UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549_____________
SCHEDULE 14A(RULE 14a‑‑101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934_____________
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TRI Pointe Group, Inc.(Name of Registrant as Specified in Its Charter)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TotheStockholders:Anannualmeetingofstockholders(the"annualmeeting")ofTRIPointeGroup,Inc.("TRIPointe")willbeheldat10:00a.m.local
time,onFriday,April27,2018,atourcorporateoffices,locatedat19540JamboreeRoad,Suite300,Irvine,California92612.Theannualmeetingwillbeheldforthefollowingpurposes:
• toelectthesixnomineesnamedintheproxystatementtoserveonourBoardofDirectorsuntilhisorhersuccessoriselectedandqualifiedoruntilhisorherearlierresignation,removalordeath(ProposalNo.1);
• toratifytheappointmentofErnst&YoungLLPasTRIPointe'sindependentregisteredpublicaccountingfirmfor2018(ProposalNo.2);and
• totransactanyotherbusinessthatmayproperlycomebeforetheannualmeetingoranyadjournmentsorpostponementsthereof.
Theseitemsofbusinessaremorefullydescribedintheproxystatementaccompanyingthisnotice.Our Board of Directorsrecommends stockholders vote "FOR" the election of each of the six director nominees listed in Proposal No. 1 and "FOR" ProposalNo. 2.
AllTRIPointestockholdersarecordiallyinvitedtoattendtheannualmeeting,althoughonlythosestockholdersofrecordatthecloseofbusinessonFebruary26,2018areentitledtoreceivenoticeoftheannualmeetingandtovoteattheannualmeetingandanyadjournmentsorpostponementsoftheannualmeeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE,SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE YOURSHARES OF TRI POINTE COMMON STOCK BY CALLING THE TOLL-FREE TELEPHONE NUMBER OR BY USING THEINTERNET AS DESCRIBED IN THE INSTRUCTIONS INCLUDED WITH YOUR PROXY CARD AT YOUR EARLIESTCONVENIENCE.
WehaveelectedtotakeadvantageoftherulesthatallowcompaniestofurnishtheirproxymaterialsviatheInternet.Asaresult,theproxystatementwasmadeavailableontheInternetandwemailedaNoticeofInternetAvailabilityofProxyMaterialscontaininginstructionsonhowtoaccessourproxystatementandannualreportonoraboutMarch16,2018.TheNoticeofInternetAvailabilityofProxyMaterialsalsocontainsinstructionsonhowtorequestapapercopyofourproxystatementandannualreport.TRI Pointe's proxy materials areavailable online at http://www.astproxyportal.com/ast/18094.
ByOrderoftheBoardofDirectors,
DavidC.LeeSecretary
Pleasevoteyoursharespromptly.Youcanfindinstructionsforvotingontheenclosedproxycard.
March16,2018
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TABLE OF CONTENTS
Page
INFORMATIONABOUTTHEANNUALMEETING 1
QUESTIONSANDANSWERSABOUTTHEANNUALMEETING 4
PROPOSALNO.1ELECTIONOFDIRECTORS 8
PROPOSALNO.2RATIFICATIONOFSELECTIONOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM 10
BOARDOFDIRECTORS 11
CORPORATEGOVERNANCE 15
COMPENSATIONDISCUSSIONANDANALYSIS 22
COMPENSATIONCOMMITTEEREPORT 40
OWNERSHIPOFOURCOMMONSTOCK 41
EQUITYCOMPENSATIONPLANINFORMATION 43
EXECUTIVECOMPENSATION 44
DIRECTORCOMPENSATION 55
REPORTOFTHEAUDITCOMMITTEE 57
MANAGEMENT 58
SECTION16(a)BENEFICIALOWNERSHIPREPORTINGCOMPLIANCE 60
CERTAINRELATIONSHIPSANDRELATEDPARTYTRANSACTIONS 61
AUDITCOMMITTEEMATTERS 63
STOCKHOLDERPROPOSALSFOR2019ANNUALMEETING 64
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INFORMATION ABOUT THE ANNUAL MEETING
General; Date; Time and Place; Purposes of the Meeting
TheenclosedproxyissolicitedonbehalfofourBoardofDirectorsforuseattheannualmeetingofstockholdersofTRIPointeGroup,Inc.("TRIPointe,""we,""us"orthe"Company")tobeheldat10:00a.m.localtime,onFriday,April27,2018oratanyadjournmentsorpostponementsoftheannualmeeting,forthepurposessetforthinthisproxystatementandintheaccompanyingnoticeofannualmeeting.Theannualmeetingwillbeheldatourcorporateoffices,locatedat19540JamboreeRoad,Suite300,Irvine,California92612.
Attheannualmeeting,stockholderswillbeaskedto:
• electthesixnomineesnamedinthisproxystatementtoserveonourBoardofDirectorsuntilhisorhersuccessoriselectedandqualifiedoruntilhisorherearlierresignation,removalordeath(ProposalNo.1);
• ratifytheappointmentofErnst&YoungLLPasourindependentregisteredpublicaccountingfirmfor2018(ProposalNo.2);and
• transactanyotherbusinessthatmayproperlycomebeforetheannualmeetingoranyadjournmentsorpostponementsthereof.
Whenthisproxystatementreferstothe"annualmeeting,"itisalsoreferringtoanyadjournmentorpostponementoftheannualmeeting,ifitisdeterminedbyourBoardofDirectorstobenecessaryorappropriate.
Electronic Delivery
InaccordancewiththerulesandregulationsadoptedbytheSecuritiesandExchangeCommission("SEC"),wehaveelectedtofurnishtheproxymaterialstoourstockholdersviatheInternet.Webelieveelectronicdeliverywillexpeditestockholders'receiptofproxymaterials,whileloweringcostsandreducingtheenvironmentalimpactoftheannualmeetingbyreducingprintingandmailingoffullsetsofproxymaterials.ThisproxystatementwasmadeavailableontheInternetandwemailedaNoticeofInternetAvailabilityofProxyMaterials(the"Notice")containinginstructionsonhowtoaccesstheproxymaterialsonoraboutMarch16,2018.Ifastockholderwouldliketoreceiveapapercopyoftheproxymaterials,theNoticecontainsinstructionsonhowtoreceiveapapercopy.
Record Date; Quorum
HoldersofrecordofourcommonstockatthecloseofbusinessonFebruary26,2018,therecorddatefortheannualmeeting,areentitledtoreceivenoticeof,andtovoteat,theannualmeetingandanyadjournmentsorpostponementsthereof.Atthecloseofbusinessontherecorddate,151,391,065sharesofourcommonstockwereoutstandingandentitledtovote.Stockholdersareentitledtoonevoteoneachmattersubmittedtothestockholdersforeachshareofourcommonstockheldasoftherecorddate.
Aquorummustbeestablishedinorderforourstockholderstotakeactionattheannualmeeting.Thepresenceattheannualmeeting,inpersonorbyproxy,oftheholdersofstockhavingamajorityofvotesthatcouldbecastbytheholdersofalloutstandingstockentitledtovoteattheannualmeetingwillconstituteaquorum.Ifashareisrepresentedforanypurposeattheannualmeeting,itwillbedeemedpresentforpurposesofdeterminingwhetheraquorumexists.Abstentionsand"brokernon-votes"willbe
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countedaspresentandentitledtovoteforpurposesofdeterminingaquorum.Ifaquorumispresentwhentheannualmeetingisconvened,thesubsequentwithdrawalofstockholders,eveniflessthanaquorumremainsaftersuchwithdrawal,willnotaffecttheabilityoftheremainingstockholderstolawfullytransactbusiness.
AsofFebruary26,2018,ourdirectorsandcurrentexecutiveofficersheldapproximately1.3%ofthesharesentitledtovoteattheannualmeeting.See"OwnershipofOurCommonStock."
Solicitation of Proxies
Wewillbeartheentirecostofsolicitingproxiesfromourstockholders.Inadditiontosolicitationofproxiesbymail,proxiesmaybesolicitedinperson,bytelephoneorotherelectroniccommunications,suchasemailsorpostingsonourwebsitebyourdirectors,officersandemployees,whowillnotreceiveadditionalcompensationfortheseservices.WehaveretainedD.F.King&Co.,Inc.toassistinthesolicitationofproxiesforafeeof$11,500plusexpenses.Banks,brokersandothernomineeswillberequestedtoforwardsolicitingmaterialtobeneficialownersofstockheldofrecordbythem,andwewillreimbursethosepersonsfortheirreasonableexpensesindoingso.
Adjournments and Postponements
Althoughitisnotcurrentlyexpected,ifitisdeterminedbyourBoardofDirectorstobenecessaryorappropriate,theannualmeetingmaybeadjournedorpostponed.Noticewillnotbegivenofanysuchadjournedmeetingifthedate,timeandplace,ifany,thereofandthemeansofremotecommunication,ifany,bywhichstockholdersandproxyholdersmaybedeemedpresentinpersonandvoteatsuchadjournedmeetingareannouncedatthemeetingatwhichtheadjournmentistaken.Attheadjournedmeeting,anybusinessmaybetransactedwhichmighthavebeentransactedattheoriginalmeeting.Iftheadjournmentisformorethan30days,orifaftertheadjournmentanewrecorddateisfixedfortheadjournedmeeting,anoticeoftheadjournedmeetingwillbegiventoeachstockholderofrecordentitledtovoteattheadjournedmeeting.IfourBoardofDirectorsfixesanewrecorddatefordeterminationofstockholdersentitledtovoteatanadjournedmeeting,ourBoardofDirectorswillalsofixastherecorddateforstockholdersentitledtonoticeofsuchadjournedmeetingthesameoranearlierdateastherecorddatedeterminedforstockholdersentitledtovoteattheadjournedmeeting.
Attending the Annual Meeting
Allstockholders,includingstockholdersofrecordandstockholderswhoholdtheirsharesin"streetname"throughbanks,brokersorothernominees,areinvitedtoattendtheannualmeeting.Stockholdersofrecordcanvoteinpersonattheannualmeeting.Toattendtheannualmeeting,stockholdersofrecordneedtobringavalidpictureidentification.Ifastockholderholdssharesin"streetname"throughanaccountwithabank,brokerorothernominee,theholderwillneedtocontactitsbank,brokerorothernomineeandobtaina"legalproxy"fromthebank,brokerorothernomineeandpresentthe"legalproxy"andvalidpictureidentificationattheannualmeeting,which"legalproxy"willserveasthestockholder'sadmissionticket.Cellphonesmustbeturnedoffpriortoenteringtheannualmeeting.Camerasandvideo,audiooranyotherelectronicrecordingdeviceswillnotbeallowedinthemeetingroomduringtheannualmeeting,excepttotheextentpermittedbyus.Youcanobtaindirectionstobeabletoattendtheannualmeetingandvoteinperson,byrequestingtheminwritingorbytelephonefromusatthefollowingaddressandtelephonenumber:TRIPointeGroup,Inc.,19540JamboreeRoad,Suite300,Irvine,California92612,Attention:InvestorRelations;Telephone:(949)478-8696.
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Householding
SECrulesallowdeliveryofasingledocumenttohouseholdsatwhichtwoormorestockholdersreside.Thisprocedure,referredtoas"householding,"reducesthevolumeofduplicateinformationreceivedbystockholders,aswellasourexpenses.Ifastockholderofrecordiseligibleforhouseholding,butitandotherstockholdersofrecordwithwhichitsharesanaddressreceivemultiplecopiesoftheNotice,orifastockholderofrecordholdsstockinmorethanoneaccount,andineithercasethestockholderwishestoreceiveasinglecopyoftheNoticeforitshousehold,itshouldnotifyourCorporateSecretary.IfastockholderparticipatesinhouseholdingandwishestoreceiveaseparatecopyoftheNotice,ordoesnotwishtoparticipateinhouseholdingandpreferstoreceiveseparatecopiesoftheNoticeinthefuture,itshouldnotifyourCorporateSecretary.AstockholdermaynotifyourCorporateSecretaryinwritingatTRIPointeGroup,Inc.,19540JamboreeRoad,Suite300,Irvine,California92612,Attention:CorporateSecretary,orbytelephoneat(949)438-1400.
Ifastockholderholdsitssharesthroughanintermediarythatisutilizinghouseholdingandthestockholderwishestoreceiveseparatecopiesofourannualreportandproxystatementinthefuture,orifitisreceivingmultiplecopiesofourproxymaterialsandannualreportandwishestoreceiveonlyone,itshouldcontactitsbank,broker,orothernomineerecordholder.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Thefollowingaresomeofthequestionsthatstockholdersmayhaveabouttheannualmeetingandanswerstothosequestions.Thesequestionsandanswersarenotmeanttobeasubstitutefortheinformationcontainedintheremainderofthisproxystatement,andthisinformationisqualifiedinitsentiretybythemoredetaileddescriptionsandexplanationscontainedelsewhereinthisproxystatement.Weurgeourstockholderstoreadthisproxystatementinitsentiretypriortomakinganydecision.
Q: What proposals will be voted on at the annual meeting?
A: Stockholderswillvoteonthefollowingproposals:
• toelectthesixnomineesnamedinthisproxystatementtoserveonourBoardofDirectorsuntilhisorhersuccessoriselectedandqualifiedoruntilhisorherearlierresignation,removalordeath(ProposalNo.1);and
• toratifytheappointmentofErnst&YoungLLPasourindependentregisteredpublicaccountingfirmfor2018(ProposalNo.2).
Q: How does our Board of Directors recommend stockholders vote?
A: OurBoardofDirectorsrecommendsthatstockholdersvote:
• "FOR "theelectionofeachofthesixnomineestoourBoardofDirectorsuntilhisorhersuccessoriselectedandqualifiedoruntilhisorherearlierresignation,removalordeath(ProposalNo.1);and
• "FOR "theratificationoftheappointmentofErnst&YoungLLPasourindependentregisteredpublicaccountingfirmfor2018(ProposalNo.2).
Questions With Respect to the Election of Directors (Proposal No. 1)
Q: What vote is required for election of directors?
A: OurBylawsprovideformajorityvotinginuncontesteddirectorelections.Uncontesteddirectorelectionsaredefinedasanymeetingofstockholdersatwhichdirectorsaretobeelectedandthenumberofnomineesdoesnotexceedthenumberofdirectorstobeelected.Theelectionofdirectorsattheannualmeetingwillbeanuncontesteddirectorelection,asdefined.Therefore,eachnomineeforelectionasadirectorwillbeelectedattheannualmeetingifthenumberofvotescast"FOR "thenominee'selectionexceedsthenumberofvotescast"AGAINST "thenominee'selection.Abstentionsand"brokernon-votes"willnotbecountedasvotescastandwillnotaffecttheoutcomewithregardtothisproposal.Thereisnocumulativevotingintheelectionofdirectors.
Q: What if a stockholder returns a proxy but does not indicate how the shares should be voted with respect to Proposal No. 1?
A: Ifastockholdersubmitsaproperlyexecutedproxytousbuttheproxydoesnotindicatehowitshouldbevotedonthisproposal,thesharessubjecttotheproxywillbevoted"FOR "theelectionofeachofthesixnomineesnamedinthisproxystatementtoourBoardofDirectors.
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Q: What if a stockholder returns a proxy but instructs the proxy holder to abstain with respect to one or more nominees?
A: Ifastockholdersubmitsaproperlyexecutedproxytousandinstructstheproxyholdertoabstainwithrespecttooneormorenominees,thesharessubjecttotheproxywillnotbevotedfororagainstthatnomineeorthosenomineesandwillbevoted"FOR "or"AGAINST "theremainingnominee(s),ifany,asindicatedontheproxy.
Q: What if a stockholder is a beneficial owner of shares held in "street name" and fails to provide voting instructions withrespect to Proposal No. 1?
A: Ifastockholderisthebeneficialownerofsharesheldin"streetname"throughitsbank,brokerorothernominee,thebank,brokerorothernomineewilltypicallybeprohibitedfromvotinginitsdiscretiononthisproposalwithrespecttothatstockholder'ssharesandthese"brokernon-votes"willnotaffecttheoutcomeoftheelection.
Questions With Respect to the Ratification of the Appointment of Auditors (Proposal No. 2)
Q: What vote is required to approve the ratification of the appointment of auditors?
A: PursuanttoourBylaws,thisproposalrequirestheaffirmativevoteoftheholdersofstockhavingamajorityofthevotesthatcouldbecastbythestockholdersentitledtovoteontheproposalthatarepresentinpersonorbyproxyattheannualmeeting.
Q: What if a stockholder returns a proxy but does not indicate how the shares should be voted with respect to Proposal No. 2?
A: Ifastockholdersubmitsaproperlyexecutedproxytousbuttheproxydoesnotindicatehowitshouldbevotedonthisproposal,thesharessubjecttotheproxywillbevoted"FOR "theratificationoftheappointmentofErnst&YoungLLPasourindependentregisteredpublicaccountingfirmfor2018.
Q: What if a stockholder returns a proxy but instructs the proxy holder to abstain with respect to Proposal No. 2?
A: Ifastockholdersubmitsaproperlyexecutedproxytousandtheproxyinstructstheproxyholdertoabstainfromvotingonthisproposal,thesharessubjecttotheproxywillnotbevoted,andwillhavetheeffectofavote"AGAINST ",withregardtothisproposal.
Q: What if a stockholder is a beneficial owner of shares held in "street name" and fails to provide voting instructions withrespect to Proposal No. 2?
A: Ifastockholderisthebeneficialownerofsharesheldin"streetname"throughitsbank,brokerorothernominee,thebank,brokerorothernomineewilltypicallyhavetheauthoritytoexerciseitsvotingdiscretiontovoteonthisproposal.
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General Questions
Q: How can stockholders cast their vote?
A: Stockholdersmayvoteinoneofthefollowingways:
• byusingthetoll-freenumbershownontheproxycard(orvotinginstructioncardifastockholderreceiveditsproxymaterialsfromabank,brokerorothernominee);
• byvisitingthewebsiteshownontheproxycard(orvotinginstructioncard)tosubmitaproxyviatheInternet;
• bycompleting,signing,datingandreturningtheenclosedproxycard(orvotinginstructioncard)intheenclosedpostage-paidenvelope;or
• byattendingtheannualmeetingandvotingtheirshares.
Q: If a stockholder is not going to attend the annual meeting, should that stockholder return its proxy card or otherwise vote itsshares?
A: Yes.Returningtheproxycard(orvotinginstructioncardifastockholderreceiveditsproxymaterialsfromabank,brokerorothernominee)orvotingbycallingthetoll-freenumbershownontheproxycard(orvotinginstructioncard)orvisitingthewebsiteshownontheproxycard(orvotinginstructioncard)tosubmitaproxyviatheInternetensuresthattheshareswillberepresentedandvotedattheannualmeeting,evenifthestockholderwillbeunableto,ordoesnot,attend.
Q: If a stockholder's shares are held in "street name" through its bank, broker or other nominee, will that bank, broker or othernominee vote those shares?
A: Banks,brokersorothernomineeswillnotvotesharesofastockholderwithrespecttoProposalNo.1unlessthestockholderinstructsitsbank,brokerorothernomineehowtovote.Astockholdershouldfollowthedirectionsonthevotinginstructioncardprovidedbyitsbank,brokerorothernomineeregardinghowtoinstructitsbank,brokerorothernomineetovoteitsshares.Ifastockholderdoesnotprovideitsbank,brokerorothernomineewithinstructions,underNewYorkStockExchange("NYSE")rules,thatbank,brokerorothernomineewillnotbeauthorizedtovotewithrespecttoProposalNo.1,butmayvoteinitsdiscretionwithrespecttoProposalNo.2.
Q: Can a stockholder change or revoke its proxy after mailing its proxy card?
A: Yes.Ifastockholderhasproperlycompletedandsubmitteditsproxycard,thatstockholdercanchangeorrevokeitsproxyvoteinanyofthefollowingways:
• byfilingwithourCorporateSecretaryaninstrumentinwritingrevokingtheproxy;
• byfilingwithourCorporateSecretaryadulyexecutedproxybearingalaterdate;
• byloggingontothewebsitespecifiedontheproxycard(orvotinginstructioncardifastockholderreceiveditsproxymaterialsfromabank,brokerorothernominee)inthesamemannerastockholderwouldtosubmititsproxyelectronicallyorbycallingthetoll-freenumberspecifiedontheproxycard(orvotinginstructioncard)priortotheannual
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meeting,ineachcaseifthestockholderiseligibletodoso,andfollowingtheinstructionsontheproxycard(orvotinginstructioncard);or
• byattendingtheannualmeetingandvotinginperson.
Simplyattendingtheannualmeetingwillnotrevokeaproxy.Intheeventofmultipleonlineortelephoneproxiessubmittedbyastockholder,eachproxywillsupersedeanyearlierdatedproxyandtheproxybearingthelatestdatewillbedeemedtobethefinalproxyofthatstockholderunlessthatproxyisrevoked.
Ifastockholderholdssharesin"streetname"throughitsbank,brokerorothernominee,andhasdirectedthatpersontovoteitsshares,itshouldinstructthatpersontochangeitsvote,orif,inthealternative,astockholderholdingsharesin"streetname"wishestovoteinpersonattheannualmeeting,thestockholdermustobtaina"legalproxy"fromthebank,brokerorothernomineeandpresentthe"legalproxy"attheannualmeeting.
Q: What should stockholders do now?
A: Aftercarefullyreadingandconsideringtheinformationcontainedinthisproxystatement,stockholdersshouldcompletetheirproxiesorvotinginstructioncardsassoonaspossiblesothattheirshareswillberepresentedandvotedattheannualmeeting.Stockholdersshouldfollowtheinstructionssetforthontheenclosedproxycard(orthevotinginstructioncardifastockholderreceiveditsproxymaterialsfromabank,brokerorothernominee).
Q: Who can answer my questions?
A: Ifyouhaveanyquestionsabouttheannualmeeting,needassistanceinvotingyoursharesorneedadditionalcopiesofthisproxystatementortheproxycard(orvotinginstructioncardifyoureceivedyourproxymaterialsfromabank,brokerorothernominee),youshouldcontact:
D.F.King&Co.,Inc.48WallStreet,22ndfloor
NewYork,NewYork10005(800)207-3158(TollFree)(212)269-5550(CallCollect)
or
TRIPointeGroup,Inc.19540JamboreeRoad,Suite300
Irvine,California92612Attention:InvestorRelationsTelephone:(949)478-8696
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
Allofourdirectorsareelectedannuallyattheannualmeetingofstockholders.StockholdersarerequestedtoelectthesixnomineesnamedinthisproxystatementtoserveonourBoardofDirectorsuntilhisorhersuccessoriselectedandqualifiedoruntilhisorherearlierresignation,removal,ordeath.
Thenamesofthesixnomineesfordirectorandtheircurrentpositionsandofficeswithusaresetforthbelow.Eachofthenomineesisnowadirector.Detailedbiographicalinformationregardingeachofthesenomineesisprovidedin"BoardofDirectors—DirectorNominees."TheNominatingandCorporateGovernanceCommitteeofourBoardofDirectorshasreviewedthequalificationsofeachofthenomineesandhasrecommendedtoourBoardofDirectorsthateachnomineebesubmittedtoavoteattheannualmeeting.
Allofthenomineesforelectionhaveconsentedtobeingnamedinthisproxystatementandtoserveifelected.Ifanynomineeisunableorunwillingtoserve,ourBoardofDirectorsmaydesignateasubstitutenomineeorreducethesizeofourBoardofDirectors.IfourBoardofDirectorsdesignatesasubstitutenominee,proxiesmaybevotedforthatsubstitutenominee.OurBoardofDirectorsknowsofnoreasonwhyanynomineewillbeunableorunwillingtoserveifelected.Listedbelowarethesixnomineesforelectionasadirectorattheannualmeeting.
Name Age PositionMr.StevenJ.Gilbert 70 ChairmanoftheBoardMr.DouglasF.Bauer 56 ChiefExecutiveOfficerandDirectorMr.LawrenceB.Burrows 65 IndependentDirectorMr.DanielS.Fulton 69 IndependentDirectorMs.ConstanceB.Moore 62 IndependentDirectorMr.ThomasB.Rogers 78 IndependentDirector
Required Vote
Eachnomineeforelectionasadirectorwillbeelectedifthenumberofvotescast"FOR "thenominee'selectionexceedsthenumberofvotescast"AGAINST "thenominee'selection.Abstentionsand"brokernon-votes"willnotbecountedasvotescastandwillnotaffecttheoutcomewithregardtothisproposal.Thereisnocumulativevotingintheelectionofdirectors.
Director Resignation Policy
Underourdirectorresignationpolicy,anyincumbentdirectorwhoisnotre-electedmustpromptlytenderawrittenofferofresignationasadirector.TheNominatingandCorporateGovernanceCommitteewillconsidertheresignationofferandrecommendtotheBoardofDirectorswhethertoacceptorrejecttheresignationoffer,orwhetherotheractionshouldbetaken.IndeterminingwhethertorecommendthattheBoardofDirectorsacceptanyresignationoffer,theNominatingandCorporateGovernanceCommitteewillbeentitledtoconsiderallfactorsbelievedrelevantbytheNominatingandCorporateGovernanceCommittee'smembers,including,butnotlimitedto:(i)anystatedorperceivedreasonsforthedirectornotreceivingamajorityvote,(ii)anyalternativesforcuringtheunderlyingcauseofthevotesagainst,(iii)thedirector'stenure,(iv)thedirector'squalifications,(v)thedirector'spastandexpectedfuturecontributionstotheBoardofDirectors,and(vi)theoverallcompositionoftheBoardof
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Directors,includingwhetheracceptingtheresignationwouldcauseustofailtomeetanyapplicableSECorNYSErequirementsorviolateanyofourmaterialagreements.
Indeterminingwhatactiontorecommendortakeregardingadirector'sresignation,eachoftheNominatingandCorporateGovernanceCommitteeandtheBoardofDirectorsmayconsiderarangeofalternativesasitdeemsappropriate,including,butnotlimitedto:(i)acceptingtheresignationoffer,(ii)rejectingtheresignationoffer,(iii)rejectingtheresignationoffertoallowthedirectortoremainontheBoardofDirectorsbutagreeingthatthedirectorwillnotbenominatedforre-electiontotheBoardofDirectorsatthenextelectionofdirectors,(iv)deferringacceptanceoftheresignationofferuntiltheBoardofDirectorscanfindareplacementdirectorwiththenecessaryqualificationstofillthevacancythatacceptingtheresignationofferwouldcreate,or(v)deferringacceptanceoftheresignationofferifthedirectorcancuretheunderlyingcausefornotreceivingamajorityvotewithinaspecifiedperiodoftime.
TheBoardofDirectorswillactontheNominatingandCorporateGovernanceCommittee'srecommendationwithin90daysfollowingthecertificationofthestockholdervote.Indecidingwhethertoaccepttheresignationoffer,theBoardofDirectorswillconsiderthefactorsconsideredbytheNominatingandCorporateGovernanceCommitteeandanyadditionalinformationandfactorstheBoardofDirectorsbelievestoberelevant.IftheBoardofDirectorsacceptsadirector'sresignationofferpursuanttothisprocess,theNominatingandCorporateGovernanceCommitteewillrecommendtotheBoardofDirectorsandtheBoardofDirectorswillthereafterdeterminewhethertofillsuchvacancyorreducethesizeoftheBoardofDirectors.AnydirectorwhotendershisorherresignationpursuanttothisprovisionwillnotparticipateintheproceedingsofeithertheNominatingandCorporateGovernanceCommitteeortheBoardofDirectorswithrespecttohisorherownresignationoffer.IfotherdirectorswhoaremembersoftheNominatingandCorporateGovernanceCommitteedidnotreceiveamajorityvoteinthesameuncontestedelectionofdirectors,sothataquorumoftheNominatingandCorporateGovernanceCommitteecannotbeachieved,thentheotherindependentdirectorsontheBoardofDirectorswhoreceivedamajorityofvotescastinthatelectionwillconsidersuchresignationofferandrecommendtotheBoardofDirectorswhethertoacceptorrejecttheresignationoffer,orwhetherotheractionshouldbetaken,regardingtheresignationofeachdirectorwhodidnotreceiveamajorityvote.
Our Board of Directors recommends that stockholders vote "FOR" the election of each of the six nominees to our Board ofDirectors.
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PROPOSAL NO. 2RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheAuditCommitteehasapprovedtheappointmentofErnst&YoungLLPasourindependentregisteredpublicaccountingfirmforthefiscalyearendingDecember31,2018andhasfurtherrecommendedthatourBoardofDirectorssubmittheselectionofourindependentregisteredpublicaccountingfirmforratificationbystockholdersattheannualmeeting.Ernst&YoungLLPhasservedasourindependentregisteredpublicaccountingfirmsince2010.RepresentativesofErnst&YoungLLPareexpectedtobepresentattheannualmeeting.Theywillhaveanopportunitytomakeastatementiftheysodesireandwillbeavailabletorespondtoappropriatequestions.
NoneofourBylaws,ourCertificateofIncorporation,oranyothergoverningdocumentsorapplicablelawrequiresstockholderratificationoftheselectionofErnst&YoungLLPasourindependentregisteredpublicaccountingfirm.However,ourBoardofDirectorsissubmittingtheselectionofErnst&YoungLLPtostockholdersforratificationasamatterofgoodcorporatepractice.Ifthestockholdersfailtoratifytheselection,theAuditCommitteewillreconsiderwhetherornottoretainErnst&YoungLLP,butmay,nonetheless,retainErnst&YoungLLPasourindependentregisteredpublicaccountingfirm.Eveniftheselectionisratified,theAuditCommittee,initsdiscretion,maychangetheappointmentatanytimeifitdeterminesthatsuchachangewouldbeinthebestinterestofstockholders.ForinformationconcerningfeesbilledtousforthefiscalyearsendedDecember31,2016and2017,see"AuditCommitteeMatters—IndependentRegisteredPublicAccountingFirmFees."
Required Vote
Thisproposalmustbeapprovedbytheaffirmativevoteoftheholdersofstockhavingamajorityofthevotesthatcouldbecastbystockholdersentitledtovoteontheproposalthatarepresentinpersonorbyproxyattheannualmeeting.Abstentionswillbetreatedasbeingpresentandentitledtovote,andwillhavetheeffectofavoteagainst,withregardtothisproposal.Thisproposalisconsidered"routine,"thereforebanks,brokersorothernomineesmayexercisetheirvotingdiscretionintheabsenceofspecificinstructionswithregardtothisproposal.
Our Board of Directors recommends that stockholders vote "FOR" the ratification of the appointment of Ernst & YoungLLP as our independent registered public accounting firm for 2018.
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BOARD OF DIRECTORS
Composition of our Board of Directors
OurCertificateofIncorporationprovidesthattheauthorizednumberofdirectorsshallnotbefewerthanthreeandshallbefixedfromtimetotimesolelybyresolutionadoptedbyaffirmativevoteofamajorityofdirectorstheninoffice.OurBoardofDirectorscurrentlyconsistsofsixdirectors.
PursuanttoouremploymentagreementwithMr.Bauer,wehaveagreedthatwhileheisemployedunderthatagreement,wewillnominatehimforre-electionasamemberofourBoardofDirectors.See"ExecutiveCompensation—EmploymentAgreementsandPerformance-BasedRSUAwards."
Director Nominees
ThenomineesforelectiontoourBoardofDirectors,togetherwithbiographicalinformationfurnishedbyeachofthemandinformationregardingeachnominee'squalifications,aresetforthbelow.Therearenofamilyrelationshipsamongourexecutiveofficersanddirectors.
DOUGLASF.BAUER,56,hasservedasourChiefExecutiveOfficerandasamemberofourBoardofDirectorssinceJanuary30,2013.HewasamemberofTRIPointeHomes,LLC's("TPHLLC")boardofmanagerspriortoitsconversionintoacorporation.PriortoformingTPHLLCinApril2009,from1989to2009,Mr.Bauerservedinseveralcapacities,includingmostrecentlythePresidentandChiefOperatingOfficer,forWilliamLyonHomes,ahomebuildingcompanywhosecommonstockwaslistedontheNYSEfrom1999untilthecompanywastakenprivatein2006.HispriortitlesatWilliamLyonHomesalsoincludedChiefFinancialOfficerand,priorthereto,PresidentofitsNorthernCaliforniaDivision.Priortohis20-yeartenureatWilliamLyonHomes,Mr.BauerspentsevenyearsatSecurityPacificNationalBankinLosAngeles,Californiainvariousfinancialpositions.Mr.Bauerhasmorethan30yearsofexperienceintherealestatefinance,developmentandhomebuildingindustry.Mr.BauerhasbeeninvolvedinbothlegislativeeffortsandcommunityenhancementprogramsthroughhisinvolvementintheCaliforniaBuildingIndustryAssociationandHomeAidOrangeCounty,acharitableorganizationwiththemissionofbuildingorrenovatingsheltersforthetemporarilyhomeless,whichservesindividualsandfamilieswhofindthemselveswithoutshelterduetosuchfactorsasdomesticviolence,jobloss,catastrophicillnessandcrisispregnancy.Mr.BauerreceivedhisB.A.fromtheUniversityofOregonandlaterreceivedhisM.B.A.fromtheUniversityofSouthernCalifornia.AsourChiefExecutiveOfficer,Mr.Bauerhasintimateknowledgeofourbusinessandoperations,andheprovidesourBoardofDirectorswithextensiveexperienceinrealestatefinance,operationsanddevelopment,aswellasafamiliaritywiththeworkingsofthehomebuildingindustry.
LAWRENCEB.BURROWS,65,hasservedasamemberofourBoardofDirectorssinceJuly7,2014.Mr.BurrowsservedasanexecutiveofficeroftheWeyerhaeuserCompanyfrom2008through2013,whenheretiredafter25yearswiththecompany.HewasSeniorVicePresidentofWoodProductsforWeyerhaeuserCompanyfrom2010through2013.From2008to2010,Mr.BurrowswasPresidentandChiefExecutiveOfficerofWeyerhaeuserRealEstateCompany("WRECO").PriortobecomingWRECO'sPresidentandChiefExecutiveOfficer,heservedasPresidentofWinchesterHomes,aWRECOsubsidiary,from2003to2008.Currently,Mr.BurrowsservesontheBoardofConnorIndustries,aprivately-heldindustrialwoodandpackagingsolutionscompany.HealsoservesasChairoftheDean'sAdvisoryBoardoftheEdwardJ.BlousteinSchoolofPlanningandPublicPolicyatRutgersUniversitywhereheisalsoaSeniorPlanningFellow.Mr.BurrowsisalsoanofficerandTreasurerofthenon-profitChesapeakeMulti-CulturalResourceCenter.BeforejoiningWeyerhaeuserCompanyand
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WRECO,Mr.Burrowswasarealestateconsultantanddeveloper.Mr.BurrowsservedontheBoardofHabitatforHumanity,Seattle/KingCounty,andHomeAidofNorthernVirginia.Mr.BurrowsearnedaB.A.fromRutgersUniversity,aMastersinCityPlanningfromtheUniversityofPennsylvania,andisagraduateoftheWhartonSchoolofBusinessAdvancedManagementProgram.HeistheauthorofGrowthManagement:Issues,TechniquesandPolicyImplications,publishedbytheCenterforUrbanPolicyResearchatRutgersUniversity.OurBoardofDirectorsbelievesthatMr.Burrows'experienceinrealestatedevelopmentandhomebuildingisatremendousbenefittoourBoardofDirectors.
DANIELS.FULTON,69,hasservedasamemberofourBoardofDirectorssinceJuly7,2014.Mr.FultonservedasPresident,ChiefExecutiveOfficerandamemberoftheboardofdirectorsofWeyerhaeuserCompanyfrom2008through2013,whenheretiredafternearly38yearswiththecompany.PriortobecomingWeyerhaeuserCompany'sChiefExecutiveOfficer,Mr.FultonservedasthePresidentandChiefExecutiveOfficerofWRECOfrom2001to2008.DuringMr.Fulton'stenureasWeyerhaeuserCompany'sChiefExecutiveOfficer,hewasamemberoftheBusinessRoundtable(BRT),whereheservedasthechairoftheBRTHousingSubcommittee,andservedontheboardsofanumberofindustryassociations,includingNAFO(theNationalAllianceofForestOwners),NAREIT(NationalAssociationofRealEstateInvestmentTrusts),SFI(SustainableForestInitiative)andtheAF&PA(AmericanForestandPaperAssociation).Mr.FultonisthepastchairoftheWashingtonRoundtable,wherehecontinuesasamember,andisthepastchairofthePolicyAdvisoryBoardoftheJointCenterforHousingStudiesatHarvardUniversity,wherehecontinuestoserveasanExecutiveFellow.Mr.FultonisadirectorofSaltchukResources,aprivately-ownedcompanyprimarilyengagedintransportationanddistribution,andamemberoftheAdvisoryBoardfortheFosterSchoolofBusinessattheUniversityofWashington.HeisalsoadirectorofGreenDiamondResourceCompany,aprivately-held,Seattle-basedtimbercompany.Mr.FultongraduatedwithaB.A.ineconomicsfromMiamiUniversity(Ohio)in1970.HereceivedanM.B.A.infinancefromtheUniversityofWashingtonin1976,andhecompletedtheStanfordUniversityExecutiveProgramin2001.From1970to1974,heservedonactivedutyasanofficerintheU.S.NavySupplyCorps.OurBoardofDirectorsbelievesthatMr.Fulton'sextensiveexperienceinrealestatefinanceanddevelopment,alongwithhisexecutiveandleadershipexperience,makeshimavaluablecontributortoourBoardofDirectors.
STEVENJ.GILBERT,70,hasservedasadirectoronourBoardofDirectorssinceJanuary30,2013.Mr.GilbertisChairmanoftheBoardofGilbertGlobalEquityPartners,L.P.,abilliondollarprivateequityfund,andhasservedinthiscapacitysince1998.HeisalsoadirectorofFairholmeFunds(Nasdaq:FAIRX),anopen-endinvestmentcompany;SeniorAdvisortoContinentalGrain;adirectorofMBIA,Inc.,(NYSE:MBI)andOaktreeCapitalGroup(NYSE:OAK);andistheLeadIndependentDirectoroftheEmpireStateRealtyTrust(NYSE:ESRT).HeisViceChairmanofMidOceanEquityPartners,LP,andservedastheViceChairmanofStoneTowerCapitalfromJanuary2007untilApril2012andastheSeniorManagingDirectorandChairmanofSunGroup(USA)until2009.From1992to1997hewasaFounderandManagingGeneralPartnerofSorosCapitalL.P.,theprincipalventurecapitalandleveragedtransactionentityoftheQuantumGroupofFunds,andaprincipalAdvisortoQuantumIndustrialHoldingsLtd.From1988to1992,hewastheManagingDirectorofCommonwealthCapitalPartners,L.P.,aprivateequityinvestmentfirm.Priortothat,from1984to1988,Mr.GilbertwastheManagingGeneralPartnerofChemicalVenturePartners(nowJ.P.MorganCapitalPartners),whichhefounded.Mr.GilbertwasadmittedtotheMassachusettsBarin1970andpracticedlawatGoodwinProcter&HoarinBoston,Massachusetts.HewasanassociateincorporatefinanceatMorganStanley&Co.from1972to1976,aVicePresidentatWertheim&Co.,Inc.from1976to1978andaManagingDirectoratE.F.HuttonInternationalfrom1978to1980.Mr.GilbertwasrecentlyChairmanoftheBoardofDuraAutomotiveSystems,Inc.,ChairmanofCPMHoldings,TrueTemperSportsandaDirectorofJ.O.HambroCapitalManagementGroupandtheAsianInfrastructureFund.Previously,Mr.GilberthasbeenaDirectorofnumerouscompanies,includingMontpelierRe,OlympusTrust,OfficeDepot,Inc.,
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Funk&Wagnalls,Inc.,ParkerPenLimited,PigglyWigglySouthern,Inc.,CoastCommunityNews,Inc.,GTS-Duratek,MagnavoxElectronicSystemsCompany,UroMedCorporation,StarCityCasinoHoldings,Ltd.,KatzMediaCorporation,AirportGroupInternational,BataviaInvestmentManagement,Ltd.,AffinityFinancialGroup,Inc.,ESATTelecom,Ltd.,ColepHolding,Ltd.,NFOWorldwide,TerraNova(Bermuda)Holdings,LimitedandVeritas-DCG.Hewastheprincipalowner,ChairmanandChiefExecutiveOfficerofLion'sGateFilmsfrom1980to1984.Mr.GilbertisamemberoftheCouncilonForeignRelationsandtheGlobalAgendaCouncilonCapitalFlowsoftheWorldEconomicForumandamemberoftheBoardofGovernorsoftheLauderInstitute.Mr.GilbertreceivedhisB.A.fromtheWhartonSchoolattheUniversityofPennsylvania,hisJ.D.fromtheHarvardLawSchoolandhisM.B.A.fromtheHarvardGraduateSchoolofBusiness.Mr.GilbertprovidesourBoardofDirectorswithvastinvestmentmanagementandleadershipexperience,andhispriorandcurrentserviceasadirectorofnumerouspublicly-heldcompaniesallowshimtomakevaluablecontributionstoourBoardofDirectors.
CONSTANCEB.MOORE,62,hasservedasamemberofourBoardofDirectorssinceJuly7,2014.ShehasservedasadirectorofCiveoCorporation(NYSE:CVEO)sinceJune2014.ShehasservedasadirectorofColumbiaPropertyTrust(NYSE:CXP)sinceNovember2017.Ms.MooreservedasaDirectorofBREProperties,Inc.(NYSE:BRE)fromSeptember2002untilBREwasacquiredinApril2014.Ms.MooreservedasPresidentandChiefExecutiveOfficerofBREfromJanuary2005untilApril2014,servedasPresidentandChiefOperatingOfficerfromJanuary2004untilDecember2004andservedasExecutiveVicePresident&ChiefOperatingOfficerfromSeptember2002toDecember2003.Ms.Moorehasmorethan40yearsofexperienceintherealestateindustry.PriortojoiningBREin2002,shewasamanagingdirectorofSecurityCapitalGroup&Affiliates.From1993to2002,Ms.MooreheldseveralexecutivepositionswithSecurityCapitalGroup,includingco-chairmanandchiefoperatingofficerofArchstoneCommunitiesTrust.Ms.MooreholdsanM.B.A.fromtheUniversityofCalifornia,Berkeley,HaasSchoolofBusinessandabachelor'sdegreefromSanJoseStateUniversity.In2009,sheservedaschairoftheNAREIT.Currently,sheisthechairoftheFisherCenterforRealEstateandUrbanEconomicsPolicyAdvisoryBoardatUCBerkeley,aGovernorandaTrusteeoftheUrbanLandInstituteandservesontheBoardoftheUrbanLandInstituteFoundationandtheUrbanLandGlobalBoardofDirectors,servesontheboardofBridgeHousingCorporation,servesontheboardoftheHaasSchoolofBusinessatUCBerkeley,andservesontheboardoftheTowerFoundationatSanJoseStateUniversity.OurBoardofDirectorsbelievesthatMs.Mooreprovidesitwithsignificantleadershipandrealestatemanagementexperience.
THOMASB.ROGERS,78,hasservedasadirectorofourBoardofDirectorssinceJanuary30,2013.UntilhisretirementinJanuary2009,Mr.RogersservedasExecutiveVicePresidentinchargeofCityNationalBank'sSouthernRegion.Inthatposition,heoversawthedeliveryofcommercialbanking,privateclientandwealthmanagementservicestoclientsthroughoutOrangeCounty,thegreaterSanDiegoareaandtheInlandEmpire.BeforejoiningCityNationalBankin2000,Mr.RogersservedforeightyearsasSeniorVicePresidentandTreasurerofTheIrvineCompany.Priortothat,Mr.Rogersspentmorethan25yearswithtwomajorfinancialinstitutions.Specifically,heservedasExecutiveVicePresidentandDivisionAdministratorofSecurityPacificNationalBank'sRealEstateIndustriesGroup,SouthernDivision,andpriortothatwasSeniorVicePresidentandChiefCreditOfficerforSecurityPacific'sCaliforniaCorporateGroup.Hispreviousbankingcareeralsoincluded15yearswiththeNationalBankofDetroitincorporatelendingassignments.Inhisretirement,Mr.RogersservedasChairmanoftheBoardofDirectorsofPlazaBancorpandPlazaBank,untilitssaleonNovember1,2017.HeservesontheBoardofDirectorsofMemorialHealthServices,anotforprofit,fivehospital,integratedhealthcareorganizationheadquarteredinFountainValley,California.Mr.RogersreceivedhisB.A.inBusinessAdministrationfromEasternMichiganUniversity,attendedgraduateschoolatWayneStateUniversityinDetroit,andcompletedthecurriculumoftheGraduateSchoolofBankingattheUniversityofWisconsininMadisonandtheNationalCommercialLendingSchoolattheUniversityofOklahoma.
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Mr.RogersprovidesourBoardofDirectorswithawealthoffinancialmanagementknowledge,andhisextensiveexecutiveandleadershipexperiencemakeshimavaluablecontributortoourBoardofDirectors.
Qualifications and Characteristics for Directors
OurBoardofDirectorsbelievesthattheBoard,asawhole,shouldpossessacombinationofskills,professionalexperienceanddiversityofbackgroundsnecessarytooverseeourbusiness.Inaddition,ourBoardofDirectorsbelievestherearecertainattributeseverydirectorshouldpossess,includinghighpersonalandprofessionalethicalstandards,practicalwisdom,maturejudgmentandintegrity.OurBoardofDirectorsseeksout,andourBoardofDirectorsiscomprisedof,individualswhosebackgroundandexperiencecomplementthoseofourotherdirectors.Accordingly,ourBoardofDirectorsandtheNominatingandCorporateGovernanceCommitteeconsiderthequalificationsofdirectorsanddirectorcandidatesindividuallyandinthebroadercontextofourBoardofDirectors'overallcompositionandourcurrentandfutureneeds.OurBoardofDirectorsbelievesthateachdirectornomineepossessesthequalitiesandexperiencethatourBoardofDirectorsandtheNominatingandGovernanceCommitteebelieveareimportant,asdescribedinfurtherdetailbelowinthesectionentitled"CorporateGovernance—CommitteesofourBoardofDirectors—NominatingandCorporateGovernanceCommittee."
IndeterminingtonominateMessrs.BurrowsandFulton,ourBoardofDirectorsconsideredtheirpriorserviceasexecutiveofficersofWRECO,withwhichwecompletedamergertransactioninJuly2014,andWRECO'sformerparent,WeyerhaeuserCompany,alargepubliclytradedcompanythatisnotaffiliatedwithTRIPointe.Messrs.BurrowsandFultonceasedservingasexecutiveofficersofWRECOmorethanfiveyearsagoin2010and2008,respectively,andceasedservingasexecutiveofficersofWeyerhaeuserCompanyin2013,theyearbeforetheywereappointedtoourBoardofDirectors.Moreover,followingtheWRECOmergertransaction,theseniormanagementofTRIPointeremainedinplaceandWRECO'sprincipalexecutiveandfinancialofficersdepartedandwerereplacedbyexecutiveofficersofTRIPointe.TheseniorleadersofWRECO'shomebuildingsubsidiariesnowreporttoTRIPointe'sseniorexecutiveteam.Thus,indeterminingtonominateMessrs.BurrowsandFulton,ourBoardofDirectorsconcludedthatMessrs.BurrowsandFultonhadnosubstantialconnectionstoWRECO'smanagementthatwouldimpacttheirabilitytoexerciseindependentjudgment.OurBoardofDirectorsalsoconcludedthattheirextensiverealestateindustryexperience,whichincludesexperienceinhomebuilding,realestatefinanceanddevelopment,makeMessrs.BurrowsandFultonvaluablecontributorstoourBoardofDirectors.
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CORPORATE GOVERNANCE
Corporate Governance Highlights
ü SeparateindependentChairmanofourBoardofDirectorsandChiefExecutiveOfficer("CEO") ü AlldirectorsareindependentunderNYSEstandards,exceptCEO
ü Audit,CompensationandNominatingandCorporateGovernanceCommitteesareeachcomprisedsolelyofindependentdirectors
ü Annualelectionofdirectors
ü Majorityvotinginuncontesteddirectorelections
ü Directorresignationpolicyrequiringincumbentdirectorswhoarenotre-electedtotenderpromptlyawrittenofferofresignation
ü Stockownershipguidelinesforourdirectorsandexecutiveofficers
ü Policyforrecoupmentofexecutiveofficerincentivebasedcompensationintheeventofcertainrestatementsofourfinancialresults
ü Regularexecutivesessionsofindependentdirectors
Director Independence
OurBoardofDirectorshasdeterminedthatfiveofitsdirectors,Ms.MooreandMessrs.Burrows,Fulton,Gilbert,andRogers,constitutingamajorityofdirectors,satisfythelistingstandardsforindependenceoftheNYSE.
Thenon-managementdirectorsmeetregularlyinexecutivesessionsoutsidethepresenceofmanagement,andMr.Gilbert,asChairmanofourBoardofDirectors,currentlypresidesatallexecutivesessionsofthenon-managementdirectors.
Leadership Structure of our Board of Directors
OurCorporateGovernanceGuidelinesprovidethatourBoardofDirectorsisfreetoselectaChairmaninthemanneritconsiderstobeinourbestinterestandthattherolesofChairmanofourBoardofDirectorsandChiefExecutiveOfficermaybefilledbyasingleindividualortwodifferentpersons.In2014,ourBoardofDirectorsamendedourBylawstoprovidethatthepositionofChairmanofourBoardofDirectorsisnotanofficerposition.ThisprovidesourBoardofDirectorswithflexibilitytodecidewhatleadershipstructureisinourbestinterestsatanypointintime.Currently,twodifferentpersonsserveintheseroles:Mr.GilbertservesasChairmanofourBoardofDirectorsandMr.BauerservesasChiefExecutiveOfficer.Atthistime,ourBoardofDirectorshasdeterminedthathavingMr.GilbertserveasChairmanofourBoardofDirectorsandMr.BauerserveasChiefExecutiveOfficerisinourbestinterest,asitallowsMr.GilberttofocusontheeffectivenessofourBoardofDirectorsandoversightofourseniormanagementteamwhileMr.Bauerfocusesonexecutingourstrategyandmanagingourbusiness.Inthefuture,however,ourBoardofDirectorsmaydeterminethatitisinourbestinteresttohaveasingleindividualserveasbothChairmanofourBoardofDirectorsandChiefExecutiveOfficer.
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Role of our Board of Directors in Risk Oversight
OneofthekeyfunctionsofourBoardofDirectorsisinformedoversightoftheriskmanagementprocess.OurBoardofDirectorsadministersthisoversightfunctiondirectly,withsupportfromthreeofitsstandingcommittees—theAuditCommittee,theCompensationCommitteeandtheNominatingandCorporateGovernanceCommittee,eachofwhichaddressesrisksspecifictoitsrespectiveareasofoversight.ThefullBoardofDirectorsmonitorsrisksthroughregularreportsfromeachofthecommitteechairs,andisapprisedofparticularriskmanagementmattersinconnectionwithitsgeneraloversightandapprovalofcorporatematters.Inconnectionwithitsreviewsofouroperationsandcorporatefunctions,ourBoardofDirectorsaddressestheprimaryrisksassociatedwiththoseoperationsandcorporatefunctions.Inaddition,ourBoardofDirectorsreviewstherisksassociatedwithourbusinessstrategiesperiodicallythroughouttheyearaspartofitsconsiderationofundertakinganysuchbusinessstrategies.
Inconnectionwithitsriskmanagementrole,theAuditCommitteeconsidersanddiscusseswithmanagementourmajorfinancialriskexposuresandthestepsmanagementtakestomonitorandcontroltheseexposures.TheAuditCommitteeoverseesthepoliciesandprocessesrelatingtofinancialstatements,financialreportingprocesses,complianceandauditing,aswellastheguidelines,policiesandprocessesformonitoringandmitigatingrelatedrisks.TheAuditCommitteealsomonitorscompliancewithlegalandregulatoryrequirements,inadditiontooversightoftheperformanceofourinternalauditfunction.TheCompensationCommitteeassessesandmonitorswhetheranyofourcompensationpoliciesandprogramshavethepotentialtoencourageexcessiverisk-takingandreviewsanddiscusses,atleastannually,therelationshipbetweenriskmanagementpoliciesandpractices,businessstrategyandourcompensationpoliciesandprograms.Basedonthisoversightapproach,wedonotbelievethatourpresentemployeecompensationpoliciesandprogramsarelikelytohaveamaterialadverseeffectonus.TheNominatingandCorporateGovernanceCommitteeprovidesoversightwithrespecttocorporategovernanceandethicalconductandmonitorstheeffectivenessofourCorporateGovernanceGuidelines,includingwhethersuchguidelinesaresuccessfulinpreventingillegalorimproperliability-creatingconduct.Inperformingtheirrespectivefunctions,eachcommitteehasfullaccesstomanagement,aswellastheabilitytoengageadvisors.
Itisneitherfeasiblenordesirabletoattempttomonitororeliminateallrisk.Accordingly,wenecessarilyface,andwillcontinuetoface,avarietyofrisksintheconductofourbusinessandtherecanbenoassurancethatourBoardofDirectorsandcommittees'oversightwillbeeffectiveinidentifyingandaddressingallmaterialrisks.TheforegoingdescriptionoftheroleofourBoardofDirectorsinriskoversightdoesnotexpressorimplyanyadditionalorspecialduties,thedutiesofdirectorsbeingonlythoseprescribedbyapplicablelaw,norisitarepresentationastotheexistenceornon-existenceoffactsrelatingtorisksassociatedwithourbusiness.
Meetings of our Board of Directors
OurBoardofDirectorsheldfivemeetingsduringfiscalyear2017.EachmemberofourBoardofDirectorsattended75%ormoreoftheaggregatenumberofmeetingsofourBoardofDirectors,andofthecommitteesonwhichheorshewasserving,heldduringfiscalyear2017.InaccordancewithourCorporateGovernanceGuidelines,weinviteandgenerallyexpectourdirectorstoattendtheannualmeeting.AllofthemembersofourBoardofDirectorsattendedthe2017annualmeetingofstockholders.
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Committees of our Board of Directors
OurBylawspermitourBoardofDirectorstodesignateoneormorecommittees,including(i)anAuditCommittee,(ii)aCompensationCommitteeand(iii)aNominatingandCorporateGovernanceCommittee.Thecurrentmembersofeachofthesecommitteesaresetforthinthefollowingtable:
Name Audit Compensation Nominating and
Corporate GovernanceLawrenceB.Burrows XDanielS.Fulton X X StevenJ.Gilbert X X*ConstanceB.Moore X X* ThomasB.Rogers X* X__________*CommitteeChair
TheAudit,Compensation,andNominatingandCorporateGovernancecommitteeseachhaveawrittencharterthatisavailableonourwebsiteatwww.tripointegroup.comintheCorporateGovernance—GovernanceDocumentssectionoftheInvestorswebpage.WealsohaveanExecutiveLandCommittee,comprisedofMessrs.Burrows,FultonandGilbert,whichreviewsandapproveslandacquisitionsordispositionswithapurchasepricegreaterthan$30millionbutlessthan$75million.
Audit Committee . TheAuditCommitteeofourBoardofDirectors,pursuanttoitswrittencharter,oversees,amongothermatters:
• ourfinancialreporting,auditingandinternalcontrolactivities;
• theintegrityandauditsofourfinancialstatements;
• ourcompliancewithlegalandregulatoryrequirements;
• thequalificationsandindependenceofourindependentauditors;
• theperformanceofourinternalauditfunctionandindependentauditors;and
• ouroverallriskexposureandmanagement.
DutiesoftheAuditCommitteealsoincludethefollowing:
• annuallyreviewingandassessingtheadequacyoftheAuditCommitteecharterandtheperformanceoftheAuditCommittee;
• beingresponsiblefortheappointment,retentionandterminationofourindependentauditorsanddeterminingthecompensationofourindependentauditors;
• reviewingwiththeindependentauditorstheplansandresultsoftheauditengagement;
• evaluatingthequalifications,performanceandindependenceofourindependentauditors;
• havingsoleauthoritytoapproveinadvanceallauditandnon-auditservicesbyourindependentauditors,thescopeandtermsthereof,andthefeestherefor;
• reviewingtheadequacyofourinternalaccountingcontrols;
• periodicallyreviewingwithmanagementourcybersecurityprogram;
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• meetingatleastquarterlywithourseniormanagementteam,internalauditstaffandindependentauditorsinseparateexecutivesessions;and
• preparingtheAuditCommitteereportrequiredbySECregulationstobeincludedinourannualproxystatement.
TheAuditCommitteeiscurrentlycomprisedofthreedirectors,Messrs.RogersandFultonandMs.Moore,eachofwhomisanon-employeeandsatisfiestheindependencerequirementsundertheapplicablelistingstandardsoftheNYSEandtheapplicablerulesoftheSEC,andotherwisesatisfiestheapplicablerequirementsforauditcommitteeserviceimposedbytheExchangeAct,theNYSE,aswellasanyotherapplicablelegalorregulatoryrequirements.OurBoardofDirectors,initsbusinessjudgment,hasdeterminedthateachofthesemembersis"financiallyliterate"undertherulesoftheNYSE.Mr.RogersservesastheChairpersonoftheAuditCommittee.OurBoardofDirectorshasdesignatedMr.RogersastheAuditCommittee"financialexpert,"asthattermisdefinedbytheSEC.TheAuditCommitteemetfivetimesduringfiscalyear2017.
Compensation Committee . TheCompensationCommitteeofourBoardofDirectors,pursuanttoitswrittencharter,hasthefollowingresponsibilities,amongothers:
• assistsourBoardofDirectorsindevelopingandevaluatingpotentialcandidatesforexecutiveofficerpositionsandoverseeingthedevelopmentofexecutivesuccessionplans;
• administers,reviewsandmakesrecommendationstoourBoardofDirectorsregardingourcompensationplans;
• annuallyreviewsandapprovesourcorporategoalsandobjectiveswithrespecttocompensationforexecutiveofficersand,atleastannually,evaluateseachexecutiveofficer'sperformanceinlightofsuchgoalsandobjectivestoseteachexecutiveofficer'sannualcompensation,includingsalary,bonusandequityandnon-equityincentivecompensation,subjecttoapprovalbyourBoardofDirectors;
• providesoversightofmanagement'sdecisionsregardingtheperformance,evaluationandcompensationofotherofficers;
• reviewsourincentivecompensationarrangementstoconfirmthatincentivepaydoesnotencourageunnecessaryrisk-takingandreviewsanddiscusses,atleastannually,therelationshipbetweenriskmanagementpoliciesandpractices,businessstrategyandourexecutiveofficers'compensation;
• assistsmanagementincomplyingwithourproxystatementandannualreportdisclosurerequirements;
• discusseswithmanagementthecompensationdiscussionandanalysisrequiredbySECregulations;and
• preparesareportonexecutivecompensationtobeincludedinourannualproxystatement.
TheCompensationCommitteemayform,anddelegateauthorityto,subcommitteeswhenitdeemsappropriatetotheextentpermittedunderapplicablelaw.Inaddition,theCompensationCommitteemaydelegatesomeorallofitsauthorityunderour2013Long-TermIncentivePlan(the"2013LTIP")toourBoardofDirectorsor,subjecttoapplicablelaw,toourChiefExecutiveOfficerorsuchotherexecutiveofficerastheCompensationCommitteedeemsappropriate;provided,thatthe
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CompensationCommitteemaynotdelegateitsauthorityunderthe2013LTIPtoourChiefExecutiveOfficeroranyotherofficerwithregardtotheselectionforparticipationinthe2013LTIPofanexecutiveofficer,directororotherpersonsubjecttoSection16oftheExchangeActordecisionsconcerningthetiming,priceoramountofanawardtosuchanofficer,directororotherperson.
TheCompensationCommitteeiscurrentlycomprisedofthreedirectors,Ms.MooreandMessrs.FultonandGilbert,eachofwhomisanon-employeeand(i)satisfiestheindependencerequirementsundertheapplicablelistingstandardsoftheNYSEandtheapplicablerulesoftheSEC,(ii)otherwisesatisfiestheapplicablerequirementsforcompensationcommitteeserviceimposedbytheExchangeActandtheNYSE,(iii)meetstherequirementsfora"non-employeedirector"containedinRule16b‑3undertheExchangeAct,and(iv)meetstherequirementsforan"outsidedirector"forthepurposesofSection162(m)oftheInternalRevenueCode(beforeenactmentoftheTaxCutsandJobsAct),aswellasanyotherapplicablelegalorregulatoryrequirements.
OurChiefExecutiveOfficer,PresidentandChiefFinancialOfficerdonotparticipateintheCompensationCommittee'sdeliberationsconcerningtheirowncompensationorthecompensationofdirectors.However,theymeetwiththeCompensationCommitteeandprovideinputregardingtheamountandformofthecompensationofourexecutiveofficersandkeyemployees.NootherexecutiveofficersparticipateintheCompensationCommittee'sdeliberationsoftheamountorformofthecompensationofexecutiveofficersordirectors.
TheCompensationCommitteehastheauthoritytoretainandterminateanycompensationconsultanttobeusedtoassistintheevaluationofexecutiveofficercompensation.TheCompensationCommitteehasengagedSemlerBrossyConsultingGroup,LLC("SemlerBrossy")asitsindependentcompensationconsultant.ThecompensationconsultantprovidestheCompensationCommitteewithdataaboutthecompensationpaidbyapeergroupofcompaniesandothercompaniesthatmaycompetewithusforexecutivesanddevelopsrecommendationsforstructuringourcompensationprograms.Thecompensationconsultantisretainedby,andreportsdirectlyto,theCompensationCommitteeanddoesnotprovideanyservicesdirectlytousorourmanagement.TheCompensationCommitteemetfourtimesduringthefiscalyear2017.
Compensation Committee Interlocks and Insider Participation. NomemberoftheCompensationCommitteeis,orhasbeenatanytime,ourofficeroremployee,norhasanymemberhadanyrelationshipwithusrequiringdisclosureunderItem404ofRegulationS-K.Noneofourexecutiveofficerscurrentlyserves,orinthepastyearhasserved,asamemberoftheboardofdirectorsorcompensationcommitteeofanyentitythathasoneormoreexecutiveofficersservingonourBoardofDirectorsorCompensationCommittee.
Nominating and Corporate Governance Committee. TheNominatingandCorporateGovernanceCommitteeofourBoardofDirectors,pursuanttoitswrittencharter,hasthefollowingresponsibilities,amongothers:
• identifiesindividualsqualifiedtobecomemembersofourBoardofDirectorsandensuresthatourBoardofDirectorshastherequisiteexpertiseanditsmembershipconsistsofpersonswithsufficientlydiverseandindependentbackgrounds;
• develops,andrecommendstoourBoardofDirectorsforitsapproval,qualificationsfordirectorcandidatesandperiodicallyreviewsthesequalificationswithourBoardofDirectors;
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• reviewsthecommitteestructureofourBoardofDirectorsandrecommendsdirectorstoserveasmembersorchairsofeachcommitteeofourBoardofDirectors;
• reviewsandrecommendscommitteeslatesannuallyandrecommendsadditionalcommitteememberstofillvacanciesasneeded;
• developsandrecommendstoourBoardofDirectorsasetofcorporategovernanceguidelinesapplicabletousand,atleastannually,reviewssuchguidelinesandrecommendschangestoourBoardofDirectorsforapprovalasnecessary;and
• overseestheannualself-evaluationsofourBoardofDirectorsandmanagement.
TheNominatingandCorporateGovernanceCommitteeiscurrentlycomprisedofthreedirectors,Messrs.Gilbert,BurrowsandRogers,eachofwhomisanon-employeeandsatisfiestheindependence-relatedrequirementsoftheNYSEaswellasanyotherapplicablelegalorregulatoryrequirements.TheNominatingandCorporateGovernanceCommitteemetthreetimesduringfiscalyear2017.
InevaluatingcandidatesfornominationtoourBoardofDirectors,theNominatingandCorporateGovernanceCommitteetakesintoaccounttheapplicablerequirementsfordirectorsundertheExchangeActandthelistingstandardsoftheNYSE.TheNominatingandCorporateGovernanceCommitteemaytakeintoconsiderationsuchotherfactorsandcriteriathatitdeemsappropriateinevaluatingacandidate,includingthecandidate'sjudgment,skill,integrity,diversity,businessorotherexperience,timeavailabilityinlightofothercommitmentsandconflictsofinterest.TheNominatingandCorporateGovernanceCommitteemay(butisnotrequiredto)considercandidatessuggestedbymanagementorothermembersofourBoardofDirectors.AlthoughtheNominatingandCorporateGovernanceCommitteedoesnothaveaformalpolicyondiversitywithregardtoitsconsiderationofdirectornominees,itconsidersdiversityinitsselectionprocessandseekstonominatecandidatesthathaveadiverserangeofviews,backgrounds,leadershipandbusinessexperience.
Policy Regarding Stockholder Recommendations
Weidentifynewdirectorcandidatesthroughavarietyofsources.AlthoughtheNominatingandCorporateGovernanceCommitteedoesnothaveaformalpolicyregardingconsiderationofdirectorcandidatesrecommendedbystockholders,ourCorporateGovernanceGuidelinesprovidethat,whenformulatingitsdirectornominationrecommendations,theNominatingandCorporateGovernanceCommitteewillconsidercandidatesrecommendedbystockholdersandothers,asitdeemsappropriate.Inconsideringcandidatessubmittedbystockholders,theNominatingandCorporateGovernanceCommitteewilltakeintoconsiderationtheneedsofourBoardofDirectorsandthequalificationsofthecandidate.Stockholdersmayproposedirectornomineesbyadheringtotheadvancenoticeproceduresdescribedinthesectionentitled"StockholderProposalsfor2019AnnualMeeting"inthisproxystatement.TheNominatingandCorporateGovernanceCommitteemayalsoestablishprocedures,fromtimetotime,regardingsubmissionofcandidatesbystockholdersandothers.
Inconsideringdirectorcandidatesforelectionattheannualmeeting,theNominatingandCorporateGovernanceCommitteedidnotconsidernomineesotherthanthesixincumbentdirectorslistedinProposalNo.1ofthisproxystatement,asnonewcandidateswereproposedandthesixincumbentdirectorscontinuetoexhibitthequalificationsdescribedabove.
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Code of Business Conduct and Ethics
OurBoardofDirectorshasadoptedtheTRIPointeGroup,Inc.CodeofBusinessConductandEthicsthatappliestoallofficers,directorsandemployees.Additionally,ourBoardofDirectorshasadoptedtheTRIPointeGroup,Inc.CodeofEthicsforSeniorExecutiveandFinancialOfficersthatappliestotheChiefExecutiveOfficer,ChiefFinancialOfficerandChiefAccountingOfficer(orpersonsperformingsimilarfunctionstotheaforementionedofficers).TheCodeofBusinessConductandEthicsalongwiththeCodeofEthicsforSeniorExecutiveandFinancialOfficersareavailableonourwebsiteatwww.tripointegroup.comintheCorporateGovernance—GovernanceDocumentssectionoftheInvestorswebpage.IfanysubstantiveamendmentstoeithertheCodeofBusinessConductandEthicsortheCodeofEthicsforSeniorExecutiveandFinancialOfficersaremade,oranywaiverfromaprovisionofeitherCodeisgrantedtoanyexecutiveofficerordirector,wewillpromptlydisclosethenatureoftheamendmentorwaiveronourwebsite.Wehaveadoptedthesecodesasguidesforfutureconductandtheyshouldnotbeconsideredtoconstituterepresentationsastopastcompliance.
Corporate Governance Guidelines
OurCorporateGovernanceGuidelinesareavailableonourwebsiteatwww.tripointegroup.comintheCorporateGovernance—GovernanceDocumentssectionoftheInvestorswebpage.
Stockholder Communications with our Board of Directors
OurstockholdersandotherinterestedpersonswhowanttocommunicatedirectlywithourBoardofDirectorsasagroup,theChairmanofourBoardofDirectors,thenon-managementdirectorsasagrouporanyindividualdirectormaydosobydeliveringsuchcommunicationincareofourCorporateSecretaryat:TRIPointeGroup,Inc.,PresidingDirectororNon-ManagementDirectorsc/oCorporateSecretary,19540JamboreeRoad,Suite300,Irvine,California92612.
Allcommunicationsmustbeaccompaniedbythefollowinginformation:
• ifthepersonsubmittingthecommunicationisastockholder,astatementofthenumberofsharesofourcommonstockthatthepersonholds;
• ifthepersonsubmittingthecommunicationisnotastockholder,thenatureoftheperson'sinterestinus;
• anyspecialinterest,meaninganinterestnotinthecapacityasastockholder,ofthepersoninthesubjectmatterofthecommunication;and
• theaddress,telephonenumberande-mailaddress,ifany,ofthepersonsubmittingthecommunication.
Communicationsreceivedinwritingareforwardedto(i)ourBoardofDirectors,(ii)thenon-managementdirectorsasagroupor(iii)anyindividualdirectortowhomthecommunicationisdirected.However,thefollowingcommunicationswillnotbeforwarded:anythreatening,incoherent,obscene,defamatoryorsimilarlyinappropriatecommunication;anycommunicationthatinvolvesanordinarybusinessmatter(suchasajobinquiry,abusinessaccountortransaction,arequestforinformationaboutus,formletters,spam,invitationsandotherformsofmassmailings);surveys;andanycommunicationthatdoesnotrelatetomattersrelevanttousorourbusiness,unlessrequestedbyadirectororatmanagement'sdiscretion.AteachmeetingofourBoardofDirectors,asummaryofallsuchcommunicationsreceivedsincethelastmeetingthatwerenotforwardedwillbepresentedandthosecommunicationsareavailabletodirectorsonrequest.
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COMPENSATION DISCUSSION AND ANALYSIS
InthisCompensationDiscussionandAnalysis,wedescribeourcompensationpractices,programs,anddecisionsforournamedexecutiveofficers("NEOs"),whowereasfollowsfor2017:
• DouglasF.Bauer,CEO
• ThomasJ.Mitchell,PresidentandChiefOperatingOfficer("COO")
• MichaelD.Grubbs,ChiefFinancialOfficer("CFO")andTreasurer
• BradleyW.Blank,VicePresident,GeneralCounselandSecretary
• GlennJ.Keeler,VicePresidentandChiefAccountingOfficer
OnJanuary8,2018,theCompanyannouncedthatMr.BlankwastransitioningtotheroleofPresidentoftheCompany'sWinchesterHomesbrand.Inconnectionwiththetransition,Mr.BlankresignedasVicePresident,GeneralCounselandSecretaryoftheCompany.OnJanuary8,2018,theCompanyalsoannouncedthatDavidC.LeewasappointedasVicePresident,GeneralCounselandSecretaryoftheCompany.Formoreinformationregardingourcurrentexecutiveofficers,see"Management."
Introduction and Compensation Philosophy
Wedesignourcompensationprogramstoachievethefollowingkeyobjectives:
• aligntheinterestsofourexecutiveofficerswiththoseofourstockholders;
• motivateexecutiveofficerstogrowlong-termstockholdervalue;
• reinforceourpayforperformanceculturebyaligningthecompensationrealizedbyourexecutiveofficerswiththeachievementofcompanygoals;
• providetotalcompensationopportunitiesthatallowustoattract,retainandmotivatetalentedexecutiveofficers;and
• promotedesiredbehaviorthroughincentivecompensationwithoutencouragingimprudentrisk-taking.
Outlinedbelowarethetoolsweusetoobtaintheseobjectives:
Link Pay to Performance :Welinkasignificantportionofexecutiveofficercompensationtoperformance.Onaverage,morethanone-halfof2017NEOtotalcompensationwasperformance-basedandwastiedtoseveralfinancialperformancemetrics.
Balance Performance Considerations :Weutilizeshort-termandlong-termperformanceawardstomotivateperformancewhilemitigatingincentivesforunduerisk-taking.
Short-TermPerformance.In2017,wegrantedcashincentiveawardswithpayoutsbasedonachievementofpre-taxincomeobjectivesfortheyear.
Long-TermPerformance.In2017,wegrantedequityawardsintheformofrestrictedstockunits("RSUs")tomotivatelong-termperformance,aligntheinterestsofourexecutiveofficerswiththoseofourstockholders,andencourageretention.Onaverage,morethanone-halfof2017NEOtotalcompensationwasequitybased.Inthecaseof
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Messrs.Bauer,Mitchell,andGrubbs,60%oftheRSUsgrantedin2017(attargetperformance)wereperformance-basedand40%weretime-based.TheRSUsawardedtoMessrs.BlankandKeelerwere100%time-based.
Maintain Rigorous Stock Ownership Guidelines :Ourminimumstockownershipguidelinesencourageownershipandfurtheraligntheinterestsofourexecutiveofficerswiththoseofourstockholders.
Thesepaypracticesarediscussedinmoredetailunder"—2017NEOCompensationDecisions"below.
Other Compensation and Governance Practices
What We Do
ü Independent Consultant: Sinceourinitialpublicofferingin2013,ourCompensationCommitteehasengagedanindependentcompensationconsultantthatdoesnotprovideanyotherservicestous.
ü Independent Chairman of the Board of Directors: WeseparatetherolesofChairmanoftheBoardofDirectorsandChiefExecutiveOfficer.ThisseparationallowstheChairmantofocusontheeffectivenessofourBoardofDirectorsandoversightofourseniormanagementwhileourCEOfocusesonexecutingourstrategyandmanagingourbusiness.
ü Prohibition on Hedging: Weprohibitalldirectors,officersandemployeesfromengagingintransactionsthathavetheeffectofhedgingtheeconomicvalueoftheirinterestsinourcommonequity.
ü Clawback Policy: Wehaveapolicythatprovidesforrecoupmentofincentivecompensationintheeventofanaccountingrestatementandmisconductofanexecutiveofficer.
ü Equity Grant Time Policy: Wehaveadoptedapolicyregardingthetimingofequityawards.
What We Do Not Do
û Provide Tax Gross Ups on Change in Control Benefits.û Provide Excessive Executive Perquisites.û Provide Tax Gross Ups on Perquisites or Benefits.û Guarantee Base Salary Increases or Incentive Payments for Executives.û Allow for Re-Pricing of Underwater Stock Options without Stockholder Approval.
Compensation Decision-Making Process
Role of the Compensation Committee
TheCompensationCommitteeisresponsibleforreviewingandapproving,onanannualbasis,thecorporategoalsandobjectiveswithrespecttothecompensationofallofourexecutiveofficers,asdescribedintheCompensationCommitteeCharter.TheCompensationCommitteereliesonitsownreviewandtheadviceofitsindependentcompensationconsultantinestablishingexecutiveofficerpay.
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TheCompensationCommitteeseekstheinputoftheCEOinmakingexecutiveofficerpaydecisions,buttheCompensationCommitteemakesalldecisions.
InFebruary2017,theCompensationCommitteeapprovedannualincentiveperformanceobjectivesforfiscalyear2017andlong-termincentiveawardstoourNEOsunderour2013LTIP.Afterthecompletionoffiscalyear2017,theCompensationCommittee(i)approved2017annualincentivepayoutsforourNEOsbasedontheachievementoftheperformanceobjectivesestablishedatthebeginningoftheyear,and(ii)certifiedachievementofperformanceobjectiveswithrespecttothelong-termincentiveawardsgrantedtoMessrs.Bauer,MitchellandGrubbsin2015thathadperformanceperiodsendingDecember31,2017.InFebruary2018,theCompensationCommitteeapprovedannualincentiveperformanceobjectivesforfiscalyear2018andlong-termincentiveawardstoourexecutiveofficersunderour2013LTIP.
Independent Compensation Consultant to the Compensation Committee
TheCompensationCommitteehasengagedSemlerBrossyasitsindependentcompensationconsultant.SemlerBrossy'sdutiesincludepreparationofmaterialfortheCompensationCommittee'sexecutiveofficerpayanalysis,reviewofourpeergroup,recommendationsfornon-employeedirectorcompensation,discussionandanalysisofpotentialincentiveprograms,andworkonbehalfoftheCompensationCommitteetoreviewmanagement'srecommendationstotheCompensationCommitteeaboutexecutiveofficerpaymatters.SemlerBrossyhasbeenretainedby,andreportsdirectlyto,theCompensationCommittee,anddoesnotprovideanyservicestousotherthanthosedescribedabove.TheCompensationCommitteehasassessedSemlerBrossy'sindependenceinlightoftheSECrequirementsandNYSElistingstandardsrelatingtoadviserindependenceanddeterminedthatSemlerBrossy'sworkdoesnotraiseanyconflictofinterestorindependenceconcerns.
Peer Group and Market Data
TheCompensationCommitteeexaminesmarketdataannuallytounderstandbothpaylevelsandpaypractices.TheCompensationCommitteeprimarilyreviewsdatafromapeergroupthatconsistsofpublicly-tradedhomebuildingcompanies,whichtheCompensationCommitteebelievesisanappropriatelistofcompetitorsforbusinessandtalent.TheCompensationCommitteeusespeergroupdatatoassessthereasonablenessofexecutiveofficerpayandgenerallyseekstoensuretheaggregatecompensationfortheexecutiveofficersiscomparableovertimetocompaniessimilartous.ForMessrs.BlankandKeeler,theCompensationCommitteereviewspaydatafromcompensationsurveysforbothhomebuildersandnon-homebuilderswhenassessingpaydecisions.
Overtime,theCompensationCommitteeintendstotargetaggregatepayforourexecutiveofficersaroundthemedianofourpeers.TheCompensationCommitteedoesnothaveanexplicitpaypositioningstrategyrelativetopeersbycomponentofpayorbyexecutive,andourpaylevelsforMessrs.BauerandMitchellareintentionallylessdifferentiatedthanwouldbeexpectedinthemarketgivenourlegacyasaprivatecompanyandthegreatersharingofmanagementresponsibilitiesbetweentheseexecutivesthanwouldbethecaseatmanyotherpeercompanies.
TheCompensationCommittee,inconsultationwithSemlerBrossyandourmanagement,periodicallyreviewsandconsiderschangestothemakeupofourpeergroup.For2017,theCompensationCommitteedidnotmakeanychangestothepeergroupfromtheprioryear.Thecompaniesinour2017peergroupareshowninthetablebelow.Asfurtherdiscussedbelow,theCompensationCommitteealsobasedvestingofone-halfoftheperformance-basedRSUsgrantedto
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Messrs.Bauer,Mitchell,andGrubbsin2017onourtotalstockholderreturn("TSR")relativetoourpeergroup.
Our Peer GroupBeazerHomesUSA M/IHomesCalAtlanticGroup* MeritageHomesD.R.Horton NVRHovnanianEnterprises PulteGroupKBHome TaylorMorrisonLennar TollBrothersM.D.C.
*In February 2018, CalAtlantic Group and Lennar announced the consummation of a business combination transaction.Consequently,CalAtlanticGroupwasremovedretroactivelyfromourpeergroupuponconsummationofthistransaction.
For2018,theCompensationCommitteeeliminatedD.R.HortonandLennarfromourpeergroupforaggregatepaybenchmarkingpurposes,althoughbothD.R.HortonandLennarremainedinourpeergroupforpurposesofmeasuringourrelativeTSR.D.R.HortonandLennarwereremovedforbenchmarkingpurposesgiventhattheannualrevenueofeachcompanyisgreaterthan5timestheannualrevenueofTRIPointe.Asaresult,bothareoutliersforpaycomparisonpurposes.
Advisory Vote on Executive Compensation
Atour2017AnnualMeetingofStockholders,ourstockholdersvotedtoapproveonanadvisorybasisthecompensationofourNEOs.Morethan97.5%ofthevotescastwithrespecttothisproposalwerecastforapprovalofourNEOs'compensation.TheCompensationCommitteedeterminedthattheexecutivecompensationphilosophyandcompensationelementscontinuedtobeappropriate.Althoughwecontinuetorefineourcompensationprogramsasapubliccompany,wehavenotmadeanychangespecificallyinresponsetotheadvisoryvoteofourstockholders.
Atour2014AnnualMeetingofStockholders,ourstockholdersvotedonanadvisorybasiswithrespecttothefrequencyoffutureadvisoryvotestoapprovethecompensationofourNEOs.Approximately66.4%ofthevotescastonthisproposalwerecastforafrequencyofeverythreeyears.OurBoardofDirectorsconcludedthatavoteeverythreeyearswasthemostappropriatetimeframeforstockholderstoassessourexecutiveofficerpaypracticesbecausethesepracticescontinuetoevolveandchangewiththetransformationoftheCompany,andthesechangeswilltakeplaceoveratimeframelongerthanasingleyear.
Pay Design and Compensation Elements
Ourcompensationprogramsarecomprisedofthefollowingcompensationelements:
• Base salary. Thebasesalariesofourexecutiveofficersareintendedtoprovideacompetitiveleveloffixedcompensationinordertoattract,retain,andmotivatetalentedexecutiveofficers.Basesalariesaregenerallysetbasedoneachexecutiveofficer’sresponsibilities,performance,skills,andexperienceascomparedwithrelevantmarketdata.
• Annual Incentive Program. Infurtheranceofourcompensationphilosophytoawardincentivebonusesbasedonperformance,wedesignourannualincentiveprogramstomotivateandrewardexecutiveofficersforachievingpre-establishedcompanyperformanceobjectives.
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• Long-term Incentive Awards. TheCompensationCommitteebelievesthatasubstantialportionofeachexecutiveofficer'scompensationshouldbeintheformoflong-termequityincentivecompensation.Whileourannualincentiveprogramsrewardexecutiveofficersforactionsthatimpactshort-andmid-termperformance,theCompensationCommitteerecognizesthatlong-termequityincentiveawardsalsoservetheinterestsofourstockholdersby:
◦ givingthesekeyemployeestheopportunitytoparticipateinthelong-termappreciationofourcommonstock;
◦ encouragingexecutiveofficerstocreateandsustainstockholdervalueoverlongerperiodsbecausethevalueofequityawardsisdirectlyattributabletochangesinthepriceofourcommonstockovertime;and
◦ promotingexecutiveofficerretentionbecausethefullvalueofequityawardscannotberealizeduntilvestingoccurs,whichgenerallyrequirescontinuedemploymentformultipleyears.
Inaddition,asignificantportionofthelong-termincentiveawardsgrantedtoMessrs.Bauer,Mitchell,andGrubbsareintheformofperformance-basedequityawardslinkedtospecifiedperformancemetrics.
2017 NEO Pay Programs
In2017,theCompensationCommitteecontinuedtheprocessofaligningourpaypracticeswithotherlargehomebuilders.
Thegraphsbelowillustratetherelativeaveragemixofthe(i)basesalary,(ii)annualincentivetarget,and(iii)long-termincentiveawardtargetforMessrs.Bauer,Mitchell,andGrubbsandallotherNEOsfor2017.TheincentivemixforMessrs.Bauer,Mitchell,andGrubbswasmoresubstantiallyperformance-based,recognizingthehigherlevelofresponsibilityoftheseNEOsandtheirgreaterabilitytoinfluenceoverallbusinessresults.
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Thetablebelowsummarizesthethreeelementsof2017compensationforourNEOs.Inadditiontothesecompensationelements,ourNEOsparticipateinbenefitsandotherprogramsasdescribedin"—OtherCompensationProgramsandPolicies."
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Pay Element Purpose 2017 Description Base Salary
Provideacompetitiveleveloffixedcompensationtoattract,retainandmotivatetalentedexecutiveofficers
TheCompensationCommitteereviewedfixedcashcompensationlevelsandmadeadjustmentsdependingontheexecutiveofficer’sresponsibilities,performance,skillsandexperienceascomparedwithrelevantmarketdata.
Annual CashIncentive
Motivateandrewardexecutiveofficersforachievingpre-establishedcompanyperformancegoals
TheCompensationCommitteeapprovedcashperformanceawardsforourNEOsunderthe2013LTIPwithaperformanceperiodofJanuary1,2017toDecember31,2017.ActualpayoutamountswerebasedontheCompany'slevelofachievementofthe2017fiscalyearpre-taxincomeannualincentiveperformanceobjective(equaltotheCompany'sbusinessplan)establishedbytheCompensationCommittee.
Long-term Incentive
Motivateandrewardexecutiveofficers'contributionstoenhancinglong-termstockholdervalueandtheachievementoflong-termbusinessobjectives;encourageexecutiveretention
Messrs.Bauer,Mitchell,andGrubbsweregrantedamixofperformance-basedandtime-basedRSUs,with60%oftheawardsintheformofperformance-basedRSUs(attargetperformance)and40%oftheawardsintheformoftime-basedRSUs.Thismixofperformance-basedandtime-basedincentivesisconsistentwithourpeersandbalancesperformanceandretentionobjectives.Theperformance-basedRSUshaveaperformanceperiodfromJanuary1,2017toDecember31,2019andareallocatedinequalpartstotwoseparateperformancemetrics:(i)TSR,withvestingbasedonourTSRrelativetoourpeer-group;and(ii)earningspershare("EPS").TheCompensationCommitteebelievestheseperformancemetricsrewardappropriatelyforCompanyperformanceovertimeandaligntheexecutive'sinterestswiththoseofourstockholders.Thelong-termincentiveawardsforMessrs.BlankandKeelerwere100%time-basedRSUs.TheawardvaluesforMessrs.BlankandKeelerareintendedtoreflecttheirindividualperformanceandcontributions.
2017 NEO Compensation Decisions
Inmaking2017NEOcompensationdecisions,theCompensationCommitteeconsideredmedianexecutivepayforthetopthreeexecutivesatotherpublicly-tradedhomebuildingcompanies(see"—PeerGroupandMarketData"above)butdidnottargetanyspecificpercentileofmarketwhenmakingindividualpaydecisions.PayforourCEOandCOOcontinuestobelessdifferentiatedthanistypicalofotherlargehomebuildersgivenourlegacyasaprivatecompanyandthenatureofthesharedmanagementresponsibilitiesofMessrs.BauerandMitchell.
Base Salary
TheCompensationCommitteeapproved2017basesalaryincreasesforeachofourNEOs.TheCompensationCommitteeconsideredeachoftheNEO'sresponsibilities,performance,skillsandexperienceascomparedwithrelevantpeergroupmarketdataindeterminingtoincreasetheirbasesalaries.TheCompensationCommitteetooktherecommendationsofMr.BauerintoconsiderationwhensettingthecompensationofMessrs.BlankandKeeler.Thesizeofthesalaryadjustmentsfor2017continuedtoreflectourtransitiontomarket-basedpractices.
ThetablebelowcomparestheNEOs'basesalariesfor2016and2017.
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Executive 2016
Base Salary 2017
Base Salary %
Increase
DouglasF.Bauer $ 700,000 $ 775,000 11%ThomasJ.Mitchell $ 675,000 $ 745,000 10%MichaelD.Grubbs $ 550,000 $ 600,000 9%BradleyW.Blank $ 385,000 $ 410,000 6%GlennJ.Keeler $ 260,000 $ 280,000 8%
Annual Cash Incentive
Atthebeginningof2017,theCompensationCommitteeapprovedannualincentivetargetsforourNEOs.TheseannualincentivetargetsweredefinedasapercentageoftheirbasesalariesandweredeterminedbasedoneachNEO'sresponsibilities,skills,andexperienceascomparedwithrelevantmarketdata.
ThetablebelowcomparestheNEOs'2016and2017annualincentivetargets:
2016 Annual Incentive Target 2017 Annual Incentive TargetExecutive % of Salary $ % of Salary $
DouglasF.Bauer 140% $ 980,000 140% $ 1,085,000ThomasJ.Mitchell 140% $ 945,500 140% $ 1,043,000MichaelD.Grubbs 120% $ 660,000 120% $ 720,000BradleyW.Blank 70% $ 269,500 75% $ 307,500GlennJ.Keeler 75% $ 195,000 75% $ 210,000
For2017,theCompensationCommitteeestablishedpre-taxincomeastheperformancemetricforcashperformanceawardstoallNEOs.Pre-taxincomeisacommonmetricusedwithinthehomebuildingindustryingeneralandtheCompensationCommitteebelievesitiswellalignedwiththeobjectiveofstockholdervaluecreation.
For2017,theCompensationCommitteeapprovedanadjustedpre-taxincomeannualincentiveperformanceobjectiveof$325.4million,whichwasequaltoourbusinessplan.Adjustedpre-taxincomemeansourincomefromcontinuingoperationsbeforetaxes,asreportedinourconsolidatedfinancialstatementsfortherelevantperiods,aftersuchadjustmentstheretoastheCompensationCommitteedeemsappropriateinitssolediscretion(i)toexcludetheeffectofextraordinary,unusualand/ornonrecurringitems,includingnetincomeattributabletonon-controllinginterests,andchangesinapplicableaccountingstandardsand(ii)toreflectsuchotherfactorsastheCompensationCommitteedeemsappropriatetofairlyreflectpre-taxincome.PayoutswerebasedonourlevelofachievementofthisperformanceobjectiveandwerecalculatedbasedonpercentagesofeachNEO'sannualincentivetarget,assetforthinthetablebelow:
Performance ObjectiveAchievement Level % of Business Plan
NEO Payout(as % of 2017 Annual Incentive
Target)Threshold 75% 50%
Target 100% 100%
Maximum 125% 200%
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Achievementbetweenthethreshold,targetandmaximumlevelswouldbedeterminedbystraightlineinterpolationandachievementbelowthresholdwouldresultinzeroincentivepayoutfortheNEO.
TheCompany'spre-taxincomeforfiscalyear2017wasapproximately$339.8million,andtheCompensationCommitteedeterminedthatouradjustedpre-taxincomefor2017wasapproximately$339.5million,or104.3%oftheannualincentiveperformanceobjective.See"—Non-GAAP Measures" below for a reconciliation of adjusted pre-tax income to the most directly comparable GAAP financialmeasure.
Thetablebelowpresentstheresultsofour2017annualcashincentiveprogramandthecorrespondingpayoutstoeachoftheNEOsbasedontheseresults.
2017 Annual Incentive PayoutAnnual Incentive Based on Pre-tax Income % of Target % of Salary $
DouglasF.Bauer 117.3% 164.2% $ 1,272,705ThomasJ.Mitchell 117.3% 164.2% $ 1,223,439MichaelD.Grubbs 117.3% 140.8% $ 844,560BradleyW.Blank 117.3% 88.0% $ 360,698GlennJ.Keeler 117.3% 88.0% $ 246,330
Long-Term Incentives
Atthebeginningof2017,theCompensationCommitteedeterminedthetargetvalueofthelong-termincentiveawardsthatwouldbegrantedtoeachoftheNEOsin2017basedontheNEO'sresponsibilities,skills,experienceandcontributions.RecognizingthehigherlevelofresponsibilityofMessrs.Bauer,Mitchell,andGrubbsandtheirgreaterabilitytoinfluenceoverallbusinessresults,theCompensationCommitteestructuredthe2017long-termincentiveprogramsothatthesethreeNEOsweregrantedamixofperformance-basedandtime-basedRSUs.Allofthelong-termincentiveawardsgrantedtoMessrs.BlankandKeelerin2017weretime-basedRSUs.
Thetargetvalueofthelong-termincentiveawardsgrantedtotheNEOsin2017wasasfollows:
2017 Long-term Incentive Award Target Values
Executive Performance- Based
RSUs Time-Based RSUs Total
DouglasF.Bauer $ 1,560,000 $ 1,040,000 $ 2,600,000ThomasJ.Mitchell $ 1,500,000 $ 1,000,000 $ 2,500,000MichaelD.Grubbs $ 720,000 $ 480,000 $ 1,200,000BradleyW.Blank $ — $ 316,859 $ 316,859GlennJ.Keeler $ — $ 230,443 $ 230,443
Indeterminingthetargetvalueoflong-termincentiveawardsthatwouldbegrantedin2017,theCompensationCommitteeconsideredthevalueofthelong-termincentiveawardsgrantedin2016andthestructureofthe2016long-termincentiveprogram.TheCompensationCommitteemaintainedthetargetvalueofthelong-termincentiveawardsgrantedtoMessrs.BauerandMitchellin2017ascomparedto2016.TheCompensationCommitteeincreasedthetargetvalueoflong-termincentiveawardswith
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respecttoMessrs.Grubbs,Blank,andKeelertocontinuetoaligntheirlong-termincentiveawardswithmarketpractices.
TheCompensationCommitteestructuredthe2017long-termincentiveprogramforMessrs.Bauer,Mitchell,andGrubbstobe60%performance-basedRSUs(attargetperformance)and40%time-basedRSUs.Thismixofperformance-basedandtime-basedincentiveawardsisconsistentwithourpeersandbalancesperformanceandretentionobjectives.
Performance-basedRSUs
TheCompensationCommitteegranted257,851,247,933and119,008performance-basedRSUstoMessrs.Bauer,Mitchell,andGrubbs,respectively,pursuanttoour2013LTIP.Thenumberofperformance-basedRSUswasdeterminedbymultiplying(i)thequotientof(x)thetargetvalueoftheawardand(y)theclosingmarketpriceoftheCompany'scommonstockonthedateofgrantby(ii)two,representingthemaximumnumberofRSUsthatmayvestassumingourattainmentofthemaximumperformanceobjectivesetbytheCompensationCommittee.TheCompensationCommitteeselectedTSRastheperformancemetricforone-halfoftheperformance-basedRSUsgrantedin2017,withvestingoftheRSUsbasedonourTSRrelativetoourpeergroup,whichtheCompensationCommitteebelievesrewardsappropriatelyforperformanceovertimeandalignstheexecutive'sinterestswiththoseofourstockholders.TheCompensationCommitteeselectedEPSastheperformancemetricforone-halfoftheperformance-basedRSUsgrantedin2017inordertofurtheraligntheinterestsoftheNEOswiththoseofourstockholders.
TheCompensationCommitteestructuredtheperformance-basedRSUssothatthevesting,ifatall,oftheseRSUswillbebasedonourpercentageattainmentofspecifiedthreshold,target,andmaximumperformanceobjectiveswithrespecttoeachperformancemetric.Withrespecttotheperformance-basedRSUsallocatedtoeachperformancemetric:
• atthresholdperformance,theNEOwillvestin25%oftheperformance-basedRSUs,representing50%ofthetargetvalueoftheperformance-basedRSUsonthegrantdate;
• attargetperformance,theNEOwillvestin50%oftheperformance-basedRSUs,representing100%ofthetargetvalueoftheperformance-basedRSUsonthegrantdate;
• atmaximumperformance,theNEOwillvestin100%oftheperformance-basedRSUs,representing200%ofthetargetvalueoftheperformance-basedRSUsonthegrantdate;
• thepercentageoftheperformance-basedRSUsthatwillvestifourperformanceisbetweenthethreshold,targetandmaximumperformancelevelswillbedeterminedbystraightlineinterpolation;and
• achievementbelowthresholdwouldresultinvestingofzerooftheperformance-basedRSUs.
InthecaseoftheTSRperformance-basedRSUs,theperformanceobjectivesareassetforthinthetablebelow(TSRpercentilemeansourpercentilerankduringtheperformanceperiodrelativetotheTSRforourpeergroup):
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Performance Level The Company’s TSR Percentile on Vesting Date Percentage of Award that VestsMaximum 75thTSRPercentileandAbove 100%Target 50thTSRPercentile 50%Threshold 35thTSRPercentile 25%BelowThreshold Below35thTSRPercentile 0%
InthecaseoftheEPSperformance-basedRSUs,theperformanceobjectivesareassetforthinthetablebelow:
Performance Level The Company’s Cumulative EPS Percentage of Award that VestsMaximum 125%ofCumulativeEPSPlanandAbove 100%Target 100%ofCumulativeEPSPlan 50%Threshold 75%ofCumulativeEPSPlan 25%BelowThreshold Below75%ofCumulativeEPSPlan 0%
Theperformanceperiodfortheperformance-basedRSUsisJanuary1,2017toDecember31,2019.Iftheperformance-basedRSUsdonotvestonorbeforeDecember31,2019,theywillbecancelledandforfeitedfornoconsideration.TSRisdeterminedbasedonchangesinstockpriceplusdividendspaidduringtheapplicableperformanceperiod.TheCompensationCommitteemaymakeadjustmentstoourpeergroupbasedondevelopmentsthatoccurduringtheperformanceperiod,suchasremovingfromthepeergroup,retroactivelytothebeginningoftheperformanceperiod,anycompanynolongerexistingasanindependententityorwhichhasannounceditisbeingacquired.
InthecaseoftheEPSperformance-basedRSUs,theCompensationCommitteemayadjustEPSasitdeemsappropriateto(i)excludetheeffectofextraordinary,unusualand/ornonrecurringitemsandchangesinapplicableaccountingstandardsand(ii)reflectsuchotherfactorsasitdeemsappropriatetofairlyreflectearningspersharegrowth.
TheCompensationCommitteebelievesexceptionalCompanyperformanceisrequiredtoachievethemaximumperformanceobjectiveandthatitwouldbedifficulttoachievemaximumvestingoftheperformance-basedRSUs.Thedifficultyofattainingtheperformanceobjectivesfortheperformance-basedRSUsisinherentlyuncertainbecausetheyaresubjecttoanumberoffactorsbeyondthecontrolofeithertheCompanyortheNEO,includingoveralleconomicconditions,theperformanceofthesecuritiesmarketsgenerally,andotherrisksanduncertaintiesthatweface,includingthosedescribedinourannualreportonForm10‑KandotherSECfilings.
Time-basedRSUs
TheCompensationCommitteealsogranted85,950,82,644,39,669,26,186,and19,044time-basedRSUstoMessrs.Bauer,Mitchell,Grubbs,Blank,andKeeler,respectively,vestingone-thirdeachyearbeginningonthefirstanniversary.Thenumberoftime-basedRSUsgrantedtoeachNEOwasdeterminedbydividingthetargetvalueoftheawardbytheclosingmarketpriceoftheCompany'scommonstockonthedateofgrant.The2017time-basedRSUawardspromoteexecutiveofficerretentionbyvestingannuallyastoone-thirdofeachawardoverathree-yearperiod.
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ThevalueoftheawardstoMessrs.BlankandKeelerwasbasedonrecommendationsmadebyourCEOtotheCompensationCommitteeafterevaluationofeachsuchNEO'sresponsibilities,skills,experience,andcontributions,andrelevantmarketinformation.
2018 Executive Officer Pay Programs
TheCompensationCommitteetookthefollowingactionswithrespectto2018executivecompensation:
• Base Salary. TheCompensationCommitteeapproved2018basesalaryincreasesforMessrs.Bauer,MitchellandKeelerof$25,000,$25,000,and$10,000,respectively,basedoncompetitivemarketpracticesforexecutiveofficersinsimilarroles.
• Annual Cash Incentive Program. TheCompensationCommitteeapproved2018targetannualincentivepercentagesforMessrs.Bauer,Mitchell,Grubbs,KeelerandLeeof160%,160%,125%,75%and25%ofbasesalary,respectively.Thepayoutamounts,ifany,mayrangefrom0%to200%ofthetargetannualincentiveandwillbebasedontheCompany'sachievementofspecifiedpre-taxincomeamountsandwillbecalculatedbasedonpercentagesofeachofficer'starget.
• Long-Term Incentive Program.
TheCompensationCommitteedidnotmakeanychangestothelong-termincentiveprogramstructurefor2018.TheCompensationCommitteegrantedMessrs.Bauer,MitchellandGrubbsamixofperformance-basedandtime-basedRSUs,with60%oftheawardsintheformofperformance-basedRSUs(attargetperformance)and40%oftheawardsintheformoftime-basedRSUs.Thismixofperformance-basedandtime-basedincentivesisconsistentwithpeersandbalancesperformanceandretentionobjectives.Theperformance-basedRSUsareallocatedinequalpartstotwoseparateperformancemetrics:(i)TSR,withvestingbasedontheCompany'sTSRrelativetoitspeer-grouphomebuilders;and(ii)EPS.Theperformanceperiodfortheperformance-basedRSUsisJanuary1,2018toDecember31,2020.TheCompensationCommitteebelievestheseperformancemetricsrewardappropriatelyforCompanyperformanceovertimeandaligntheexecutive'sinterestswiththoseofourstockholders.Thelong-termincentiveawardsforMessrs.KeelerandLeeare100%time-basedRSUsastheseexecutiveshavelessdirectresponsibilityandimpactoverdrivingTSR.
TheCompensationCommitteegranted184,179,177,095and85,005performance-basedRSUstoMessrs.Bauer,MitchellandGrubbs,respectively.Thenumberofperformance-basedRSUsgrantedtotheseexecutiveofficersin2018wasdeterminedbymultiplying(i)thequotientof(x)thetargetvalueoftheawardand(y)theclosingmarketpriceoftheCompany'scommonstockonthedateofgrantby(ii)two,representingthemaximumnumberofRSUsthatmayvestassumingourattainmentofthemaximumperformanceobjectivesetbytheCompensationCommittee.Theseperformance-basedRSUsweregrantedpursuanttoour2013LTIP.
TheCompensationCommitteealsoawarded61,393,59,031,28,335,14,437and2,951time-basedRSUstoMessrs.Bauer,Mitchell,Grubbs,KeelerandLee,respectively,vestingone-thirdeachyearbeginningonthefirstanniversaryofthegrantdateoftheawardunits.
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Thetargettotalannualcompensationofourcurrentexecutiveofficersfor2018isasfollows:
2018 Total Target Compensation by Element
Executive Base
Salary Target
Annual Incentive
TargetLong-termIncentive Total
DouglasF.Bauer $ 800,000 $ 1,280,000 $ 2,600,000 $ 4,680,000ThomasJ.Mitchell $ 770,000 $ 1,232,000 $ 2,500,000 $ 4,502,000MichaelD.Grubbs $ 600,000 $ 750,000 $ 1,200,000 $ 2,550,000GlennJ.Keeler $ 290,000 $ 217,500 $ 244,575 $ 752,075DavidC.Lee $ 500,000 (1) $ 125,000 $ 50,000 $ 725,000
__________(1)Inaddition,Mr.Leereceiveda$50,000signingbonuswhenhewashiredinJanuary2018.
Forcomparison,thetargettotalannualcompensationofMessrs.Bauer,Mitchell,GrubbsandKeelerin2017wasasfollows:
2017 Total Target Compensation by Element
Executive Base
Salary Target
Annual Incentive
TargetLong-termIncentive Total
DouglasF.Bauer $ 775,000 $ 1,085,000 $ 2,600,000 $ 4,460,000ThomasJ.Mitchell $ 745,000 $ 1,043,000 $ 2,500,000 $ 4,288,000MichaelD.Grubbs $ 600,000 $ 720,000 $ 1,200,000 $ 2,520,000GlennJ.Keeler $ 280,000 $ 210,000 $ 230,443 $ 720,443
2015 Performance-Based RSUs
InMarch2015,theCompensationCommitteegrantedMessrs.Bauer,MitchellandGrubbsperformance-basedRSUstiedtothreeseparateperformancemetrics:
• TSR,withvestingbasedontheCompany'sTSRrelativetoitspeer-grouphomebuilders;• EPS;and• absolutestockprice,calculatedastheaverageclosingpricepershareoftheCompany'scommonstockasreportedbytheNew
YorkStockExchangeforeachofthetradingdaysinthesixty(60)calendardayperiodendingonandincludinganyrelevantdate.
TheCompensationCommitteeallocatedone-thirdoftheperformance-basedRSUsgrantedtoeachoftheseperformancemetrics.TheperformanceperiodfortheTSRperformance-basedRSUsandtheEPSperformance-basedRSUswasJanuary1,2015toDecember31,2017.Theperformanceperiodfortheperformance-basedRSUswithvestingbasedonabsolutestockpricewasJanuary1,2016toDecember31,2017.Thevesting,ifatall,oftheseperformance-basedRSUswasbasedonourpercentageattainmentofspecifiedthreshold,target,andmaximumperformanceobjectiveswithrespecttoeachperformancemetric.
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InthecaseoftheTSRperformance-basedRSUs,theperformanceobjectiveswereassetforthinthetablebelow:
Performance Level The Company's TSR Percentile on Vesting Date Percentage of Award that VestsMaximum 75thTSRPercentileandAbove 100%Target 50thTSRPercentile 50%Threshold 35thTSRPercentile 25%BelowThreshold Below35thTSRPercentile 0%
InthecaseoftheEPSperformance-basedRSUs,theperformanceobjectiveswereassetforthinthetablebelow.TheCompensationCommitteehastheabilitytoadjustEPSasitdeemsappropriateto(i)excludetheeffectofextraordinary,unusualand/ornonrecurringitemsandchangesinapplicableaccountingstandardsand(ii)reflectsuchotherfactorsasitdeemsappropriatetofairlyreflectearningspersharegrowth.
Performance Level The Company’s Cumulative EPS Per Share Percentage of Award that VestsMaximum $4.66andAbove 100%Target $3.73 50%Threshold $2.80 25%BelowThreshold Below$2.80 0%
Inthecaseoftheperformance-basedRSUswithvestingbasedonabsolutestockprice,theperformanceobjectiveswereassetforthinthetablebelow:
Performance Level The Company’s Absolute Stock Price Per Share Percentage of Award that VestsMaximum $24.00andAbove 100%Target $21.00 50%Threshold $18.00 25%BelowThreshold Below$18.00 0%
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OnFebruary15,2018,theCompensationCommitteecertifiedtheactualperformanceachievedwithrespecttotheseperformance-basedRSUsfortheperformanceperiodsendingDecember31,2017assetforthbelow:
• TSR.TheCompensationCommitteedeterminedthattheCompany’srelativeTSRwasbelowthe35thTSRpercentileandnoneoftheTSRperformance-basedRSUsvested.
• EPS.TheCompany'scumulativeEPSperfullydilutedsharewas$3.69.TheCompensationCommitteedeterminedthattheCompany'scumulativeEPSperfullydilutedshare,asadjustedtoexcludetheimpactofa$22.0millionchargeasaresultofthere-measurementoftheCompany’sdeferredtaxassetsrelatedtotheTaxCutsandJobsActthatwassignedintolawinDecember2017,was$3.83pershareand55.45%oftheEPSperformance-basedRSUsgrantedtoeachofMessrs.Bauer,MitchellandGrubbsvested.See "—Non-GAAP Measures" below for a reconciliation of adjusted cumulative EPS per fully diluted share to the mostdirectly comparable GAAP financial measure.
• AbsoluteStockPrice.TheCompensationCommitteedeterminedthattheCompany'sabsolutestockpricedidnotexceed$18.00pershareandnoneoftheperformance-basedRSUswithvestingbasedonabsolutestockpricevested.
Therefore,theCompensationCommitteeapprovedtheissuanceof76,115,71,040and50,743sharesoftheCompany’scommonstocktoMessrs.Bauer,MitchellandGrubbs,respectively.
Other Compensation Programs and Policies
Severance and Change in Control Benefits
InNovember2015,weenteredintonewemploymentagreementswitheachofMessrs.Bauer,Mitchell,andGrubbs.Theseemploymentagreementssupersedetheemploymentagreementspreviouslyenteredintowitheachofthem.Theseagreementsgoverntheirtreatmentuponaterminationofemployment,amongotherconsiderations,andhaveaninitialtermexpiringonNovember19,2018.Thechangeincontrolcomponentoftheseagreementsreflectsourbeliefthattheinterestsofstockholderswillbebestservediftheinterestsoftheseexecutivesarealignedwiththestockholders,andthatprovidingchangeincontrolbenefitsshouldeliminateoratleastreducedisincentivestopursuepotentialchangeincontroltransactionsthatmaybeinthebestinterestsofstockholders.
InFebruary2016,weenteredintoseveranceandchangeincontrolprotectionagreementswitheachofMessrs.BlankandKeeler.Theseagreementsgovernthetreatmentofeachofthemuponaterminationofemployment,includinginconnectionwithachangeincontrol,andhaveaninitialtermexpiringonFebruary26,2019.InJanuary2018,weenteredintoaseveranceandchangeincontrolprotectionagreementwithMr.Lee.ThisagreementgovernsthetreatmentofMr.Leeuponaterminationofemployment,includinginconnectionwithachangeincontrol,andhasaninitialtermexpiringonJanuary8,2021.
Seethe"ExecutiveCompensation—PotentialPaymentsUponTerminationorChangeinControl"sectionofthisproxystatementforfurtherinformationregardingtheseveranceandchangeincontrolprovisionsoftheseagreementsandaquantificationofthecompensationtobereceivedintheeventofachangeincontrolorterminationoftheemploymentofMessrs.Bauer,Mitchell,Grubbs,BlankandKeelerasofDecember31,2017.
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Benefits
Ourexecutiveofficersparticipateinretirementandbenefitplansgenerallyavailabletoour,andonthesametermsas,otheremployees.Thesebenefitsincludea50%matchontheir401(k)contributionsupto$8,100aswellasmedical,vision,dental,employeeassistanceprogram,lifeinsuranceandlong-termdisabilitycoverage.Wealsoprovidecertainofourexecutiveofficerswithareimbursementoflifeinsurancepremiumsandreimbursementofclubmembershipdues.
Equity Grant Time Policy
ItisthepolicyoftheCompensationCommitteethatregularannualequityawardsaregrantedonthelaterofthesecondbusinessdayafterthepublicreleaseoffiscalyear-endearnings,or(iflater)theMondayfollowingthedateonwhichtheCompensationCommitteeapprovestheawards.TheCompensationCommitteemayinitsdiscretionmakeequityawardsatothertimesinconnectionwithnewhires,promotionsorspecialcircumstances.ThegrantdatefortheseawardswillbetheMondayfollowingthedateonwhichtheCompensationCommitteeapprovestheaward.IfthegrantdateisaMondayandaclosingpriceisnotreportedforthatday,thegrantdatewillbethenextfollowingdayonwhichaclosingpriceisreported.
Stock Ownership Guidelines
OurBoardofDirectorshasadoptedthefollowingstockownershipguidelines:
Position Ownership GuidelineDirectors 5timesannualcashretainerCEO 5timesbasesalaryCOO 5timesbasesalaryCFO 3timesbasesalaryCorporatevicepresidents 1timesbasesalaryPresidentsofhomebuildingsubsidiaries 1timesbasesalary
Directorsandexecutiveofficershavefiveyearsfromthedateonwhichtheybecomesubjecttotheguidelinestosatisfytheapplicableguidelinelevel.Forthepurposesoftheseguidelines,ownershipincludessharesbeneficiallyownedandunvestedrestrictedstockandRSUawardssubjectonlytotime-basedvesting.Unexercisedoptions,whethervestedornot,donotcountasstock"owned"undertheseguidelines.Duringtheapplicablefive-yeartransitionperiod,ifaparticipantisnotincompliancewiththeapplicableguideline,heorsheisrequiredtoretain60%ofsharesearnednetoftaxesfromanyofourincentiveplansuntilheorsheisincompliancewiththeguidelines.Ifaparticipantfailstoachievetherequiredownershipduringtheapplicablefive-yeartransitionperiod,thatpersonwillthereafterberequiredtoretain100%ofsharesearnednetoftaxesuntilthetargetedownershiplevelisattained.AsofFebruary26,2018,eachofourdirectorsandNEOssatisfiestheapplicablestockownershipguidelinelevels.
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"Clawback "Policy
TheCompensationCommitteeadministersour"clawback"policythatprovidesforrecoupmentfromourexecutiveofficersofincentivecompensationintheeventofcertainrestatementsofourfinancialresults.Incentivecompensationunderthispolicymeansallcashbonusesandequitycompensationawardedtoacoveredexecutive,theamount,paymentand/orvestingofwhichwascalculatedbasedwhollyorinpartontheapplicationofobjectiveperformancecriteria.Itdoesnotcoveranexecutive'sbasesalary.Atriggereventoccursunderthepolicywhenwearerequiredtoprepareanaccountingrestatementofourfinancialstatementsduetoamaterialnoncompliancewithanyfinancialreportingrequirementunderthesecuritieslaws.If,followingatriggerevent,theCompensationCommitteedeterminesthat:
• theamountofanyincentivecompensationawardedto,orreceivedby,acoveredexecutiveduringthethree-yearperiodprecedingthedateonwhichwearerequiredtopreparetheaccountingrestatementwouldhavebeenlower(andnotearned)haditbeencalculatedbasedontherestatedfinancialresults;and
• theexecutiveengagedinfraud,intentionalmisconductorgrossnegligence,theCompensationCommitteewillseektorecoupfromtheexecutivetheafter-taxportionofthedifferencebetweentheawardedcompensationandtheactualcompensation.
TheCompensationCommitteeisnotrequiredtoseekrecoupmentfromanexecutiveifitdeterminesthatseekingrecoverywouldnotbeinourbestinterests.Inmakingthisdetermination,theCompensationCommitteemaytakeintoaccount,amongotherfactors,theprobabilityofsuccessunderapplicablelaw;thecostofseekingrecoupment;theeffectofseekingrecoupmentonanypendingorthreatenedinvestigations,litigationorotherproceedingsinvolvingus;thedifficultyofproof;thepossibilityofcounterclaimsagainstus;andtheamountsubjecttorecoupment.TheCompensationCommitteeisauthorizedunderthepolicytodetermineinitsdiscretionthemethodforobtainingrecoupment.
No Hedging of Company Stock
Asdescribedfurtherintheourpolicyoninsidertrading,alldirectors,officers,andotheremployeesareprohibitedfromenteringintotransactionswhichhavetheeffectofhedgingtheeconomicvalueofanydirectorindirectinterestsofthepersoninourcommonequity.
Tax Deductibility; Section 162(m)
Asapublicly-tradedcompany,wearesubjecttoSection162(m)oftheInternalRevenueCode("Section162(m)")whichlimitsourabilitytodeductforU.S.incometaxpurposescompensationinexcessof$1millionpaidtoourCEOandthreeothermosthighlycompensatedofficers(otherthantheCFO)unlessthecompensationisperformance-basedunderSection162(m).TherecentlyenactedTaxCutsandJobsActmadesignificantchangestoSection162(m).Beginningin2018,Section162(m)limitsdeductionsto$1millionforcompensationpaidtoourCFOaswellasourCEOandourthreeothermosthighlycompensatedofficers.Inaddition,beginningin2018theexceptiontothe$1milliondeductionlimitationforcommissionandperformance-basedcompensationhasbeeneliminated.However,compensationpaidpursuanttoawrittenbindingagreementineffectonNovember2,2017thathasnotbeenmateriallymodifiedthereafterisgrandfatheredandcancontinuetoqualifyfortheperformance-basedcompensationexemption,assumingallotherSection162(m)requirementsaremet.Becauseoftheambiguitiesanduncertaintiesastothescopeofthisgrandfatherprovision,noassurancecanbegiventhatcompensationoriginallyintendedtoqualifyfortheexemptionwill,infact,befullydeductible.
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TheCompensationCommitteeconsiderstaxdeductibilitytobeanimportant,butnotthesole,orprimary,considerationinsettingexecutivecompensation.BecausetheCompensationCommitteealsorecognizestheneedtomaintainflexibilitytomakecompensationdecisionsthatmaynotmeetthestandardsofSection162(m)whennecessarytoenableustocontinuetoattract,retain,andmotivatetalentedexecutiveofficers,itreservestheauthoritytoapprovepotentiallynon-deductiblecompensation.
Non-GAAP Measures
InthisCompensationDiscussionandAnalysis,wereferencecertainfinancialmeasuresusedbytheCompensationCommitteeinconnectionwithexecutivecompensationcalculatedotherthaninaccordancewithU.S.generallyacceptedaccountingprinciples("GAAP"),includingadjustedpre-taxincomeandadjustedcumulativeEPS,whicharereconciledtothenearestGAAPfinancialmeasureintheinformationbelow.Thesenon-GAAPfinancialmeasuresmaynotbecomparabletoothersimilarlytitledmeasuresofothercompaniesandshouldnotbeconsideredinisolationorasasubstitutefor,orsuperiorto,financialmeasurespreparedinaccordancewithGAAP.
Reconciliation of Adjusted Pre-Tax Income for 2017 Annual Cash Incentive Year Ended December 31, 2017Income before income taxes $339,818,636Less:Netincomeattributabletononcontrollinginterest ($360,223)Adjusted pre-tax income $339,458,414
Reconciliation of Cumulative EPS for 2015 EPS Performance-Based RSUs2015 diluted earnings per share $1.272016 diluted earnings per share $1.212017 diluted earnings per share $1.21Cumulative diluted earnings per share $3.69Add:U.S.taxlawreformimpact(1) $0.14Adjusted cumulative diluted earnings per share $3.83
____________________
(1) Impactto2017dilutedearningspersharefroma$22.0millionchargerelatedtothere-measurementoftheCompany'snetdeferredtaxassetsasaresultoftheTaxCutsandJobsActenactedinDecember2017.
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COMPENSATION COMMITTEE REPORT
TheCompensationCommitteehasreviewedanddiscussedtheCompensationDiscussionandAnalysiswithmanagement.
Basedonsuchreviewanddiscussionwithmanagement,theCompensationCommitteerecommendedtoourBoardofDirectorsthattheCompensationDiscussionandAnalysisbeincludedinthisproxystatementandincorporatedbyreferenceinourAnnualReportonForm10-KfortheyearendedDecember31,2017.
Respectfullysubmittedby:
THECOMPENSATIONCOMMITTEEOFTHEBOARDOFDIRECTORS
ConstanceB.Moore,CompensationCommitteeChairDanielS.FultonStevenJ.Gilbert
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OWNERSHIP OF OUR COMMON STOCK
ThefollowingtablesetsforththebeneficialownershipofourcommonstockasofFebruary26,2018by(i)eachofourdirectors,(ii)eachoftheexecutiveofficersnamedinthetableentitled"Fiscal2017SummaryCompensationTable",(iii)allofourdirectorsandcurrentexecutiveofficersasagroupand(iv)eachpersonknownbyustobethebeneficialownerof5%ormoreofouroutstandingcommonstock.
Toourknowledge,exceptasotherwisesetforthinthefootnotestothetable,eachpersonnamedinthetablehassolevotingandinvestmentpowerwithrespecttoallofthesecuritiesshownasbeneficiallyownedbysuchperson.Thenumberofsecuritiesshownrepresentsthetotalnumberofsecuritiestheperson"beneficiallyowns,"asdeterminedbytherulesoftheSEC.TheSEChasdefined"beneficial"ownershipofasecuritytomeanthepossession,directlyorindirectly,ofvotingpowerand/orinvestmentpower.Asecurityholderisalsodeemedtobe,asofanydate,thebeneficialownerofallsecuritiesthatsuchsecurityholderhastherighttoacquirewithin60daysafterthatdatethrough(i)theexerciseofanyoption,warrantorright,(ii)theconversionofasecurity,(iii)thepowertorevokeatrust,discretionaryaccountorsimilararrangementor(iv)theautomaticterminationofatrust,discretionaryaccountorsimilararrangement.Exceptasnotedbelow,theaddressforallbeneficialownersinthetablebelowis19540JamboreeRoad,Suite300,Irvine,California92612.
Name of Beneficial Owner Shares Beneficially Owned (1) Percentage (2)
Directors and Executive Officers:
DouglasF.Bauer(3) 1,036,847 *LawrenceB.Burrows 46,623 *
DanielS.Fulton(4) 68,160 *StevenJ.Gilbert 53,599 *ConstanceB.Moore 58,087 *ThomasB.Rogers 54,588 *BradleyW.Blank 61,039 *
MichaelD.Grubbs(5) 367,899 *GlennJ.Keeler 43,943 *
ThomasJ.Mitchell(6) 830,136 *Alldirectorsandcurrentexecutiveofficersasagroup(10persons) 2,562,833 1.7%
5% or more Stockholders:
BlackRock,Inc.(7)(8) 19,037,872 12.6%
DimensionalFundAdvisorsLP(7)(9) 13,194,743 8.7%
FMRLLC(7)(10) 8,647,704 5.7%
HotchkisandWileyCapitalManagement,LLC(7)(11) 8,876,699 5.9%
T.RowePriceAssociates,Inc.(7)(12) 9,154,276 6.0%
TheVanguardGroup(7)(13) 12,328,941 8.1%
WellingtonManagementGroupLLP(7)(14) 9,213,190 6.1%__________*Representslessthan1%ofthenumberofsharesofourcommonstockoutstanding.
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(1) Beneficialownershipincludesthefollowingsharesthatthedirectorsandexecutiveofficerscouldacquirebyexercisingstockoptionsonorwithin60daysofFebruary26,2018:Mr.Bauer:146,921;Mr.Gilbert:3,699;Mr.Grubbs:144,278;andMr.Mitchell:145,600.ForeachofMessrs.Burrows,Fulton,Gilbert,andRogersandMs.Moore,thebeneficialownershipalsoincludes11,173RSUsthatvestonorwithin60daysofFebruary26,2018.ForeachofMessrs.Bauer,Mitchell,Grubbs,BlankandKeeler,thebeneficialownershipalsoincludes61,696,59,323,27,203,22,397and17,251RSUsthatvestonorwithin60daysofFebruary26,2018.Foralldirectorsandcurrentexecutiveofficersasagroup,thesestockoptionsandRSUsrepresentanaggregateof661,836shares.
(2) Thepercentagesarecalculatedbasedon151,391,065sharesofourcommonstockoutstandingandentitledtovoteasofFebruary26,2018.Foreachperson,separately,hisorherpercentageiscalculatedbyincludinghisorheroptionsandRSUssetforthinFootnote(1)aboveinboththenumeratoranddenominator,andforthedirectorsandcurrentexecutiveofficersasagroup,thepercentageiscalculatedbyincludingthestockoptionsandRSUssetforthinFootnote(1)aboveinboththenumeratoranddenominator.
(3) Amountincludes854,136sharesareheldintrustforthebenefitofMr.Bauerandhisimmediatefamily.(4) Amountincludes30,073sharesheldinajointaccountwithMr.Fulton'sspouse.Mr.Fultonhassolevotinganddispositivepowerwithrespectto38,087
sharesandsharedvotinganddispositivepowerwithrespectto30,073shares.(5) Amountincludes245,585sharesareheldintrustforthebenefitofMr.Grubbsandhisimmediatefamily.(6) Amountincludes610,000sharesareheldintrustforthebenefitofMr.Mitchellandhisimmediatefamily.(7) Thebeneficialownershipfiguresforthe5%ormorestockholdersweretakenfromtheirrespectiveSchedule13GorSchedule13G/Afilingswiththe
SEC.(8) AccordingtotheSchedule13G/AfiledonJanuary19,2018,BlackRock,Inc.hassolevotingpowerwithrespectto18,699,337sharesandsoledispositive
powerwithrespectto19,037,872shares.Itsaddressis55East52ndStreet,NewYork,NY10022.(9) AccordingtotheSchedule13G/AfiledonFebruary9,2018,DimensionalFundAdvisorsLPhassolevotingpowerwithrespectto12,981,585sharesand
soledispositivepowerwithrespectto13,194,743shares.ItsaddressisBuildingOne,6300BeeCaveRoad,Austin,TX78746.(10) AccordingtotheSchedule13GfiledonFebruary13,2018,FMRLLChassolevotingpowerwithrespectto411,525sharesandsoledispositivepower
withrespectto8,647,703shares.Itsaddressis245SummerStreet,Boston,MA02210.(11) AccordingtotheSchedule13G/AfiledonFebruary14,2018,HotchkisandWileyCapitalManagement,LLChassolevotingpowerwithrespectto
7,930,409sharesandsoledispositivepowerwithrespectto8,876,699shares.Itsaddressis725S.FigueroaStreet39thFl.,LosAngeles,CA90017.(12) AccordingtoSchedule13G,filedonFebruary14,2018,T.RowePriceAssociates,Inc.hassolevotingpowerwithrespectto1,572,415sharesandsole
dispositivepowerwithrespectto9,154,276shares.Itsaddressis100E.PrattStreet,Baltimore,MD21202.(13) AccordingtotheSchedule13G/AfiledonFebruary9,2018,TheVanguardGrouphassolevotingpowerwithrespectto172,612shares,soledispositive
powerwithrespectto12,151,920shares,sharedvotingpowerwithrespectto18,092shares,andshareddispositivepowerwithrespectto177,021shares.Itsaddressis100VanguardBlvd.,Malvern,PA19355.
(14) AccordingtotheSchedule13GfiledonFebruary8,2018,WellingtonManagementGroupLLPhassharedvotingpowerwithrespectto7,780,680sharesandshareddispositivepowerwithrespectto9,213,190shares.Itsaddressis280CongressStreet,Boston,MA2210.
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EQUITY COMPENSATION PLAN INFORMATION
Thefollowingtablesetsforthcertaininformation,asofDecember31,2017,withrespecttoourequitycompensationplansunderwhichourequitysecuritiesareauthorizedforissuance.
Plan Category
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights (#)
(a)
Weighted-Average Exercise Price of
Outstanding Options, Warrants
and Rights ($) (b)
Number of Securities Remaining Available for Future
Issuance Under Equity Compensation Plans
(Excluding Securities Reflected in Column (a)) (#)
(c)
Equitycompensationplansapprovedbysecurityholders 5,462,250 $2.99(1) 6,228,769
Equitycompensationplansnotapprovedbysecurityholders — — —
Total 5,462,250 $2.99(1) 6,228,769__________(1)Thisweighted-averageexercisepriceincludesoutstandingRSUsthatcanbeexercisedfornoconsideration,resultinginareducedprice.Theweighted-averageexercisepriceofoutstandingoptions,excludingthoseRSUsthatcanbeexercisedfornoconsideration,is$14.16.AtDecember31,2017,therewere756,878sharesofourcommonstocktobeissuedupontheexerciseofoutstandingoptionsandvestingofRSUsthatweassumedinconnectionwithourmergertransactionwithWRECOduringtheyearendedDecember31,2014.Theweighted-averageexercisepriceoftheseassumedoptionsandRSUswas$11.86atDecember31,2017.Theweighted-averageexercisepriceoftheseassumedoptions,excludingthoseRSUsthatcanbeexercisedfornoconsideration,was$12.57atDecember31,2017.
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EXECUTIVE COMPENSATION
Fiscal 2017 Summary Compensation Table
Thefollowingtablesummarizesinformationregardingthecompensationawardedto,earnedbyorpaidtoMr.DouglasBauer,ourChiefExecutiveOfficer,Mr.ThomasMitchell,ourPresidentandChiefOperatingOfficer,Mr.MichaelGrubbs,ourChiefFinancialOfficerandTreasurer,Mr.BradleyBlank,ourformerVicePresident,GeneralCounselandSecretary,andMr.GlennJ.Keeler,ourVicePresidentandChiefAccountingOfficer,collectivelyourNEOsfor2017.
Name and PrincipalPosition Year Salary ($) Bonus ($)
Stock Awards($) (1)
OptionAwards ($)
Non-EquityIncentive Plan
Compensation ($) All Other
Compensation ($) Total ($)
DouglasF.BauerChiefExecutiveOfficer
2017 754,808 — 3,394,178 — 1,272,705(2) 29,640(3) 5,451,330
2016 673,077 — 2,455,747 — 1,108,380 29,070 4,266,274
2015 580,769 — 3,120,788 — 745,800 20,640 4,467,997
ThomasJ.Mitchell
PresidentandChiefOperatingOfficer
2017 726,154 — 3,263,624 — 1,223,439(2) 15,810(4) 5,229,027
2016 648,077 — 2,361,284 — 1,067,795 15,660 4,092,816
2015 555,769 — 2,912,740 — 714,725 7,710 4,190,944
MichaelD.Grubbs
ChiefFinancialOfficerandTreasurer
2017 586,539 — 1,566,538 — 844,560(2) 13,950(5) 3,011,587
2016 536,539 — 1,038,962 — 746,460 13,800 2,335,761
2015 490,385 — 2,080,525 — 621,500 5,850 3,198,260
BradleyW.Blank
VP–GeneralCounselOfficer
2017 403,269 — 316,851 — 360,698(2) 8,100 1,088,918
2016 375,577 — 289,996 — 351,428 7,950 1,024,951
2015 345,192 — 200,000 — 277,200 — 822,392
GlennJ.Keeler
VP–ChiefAccountingOfficer
2017 274,616 — 230,432 — 246,330(2) 8,100 759,478
2016 257,308 — 202,992 — 254,280(2) 7,950 722,530
2015 240,385 — 200,000 — 247,500 — 687,885
__________(1) InaccordancewithSECrules,theamountshownistheaggregategrantdatefairvalueforawardsgrantedduringthefiscalyearcalculatedinaccordance
withFASBASCTopic718.Thegrantdatefairvalueofperformance-basedRSUawardsisbasedontheprobableoutcomeoftheperformance-basedconditions,determinedasofthegrantdate.Themaximumpotentialpayoutfortheperformance-basedRSUawardsis200%ofthetargetawardonthegrantdate.Thetargetvaluesoftheperformance-basedRSUawardsfor2017determinedasofthedateofgrantforMessrs.Bauer,MitchellandGrubbswas$1,560,000,$1,500,000and$720,000,respectively.Noperformance-basedRSUawardsweremadein2017toMessrs.BlankorKeeler.Amountsshowndonotreflectcompensationactuallyreceivedorthatmayberealizedinthefuturebytheexecutiveofficer.Foradiscussionoftheassumptionsrelatingtothevaluationoftheawards,pleaseseeNote14.Stock-BasedCompensationtoourauditedconsolidatedfinancialstatementsincludedinourAnnualReportonForm10-KforthefiscalyearendedDecember31,2017.
(2) Representstheamountearnedunderour2017non-equity,annualcashincentivecompensationplan,asdescribedinfurtherdetailabovein"CompensationDiscussionandAnalysis."
(3) Representstheamountpaidbyusin2017forclubmembershipduesfortheNEO($18,360),contributionstodefinedcontributionplan($8,100)andthereimbursementoflifeinsurancepremiums($3,180).
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(4) Representscontributionstodefinedcontributionplan($8,100)andthereimbursementoflifeinsurancepremiums($7,710)fortheNEO.(5) Representscontributionstodefinedcontributionplan($8,100)andthereimbursementoflifeinsurancepremiums($5,850)fortheNEO.
Grants of Plan-Based Awards
Estimated Possible Payouts Under Non-Equity
Incentive Plan AwardsEstimated Future Payouts Under Equity
Incentive Plan Awards
All Other StockAwards;
Number ofShares of Stock
or Units (#)
All Other OptionAwards; Number
of SecuritiesUnderlyingOptions (#)
Exercise or BasePrice of OptionAwards ($/Sh)
Grant Date FairValue of Stock
and OptionAwards(1)
Name Grant Date Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) DouglasF.Bauer 2/27/2017 542,500 1,085,000 2,170,000 64,463 128,926 257,851 85,950 — N/A $3,394,178
ThomasJ.Mitchell 2/27/2017 521,500 1,043,000 2,086,000 61,983 123,967 247,933 82,644 — N/A $3,263,624
MichaelD.Grubbs 2/27/2017 360,000 720,000 1,440,000 29,752 59,504 119,008 39,669 — N/A $1,566,538
BradleyW.Blank 2/27/2017 153,750 307,500 615,000 — — — 26,186 — N/A $316,851
GlennJ.Keeler 2/27/2017 105,000 210,000 420,000 — — — 19,044 — N/A $230,432
__________(1) InaccordancewithSECrules,theamountshownistheaggregategrantdatefairvalueforawardsgrantedduringthefiscalyearcalculatedinaccordance
withFASBASCTopic718.Thegrantdatefairvalueofperformance-basedRSUawardsisbasedontheprobableoutcomeoftheperformance-basedconditions,determinedasofthegrantdate.Themaximumpotentialpayoutfortheperformance-basedRSUawardsis200%ofthetargetawardasofthegrantdate.Noperformance-basedRSUawardsweremadein2017toourMessrs.BlankorKeeler.Amountsshowndonotreflectcompensationactuallyreceivedorthatmayberealizedinthefuturebytheexecutiveofficer.Foradiscussionoftheassumptionsrelatingtothevaluationoftheawards,pleaseseeNote14.Stock-BasedCompensationtoourauditedconsolidatedfinancialstatementsincludedinourAnnualReportonForm10‑KforthefiscalyearendedDecember31,2017.
Employment Agreements and Performance-Based RSU Awards
InNovember2015,weenteredintonewemploymentagreementswitheachofMessrs.Bauer,MitchellandGrubbs.Theseemploymentagreementssupersedetheemploymentagreementspreviouslyenteredintowitheachofthesethreeexecutives.Eachemploymentagreementhasaninitialtermofthreeyearsandonthethirdanniversarydate(andeachannualanniversarydatethereafter)willbeautomaticallyextendedforoneadditionalyearunlesseitherpartyprovidestheotherwithatleast60days'priorwrittennoticeofnon-renewal.Ifa"changeincontrol"(asdefinedintheagreement)occursduringtheinitialorextendedterm,thenthetermwillcontinuefornotlessthan18monthsbeyondthemonthinwhichthechangeincontroloccurs.Bothpartieshavetherighttoterminatetheexecutive'semploymentatanytime,withorwithoutcause,andwithorwithoutpriornotice.
TheemploymentagreementswitheachofMessrs.Bauer,MitchellandGrubbsprovidethatuponterminationofemployment,eachexecutivewillreceiveanyaccruedbutunpaidbasesalaryandotheraccruedandunpaidcompensation,includinganyaccruedandunpaidvacationandannualbonus.Uponeitheran"involuntaryterminationwithoutcause"(asdefinedintheagreement)oravoluntaryterminationfora"goodreason"(asdefinedintheagreement),theexecutive,subjecttohisdeliveryofareleaseof
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claims,willalsobeentitledtoreceivespecifiedseverancebenefits.Ifacoveredterminationoccurspriorto,ormorethan18monthsaftera"changeincontrol"(asdefinedintheagreement),Messrs.Bauer,MitchellandGrubbswillbeentitledtoreceiveanamountequalto2,1.5,and1.5,respectively,timesthesumofhisannualbasesalaryplustheaverageofthegreaterof(i)theaverageoftheannualcashbonusesreceivedforthetwofiscalyearsendingbeforethetermination;and(ii)thetargetannualbonusfortheyearinwhichtheterminationoccurs.Ifacoveredterminationoccursduringthe18-monthperiodcommencingonachangeincontrol,thenthemultiplierwillbe3withrespecttoMr.Bauer,and2.5withrespecttoMessrs.MitchellandGrubbs.IneithercaseandiftheexecutiveelectscontinuedhealthcarecoverageunderCOBRA,theCompanywillalsodirectlypay,orreimbursetheexecutivefor,thepremiumforhisandhiscovereddependentsthroughtheearlierof(i)the18monthanniversaryofthedateofhisterminationofemployment,and(ii)thedateheandhiscovereddependentsbecomeeligibleforhealthcarecoverageunderanotheremployer'splan(s).Intheeventthattheexecutive'semploymentisterminateddueto"deathordisability"(asdefinedintheagreement),theexecutiveorhisbeneficiariesorestatewillbeentitledtoreceiveapro-rataportionofhisannualbonusforthefiscalyear.
Theemploymentagreementsalsoprovidefor,amongotherthings:
• anannualbasesalaryequalto$600,000(Mr.Bauer);$575,000(Mr.Mitchell),and$500,000(Mr.Grubbs),subjecttoincreaseinthediscretionofourBoardofDirectorsoracommitteeofourBoardofDirectors;
• eligibilityforannualcashperformancebonusestargetedat110%oftheexecutive'sbasesalaryontermsandconditionsdeterminedbyourBoardofDirectorsoracommitteeofourBoardofDirectors;
• eligibilitytoreceivestockoptionsandotherequityincentivegrantsasdeterminedbyourBoardofDirectorsoracommitteeofourBoardofDirectors;and
• entitlementtoallrightsandbenefitstowhichtheexecutiveisentitledunderourbenefitsandcompensationpracticesthatareineffectfromtimetotimeandprovidedtoourexecutiveemployeesgenerally,aswellasbenefitsprovidedtotheexecutiveconsistentwithpastpractices;providedwearenotobligatedtoadoptormaintainanybenefitsorcompensationpracticesatanytime.
Theemploymentagreementscontainnon-competitionprovisionsandnon-solicitationprovisionsthatapplyduringthetermoftheagreementsandforoneyearaftertheterminationoftheexecutive'semploymentforanyreason.However,thepost-employmentnon-competitionprovisionsdonotapplyandwillnotbeenforcedinCaliforniaorotherstateswheresuchrestrictivecovenantsarenotpermitted.
In2017,wegranted257,851,247,933,and119,008performance-basedRSUstoMessrs.Bauer,MitchellandGrubbs,respectively.Thenumberofperformance-basedRSUsgrantedwasdeterminedbymultiplying(i)thequotientof(x)thetargetvalueoftheawardand(y)theclosingmarketpriceoftheCompany'scommonstockonthedateofgrantby(ii)two,representingthemaximumnumberofRSUsthatmayvestassumingourattainmentofthemaximumperformanceobjectivesetbytheCompensationCommittee.Foradditionaldetailsconcerningtheseperformance-basedRSUs,see"CompensationDiscussionandAnalysis—2017NEOPayProgram—Long-TermIncentives."
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Potential Payments Upon Termination or Change in Control
TheemploymentagreementswitheachofMessrs.Bauer,MitchellandGrubbsprovideforcertainpaymentsuponeitherterminationofemploymentorachange-in-control,asdescribedin"—EmploymentAgreementsandPerformance-BasedRSUAwards"above.
InFebruary2016,theCompanyenteredintoseveranceandchangeincontrolprotectionagreementswitheachofMessrs.BlankandKeeler.Eachagreementhasaninitialtermofthreeyearsandonthethirdanniversarydate(andeachannualanniversarydatethereafter)willbeautomaticallyextendedforoneadditionalyearunlesseithertheexecutiveortheCompanygiveswrittennoticeofnon-renewal.Ifa"changeincontrol"(asdefinedintheagreement)occursduringtheinitialorextendedterm,thenthetermwillcontinuefornotlessthan18monthsbeyondthemonthinwhichthechangeincontroloccurs.TheseveranceandchangeincontrolprotectionagreementsshallnotbedeemedtocreateacontractofemploymentbetweentheCompanyandtheexecutive,andboththeCompanyandtheexecutivewillhavetherighttoterminatetheexecutive'semploymentatanytime,withorwithoutcause,andwithorwithoutpriornotice.
TheseveranceandchangeincontrolprotectionagreementswitheachofMessrs.BlankandKeelerprovidethatuponterminationofemployment,eachexecutivewillreceiveanyaccruedbutunpaidbasesalaryandotheraccruedandunpaidcompensation,includinganyaccruedandunpaidvacationandannualbonus.Uponeitheran"involuntaryterminationwithoutcause"(asdefinedintheagreement)oravoluntaryterminationfora"goodreason"(asdefinedintheagreement),Messrs.BlankandKeeler,subjecttohisdeliveryofareleaseofclaims,willbeentitledtoreceiveanamountequaltothesumofhisannualbasesalaryplusthegreaterof(i)theaverageoftheannualcashbonusesreceivedforthetwofiscalyearsendingbeforethetermination;and(ii)thetargetannualbonusfortheyearinwhichtheterminationoccurs.IneithercaseandiftheexecutiveelectscontinuedhealthcarecoverageunderCOBRA,theCompanywillalsodirectlypay,orreimbursetheexecutivefor,thepremiumforhisandhiscovereddependentsthroughtheearlierof(i)theoneyearanniversaryofthedateofhisterminationofemployment,and(ii)thedateheandhiscovereddependentsbecomeeligibleforhealthcarecoverageunderanotheremployer'splan(s).Intheeventthattheexecutive'semploymentisterminateddueto"deathordisability"(asdefinedintheagreement),theexecutiveorhisbeneficiariesorestatewillbeentitledtoreceiveapro-rataportionofhisannualbonusforthefiscalyear.
Our2013LTIPprovidesthatupona"changeincontrol"(asdefinedinthe2013LTIP),ourBoardofDirectorsmay,initsdiscretion,determinewhethersomeoralloutstandingoptionsandstockappreciationrightswillbecomeexercisableinfullorinpart,whethertherestrictionperiodandperformanceperiodapplicabletosomeoralloutstandingrestrictedstockawardsandRSUawardswillbedeemedsatisfied.Theperformance-basedRSUawardsgrantedtoMessrs.Bauer,MitchellandGrubbsin2017and2016includechangeincontrolprovisionsthataresummarizedasfollows:
2017 performance-based RSUs with vesting based on TSR and EPS. IntheeventachangeincontroloccursbeforeDecember31,2019,theperformanceperiodwillterminateonclosingofthechangeincontroltransactionandthefollowingprovisionswillapply:
• If(i)theclosingofthechangeincontroltransactionoccursonorbeforeJanuary1,2018,(ii)theexecutiveremainscontinuouslyemployedbyusthroughthedateoftheclosingofthechangeincontroltransaction,and(iii)theawardisnotassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateupontheclosingofthechangeincontrolorotherwiseexpresslycontinuedinfullforceandeffectpursuanttothetermsofthe
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changeincontroltransaction,50%oftheRSUsgrantedpursuanttotheawardwillvestasofthedateoftheclosingofthechangeincontrol.
• If(i)theclosingofthechangeincontroltransactionoccursonorbeforeJanuary1,2018,(ii)theexecutiveremainscontinuouslyemployedbyusthroughthedateoftheclosingofthechangeincontroltransaction,and(iii)theawardisassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateuponclosingofthechangeincontrol,orisotherwiseexpresslycontinuedinfullforceandeffectpursuanttothetermsofthechangeincontroltransaction,50%oftheRSUsgrantedpursuanttotheawardmayvestasfollows:if(a)theexecutiveremainscontinuouslyemployedbyusoroursuccessor-in-interestoranaffiliatethroughDecember31,2019,50%oftheRSUsgrantedwillbecomefullyvestedasofDecember31,2019;or(b)iftheexecutivesuffersa"qualifyingtermination"(asdefinedintheawardagreement)beforeDecember31,2019,50%oftheRSUsgrantedwillbecomevestedontheeffectivedateofthequalifyingtermination.
• If(i)theclosingofthechangeincontroltransactionoccursafterJanuary1,2018,(ii)theexecutiveremainscontinuouslyemployedbyusthroughtheclosingofthechangeincontroltransaction,and(iii)theawardisnotassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateuponclosingofthechangeincontroltransactionorotherwiseexpresslycontinuedinfullforceandeffectpursuanttothetermsofthechangeincontroltransaction,theRSUsgrantedpursuanttotheawardwillvestasofthedateoftheclosingofthechangeincontrol,butonlywithrespecttoanumberofRSUsequaltothe"changeincontrolunits"(asdefinedintheawardagreement).
• If(i)theclosingofthechangeincontroltransactionoccursafterJanuary1,2018,(ii)theexecutiveremainscontinuouslyemployedbyusthroughtheclosingofthechangeincontroltransaction,and(iii)theawardisassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateupontheclosing,orisotherwiseexpresslycontinuedinfullforceandeffectpursuanttothetermsofthechangeincontroltransaction,theRSUsgrantedpursuanttotheawardmaybecomevested,butonlywithrespectanumberofRSUsequaltothechangeincontrolunits(asdefinedintheawardagreement),asfollows:if(a)theexecutiveremainscontinuouslyemployedbyusoroursuccessor-in-interestoranaffiliatethroughDecember31,2019,thechangeincontrolunitswillbecomefullyvestedasofDecember31,2019;or(b)theexecutivesuffersaqualifyingterminationbeforeDecember31,2019andtheexecutiveremainscontinuouslyemployedbyusoroursuccessor-in-interestoranaffiliatethroughthedateofthequalifyingtermination,thechangeincontrolunitswillbecomevestedontheeffectivedateofthequalifyingtermination.
2016 performance-based RSUs with vesting based on TSR. IntheeventachangeincontroloccursbeforeDecember31,2018,theperformanceperiodwillterminateonclosingofthechangeincontroltransactionandthefollowingprovisionswillapply:
• If(i)theexecutiveremainscontinuouslyemployedbyusthroughtheclosingofthechangeincontroltransaction,and(ii)theawardisnotassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateuponclosingofthechangeincontroltransactionorotherwiseexpresslycontinuedinfullforceandeffectpursuanttothetermsofthechangeincontroltransaction,theRSUsgrantedpursuanttotheawardwillvestasofthedateoftheclosingofthechangeincontrol,butonlywithrespecttoanumberofRSUsequaltothe"changeincontrolunits"(asdefinedintheawardagreement).
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• If(i)theexecutiveremainscontinuouslyemployedbyusthroughtheclosingofthechangeincontroltransaction,and(iii)theawardisassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateupontheclosing,orisotherwiseexpresslycontinuedinfullforceandeffectpursuanttothetermsofthechangeincontroltransaction,theRSUsgrantedpursuanttotheawardmaybecomevested,butonlywithrespectanumberofRSUsequaltothechangeincontrolunits(asdefinedintheawardagreement),asfollows:if(a)theexecutiveremainscontinuouslyemployedbyusoroursuccessor-in-interestoranaffiliatethroughDecember31,2018,thechangeincontrolunitswillbecomefullyvestedasofDecember31,2018;or(b)theexecutivesuffersaqualifyingterminationbeforeDecember31,2018andtheexecutiveremainscontinuouslyemployedbyusoroursuccessor-in-interestoranaffiliatethroughthedateofthequalifyingtermination,thechangeincontrolunitswillbecomevestedontheeffectivedateofthequalifyingtermination.
ThefollowingtableshowstheestimatedpotentialpaymentsuponterminationofemploymentorachangeincontrolfortheNEOs.Thetableassumesthat(i)thetriggeringeventtookplaceonDecember31,2017,thelastbusinessdayofourfiscal2017;(ii)exceptinthecaseofterminationforcausebytheCompanyandterminationbyexecutivewithoutgoodreason,ourBoardofDirectorsdeterminesthatalloutstandingoptionswouldbecomeexercisable;(iii)exceptinthecaseofterminationforcausebytheCompany,terminationbyexecutivewithoutgoodreasonanddeathordisability,ourCompensationCommitteewouldacceleratealltime-basedRSUsthatremainunvested;(iv)theintrinsicvalueofequityvestingaccelerationiscomputed,(a)inthecaseofunexercisedoptions,bymultiplyingthedifferencebetweentheexercisepricesoftheunexercisedoptionsandtheclosingmarketpriceofourcommonstockonDecember29,2017($17.92),thelasttradingdayofourfiscalyear2017,bythenumberofunexercisedoptionsand,(b)inthecaseofunvestedRSUs,bymultiplyingtheclosingmarketpriceofourcommonstockonDecember29,2017($17.92),thelasttradingdayofourfiscalyear2017,bythenumberofunvestedRSUs;(v)inthecaseofdeathordisability,aperformanceincentivebonuswasearnedunderour2017annualincentiveplanatthelevelsetforthintheSummaryCompensationtableforeachindividual;(vi)inthecaseofMessrs.Bauer,MitchellandGrubbs,theexecutiveelectstoreceivecontinuedhealthcarecoveragepursuanttotheprovisionsofCOBRAfor18monthsusingratesofapproximately$2,000permonth;(vii)inthecaseofMessrs.BlankandKeeler,theexecutiveelectstoreceivecontinuedhealthcarecoveragepursuanttotheprovisionsofCOBRAfor12monthsusingratesofapproximately$2,000permonth;and(viii)inthecaseofMessrs.Bauer,Mitchell,Grubbs,BlankandKeeler,theexecutiveremainscontinuouslyemployedbyusthroughthedateofclosingofthechangeincontroltransaction,theawardisnotassumedinfullbytheacquiringorsuccessorcompanyoritsaffiliateorotherwisecontinuedinfullforceandeffect,andthechangeincontroltransactionclosedonDecember31,2017.ThefollowingtabledoesnotincludesharesissuedtoMessrs.Bauer,MitchellandGrubbspursuanttotheperformance-basedRSUsawardedin2015asdescribedin"CompensationDiscussionandAnalysis—2015PerformanceBasedRSUs."TheCompanyandtheaffectedexecutivesmay,dependinguponthecircumstances,negotiatefordifferentpaymentsthatmaybehigherorlowerthanthosedescribedinthetable.Amountstobeprovidedtoanexecutiveunderarrangementsthatdonotdiscriminateinscope,termsoroperationinfavorofourexecutiveofficersandareavailabletoallsalariedemployeesarenotincludedinthefollowingtableinaccordancewithSECregulations.
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Name Payments and Benefits
InvoluntaryTermination For
Cause or VoluntaryTermination Other
Than for GoodReason ($)
InvoluntaryTermination
Without Cause orVoluntary
Termination forGood Reason ($)
Change in ControlWithout
Termination ($)
Change in ControlWith Voluntary
Termination for GoodReason or
InvoluntaryTermination Without
Cause ($)Death or Disability
($)
DouglasF.BauerSeverance — 3,720,000 — 5,580,000 1,272,705Equityawards — — 5,214,028 5,214,028 3,427,245
Healthbenefits — 36,000 — 36,000 —
Total — 3,756,000 5,214,028 10,830,028 4,699,950
ThomasJ.MitchellSeverance — 2,682,000 — 4,470,000 1,223,439Equityawards — — 5,018,036 5,018,036 3,250,680
Healthbenefits — 36,000 — 36,000 —
Total — 2,718,000 5,018,036 9,524,036 4,474,119
MichaelD.GrubbsSeverance — 1,980,000 — 3,300,000 844,560Equityawards — — 2,452,688 2,452,688 1,877,026
Healthbenefits — 36,000 — 36,000 —
Total — 2,016,000 2,452,688 5,788,688 2,721,586
BradleyW.BlankSeverance — 724,314 — 724,314 360,698Equityawards — — 879,334 879,334 —
Healthbenefits — 24,000 — 24,000 —
Total — 748,314 879,334 1,627,648 360,698
GlennJ.KeelerSeverance — 530,890 — 530,890 246,330Equityawards — — 652,270 652,270 —
Healthbenefits — 24,000 — 24,000 —
Total — 554,890 652,270 1,207,160 246,330
Theabovetabledoesnotgiveeffecttoperformance-basedandtime-basedRSUsawardedtoourNEOsinFebruary2018.
Theforegoingdescriptionsoftheperformance-basedRSUawards,theemploymentagreementsandtheseveranceandchangeincontrolprotectionagreementsaresummariesonlyandarenotcomplete.ThefulltextoftheseagreementsandawardagreementsareincludedasexhibitstoourcurrentreportsfiledonForm8-KwiththeSEConNovember20,2015andMarch2,2016.
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Outstanding Equity Awards as of December 31, 2017
ThefollowingtableprovidesinformationregardingtheequityawardsheldbytheNEOsasofDecember31,2017.
Option Awards Stock Awards
Name
Number ofSecurities
UnderlyingUnexercised
OptionsExercisable (#)
Number ofSecurities
UnderlyingUnexercised Options
Unexercisable (#)
OptionExercisePrice ($)
OptionExpiration
Date
Number ofShares or Unitsof Stock That
Have NotVested (#)
Market Valueof Shares or
Units of StockThat Have Not
Vested($)
Equity IncentivePlan Awards:
Number ofUnearned Shares,
Units or OtherRights That Have
Not Vested (#)
Equity Incentive PlanAwards: Market or
Payout Value ofUnearned Shares,
Units or Other RightsThat Have Not Vested
($)
DouglasF.Bauer 94,067(1) — 17.00 1/30/2023 52,854(2) — 16.17 4/7/2024
34,317(3) 614,961
137,268(4) 2,459,843
34,317(3) 614,961
66,095(5) 1,184,422
111,535(6) 1,998,703
85,950(7) 1,540,224
32,344(8) 579,600
129,375(8) 2,318,400
ThomasJ.Mitchell
94,067(1) — 17.00 1/30/2023 51,533(2) — 16.17 4/7/2024
32,029(3) 573,960
128,116(9) 2,295,839
32,029(3) 573,960
63,552(5) 1,138,852
107,245(6) 1,921,826
82,644(7) 1,480,980
30,992(8) 555,368
123,966(8) 2,221,471
MichaelD.Grubbs
94,067(1) — 17.00 1/30/2023 50,211(2) — 16.17 4/7/2024
22,878(3) 409,974
91,512(10) 1,639,895
22,878(3) 409,974
27,963(5) 501,097
47,188(6) 845,604
39,669(7) 710,868
14,876(8) 266,578
59,504(8) 1,066,312
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BradleyW.Blank 4,454(11) 79,816
18,430(5) 330,266
26,186(7) 469,253
GlennJ.Keeler 4,454(11) 79,816
12,901(5) 231,186
19,044(7) 341,268
__________(1) 1/30/2013stockoptiongrant.(2) 4/7/2014stockoptiongrant.(3) 3/9/2015RSUawardthatvested,ifatall,on12/31/2017basedontheachievementofcertainperformancemetrics.OnFebruary15,2018,theCompensation
CommitteecertifiedtheactualperformanceachievedwithrespecttotheseRSUsanddeterminedthatnoneoftheseRSUsvestedandtheawardwasforfeitedfornovalue.
(4) 3/9/2015RSUawardthatvested,ifatall,on12/31/2017basedontheachievementofaperformancemetric.OnFebruary15,2018,theCompensationCommitteecertifiedtheactualperformanceachievedwithrespecttotheseRSUsanddeterminedthat76,115oftheseRSUsvested.
(5) 3/1/2016RSUaward;onethirdoftheawardvestedon3/1/2018andtheremainingonethirdvestson3/1/2019.(6) 3/1/2016RSUawardthatvests,ifatall,on12/31/2018basedontheachievementofaperformancemetric.(7) 2/27/2017RSUaward;onethirdoftheawardvestedon2/27/2018andonethirdvestsoneachof2/27/2019and2/27/2020,respectively.(8) 2/27/2017RSUawardthatvests,ifatall,on12/31/2019basedontheachievementofcertainperformancemetrics.(9) 3/9/2015RSUawardthatvested,ifatall,on12/31/2017basedontheachievementofaperformancemetric.OnFebruary15,2018,theCompensationCommittee
certifiedtheactualperformanceachievedwithrespecttotheseRSUsanddeterminedthat71,040oftheseRSUsvested.(10) 3/9/2015RSUawardthatvested,ifatall,on12/31/2017basedontheachievementofaperformancemetric.OnFebruary15,2018,theCompensationCommittee
certifiedtheactualperformanceachievedwithrespecttotheseRSUsanddeterminedthat50,743oftheseRSUsvested.(11) 3/5/2015RSUaward;theremainingawardvestedon3/5/2018.
Option Exercises and Stock Vested
ThefollowingtablesetsforthonanaggregatedbasisforeachoftheNEOs,thenumberandvalueofsharesofourcommonstockacquireduponexerciseofstockoptions,andthenumberandvalueofsharesofourcommonstockacquireduponvestingofRSUsduring2017.
Option Awards Stock Awards
Name
Number of SharesAcquired on Exercise
(#) Value Realized on
Exercise ($)
Number of SharesAcquired on Vesting
(#) (1) Value Realized on
Vesting ($) (2)
DouglasF.Bauer — — 43,356 531,960ThomasJ.Mitchell — — 41,826 513,170MichaelD.Grubbs — — 23,774 290,993BradleyW.Blank — — 15,730 193,108GlennJ.Keeler — — 13,481 165,335__________(1) Representsthenetsharesacquiredafterwithholdingsharesfortaxobligations.(2) Representsthevalueoftheacquiredsharesbasedontheclosingstockpriceonthedateofvesting.
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Pay Ratio Disclosure
AsrequiredbySection953(b)oftheDodd-FrankWallStreetReformandConsumerProtectionAct,andItem402(u)ofRegulationS-K,weareprovidingthefollowinginformationfor2017:
• theannualtotalcompensationofourCEO,Mr.Bauer,was$5,467,803;and
• theannualtotalcompensationofthemediancompensatedofallemployeesoftheCompany(otherthanourCEO)asofDecember31,2017(our"MedianEmployee"),was$121,115.
Basedonthisinformation,for2017theratiooftheannualtotalcompensationofourCEOtothatofourMedianEmployeewas45to1.
Forpurposesofcalculatingthepayratio,wedeterminedtheannualtotalcompensationofourCEOandourMedianEmployeeasfollows:
• AsofDecember31,2017,ouremployeepopulationconsistedof1,251individuals.
• WeidentifiedourMedianEmployeebyrankingfromlowesttohighesttheamountoftotalcashcompensationpaidtoeachoftheseemployees(otherthantheCEO)in2017.Weexcludedfromtherankingeightemployeesthatwerehiredinthelasttwoweeksof2017andreceivednocashcompensationduringtheyear.Totalcashcompensationconsistsofallwages,cashbonuspayments,andothercashpaymentsrepresentingcompensationduringtheperiod.Weannualizedthetotalcashcompensationof242full-timeandpart-timeemployeesincludedinouremployeepopulationwhowerehiredin2017butdidnotworkforustheentireyear.
• Webelievetotalcashcompensationisaconsistentlyappliedcompensationmeasurebecausewedonotwidelydistributeannualequityawardstoemployees,withonlyapproximately8%ofouremployeesreceivingannualequityawardsaspartoftheircompensationpackagein2017.
• AfteridentifyingourMedianEmployeebasedontotalcashcompensation,wecalculatedtheannualtotalcompensationofourCEOandourMedianEmployeeusingthesamemethodologythatweusetocalculatetheannualtotalcompensationofournamedexecutiveofficersassetforthintheFiscal2017SummaryCompensationTableincludedelsewhereinthisproxystatement,exceptthat,inordertobetterreflectouremployeecompensationpractices,theannualtotalcompensationforourCEOandforourMedianEmployeeincludesthedollarvalueofnon-discriminatoryhealthandwelfarebenefitcontributionsmadebytheCompany,whicharenotrequiredtobereportedascompensationforourCEOintheFiscal2017SummaryCompensationTable.ThedifferencebetweenourCEO’sannualtotalcompensationreportedinthe"Total"columnoftheFiscal2017SummaryCompensationTableandtheannualtotalcompensationsetforthaboverepresentshealthandwelfarebenefitcontributions(inanamountequalto$16,472).ThedifferencebetweenourMedianEmployee’stotalcashcompensationandannualtotalcompensationsetforthaboverepresentscontributionstoadefinedcontributionplan(inanamountequalto$2,576)andhealthandwelfarebenefitcontributions(inanamountequalto$16,472).
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TheSEC’srulesforidentifyingthemediancompensatedemployeeandcalculatingthepayratiobasedonthatemployee’sannualtotalcompensationallowcompaniestoadoptavarietyofmethodologies,toapplycertainexclusions,andtomakereasonableestimatesandassumptionsthatreflecttheiremployeepopulationsandcompensationpractices.Asaresult,thepayratioreportedbyothercompaniesmaynotbecomparabletothepayratioreportedabove,asothercompanieshavedifferentemployeepopulationsandcompensationpracticesandmayutilizedifferentmethodologies,exclusions,estimatesandassumptionsincalculatingtheirownpayratios.
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DIRECTOR COMPENSATION
Thefollowingtablesetsforththetotalcashandequitycompensationpaidtonon-employeedirectorsfortheirserviceonourBoardofDirectorsandcommitteesofourBoardofDirectorsduringfiscal2017:
Name Fees earned or paid in
cash ($) Stock Awards ($) (1) Total ($)
LawrenceB.Burrows 77,500 139,998 217,498DanielS.Fulton 93,500 139,998 233,498StevenJ.Gilbert 143,750 139,998 283,748ChristopherD.Graham(2) 19,000 — 19,000ConstanceB.Moore 99,500 139,998 239,498ThomasB.Rogers 100,000 139,998 239,998BarryS.Sternlicht(2) 26,250 — 26,250__________(1) TheamountsreportedinthiscolumnreflecttheaggregategrantdatefairvalueofRSUawardstoeachofthenon-employeedirectors,computedin
accordancewithFASBASCTopic718.Amountsshowndonotreflectcompensationactuallyreceivedorthatmayberealizedinthefuturebythedirectors.Foradiscussionoftheassumptionsrelatingtothevaluationoftheawards,pleaseseeNote14.StockBasedCompensationtoourauditedconsolidatedfinancialstatementsincludedinourAnnualReportonForm10‑KforthefiscalyearendedDecember31,2017.
(2) Messrs.BarryS.SternlichtandChristopherD.GrahamresignedfromourBoardofDirectorsonMarch27,2017,followingthepreviouslyannouncedsalebyVIII/TPCHoldings,L.L.C.,afundaffiliatedwithStarwoodCapitalGroup,ofitssharesofcommonstockoftheCompany.
Compensation of Non-Employee Directors
Directorswhoareemployeesdonotreceiveanycompensationfortheirservicesasdirectors.Thecashandequitycompensationthatwepaytoournon-employeedirectorsiscomprisedofthefollowing:
• anannualcashretainerof$75,000andarestrictedstockawardof$140,000(basedupontheclosingpriceonthedateofgrant);
• anadditionalannualcashretainerof$25,000totheChairoftheAuditCommitteeandanadditionalcashretainerof$16,000fortheothermembersoftheAuditCommittee;
• anadditionalannualcashretainerof$20,000totheChairoftheCompensationCommitteeandanadditionalcashretainerof$10,000fortheothermembersofsuchcommittee;
• anadditionalannualcashretainerof$15,000totheChairoftheNominatingandCorporateGovernanceCommitteeandanadditionalcashretainerof$10,000fortheothermembersofsuchcommittee;and
• anadditionalannualcashretainerof$45,000totheChairmanofourBoardofDirectors.
Wereimburseournon-employeedirectorsforreasonableout-of-pocketexpensesincurredinconnectionwiththeperformanceoftheirdutiesasdirectors,including,butnotlimitedto,travelexpensesinconnectionwiththeirattendancein-personatboardandcommitteemeetings.
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Director Stock Ownership Requirement
Eachofourindependentdirectorsisrequired,withinfiveyearsofbecomingamemberofourBoardofDirectors,toownsharesofcommonstockequaltofivetimestheannualcashretainerpayabletonon-employeedirectors.
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REPORT OF THE AUDIT COMMITTEE
ThisreportoftheAuditCommitteeofourBoardofDirectorsisrequiredbytheSECand,inaccordancewithSECrules,willnotbedeemedtobepartoforincorporatedbyreferencebyanygeneralstatementincorporatingbyreferencethisproxystatementintoanyfilingundertheSecuritiesActof1933,asamended(the"SecuritiesAct")ortheExchangeAct,excepttotheextentthatwespecificallyincorporatethisinformationbyreference,andwillnototherwisebedeemed"solicitingmaterial"or"filed"undereithertheSecuritiesActortheExchangeAct.
TheAuditCommitteehasreviewedanddiscussedwithmanagementourauditedfinancialstatementsforthefiscalyearendedDecember31,2017.TheAuditCommitteehasalsoreviewedanddiscussedwithErnst&YoungLLP,ourindependentregisteredpublicaccountingfirmfor2017,theauditedfinancialstatementsforthefiscalyearendedDecember31,2017.Inaddition,theAuditCommitteediscussedwithErnst&YoungLLPthosemattersrequiredtobediscussedbyAuditingStandardNo.1301:CommunicationswithAuditCommittees,asadoptedbythePublicCompanyAccountingOversightBoard("PCAOB").Additionally,Ernst&YoungLLPprovidedtotheAuditCommitteethewrittendisclosuresandtheletterrequiredbyapplicablerequirementsofPCAOBregardingErnst&YoungLLP'scommunicationswiththeAuditCommitteeconcerningindependence.TheAuditCommitteealsodiscussedwithErnst&YoungLLPtheaccountingfirm'sindependence.
Basedupontheforegoingreviewanddiscussionsdescribedinthisreport,theAuditCommitteerecommendedtoourBoardofDirectorsthattheauditedfinancialstatementsbeincludedinourForm10‑KforthefiscalyearendedDecember31,2017forfilingwiththeSEC.
Respectfullysubmittedby:
THEAUDITCOMMITTEEOFTHEBOARDOFDIRECTORS
ThomasB.Rogers,AuditCommitteeChairDanielS.FultonConstanceB.Moore
February15,2018
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MANAGEMENT
Setforthbelowarethenames,agesandpositionsofTRIPointe'sexecutiveofficersasofFebruary26,2018.Eachexecutiveofficershallholdofficeuntiltheexecutiveofficer'srespectivesuccessoriselectedandqualifiedoruntiltheexecutiveofficer'searlierdeath,resignationorremoval.
Name Age Position with TRI PointeDouglasF.Bauer 56 ChiefExecutiveOfficerThomasJ.Mitchell 57 PresidentandChiefOperatingOfficerMichaelD.Grubbs 59 ChiefFinancialOfficerandTreasurerGlennJ.Keeler 41 VicePresidentandChiefAccountingOfficerDavidC.Lee 46 VicePresident,GeneralCounselandSecretary
ForbiographicalinformationforMr.DouglasF.Bauer,see"BoardofDirectors—DirectorNominees."
THOMASJ.MITCHELL.Mr.MitchellhasservedasTRIPointe'sPresidentandChiefOperatingOfficersinceJanuary30,2013.HeservedasamemberoftheboardofmanagersofTPHLLCpriortoitsconversionintoacorporation.PriortoformingTPHLLCinApril2009,from1988to2009,Mr.Mitchellservedinseveralcapacities,includingmostrecentlyExecutiveVicePresident,forWilliamLyonHomes,ahomebuildingcompanywhosecommonstockwaslistedontheNYSEfrom1999untilthecompanywastakenprivatein2006.Throughhisvariousroleswithinthatcompany,Mr.Mitchelldevelopedabroadbackgroundandexperienceinallaspectsofresidentialconstructionandlanddevelopment.Priortohis20-yeartenureatWilliamLyonHomes,Mr.MitchellspentovertwoyearswithTheIrvineCompanyintheircommunitydevelopmentgroupandovertwoyearswithPacificSavingsBank.Throughouthiscareer,Mr.Mitchellhasobtainedsignificantexperienceinlandacquisition,landentitlement,landdevelopment,projectplanning,productdesign,constructionoperations,projectandcompanyfinance,salesandmarketing,customersatisfactionandwarrantyservice.Mr.Mitchellhasmorethan30yearsofexperienceintherealestatedevelopmentandhomebuildingindustry.Hisaccomplishmentshavebeenrecognizedby,amongotherthings,himbeingawardedtheOutstandingHomeDesignandNationalHomeoftheYearawardsandbeingidentifiedbyHomeBuilderExecutiveasaTop100President.In2004,Mr.MitchellwasawardedtheBIAInlandEmpireBuilderoftheYear.Mr.MitchellreceivedhisB.A.fromCaliforniaStateUniversityofLongBeach.
MICHAELD.GRUBBS.Mr.GrubbshasservedasTRIPointe'sChiefFinancialOfficerandTreasurersinceJanuary30,2013.PriortoformingTPHLLCinApril2009,from1992to2009,Mr.Grubbsservedinseveralcapacities,includingmostrecentlytheSeniorVicePresidentandChiefFinancialOfficer,forWilliamLyonHomes,ahomebuildingcompanywhosecommonstockwaslistedontheNYSEfrom1999untilthecompanywastakenprivatein2006.Priortohis17-yeartenureatWilliamLyonHomes,Mr.GrubbsspentfiveyearsatKennethLeventhal&CompanywherehespecializedinrealestateaccountingandoverfiveyearsatJ.C.PenneyCompanyConstructionandRealEstateDivisionwhichbuiltretailfacilitiesthroughouttheWesternUnitedStates.Mr.Grubbshasmorethan30yearsofexperienceinresidentialrealestateandhomebuildingfinance.Mr.Grubbsisamember(inactive)oftheAmericanInstituteofCertifiedPublicAccountantsandtheCaliforniaSocietyofCertifiedPublicAccountants.Mr.GrubbsisalsoaformermemberoftheBoardofDirectorsforHomeAidOrangeCounty,acharitableorganizationwiththemissionofbuildingorrenovatingsheltersforthetemporarilyhomeless,whichservesindividualsandfamilieswhofindthemselveswithoutshelterduetosuchfactorsasdomesticviolence,jobloss,catastrophicillnessorcrisispregnancy.HeservedasTreasurerand
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committeechairfortheFinanceFocusGroup.Mr.GrubbsreceivedhisB.A.,magnacumlaude,withhonorsfromArizonaStateUniversity.
GLENNJ.KEELER.Mr.KeelerjoinedTRIPointeinFebruary2013andcurrentlyservesasourVicePresidentandChiefAccountingOfficer.From2011until2013,heservedasCorporateControllerofSTEC,Inc.,apubliclytraded,globalproviderofenterprise-classsolidstatedrives.From2006until2011,Mr.KeelerservedasDirectorofFinanceandControllerofLantronix,Inc.,apubliclytradeddesigner,developer,marketerandsellerofnetworkingandcommunicationsproducts.Mr.KeelerspentsixyearsatErnst&YoungLLPservingclientsintherealestate,technologyandmanufacturingindustries.Mr.KeelerisaCertifiedPublicAccountant(inactive)inCaliforniaandearnedhisB.A.fromCaliforniaStateUniversityDominguezHills.
DAVIDC.LEE.Mr.LeehasservedasourVicePresident,GeneralCounselandSecretarysinceJanuary2018.From2013untiljoiningourmanagementteam,Mr.LeewasapartnerintheOrangeCountyandLosAngelesofficesofK&LGatesLLP,wherehefocusedoncapitalmarketstransactions,mergersandacquisitionsandgeneralcorporateandsecuritiesmatters.From2004to2013,Mr.LeewasacorporateandsecuritieslawyerwithGibson,Dunn&CrutcherLLP,andfrom1998to2004,Mr.LeeservedasspecialcounselintheOfficeofChiefCounselattheU.S.SecuritiesandExchangeCommission'sDivisionofCorporationFinanceandascounseltoanSECCommissioner.Mr.LeereceivedhisB.A.fromUniversityofCalifornia,Riverside,hisM.B.A.fromLoyolaMarymountUniversityandhislawdegreefromLoyolaLawSchool,LosAngeles.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section16(a)oftheExchangeActrequiresTRIPointe'sdirectorsandcertainofficers,andpersonswhoownmorethan10%ofaregisteredclassofTRIPointeequitysecurities,tofilewiththeSECinitialreportsofownershipandreportsofchangesinownershipofTRIPointecommonstockandotherequitysecurities.Certainofficers,directorsandgreater-than-ten-percentstockholdersarerequiredbySECregulationtofurnishTRIPointewithcopiesofallSection16(a)formstheyfile.ToTRIPointe'sknowledge,basedoninformationfurnishedbythesepersons,allSection16(a)filingrequirementsapplicabletoTRIPointe'sdirectors,executiveofficersandgreater-than-ten-percentstockholderswerecompliedwithonatimelybasisduringthefiscalyearendedDecember31,2017.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Inadditiontothecompensationdescribedinthesectionentitled"ExecutiveCompensation,"ourexecutiveofficers,directorsandotherrelatedpartieswillbeentitledtoreceive,orhavereceivedsincethebeginningofthelastfiscalyear,materialfinancialandotherbenefits,includingthefollowing:
Indemnification Agreements
Wehaveenteredintoanindemnificationagreementwitheachofourdirectorsandourcurrentexecutiveofficers.TheseagreementsrequireustoindemnifytheseindividualstothefullestextentpermittedunderDelawarelawagainstliabilitiesthatmayarisebyreasonoftheirservicetous,andtoadvanceexpensesincurredasaresultofanyproceedingagainstthemastowhichtheycouldbeindemnified.
Registration Rights Agreement and Sale of Starwood Fund Shares
OnJanuary30,2013,TRIPointeenteredintoaregistrationrightsagreementwiththeformermembersofTPHLLC,includingVIII/TPCHoldings,L.L.C.,afundaffiliatedwithtwoofourformerdirectors,Messrs.SternlichtandGrahamandathengreaterthan5%holderofourcommonstock(the"StarwoodFund"),andMessrs.Bauer,GrubbsandMitchell,withrespecttothesharesofcommonstockthattheyreceivedaspartofTRIPointe'sformationtransactions.Thesharesarereferredtocollectivelyasthe"registrableshares."AfterarequestbytheStarwoodFund,wefiledanautomaticshelfregistrationstatementonFormS‑3withrespecttothepotentialofferandsaleoftheregistrableshares.OnMarch22,2017,theStarwoodFundsoldallofitsregistrablesharesundertheshelfregistrationstatementinanunderwrittenoffering.Wedidnotreceiveanyproceedsfromthissale.
Conflicts of Interest
TRIPointehasadoptedwrittenCorporateGovernanceGuidelinesthat,amongotherthings,requiredirectorstodisclosetotheChairmanofourBoardofDirectorspersonalorbusinessintereststhatinvolveanactualorpotentialconflictofinterest.Inaddition,ourCodeofBusinessConductandEthicsrequiresthata"RelatedPersonTransaction"mustbeapprovedinadvancebyavoteofamajorityofourdisinterestedandindependentdirectors.A"RelatedPersonTransaction"meansanytransaction,arrangementorrelationshipinwhich(i)TRIPointeisaparticipant,(ii)theamountinvolvedwill,ormaybeexpectedto,exceed$120,000,and(iii)a"RelatedPerson"has,orwillhave,adirectorindirectmaterialinterest."RelatedPerson"means(i)amemberoftheBoardofDirectorsoftheCompanyandanynominee;(ii)anexecutiveofficer(asdefinedunderSecuritiesandExchangeCommissionrules)oftheCompany;(iii)anystockholderbeneficiallyowningmorethanfivepercentofanyoutstandingclassofTRIPointe'svotingsecurities;(iv)anImmediateFamilyMemberofanysuchperson,and(v)anyentityinwhichanypersonidentifiedin(i)through(iii)isemployed,orisapartnerorprincipal(orholdsasimilarposition),orisabeneficialownerofa10%orgreaterdirectorindirectequityinterest."ImmediateFamilyMember"meansanyspouse,child,stepchild,son-in-lawordaughter-in-law,parent,stepparent,mother-in-laworfather-in-law,sibling,brother-in-laworsister-in-lawofaperson,andanypersonsharingthehouseholdofsuchperson(otherthanatenantoremployee).OurChiefExecutiveOfficer,ChiefFinancialOfficerandChiefAccountingOfficer(orpersonsperformingsimilarfunctions)(collectively,"SeniorOfficers"andeacha"SeniorOfficer")mustcomplywithourCodeofEthicsforSeniorExecutiveandFinancialOfficers,whichrequiresthepriorwrittenapprovaloftheAuditCommitteebeforeaSeniorOfficermakesanyinvestment,acceptsanypositionorbenefits,participatesinanytransactionorbusinessarrangementorotherwiseactsinamannerthatcreatesorappearstocreateaconflictofinterest.Neithertheadoptionofthesepoliciesnoranycommunicationconcerningthese
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policiesisintendedtoconstitutearepresentationconcerningpast,presentorfuturecompliancebythepersonssubjecttothem.Wecannotassureyouthatthesepolicieswillbesuccessfulineliminatingtheinfluenceofconflictsofinterest.ThesepoliciesmaybeamendedfromtimetotimeatthediscretionofourBoardofDirectors,withoutavoteofstockholders.
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AUDIT COMMITTEE MATTERS
Independent Registered Public Accounting Firm Fees
ThefollowingtablerepresentsaggregatefeesbilledtousforthefiscalyearsendedDecember31,2017and2016byErnst&YoungLLP.AllfeesbelowwereapprovedbytheAuditCommitteeinconformitywiththeAuditCommittee'spre-approvalprocess.
Year Ended December 31,
2017 2016
AuditFees(1) $2,325,214 $2,428,461
Audit-RelatedFees(2) — 37,389
TaxFees(3) 463,328 459,830
AllOtherFees(4) 2,000 2,000
Total $2,790,542 $2,927,680__________(1) ThesearefeesforprofessionalservicesperformedbyErnst&YoungLLPfortheauditofTRIPointe'sannualfinancialstatements,consentsandcomfort
lettersandservicesthatarenormallyprovidedinconnectionwithstatutoryandregulatoryfilingsorengagements.(2) ThesearefeesforassuranceandrelatedservicesperformedbyErnst&YoungLLPthatarereasonablyrelatedtotheperformanceoftheauditorreview
ofTRIPointe'sfinancialstatements,includingconsultingonfinancialaccounting/reportingstandards.(3) ThesearefeesforprofessionalservicesperformedbyErnst&YoungLLPwithrespecttotaxcompliance,taxadviceandtaxplanning.Thisincludesthe
preparationofTRIPointe'sanditsconsolidatedsubsidiaries'originalandamendedtaxreturns,refundclaims,paymentplanning,taxauditassistanceandtaxworkstemmingfrom"Audit-Related"items.
(4) ThesearefeesforotherpermissibleworkperformedbyErnst&YoungLLPthatdoesnotmeettheabovecategorydescriptions.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
TheAuditCommitteehasresponsibilityforestablishingpoliciesandproceduresforthepre-approvalofauditandnon-auditservicesrenderedbyourindependentregisteredpublicaccountingfirm,Ernst&YoungLLP.TheAuditCommitteehasthesoleauthorityandresponsibilitytoselect,appoint,evaluate,compensate,retainandoverseetheworkofanyindependentregisteredpublicaccountingfirmengagedforthepurposeofpreparingorissuinganauditreportorperformingotheraudit,revieworattestservicesforus(includingresolutionofdisagreementsbetweenmanagementandtheindependentregisteredpublicaccountingfirmregardingfinancialreporting).OurinternalauditingfunctionandtheindependentregisteredpublicaccountingfirmreportsdirectlytotheAuditCommittee.TheAuditCommitteehasthesoleauthoritytoapproveallauditengagementfeesandterms,andtheAuditCommittee,ortheChairoftheAuditCommittee,mustpre-approveanyauditandnon-auditservicesprovidedtousbytheindependentregisteredpublicaccountingfirmandthefeesandtermsthereof(providedthattheChairmaynotpre-approveservicesinexcessof$25,000andmustreportanysuchapprovaltothefullAuditCommitteeatthenextregularlyscheduledmeetingoftheAuditCommittee).
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STOCKHOLDER PROPOSALS FOR 2019 ANNUAL MEETING
Stockholderswhowishtosubmitaproposaltobeconsideredforinclusioninourproxystatementandformofproxyforthe2019AnnualMeetingofStockholdersmaydosobyfollowingtheproceduressetforthinRule14a‑8undertheExchangeAct.Tobeeligibleforinclusion,proposalsmustbesubmittedinwritingandreceivedbyusonorbeforeNovember16,2018atTRIPointeGroup,Inc.,19540JamboreeRoad,Suite300,Irvine,California92612,Attention:CorporateSecretary.
AnystockholderwhointendstonominateanindividualforelectiontoourBoardofDirectorsorsubmitamatterforconsiderationatthe2019annualmeeting,otherthanbysubmittingaproposaltobeincludedinour2019proxystatement,mustgivetimelynoticeaccordingtoourBylaws.OurBylawsprovidethat,tobetimelyforsubmissiontothe2019annualmeeting,astockholder'snoticemustbemailedtoandreceivedatourprincipalexecutiveoffices,at19540JamboreeRoad,Suite300,Irvine,California92612notlessthan90daysnormorethan120dayspriortothefirstanniversaryofthedateonwhichwefirstmailedourproxymaterialsornoticeofavailabilityofproxymaterials(whicheverisearlier)forthe2018annualmeeting;provided,however,thatifthe2019annualmeetingisheldorthe2019annualmeetingdateiscalledforadatethatisnotwithin30daysfromthefirstanniversarydateofthe2018annualmeeting,thenwrittennoticebyastockholderinordertobetimelymustbereceivednoearlierthanthe120thdaybeforethedateofsuchannualmeetingandnotlaterthanthelaterofthe90thdaybeforethedateofsuchannualmeeting,asoriginallyconvened,orthecloseofbusinessonthetenthdayfollowingthedayonwhichthefirstpublicdisclosureofthedateofsuchannualmeetingwasmade.Fortheavoidanceofdoubt,ifthenoticeofproposedmatterornominatedindividualisnotreceivedduringthistime-frame,suchproposalwillbedeemeduntimelyandwillnotbeaccepted.
Foreachmatteranystockholderintendstobringbeforethe2019annualmeeting,thestockholder'snoticemustcomplywithallapplicableprovisionsofourBylaws,includingadescriptionoftheproposalorbusiness(includingthecompletetextofanyresolutionstobepresentedattheannualmeeting,and,intheeventthatsuchbusinessincludesaproposaltoamendourBylaws,thetextoftheproposedamendment),thereasonsforconductingsuchbusinessattheannualmeeting,andanymaterialinterestthestockholderhasinthatbusinessaswellasinformationregardingthestockholder,thenumberofsharesofourcommonstockthatthestockholderownsandarepresentationthatsuchstockholderintendstoappearinpersonorbyproxyattheannualmeeting.AnystockholderproposalsmustalsocomplyinallrespectswiththerulesandregulationsoftheSEC.Formoreinformation,andformoredetailedrequirements,pleaserefertoourAmendedandRestatedBylaws,filedasExhibit3.2toourCurrentReportonForm8‑K,filedwiththeSEConOctober27,2016.
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