121,111
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|
|
|
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1,615,286
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Senior Vice President and Chief Accounting Officer
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Glen W. Barnard
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2007
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|
|
|
|
289,168
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|
|
|
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0
|
|
|
|
|
98,662
|
|
|
|
|
96,478
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|
|
|
|
600,000
|
|
|
|
|
79,716
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|
|
|
|
95,069
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|
|
|
|
1,259,093
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|
Senior Vice President,
KBnxt Group
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|
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Kelly K. Masuda
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|
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2007
|
|
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|
|
296,771
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100,000
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|
|
|
|
78,837
|
|
|
|
|
85,238
|
|
|
|
|
355,500
|
|
|
|
|
0
|
|
|
|
|
96,459
|
|
|
|
|
1,012,805
|
|
|
|
Senior Vice President and Treasurer
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|
Former NEO
|
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|
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|
|
|
|
|
|
|
|
|
|
Robert Freed*
|
|
|
|
2007
|
|
|
|
|
256,500
|
|
|
|
|
0
|
|
|
|
|
640,057
|
|
|
|
|
95,803
|
|
|
|
|
0
|
|
|
|
|
86,362
|
|
|
|
|
2,821,997
|
|
|
|
|
3,900,719
|
|
|
|
Senior Vice President,
Investment Strategy
|
|
|
|
|
|
|
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|
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|
(a) |
|
Bonus: The amounts reported in this column
reflect discretionary bonuses paid to Messrs. Mezger,
Hollinger and Masuda. These are described under the heading
Annual Incentives and Discretionary Bonuses on
pages 29-30 above. |
|
(b) |
|
Stock Awards: The amounts reported in this
column reflect the aggregate compensation expense we recognized
in our 2007 fiscal year for shares of restricted stock and
phantom shares granted to our NEOs, computed in accordance with
SFAS 123(R) (disregarding estimates of forfeitures related
to service-based vesting conditions). Information used in
determining these amounts can be found in Note 15 of the
Notes to |
35
|
|
|
|
|
the Consolidated Financial Statements contained in our Annual
report on
Form 10-K
for the fiscal year ended November 30, 2007. The
Outstanding Equity Awards at Fiscal Year-End 2007
table on pages 39-40 below and its associated footnotes
contain additional information about our NEOs respective
equity award holdings. The amount reported in this column for
Mr. Freed reflects the aggregate compensation costs we
recognized for his equity awards through the date on which his
employment with us ended. |
|
(c) |
|
Option Awards: The amounts reported in this
column reflect the aggregate compensation expense we recognized
in our 2007 fiscal year for stock option and SAR awards granted
to our NEOs, computed in accordance with SFAS 123(R)
(disregarding estimates of forfeitures related to service-based
vesting conditions). Information used in determining these
amounts can be found in Note 15 of the Notes to the
Consolidated Financial Statements contained in our Annual Report
on
Form 10-K
for the fiscal year ended November 30, 2007. The
Outstanding Equity Awards at Fiscal Year-End 2007
table on pages 39-40 below and its associated footnotes
contain additional information about our NEOs respective
option award holdings. The amount reported in this column for
Mr. Freed reflects the aggregate compensation costs we
recognized for his option awards through the date on which his
employment with us ended. |
|
(d) |
|
Non-Equity Incentive Plan Compensation: The
amounts reported in this column reflect annual incentive
compensation the respective NEOs earned based on achieving
applicable 2007 fiscal year performance goals and payouts of UPP
performance units corresponding to the
2005-2007
performance period. Mr. Freed did not receive any
non-equity incentive plan compensation due to the termination of
his employment with us. |
|
(e) |
|
Change in Pension Value and Nonqualified Deferred
Compensation Earnings: The amounts reported in
this column reflect the change in present value during our 2007
fiscal year of accumulated benefits we provide under our
Retirement Plan. Above-market or preferential earnings are not
provided under our Deferred Compensation Plan. |
|
(f) |
|
All Other Compensation: The amounts reported
in this column consist primarily of offsetting payments we made
in 2007 to the NEOs and other employees who held stock options
for which we increased the exercise price based on Internal
Revenue Code Section 409A consequences resulting from the
Review, as further discussed under the heading Option
Exercise Price Adjustment Payments on page 38 below.
For our NEOs, the aggregate offsetting payments were:
Mr. Mezger $758,956, Mr. Cecere $85,921,
Mr. Hollinger $87,393, Mr. Barnard $58,720,
Mr. Masuda $65,583, and Mr. Freed $95,946.
The remainder of the amounts reported in this column consist of
the following items: |
|
|
|
|
|
Perquisites: Perquisites provided to the NEOs
include automobile allowances, company-paid automobile fuel
cards, and reimbursement of expenses for automobile insurance,
annual financial planning and tax preparation services, and
one-time estate planning services. These perquisites were
discontinued, effective July 1, 2007. Included in the
amounts reported for Mr. Mezger are $135,484 in legal
expenses, which were incurred in negotiating his Employment
Agreement, and $4,290 of incremental costs associated with
personal use of an aircraft we owned in our 2007 fiscal year. We
sold our aircraft in December 2007. |
|
|
|
Matching 401(k) Savings Plan and Supplemental Deferred
Compensation Plan Contributions: We provide a
dollar-for-dollar match of Deferred Compensation Plan and 401(k)
Savings Plan contributions of up to an aggregate amount of six
percent of a participants base salary. The aggregate 2007
fiscal year matching contributions we made to each NEO were as
follows: Mr. Mezger $57,125,
Mr. Cecere $13,500, Mr. Hollinger $20,825,
Mr. Barnard $17,350, Mr. Masuda $9,550, and
Mr. Freed $9,320. |
|
|
|
Premium Payments: We paid premiums on
supplemental medical expense reimbursement plans and life
insurance policies for the benefit of participating executives.
These plans and policies are described under the heading
Benefits on pages 32-33 above. The aggregate
premiums we paid in our 2007 fiscal year for each NEO for these
plans and policies were as follows: Mr. Mezger $9,043,
Mr. Cecere $8,083, Mr. Hollinger $5,781,
Mr. Barnard $8,552, Mr. Masuda $8,552, and
Mr. Freed $4,934. |
|
|
|
Post-Employment Incentive Compensation
Payout: When his employment with us ended in July
2007, Mr. Freed became entitled to an aggregate payment of
$2,702,484 representing incentive compensation he earned in
prior fiscal years. To comply with Internal Revenue Code
Section 409A, this payment was made on February 1,
2008. |
|
|
|
* |
|
Mr. Freeds employment with us ended on July 15,
2007. |
36
Grants of
Plan-Based Awards During Fiscal Year 2007
|
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Estimated Possible Payouts Under
|
|
|
Estimated Future Payouts Under Equity
|
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Non-Equity
Incentive Plan Awards
|
|
|
Incentive Plan Awards(d)
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number of
|
|
|
or Base
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
Type of
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
|
Name
|
|
|
Date(a)
|
|
|
Award
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Mezger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,050
|
|
|
|
$
|
36.19
|
|
|
|
$
|
3,819,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,050
|
|
|
|
|
36.19
|
|
|
|
|
4,000,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,500
|
|
|
|
|
54,000
|
|
|
|
|
81,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,500
|
|
|
|
|
28.10
|
|
|
|
|
1,177,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
SARs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,355,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Cecere
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
$
|
1,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
SARs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
570,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Hollinger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
875,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
SARs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
SARs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Barnard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
1,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
SARs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
SARS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Masuda
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
743,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
SARs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/12/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
SARS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/4/07
|
|
|
|
Phantom Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former NEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Mr. Freed
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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(c)
|
|
|
|
2,280,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(a)
|
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Grant
Date: The
grant date for each award is the date the Compensation Committee
approved the award. The exercise price for each award is equal
to the closing price of our common stock on the date of grant
(if applicable to the award granted). Mr. Freed was not
granted any plan-based awards in our 2007 fiscal year.
|
|
(b)
|
|
Mr. Mezgers annual
incentive for our 2007 fiscal year was based on a specified
percentage of our pre-tax, pre-incentive profit, as discussed
under the heading Annual Incentives and Discretionary
Bonuses on pages 29-30 above. Therefore, this annual
incentive at the time it was granted did not have an estimated
possible threshold, target or maximum payout amount. We do not
believe it is possible to provide a representative
target amount for this annual incentive based on our
2006 fiscal year performance because Mr. Mezger served as
our Executive Vice President and Chief Operating Officer for
substantially all of that year and thus had different
responsibilities and
|
37
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|
performance objectives. If his
2007 fiscal year annual incentive arrangement were applied to
our 2006 fiscal year performance, however, the amount of the
payout would have been $21,168,500. Because Mr. Mezger did
not qualify for a payout under his 2007 fiscal year annual
incentive, no payout amount is reported under the
Non-Equity Incentive Plan Compensation column in the
Summary Compensation Table on
page 35 above.
|
|
(c)
|
|
In setting annual incentive
arrangements for Messrs. Cecere, Hollinger, Barnard and
Masuda for our 2007 fiscal year, the Compensation Committee did
not set any specific target payout amounts. Rather, it set only
maximum payout amounts, as shown in the table above. These
annual incentives are described under the heading Annual
Incentives and Discretionary Bonuses on pages 29-30
above. The actual annual incentive payouts the Compensation
Committee approved for these four NEOs were significantly lower,
and were as follows: Mr. Cecere $400,000,
Mr. Hollinger $450,000, Mr. Barnard $600,000, and
Mr. Masuda $350,000. These payout amounts are reported
under the Non-Equity Incentive Plan Compensation
column in the Summary Compensation Table on
page 35 above. The Compensation Committee also set an
annual incentive for Mr. Freed for our 2007 fiscal year
that was based on achieving specified performance goals relating
to his roles as our Senior Vice President, Investment Strategy
and as a regional manager for our Northern California
operations. The Compensation Committee did not set a specific
target payout for Mr. Freeds annual incentive, only a
maximum amount as shown in the table above. Since
Mr. Freeds employment with us ended during our 2007
fiscal year, he did not receive any payout under this annual
incentive and no payout amount is reported under the
Non-Equity Incentive Plan Compensation column in the
Summary Compensation Table.
|
|
(d)
|
|
Estimated Future Payouts Under
Equity Incentive Plan
Awards: Mr. Mezger
will vest in the specified threshold, target and maximum amounts
relating to the restricted stock/performance shares granted to
him on July 12, 2007 depending on our total stockholder
return relative to our peer group, as further discussed under
the heading CEO Employment Agreement Grants on
page 31 above. The SARs and phantom shares reported in this
column that were granted to the NEOs on July 12, 2007 and
October 4, 2007 will vest in the specified target amounts
if the Compensation Committee determines that the applicable
performance vesting conditions are satisfied, as further
discussed under the heading Long-Term Incentives on
pages 30-32
above.
|
|
(e)
|
|
Grant Date Fair Value of Stock
and Option Awards: The
grant date fair value reported in this column for each award is
computed in accordance with SFAS 123(R).
|
Option
Exercise Price Adjustment Payments
As described in our Annual Report on
Form 10-K
for the fiscal year ended November 30, 2006, the Review
found that we used incorrect measurement dates with respect to
eight annual employee stock option grants made between October
1998 and October 2005. In order to comply with Internal Revenue
Code Section 409A, we increased the exercise prices of
certain of these stock option grants in late 2006 and, in early
2007, made an offsetting payment to employees who held these
adjusted stock options. These offsetting payments to our NEOs
are reported in the Summary Compensation Table on
page 35 above. The stock options reported in the
Outstanding Equity Awards at Fiscal Year-End 2007
table on pages 39-40 below reflect the adjusted exercise
prices, as applicable.
38
Outstanding
Equity Awards at Fiscal Year-End 2007
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Option Awards
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Stock Awards
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Options
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Equity
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Awards
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Incentive
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Equity
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Equity
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Plan
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Incentive
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Incentive
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Market
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Awards:
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Plan Awards:
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Plan Awards:
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Number
|
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Value of
|
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Number of
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Market or
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Number of
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|
of Shares
|
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|
Shares or
|
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|
|
Unearned
|
|
|
|
Payout Value
|
|
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|
|
Number of
|
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|
|
Number of
|
|
|
|
Securities
|
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|
|
|
|
|
|
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|
|
or Units
|
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|
|
Units of
|
|
|
|
Shares,
|
|
|
|
of Unearned
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
Securities
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
of Stock
|
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|
|
Stock
|
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|
|
Units or
|
|
|
|
Shares, Units
|
|
|
|
|
|
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|
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Underlying
|
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|
Underlying
|
|
|
|
Unexercised
|
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That
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That
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Other
|
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|
|
or Other
|
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|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
|
Unexercised
|
|
|
|
Unearned
|
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|
|
Option
|
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|
|
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|
|
Have
|
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|
|
Have
|
|
|
|
Rights That
|
|
|
|
Rights That
|
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|
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|
|
Options
|
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|
|
Options
|
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|
|
Options/
|
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|
Exercise
|
|
|
|
Option
|
|
|
|
Not
|
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|
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Not
|
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|
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Have Not
|
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|
|
Have Not
|
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|
|
|
|
|
|
|
|
Exercisable
|
|
|
|
Unexercisable
|
|
|
|
SARs
|
|
|
|
Price
|
|
|
|
Expiration
|
|
|
|
Vested
|
|
|
|
Vested
|
|
|
|
Vested
|
|
|
|
Vested
|
|
|
|
Name
|
|
|
Grant Date
|
|
|
|
(#)
|
|
|
|
(#)(a)
|
|
|
|
(#)(b)
|
|
|
|
($)
|
|
|
|
Date
|
|
|
|
(#)
|
|
|
|
($)(c)
|
|
|
|
(#)(d)
|
|
|
|
($)(e)
|
|
|
|
Mr. Mezger
|
|
|
|
10/30/01
|
|
|
|
|
431,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13.95
|
|
|
|
|
10/30/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/01
|
|
|
|
|
68,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.95
|
|
|
|
|
10/30/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/02
|
|
|
|
|
102,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.07
|
|
|
|
|
2/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/8/02
|
|
|
|
|
44,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.63
|
|
|
|
|
5/8/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/02
|
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.51
|
|
|
|
|
10/7/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/24/03
|
|
|
|
|
74,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33.24
|
(f)
|
|
|
|
10/24/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/24/03
|
|
|
|
|
149,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34.05
|
(f)
|
|
|
|
10/24/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/22/04
|
|
|
|
|
80,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40.90
|
|
|
|
|
10/22/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/22/04
|
|
|
|
|
119,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40.90
|
|
|
|
|
10/22/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|