PRE 14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant                               Filed by a Party other than the Registrant  

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under 14a-12

BEAZER HOMES USA, INC.

(Name of registrant as specified in its charter)

 

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
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LOGO

2018 PROXY STATEMENT


  

 

 

 

FROM OUR

CHAIRMAN OF THE BOARD

Dear Fellow Stockholders:

The 2019 annual meeting of stockholders of Beazer Homes USA, Inc. will be held at 8:30 a.m., Eastern Time, on Wednesday, February 6, 2019, at our principal executive offices at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, for the following purposes:

 

 

Election of the nine directors named in the accompanying Proxy Statement to serve until our annual meeting in 2020;

 

 

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2019;

 

 

Approval of the compensation of our named executive officers;

 

 

Amendment of our Amended and Restated Certificate of Incorporation to extend the term of a protective amendment designed to preserve tax benefits associated with our net operating losses;

 

 

Approval of a new Section 382 Rights Agreement to become effective upon the expiration of our existing Section 382 Rights Agreement, to preserve tax benefits associated with our net operating losses; and

 

 

Transaction of any other business that may properly come before the meeting or any adjournments or postponements thereof.

Holders of record of our common stock as of the close of business on December 12, 2018, are entitled to notice of, and to vote at, the annual meeting. For instructions on voting, please refer to the Notice of Internet Availability of Proxy Materials you received in the mail, the section entitled “How to Vote” beginning on page [1] of the proxy statement, or, if you received a paper copy of the proxy statement, your enclosed proxy card.

Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote as soon as possible.

By Order of the Board of Directors,

 

 

LOGO

STEPHEN P. ZELNAK, JR.

Non-Executive Chairman of the Board of Directors

Beazer Homes USA, Inc.

December [    ], 2018

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Stockholders to be held on February 6, 2019:

This proxy statement, along with the Company’s Annual Report on Form 10-K for the fiscal year ended

September 30, 2018, are available free of charge on the Company’s website at

http://www.beazer.com

 

 

 

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PROXY

STATEMENT SUMMARY

This executive summary provides an overview of the information contained within this proxy statement. We encourage you to read the entire proxy statement prior to voting.

ANNUAL MEETING OF STOCKHOLDERS ROADMAP

 

 

 

STOCKHOLDERS

ANNUAL MEETING

 

                    LOGO  

STOCKHOLDER

VOTING MATTERS

Wednesday, February 6, 2019    
8:30 a.m.
(Eastern time)

 

Beazer Homes

1000 Abernathy Road,

Suite 260

Atlanta, Georgia 30328

 

Stockholders of record as of the
close of business on December 12,
2018 are entitled to notice of, and
to vote at, the annual meeting.

 

This proxy statement, along with
the Company’s Annual Report on
Form 10-K for the fiscal year ended
September 30, 2018, are available
on the Company’s website at
http://www.beazer.com.

 

On December [    ], 2018, we
began mailing this proxy statement
to stockholders who requested
paper copies.

      

PROPOSAL

 

  

BOARD’S VOTING
RECOMMENDATION

 

  

PAGE

REFERENCE

 

     
    

 

Election of directors

  

 

For Each

Nominee

 

  

 

[10]

    
    

 

Ratification of appointment of independent auditors

 

  

 

For

  

 

[16]

    
    

 

Approval of executive compensation

 

  

 

For

  

 

[18]

    
    

 

Amendment of certificate of incorporation to preserve tax benefits

 

  

 

For

  

 

[41]

    
    

 

Approval of Section 382 Rights Agreement to preserve tax benefits

 

  

 

For

  

 

[41]

    
             
             
             
             
             
             
             
             
             
             
             

 

 

 

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2018

BUSINESS HIGHLIGHTS

In 2018, we continued to pursue our objective of providing our customers with homes that incorporate exceptional value and quality at affordable prices, while creating durable and growing value for our employees, partners and stockholders. Here are several highlights of our financial, operational and strategic achievements during fiscal 2018:

2B-10 Plan

Surpassed our multi-year plan to reach at least $2 billion in revenue and $200 million of Adjusted EBITDA

 

LOGO  

FINANCIAL

 

    
 

 

$2.1 BILLION

   Revenue
    

Achieved $2.1 billion in homebuilding revenue, a 9.6% increase year-over-year

 

 

 

$204.7 MILLION

   Adjusted EBITDA
      

Achieved $204.7 million in Adjusted EBITDA, a 14.5% increase year-over-year

 

 

 

$250 MILLION

   Debt Reduction
    

Completed three-year, $250 million debt reduction plan

 

LOGO  

OPERATIONAL

 

    
 

 

3.0 PER MONTH

   Sales Pace
      

Achieved average monthly sales pace per community of 3.0

 

 

 

$360,200

   Average Selling Price
      

Ended the year with an average selling price (ASP) of $360,200 for our homes, marking our seventh consecutive year of ASP growth

 

 

 

160 COMMUNITIES

   Community Count
     Ended the year with a community count of 160
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STRATEGIC

 

    
 

 

34 NEWLY

ACQUIRED

COMMUNITIES

   Acquisitions
   Completed the acquisitions of Bill Clark Homes and Venture Homes during the year, adding 34 existing and future communities

 

 

During 2019, the Board and management will continue to take steps to position Beazer for future success by growing EBITDA and EPS, while managing the balance sheet to drive return on assets (ROA) above 10%. Please see Annex 1 for a reconciliation of non-GAAP measures to GAAP measures.

 

 

 

 

 

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CORPORATE

GOVERNANCE HIGHLIGHTS

 

Annual election of all directors

 

Majority vote standard for the election of directors

 

Officer and director stock ownership requirements

 

20% female representation among our non-employee directors

 

Policies against hedging, pledging and stock option repricing

Clawbacks of incentive awards in the event of a restatement

 

Double triggers for both cash severance and accelerated vesting of equity upon a change in control

 

Robust Board and Committee evaluation practices

 

Long-standing stockholder engagement practices

 

 

STOCKHOLDER

ENGAGEMENT

We are committed to a robust stockholder engagement program. Our Board values our stockholders’ perspectives, and feedback from stockholders on our business, corporate governance and executive compensation are important considerations for Board discussions throughout the year. Over the course of the year, our team held more than 80 meetings with stockholders and investors.

Our Board maintains a process for stockholders and interested parties to communicate with the Board. Stockholders and interested parties may write or call our Board as provided under “Corporate Governance” on pg. [5].

 

 

 

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BOARD

NOMINEES (PG. [10])

Below are the directors nominated for election by stockholders at the annual meeting. The Board recommends a vote “FOR” each of the directors.

 

     

AGE

 

  

SERVING SINCE

 

  

COMMITTEES SERVED

 

  

INDEPENDENT  

 

 

Elizabeth S. Acton

 

  

 

67

 

  

 

2012

 

  

 

Audit, Finance (Chair)

 

  

 

Yes  

 

 

Laurent Alpert

 

  

 

72

 

  

 

2002

 

  

 

Nom/Corp Gov (Chair), Finance

 

  

 

Yes  

 

 

Brian C. Beazer

 

  

 

83

 

  

 

1994

 

  

 

Compensation, Nom/Corp Gov

 

  

 

Yes  

 

 

Peter G. Leemputte

 

  

 

61

 

  

 

2005

 

  

 

Audit, Finance

 

  

 

Yes  

 

 

Allan P. Merrill

 

  

 

52

 

  

 

2011

 

  

 

Not Applicable

 

  

 

No  

 

 

Peter M. Orser

 

  

 

62

 

  

 

2016

 

  

 

Compensation (Chair), Finance

 

  

 

Yes  

 

 

Norma A. Provencio

 

  

 

61

 

  

 

2009

 

  

 

Compensation, Nom/Corp Gov

 

  

 

Yes  

 

 

Danny R. Shepherd

 

  

 

67

 

  

 

2016

 

  

 

Audit (Chair), Compensation

 

  

 

Yes  

 

 

Stephen P. Zelnak, Jr.

 

  

 

73

 

  

 

2003

 

  

 

Non-Executive Chair, Audit, Nom/Corp Gov

 

  

 

Yes  

 

BOARD AND

COMMITTEE COMPOSITION (PG. [6])

The Board of Directors has an Audit Committee, a Compensation Committee, a Nominating/Corporate Governance Committee and a Finance Committee. Below are our directors, their committee memberships, and their 2018 attendance rates for regularly scheduled Board and committee meetings.

 

     

BOARD

 

  

AUDIT

 

  

COMPENSATION

 

  

NOM/
CORP GOV

 

  

FINANCE

 

  

ATTENDANCE  
RATE  

 

 

Elizabeth S. Acton

 

  

 

LOGO

 

  

 

LOGO

 

            

 

LOGO

 

  

 

100%  

 

 

Laurent Alpert

 

  

 

LOGO

 

            

 

LOGO

 

  

 

LOGO

 

  

 

100%  

 

 

Brian C. Beazer

 

  

 

LOGO

 

       

 

LOGO

 

  

 

LOGO

 

       

 

100%  

 

 

Peter G. Leemputte

 

  

 

LOGO

 

  

 

LOGO

 

            

 

LOGO

 

  

 

100%  

 

 

Allan P. Merrill

 

  

 

LOGO

 

                      

 

100%  

 

 

Peter M. Orser

 

  

 

LOGO

 

       

 

LOGO

 

       

 

LOGO

 

  

 

100%  

 

 

Norma A. Provencio

 

  

 

LOGO

 

       

 

LOGO

 

  

 

LOGO

 

       

 

100%  

 

 

Danny R. Shepherd

 

  

 

LOGO

 

  

 

LOGO

 

  

 

LOGO

 

            

 

100%  

 

 

Stephen P. Zelnak, Jr.

 

  

 

LOGO

 

  

 

LOGO

 

       

 

LOGO

 

       

 

100%  

 

   LOGO Chair

 

 

 

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KEY

QUALIFICATIONS

The following are several of the key qualifications, skills and experience of our Board that we believe are uniquely important to our business.

 

Homebuilding/Construction Industry Experience

    

Beazer, Merrill, Orser, Shepherd, Zelnak

 

CEO/COO Experience

    

Beazer, Merrill, Orser, Shepherd, Zelnak

 

CFO/Accounting/Finance Experience

    

Acton, Leemputte, Merrill, Provencio

Public Company Board Experience

    

Beazer, Leemputte, Provencio, Shepherd, Zelnak

 

Marketing/Sales

    

Merrill, Orser

 

Corporate Governance

    

Alpert

 

 

The lack of a mark for a director does not mean that he or she does not possess that particular qualification, skill or experience. The marks above simply indicate that the characteristic is one for which the director is especially well known among our Board.

We believe our Board reflects the broad expertise and perspective needed to govern our business and constructively engage with senior management.

HOW

WE PAY

Our executive compensation program consists of the following elements:

 

Base salary

 

Short-term cash incentive compensation, based on performance

Long-term equity incentive compensation

    

(performance shares and restricted stock)

 

Benefits available to all employees

 

 

2018

EXECUTIVE COMPENSATION ACTIONS

 

Mr. Merrill’s base salary was increased from $900,000 to $950,000. Mr. Salomon’s base salary was increased from $525,000 to $550,000. Mr. Belknap joined the Company in January 2018 and his initial base salary was $450,000. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Base Salary” for more information

 

Mr. Merrill’s long-term incentive target was increased from 250% to 300% of base salary, and Mr. Salomon’s short-term incentive target was increased from 100% to 125% of base salary. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Short-Term Incentive Compensation” and “— Long-Term Incentive Compensation” for more information

 

We based 75% of the fiscal 2018 short-term incentive opportunity for named executive officers on achievement of Bonus Plan EBITDA and 25% of the incentive opportunity on key operational metrics

 

We determined to use operational objectives identical to those used in determining the fiscal 2017 short-term incentive opportunity, with improvement over fiscal 2017 results required in all cases

 

 

 

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We determined that Messrs. Merrill, Salomon and Belknap would be eligible to receive an award for the operational components of the 2018 short-term bonus opportunity only if threshold Bonus Plan EBITDA was achieved

 

We retained the discretion to deduct from awards earned for failure to achieve certain construction quality standards based on the assessment of an independent third-party expert

 

We continued our practice of awarding performance shares equal to two-thirds of an NEO’s overall long-term incentive award opportunity, and time-based restricted stock equal to one-third of award opportunity

 

We based 2018-2020 performance share metrics on cumulative pre-tax income, return on assets and the number of Gatherings® home sales

 

We continued to include an adjustment to performance shares based on relative total shareholder return (TSR) performance

 

We no longer use employment agreements for our NEOs. We entered into new severance and change in control agreements with our NEOs upon the expiration of previously-existing employment agreements

PERFORMANCE-BASED

COMPENSATION OUTCOMES

Compensation outcomes from performance incentives were well-aligned with the strong performance our management team achieved during fiscal 2018:

 

The annual cash incentive program delivered a percent-of-target outcome ranging from 122.9% to 144.9% based on the operational and financial performance factors described under “Compensation Discussion and Analysis — Short-Term Incentive Compensation”

 

The three-year award cycle of the 2016 performance share program ended on September 30, 2018, with results yielding a payout relative to target of 140.0%. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation” for more information

RATIFICATION OF

AUDITORS (PG. [16])

Although stockholder ratification is not required, the appointment of Deloitte & Touche LLP as the Company’s independent auditors for fiscal 2019 is being submitted for ratification at the annual meeting because the Board believes doing so is a good corporate governance practice. The Board recommends a vote “FOR” the ratification of the Company’s independent auditors.

CHARTER AMENDMENT AND

NEW RIGHTS AGREEMENT (PG. [41])

We have significant deferred tax assets comprised primarily of net operating losses, or NOLs, that we use (and want to continue to use) to offset the taxable income we are now generating and expect to continue to generate in the future. These benefits, which have substantial value to us, can be significantly impaired, however, if we experience an “ownership change” under Section 382 of the Internal Revenue

 

 

 

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Code (which is discussed in detail under “Proposals 4 and 5 — Background” on page [41]). To help protect against an “ownership change” and preserve our ability to fully maximize our NOLs, our stockholders have previously approved certain protective measures, including the charter amendment and the Section 382 Rights Agreement described in Proposal 4 and Proposal 5, respectively.

These protective provisions are set to expire in November 2019. Accordingly, we are now seeking stockholder approval to extend the expiration dates of each of these protective provisions by an additional three years. We have provided a brief “Frequently Asked Questions” section beginning on page [41], followed by the related proposals. The Board recommends a vote “FOR” approval of both the protective charter amendment and the new Rights Agreement.

 

 

 

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TABLE OF

CONTENTS

 

PROXY STATEMENT SUMMARY

   i

 

PROXY STATEMENT

   1

 

General

   1

 

Purpose of Annual Meeting

   1

 

Who Can Vote

   1

 

How to Vote

   1

 

Revoking a Proxy

   2

 

Quorum

   2

 

Votes Needed

   3

 

Who Counts the Votes

   4

 

Expenses of Solicitation

   4

 

CORPORATE GOVERNANCE

   5

 

Director Independence

   5

 

Board Leadership Structure and Governance Practices

   5

 

Standing Committees and Meetings of the Board of Directors

   6

 

Audit Committee

   7

 

Nominating/Corporate Governance Committee

   7

 

Compensation Committee

   8

 

Finance Committee

   8

 

Committee Charters and Other Information

   8

 

Board and Committee Evaluations

   8

 

Director Qualifications

   8

 

Procedures Regarding Director Candidates Recommended by Stockholders

   9

 

Reporting of Concerns to Independent Directors

   9

 

PROPOSAL 1 — ELECTION OF DIRECTORS

   10

 

NON-EMPLOYEE DIRECTOR COMPENSATION

   14

 

PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

   16

 

REPORT OF THE AUDIT COMMITTEE

   17

 

PROPOSAL 3 — ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

   18

 

COMPENSATION DISCUSSION AND ANALYSIS

   19

 

CD&A Overview

   19

 

Our Overall Compensation Philosophy and Objectives

   21

 

Elements of Fiscal 2018 Compensation Program

   24

 

REPORT OF THE COMPENSATION COMMITTEE

   30

 

EXECUTIVE COMPENSATION

   31

 

SECURITY OWNERSHIP

   38

 

PROPOSALS 4 AND 5 — APPROVAL OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND NEW SECTION 382 RIGHTS AGREEMENTS

   41

TRANSACTIONS WITH RELATED PERSONS

   47

 

PROPOSALS FOR THE NEXT ANNUAL MEETING

   47

 

OTHER INFORMATION

   48

 

APPENDIX I — PROTECTIVE AMENDMENT EXTENSION

   49

 

APPENDIX II — NEW SECTION 382 RIGHTS AGREEMENT

   50

 

ANNEX I — NON-GAAP RECONCILIATION

   92
 

 

 

 

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PROXY

STATEMENT

GENERAL

 

 

This proxy statement contains information about the 2019 annual meeting of stockholders of Beazer Homes USA, Inc. In this proxy statement both “Beazer” and the “Company” refer to Beazer Homes USA, Inc. This proxy statement and the enclosed proxy card are being made available to you by the Company’s Board of Directors starting on or about December [        ], 2018.

PURPOSE OF THE ANNUAL MEETING

 

 

At the Company’s annual meeting, stockholders will vote on the following matters:

 

 

Proposal 1: election of directors;

 

 

Proposal 2: ratification of appointment of Deloitte & Touche LLP as the Company’s independent auditors;

 

 

Proposal 3: approval of the compensation of the Company’s named executive officers;

 

 

Proposal 4: amendment of the Company’s Amended and Restated Certificate of Incorporation;

 

 

Proposal 5: approval of a new Section 382 Rights Agreement; and

 

 

Transaction of any other business that properly comes before the meeting or any adjournments or postponements thereof. As of the date of this proxy statement, the Company is not aware of any other business to come before the meeting.

WHO CAN VOTE

 

 

Only stockholders of record holding shares of Beazer common stock at the close of business on the record date, December 12, 2018, are entitled to receive notice of the annual meeting and to vote the shares of Beazer common stock they held on that date. The Company’s stock transfer books will not be closed. A complete list of stockholders entitled to vote at the annual meeting will be available for examination by any Beazer stockholder at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, for purposes relating to the annual meeting, during normal business hours for a period of ten days before the meeting.

As of December 12, 2018, there were [                    ] shares of Beazer common stock issued and outstanding. Holders of Beazer common stock are entitled to one vote per share and are not allowed to cumulate votes in the election of directors.

HOW TO VOTE

 

 

If your shares of Beazer common stock are held by a broker, bank or other nominee (in “street name”), you will receive instructions from them on how to vote your shares. As further described below, if your shares are held in street name and you do not give your broker, bank or other nominee specific instructions on how to vote your shares, the entity holding your shares may vote them at its discretion on any “routine” matters; however, your shares will not be voted on any “non-routine” matters. An absence of voting instructions on any “non-routine” matters will result in a “broker non-vote.”

 

 

 

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The only “routine” matter to be acted upon at the annual meeting is Proposal No. 2: ratification of appointment of Deloitee & Touche LLP as the Company’s independent auditors. All other matters to be acted upon at the annual meeting are “non-routine” matters and, as such, if you hold all or any portion of your shares in street name and you do not give your broker, bank or other nominee specific instructions on how to vote your shares, your shares will not be voted on any of the following “non-routine” matters:

 

 

Proposal 1: election of directors;

 

 

Proposal 3: advisory vote to approve the compensation of the Company’s named executive officers;

 

 

Proposal 4: amendment of the Company’s Amended and Restated Certificate of Incorporation; and

 

 

Proposal 5: approval of a new Section 382 Rights Agreement.

If you hold shares of Beazer common stock in your own name (as a “stockholder of record”), you may vote your shares:

 

LOGO

over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials; or

 

LOGO

if you requested to receive printed proxy materials, by using the toll-free telephone number listed on the enclosed proxy card (specific directions for using the telephone voting system are included on the proxy card); or

 

LOGO

if you requested to receive printed proxy materials, by marking, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Whichever method you use, your shares of Beazer common stock will be voted as you direct. If you designate the proxies named in these proxy materials to vote on your behalf, but do not specify how to vote your shares, they will be voted:

 

 

FOR the election of the director nominees;

 

 

FOR the ratification of appointment of Deloitte & Touche LLP as the Company’s independent auditors;

 

 

FOR approval of the compensation of the Company’s named executive officers;

 

 

FOR amendment of the Company’s Amended and Restated Certificate of Incorporation;

 

 

FOR approval of a new Section 382 Rights Agreement; and

 

 

In accordance with the judgment of the persons voting the proxy on any other matter properly brought before the meeting or any adjournments or postponements of the annual meeting.

REVOKING A PROXY

 

 

You may revoke your proxy by submitting a new proxy with a later date by Internet, telephone or mail (if applicable), by voting at the meeting, or by filing a written revocation with Beazer’s corporate secretary. Your attendance at the annual meeting alone will not automatically revoke your proxy. If you vote in advance using one of the above methods, you may still attend and vote at the meeting.

QUORUM

 

 

A majority of the shares of Beazer common stock outstanding and entitled to vote on the record date will constitute a quorum, permitting the business of the annual meeting to be conducted. If your shares are present in person or by proxy, your shares will be part of the quorum.

 

 

 

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VOTES NEEDED

 

 

Election of Directors

You may vote FOR or AGAINST any or all director nominees or you may ABSTAIN as to one or more director nominees. In order to be elected, the number of votes FOR a director must exceed the number of votes AGAINST such director. As set forth in our bylaws, only votes FOR or AGAINST the election of a director nominee will be counted. Abstentions and broker non-votes count for quorum purposes, but not for purposes of the election of directors. A vote to ABSTAIN is not treated as a vote FOR or AGAINST and will have no effect on the outcome of the vote.

Ratification of Appointment of Independent Auditors

You may vote FOR or AGAINST the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Broker non-votes are not applicable to this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter.

Approval of the Compensation of Our Named Executive Officers

You may vote FOR or AGAINST the approval of the compensation of our named executive officers or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Broker non-votes will not be counted as shares entitled to vote on this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter.

Amendment to Company’s Amended and Restated Certificate of Incorporation

You may vote FOR or AGAINST the proposed amendment to the Company’s Amended and Restated Certificate of Incorporation or you may ABSTAIN. A majority of all outstanding shares of common stock entitled to vote must be voted FOR approval of this matter in order for it to pass. A broker non-vote and a vote to ABSTAIN will have the effect of a vote AGAINST the matter.

Approval of New Section 382 Rights Agreement

You may vote FOR or AGAINST the new Section 382 Rights Agreement or you may ABSTAIN. A majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote must be voted FOR approval of this matter in order for it to pass. Votes cast FOR or AGAINST and ABSTENTIONS with respect to this matter will be counted as shares entitled to vote on the matter. Broker non-votes will not be counted as shares entitled to vote on this matter. A vote to ABSTAIN will have the effect of a vote AGAINST the matter.

Other Business

The affirmative vote of a majority of the shares cast at the annual meeting is required for approval of any other business that may properly come before the meeting or any adjournment thereof. Only votes FOR or AGAINST approval of any other business will be counted. Abstentions and broker non-votes count for quorum purposes, but not for the voting on the approval of such other business.

 

 

 

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WHO COUNTS THE VOTES

 

 

Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspectors of the election.

EXPENSES OF SOLICITATION

 

 

Expenses incurred in connection with the solicitation of proxies will be paid by the Company. In addition, we have engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies. We anticipate that the costs associated with this engagement will be approximately $18,500 plus costs and expenses incurred by MacKenzie. We will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for costs incurred in connection with this solicitation.

 

 

 

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CORPORATE

GOVERNANCE

DIRECTOR INDEPENDENCE

 

 

Our Board of Directors has evaluated all business and charitable relationships between the Company and the Company’s directors during fiscal 2018 as required by the Company’s Corporate Governance Guidelines. As a result of this evaluation, the Board determined that each non-employee director (all directors other than Mr. Merrill) is an “independent director” as defined by the standards for director independence established by applicable laws, rules and listing standards including the standards for independent directors established by The New York Stock Exchange, Inc., or NYSE, and the Securities and Exchange Commission, or SEC. The Company’s Corporate Governance Guidelines are available on the Company’s website (www.beazer.com).

The Corporate Governance Guidelines require that non-employee directors meet in executive session as part of each regularly scheduled meeting of the Board. These executive sessions are called and chaired by our non-executive chairman. Pursuant to our Corporate Governance Guidelines, the non-executive chairman is an independent director who is elected by the affirmative vote of a majority of the independent directors. In addition to chairing the executive sessions, the non-executive chairman discusses with the other independent directors management’s proposed meeting agenda for meetings of the Board and reviews the approved meeting agenda with our chief executive officer, leads the discussion with our chief executive officer following the independent directors’ executive sessions and leads periodic discussions with other Board members and management concerning the Board’s information needs.

BOARD LEADERSHIP STRUCTURE AND GOVERNANCE PRACTICES

 

 

Board Leadership Structure

Our Board believes that, at this present time, it is appropriate for the positions of Chairman of the Board and Chief Executive Officer to be held by separate individuals. Stephen P. Zelnak, Jr. was appointed to serve as our non-executive Chairman on February 4, 2015. The Board regularly reviews all aspects of its governance profile, including the Board’s leadership structure, and makes changes as appropriate.

Majority Vote Standard and Director Resignation Policy

Our Bylaws and Corporate Governance Guidelines provide a majority voting standard for the election of directors in uncontested elections. Director nominees will be elected if the votes cast for such nominee exceed the number of votes cast against such nominee. In the event that (i) a stockholder proposes a nominee to compete with nominees selected by our Board, and the stockholder does not withdraw the nomination prior to our mailing the notice of the stockholders meeting, or (ii) one or more directors are nominated by a stockholder pursuant to a solicitation of written consents, then directors will be elected by a plurality vote.

The Corporate Governance Guidelines provide that our Board will only nominate candidates who tender their irrevocable resignations, which are effective upon (i) the candidate not receiving the required vote at the next annual meeting at which they face re-election and (ii) our Board of Directors accepting the candidate’s resignation. In the event that any director does not receive a majority vote, then our Guidelines provide that the NCG Committee will act on an expedited basis to determine whether to accept the director’s resignation and will submit its recommendation to the Board. In deciding whether to accept a director’s resignation, the Board and the Nominating/Corporate Governance, or NCG, Committee may consider any factors that they deem relevant. Our Guidelines also provide that the director whose resignation is under consideration will abstain from the deliberation process. All candidates standing for re-election at the annual meeting have tendered such resignations.

 

 

 

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Risk Oversight

Effective risk oversight is a priority for our Board. The goal of the Company’s risk management process is to understand and manage risk in accordance with the Board’s tolerance for risk. All committees report on the risk categories they oversee to the full Board.

Our Board has delegated primary responsibility for overseeing our risk management process to the Audit Committee. The Audit Committee oversees our risk identification and mitigation processes and specifically oversees management of our financial, legal and fraud policies, as well as our regulatory compliance and cybersecurity risks. This includes regular evaluation of risks related to the Company’s financial statements, including internal controls over financial reporting. Members of management, including our Chief Financial Officer, General Counsel, Compliance Officer and Director of Internal Audit, report to the Audit Committee on a quarterly basis regarding on-going risk management activities. In addition, the Audit Committee consults with our Chief Technology Officer regarding ongoing cybersecurity initiatives, and requests such individual, together with other members of senior management, to report to the Audit Committee or the full Board regularly on their assessment of cybersecurity and related risks to the Company. The Audit Committee also oversees the internal audit function and our independent auditors, and meets separately on at least a quarterly basis with our Compliance Officer, Director of Internal Audit and representatives of our independent auditors as part of this oversight responsibility.

Our Compensation Committee oversees risks related to compensation philosophy and programs to determine that our compensation programs, including those applicable to our executives, do not encourage excessive risk taking. The Compensation Committee works with its independent compensation consultant to structure executive compensation plans that are appropriately aligned with key business objectives, company performance and stockholder interests. For more information on risk considerations in our compensation programs, please see “Compensation Discussion and Analysis — Risk Considerations in Our Compensation Programs” below.

Our Finance Committee oversees risks relating to liquidity, capital structure and investments, including land acquisition and development. The Finance Committee, as well as the Board as a whole, reviews our long-term strategic plans, annual budget, capital commitments, cash needs and funding plans. Management is responsible for identifying and managing the risks, while directors provide oversight to management in this process.

Our Nominating/Corporate Governance Committee oversees risks relating to governance matters. The Committee also oversees our ethics program, including implementation of our Code of Business Conduct and Ethics, and compliance by directors and management with the corporate governance and ethics standards of the Company.

STANDING COMMITTEES AND

MEETINGS OF THE BOARD OF DIRECTORS

 

 

There are four standing committees of the Board: An Audit Committee, a Nominating/Corporate Governance Committee, a Compensation Committee, and a Finance Committee. Actions taken by these committees are reported to the Board of Directors at the next following Board meeting. All directors attended the Company’s 2018 annual meeting of stockholders held on February 1, 2018. The following table shows the current membership of the Board and each standing committee, and the number of meetings held during fiscal 2018:

 

 

 

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BOARD

 

  

AUDIT

 

  

COMPENSATION

 

  

NCG

 

  

FINANCE

 

  

ATTENDANCE  
RATE  

 

 

Elizabeth S. Acton

 

  

 

LOGO

 

  

 

LOGO

 

            

 

LOGO

 

  

 

100%  

 

 

Laurent Alpert

 

  

 

LOGO

 

            

 

LOGO

 

  

 

LOGO

 

  

 

100%  

 

 

Brian C. Beazer

 

  

 

LOGO

 

       

 

LOGO

 

  

 

LOGO

 

       

 

100%  

 

 

Peter G. Leemputte

 

  

 

LOGO

 

  

 

LOGO

 

            

 

LOGO

 

  

 

100%  

 

 

Allan P. Merrill

 

  

 

LOGO

 

                      

 

100%  

 

 

Peter M. Orser

 

  

 

LOGO

 

       

 

LOGO

 

       

 

LOGO

 

  

 

100%  

 

 

Norma A. Provencio

 

  

 

LOGO

 

       

 

LOGO

 

  

 

LOGO

 

       

 

100%  

 

 

Danny R. Shepherd

 

  

 

LOGO

 

  

 

LOGO

 

  

 

LOGO

 

            

 

100%  

 

 

Stephen P. Zelnak, Jr.

 

  

 

LOGO

 

  

 

LOGO

 

       

 

LOGO

 

       

 

100%  

 

 

Number of Meetings in 2018

 

   5

 

   5

 

   3

 

   5

 

   4

 

    

   LOGO Chair

AUDIT COMMITTEE

 

 

Our Audit Committee assists the Board in its oversight responsibility relating to (i) the integrity of the Company’s consolidated financial statements, accounting and financial reporting processes, and systems of internal controls over accounting and financial reporting; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the independent auditor’s qualifications, independence and performance, including sole authority for appointment, compensation, oversight, evaluation and termination; (iv) the performance of the Company’s internal audit function; (v) the report of the Audit Committee required by the rules of the SEC, as included in this proxy statement; (vi) reviewing related party transactions, and (vii) the fulfillment of the other responsibilities set out in its charter.

Our Board has determined that all members of the Audit Committee qualify as financial experts, as defined in Item 407 of Regulation S-K under the Securities Act of 1933, as amended, and each are considered “financially literate” under NYSE rules. Our Board has reviewed the composition of the Audit Committee pursuant to the rules of the SEC and NYSE governing audit committees, and confirmed that all members of the Audit Committee are “independent” under such rules.

NOMINATING/CORPORATE GOVERNANCE COMMITTEE

 

 

As described further below, the duties of our NCG Committee include recommending to the Board the slate of director nominees submitted to stockholders for election at each annual meeting and proposing qualified candidates to fill vacancies on the Board. The NCG Committee is also responsible for developing corporate governance principles for the Company, and overseeing the evaluation of the Board of Directors. Our Board has reviewed the composition of the NCG Committee pursuant to the rules of the NYSE governing nominating and governance committees, and confirmed that all members of the NCG Committee are “independent” under such rules.

The NCG Committee considers director nominee recommendations from executive officers of the Company, independent members of the Board, and stockholders of the Company, as well as recommendations from other interested parties. The NCG Committee may also retain an outside search firm to assist it in finding appropriate nominee candidates. Stockholder recommendations for director nominees received by the Company’s corporate secretary (at the address for submitting stockholder proposals and nominations set forth under the heading

 

 

 

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“Procedures Regarding Director Candidates Recommended by Stockholders” below) are forwarded to the NCG Committee for consideration. See also “Director Qualifications” below.

COMPENSATION COMMITTEE

 

 

Our Compensation Committee reviews the Company’s management resources and structure and administers the Company’s cash- and equity-based compensation programs for directors and management, which includes our named executive officers. Our Board has reviewed the composition of the Compensation Committee pursuant to the rules of the NYSE governing compensation committees, and confirmed that all members of the Compensation Committee are “independent” under such rules. All members of the Committee are also “outside directors,” as defined by applicable federal tax law or regulations of the Internal Revenue Service.

FINANCE COMMITTEE

 

 

Our Finance Committee provides assistance to the Board by reviewing from time to time matters concerning corporate finance, including equity and debt financings, acquisitions and divestitures, share and debt repurchases and dividend policy.

COMMITTEE CHARTERS AND OTHER INFORMATION

 

 

You can access electronic copies of the charters of our Audit Committee, NCG Committee, Compensation Committee and Finance Committee on the Company’s website (www.beazer.com). Our Corporate Governance Guidelines and our Code of Business Conduct and Ethics, which meet the requirements of a code of ethics under applicable SEC regulations and NYSE standards, are also available on the Company’s website. You may request printed copies of any of these documents by writing to the Company’s corporate secretary at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328.

BOARD AND COMMITTEE EVALUATIONS

 

 

Our Board recognizes that a thorough evaluation process is an important element of corporate governance and enhances our Board’s effectiveness. Therefore, each year, the NCG Committee oversees the evaluation process, which includes an assessment of both Board and Committee performance, and feedback is solicited for areas of improvement. These evaluations and feedback are then reviewed and shared with the full board during executive session.

DIRECTOR QUALIFICATIONS

 

 

Pursuant to our Corporate Governance Guidelines, the NCG Committee is directed to work with our Board on an annual basis to determine the appropriate qualifications, skills and experience for each director and for our Board as a whole. In evaluating these characteristics, the Committee and our Board take into account many factors, including the individual director’s general understanding of our business on an operational level, as well as his or her professional background and willingness to devote sufficient time to Board duties.

 

 

 

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While our Board does not have a specific diversity policy, it considers diversity of race, ethnicity, gender, age and professional accomplishments in evaluating director candidates. Each individual is evaluated in the context of our Board as a whole, with the objective of recommending a group of nominees that can best promote the success of our business and represent stockholder interests through the exercise of sound judgment based on diversity of experience and background.

PROCEDURES REGARDING DIRECTOR CANDIDATES

RECOMMENDED BY STOCKHOLDERS

 

 

The NCG Committee will consider Board candidates recommended by our stockholders. If the NCG Committee determines to nominate a stockholder-recommended candidate, then that nominee’s name will be included in the proxy statement for our next annual meeting. Stockholder recommendations must be addressed to: Beazer Homes USA, Inc., Attention: Chair, Nominating/Corporate Governance Committee, 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328.

Our stockholders also have the right under our Bylaws to directly nominate director candidates at an annual meeting by following the procedures outlined in our Bylaws. If a director candidate were to be recommended by a stockholder, our NCG Committee would evaluate the candidate in the same manner it evaluates director candidates identified by the Committee.

REPORTING OF CONCERNS TO INDEPENDENT DIRECTORS

 

 

If you have any concerns about the Company, you may communicate them to our independent directors. We maintain an ethics hotline (at 1-866-457-9346) that individuals may call to report any concerns to Global Compliance, a third party service provider that administers our ethics hotline. Individuals may report their concerns anonymously, should they wish to do so. Written communications should be mailed to the Company’s Corporate Secretary at 1000 Abernathy Road, Suite 260, Atlanta, GA 30328, and the Corporate Secretary will forward such communications to our independent directors.

 

 

 

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PROPOSAL 1 —

ELECTION OF DIRECTORS

GENERAL

 

 

Each of the nominees listed below has been nominated as a director to serve a term of one year and until his or her respective successor has been qualified and elected. Each of the following nominees is presently serving as a director. Our Board of Directors periodically evaluates the appropriate size for our Board of Directors and will set the number of directors in accordance with our Bylaws and based on recommendations of the NCG Committee.

In the event any nominee is not available as a candidate for director, votes will be cast pursuant to authority granted by the proxy for such other candidate or candidates as may be recommended by the NCG Committee and subsequently nominated by our Board of Directors. Our Board of Directors has no reason to believe that any of the following nominees will be unable or unwilling to serve as a director, if elected.

 

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NOMINEES

The biographical information appearing below with respect to each nominee has been furnished to us by the nominee:

ELIZABETH S. ACTON

Ms. Acton, 67, has served as a director of the Company since May 2012. Prior to her retirement in April 2012, Ms. Acton was Executive Vice President Finance (from 2011 to 2012) and Executive Vice President and Chief Financial Officer from (2002 to 2011) of Comerica Incorporated, a financial services company. Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company from 1983 to 2002, including Vice President and Treasurer from 2000 to 2002 and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company from 1998 to 2000. She is an Independent Trustee of the Fidelity Fixed Income and Asset Allocation Funds. Ms. Acton received a Bachelor’s degree from the University of Minnesota and a Master of Business Administration degree in Finance from Indiana University.

Ms. Acton has over 35 years of financial management expertise as well as significant experience as a finance executive for two public companies. We believe Ms. Acton’s finance and accounting expertise is valuable to the Company in many respects, including as Chair of our Finance Committee, as well as compliance with our obligations under various regulatory requirements for financial expertise on our Board of Directors and Audit Committee.

LAURENT ALPERT

Mr. Alpert, 72, has served as a director of the Company since February 2002. Mr. Alpert is a Senior Counsel of the international law firm of Cleary, Gottlieb, Steen & Hamilton. He joined Cleary Gottlieb in 1972, and was a partner from 1980 until his retirement in November 2016. He received his undergraduate degree from Harvard College and a law degree from Harvard Law School. Mr. Alpert is also an overseer of the International Rescue Committee, a non-profit organization providing relief and resettlement services to refugees.

Mr. Alpert brings to our Board of Directors over 40 years of experience practicing law with one of the world’s pre-eminent law firms and over 16 years’ experience on our Board of Directors. He has substantial experience representing companies in a broad range of industries. In light of the regulatory environment in which the Company operates and the continued emphasis on corporate governance, ethics and compliance for public companies, Mr. Alpert’s experience, training and judgment are deemed to be of significant benefit to the Company.

 

 

 

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BRIAN C. BEAZER

Mr. Beazer, 83, is our Chairman Emeritus and has served as a director of the Company since our IPO in 1994. Mr. Beazer served as our Non-Executive Chairman of the Board from 1994 until February 2015. From 1968 to 1983, Mr. Beazer was Chief Executive Officer of Beazer PLC, a United Kingdom company, and then was Chairman and Chief Executive Officer of that company from 1983 to the date of its acquisition by Hanson PLC in 1991. During that time, Beazer PLC expanded its activities internationally to include homebuilding, quarrying, contracting and real estate and generated annual revenue of approximately $3.4 billion. Mr. Beazer was educated at the Cathedral School, Wells, Somerset, England. He is a director of Beazer Japan, Ltd. and Seal Mint, Ltd. and is a private investor.

Mr. Beazer has been in the homebuilding and construction industry worldwide for over 50 years. His experience and vision have been driving forces at the Company since prior to its IPO. His extraordinary experience and stature as a highly respected international businessman provide the Company with unique insight into national and international economic policies that impact the homebuilding industry, as well as an in-depth understanding of the domestic homebuilding industry. We continue to benefit from his knowledge and experience in his role as Chairman Emeritus.

PETER G. LEEMPUTTE

Mr. Leemputte, 61, has been a director of the Company since August 2005. Mr. Leemputte joined Keurig Green Mountain, Inc., a leader in specialty coffee, coffee makers, teas and other beverages, in June 2015 and served as Chief Financial Officer and Treasurer from August 2015 until his retirement following the sale of the company in June 2016. Prior to that, from September 2008 to March 2015, Mr. Leemputte worked at Mead Johnson Nutrition Company, a global leader in infant and children’s nutrition, where he served most recently as Executive Vice President and Chief Financial Officer. Previously, Mr. Leemputte was Senior Vice President and Chief Financial Officer for Brunswick Corporation. He joined Brunswick in 2001 as Vice President and Controller. Prior to joining Brunswick Corporation, Mr. Leemputte held various management positions at Chicago Title Corporation, Mercer Management Consulting, Armco Inc., FMC Corporation and BP. Mr. Leemputte holds a Bachelor of Science degree in Chemical Engineering from Washington University, St. Louis and a Master of Business Administration in Finance from the University of Chicago Booth School of Business. Mr. Leemputte currently serves as a director of MasterCraft Boat Company (NASDAQ: MCFT).

Mr. Leemputte’s experience, particularly his increasingly important financial responsibilities for several of the nation’s leading corporations, provides significant financial and accounting expertise that has been invaluable to the Company in many respects, including assessment of our capital structure and financial strategy.

ALLAN P. MERRILL

Mr. Merrill, 52, joined the Company in May 2007 as Executive Vice President and Chief Financial Officer, and was named President and Chief Executive Officer in June 2011. Prior to joining the Company, Mr. Merrill worked in both investment banking and in online real estate marketing. From 1987 to 2000, Mr. Merrill worked for the investment banking firm UBS (and its predecessor Dillon, Read & Co.), where he was a managing director and ultimately served as co-head of the Global Resources Group, overseeing relationships with construction and building materials companies around the world, as well as with clients in other industries. During his investment banking career, he advised the Company on its 1994 IPO as well as on several major acquisitions. Immediately prior to joining the Company, Mr. Merrill worked for Move, Inc., where he served as Executive Vice President of Corporate Development and Strategy. From April 2000 to October 2001, Mr. Merrill was president of Homebuilder.com, a division of Move, Inc. Mr. Merrill is chair of the Policy Advisory Board of the Joint Center for Housing Studies at Harvard University and a member of the Executive Committee of the Metro Atlanta Chamber of Commerce. He is also a director of Builder Homesite, Inc. and he chairs the Management Committee of the Leading Builders of America. He is a graduate of the University of Pennsylvania’s Wharton School with a Bachelor of Science degree in Economics.

We believe Mr. Merrill’s experience in and knowledge of the homebuilding sector, gained primarily through finance, capital markets and strategic development roles over more than 20 years, is particularly valuable to the Company as it seeks to achieve its financial and operational goals.

 

 

 

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PETER M. ORSER

Mr. Orser, 62, has been a director of the Company since February 2016. From 2010 to 2014, Mr. Orser served as President and Chief Executive Officer of the Weyerhaeuser Real Estate Company, a subsidiary of Weyerhaeuser Company, where he oversaw five different homebuilding operations across the United States. In July 2014, under his leadership, Weyerhaeuser completed the successful sale of the company. Prior to that, Mr. Orser spent almost 25 years in various positions at Quadrant Homes, a leading homebuilder in the state of Washington and a subsidiary of Weyerhaeuser, including serving as President from 2003 to 2010. Mr. Orser is active in a number of other civic organizations, including serving as Chairman of the Runstad Department of Real Estate Advisory Board, University of Washington, and was appointed by the Governor to serve on the Washington State Affordable Housing Advisory Board. Mr. Orser holds a Bachelor of Science degree from the University of Puget Sound and a Master of Urban Planning from the University of Washington.

Mr. Orser’s experience in the homebuilding industry provides significant operational and safety expertise to the Company. We believe his understanding of our industry, as well as his management experience gained over the course of his career, provides tremendous value to the Board.

NORMA A. PROVENCIO

Ms. Provencio, 61, has been a director of the Company since November 2009. Ms. Provencio is President and owner of Provencio Advisory Services Inc., a healthcare financial and operational consulting firm. Prior to forming Provencio Advisory Services in October 2003, she was the Partner-in-Charge of KPMG’s Pacific Southwest Healthcare Practice since May 2002. From 1979 to 2002, she was with Arthur Andersen, serving as that firm’s Partner-in-Charge of the Pharmaceutical, Biomedical and Healthcare Practice for the Pacific Southwest. Ms. Provencio received her Bachelor of Science in Accounting from Loyola Marymount University. She is a certified public accountant and also a member of the Board of Trustees of Loyola Marymount University.

Ms. Provencio has over 30 years’ experience in the public accounting field. We believe her in-depth understanding of accounting rules and financial reporting regulations to be extremely valuable to the Company’s commitment and efforts to comply with regulatory requirements.

DANNY R. SHEPHERD

Mr. Shepherd, 67, has been a director of the Company since November 2016. Prior to his retirement in 2015, Mr. Shepherd was Vice Chairman (from 2014 to 2015) and served as Senior Vice President, Executive Vice President and Chief Operating Officer (from 2001 to 2014) of Vulcan Materials Company, a producer of construction aggregates. Mr. Shepherd is a current director of GCP Applied Technologies. Mr. Shepherd received his Bachelor of Science degree from Georgia Institute of Technology.

Mr. Shepherd has significant experience in the building materials industry, and he has over forty years of public company experience. He served in various management roles over the course of his career, including thirteen years as an executive of a large producer of construction aggregates. We believe his in-depth understanding of our industry, as well as his management and operational experience, provides tremendous value to the Board.

STEPHEN P. ZELNAK, JR.

Mr. Zelnak, 73, has served as a director of the Company since February 2003 and as our Non-Executive Chairman of the Board since February 2015. He is currently a director of Martin Marietta Materials, Inc., a producer of aggregates for the construction industry where he has also served as Chief Executive Officer from 1993 through 2009 and Chairman of the Board of Directors from 1997 through May 2014. Mr. Zelnak joined Martin Marietta Corporation in 1981 where he served as the President of Martin Marietta’s Materials Group and of Martin Marietta’s Aggregates Division. Mr. Zelnak also serves as Chairman and majority owner of ZP Enterprises, LLC, a private investment firm. Mr. Zelnak received a Bachelor’s degree from Georgia Institute of Technology and Masters degrees in Administrative Science and Business Administration from the University of Alabama System. He has served as Chairman of the North Carolina Chamber and is the past Chairman of the North Carolina Community College Foundation. He serves on the Advisory Board of the College of Management at North Carolina State University and is a Trustee Emeritus of the Georgia Tech Foundation.

 

 

 

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Mr. Zelnak brings over 30 years’ experience as a senior executive in the building materials industry, as well as an educational background that includes business administration, organizational behavior and finance. In addition, his prior experience as the chief executive officer of a publicly-traded company is especially beneficial in his role as a member of the Audit Committee and the Nominating/Corporate Governance Committee. His vast knowledge of the building industry and mentorship skills are tremendous assets to the Board and the executive management team in his role as Non-Executive Chairman.

RECOMMENDATION

 

 

The Board of Directors recommends a vote FOR the election of each of the nominees named above.

 

 

 

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NON-EMPLOYEE

DIRECTOR COMPENSATION

SUMMARY OF 2018 NON-EMPLOYEE DIRECTOR COMPENSATION

 

 

Our non-employee directors generally receive an annual cash retainer and an annual equity grant that vests one year from the date of grant. They also receive reimbursement for reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings; however, they do not receive fees for meeting attendance.

The Compensation Committee seeks to position non-employee director compensation at or near the 50th percentile of industry peers, to reward our directors’ efforts and contributions, with a meaningful emphasis on equity-based awards to align their interests with stockholders.

NON-EMPLOYEE DIRECTOR CASH COMPENSATION

 

 

For fiscal year 2018, all non-employee directors received a $75,000 annual cash retainer. We also provide annual committee chair retainers of $25,000 for our Audit Committee chair and $20,000 for each of our other committee chairs. Non-chair committee members receive $12,500 annually for service on the Audit Committee and $10,000 annually for service on all other committees.

In addition to the $75,000 annual cash retainer paid to all non-employee directors, the non-executive Chairman receives an additional $75,000 annual cash retainer. However, the non-executive Chairman does not receive additional retainers for committee service.

ANNUAL EQUITY GRANT

 

 

For fiscal 2018, all non-employee directors received an equity grant with the number of shares calculated by dividing $100,000 by the fair market value of a share of common stock on the date of grant, rounded down to the nearest whole number. Directors are eligible to receive grants of equity-based awards under the Company’s long-term incentive plans, at the discretion of our Compensation Committee. Our Compensation Committee’s rationale for equity grants to directors is similar to that for our named executive officers; namely, to align their interests with those of stockholders. The amount of the director grant is determined in consultation with our Compensation Committee’s independent compensation consultant, Pearl Meyer. See footnote 2 to the Director Compensation Table below.

In addition to the $100,000 annual equity award to all non-employee directors, the non-executive Chairman receives an additional $100,000 annual equity award.

Except as described above, our non-employee directors did not receive any other compensation from the Company for services rendered as a director during fiscal 2018. Our directors are subject to stock ownership and holding requirements, as described under “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Stock Ownership and Holding Requirements” below.

 

 

 

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DIRECTOR COMPENSATION TABLE

 

 

The following table sets forth the compensation of each non-employee director in fiscal year 2018.

 

  NAME (1)

 

  

FEES EARNED OR
PAID IN CASH ($)

 

 

  

STOCK AWARDS ($) (2)

 

  

TOTAL ($)        

 

 

Elizabeth S. Acton

 

    

 

 

 

 

107,500

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

207,488          

 

 

 

 

Laurent Alpert

 

    

 

 

 

 

105,000

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

204,988          

 

 

 

 

Brian C. Beazer

 

    

 

 

 

 

95,000

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

194,988          

 

 

 

 

Peter G. Leemputte

 

    

 

 

 

 

99,600

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

199,588          

 

 

 

 

Peter M. Orser

 

    

 

 

 

 

101,650

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

201,638          

 

 

 

 

Norma A. Provencio

 

    

 

 

 

 

100,438

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

200,426          

 

 

 

 

Danny R. Shepherd

 

    

 

 

 

 

105,813

 

 

 

    

 

 

 

 

99,988    

 

 

 

    

 

 

 

 

205,801          

 

 

 

 

Stephen P. Zelnak, Jr.

 

    

 

 

 

 

150,000

 

 

 

    

 

 

 

 

199,997    

 

 

 

    

 

 

 

 

349,997          

 

 

 

 

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Allan Merrill, our President and Chief Executive Officer, is a member of our Board of Directors, but does not receive separate compensation for his Board service.

 

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Represents the aggregate grant date fair value of awards determined in accordance with FASB ASC Topic 718. These are not amounts paid to or realized by the non-employee directors. Further information regarding the valuation of stock awards can be found in Notes 2 and 16 to our Consolidated Financial Statements in our 2018 Form 10-K. In fiscal 2018, Ms. Acton, Ms. Provencio and Messrs. Alpert, Beazer, Leemputte, Orser and Shepherd were each granted 4,887 shares of restricted stock. Mr. Zelnak was granted 9,775 shares of restricted stock, consisting of: (a) his non-employee director grant of 4,887 shares; and (b) an additional grant of 4,888 shares in connection with his service as Chairman of the Board. Each award vests on the one-year anniversary of its grant date.

 

 

 

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PROPOSAL 2 —

RATIFICATION OF APPOINTMENT

OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Audit Committee of our Board of Directors has selected the firm of Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively, Deloitte & Touche), to serve as our independent registered public accounting firm for the fiscal year ending September 30, 2019. Deloitte & Touche has served as our accounting firm since 1996. The services provided to the Company by Deloitte & Touche for the last two fiscal years are described under the caption “Principal Accountant Fees and Services” below. Stockholder approval of the appointment is not required; however, our Board of Directors believes that obtaining stockholder ratification of the appointment is a sound governance practice.

Representatives of Deloitte & Touche will be present at the annual meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from stockholders.

 

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PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the fiscal years ended September 30, 2018 and 2017, the following professional services were performed by Deloitte & Touche.

Audit Fees: The aggregate audit fees billed for the fiscal years ended September 30, 2018 and 2017 were $1,065,000 and $1,205,000, respectively. Audit fees consisted of fees associated with the audit of our annual financial statements and internal control over financial reporting, the audits of certain consolidated subsidiaries, reviews of the financial statements included in our quarterly reports on Form 10-Q, and other services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

Audit-Related Fees: The aggregate fees billed for audit-related services for the fiscal years ended September 30, 2018 and 2017 were $33,790 and $33,800, respectively. These fees related to assurance and related services performed by Deloitte & Touche that are reasonably related to the performance of the audit or review of our financial statements. These services included employee benefit and compensation plan audits.

Tax Fees: No fees for tax services were billed by or paid to Deloitte & Touche in either fiscal year 2018 or fiscal year 2017.

All Other Fees: No other fees were billed by or paid to Deloitte & Touche in either fiscal year 2018 or fiscal year 2017.

Our Audit Committee annually approves each year’s engagement for audit services in advance. Our Audit Committee has also established complementary procedures to require pre-approval of all permitted non-audit services provided by our independent auditors.

RECOMMENDATION

 

 

The Board of Directors recommends a vote FOR ratification of the appointment of Deloitte & Touche as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2019.

 

 

 

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REPORT OF THE

AUDIT COMMITTEE

The Audit Committee meets the definition of an audit committee as set forth in Section 3(a)(58)(A) of the Exchange Act and operates under a written charter adopted by our Board of Directors. Each member of the Audit Committee is independent and financially literate in the judgment of the Board of Directors and as required by the Sarbanes-Oxley Act and applicable SEC and NYSE rules. The Board of Directors has also determined that Ms. Acton and Messrs. Leemputte, Shepherd and Zelnak qualify as “audit committee financial experts,” as defined under SEC regulations.

Management is responsible for our internal controls and the financial reporting process. Deloitte & Touche, the Company’s independent registered public accounting firm, is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and for issuing a report thereon. The Audit Committee’s responsibility is generally to monitor and oversee these processes, as described in the Audit Committee Charter.

The Audit Committee reviewed and discussed with management the Company’s audited financial statements as of and for the fiscal year ended September 30, 2018. The Audit Committee has discussed with Deloitte & Touche the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T.

The Audit Committee has also received the written communications from Deloitte & Touche required by the PCAOB regarding Deloitte & Touche’s communications with the Audit Committee concerning independence and has discussed with Deloitte & Touche their independence. The Audit Committee has considered whether the provision of the non-audit services described below by Deloitte & Touche is compatible with maintaining their independence and has concluded that the provision of these services does not compromise such independence.

Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018 for filing with the SEC.

DANNY R. SHEPHERD (CHAIR)

ELIZABETH S. ACTON

PETER G. LEEMPUTTE

STEPHEN P. ZELNAK, JR.

The Members of the Audit Committee

November 7, 2018

 

 

 

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PROPOSAL 3 –

ADVISORY VOTE TO APPROVE THE COMPENSATION

OF OUR NAMED EXECUTIVE OFFICERS

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, as amended, the Company is asking its shareholders to cast an advisory vote to approve the compensation of the Company’s named executive officers, or NEOs, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K. This proposal, commonly known as “say-on-pay,” gives our shareholders the opportunity to express their views on the design and effectiveness of our executive compensation programs. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this proxy statement.

As described in detail in the section of this proxy statement titled “Compensation Discussion and Analysis,” our executive compensation programs are designed to attract, motivate and retain our executive officers (including our NEOs), who are critical to our success. Under these programs, our NEOs are rewarded for the achievement of specific annual, long-term and strategic goals in support of long-term value creation. Please read the section of this proxy statement titled “Compensation Discussion and Analysis,” and the Executive Compensation tables that follow it, for additional details about our executive compensation programs.

At each of the Company’s annual meetings since the 2012 annual meeting of shareholders, the Company’s shareholders have approved, on an advisory basis, the compensation of the Company’s NEOs, as disclosed in the proxy statement for such meeting, and the Board and the Compensation Committee have considered the result of these shareholder votes in setting compensation policies and making compensation decisions for each of the fiscal years that has followed. At our 2018 annual meeting of stockholders, over 97% of shares present in person or represented by proxy voted for approval of our executive compensation.

At our 2017 annual meeting of shareholders, the Company’s shareholders once again determined that our say-on-pay vote should be held on an annual basis. In accordance with this determination, we are asking our shareholders to vote FOR the following resolution:

RESOLVED, that the compensation paid to the NEOs, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Executive Compensation tables, and the narrative discussion, is hereby approved.

The say-on-pay vote is advisory and, therefore, not binding on the Company, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our shareholders, and to the extent there is a significant vote against the compensation paid to our NEOs, as disclosed in this proxy statement, we will consider our shareholders’ concerns and will evaluate what, if any, further actions are necessary to address those concerns.

RECOMMENDATION

 

 

The Board of Directors recommends a vote FOR approval of the compensation of our named executive officers.

 

 

 

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COMPENSATION

DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis, or “CD&A”, describes the compensation programs for our Named Executive Officers, or “NEOs”. Our current NEOs, who also served as our NEOs in 2018, are:

 

  NAME

 

  

TITLE

 

 

Allan P. Merrill

 

  

 

President and Chief Executive Officer

 

 

Robert L. Salomon

 

  

Executive Vice President and Chief Financial Officer

 

 

Keith L. Belknap

 

  

 

Executive Vice President and General Counsel

 

CD&A

OVERVIEW

WHO WE ARE

 

 

 

We are a geographically diversified homebuilder with operations in 13 states within three geographic regions in the United States. Our homes are designed to appeal to homeowners at different price points across various demographic segments. Our objective is to provide our customers with homes that incorporate exceptional value and quality, at affordable prices, while creating durable and growing value for our employees, partners and stockholders.

LOGO

 

 

2018 BUSINESS HIGHLIGHTS

 

 

In 2018, we continued to pursue our objective of providing our customers with homes that incorporate exceptional value and quality at affordable prices, while creating durable and growing value for our employees, partners and stockholders. Listed below are several highlights of our financial, operational and strategic achievements during fiscal 2018:

2B-10 Plan

Surpassed our multi-year plan to reach at least $2 billion in revenue and $200 million of Adjusted EBITDA

 

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FINANCIAL

 

 

 

$2.1 BILLION

  

 

Revenue

Achieved $2.1 billion in homebuilding revenue, a 9.6% increase year-over-year

 

 

 

$204.7 MILLION

  

 

Adjusted EBITDA

Achieved $204.7 million in Adjusted EBITDA, a 14.5% increase year-over-year

 

 

 

$250 MILLION

  

 

Debt Reduction

Completed three-year, $250 million debt reduction plan

 

 

 

 

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OPERATIONAL

 

 

 

3.0 PER MONTH

  

 

Sales Pace

Achieved average monthly sales pace per community of 3.0

 

 

 

$360,200

  

 

Average Selling Price

Ended the year with an average selling price of $360,200 for our homes, marking our seventh consecutive year of ASP growth

 

 

 

160 COMMUNITIES

  

 

Community Count

Ended the year with a community count of 160

 

 

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STRATEGIC

 

 

 

34 NEWLY

ACQUIRED

COMMUNITIES

  

 

Acquisitions

Completed the acquisitions of Bill Clark Homes and Venture Homes during the year, adding 34 existing and future communities

 

During 2019, the Board and management will continue to take steps to position Beazer for future success by growing EBITDA and EPS, while managing the balance sheet to drive ROA above 10%.

For purposes of this CD&A:

 

 

“Adjusted EBITDA” means earnings before interest, taxes, depreciation, amortization, debt extinguishment charges and impairments, and is calculated by adding charges, including inventory impairment and abandonment charges, joint venture impairment charges and other non-recurring items for the period to EBITDA.

 

 

“EBITDA” means earnings before interest, taxes, depreciation, amortization, debt extinguishment charges and impairments, and is calculated by adding non-cash charges, including depreciation and amortization for the period, to EBIT.

 

 

“EBIT” means net income (loss) before (a) previously capitalized interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization; and (b) income taxes.

 

 

“Bonus Plan EBITDA” means Adjusted EBITDA before accrual of corporate bonuses.

Please see Annex I for a reconciliation of Adjusted EBITDA to net income (loss).

2018 COMPENSATION HIGHLIGHTS

 

 

Actions

 

 

Mr. Merrill’s base salary was increased from $900,000 to $950,000. Mr Salomon’s base salary was increased from $525,000 to $550,000. Mr. Belknap joined the Company in January 2018 and his initial base salary was $450,000. See “— Elements of Fiscal 2018 Compensation Program — Base Salary” below for more information about these salary adjustments.

 

 

Mr. Merrill’s long-term incentive target was increased from 250% to 300% of base salary, and Mr. Salomon’s short-term incentive target was increased from 100% to 125% of base salary. See “— Elements of Fiscal 2018 Compensation Program — Short-Term Compensation” and “— Loss-Term Compensation” below for more information about these adjustments to target compensation.

 

 

Operational objectives for the fiscal 2018 short-term incentive opportunity were identical to those used for the fiscal 2017 short-term incentive opportunity, with improvement over fiscal 2017 results required in all cases. Discretion was retained to deduct from awards earned for failure to achieve certain construction quality standards based on the assessment of an independent third-party expert.

 

 

We continued our practice of awarding performance-based restricted stock equal to two-thirds of overall long-term incentive award opportunity, and time-based restricted stock equal to one-third of award opportunity.

 

 

 

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We based 2018-2020 performance share metrics on cumulative pre-tax income, return on assets and the number of Gatherings® home sales, with achievement subject to adjustment based on relative TSR performance.

 

 

We no longer use employment agreements for our NEOs. We entered into new severance and change in control agreements with our NEOs upon the expiration of previously-existing employment agreements.

Outcomes

 

 

The short-term bonus opportunity delivered a percent-of-target outcome ranging from 122.9% to 144.9%, based on the operational and financial performance factors described under “— Elements of Fiscal 2018 Compensation Program — Short-Term Incentive Compensation” below.

 

 

The three-year award cycle of the 2016 performance share program ended on September 30, 2018, with results yielding a payout relative to target of 140.0%, as described under “— Elements of Fiscal 2018 Compensation Program — Long-Term Incentive Compensation” below.

OUR OVERALL COMPENSATION

PHILOSOPHY AND OBJECTIVES

 

 

Our executive compensation philosophy is to design compensation programs that:

 

 

Attract, retain and reward top talent;

 

 

Align pay with performance; and

 

 

Provide a substantial portion of our compensation in long-term equity-based compensation to reinforce key business and strategic objectives in support of long-term value creation.

CORE PRINCIPLES AND KEY OBJECTIVES

 

 

We utilize a combination of base salary, short-term cash incentives and long-term equity incentives in the form of performance shares and, to a lesser extent, time-based restricted stock. The Committee generally seeks to align overall target compensation opportunities within a competitive range (plus or minus 10%) of the peer group 50th percentile.

Our Compensation Committee reviews our core compensation philosophy annually in conjunction with the review of our compensation programs. While our core compensation philosophy and objectives have remained largely constant, the Committee has made adjustments to various aspects of our compensation programs to meet changing needs and circumstances of the Company. For example, the addition of a debt reduction metric for the three-year performance period associated with the performance shares granted in fiscal 2016 was the result of a strategic objective to aggressively reduce debt.

The Committee believes that base salary and incentive compensation opportunities should be set based on a variety of factors, including key business objectives and strategic priorities, Company performance, the compensation practices of our peer group, each executive’s specific responsibilities and skill sets, and the relationship among the compensation levels of members of our management team. The Committee has taken into consideration our need to attract and retain qualified executives in an industry that continues to experience an intense level of competition for senior executives.

By structuring compensation programs with features that are balanced between short- and long-term incentives as well as cash and equity awards, the Committee believes it can: align management’s interests with those of our stockholders in both the short- and long-term; reduce risks that may be associated with compensation that is overly focused on short-term objectives; and attract, retain and motivate senior management personnel.

 

 

 

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PAY FOR PERFORMANCE

 

 

Our core compensation philosophy continues to be focused on providing incentive compensation to our management team when they achieve challenging financial and non-financial goals that the Committee and our Board of Directors believe are critical to enhancing stockholder value. As part of that philosophy, failure to reach such goals can result in no compensation under a particular plan or metric. For example, none of the performance shares granted to our NEOs in fiscal years 2011 through 2014 vested because required performance targets were not achieved.

PAY BEST PRACTICES

 

 

Our compensation practices include:

 

 

Emphasis on Performance-Based Pay: 64 percent of the ongoing pay mix for our CEO, and an average of 58% of the target pay mix for our other NEOs, is variable and performance-based. In aggregate, 62 percent of the target compensation for our CEO and other NEOs for 2018 was variable and performance-based.

 

 

Long-term vesting: Our equity-based pay vehicles have multi-year vesting periods to reward long-term performance and value creation, enhance retention and deter inappropriate risk taking.

 

 

Multiple Performance Measures: We use multiple metrics to evaluate Company performance, covering both short-term and long-term performance objectives, with caps to deter inappropriate risk taking.

 

 

Stock Ownership Requirements: We have stock ownership requirements for our directors and officers. For example, our CEO must hold common stock equivalent in value to at least five times base salary.

 

 

No Repricing: Our stock options cannot be repriced, reset or exchanged for cash if under water without stockholder approval.

 

 

Anti-Pledging and Hedging Policies: We prohibit our directors and executive officers from (i) holding Beazer securities in a margin account or pledging any Beazer securities as collateral for a loan and (ii) entering into any hedge or other transaction in Beazer securities that limits the risk of ownership of Beazer common stock or stock options.

 

 

Double Trigger Change in Control Provisions: We have a policy of requiring a double trigger to receive cash severance and to receive accelerated vesting of equity awards upon a change in control.

 

 

Clawback: Each equity award is conditioned on repayment or forfeiture as required by existing law. In addition, each executive officer’s incentive compensation is subject to repayment or such other means of recovery (or a combination thereof) as is necessary to comply with law or related rules and regulations of the SEC or NYSE.

 

 

No Tax Gross-Ups: We maintain severance agreements with our NEOs that standardize executive separation terms, minimize the risk of excessive payouts and do not provide for any tax gross-ups.

ROLE OF THE COMPENSATION COMMITTEE, MANAGEMENT AND COMPENSATION CONSULTANTS

 

 

The principal responsibilities of our Compensation Committee include:

 

 

meeting with its independent compensation consultant, with and without the presence of management, to review and structure objectives and compensation programs for our NEOs that are aligned with the Company’s business and financial strategy, and accordingly, stockholder interests;

 

 

evaluating the performance of our NEOs in light of those objectives; and

 

 

based on this evaluation, determining and approving the compensation level for our CEO and for other executive officers.

 

 

 

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The Committee has retained Pearl Meyer for each of the last six fiscal years to provide advice regarding compensation plan design, compensation levels and benchmarking data and advice. Prior to retaining Pearl Meyer for fiscal 2018, the Committee determined that Pearl Meyer qualifies as an independent compensation consultant. Pearl Meyer reports directly to the Committee and does not provide any other services to the Company.

In relation to compensation program design for fiscal 2018, the Committee took into account discussions with, and presentations by, key members of our management team to ensure that our compensation plans were aligned with our operating, financial and strategic objectives.

On an annual basis, Mr. Merrill reviews the performance of the other NEOs, and makes recommendations to the Committee based on his review. In addition, our non-executive chairman discussed Mr. Merrill’s performance with the Committee. Mr. Merrill is present for the Committee’s deliberations related to the compensation of the other NEOs, but not for the Committee’s discussions related to his own compensation.

PEER GROUPS AND DATA

 

 

For fiscal year 2018, our peer group comprised AV Homes, Inc., Century Communities, Inc., Hovnanian Enterprises, Inc., KB Home, LGI Homes, Inc., M.D.C. Holdings, Inc., M/I Homes, Inc., Meritage Homes Corporation, Taylor Morrison Home Corporation, TRI Pointe Group, Inc. and William Lyon Homes (the “2018 Peer Group”). These companies were chosen because, in addition to being among our chief competition among publicly-traded homebuilders, they are closely aligned to us in terms of size. WCI Communities, Inc. was removed from the peer group for fiscal year 2018 because it was acquired during our fiscal year 2017. Based in part on recommendations of Pearl Meyer, the Committee determined to add Century Communities, Inc. and LGI Homes, Inc. as additional peers for fiscal year 2018 to replace the loss of WCI Communities, Inc. from the peer group and increase the sample size to eleven companies.

Each year, the Committee’s independent consultant conducts a review of peer group pay levels and practices, which the Committee takes into consideration when establishing NEO compensation levels, along with a variety of other factors, such as Company and individual performance, each incumbent’s qualifications and responsibilities, the Company’s recruiting experience and talent management needs and the Committee’s business judgment.

While the Committee believes benchmarking against pay practices at other publicly-held homebuilders is useful in determining whether our executive compensation practices are reasonable for fiscal 2018, it did not establish compensation levels based solely on benchmarking industry practices. Nonetheless, based on data for the 2018 Peer Group, the Committee was advised by Pearl Meyer that compensation for our NEOs remained targeted between the 25th and 50th percentile market values in the aggregate and within or below a competitive range (plus or minus 10%) of the 50th percentile for each incumbent.

CONSIDERATION OF SAY ON PAY VOTES

 

 

Following our 2017 and 2018 annual meetings of stockholders, the Committee reviewed the results of the stockholder advisory votes on our executive compensation. Over 97% of the shares voted on the proposal at both the 2017 and 2018 annual meetings were voted in support of the compensation of our NEOs.

In designing the compensation program for fiscal year 2018, the Committee considered the results of the 2017 Say on Pay vote, our ongoing dialogue with stockholders, internal considerations such as consistency from year to year and an evaluation of peer practices. After consideration, the Committee concluded that, for fiscal year 2018, it was appropriate to maintain the existing compensation mix of our NEOs, with a slight variation in the components of the long-term incentive plan to reflect the Company’s current strategic direction. The fiscal year 2018 compensation program continues to tie the majority of our NEOs’ compensation to performance metrics that support the Company’s strategy of balanced growth.

 

 

 

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ELEMENTS OF FISCAL

2018 COMPENSATION PROGRAM

 

 

BASE SALARY

 

 

Our ability to recruit and retain executive talent depends on setting competitive base salaries. We begin with an analysis of base pay relative to the market. We target base pay at or near the peer group 50th percentile (or median) and then evaluate the need to make any adjustments based on vertical variables such as pay parity relative to other officers and internal accountability. We review base salaries annually as a whole and individually every 12 months, unless circumstances require otherwise. For non-CEO NEO salaries, we solicit CEO input.

Based on its review for the 2018 fiscal year, the Committee decided to increase the base salary for Mr. Merrill by 5.5% to $950,000 to recognize his continued strong performance and leadership. This was Mr. Merrill’s first salary increase since assuming the CEO role in 2011. Mr. Salomon’s base salary was increased by 4.8% to $550,000 to align more closely with industry peers. Mr. Belknap joined the Company in January 2018 and his base salary was initially established at $450,000. Based on Pearl Meyer’s market pay analysis, fiscal 2018 salaries were positioned slightly above and within a competitive range of the peer group 50th percentile for Mr. Merrill, at the 50th percentile for Mr. Salomon, and between the 25th and 50th percentiles for Mr. Belknap.

SHORT-TERM INCENTIVE COMPENSATION

 

 

Our annual cash incentive plan is designed to motivate and reward executives for achieving key business objectives that continue to drive the Company’s success and generate returns for our stockholders. We set annual cash incentive bonus targets hierarchically based on a multiple of base salary. Based on Pearl Meyer’s analysis, fiscal 2018 short-term incentive targets positioned target total annual cash compensation between the peer group 25th and 50th percentiles.

For fiscal 2018, the Committee determined to use operational objectives identical to those used in determining fiscal 2017 bonus opportunity, though improvement over fiscal 2017 results was required in all cases. In addition, NEOs would be eligible to receive an award for other components of the 2018 Bonus Plan only if threshold 2018 Bonus Plan EBITDA was achieved. The Committee also retained the discretion to adjust results for unanticipated and exceptional items and to deduct from awards earned for failure to achieve certain construction quality standards based on the assessment of an independent third-party expert.

2018 OBJECTIVES

 

 

Bonus Plan EBITDA — 75% of bonus opportunity — In light of the demonstrated success of the Adjusted EBITDA metric as a driver of financial results in prior years and because improvement in Adjusted EBITDA is key to accomplishment of the strategic plan, the Committee determined that 75% of the overall annual bonus opportunity would be based on the achievement of levels of Bonus Plan EBITDA. The Committee established a 2018 Bonus Plan EBITDA objective with a $192.50 million threshold: $206.64 million target and a $215.00 million maximum.

 

 

Customer Satisfaction Scores — 10% of bonus opportunity — In order to achieve a bonus with respect to this metric, the Company would have to improve on customer satisfaction survey scores from the prior year in a predetermined number of its divisions in order to achieve either a threshold, target or maximum award.

 

 

Construction Cycle Times — 10% of bonus opportunity — In order to achieve a bonus with respect to this metric, the Company would have to improve on construction cycle times from the prior year, and a threshold, target or maximum award would be earned depending on the number of days of overall improvement.

 

 

Sales Pace and Margin — 5% of bonus opportunity — NEOs were eligible to receive 20% of this 5% overall component for each quarter that the Company met or exceeded a benchmark combination of sales pace and margin and the remaining 20% of this metric if the benchmark was achieved for the full year.

 

 

 

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2018 ACHIEVEMENT OF OBJECTIVES

In 2018, the following results were achieved against these objectives:

 

  OBJECTIVE

 

  

WEIGHTING (%)

 

  

RESULT

 

  

ACHIEVEMENT

 

 

Bonus Plan EBITDA

 

  

 

75

 

  

 

$212.2 million

 

  

 

Between target and maximum

 

 

Customer Satisfaction Scores

 

  

 

10

 

  

 

Improved by 80 bps

 

  

 

Between threshold and target

 

 

Construction Cycle Times

 

  

 

10

 

  

Improved by 1.1%

 

  

 

Between threshold and target

 

Sales Pace / Margin

  

 

5

  

 

Exceeded benchmark for 2 quarters and for full year

 

  

 

Between threshold and target

 

 

Total

 

  

 

100

 

         

To the extent actual 2018 Bonus Plan performance was between the threshold and target performance levels, or between the target and maximum performance levels, linear interpolation was applied to determine the actual payout under each component of the 2018 Bonus Plan. Because the slope from target to maximum performance levels differs among the NEOs, the bonus as a percentage of target shown in the table below will also vary among the NEOs.

2018 BONUSES AWARDED

The annual cash incentive bonuses awarded to the NEOs for 2018 were:

 

  NAME

 

  

    2018 TARGET    
    BONUS (%)    

 

  

    2018 TARGET    
    BONUS ($)    

 

  

    2018 ANNUAL    
    CASH INCENTIVE    
     BONUS ($)    

 

  

    BONUS AS A    
    PERCENTAGE    
    OF TARGET (%)    

 

 

Allan P. Merrill

 

    

 

 

 

 

150

 

 

 

    

 

 

 

 

1,425,000  

 

 

 

    

 

 

 

 

2,064,537  

 

 

 

    

 

 

 

 

144.9

 

 

 

 

Robert L. Salomon

 

    

 

 

 

 

125

 

 

 

    

 

 

 

 

687,500  

 

 

 

    

 

 

 

 

845,092  

 

 

 

    

 

 

 

 

122.9

 

 

 

 

Keith L. Belknap

 

    

 

 

 

 

100

 

 

 

    

 

 

 

 

450,000  

 

 

 

    

 

 

 

 

651,959  

 

 

 

    

 

 

 

 

144.9

 

 

 

LONG-TERM INCENTIVE COMPENSATION

 

 

Based on recommendations from Pearl Meyer and other factors, the Committee awarded performance shares equal to two-thirds of overall long-term incentive award opportunity, and time-based restricted stock equal to one-third of award opportunity. The Committee intended to establish a mix of equity awards that remains highly performance-based, while at the same time providing retention strength. The Committee also determined to increase Mr. Merrill’s target long-term incentive compensation from 250% to 300% of base salary. Target long-term incentive compensation for Messrs. Salomon and Belknap is 175% and 125%, respectively, of base salary. Long-term incentive compensation targets for the NEOs were positioned at or near the peer group 50th percentile.

RESTRICTED STOCK

Time-based restricted stock awards generally vest ratably over a three-year period, beginning with the first anniversary of the grant date. In fiscal year 2018, the NEOs were granted the following number of shares of restricted stock: Mr. Merrill: 46,432; Mr. Salomon: 15,681 and Mr. Belknap: 9,398.

 

 

 

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PERFORMANCE SHARES

Each performance share award reflects a target number of shares (based on the fair market value of our common stock on the award date) that may be issued to the award recipient at the end of a three-year award cycle based on the achievement of performance targets that are either (a) applicable to cumulative results over the entire three-year cycle or (b) applicable only to the final fiscal year of the three-year award cycle. At the end of each award cycle, the Committee confirms performance against the applicable performance targets, and performance shares corresponding to the level of achievement during the award cycle are calculated.

In determining fiscal year 2016-2018 performance share award metrics, the Committee considered the fluid nature of the housing market and need to design metrics that would not be obsolete in the event of a change in strategy during the three-year award cycle ending with fiscal 2018. The three metrics used for the fiscal 2016-2018 award cycle were:

 

 

Cumulative pre-tax income (defined as the Company’s income from continuing operations, before taxes and excluding impairments and abandonments, bond losses and such other non-recurring items as the Committee may approve) over the entire three-year award cycle;

 

 

Return on assets, based on the ratio of Adjusted EBITDA to total assets (defined as the Company’s total assets as shown on the consolidated balance sheet included in the Company’s Form 10-K for fiscal 2018) for fiscal 2018; and

 

 

Debt reduction, as measured at September 30, 2018, based on the ratio of net debt (defined as the Company’s total debt as shown on the consolidated balance sheet included in the Company’s Form 10-K for fiscal 2018, less unrestricted cash) to Adjusted EBITDA for fiscal 2018.

In addition, as in previous years, to maintain alignment with stockholders, relative TSR performance was a component of the fiscal 2016-2018 performance share awards, as described more fully below.

Performance Measures and Results for the Fiscal 2016-2018 Performance Period

 

 

Cumulative pre-tax income — The performance necessary to earn a target payout required a cumulative pre-tax income of $140 million, and the performance necessary to earn a maximum payout required cumulative pre-tax income of at least $160 million. Actual cumulative pre-tax income for the fiscal 2016-2018 award cycle was $167.8 million.

 

 

Return on assets — The performance necessary to earn a target payout required a return on assets for fiscal 2018 of 9%, and the performance necessary to earn a maximum payout required a return on assets of at least 10%. Actual return on assets for fiscal 2018 was 9.6%.

 

 

Ratio of net debt to Adjusted EBITDA — The performance necessary to earn a target payout required a net debt to Adjusted EBITDA ratio of no more than 6 times at the end of fiscal 2018, and the performance necessary to earn a maximum payout required a net debt to Adjusted EBITDA ratio of no more than 5 times. As measured at September 30, 2018, the actual ratio of net debt to Adjusted EBITDA for fiscal 2018 was 5.3 times.

We exceeded target performance levels for all three metrics, resulting in earned awards of 175.0% of target. However, earned awards were subject to adjustment based on our relative TSR, as discussed below.

The Committee has historically incorporated a TSR metric into the NEOs’ long-term incentive program. The Committee believes it is important to continue utilizing relative TSR as a component of the NEO long-term incentive program. As a result, after determining the number of shares earned based on the financial measures the following three-year relative TSR scale is applied as a modifier:

 

    TSR PERCENTILE RANK VS. S&P    

    HOMEBUILDERS SELECT INDUSTRY INDEX    

 

  

    ADJUSTMENT TO # OF    
    PERFORMANCE SHARES     

 

 

At or above 75th Percentile

 

  

 

+20%

 

 

70-74th Percentile

 

  

 

+15%

 

 

65-69th Percentile

 

  

 

+10%

 

 

60-64th Percentile

 

  

 

+5%

 

 

40-59th Percentile

 

  

 

No adjustment

 

 

35-39th Percentile

 

  

 

-5%

 

 

30-34th Percentile

 

  

 

-10%

 

 

25-29th Percentile

 

  

 

-15%

 

 

Below 25th Percentile

 

  

 

-20%

 

 

 

 

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As a result, the recipients’ percentage of awards earned attributable to the fiscal 2016-2018 performance period was reduced from 175.0% to 140.0% of target.

Performance Shares Issued

Shares issued to NEOs for the fiscal 2016-2018 award cycle are set forth in the following table:

 

NAME

 

  

PERFORMANCE
SHARES AWARD

TARGET (#)

 

  

PERFORMANCE
SHARES EARNED (#)

 

  

    PERFORMANCE SHARES    
    EARNED AS A PERCENTAGE     
    OF AWARD TARGET (%)    

 

 

Allan P. Merrill

 

    

 

 

 

 

105,338  

 

 

 

    

 

 

 

 

147,473  

 

 

 

    

 

 

 

 

140.0

 

 

 

 

Robert L. Salomon

 

    

 

 

 

 

43,013  

 

 

 

    

 

 

 

 

60,218  

 

 

 

      

 

140.0

 

 

 

Keith L. Belknap

 

    

 

 

 

 

n/a  

 

 

 

    

 

 

 

 

n/a  

 

 

 

    

 

 

 

 

n/a

 

 

 

Performance Measures for 2018-2020 Performance Shares

We established performance measures for our 2018-2020 performance share grants in accordance with our core compensation philosophy of providing incentive compensation to our management team when they achieve challenging financial and non-financial goals that we believe are critical to value creation. As such, we based our 2018-2020 performance share metrics on cumulative pre-tax income, return on assets and the number of Gatherings® home sales.

BENEFITS

 

 

Our NEOs receive the standard benefits received by all employees including: group health (medical, dental, pharmacy, and vision), group life, accidental death and dismemberment, business travel accident, disability plans, defined contribution retirement plans (a Money Purchase Retirement Plan and a 401(k) Savings Plan), and vacation.

Deferred Compensation Plan

The Company maintains the Beazer Homes Deferred Compensation Plan, or the Deferred Plan, to provide eligible employees the opportunity to defer a portion of their current compensation. With respect to fiscal year 2018, the Committee made a contribution to the Deferred Plan for the benefit of each NEO as follows: Mr. Merrill, $100,000; Mr. Salomon, $75,000, and Mr. Belknap, $50,000. These contributions are made in regular installments and are subject to several restrictions and limitations including the Committee’s right to terminate or suspend any such contribution in the future.

Other Benefits

We do not have a defined benefit pension plan or supplemental executive retirement plan. Our executive management team, including our NEOs, participate in our various benefit programs on the same terms as other employees. The Company does not provide to its NEOs supplemental executive retirement plans, company cars (or automobile reimbursements), club memberships or other significant perquisites.

STOCK OWNERSHIP AND HOLDING REQUIREMENTS

 

 

The Company maintains a stock ownership policy that requires NEOs and members of the Board of Directors to acquire and retain a meaningful level of stock ownership in the Company. In 2014, the Board amended the policy to significantly increase the ownership requirement for our NEOs, from 3.0 times base salary to 5.0 times base salary for our CEO, and from 1.5 times base salary to 3.0 times base salary for our other NEOs.

 

 

 

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The current stock ownership requirements are based on a multiple of base salary or annual retainer, as applicable, and are as set forth below:

 

     

    MULTIPLE OF BASE SALARY/ ANNUAL RETAINER    

 

 

CEO

 

  

 

5.0 x base salary

 

 

Other NEOs

 

  

 

3.0 x base salary

 

 

Directors

 

  

 

3.0 x annual retainer

 

For purposes of the stock ownership policy, the following types of share holdings are counted towards an individual’s stock ownership: (i) stock that is considered beneficially owned, (ii) two-thirds of service-based restricted stock and (iii) one-third of “in the money” stock options. Unearned performance shares do not count towards ownership requirements. As of December 12, 2018, each of our NEOs and directors, other than Mr. Belknap, was in compliance with our stock ownership requirements. Mr. Belknap joined the Company in January 2018.

The policy also requires NEOs and directors to hold 50% of net after-tax shares issued upon vesting of restricted stock or stock option exercises until their required respective stock ownership levels are achieved.

COMPENSATION CLAWBACK POLICY

 

 

In 2011, the Committee adopted an incentive compensation clawback policy that would enable the Company to clawback all or a portion of incentive compensation in the event an individual’s misconduct causes the Company to have to issue a restatement of its financial statements, to the extent that such individual’s incentive compensation was based on the misstated financials.

In addition, awards under our 2014 Long-Term Incentive Plan are subject not only to our existing clawback policy but any other clawback policy adopted by the Compensation Committee, and the Committee has the authority to recoup or cancel awards if a participant engages in “detrimental activity” with respect to the Company.

As described in further detail under “Executive Compensation — Potential Payments Upon Termination or Change of Control — Severance Agreements,” pursuant to the severance agreements with each of our NEOs, any incentive compensation that is paid or granted to the NEOs will be subject to recoupment under the terms thereof.

RISK CONSIDERATIONS IN OUR COMPENSATION PROGRAMS

 

 

The Committee does not believe our compensation programs encourage inappropriate risk taking. The Committee, with assistance from Pearl Meyer, arrived at this conclusion for the following reasons:

 

 

Our employees receive both fixed and variable compensation. The fixed portion provides a steady income regardless of the Company’s stock price or financial performance. This allows executives to focus on the Company’s business without an excessive focus on the Company’s stock price.

 

 

Our equity awards for executives generally vest over three-year periods, which discourages short-term risk taking. Our substantial equity holding requirements extend these time frames further.

 

 

Our equity ownership requirements encourage a long-term perspective by our executives.

 

 

Our equity compensation plan provides that our executives’ unvested long-term equity compensation is forfeited upon voluntary termination.

 

 

 

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TAX LEGISLATION RELATED TO COMPENSATION

 

 

Historically, it has been the Committee’s general policy to consider whether particular payments and awards are deductible by the Company for federal income tax purposes under Section 162(m) of the Internal Revenue Code. Section 162(m) has limited the deductibility for federal income tax purposes of compensation payments to certain executive officers in excess of $1 million, subject to certain exemptions and exceptions for qualified performance-based compensation. Although the Committee has taken into consideration the provisions of Section 162(m), being eligible for tax deductibility has not been a primary focus, but one consideration among many in the design of our executive compensation programs.

On December 22, 2017, the President signed H.R. 1, the “Tax Cuts and Jobs Act” into law. The new law repeals certain exceptions to the deductible limit for performance-based compensation for tax years beginning after 2017. In addition, the new law requires compensation of the principal executive officer, principal financial officer and three highest compensated officers (“covered employees”) to be subject to the limit. Once an employee is treated as a covered employee in a tax year after December 31, 2016, the individual remains a covered employee for all future years, including once they are no longer employed by the corporation or with respect to payments made after the death of a covered employee. The new law does provide for a transition rule to these Section 162(m) changes whereby the expansion of the rules mentioned above does not apply to remuneration paid under a written, binding contract in effect on November 2, 2017, which is not materially modified on or after this date. While the Compensation Committee cannot predict how our compensation policies may be further affected by this limitation, it is anticipated that certain compensation paid to our executives that have not met the requirements of this new law will not be deductible.

Internal Revenue Code section 409A requires “nonqualified deferred compensation plans” to meet requirements in order to avoid acceleration of the recipient’s federal income taxation of the deferred compensation. The Internal Revenue Service issued final regulations in April 2007 regarding the application of Section 409A, which were generally effective January 1, 2009. Prior to effectiveness, companies were expected to comply in “good faith” with the statute, taking note of the interim guidance issued by the Internal Revenue Service. We provide benefits through several plans that are intended to meet the requirements of the final regulations.

 

 

 

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REPORT OF THE

COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management. Based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis set forth above be included in this Proxy Statement.

PETER M. ORSER (CHAIR)

BRIAN C. BEAZER

NORMA A. PROVENCIO

DANNY R. SHEPHERD

The Members of the Compensation Committee

 

 

 

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EXECUTIVE

COMPENSATION

SUMMARY COMPENSATION TABLE

 

 

The table below summarizes compensation information for our named executive officers for the fiscal years 2018, 2017 and 2016.

 

  NAME AND

  PRINCIPAL POSITION

 

  

FISCAL    
YEAR    

 

 

SALARY
($)

 

  

BONUS
($)

 

  

STOCK
AWARDS
($)
(1)

 

  

NON-EQUITY
INCENTIVE PLAN
COMPENSATION
($)
(2)

 

  

ALL OTHER

COMPENSATION

($) (3)

 

  

      TOTAL      

      ($)      

 

 

Allan P. Merrill

    

 

 

 

2018

 

   

 

 

 

949,231

 

    

 

 

 

0

 

    

 

 

 

3,030,152

 

    

 

 

 

2,064,537

 

    

 

 

 

108,250

 

    

 

 

 

6,152,170  

 

President and Chief

Executive Officer

    

 

 

 

2017

 

   

 

 

 

900,000

 

       0     

 

 

 

2,380,694

 

    

 

 

 

2,380,849

 

    

 

 

 

110,023

 

    

 

 

 

5,771,566  

 

    

 

 

 

 

2016

 

 

 

   

 

 

 

 

900,000

 

 

 

    

 

 

 

 

0

 

 

 

    

 

 

 

 

2,375,372

 

 

 

    

 

 

 

 

1,442,957

 

 

 

    

 

 

 

 

162,982

 

 

 

    

 

 

 

 

4,881,311  

 

 

 

 

Robert L. Salomon

       2018       549,616        0        1,023,342        845,092        83,273        2,501,323  

Executive Vice President

and Chief Financial Officer

    

 

 

 

2017

 

   

 

 

 

525,000

 

    

 

 

 

0

 

    

 

 

 

972,101

 

    

 

 

 

925,886

 

    

 

 

 

80,882

 

    

 

 

 

2,503,869  

 

    

 

 

 

 

2016

 

 

 

   

 

 

 

 

525,000

 

 

 

    

 

 

 

 

0

 

 

 

    

 

 

 

 

969,951

 

 

 

    

 

 

 

 

579,022

 

 

 

    

 

 

 

 

57,875

 

 

 

    

 

 

 

 

2,131,848  

 

 

 

 

Keith L. Belknap

    

 

 

 

2018

 

 (4) 

   

 

 

 

320,192

 

    

 

 

 

0

 

    

 

 

 

608,521

 

    

 

 

 

651,959

 

    

 

 

 

44,490

 

    

 

 

 

1,625,162  

 

Executive Vice President
and General Counsel

 

                                                                           

 

LOGO

Represents the aggregate grant date fair value of restricted stock and performance shares awarded in each of the fiscal years indicated above, determined in accordance with FASB ASC Topic 718. These are not amounts paid to or realized by the NEOs. The grant date fair value of the performance shares was calculated based on a “Monte Carlo” simulation model, which utilizes numerous arbitrary assumptions about financial variables that determine the probability of satisfying the performance conditions stipulated in the award. Further information regarding the valuation of stock and option awards can be found in Notes 2 and 16 to our Consolidated Financial Statements in our 2018 Form 10-K. We caution that the amounts reported in the table for equity- related awards and, therefore, total compensation, may not represent the amounts that each NEO will actually realize from the awards. Whether, and to what extent, an NEO realizes value will depend on a number of factors, including Company performance and stock price. For more information on restricted stock and performance shares, see “Compensation Discussion and Analysis — Long-Term Incentive Compensation” above.

 

LOGO

Amounts in this column are paid pursuant to the Company’s short-term incentive plan as described under “Compensation Discussion and Analysis — Short-Term Incentive Compensation” above.

 

LOGO

For information on All Other Compensation, see table below.

 

LOGO

Mr. Belknap joined the company in January 2018.

 

 

 

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ALL OTHER COMPENSATION

 

 

The table below provides a detailed breakdown of the amounts for fiscal 2018 under “All Other Compensation” in the Summary Compensation Table above.

 

  NAME

 

  

YEAR

 

  

DEFERRED COMPENSATION OR
DISCRETIONARY LUMP SUM
CONTRIBUTIONS ($)

 

  

401(K)
COMPANY
MATCH ($)

 

  

TOTAL ($)

 

 

Allan P. Merrill

 

  

 

2018

 

    

 

 

 

 

100,000

 

 

 

    

 

 

 

 

8,250   

 

 

 

    

 

 

 

 

108,250   

 

 

 

 

Robert L. Salomon

 

  

 

2018

 

    

 

 

 

 

75,000

 

 

 

    

 

 

 

 

8,273   

 

 

 

    

 

 

 

 

83,273   

 

 

 

 

Keith L. Belknap

 

  

 

2018

 

    

 

 

 

 

36,538

 

 

 

    

 

 

 

 

7,952   

 

 

 

    

 

 

 

 

44,490   

 

 

 

GRANTS OF PLAN-BASED AWARDS TABLE

 

 

The following table shows information about eligible or granted plan-based awards for fiscal 2018 to our NEOs.

 

  NAME

 

AWARD
TYPE 
(1) 

 

GRANT

DATE

 

ESTIMATED FUTURE PAYOUTS

UNDER NON-EQUITY INCENTIVE
PLAN AWARDS
(2)

 

ESTIMATED FUTURE ISSUANCES

OF SHARES UNDER EQUITY

INCENTIVE PLANS (3)

 

ALL OTHER

   STOCK-BASED   

AWARDS (#) (4)

 

GRANT DATE
FAIR VALUE

OF STOCK-

BASED

AWARDS

($) (5)

 

 

  THRESHOLD  

  ($)  

 

 

TARGET
($)

 

 

MAXIMUM
($)

 

 

  THRESHOLD  

($)

 

 

TARGET
($)

 

 

MAXIMUM
    ($)    

 

 

Allan P. Merrill

 

 

 

 

BP

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

712,500

 

 

 

 

 

 

 

1,425,000

 

 

 

 

 

 

 

2,850,000

 

 

 

 

 

—     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RS

 

 

 

 

11/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,432    

 

 

 

 

 

 

 

949,999

 

 

 

 

 

 

 

 

 

PS

 

 

 

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—     

 

 

 

 

92,864

 

 

 

 

195,014

 

 

 

 

 

 

 

 

 

 

 

 

2,080,154

 

 

 

 

 

Robert L. Salomon

 

 

 

 

 

BP

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

275,000

 

 

 

 

 

 

 

687,500

 

 

 

 

 

 

 

1,100,000

 

 

 

 

 

—     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RS

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,681    

 

 

 

 

 

 

 

320,833

 

 

 

 

 

 

 

PS

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—     

 

 

 

 

31,362

 

 

 

 

65,860

 

 

 

 

 

 

 

 

 

 

 

 

702,509

 

 

 

 

 

Keith L. Belknap

 

 

 

 

BP

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

225,000

 

 

 

 

 

 

 

450,000

 

 

 

 

 

 

 

900,000

 

 

 

 

 

—     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RS

 

 

 

 

 

 

 

1/8/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,398    

 

 

 

 

 

 

 

187,490

 

 

 

 

 

 

 

PS

 

 

 

 

 

 

 

11/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—     

 

 

 

 

18,796

 

 

 

 

39,472

 

 

 

 

 

 

 

 

 

 

 

 

 

421,030

 

 

 

 

LOGO

Award Type: “BP” means potential cash awards under 2018 Short-Term Incentive Plan; “RS” means shares of time-vesting restricted stock; “PS” means performance shares.

 

LOGO

Amounts represent the range of possible cash payouts for fiscal 2018 under the 2018 Short-Term Incentive Plan, as described under “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Short-Term Incentive Compensation” above. The awards that were earned based on actual performance for fiscal 2018 were paid in November 2018 and are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above.

 

LOGO

Represents the range of shares of Common Stock that may vest after the end of the three-year award cycle applicable to a performance award, assuming achievement of threshold, target and maximum performance. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Long-Term Incentive Compensation — Performance Measures for 2018-2020 Performance Shares” above.

 

LOGO

Represents time-vesting restricted stock. The shares of restricted stock generally vest in equal installments on the first, second and third anniversaries of the grant date. See “Compensation Discussion and Analysis — Compensation Elements — Elements of Fiscal 2018 Compensation Program — Long-Term Incentive Compensation — Restricted Stock” above.

 

LOGO

See footnote 1 to the Summary Compensation Table above for an explanation of the calculation of the grant date fair value of stock-based awards.

 

 

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE

 

 

The following table provides information with respect to outstanding unexercised options and unvested performance-based restricted stock and time-based restricted stock held by our NEOs at September 30, 2018.

 

            OPTION AWARDS   STOCK AWARDS

NAME

 

 

GRANT
DATE

 

      

 

NUMBER OF SECURITIES

UNDERLYING
OPTIONS/SSARS

 

 

OPTION

EXERCISE

PRICE ($)

 

 

OPTION

EXPIRATION

DATE

 

 

 

NUMBER

OF SHARES

OF STOCK

THAT

HAVE NOT

VESTED

(#) (1)

 

 

 

MARKET

VALUE OF

SHARES OF

STOCK THAT

HAVE NOT

VESTED

($) (2)

 

 

 

NUMBER

OF PER-

FORMANCE

SHARES

THAT HAVE

NOT VESTED

(#)

 

      

 

MARKET

VALUE OF

PERFOR-

MANCE

SHARES THAT

HAVE NOT

    VESTED ($) (3)    

 

 

(#)

 

 

EXERCISABLE

 

 

UNEXERCIS-
ABLE

 

Allan P. Merrill

      11/16/11           58,264             10.80       11/16/19                            
      11/14/12           86,000             13.33       11/14/20                            
      11/8/13           86,000             19.11       11/8/21                            
      11/23/15                                   17,557       184,349                
      11/23/15       (4 )                                           105,338       (4 )       1,106,049
      11/17/16                                   39,968       419,664              
      11/17/16       (5 )                                           119,904       (5 )       1,258,992
      11/16/17       (6 )                                           92,864       (6 )       975,072
       

 

11/16/17

 

 

               

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

46,432

 

 

     

 

487,536

 

 

     

 

 

 

               

 

 

 

Robert L. Salomon

      11/16/11           20,392             10.80       11/16/19                            
      11/14/12           30,200             13.33       11/14/20                            
      11/8/13           30,200             19.11       11/8/21                            
      11/23/15                                   7,169       75,275                
      11/23/15       (4 )                                           43,013       (4 )       451,637
      11/17/16                                   16,320       171,360                
      11/17/16       (5 )                                           48,960       (5 )       514,080
      11/16/17       (6 )                                           31,362       (6 )       329,301
       

 

11/16/17

 

 

               

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

15,681

 

 

     

 

164,651

 

 

     

 

 

 

               

 

 

 

Keith L. Belknap

      1/8/18                                   9,398       98,679                
       

 

11/16/17

 

 

     

 

(6

 

)

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

18,796

 

 

     

 

(6

 

)

 

     

 

197,358

 

 

 

LOGO

Award vests ratably over a three-year period.

 

LOGO

Reflects the value using the closing price of common stock on the NYSE on the last trading day of fiscal year 2018 (September 28, 2018) of $10.50 per share.

 

LOGO

“Market value” is calculated by multiplying the number of shares that have not vested by the closing price of common stock on the NYSE on September 28, 2018 of $10.50 per share.

 

LOGO

Represents performance shares awarded in fiscal 2016 for a three-year award cycle (fiscal 2016 through fiscal 2018). The performance shares shown are based on actual performance. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Long-Term Incentive Compensation — Performance Shares” above. These performance shares vested in November 2018. For more information regarding these performance shares, see pages 28-31 of the Company’s proxy statement for the 2017 annual meeting of stockholders filed with the SEC on December 19, 2016.

 

LOGO

Represents performance shares awarded in fiscal 2017 for a three-year award cycle (fiscal 2017 through fiscal 2019). The performance shares shown assume target performance for the award cycle. For more information regarding these performance shares, see pages 28-30 of the Company’s proxy statement for its 2018 annual meeting of stockholders filed with the SEC on December 15, 2017.

 

LOGO

Represents performance shares awarded in fiscal 2018 for a three-year award cycle (fiscal 2018 through fiscal 2020). The performance shares shown assume target performance for the award cycle. See “Compensation Discussion and Analysis — Elements of Fiscal 2018 Compensation Program — Long-Term Incentive Compensation — Performance Measures for 2018-2020 Performance Shares” above.

 

 

 

LOGO

  

 

33


  

 

 

 

OPTION EXERCISES AND STOCK VESTED TABLE

 

 

The table below provides supplemental information relating to the value realized upon the exercise of stock options and upon the vesting of restricted stock during fiscal 2018 for each NEO.

 

     STOCK AWARDS

 

NAME

 

  

 

NUMBER OF SHARES
    ACQUIRED ON VESTING (#)    

 

  

 

        VALUE REALIZED UPON        
VESTING ($)

 

 

Allan P. Merrill

 

    

 

 

 

 

300,650

 

 

 

    

 

 

 

 

4,085,002

 

 

 

 

Robert L. Salomon

 

    

 

 

 

 

100,682

 

 

 

    

 

 

 

 

1,402,379

 

 

 

 

Keith L. Belknap

    

 

 

 

0

 

    

 

 

 

 

 

0

 

 

NON-QUALIFIED DEFERRED COMPENSATION TABLE

 

 

The table below provides supplemental information relating to compensation deferred during fiscal 2018 under the terms of the Beazer Homes Deferred Compensation.

 

NAME

 

 

EXECUTIVE
CONTRIBUTIONS
IN LAST FY ($)

 

 

COMPANY
CONTRIBUTIONS
IN LAST FY ($)

 

 

AGGREGATE
EARNINGS/
(LOSSES) IN
LAST FY ($) 
(1)

 

 

AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
($)

 

 

AGGREGATE

BALANCE AT

    LAST FYE ($) (2)    

 

 

Allan P. Merrill

 

   

 

 

 

 

0

 

 

 

   

 

 

 

 

100,000

 

 

 

   

 

 

 

 

69,959

 

 

 

   

 

 

 

 

0  

 

 

 

   

 

 

 

 

1,403,034

 

 

 

 

Robert L. Salomon

   

 

 

 

0

 

   

 

 

 

75,000

 

   

 

 

 

58,645

 

   

 

 

 

0  

 

   

 

 

 

558,643

 

 

Keith L. Belknap

 

   

 

 

 

 

0

 

 

 

   

 

 

 

 

36,539

 

 

 

   

 

 

 

 

498

 

 

 

   

 

 

 

 

0  

 

 

 

   

 

 

 

 

37,037

 

 

 

 

LOGO

Represents amounts of earnings on the balance of the participants’ accounts that are attributable to the performance of independently managed funds available to and selected by each participant under the Deferred Plan and in which deferred amounts are deemed to be invested. None of the earnings in this column are included in the “Summary Compensation Table” above because they were not preferential or above-market.

 

LOGO

Aggregate balances include unvested amounts of Company contributions.

Narrative Disclosure to Non-Qualified Deferred Compensation Table

Under the Deferred Plan, participants select from a menu of investment options which track a variety of independently managed benchmark funds in which the funds are deemed to be invested. The return on the underlying investments determines the amount of earnings and losses that are credited or debited to the participants’ account. There is no guaranteed rate of return on these funds and the rate of return depends on the participants’ deemed investment option elections and on the market performance of the underlying funds. Deferred amounts and Company contributions are deposited in a trust that qualifies as a grantor trust under the Internal Revenue Code. Our obligations under the Deferred Plan are unsecured general obligations and rank equally with our other unsecured general creditors. Amounts deferred by participants and earnings and losses thereon are 100% vested.

 

 

 

LOGO

  

 

34


  

 

 

 

POTENTIAL PAYMENTS UPON TERMINATION OR

CHANGE OF CONTROL

 

 

SEVERANCE AND CHANGE IN CONTROL AGREEMENTS

In September 2018, we entered into new severance and change in control agreements with each of our named executive officers. With respect to Messrs. Merrill and Salomon, these new agreements replaced their former employment agreements, which also expired in September 2018.

The new agreements set forth each executive’s base salary, eligibility to receive awards pursuant to short-term and long-term incentive compensation programs, deferred compensation and severance payments, all of which are described in greater detail below. The agreements are substantially identical in non-economic terms, and set forth each executive’s non-competition and non-solicitation, confidentiality and intellectual property obligations.

Mr. Merrill’s agreement provides for a base salary of $950,000, an annual target bonus opportunity pursuant to the annual cash incentive plan of 150% of base salary and annual long-term incentive awards of up to 300% of base salary. The new agreement for Mr. Salomon provides for a base salary of $550,000, a target annual bonus opportunity of 125% of base salary and annual long-term incentive awards of up to 175% of base salary. The agreement for Mr. Belknap provides for a base salary of $450,000, a target annual bonus opportunity of 100% of base salary and annual long-term incentive awards of up to 125% of base salary. Base salaries, performance metrics and actual target opportunities for any given year remain within the discretion of the Company’s Compensation Committee. The agreements also provide for each executive’s eligibility to participate in the Company’s Deferred Compensation Plan.

The agreements provide for a lump sum severance payment in the event of a “change of control” of the Company followed by a termination of the executive without “cause” or a resignation by the executive for “good reason” within two years of the change of control. In such event, the severance payment for Mr. Merrill would be three times the sum of his then current base salary and target annual incentive bonus for the fiscal year in which the termination occurs, and, in the case of Messrs. Salomon and Belknap, the severance payments would be two times the sum of the executive’s then current base salary and target annual incentive bonus for the fiscal year in which the termination occurs, in each case payable in a lump sum.

Where there is no “change of control,” in the event of a termination of the executive without “cause” or a resignation by the executive for “good reason,” such executive would receive a severance payment. The severance payment for Mr. Merrill in this situation would be (1) two times the sum of his then current base salary and target annual incentive bonus for the fiscal year in which the termination occurs, payable in equal installments over twelve months, and (2) a pro rata annual incentive bonus for the fiscal year in which the termination occurs calculated based on actual performance for the year, payable at the same time bonuses are paid to other executives. For Messrs. Salomon and Belknap, the severance payment would be (1) one and one-fourth times the sum of the executive’s then current base salary and target annual incentive bonus for the fiscal year in which termination occurs, payable in equal installments over twelve months, and (2) a pro rata annual incentive bonus for the fiscal year in which the termination occurs calculated based on actual performance for the year, payable at the same time bonuses are paid to other executives. No severance will be payable in the event the executive is terminated for “cause” or the executive resigns without “good reason.”

The agreements do not entitle the executives to any extension or continuation of employee benefits after termination, except in the event the executive is entitled to receive severance pay, in which case the executive may receive up to twelve months of coverage under the group health, dental and vision plans the executive participated in prior to termination. In addition, there is no provision to “gross up” any payment to account for taxes for which the executive may be liable. Under the agreements, any incentive compensation that is paid or granted to the executives will be subject to recoupment under the terms of the Company’s “clawback” policy.

 

 

 

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35


  

 

 

 

DISPOSITION OF OUTSTANDING EQUITY AWARDS

The new severance and change in control agreements with each of our named executive officers also govern the disposition of outstanding equity awards issued under our 2014 Long-Term Incentive Plan in the event the executive’s employment is terminated under various scenarios or in the event there is a change in control of the Company.

Termination of Employment by the Company with Cause or Resignation by Executive

Pursuant to the severance agreements, equity grants under our 2014 Long-Term Incentive Plan provide that all unvested awards will be forfeited in the event the executive is terminated by the Company for “cause” or the executive voluntarily resigns and the resignation is not within two years of a change in control of the Company.

Termination of Employment by the Company without “Cause,” by Executive for Good Reason or Retirement

If the executive’s employment is terminated by the Company without cause, the executive resigns for “good reason,” or the executive retires, unvested equity grants under our 2014 Long-Term Incentive Plan will generally vest as follows:

 

 

awards that vest solely on a time basis will vest pro rata based on the number of months the executive was employed during the applicable vesting period; and

 

 

awards that vest based on the Company’s performance will vest pro rata based on the Company’s performance during the applicable performance period and the number of months the executive was employed during such period.

Death or Disability

If the executive’s employment is terminated due to death or disability, all unvested equity grants under our 2014 Long-Term Incentive Plan will fully vest.

Change of Control

In the event of an anticipated change in control of the Company, the Company’s Compensation Committee has the authority to determine that awards granted under our 2014 Long-Term Incentive Plan:

 

 

will be continued by the Company (if the Company is the surviving entity);

 

 

will be assumed by the surviving entity or its parent or subsidiary; or

 

 

will be substituted for by the surviving entity or its parent or subsidiary with an equivalent award for the outstanding award.

If an award is continued, assumed or substituted upon a change in control, such award will generally provide similar terms and conditions and preserve the same benefits as the outstanding award that is being continued or replaced, and, in the event executive’s employment is terminated without cause or the executive terminates his employment for good reason within two years following the change in control, the unvested outstanding award (or assumed or substituted award) will fully vest.

 

 

 

LOGO

  

 

36


  

 

 

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL TABLE

The table below summarizes the compensation payable to each NEO in the event of termination of employment or a change in control of the Company. The amount of compensation payable to each NEO in each situation is listed, assuming termination had occurred on the last day of our most recent fiscal year, September 30, 2018. All equity awards have been valued as of September 28, 2018, the last trading day in the fiscal year.

 

         

TYPE OF TERMINATION

 

  NAME

 

  

PAYMENT OR BENEFIT TYPE

 

  

 

TERMINATION

FOLLOWING

CHANGE OF

  CONTROL WITHOUT  

CAUSE ($)

 

  

DEATH OR
DISABILITY ($)

 

  

  WITHOUT  
  CAUSE OR  
  FOR GOOD  
  REASON ($)  

 

 

Allan P. Merrill

   Severance        7,125,000               6,814,537
  

 

Vesting of Unvested Long-Term Awards

       4,431,661        4,431,661        2,663,240
  

 

Benefits Continuation

 

    

 

 

 

 

17,241

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

17,241

 

 

 

    

 

Total

 

    

 

 

 

 

11,573,902

 

 

 

    

 

 

 

 

4,431,661

 

 

 

    

 

 

 

 

9,495,018

 

 

 

 

Robert L. Salomon

   Severance        2,475,000               2,391,967
  

 

Vesting of Unvested Long-Term Awards

       1,706,303        1,706,303        1,058,352
  

 

Benefits Continuation

 

      

 

18,100

 

 

      

 

 

 

      

 

18,100

 

 

    

 

Total

 

    

 

 

 

 

4,199,403

 

 

 

    

 

 

 

 

1,706,303

 

 

 

    

 

 

 

 

3,468,419

 

 

 

 

Keith L. Belknap

   Severance        1,800,000               1,776,959
  

 

Vesting of Unvested Long-Term Awards

    

 

 

 

296,037

 

    

 

 

 

296,037

 

    

 

 

 

71,513

 

  

 

Benefits Continuation

 

    

 

 

 

 

17,241

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

17,241

 

 

 

    

 

Total

 

    

 

 

 

 

2,113,278

 

 

 

    

 

 

 

 

296,037

 

 

 

    

 

 

 

 

1,865,713

 

 

 

PAY RATIO

 

 

The following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee.

We identified the median employee using the employee population on September 30, 2018 that received taxable compensation (other than our Chief Executive Officer) for the fiscal year 2018, which included our reviewing gross compensation, excluding equity, within the fiscal year 2018. Compensation was annualized for employees who joined the Company during the fiscal year. The annual total compensation of our median employee (other than the Chief Executive Officer) for the fiscal year 2018 was $88,722. As disclosed in the Summary Compensation Table above, our Chief Executive Officer’s annual total compensation for fiscal 2018 was $6,152,170. For purposes of determining the ratio, the annual total compensation of the CEO and the median employee includes the dollar value of non-discriminatory health and welfare benefit contributions made by the Company, which are not required to be reported as compensation in the Summary Compensation Table. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was 58:1.

For fiscal 2018, long-term equity-based compensation comprised 49% of our CEO’s compensation, the ultimate value of which is related directly to company and common stock performance. As a result of this emphasis on equity and stockholder alignment, the CEO pay ratio is 30:1 when utilizing the methodology for determining the median employee that excludes equity.

This information is being provided for compliance purposes. Because SEC rules permit significant flexibility in terms of approaches used to calculate compensation and identify the median employee, comparisons of pay ratios among companies may not be very meaningful, even for companies within the same industry. Neither the Compensation Committee nor the executives of our Company used the pay ratio measure in making compensation decisions.

 

 

 

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37


  

 

 

 

SECURITY

OWNERSHIP

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

 

The following table sets forth, to the best of our knowledge and belief, certain information regarding the beneficial ownership of our common stock by each person known to the Company to be the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of more than 5% of our outstanding common stock as of December 12, 2018.

 

  NAME AND ADDRESS OF BENEFICIAL OWNER

 

  

NUMBER OF COMMON
SHARES BENEFICIALLY OWNED

 

  

PERCENT OF
OUTSTANDING 
(1)

 

    

 

BlackRock, Inc. (2)

 

             

55 East 52nd Street

 

      

 

3,135,962

 

 

      

 

[    ]%

 

 

   

New York, NY 10022

 

                               

 

LOGO

Based upon [            ] shares of common stock outstanding as of December 12, 2018. Beneficial ownership is determined in accordance with the rules of the SEC under which shares are beneficially owned by the person or entity that holds investment and/or voting power.

 

LOGO

Based upon information set forth in a Schedule 13G/A filed by BlackRock, Inc. on January 29, 2018. BlackRock, Inc. reported beneficial ownership and sole voting power of 3,054,310 shares and beneficial ownership and sole dispositive power of 3,135,962 shares.

 

 

 

LOGO

  

 

38


  

 

 

 

SECURITY OWNERSHIP OF EXECUTIVE OFFICERS

AND DIRECTORS

 

 

The following table sets forth information, as of December 12, 2018, with respect to the beneficial ownership of our common stock by each director, each of our NEOs, and all directors and executive officers as a group. Except as otherwise indicated, each beneficial owner possesses sole voting and investment power with respect to all shares.

 

  NAME OF BENEFICIAL OWNER

 

  

NUMBER OF COMMON SHARES
BENEFICIALLY OWNED 
(1) (2) (3) (4)

 

  

PERCENT OF OUTSTANDING (5)    

 

 

Elizabeth S. Acton

 

      

 

49,495

 

 

      

 

*

 

 

 

Laurent Alpert

 

      

 

58,775

 

 

      

 

*

 

 

 

Brian C. Beazer

 

      

 

142,685

 

 

      

 

*

 

 

 

Keith L. Belknap

 

       104,568        *

 

Peter G. Leemputte

 

      

 

60,315

 

 

      

 

*

 

 

 

Allan P. Merrill

 

      

 

1,235,330

 

 

      

 

[    

 

]%

 

 

Peter M. Orser

 

      

 

31,530

 

 

      

 

*

 

 

 

Norma A. Provencio

 

      

 

53,675

 

 

      

 

*

 

 

 

Robert L. Salomon

 

      

 

487,717

 

 

      

 

[    

 

]%

 

 

Danny R. Shepherd

 

      

 

37,680

 

 

      

 

*

 

 

 

Stephen P. Zelnak, Jr.

 

      

 

354,730

 

 

      

 

*

 

 

 

Directors and Executive Officers as a Group (11 persons)

 

      

 

2,611,921

 

 

      

 

[    

 

]%

 

  *Less than 1%

 

LOGO

Beneficial ownership includes shares of time-based restricted stock as follows: Ms. Acton - 10,183, Mr. Alpert - 10,183, Mr. Belknap - 34,856, Mr. Beazer - 10,183, Mr. Leemputte - 10,183, Mr. Merrill - 147,680, Mr. Orser - 10,183, Ms. Provencio - 10,183, Mr. Salomon - 59,347, Mr. Shepherd - 10,183 and Mr. Zelnak - 20,366.

 

LOGO

Beneficial ownership for Messrs. Merrill and Salomon includes performance shares granted in November 2016, November 2017 and November 2018 as follows: Mr. Merrill - 406,250, Mr. Salomon - 161,788 and Mr. Belknap - 69,712.

 

LOGO

Beneficial ownership includes shares underlying stock options/SSARs and RSUs, respectively, which were fully vested and exercisable at, or will vest within 60 days of, December 12, 2018 as follows: Mr. Merrill - 230,264 and Mr. Salomon - 80,792.

 

LOGO

All of the shares beneficially owned by Ms. Acton are held indirectly through the Robert and Elizabeth Acton Living Trust dated as of December 17, 2010 as amended. Mr. Beazer’s ownership includes 58,600 shares of common stock held indirectly through BC Beazer Investments PTE Ltd. Mr. Leemputte’s ownership includes 2,460 shares of common stock held indirectly through Peter Leemputte TTEEFBO Peter G. Leemputte Trust.

 

LOGO

Based upon              shares of outstanding common stock as of December 12, 2018 and shares deemed outstanding with respect to each person pursuant to Exchange Act Rule 13d-3(d)(1). Adjusted as necessary to reflect the shares issuable to such person upon the vesting or exercise of his stock options/SSARs and RSUs listed in footnote 3 above (and assuming no other stock options/SSARs are exercised). Shares of common stock subject to stock options/SSARs and RSUs that are currently exercisable or vested, or will become exercisable or vested within 60 days of December 12, 2018, are deemed outstanding for computing the percentage ownership of the person holding such stock options/SSARs and RSUs, but are not deemed outstanding for computing the percentage ownership of any other persons.

 

 

 

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39


  

 

 

 

SECTION 16(A) BENEFICIAL OWNERSHIP

REPORTING COMPLIANCE

 

 

Section 16(a) of the Securities Exchange Act requires our executive officers and directors and persons who own more than 10% of our stock, as well as certain affiliates of such persons, to file initial reports of ownership and changes of ownership with the SEC. These parties are required to furnish us with copies of the reports they file. Based solely on a review of the copies of the Section 16(a) reports and amendments thereto known to us, we believe that all reports required pursuant to Section 16(a) for fiscal year 2018 were timely filed by our executive officers and directors, except a Form 5 for Mr. Beazer disclosing the purchase of 3,000 shares of common stock was filed late due to an administrative error on the part of the Company.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER

EQUITY COMPENSATION PLANS

 

 

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information about the Company’s shares of common stock that may be issued under our existing equity compensation plans as of September 30, 2018, all of which have been approved by our stockholders.

 

PLAN CATEGORY

 

NUMBER OF COMMON SHARES
TO BE ISSUED UPON EXERCISE
OF OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS

 

 

    WEIGHTED AVERAGE EXERCISE    
PRICE OF OUTSTANDING

OPTIONS, WARRANTS

AND RIGHTS

 

 

NUMBER OF COMMON SHARES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
EQUITY COMPENSATION PLANS

 

 

Equity compensation plans

approved by stockholders

 

 

533,052 $14.26 2,066,189

EXECUTIVE OFFICERS OF THE COMPANY

 

 

EXECUTIVE OFFICERS

Biographical information, as of September 30, 2018, for the executive officers of the Company is set forth below. Biographical information for Allan P. Merrill is set forth above under “Proposal 1 — Election of Directors — Nominees.”

ROBERT L. SALOMON. Mr. Salomon, 58, our Executive Vice President and Chief Financial Officer, joined the Company in February 2008 as Senior Vice President, Chief Accounting Officer and Controller. Mr. Salomon was previously with the homebuilding company Ashton Woods Homes where he served as Chief Financial Officer and Treasurer since 1998. Previously, he held various financial management roles of increasing responsibility over a six-year period with homebuilder M.D.C. Holdings, Inc. Mr. Salomon has 34 years of financial management experience, 25 of which have been in the homebuilding industry. Mr. Salomon is a member of the American Institute of Certified Public Accountants and a graduate of the University of Iowa with a Bachelor of Business Administration degree.

KEITH L. BELKNAP. Mr. Belknap, 60, joined the Company as Executive Vice President, General Counsel and Corporate Secretary in January 2018. Mr. Belknap was previously EVP, Business Development, General Counsel and Chief Compliance Officer of Mueller Water Products, Inc. Previously, he served as SVP and General Counsel of PRIMEDIA, Inc., a digital media and real estate advertising company. In addition, Mr. Belknap held senior legal positions with PPG Industries and Georgia-Pacific Corporation. He began his legal career at Skadden, Arps, Slate, Meagher & Flom LLP where he practiced for 10 years. Mr. Belknap received a Bachelor of Arts degree from the University of Tulsa and a Juris Doctor from Harvard Law School.

 

 

 

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40


  

 

 

 

PROPOSALS 4 AND 5 –

APPROVAL OF AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION AND

NEW SECTION 382 RIGHTS AGREEMENT

 

LOGO   

 

BACKGROUND AND FREQUENTLY ASKED QUESTIONS

 

BACKGROUND

Until recently, we generated significant net operating losses for tax purposes, or NOLs, which we use (and want to continue to use) to offset the taxable income we are now generating and expect to continue to generate in the future. Accordingly, our NOLs, along with our other deferred tax assets, have substantial value to us. As of September 30, 2018, our deferred tax assets, including our NOLs, totaled approximately $248 million.

However, the Internal Revenue Code places strict limits on our ability to fully maximize our NOLs. For example, under Section 382 of the Code, the value of our NOLs could be significantly reduced if we experienced an “ownership change,” which would occur if a 5% stockholder (or a group of stockholders) increased its ownership by more than 50% during a rolling three-year period. If this were to occur, Section 382 would impose an annual limit on the amount of NOLs we could use to offset our income taxes, which could result in a material amount of our NOLs expiring unused. A number of complex tax rules are involved in making this determination, including who is considered a 5% stockholder and whether any ownership change has, in fact, occurred. Because of this complexity, and the simple reality that we — like any public company — have limited knowledge about the true ownership of our outstanding shares, it is very difficult for us to comply with Section 382’s limitations without the use of the protective devices described in Proposals 4 and 5.

The charter amendment described in Proposal 4 has been in place since 2011 when our stockholders first overwhelmingly approved it. Similarly, the Section 382 Rights Agreement described in Proposal 5 has been in place since 2013 when it, too, was overwhelmingly approved by our stockholders. Since then, our stockholders have re-approved Proposals 4 and 5 by wide margins every three years. Because both of these protective devices are set to expire in November 2019, the purpose of Proposals 4 and 5 is to renew them for another three years until November 2022.

Accordingly, our Board of Directors strongly recommends that stockholders once again approve the adoption of both Proposals 4 and 5.

FREQUENTLY ASKED QUESTIONS

We have prepared the following frequently asked questions to assist our stockholders in their understanding of the complexities involved in determining the value of our deferred tax assets, including our NOLs, as well as our ability to maximize them. We urge our stockholders to read carefully Proposals 4 and 5, including their related Appendices, and the other documents to which Proposals 4 and 5 refer or are otherwise incorporated herein by reference, because this section does not provide all of the information that might be important to them.

Are the amount of the Company’s NOLs subject to challenge by the IRS?

The IRS could challenge the amount of our NOLs, but has not done so to date. If the IRS were to audit or otherwise seek to validate the amount of our NOLs. our ability to use our NOLs could be reduced, perhaps significantly. In addition, the complexity of Section 382’s provisions and the limited knowledge any public company has or is able to obtain about the ownership of its publicly-traded stock make it difficult to determine whether an ownership change has occurred. Therefore, we cannot assure you that the IRS will not claim that we experienced an ownership change and attempt to reduce or eliminate the benefit of our NOLs even if Proposals 4 and 5 are approved.

 

 

 

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Will Proposals 4 and 5 prevent all transfers that could result in an ownership change?

Although Proposals 4 and 5 are intended to reduce the likelihood of an ownership change, we cannot assure that they will prevent all transfers of our stock that could result in such an ownership change. In particular, absent a court determination, we cannot assure you that the charter amendment described in Proposal 4 will be enforceable against all of our stockholders. In addition, the new Rights Agreement described in Proposal 5 may deter, but ultimately cannot block, all transfers of our stock that might result in an ownership change. However, our Board of Directors believes that both measures are needed and that they will serve as important tools to help prevent an ownership change that could substantially reduce or eliminate the significant long-term potential benefits of our NOLs.

Will the charter amendment and the new Rights Plan impact the liquidity or trading value of the Company’s common stock?

The protective devices described in Proposals 4 and 5 generally restrict a stockholder’s ability to acquire, directly or indirectly, additional shares of our common stock in excess of 4.95%. Furthermore, a stockholder’s ability to dispose of its common stock may be limited by reducing the number of acquirers capable of purchasing the shares in light of their own ownership levels. We recommend that stockholders monitor carefully their ownership of our stock and consult their own legal advisors and/or us to assist them in determining whether their ownership of our stock approaches the restricted levels described in Proposals 4 and 5.

If the protective devices contained in Proposals 4 and 5 are extended, our Board of Directors intends to continue to disclose that our shares continue to be subject to transfer restrictions, both on certificates representing newly-issued or transferred shares as well as publicly so that potential recipients of uncertificated shares will have the ability to be aware of the transfer restrictions and ownership limitations imposed by the protective provisions. Because certain buyers, including persons who wish to acquire 4.95% or more of our common stock as well some institutional holders who may not be comfortable holding common stock with transfer restrictions or other ownership limits, may not be able to purchase our common stock, extending the protective mechanisms could depress the trading value of our common stock in an amount that could more than offset any value preserved from protecting our NOLs.

Will the charter amendment and the new Rights Plan have an anti-takeover effect?

Our Board of Directors approved the adoptions of the protective provisions contained in Proposals 4 and 5 in order to preserve the value of our NOLs, not as part of a plan to render more difficult, or discourage, a takeover of the Company, such as a merger, tender offer, proxy contest or assumption of control by a substantial holder of our common stock. However, if extended, the protective provisions contained in Proposals 4 and 5 could have an anti-takeover effect because, among other things, they will restrict the ability of a person or group to accumulate 4.95% or more of our common stock and the ability of a person or group now owning 4.95% or more of our common stock to acquire additional shares without the approval of our Board of Directors. We are not aware presently aware of any potential takeover transaction.

What is the effect of the transfer restrictions contained in the charter amendment on my shares if I vote against Proposal 4 but it is nonetheless still approved by stockholders?

Delaware law provides that the transfer restrictions contained in the charter amendment for common stock issued prior to the amendment’s adoption will be effective as to (1) stockholders with respect to shares that were voted in favor of the amendment and (2) purported transferees of such shares if:

 

 

the transfer restriction is conspicuously noted on the certificate(s) representing such shares; or

 

 

the transferee had actual knowledge of the transfer restrictions (even absent the conspicuous notation).

If Proposal 4 is approved, we intend to continue having newly-issued certificated or certificated transferred shares issued with the relevant transfer restrictions conspicuously noted on the certificate(s). In addition, if Proposal 4 is approved, we intend to give a notice regarding the relevant transfer restrictions to registered holders of our common stock in uncertificated form, as contemplated by Delaware law. For the purpose of determining whether a stockholder is subject to the transfer restrictions imposed by the protective provisions, we have taken

 

 

 

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and intend to continue to take the position that all shares issued prior to the effectiveness of Proposal 4 that are proposed to be transferred were voted in favor of Proposal 4, unless the contrary is established. We may also assert that stockholders have waived the right to challenge or otherwise cannot challenge the enforceability of the charter amendment, unless a stockholder establishes that it did not vote in favor of extending the protective provisions. Nonetheless, a court could find that the protective provisions contained in the charter amendment are unenforceable, either in general or as applied to a particular stockholder or fact situation.

PROPOSAL 4 —

ADOPTION OF CHARTER AMENDMENT TO EXTEND

NOL PROTECTIVE PROVISIONS

 

 

This proposal is asking our stockholders to extend protective provisions contained in our charter that are designed to assist us to in protecting the value of our NOLs by limiting and/or prohibiting transfers of our stock that could affect the percentage of stock that is treated as being owned by a holder of 4.95% of our shares. These provisions were first approved by our stockholders in 2011 and, since then, have been re-approved every three years. Because the provisions are due to expire in November 2019, we are once again asking stockholders to extend them for another three years to November 12, 2022.

DESCRIPTION OF THE NOL PROTECTIVE PROVISIONS

The following description of the protective provisions is qualified in its entirety by reference to the full text of our charter, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on February 8, 2011 (as amended by the first and second extensions, which were filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on November 7, 2013, and Exhibit 3.8 to our Annual Report on Form 10-K filed with the SEC on November 15, 2016, respectively), and the full text of the proposed extension to the protective provisions, which is attached hereto as Appendix I. We urge you to carefully read our charter in its entirety as the discussion of the protective provisions below is only a summary.

Prohibited Transfers.  The protective provisions generally prohibit any direct or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if the effect would be to:

 

 

increase the direct or indirect ownership of our stock by any person from less than 4.95% to 4.95% or more; or

 

 

increase the percentage of our common stock owned directly or indirectly by a person owning or deemed to own 4.95% or more of our common stock.

Complicated common stock ownership rules prescribed by the Code apply in determining whether a person is a 4.95% stockholder. For purposes of determining the existence and identity of, and the amount of our common stock owned by, any stockholder, we are entitled to rely on the existence or absence of certain public securities filings as of any date, subject to our actual knowledge of the ownership of our common stock. We also have the right to require a proposed transferee, as a condition to registration of a transfer of our common stock, to provide all information reasonably requested regarding such person’s direct and indirect ownership of our common stock.

These transfer restrictions may result in the delay or refusal of certain requested transfers of our common stock or may prohibit ownership (thus requiring dispositions) of our common stock due to a change in the relationship between two or more persons or entities or to a transfer of an interest in an entity other than us that, directly or indirectly, owns our common stock. The transfer restrictions will also apply to proscribe the creation or transfer of certain “options” (which are broadly defined by Section 382) with respect to our common stock to the extent that, in certain circumstances, the creation, transfer or exercise of the option would result in a proscribed level of ownership.

Consequences of Prohibited Transfers.  Any direct or indirect transfer attempted in violation of the protective provisions is void immediately, and the purported transferee will not be recognized as the owner of the shares

 

 

 

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owned in violation of the protective provisions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of such common stock, or in the case of options, receiving our common stock in respect of their exercise. In this Proxy Statement, our common stock purportedly acquired in violation of the protective provisions is referred to as “excess stock.”

In addition to a prohibited transfer being void as of the date it is attempted, upon the Company’s demand, the purported transferee must transfer the excess stock to our agent along with any dividends or other distributions paid with respect to such excess stock. Our agent is required to sell such excess stock in an arm’s-length transaction (or series of transactions) that would not constitute a violation under the protective provisions. The net proceeds of the sale, together with any other distributions with respect to such excess stock received by our agent, after deduction of all costs incurred by the agent, will be distributed first to the purported transferee in an amount, if any, up to the cost (or in the case of gift, inheritance or similar transfer, the fair market value of the excess stock on the date of the prohibited transfer) incurred by the purported transferee to acquire such excess stock, and the balance of the proceeds, if any, will be distributed to a charitable beneficiary. If the excess stock is sold by the purported transferee, such person will be treated as having sold the excess stock on behalf of the agent and will be required to remit all proceeds to our agent (except to the extent we grant written permission to the purported transferee to retain an amount not to exceed the amount such person otherwise would have been entitled to retain had our agent sold such shares).

Any stockholder who knowingly violates the protective provisions will be liable for any and all damages we suffer as a result of such violation, including damages resulting from any limitation in our ability to use our NOLs and any professional fees incurred in connection with addressing such violation.

Modification and Waiver of Transfer Restrictions.  Our Board of Directors has the discretion to approve a transfer of our common stock that would otherwise violate the transfer restrictions if it determines that the transfer is in our stockholders’ best interests. If our Board of Directors decides to permit such a transfer, that transfer or later transfers may result in an ownership change that could limit our use of our NOLs.

In the event of a change in law, our Board of Directors will have the unilateral authority to modify the 4.95% ownership threshold, as well as any of the definitions, terms and conditions of the transfer restrictions, or to eliminate the transfer restrictions in their entirety. Our Board of Directors may also establish, modify, amend or rescind by-laws, policies and any procedures for purposes of determining whether any transfer of common stock would jeopardize our ability to use our NOLs.

EXPIRATION

If approved, the protective provisions will expire on the earliest of (i) the determination by our Board of Directors that the provisions are no longer necessary for the preservation of our NOLs because of the amendment or repeal of Section 382 or any successor statute, (ii) the beginning of a taxable year to which our Board of Directors determines that none of our NOLs may be carried forward (iii) such date as our Board of Directors otherwise determines that the provisions are no longer necessary for the preservation of our NOLs and (iv) November 12, 2022.

EFFECTIVENESS AND ENFORCEABILITY

Although the protective provisions are intended to reduce the likelihood of an ownership change, we cannot eliminate the possibility that an ownership change will occur. The effectiveness of the protective provisions is limited by, among other things:

 

 

Our Board of Directors’ right to permit a transfer to an acquirer that results or contributes to an ownership change if it determines that such transfer is in our stockholders’ best interests.

 

 

A court’s finding that part or all of our charter is not enforceable, either in general or as to a particular fact situation.

 

 

Certain changes in relationships among stockholders or other events could cause an ownership change under Section 382.

 

 

 

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Accordingly, we cannot assure you that an ownership change will not occur even if the protective provisions are extended. However, our Board of Directors believes that the protective provisions, together with the Rights Agreement discussed in Proposal 5, provide significant protections to preserve our ability to use our NOLs to offset future income tax liabilities.

REQUIRED VOTE

This proposal requires the affirmative vote of a majority of our outstanding shares of common stock.

RECOMMENDATION

The Board of Directors recommends that stockholders vote FOR this proposal.

PROPOSAL 5 —

APPROVAL OF SECTION 382 RIGHTS AGREEMENT

 

 

In February 2013, our stockholders first approved the adoption of a Section 382 Rights Agreement, which was intended to act as a deterrent to any person desiring to acquire 4.95% or more of our common stock. By its terms, the original Rights Agreement was to expire in November 2016. Accordingly, in February 2016, our stockholders adopted a new Rights Agreement which contained substantially the same terms as the first Rights Agreement. Because that Rights Agreement is scheduled to expire in November 2019, we are now seeking stockholder approval to enter into yet another new Section 382 Rights Agreement, which is the same in all material respects as the two previous Rights Agreements approved by stockholders in 2013 and 2016, except that it will expire on November 14, 2022 if adopted.

Because the Section 382 charter protections described in Proposal 4 will not eliminate the possibility that an ownership change will occur, we believe the new Rights Agreement, which is designed to deter transfers of our stock that could result in an ownership change, is an important tool to further protect our ability to utilize our NOLs.

DESCRIPTION OF THE RIGHTS AGREEMENT

The following description of the Rights Agreement is qualified in its entirety by reference to the text of the Rights Agreement, which is attached to this Proxy Statement as Appendix II. We urge you to read it carefully in its entirety as the discussion below is only a summary.

The Rights.  Our Board of Directors authorized the issuance of one right per outstanding common share payable upon the effectiveness of the Rights Agreement to our stockholders of record as of November 14, 2019. Subject to the terms, provisions and conditions of the Rights Agreement, if the rights become exercisable, each right would initially represent the right to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Shares, for a purchase price of $50.00 per right (which we refer to as the “purchase price”). If issued, each fractional Series A Preferred Share would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of our common stock. However, prior to exercise, a right will not give its holder any rights as a stockholder of the Company, including any dividend, voting or liquidation rights.

Exercisability.  The rights are not exercisable until the earlier of (1) ten calendar days after a public announcement by us that a person has acquired at least 4.95% or more of our outstanding stock (which we refer to as an “acquiring person”) and (2) ten business days (or such later date as may be determined by our Board of Directors) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in such person becoming an acquiring person. We refer to the date that the rights become exercisable under the proposed Rights Agreement as the “distribution date.”

Any transfer of our stock prior to the distribution date will constitute a transfer of the associated rights. After the distribution date, the rights may be transferred separately from the transfer of the underlying common stock until our Board of Directors determines otherwise (as described below).

 

 

 

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After the distribution date, each holder of a right (other than the acquiring person) will generally be entitled to exercise the right and, upon payment of $100.00 (i.e., two times the purchase price), will be entitled to receive that number of shares of our common stock or other securities having a market value of $100.00.

Exemptions.  Our Board of Directors recognizes there may be instances when an acquisition of our common stock that would cause a stockholder to become an acquiring person may not jeopardize or endanger in any material respect the availability of our NOLs or there may be situations when the acquisition would otherwise be in the Company’s and its stockholders’ best interests. Accordingly, the Rights Agreement grants full discretion to our Board of Directors to exempt acquisitions in such instances.

Redemption.  We may redeem the rights (at a price of $0.001 per share) at any time until ten calendar days following the public announcement that a person has become an acquiring person. Upon any such redemption, the ability to exercise the rights will terminate and the only right the holder will have is the right to receive the redemption price of $0.001 per right.

Expiration.  If approved and adopted, the Rights Agreement will expire on the earliest of the following:

 

 

the close of business on November 14, 2022;

 

 

the redemption of the rights;

 

 

the exchange of the rights;

 

 

the effective date of the repeal of Section 382 or any successor statute if our Board of Directors determines that the Rights Agreement is no longer necessary or desirable; and

 

 

the first day of a taxable year to which our Board of Directors determines that no tax benefits may be carried forward.

Anti-Dilution Provisions.  Our Board of Directors may adjust the purchase price of the Series A Preferred Shares, the number of Series A Preferred Shares issuable and the number of outstanding rights to prevent dilution that may occur due to any number of events, including among others, a share dividend or a share split. In general, no adjustments to the purchase price of less than 1% will be made.

Amendments.  Prior to the distribution date, our Board of Directors will have the general right to supplement or amend any provision of the Rights Agreement in any respect. After the distribution date, no amendment may be made by our Board of Directors that would adversely affect the interests of any rights holders.

REQUIRED VOTE

This proposal requires the affirmative vote of a majority of our common stock present in person or by proxy at the Annual Meeting.

RECOMMENDATION

The Board of Directors recommends that stockholders vote FOR this proposal.

 

 

 

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TRANSACTIONS WITH

RELATED PERSONS

REVIEW, APPROVAL OR RATIFICATION OF

TRANSACTIONS WITH RELATED PERSONS

 

 

The Audit Committee of our Board of Directors, in accordance with its charter and our Related Party Transactions Policy, is responsible for conducting an appropriate review of all proposed related party transactions to identify potential conflict of interest situations. Any identified related party transactions are then presented to our Board of Directors for approval and implementation of appropriate action to protect us from potential conflicts of interest. We have also adopted a Code of Ethics pursuant to which all directors and employees must disclose any potential conflicts of interest or related party transactions prior to entering into any such transactions.

There were no reportable transactions with related persons during fiscal year 2018.

COMPENSATION COMMITTEE INTERLOCKS

AND INSIDER PARTICIPATION

 

 

The members of our Compensation Committee during fiscal year 2018 were Messrs. Beazer, Leemputte, Orser and Shepherd and Ms. Provencio. Mr. Beazer joined the Compensation Committee in February 2018. None of the members of our Compensation Committee has ever been an officer or employee of the Company or any of our subsidiaries. None of the members of our Compensation Committee had any relationship requiring disclosure under “Transactions with Related Persons.” During fiscal year 2018, none of our executive officers served as a director or member of the compensation committee (or other committee of the board of directors performing equivalent functions) of another entity that had an executive officer serving on our Board of Directors.

PROPOSALS FOR THE

NEXT ANNUAL MEETING

PROPOSALS TO BE INCLUDED IN OUR PROXY STATEMENT

FOR THE 2020 ANNUAL MEETING

 

 

Any proposal by a stockholder to be included in the proxy statement for our 2020 annual meeting of stockholders must be received at our principal executive offices, 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, not later than August [    ], 2019. Any such proposal must also meet the other requirements of the rules of the SEC relating to stockholder proposals.

 

 

 

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STOCKHOLDER PROPOSALS REGARDING NOMINATIONS OR

OTHER BUSINESS AT THE 2020 ANNUAL MEETING

 

 

Any proposal by a stockholder for nominations or other business at our 2020 annual meeting of stockholders (outside of the processes for proposals to be included in the proxy statement for our 2020 annual meeting of stockholders described above) must be received at our principal executive offices, 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, no earlier than July [    ], 2019 and no later than August [    ], 2019. Any such notice must also meet the other requirements of our by-laws relating to stockholder proposals.

OTHER

INFORMATION

Management does not know of any items, other than those referred to in this Proxy Statement, which may properly come before the meeting or other matters incident to the conduct of the meeting.

As to any other item or proposal that may properly come before the meeting, including voting on a proposal omitted from this Proxy Statement pursuant to the rules of the SEC or any proposal to adjourn or postpone the meeting, it is intended that proxies will be voted in accordance with the discretion of the proxy holders.

By Order of the Board of Directors,

Keith L. Belknap

Corporate Secretary

Dated: December [    ], 2018

 

 

 

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APPENDIX I

PROTECTIVE AMENDMENT EXTENSION

CERTIFICATE OF AMENDMENT

TO THE

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

BEAZER HOMES USA, INC.

Beazer Homes USA, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), pursuant to the General Corporation Law of the State of Delaware (the “DGCL”), DOES HEREBY CERTIFY as follows:

 

 

Article EIGHT of the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Amended and Restated Certificate of Incorporation”), is hereby amended by replacing paragraph (i) of the existing Article EIGHT in its entirety with the following:

“Expiration Date” means the earliest of (1) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this Article EIGHT is no longer necessary or desirable for the preservation of Tax Benefits, (2) the close of business on the first day of a taxable year of the Corporation as to which the Board of Directors determines that no Tax Benefits may be carried forward, (3) such date as the Board of Directors shall fix in accordance with Part XII of this Article EIGHT and (4) November 12, 2022.”

 

 

In accordance with the provisions of Section 242 of the DGCL, the Board of Directors of the Corporation duly adopted the above amendment to the Amended and Restated Certificate of Incorporation (the “Amendment”), deemed the Amendment advisable and directed that the Amendment be considered by the Corporation’s stockholders. Notice of the Amendment was duly given to the stockholders of the Corporation in accordance with Section 222 of the DGCL. The Amendment was adopted by the Corporation’s stockholders on February 6, 2019 in accordance with Section 242 of the DGCL.

 

 

Pursuant to Sections 103 and 242 of the DGCL, the Amendment shall become effective at 12:00 a.m., New York City time, on Saturday, November 12, 2019.

IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer to execute this Certificate of Amendment on this      day of November, 2019.

 

Beazer Homes USA, Inc.
By:  

                 

Name:   Robert L. Salomon
Title:   Executive Vice President and Chief Financial Officer

 

Attest:

 

Name:   Keith L. Belknap
Title:   Executive Vice President and General Counsel

 

 

 

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APPENDIX II

NEW SECTION 382 RIGHTS AGREEMENT

 

 

 

 

 

BEAZER HOMES USA, INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

as

Rights Agent

Section 382 Rights Agreement

Dated as of November 6, 2018

Effective as of November 14, 2019

 

 

 

 

 

 

 

 

 

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TABLE OF

CONTENTS

 

Section 1.

 

 

Certain Definitions

 

    

 

52

 

 

 

 

Section 2.

 

 

 

Appointment of Rights Agent

 

    

 

56

 

 

 

 

Section 3.

 

 

 

Issue of Rights Certificates

 

    

 

56

 

 

 

 

Section 4.

 

 

 

Form of Rights Certificates

 

    

 

57

 

 

 

 

Section 5.

 

 

 

Countersignature and Registration

 

    

 

57

 

 

 

 

Section 6.

 

 

 

Transfer, Split Up, Combination and Exchange of Rights Certificates;

Mutilated, Destroyed, Lost or Stolen Rights Certificates

 

    

 

58

 

 

 

 

Section 7.

 

 

 

Exercise of Rights; Purchase Price; Expiration Date of Rights

 

    

 

58

 

 

 

 

Section 8.

 

 

 

Cancellation and Destruction of Rights Certificates

 

    

 

60

 

 

 

 

Section 9.

 

 

 

Reservation and Availability of Capital Stock

 

    

 

60

 

 

 

 

Section 10.

 

 

 

Preferred Stock Record Date

 

    

 

61

 

 

 

 

Section 11.

 

 

 

Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights

 

    

 

61

 

 

 

 

Section 12.

 

 

 

Certificate of Adjusted Purchase Price or Number of Shares

 

    

 

67

 

 

 

 

Section 13.

 

 

 

Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power

 

    

 

67

 

 

 

 

Section 14.

 

 

 

Fractional Rights and Fractional Shares

 

    

 

68

 

 

 

 

Section 15.

 

 

 

Rights of Action

 

    

 

69

 

 

 

 

Section 16.

 

 

 

Agreement of Rights Holders

 

    

 

69

 

 

 

 

Section 17.

 

 

 

Rights Certificate Holder Not Deemed a Stockholder

 

    

 

70

 

 

 

 

Section 18.

 

 

 

Concerning the Rights Agent

 

    

 

70

 

 

 

 

Section 19.

 

 

 

Merger or Consolidation or Change of Name of Rights Agent

 

    

 

70

 

 

 

 

Section 20.

 

 

 

Duties of Rights Agent

 

    

 

71

 

 

 

 

Section 21.

 

 

 

Change of Rights Agent

 

    

 

72

 

 

 

 

Section 22.

 

 

 

Issuance of New Rights Certificates

 

    

 

73

 

 

 

 

Section 23.

 

 

 

Redemption and Termination

 

    

 

73

 

 

 

 

Section 24.

 

 

 

Notice of Certain Events

 

    

 

73

 

 

 

 

Section 25.

 

 

 

Notices

 

    

 

74

 

 

 

 

Section 26.

 

 

 

Supplements and Amendments

 

    

 

74

 

 

 

 

Section 27.

 

 

 

Exchange

 

    

 

75

 

 

 

 

Section 28.

 

 

 

Successors

 

    

 

76

 

 

 

 

Section 29.

 

 

 

Determinations and Actions by the Board of Directors, etc.

 

    

 

76

 

 

 

 

Section 30.

 

 

 

Benefits of this Agreement

 

    

 

76

 

 

 

 

Section 31.

 

 

 

Severability

 

    

 

77

 

 

 

 

Section 32.

 

 

 

Governing Law

 

    

 

77

 

 

 

 

Section 33.

 

 

 

Counterparts

 

    

 

77

 

 

 

 

Section 34.

 

 

 

Descriptive Headings

 

    

 

77

 

 

 

 

Section 35.

 

 

 

Effectiveness.

 

    

 

77

 

 

 

              

 

Exhibit A —

 

 

 

Form of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock

 

    

 

79

 

 

 

 

Exhibit B —

 

 

 

Form of Rights Certificate

 

    

 

84

 

 

 

 

Exhibit C —

 

 

 

Summary of Rights to Purchase Series A Junior Participating Preferred Stock

 

    

 

88

 

 

 

 

 

 

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SECTION 382

RIGHTS AGREEMENT

SECTION 382 RIGHTS AGREEMENT, dated as of November 6, 2018 (the “Agreement”), between Beazer Homes USA, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company (the “Rights Agent”).

WITNESSETH:

WHEREAS, the Company has generated NOLs (as defined in Section 1 hereof) for United States federal income tax purposes; and such NOLs may potentially provide valuable tax benefits to the Company; the Company desires to avoid an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder, and thereby preserve the ability to utilize fully such NOLs and certain other tax benefits; and, in furtherance of such objective, the Company desires to enter into this Agreement; and

WHEREAS, on November 6, 2018 (the “Rights Dividend Declaration Date”), the Board of Directors of the Company authorized and declared a dividend distribution of one preferred share purchase right (a “Right”) for each share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) outstanding at the close of business on November 14, 2019 (the “Record Date”), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each share of Common Stock issued between the Record Date (whether originally issued or delivered from the Company’s treasury) and the earlier of the close of business on the Distribution Date (as defined in Section 3 hereof) and the Expiration Date (as defined in Section 7(a) hereof), each Right initially representing the right to purchase one one-thousandth of a share (a “Unit”) of Series A Junior Participating Preferred Stock (the “Preferred Stock”) of the Company having the rights, powers and preferences set forth in the form of Designations, Preferences and Rights attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth.

WHEREAS, on February 6, 2019, the stockholders of the Company approved the adoption of this Agreement by the Company.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

CERTAIN DEFINITIONS

For purposes of this Agreement, the following terms have the meanings indicated:

Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.95% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company, or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, (iv) any Exempted Person or (v) any Person that beneficially owns at least a majority of the Common Stock following consummation of a Qualified Offer. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” solely as a result of an Exempted Transaction.

Affiliate” and “Associate” shall mean, with respect to any Person, any other Person whose Common Stock would be deemed constructively owned by such first Person for purposes of Section 382 of the Code, would be deemed owned by a single “entity” as defined in Treasury Regulation § 1.382-3(a)(1) in which both such Persons are included, or otherwise would be deemed aggregated with Common Stock owned by such first Person pursuant to the provisions of Section 382 of the Code and the Treasury Regulations thereunder; provided, however, that a Person shall not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company.

 

 

 

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A Person shall be deemed a “Beneficial Owner” of, shall be deemed to have “Beneficial Ownership” and shall be deemed to “beneficially own” any securities which such Person directly owns, or would be deemed to constructively own, pursuant to Section 382 of the Code and the Treasury Regulations promulgated thereunder.

Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date provided; however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

Code” shall have the meaning set forth in the recitals to this Agreement.

Common Stock” shall have the meaning set forth in the recitals to this Agreement, except that “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person (or, if such Person is a Subsidiary of another Person, the Person or Persons that ultimately control such first mentioned Person).

Common Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

Current Market Price” shall have the meaning set forth in Sections 11(d)(i) and 11(d)(ii) hereof.

Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.

Distribution Date” shall have the meaning set forth in Section 3(a) hereof.

Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b) hereof.

Exempted Person” shall mean any Person who, together with all Affiliates and Associates of such Person,

is the Beneficial Owner of securities (as disclosed in public filings with the Securities and Exchange Commission on the Rights Dividend Declaration Date), representing 4.95% or more of the shares of Common Stock outstanding on the Rights Dividend Declaration Date provided; however, that any such Person described in this clause (i) shall no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of securities representing a percentage of Common Stock that exceeds by one-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such Person had at any time since the Rights Dividend Declaration Date, except solely (x) pursuant to equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a redemption of shares of Common Stock by the Company; or

becomes the Beneficial Owner of securities representing 4.95% or more of the shares of Common Stock then outstanding because of a reduction in the number of outstanding shares of Common Stock then outstanding as a result of the purchase by the Company or a Subsidiary of the Company of shares of Common Stock provided; however, that any such Person described in this clause (ii) shall no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner, at any time after the date such Person became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock, of securities representing a percentage of Common Stock that exceeds by one-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such Person had at any time since the date such Person first became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock, except solely (x) pursuant to equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock

 

 

 

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represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a redemption of shares of Common Stock by the Company; or

who is a Beneficial Owner of 4.95% or more of the shares of Common Stock outstanding and whose beneficial ownership, as determined by the Board of Directors in its sole discretion, (x) would not jeopardize or endanger the availability to the Company of its NOLs or other Tax Benefits or (y) is otherwise in the best interests of the Company provided; however, that if a Person is an Exempted Person solely by reason of this clause (iii), then such Person shall cease to be an Exempted Person if (A) such Person ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock, (B) after the date of such determination by the Board of Directors, such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of securities representing a percentage of Common Stock that exceeds by one-half of one percent (0.5%) or more the lowest percentage of Beneficial Ownership of Common Stock that such Person had at any time since the date such Person first became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock, except solely (I) pursuant to equity compensation awards granted to such Person by the Company or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (II) as a result of a redemption of shares of Common Stock by the Company, or (C) the Board of Directors of the Company, in its sole discretion, makes a contrary determination with respect to the effect of such Person’s beneficial ownership (together with all Affiliates and Associates of such Person) with respect to the availability to the Company of its NOLs or other Tax Benefits.

A purchaser, assignee or transferee of the shares of Common Stock (or warrants or options exercisable for Common Stock) from an Exempted Person shall not thereby become an Exempted Person, except that a transferee from the estate of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person shall be an Exempted Person so long as such Person continues to be the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock.

Exempted Transaction” shall mean any transaction that the Board of Directors determines, in its sole discretion, is exempt from this Agreement, which determination shall be made in the sole and absolute discretion of the Board of Directors prior to the date of such transaction, including, without limitation, if the Board of Directors determines that (i) neither the Beneficial Ownership of shares of Common Stock by any Person, directly or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize or endanger the availability to the Company of the Tax Benefits or (ii) such transaction is otherwise in the best interests of the Company. In granting an exemption under this definition, the Board of Directors may require any Person who would otherwise be an Acquiring Person to make certain representations or undertakings or to agree that any violation or attempted violation of such representations or undertakings will result in such consequences and subject to such conditions as the Board of Directors may determine in its sole discretion, including that any such violation shall result in such Person becoming an Acquiring Person.

Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

Final Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

NOLs” shall mean the Company’s net operating loss carryforwards.

Person” shall mean any individual, firm, corporation, limited liability company, partnership or other entity, or a group of Persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of Section 1.382-3(a)(1) of the Treasury Regulations, and shall include any successor (by merger or otherwise) of such individual or entity, but shall not include a Public Group (as such term is defined in Section 1.382-2T(f)(13) of the Treasury Regulations).

Preferred Stock” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of Preferred Stock, par value $0.01 per share, of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock.

 

 

 

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Principal Party” shall have the meaning set forth in Section 13(b) hereof.

Purchase Price” shall have the meaning set forth in Section 4(a) hereof.

Qualified Offer” shall mean an offer, determined by a majority of the members of the Board of Directors of the Company that are independent of the relevant offeror, to have each of the following characteristics with respect to the Common Stock: (i) a tender or exchange offer for all of the outstanding shares of Common Stock at the same per-share consideration; (ii) an offer that has commenced within the meaning of Rule 14d-2(a) under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the “Exchange Act”); (iii) an offer that is conditioned on a minimum of at least a majority of the outstanding shares of the Common Stock being tendered and not withdrawn as of the offer’s expiration date, which condition shall not be waivable; (iv) an offer pursuant to which the offeror has announced that it intends, as promptly as practicable upon successful completion of the offer, to consummate a second step transaction whereby all shares of the Common Stock not tendered into the offer will be acquired using the same form and amount of consideration per share actually paid pursuant to the offer, subject to stockholders’ statutory appraisal rights, if any; (v) an offer pursuant to which the Company and its stockholders have received an irrevocable written commitment of the offeror that the offer will remain open for not less than 60 days; and (vi) an offer at a per-share consideration, and on such other terms and conditions, that in each case are adequate and fair. An offer shall constitute a Qualified Offer if and only for so long as each of the foregoing requirements in clauses (i) through (vi) remain satisfied, and if any such requirement shall at any time thereafter fail to be satisfied such offer shall no longer constitute a Qualified Offer.

Record Date” shall have the meaning set forth in the recitals of this Agreement.

Right” shall have the meaning set forth in the recitals of this Agreement.

Rights Agent” shall have the meaning set forth in the recitals of this Agreement.

Rights Certificate” shall have the meaning set forth in Section 3(a) hereof.

Rights Dividend Declaration Date” shall have the meaning set forth in the recitals of this Agreement.

Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii) hereof.

Section 13 Event” shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof.

Stock Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.

Subsidiary” shall mean, with reference to any Person, any Person of which a majority of the voting power of voting equity securities or equity interests is beneficially owned, directly or indirectly, by such Person or otherwise controlled by such Person.

Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.

Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.

Tax Benefits” shall mean the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, foreign tax credit carryovers, any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the Code, and the Treasury Regulations promulgated thereunder, of the Company or any of its Subsidiaries.

 

 

 

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Treasury Regulations” shall mean final, temporary and proposed income tax regulations promulgated under the Code, as amended.

Triggering Event” shall mean any Section 11(a)(ii) Event or any Section 13 Event.

APPOINTMENT OF RIGHTS AGENT

The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable.

ISSUE OF RIGHTS CERTIFICATES

Until the earlier of (i) the close of business on the tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), or (ii) the close of business on the tenth Business Day (or such later date as the Board of Directors of the Company shall determine prior to such time as any Person becomes an Acquiring Person) after the date that a tender or exchange offer by any Person (other than any Exempted Person, the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would become an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.

As promptly as practicable following the Record Date, the Company shall send a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, or issued subsequent to the Record Date, unless and until the Distribution Date shall occur, the Rights will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the earliest of the Distribution Date, the Expiration Date (as such term is defined in Section 7 hereof) or the redemption of the Rights pursuant to Section 23 hereof, the transfer of any certificates representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock.

Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company’s treasury) after the Record Date but prior to the earliest of the Distribution Date, the Expiration Date or the redemption of the Rights pursuant to Section 23 hereof. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear a legend substantially in the following form : “This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights

 

 

 

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Agreement between Beazer Homes USA, Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), dated as of November 14, 2019 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Rights Agent. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.” With respect to such certificates containing the foregoing legend, until the earlier of the (i) Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates.

FORM OF RIGHTS CERTIFICATES

The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date or, in the case of Rights with respect to Common Stock issued or becoming outstanding after the Record Date, the same date as the date of the share certificate evidencing such shares, and on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a share, the “Purchase Price”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially owned by any Person known to be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing plan, agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, agreement, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, or (iv) subsequent transferees of such Persons described in clause (i), (ii) or (iii) of this sentence , and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) a legend substantially in the following form: “The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement.” The absence of the foregoing legend on any Rights Certificate shall in no way affect any of the other provisions of this Agreement, including, without limitation, the provisions of Section 7(e).

COUNTERSIGNATURE AND REGISTRATION

The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President or any Executive Vice President or Senior Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested

 

 

 

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by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.

Following the Distribution Date, the Rights Agent shall keep, or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES;

MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES

Subject to the provisions of Section 4(b), Section 7(e), Section 14 and Section 27 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date or the redemption of the rights pursuant to Section 23 hereof, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 27 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. The Rights Agent shall promptly forward any such sum collected by it to the Company or to such Persons as the Company shall specify by written notice.

Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS

Subject to Section 7(e) and Section 27 hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the

 

 

 

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certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandth of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the close of business on November 14, 2022 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, (iii) the time at which all of the Rights (other than Rights that have become void pursuant to the provisions of Section 7(e) hereof) are exchanged for Common Stock or other assets or securities as provided in Section 27 hereof, (iv) the close of business on the effective date of the repeal of Section 382 or any successor statute if the Board of Directors of the Company determines that this Agreement is no longer necessary or desirable for the preservation of Tax Benefits, or (v) the close of business on the first day of a taxable year of the Company to which the Board of Directors of the Company determines that no Tax Benefits may be carried forward (the earliest of (i) and (ii) and (iii) and (iv) and (v) being herein referred to as the “Expiration Date”).

The Purchase Price for each one one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $50.00, and shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below.

Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-thousandth of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company shall direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to, or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash described in clause (ii) hereof, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof.

Not withstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a) (ii) Event, any Rights beneficially owned by any Person known to be (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring

 

 

 

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Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing plan, agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, agreement, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), or (iv) subsequent transferees of such Persons described in clause (i), (ii) or (iii) of this sentence, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Affiliates, Associates or transferees hereunder.

Not withstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.

CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES

All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

RESERVATION AND AVAILABILITY OF CAPITAL STOCK

The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights.

So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/ or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Securities Act of 1933 (the “Act”) with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period

 

 

 

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of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective.

The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-thousandths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/ or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (or Units) (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and non-assessable.

The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/ or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.