DEF 14A 1 d133356ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material pursuant to § 240.14a-12

TAYLOR MORRISON HOME CORPORATION

(Name of Registrant as Specified In Its Charter)

N/A

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

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


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LOGO


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LOGO

Scottsdale, Arizona

April 12, 2022

Dear Stockholders:

You are cordially invited to attend the Taylor Morrison Home Corporation 2022 Annual Meeting of Stockholders on Thursday, May 26, 2022 at 8:00 a.m. PT. The 2022 Annual Meeting will be a virtual meeting of stockholders. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the meeting via live audio webcast by visiting www.virtualshareholdermeeting.com/TMHC2022. To participate in the meeting, you must have your 16-digit control number that is shown on your Notice of Internet Availability of Proxy Materials or on your proxy card if you elected to receive proxy materials by mail. You will not be able to attend the 2022 Annual Meeting in person.

Our board of directors has fixed the close of business on March 30, 2022 as the record date for determining those holders of our common stock entitled to notice of, and to vote at, the Annual Meeting of Stockholders and any adjournments or postponements of the Annual Meeting of Stockholders.

The Notice of Annual Meeting of Stockholders and Proxy Statement, both of which accompany this letter, provide details regarding the business to be conducted at the meeting, including proposals for the election of the directors named in this Proxy Statement to serve until the 2023 Annual Meeting of Stockholders (Proposal 1), an advisory vote to approve the compensation of our named executive officers (Proposal 2), the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal 3) and the approval of the amendment and restatement of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (Proposal 4).

Our board of directors recommends that you vote “FOR” the director nominees named in this Proxy Statement and “FOR” each of Proposals 2, 3 and 4. Each proposal is described in more detail in this Proxy Statement.

Your vote is very important. Please vote your shares promptly, whether or not you expect to attend the meeting. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy card or voting instruction form, as applicable.

Sincerely,

 

LOGO

Sheryl D. Palmer

Chairman of the Board of Directors, President and Chief Executive Officer


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TAYLOR MORRISON HOME CORPORATION

4900 N. Scottsdale Road, Suite 2000

Scottsdale, Arizona 85251

Notice of Annual Meeting of Stockholders

To be Held on May 26, 2022

The 2022 Annual Meeting of Stockholders of Taylor Morrison Home Corporation (the “Annual Meeting”) will be held on Thursday, May 26, 2022 at 8:00 a.m. PT. You can attend the Annual Meeting online, vote your shares electronically and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/TMHC2022. You will need to have your 16-digit control number included on your Notice of Internet Availability of Proxy Materials or your proxy card (if you received a printed copy of the proxy materials) to join the Annual Meeting. The Annual Meeting will be held for the following purposes:

 

1.

To elect the directors named in this Proxy Statement and nominated by our board of directors to serve until the 2023 Annual Meeting of Stockholders;

 

2.

To conduct an advisory vote to approve the compensation of our named executive officers;

 

3.

To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022;

 

4.

To approve the amendment and restatement of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan; and

 

5.

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements of the Annual Meeting.

Only holders of record of our common stock at the close of business on March 30, 2022 (the “Record Date”) will be entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements of the Annual Meeting. A list of these stockholders will be open for examination by any stockholder electronically during the 2022 Annual Meeting at www.virtualshareholdermeeting.com/TMHC2022 when you enter your 16-digit control number.

This Notice of Annual Meeting of Stockholders and Proxy Statement are first being distributed or made available, as the case may be, on or about April 12, 2022.

 

By order of the board of directors,

LOGO

Darrell C. Sherman

Executive Vice President, Chief Legal Officer

and Secretary

Scottsdale, Arizona

April 12, 2022

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 26, 2022

THIS PROXY STATEMENT AND OUR ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT: WWW.PROXYVOTE.COM

 


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  TABLE OF CONTENTS    

 

Table of Contents

 

Proxy Statement Summary

  

 

i

 

General Information Concerning Proxies and Voting at the Annual Meeting

  

 

1

 

Proposal 1: Election of Directors

  

 

7

 

Corporate Governance

  

 

11

 

Information About Our Board of Directors

  

 

11

 

Board Tenure and Diversity

  

 

14

 

Board Structure and Operations

  

 

15

 

Committees of Our Board of Directors

  

 

18

 

Compensation Committee Interlocks and Insider Participation

  

 

19

 

Corporate Governance Guidelines and Code of Conduct and Ethics

  

 

19

 

Anti-Hedging Policy

  

 

20

 

ESG Report

  

 

20

 

Director Compensation

  

 

21

 

Annual Compensation

  

 

21

 

Deferred Compensation Plan

  

 

21

 

Stock Retention Policy

  

 

22

 

2021 Director Compensation Table

  

 

22

 

Executive Officers

  

 

24

 

Compensation Discussion and Analysis

  

 

25

 

Compensation Committee Report

  

 

40

 

Summary Compensation Table

  

 

41

 

Grants of Plan-Based Awards

  

 

42

 

Outstanding Equity and Equity-Based Awards at Fiscal Year-End

  

 

44

 

Option Exercises and Stock Vested Table

  

 

45

 

Pension Benefits

  

 

47

 

Potential Payments Upon Termination of Employment or Change in Control

  

 

48

 

CEO Pay Ratio Disclosure

  

 

53

 

Proposal 2: Advisory Vote to Approve the Compensation of our Named Executive Officers (Say on Pay)

  

 

54

 

Proposal 3: Ratification of the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm

  

 

55

 

Audit Committee Report

  

 

57

 

Proposal 4: Approval of the Amendment and Restatement of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan

  

 

58

 

Security Ownership of Certain Beneficial Owners, Directors and Management

  

 

69

 

Certain Relationships and Related Person Transactions

  

 

71

 

Additional Information

  

 

72

 

 

 

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    PROXY STATEMENT SUMMARY  

 

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should review all of the information contained in the Proxy Statement before voting.

Annual Meeting of Stockholders

 

Date:

 

Thursday, May 26, 2022

Time:

 

8:00 a.m. PT

Virtual Meeting:

 

This year’s meeting is a virtual stockholders meeting at www.virtualshareholdermeeting.com/TMHC2022.

Record Date:

 

March 30, 2022

Voting:

 

Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote per share.

Proposals and Voting Recommendations

 

      Board
Recommendation
   Page

1. Election of the director nominees named herein

   For    7

2. Advisory vote on the compensation of our named executive officers

   For    54

3. Ratification of the appointment of our independent auditor for fiscal 2022

   For    55

4. Approval of the amendment and restatement of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (the “Amended and Restated Plan”)

   For    58

Voting Methods

You can vote in one of four ways:

 

     LOGO

  

Visit www.proxyvote.com to vote VIA THE INTERNET

     LOGO

  

Call 1-800-690-6903 to vote BY TELEPHONE

     LOGO

  

If you received printed proxy materials, sign, date and return your proxy card or voting instruction form, as applicable, in the prepaid enclosed envelope to vote BY MAIL

     LOGO

  

You may also vote ONLINE during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/TMHC2022 and following the instructions. You will need the 16-digit control number included on your proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials

To reduce our administrative and postage costs and the environmental impact of the Annual Meeting, we encourage stockholders to vote prior to the meeting via the Internet or by telephone, both of which are available 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on May 25, 2022. Stockholders may revoke their proxies at the times and in the manner described on page 4 of this Proxy Statement.

You will need to have your 16-digit control number included on your Notice of Internet Availability of Proxy Materials or, if you received a printed copy of the proxy materials, your proxy card or the instructions that accompanied your proxy materials to join the Annual Meeting and to vote during the Annual Meeting.

 

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    GENERAL INFORMATION  

 

TAYLOR MORRISON HOME CORPORATION

4900 N. Scottsdale Road, Suite 2000

Scottsdale, Arizona 85251

Proxy Statement

For the 2022 Annual Meeting of Stockholders

General Information Concerning Proxies and Voting at the Annual Meeting

 

Why did I receive these proxy materials?

We are providing these proxy materials in connection with the solicitation by the board of directors of Taylor Morrison Home Corporation (the “Company,” “TMHC,” “we,” “us,” or “our”), a Delaware corporation, of proxies to be voted at our 2022 annual meeting of stockholders (the “Annual Meeting”) and at any adjournment or postponement of the Annual Meeting. In accordance with the rules of the Securities and Exchange Commission (“SEC”), on or about April 12, 2022, we sent a Notice of Internet Availability of Proxy Materials (the “Notice) (or, upon your request, will deliver printed versions of these proxy materials) and made available our proxy materials over the Internet to the holders of our common stock as of the close of business on March 30, 2022 (the “Record Date”).

Why is the Annual Meeting being webcast online?

The Annual Meeting will be conducted in an online, virtual format. We are pleased to continue to use the virtual meeting format to facilitate stockholder attendance, voting and questions by leveraging technology to communicate more effectively and efficiently with our stockholders. This format allows stockholders to participate fully from any location, without the cost of travel and will provide the same rights and advantages of a physical meeting. Stockholders will be able to present questions online during the meeting through www.virtualshareholdermeeting.com/TMHC2022, providing our stockholders with the opportunity for meaningful engagement with the Company.

How do I participate in the virtual meeting?

Our Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by live audio webcast. No physical in-person meeting will be held.

To participate in the meeting, you must have your 16-digit control number that is shown on your Notice or, if you received a printed copy of the proxy materials, on your proxy card or the instructions that accompanied your proxy materials. You may access the Annual Meeting by visiting www.virtualshareholdermeeting.com/TMHC2022. You will be able to submit questions during the meeting by typing in your question into the “ask a question” box on the meeting page. Should you require technical assistance, support will be available by dialing 1-800-586-1548 (US) or 1-303-562-9288 (international) during the meeting; these telephone numbers will also be displayed on the meeting webpage.

What information is included in this Proxy Statement?

The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, our board of directors and board committees, corporate governance, the compensation of current directors and certain executive officers for the year ended December 31, 2021, and other information.

Who is entitled to vote?

Holders of our common stock at the close of business on the Record Date are entitled to vote at the Annual Meeting. As of the close of business on the Record Date, there were 120,369,695 shares of our common stock outstanding and entitled to vote.

 

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  GENERAL INFORMATION    

 

How many votes do I have?

On any matter that is submitted to a vote of our stockholders, holders are entitled to one vote per share of common stock held by them on the Record Date. Holders of our common stock are not entitled to cumulative voting in the election of directors.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Most stockholders hold their shares through a bank, broker or other nominee rather than directly in their own name.

If, on the Record Date, your shares were registered directly in your name with our transfer agent, Computershare Limited, then you are a stockholder of record. As a stockholder of record, you may vote online during the Annual Meeting or vote by proxy. Whether or not you plan to virtually attend the Annual Meeting, we urge you to vote prior to the meeting over the Internet, by telephone or by filling out and returning a proxy card by mail to ensure your vote is counted.

If, on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account.

Shares held in your name as the stockholder of record or beneficially in street name may be voted by you, while the polls remain open, at www.virtualshareholdermeeting.com/TMHC2022 during the meeting. You will need the 16-digit control number included on your Notice or, if you received a printed copy of the proxy materials, on your proxy card or the instructions that accompanied your proxy materials in order to be able to enter the meeting and to vote online during the meeting.

Even if you plan to participate in the online meeting, we recommend that you also submit your proxy or voting instructions as described above so that your vote will be counted if you later decide not to participate in the online meeting.

What am I voting on?

We are asking you to vote on the following matters in connection with the Annual Meeting:

 

1.

The election of the directors named in this Proxy Statement and nominated by our board of directors to serve until our annual meeting of stockholders to be held in 2023;

 

2.

An advisory vote to approve the compensation of our named executive officers;

 

3.

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; and

 

4.

Approval of the Amended and Restated Plan.

We will also consider any other business that may properly come before the Annual Meeting. At the date of this Proxy Statement, we know of no business that will be brought before the Annual Meeting other than the matters set forth above.

How do I vote?

Vote by Internet

Stockholders of record may submit proxies over the Internet by following the instructions on the Notice or, if you requested printed copies of the proxy materials, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their banks, brokers or other nominees. Please check your voting instruction form for Internet voting availability.

 

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    GENERAL INFORMATION  

 

Vote by Telephone

Stockholders of record may submit proxies by telephone or mobile device by dialing (800) 690-6903 and following the recorded instructions. You will need the 16-digit control number included on your Notice or, if you requested printed copies of the proxy materials, the instructions printed on the proxy card in order to vote by telephone. Most beneficial owners may vote using any telephone or mobile device from within the United States by calling the number specified on the voting instruction forms provided by their banks, brokers or other nominees.

Vote by Mail

Stockholders of record may submit proxies by mail by requesting a printed proxy card and completing, signing and dating the printed proxy card and mailing it in the pre-addressed envelopes that will accompany the printed proxy materials. Beneficial owners may vote by completing, signing and dating the voting instruction forms provided by their banks, brokers or other nominees and mailing them in the pre-addressed envelopes accompanying the voting instruction forms.

If you are a stockholder of record and you return your signed proxy card but do not indicate your voting preferences, the persons named in the proxy card will vote the shares represented by that proxy as recommended by our board of directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are “broker non-votes”?” regarding whether your bank, broker or other nominee may vote your uninstructed shares on a particular proposal.

Vote Online at the Annual Meeting

All stockholders as of the close of business on the Record Date can vote online at the Annual Meeting. You may vote and submit questions while attending the meeting online via live audio webcast. Shares held in your name as the stockholder of record or beneficially in street name may be voted by you, while the polls remain open, at www.virtualshareholdermeeting.com/TMHC2022 during the meeting. You will need the 16-digit control number included on your Notice or, if you received a printed copy of the proxy materials, on your proxy card or the instructions that accompanied your proxy materials in order to be able to vote and enter the meeting. Even if you plan to attend the Annual Meeting, we recommend that you also vote either by telephone, by Internet or by mail so that your vote will be counted if you decide not to attend.

Will I be able to participate in the virtual meeting on the same basis as I would be able to participate in a live meeting?

The virtual meeting format for the Annual Meeting will enable full and equal participation by all of our stockholders from any place in the world at little to no cost.

We designed the format of the virtual meeting to ensure that our stockholders who attend our Annual Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting and to enhance stockholder access, participation and communication through online tools. In order to ensure such an experience, we will provide stockholders with the ability to submit appropriate questions real-time via the meeting website, limiting questions to one per stockholder and will answer as many questions submitted in accordance with the meeting rules of conduct as possible in the time allotted for the meeting without discrimination.

Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to employment issues, are not pertinent to meeting matters and therefore will not be answered.

What does it mean if I receive more than one set of materials?

If you receive more than one set of materials, it means that your shares are registered in more than one name or are registered in different accounts. In order to vote all the shares you own, you must either sign and return all of the proxy cards or follow the instructions for any alternative voting procedures on each of the proxy cards or Notices of Internet Availability of Proxy Materials you receive.

 

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  GENERAL INFORMATION    

 

What can I do if I change my mind after I vote?

If you are a stockholder of record, you may revoke your proxy at any time before it is exercised at the Annual Meeting by (a) delivering written notice stating that the proxy is revoked, bearing a date later than the proxy, to Taylor Morrison Home Corporation, 4900 N. Scottsdale Road, Suite 2000, Scottsdale, Arizona 85251, Attn: Chief Legal Officer and Secretary, (b) submitting a later-dated proxy relating to the same shares by mail, telephone or the Internet prior to the vote at the Annual Meeting or (c) attending the Annual Meeting and voting online. Stockholders of record may send a request for a new proxy card via e-mail to sendmaterial@proxyvote.com, or follow the instructions provided on the Notice of Internet Availability of Proxy Materials or proxy card to submit a new proxy via the Internet or by telephone. Stockholders of record may also request a new proxy card by calling 1-800-579-1639. If you are a beneficial stockholder, you may revoke your proxy or change your vote by following the separate instructions provided by your bank, broker or other nominee. To change your vote or revoke your proxy during the Annual Meeting, you must have your 16-Digit control number that is shown on your Notice or, if you received a printed copy of the proxy materials, on your proxy card or the instructions that accompanied your proxy materials.

What constitutes a quorum at the Annual Meeting?

Transaction of business at the Annual Meeting may occur only if a quorum is present. A quorum will be present if at least a majority of the voting power of our outstanding common stock entitled to vote at the meeting is present in person or represented by proxy. Your shares will be counted towards the quorum if you vote by mail, by telephone or through the Internet either before or during the Annual Meeting. Abstentions and shares represented by “broker non-votes” that are present and entitled to vote at the Annual Meeting are counted for purposes of determining a quorum.

If a quorum is not present, it is expected that the Annual Meeting will be adjourned or postponed in order to permit additional time for soliciting and obtaining additional proxies or votes, and, at any subsequent reconvening of the Annual Meeting, all proxies will be voted in the same manner as such proxies would have been voted at the original convening of the Annual Meeting, except for any proxies that have been effectively revoked or withdrawn, as discussed above under the heading “What can I do if I change my mind after I vote?”

What are “broker non-votes”?

A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote the shares on a proposal because the nominee does not have discretionary voting power for a particular item and has not received instructions from the beneficial owner regarding voting. Brokers who hold shares for the accounts of their clients have discretionary authority to vote shares if specific instructions are not given only with respect to “routine” items. If your shares are held by a bank, broker or other nominee on your behalf and you do not instruct the bank, broker or other nominee as to how to vote your shares on Proposals 1, 2 or 4, the bank, broker or other nominee may not exercise discretion to vote on those proposals because these proposals are considered “non-routine” by the New York Stock Exchange (“NYSE”). With respect to Proposal 3 regarding the ratification of the appointment of our independent registered public accounting firm, the bank, broker or other nominee may exercise its discretion to vote for or against that proposal in the absence of your instructions.

 

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    GENERAL INFORMATION  

 

What are the voting requirements to elect directors and approve each of the other proposals described in this Proxy Statement?

The table below summarizes the vote required to approve each proposal described in this Proxy Statement, how votes are counted and how our board of directors recommends you vote:

 

     Vote
Required
  Voting
Options(1)
  Board
Recommendation
  Broker
Discretionary
Voting
Allowed
  Impact of
Broker
Non-Vote
 

Impact of
Abstain

Vote

Proposal 1: Election of directors  

Affirmative vote of a

majority of the votes cast in respect of the shares of our common stock present

in person or by proxy at the

Annual Meeting and

entitled to vote on the

matter

  “FOR”
“AGAINST”
“ABSTAIN”
  “FOR”   NO   NONE   NONE

 

Proposal 2: Advisory vote to approve the compensation of our named executive officers

 

 

Affirmative vote of a

majority of shares of our

common stock present in

person or by proxy at the

Annual Meeting and

entitled to vote on the

matter

  “FOR”
“AGAINST”
“ABSTAIN”
  “FOR”   NO   NONE   “AGAINST”

 

Proposal 3: Ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022

 

 

Affirmative vote of a

majority of shares of our

common stock present

in person or by proxy at

the Annual Meeting and

entitled to vote on the

matter

  “FOR”
“AGAINST”
“ABSTAIN”
  “FOR”   YES(2)   N/A   “AGAINST”

 

Proposal 4: Approval of the Amended and Restated Plan

 

 

Affirmative vote of a

majority of shares of our

common stock present

in person or by proxy at

the Annual Meeting and

entitled to vote on the

matter

  “FOR”
“AGAINST”
“ABSTAIN”
  “FOR”   NO   NONE   “AGAINST”

 

(1)

If you are a stockholder of record and just sign and submit your proxy card without voting instructions, your shares will be voted “FOR” the director nominees listed herein and on the other proposals as recommended by our board of directors and in accordance with the discretion of the holders of the proxy with respect to any other matters that may be voted upon.

(2)

As this proposal is considered a discretionary matter, brokers are permitted to exercise their discretion to vote uninstructed shares on this proposal. Therefore, there will be no broker non-votes.

Who will count the votes?

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

Who will pay for the cost of this proxy solicitation?

We will bear the cost of the solicitation of proxies from our stockholders. In addition to solicitation by mail, our directors, officers and employees, without additional compensation, may solicit proxies from stockholders by telephone, by electronic communications, including by email, by letter, by facsimile, in person or otherwise. We will request banks, brokers or other nominees to forward copies of the proxy and other soliciting materials to persons for whom they hold shares of our common stock and to request authority for the exercise of proxies. In such cases, upon the request of the banks, brokers and other nominees, we will reimburse such holders for their reasonable expenses.

 

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  GENERAL INFORMATION    

 

We will also bear the cost of retaining any proxy solicitation firm, should we choose to retain one. We would expect the expenses associated with retaining any such proxy solicitation firm not to exceed $50,000.

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice to each of our stockholders (other than those who have previously requested a printed copy of proxy materials) who held our common stock as of the Record Date. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or proxy card (or, for beneficial holders, the voting instruction form) and request to receive an electronic copy or printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request an electronic copy or printed copy may be found

in the Notice and in the proxy card (or, for beneficial holders, in the voting instruction form). In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the costs and environmental impact of the Annual Meeting.

When will we announce the results of the voting?

We expect to announce the final voting results by filing a Current Report on Form 8-K within four business days after the Annual Meeting. If the final voting results are unavailable at that time, we will file a Current Report on Form 8-K announcing the preliminary results, followed by an amended Current Report on Form 8-K within four business days of the day the final results are available.

 

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    PROPOSAL 1: ELECTION OF DIRECTORS  

 

Proposal 1: Election of Directors

Board Composition

 

Our board of directors currently consists of nine members, eight of whom our board of directors has affirmatively determined to be independent under the NYSE listing standards and our corporate governance documents. As described in further detail below, Mr. Hunt, who has reached our mandatory retirement age, will not stand for reelection at the Annual Meeting, and the size of our board will be reduced to eight members following the meeting.

For more information on the current composition of our board of directors, see “Corporate Governance—Information About Our Board of Directors—Process for Identifying and Nominating Directors” and “Corporate Governance—Board Structure and Operations—Composition of Our Board of Directors.”

Upon the recommendation of our nominating and governance committee, our board of directors has nominated Messrs. Lane, Lyon, Merritt and Yip, and Mses. Mariucci, Owen, Palmer and Warren for election as members of our board of directors. Each of our director nominees currently serves as a director and, if elected at the Annual Meeting, will serve as a director until our annual meeting of stockholders to be held in 2023 and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal. Each of our director nominees has consented to being named as a nominee in this Proxy Statement and has agreed to serve if elected. If a nominee becomes unable to serve at the time the election occurs, proxies will be voted for another nominee designated by the board of directors unless the board chooses to reduce the number of directors serving on the board. The board of directors has no reason to believe that the nominees identified in this Proxy Statement will be unable or unwilling to serve as a director if elected.

Directors for Election to a One-Year Term Expiring at the 2023 Annual Meeting of Stockholders

 

 

    LOGO

 PETER LANE

    AGE 57

 

Mr. Lane has served as a director since June 2012 and as lead independent director since May 2017. Mr. Lane served as Chief Executive Officer of AXIP Energy Services, LP (formerly known as Valerus Compression Services, “AXIP”), an oilfield services company headquartered in Houston, Texas from 2010 to 2016. Prior to joining AXIP, Mr. Lane was an Operating Partner at TPG Global, LLC (“TPG”) from 2009 to 2011. Before TPG, Mr. Lane spent 12 years at Bain & Company (“Bain”), a global consulting firm, where he led the Dallas and Mexico City offices, as well as its oil and gas practice. He became a Partner at Bain in 2003. Mr. Lane currently serves on the board of directors of AXIP, The Bayou Companies, Rockall Energy, the Specialized Packaging Group and Goosehead Insurance, Inc. Mr. Lane holds a B.S. in physics from the University of Birmingham in the United Kingdom and an M.B.A. from the Wharton School at the University of Pennsylvania.

 

Mr. Lane brings extensive experience in business operations, finance and corporate governance to our board of directors. For these reasons, we believe he is well qualified to serve on our board of directors.

 

 

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 WILLIAM H. LYON

    AGE 48

 

William H. Lyon has served as a director since February 2020. Previously, he was the Executive Chairman and Chairman of the Board of William Lyon Homes from March 2016 until our acquisition of William Lyon Homes in February 2020. He also served as Chief Executive Officer of William Lyon Homes from March 2013 through July 2015, and as Co-Chief Executive Officer and Vice Chairman of the Board from July 2015 to March 2016. Since joining William Lyon Homes’ predecessor company in November 1997 as an assistant project manager, Mr. Lyon served in various capacities during his time with the company, including as a Project Manager, the Director of Corporate Development, the Director of Corporate Affairs, Vice President and Chief Administrative Officer, Executive Vice President and Chief Administrative Officer, and President and Chief Operating Officer. Mr. Lyon also actively served as the President of William Lyon Financial Services from June 2008 to April 2009, and was appointed to the William Lyon Homes board of directors in 2000. Mr. Lyon is a member of the Board of Directors of Commercial Bank of California and Pretend City Children’s Museum in Irvine, CA and an honorary Board member of The Bowers Museum in Santa Ana, CA. Mr. Lyon holds a dual B.S. in Industrial Engineering and Product Design from Stanford University.

 

Mr. Lyon brings to our Board significant executive and real estate development and homebuilding industry experience, which make him well qualified to serve on our board of directors.

 

 

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 ANNE L. MARIUCCI

     AGE 64

 

Ms. Mariucci has served as a director since March 2014. Ms. Mariucci has over 30 years of experience in homebuilding and real estate. Prior to 2003, Ms. Mariucci held a number of executive senior management roles with Del Webb Corporation and was responsible for its large-scale community development and homebuilding business. She also served as President of Del Webb Corporation following its merger with Pulte Homes, Inc. She presently serves as a director of the following publicly traded companies: CoreCivic, Inc., Southwest Gas and Berry Corp. She also serves on the board of Banner Health, a national nonprofit health care provider. Since 2003, she has been affiliated with the private equity firm Hawkeye Partners, serving as a member of the Board of Advisors. She is a past director of the Arizona State Retirement System, Action Performance Companies, the Arizona Board of Regents (where she was its past Chairman) and the University of Arizona Health Network, as well as a past Trustee of the Urban Land Institute. She currently serves on the Board of Arizona State University Enterprise Partners, the parent organization of five ASU-affiliate companies. Ms. Mariucci received her undergraduate degree in accounting and finance from the University of Arizona and completed the corporate finance program at the Stanford University Graduate School of Business.

 

Ms. Mariucci brings extensive experience in real estate, homebuilding and corporate governance. For these reasons, we believe she is well qualified to serve on our board of directors.

 

 

 

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 DAVID C. MERRITT

    AGE 67

 

Mr. Merritt has served as a director since June 2013. From March 2009 through December 2013, he was the president of BC Partners, Inc., a financial advisory firm. Mr. Merritt is a director of Charter Communications, Inc., a publicly traded company, and currently serves as Chairman of its audit committee. Mr. Merritt previously served on the board of directors of Calpine Corporation. From 1975 to 1999, Mr. Merritt served in a variety of capacities at KPMG, including serving as an audit and consulting partner from 1985 to 1999 and national partner in charge of the media and entertainment practice. Mr. Merritt holds a B.S. degree in Business and Accounting from California State University—Northridge.

 

As a seasoned director and audit committee chair with extensive accounting, financial reporting and audit committee experience, Mr. Merritt brings a strong background in leadership, governance and corporate finance to the Company’s board of directors.

 

 

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 ANDREA (ANDI) OWEN

    AGE 56

 

Ms. Owen has served as a director since July 2018. Since August 2018, she has served as the Chief Executive Officer and member of the Board of Directors for MillerKnoll, Inc. (formerly Herman Miller, Inc.), one of the largest and most influential modern design companies in the world. As CEO, Ms. Owen is responsible for leading the company’s worldwide operations, which encompasses just over 11,000 team members and revenue of $3.55 billion. As MillerKnoll’s CEO, Andi is passionate about using design thinking to solve complex problems, leveraging innovation to improve people’s lives, and using business as a force for good. She is often asked to share her views on diversity, equity, and inclusion; sustainability; the future of the workplace and distributed work models; and other ways MillerKnoll is helping to design a better world for employees and customers. Andi joined Herman Miller in 2018 as the company’s President and CEO. Prior to that, Ms. Owen served in various executive roles at The Gap Inc. for 25 years, most recently as the Global President, Banana Republic from 2014 to 2017 and as the Executive Vice President/General Manager of Gap Global Outlet from 2010 to 2014. Ms. Owen holds a Bachelor of Arts degree from the College of William and Mary and completed Harvard Business School’s Advanced Management Program. She also completed Harvard’s intensive, first-of-its-kind course, Women on Boards: Succeeding as a Corporate Director. Ms. Owen is a member of the Board of Directors of The National Association of Manufacturers, member of the Board of Directors for Susan G. Koeman and Chairperson of the Board of Directors of HAY ApS. She is also active in the community, serving as a member of the The Right Place, Inc., Business Leaders for Michigan, and the Herman Miller Foundation.

 

Ms. Owen brings extensive experience in consumer products businesses, marketing and executive leadership, which make her well qualified to serve on our board of directors.

 

 

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 SHERYL D. PALMER

     AGE 60

 

Ms. Palmer became our predecessor’s President and Chief Executive Officer and a member of its board of directors in August 2007 after previously serving as Executive Vice President for the West Region of Morrison Homes. She has also served as our Chairman of the Board since May 2017. Her previous experience includes senior leadership roles at Blackhawk Corp. and Pulte Homes/Del Webb Corporation, each homebuilders and developers of retirement communities, where she last held the title of Nevada Area President at Pulte/Del Webb Corporation and Division President at Blackhawk Corp. Ms. Palmer brings over 35 years of cross-functional building experience to her position, including leadership in land acquisition, sales and marketing, development and operations management. In addition to her employment with the Company, Ms. Palmer currently serves as a member of the board of directors and the audit and governance committees of OfferPad Solutions Inc, a leading publicly traded tech-enabled platform for buying and selling residential real estate, and as a member of the board of directors and the audit and compensation committees of Interface, Inc., a leading publicly traded global manufacturer of modular carpet (Ms. Palmer will not stand for re-election at Interface, Inc.’s upcoming annual shareholder meeting). In addition, Ms. Palmer is a member of the board of directors and executive committee of HomeAid America, a national non-profit that works with the local building industry to build and renovate multi-unit shelters for homeless families, the Chairman of the Board of Directors for Building Talent Foundation, and a member of the Executive Committee of the Joint Center for Housing Studies at Harvard University.

 

We believe Ms. Palmer’s over 30 years of industry experience make her a valuable member of our board of directors. In addition, as our President and Chief Executive Officer, it is appropriate for her to be a member of our board.

 

 

 

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 DENISE F. WARREN

     AGE 58

 

Ms. Warren has served as a director since July 2018. Since June 2016, she has served as the Chief Executive Officer of Netlyst, LLC, a consulting and advisory firm that focuses on digital business growth and scaling consumer and business-to-business recurring revenue streams. From June 2015 to March 2016, she served as the Tribune Publishing Company’s President of Digital and Chief Executive Officer of East Coast Publishing and Executive Vice President of Tribune Publishing Company. In her 26 years with The New York Times Company, she served in various executive leadership positions including Executive Vice President, Digital Products and Services, General Manager of NYTimes.com and Senior Vice President and Chief Advertising Officer. Ms. Warren formerly served as a director, a member of the audit committee and chair of the nominating and governance committee of Monotype Imaging Holdings Inc., a publicly traded provider of design assets, technology and expertise, and as a director and member of the audit committee of Electronic Arts Inc., a publicly traded digital interactive entertainment company. Ms. Warren also currently serves on the board of directors of Naviga, a Vista Equity Partners privately backed software technology company. Ms. Warren holds a B.S. in management from Tulane University and an M.B.A. in communications and media management from Fordham University.

 

We believe Ms. Warren’s long experience in digital marketing, business operations and corporate governance make her well qualified to serve on our board of directors.

 

 

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 CHRISTOPHER YIP

     AGE 39

 

Mr. Yip has served as a director since November 2021. He is currently a partner at RET Ventures, an early-stage venture capital firm focused on investing in companies that provide innovative technology solutions to the real estate industry. Prior to joining the team at RET Ventures, Mr. Yip was an investor at TPG Capital, where he led private equity and growth equity investments and exits in technology-enabled business services for more than 14 years. Before that, he was a consultant with McKinsey & Company. Throughout his career, Mr. Yip has served as a hands-on public and private board member, advised a range of companies, and mentored leading entrepreneurs and CEOs. He holds an M.B.A. from Stanford University Graduate School of Business, where he was an Arjay Miller Scholar, as well as a master’s degree in Computer Science and a bachelor’s degree in Economics from Harvard University.

 

Mr. Yip brings extensive experience as an investor in real estate technology, which makes him well qualified to serve on our board of directors.

 

In the vote on the election of the director nominees, stockholders may:

 

 

vote FOR the nominee;

 

 

vote AGAINST the nominee; or

 

 

ABSTAIN.

Unless you elect to vote differently by so indicating on your signed proxy, your shares will be voted FOR the board of directors’ nominees. For each of the eight director nominees, the number of shares voted “FOR” at the Annual Meeting must exceed the total number of shares voted “AGAINST” such nominee for director in order to be elected. Proxies marked “ABSTAIN” and broker non-votes will have no effect on the outcome of this proposal. If a nominee

 

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ceases to be a candidate for election by the time of the Annual Meeting (a contingency that the board does not expect to occur), such proxies may be voted by the proxyholders in accordance with the recommendation of our board of directors.

The Board of Directors Recommends a Vote “FOR” the Above-Named Director Nominees.

Retiring Director

Mr. Gary Hunt, who has reached our mandatory retirement age, will not stand for reelection at our Annual Meeting and consequently his term will expire immediately following the Annual Meeting. We acknowledge the outstanding service rendered by Mr. Hunt during his service on the board and wish him continued success in the future.

 

 

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 GARY H. HUNT

     AGE 73

  

Gary H. Hunt has served as a director since February 2020. As a founding partner in 2001 and now the Vice Chairman of California Strategies, LLC, a full-service public affairs consulting firm. Mr. Hunt serves as a senior advisor to some of the largest master-planned community and real estate developers in the Western United States. Mr. Hunt also works or has worked with major national financial institutions and regional banks to manage projects through the real estate macro-economic restructuring and re-entitlement period. Previously, he was with The Irvine Company, one of the nation’s largest master planning and land development organizations, for 25 years, serving for ten years as its Executive Vice President and as a member of its Board of Directors and Executive Committee. Mr. Hunt led the company’s major entitlement, regional infrastructure, planning, legal and strategic government relations, as well as media and community relations activities. Since May 2016, Mr. Hunt has served on the board of Five Point Holdings, LLC, a publicly traded company, and was a member of the board and lead independent director of William Lyon Homes from October 2005 until our acquisition of William Lyon Homes in February 2020. In addition, Mr. Hunt serves on the boards of several private companies including Glenair Corporation, University of California, Irvine Foundation and Psomas Engineering Company. He formerly was Chairman of the Board of CT Realty and lead independent director of Grubb & Ellis Corporation, where he also served as interim President and CEO for a period of sixteen months.

 

Mr. Hunt brings extensive experience in the real estate industry and provides the board with additional insight on strategic, corporate governance and political matters, which have made him well qualified to serve on our board of directors.

 

 

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    CORPORATE GOVERNANCE  

 

Corporate Governance

We believe that effective corporate governance is critical to our ability to create long-term value for our stockholders. We have adopted and implemented charters, policies, procedures and controls that we believe promote and enhance corporate governance, accountability and responsibility and create a culture of honesty and integrity at our company. Our Corporate Governance Guidelines, Code of Conduct and Ethics, various other governance-related information and board committee charters are available on the Investor Relations page of our corporate website at www.taylormorrison.com under the category “Corporate Governance.”

Our board of directors consists of a majority of independent directors, and all of our standing committees are fully independent.

Governance Highlights

In 2021, in furtherance of the board’s commitment to strong corporate governance practices on behalf of our stockholders, our board conducted a strategic review of our corporate governance program taking into account, among other things, trends in corporate governance, stockholder feedback, and legal and regulatory developments. Based upon its strategic review, our board, upon the recommendation of our nominating and governance committee, developed a set of changes intended to enhance our corporate governance practices. In particular, our board approved amendments to our amended and restated by-laws (our “By-laws”) to implement a majority voting standard for the election of directors in uncontested elections. In addition, our board adopted changes to our Corporate Governance Guidelines to require each incumbent nominee who does not receive the requisite majority vote in an uncontested election to promptly offer to tender her or his resignation following certification of the stockholder vote. In addition, in furtherance of the Company’s continuing commitment to board diversity, the Corporate Governance Guidelines were further amended to reflect the policy of the nominating and governance committee that, when conducting a search to fill a vacancy on the board, any candidate pool will include candidates who are diverse in terms of race, ethnicity and/or gender.

Our commitment to strong governance practices is illustrated by the following:

 

 Annual election of directors with a majority voting standard in uncontested directors

 

 Independent directors meet regularly without management

 Independent Lead Director

 

 Commitment to a diverse director candidate pool

 All directors are independent except for our CEO

 

 No stockholder rights plan, also referred to as a “poison pill”

 Director mandatory retirement age (age 72)

 

 Director over-boarding policy

 Annual Board and committee self-evaluations

 

 Single class of voting stock

Information About Our Board of Directors

Director Independence

Our board of directors consults with our legal counsel to ensure that the board’s independence determinations are consistent with relevant securities and other laws and regulations regarding director independence. To assist in the board’s independence determinations, each director completes materials designed to identify any relationships that could affect the director’s independence. In addition, through discussions among our directors, an analysis of independence is undertaken by the nominating and governance committee, and an affirmative determination is made by the board of directors. The board of directors has determined that Mses. Mariucci, Owen and Warren and Messrs. Hunt, Lane, Lyon, Merritt and Yip are “independent,” as such term is defined by the applicable rules and regulations of the NYSE. Additionally, the board of directors previously determined that former U.S. Senator Jeffry Flake, who resigned from the board on July 13, 2021, was also “independent” for the portion of the 2021 fiscal year during which he served as a director.    Additionally, each of these directors meets the categorical standards for independence established by our board of directors, as set forth in our Corporate Governance Guidelines.

Director Qualifications

The board of directors has delegated to the nominating and governance committee the responsibility of reviewing and recommending nominees for membership of the board of directors. The nominating and governance committee seeks

 

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candidates from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. In fiscal 2021, in furtherance of the Company’s continuing commitment to board diversity, the board adopted an amendment to the Corporate Governance Guidelines of the Company to reflect the policy of the nominating and governance committee that, when conducting a search to fill a vacancy on the Board, any candidate pool will include candidates who are diverse in terms of race, ethnicity and/or gender. The assessment of director candidates includes, among other factors, an individual’s independence, which determination is based upon applicable NYSE rules, applicable SEC rules and regulations, our Corporate Governance Guidelines and input from legal counsel, if necessary, as well as consideration of age, skills, character and experience, and a policy of promoting diversity, in the context of the needs of the Company. Other characteristics, including, but not limited to, the director nominee’s material relationships with us, time availability, service on other boards of directors and their committees or any other characteristics which may prove relevant at any given time, are also reviewed by the nominating and governance committee for purposes of determining a director nominee’s qualification.

In the case of incumbent directors whose terms of office are set to expire, the nominating and governance committee reviews such directors’ overall service to our Company during their respective term, including the number of meetings attended, level of participation, quality of performance and any relationships and transactions that might impair such directors’ independence. In addition, pursuant to our Corporate Governance Guidelines, no person shall be nominated by the board of directors to serve as a director after he or she has passed his or her 72nd birthday, unless the nominating and governance committee has voted to waive the mandatory retirement age for such director at the time of nomination.

Summary of Individual Director Skills and Attributes

Our Board reflects a diverse, highly engaged group of directors with a wide range of relevant experience. The following matrix provides information about our director nominees, including certain types of knowledge, skills, experiences and attributes possessed by one or more of our directors, which our Board believes are relevant to our business and operations. The matrix does not encompass all of the knowledge, skills, experiences or attributes of our directors and does not suggest that a director who is not listed as having any particular knowledge, skills, experiences or attribute is unable to contribute to the decision-making process in such area.

 

Summary of Director Nominee

Attributes and Experience

   Lane      Lyon      Mariucci      Merritt      Owen      Palmer      Warren      Yip      Total  
Executive Leadership Experience. Directors with executive leadership experience at large organizations typically possess strong leadership qualities and the ability to identify and develop those qualities in others.                                                              100%  
Homebuilding / Real Estate Industry Experience. Directors with significant industry experience provide valuable perspective and insight into the company’s risks and opportunities, regulatory environment and business strategies.                                                                      50%  
Technology / Cybersecurity. Directors with significant technology or cybersecurity related experience assist the board and the company at using technology to enhance our customer experience, implement digital strategies and oversee cyber security risk.                                                                          25%  
Human Capital Management. Directors with significant human capital management experience assist the company with oversight of the implementation of a successful framework for workforce acquisition, workforce management and workforce optimization that results in the attraction, development and retention of top candidates with diverse skills and backgrounds.                                                                      50%  
Public Company Board Experience. Directors with experience serving as a director of other public companies typically possess a strong understanding of effective corporate governance standards and practices.                                                                88%  

 

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Summary of Director Nominee

Attributes and Experience

   Lane      Lyon      Mariucci      Merritt      Owen      Palmer      Warren      Yip      Total  
Risk Management. Experience with risk management is critical to foster an environment where risk management is an integral component of our strategy, culture and business operations and to ensure that policies and procedures are designed and implemented that are consistent with our risk appetite.                                                                      50%  
ESG. ESG expertise strengthens the Board’s oversight and assures that strategic business imperatives and long term value creation are achieved within a sustainable, environmentally focused model.                                                                    63%  
Global Experience. Global experience helps directors better understand and review our business and strategy in the context of the global economy and macroeconomic conditions.                                                                        38%  
Finance / Accounting. An understanding of finance, financial statements and financial reporting processes enables our directors to better understand what drives our performance and develop financial strategies.                                                              100%  
Regulated Industry Experience. Directors with experience in large organizations facing diverse regulatory requirements provide valuable insight on strategies and practices to help the company navigate complicated compliance matters.                                                                      50%  
Marketing / Sales. Relevant to the Company as it seeks to identify and develop new marketing strategies, develop its brands, and monitor consumer trends.                                                                      50%  
Diverse. We believe that diversity and inclusion, on our Board and throughout our Company, are foundational to superior financial results. For purposes of this attribute, we’ve identified those directors who are diverse in terms of race, ethnicity and/or gender.                                                                      63%  
Tenure. Diversity with respect to tenure is important in order to provide for both fresh perspectives and deep experience and knowledge of the Company.      10        2        8        9        4        15        4        1       


6.6
Years

Average
Tenure

 
 

 
 

Age. Age diversity provides the board with new perspectives in combination more tenured directors with existing deep experience and knowledge of the Company.

 

     57        48        64        67        56        60        58        39       


56
Years

Average
Age

 
 

 
 

Process for Identifying and Nominating Directors

Nominees for our board of directors are recommended by the nominating and governance committee, which may utilize a variety of methods for identifying nominees for director. Candidates may come to the attention of the nominating and governance committee through current board members, management, professional search firms, stockholders or other persons. The nominating and governance committee uses the same criteria for evaluating candidates regardless of the source of the referral or recommendation. With respect to Mr. Yip, who was appointed to the board in November 2021, he was recommended to the committee by a third-party search firm.

The nominating and governance committee will consider nominees proposed by our stockholders in accordance with the provisions contained in our By-laws. Each notice of nomination submitted in this manner must contain the information specified in our By-laws, including, but not limited to, information with respect to the beneficial ownership

 

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of our common stock or derivative securities that have a value associated with our common stock held by the proposing stockholder and its associates and any voting or similar agreement the proposing stockholder has entered into with respect to our common stock. To be timely, the notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the date of the prior year’s annual meeting of stockholders. If the annual meeting of stockholders is advanced by more than 30 days, or delayed by more than 60 days, from the anniversary of the preceding year’s annual meeting of stockholders, or if no annual meeting of stockholders was held in the preceding year, notice by the stockholder, to be timely, must be received no earlier than the 120th day prior to the annual meeting of stockholders and no later than the later of (1) the 90th day prior to the annual meeting of stockholders and (2) the tenth day following the day on which we notify stockholders of the date of the annual meeting of stockholders, either by mail or other public disclosure.

The foregoing description of the advance notice provisions of our By-laws is a summary and is qualified in its entirety by reference to the full text of our By-laws. Accordingly, we advise you to review our By-laws for additional stipulations relating to the process for nominating directors, including advance notice of director nominations and stockholder proposals. See also “Additional Information—Submission of Stockholder Proposals at Next Year’s Annual Meeting.”

Board Tenure and Diversity

As noted above, consistent with the Company’s Corporate Governance Guidelines, the nominating and governance committee seeks director candidates from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise. In addition, in furtherance of the Company’s continuing commitment to board diversity, the Corporate Governance Guidelines of the Company reflect the policy of the nominating and governance committee that, when conducting a search to fill a vacancy on the Board, any candidate pool will include candidates who are diverse in terms of race, ethnicity and/or gender. The nominating and governance committee and the Board believe that considering diversity is consistent with the goal of creating a Board that best serves the needs of the Company and the interests of its stockholders, and it is one of the many factors that they consider when identifying individuals for Board membership.

In addition, we believe that diversity with respect to tenure is important in order to provide for both fresh perspectives and deep experience and knowledge of the Company. Therefore, we aim to maintain an appropriate balance of tenure across our directors. In furtherance of the Board’s active role in Board succession planning, the Board has appointed six new directors since 2018.

The composition of our Board reflects those efforts and the importance of diversity to the Board. Of our eight director nominees:

 

LOGO    LOGO

 

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LOGO

Board Structure and Operations

Composition of Our Board of Directors

In accordance with our Certificate of Incorporation and By-laws, the number of directors on our board is determined from time to time by our board of directors and is currently a nine-member board. Each director elected or appointed to the board will hold office for a term expiring at the annual meeting of stockholders following his or her election or appointment and until his or her successor has been duly elected and qualified, or until his or her earlier death, disqualification, resignation or removal. Subject to the special rights of the holders of one or more series of preferred stock, vacancies and newly created directorships on the board of directors may be filled at any time by the remaining directors.

Board Leadership Structure

Our board of directors does not currently have a policy as to whether the role of Chairman of our board of directors and the Chief Executive Officer should be separate. Our board of directors believes that the Company and its stockholders are best served by maintaining the flexibility to determine whether the Chairman and Chief Executive Officer positions should be separated or combined at a given point in time in order to provide appropriate leadership for us at that time. In addition, our Corporate Governance Guidelines provide that, in order to maintain the independent integrity of our board of directors, if the Chairman of the board is not an independent director, the board of directors may appoint an independent director as lead director.

The board of directors understands that no single approach to board leadership is universally accepted and that the appropriate leadership structure may vary based on several factors, such as a company’s size, industry, operations, history and culture. Accordingly, our board of directors, with the assistance of the nominating and governance committee, assesses its leadership structure in light of these factors and the current environment to achieve the optimal model for us and for our stockholders. The board has determined that, at this time, it is in our and our stockholders’ best interests that our President and Chief Executive Officer serve as Chairman and that Peter Lane serve as our lead independent director with such role and responsibilities as set forth our Corporate Governance Guidelines, including presiding at all meetings at which the Chairman of the board is not present, as well as at all executive sessions of the independent directors.

The board of directors believes that Ms. Palmer’s dual role is appropriate, given her extensive industry experience, as well as the depth and breadth of her institutional knowledge of the Company’s business, having served at length in a leadership position at the Company and on our board of directors. The board of directors further believes that this combined role of Chairman and Chief Executive Officer, counterbalanced by a lead independent director, is most suitable for us at this time and is in the best interest of our stockholders because it provides the optimal balance between independent oversight of management and unified leadership (i.e., the appropriate balance of authority between those persons charged with overseeing the Company and those who manage it on a day-to-day basis), promotes the development and execution of our strategy and facilitates the flow of information between management and the board of directors, which are essential to effective corporate governance.

 

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Board’s Role in Risk Oversight

Our board of directors exercises oversight of risk management consistent with its duties to the Company and its subsidiaries.

The audit committee is responsible for discussing with management our major financial, credit, liquidity and other risk exposures, as well as our risk assessment and risk management policies. The audit committee works directly with members of senior management and our internal audit staff to review and assess our risk management initiatives, including our compliance programs and cybersecurity initiatives, and reports as appropriate to the board. In addition, the audit committee meets as appropriate (1) as a committee to discuss our risk management guidelines and policies and risk exposures and (2) with our independent auditors to review our internal control environment and other risk exposures.

The compensation committee oversees the management of risks relating to our executive compensation programs and employee benefit plans. In the fulfillment of its duties, the compensation committee reviews at least annually our executive compensation programs, meets regularly with management to understand the financial, human resources and stockholder implications of compensation decisions and reports as appropriate to the board.

The board of directors as a whole also engages in the oversight of risk in various ways.

 

 

During the course of each year, the board of directors reviews the structure and operation of various departments and functions of our company, including its risk management and internal audit functions. In these reviews, the board of directors discusses with management the risks affecting those departments and functions and management’s approaches to mitigating those risks.

 

 

The board of directors reviews and approves each year’s management operating plan. These reviews cover risks that could affect the management operating plan and measures to cope with those risks.

 

 

In its review and approval of our annual reports on Form 10-K, the board of directors reviews our business and related risks, including as described in the “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the document. The audit committee updates this review quarterly in connection with the preparation of our quarterly reports on Form 10-Q.

 

 

Management must obtain the approval of the board of directors before proceeding with any land acquisition above a pre-established threshold. When the board of directors reviews particular transactions and initiatives that require board approval, or that otherwise merit the board of directors’ involvement, the board of directors generally includes related risk analysis and mitigation plans among the matters addressed with management.

In addition to the foregoing, the Company has an enterprise risk management (“ERM”) committee. The ERM committee consists of members of our management team who work with other key members of management to identify, monitor and evaluate the Company’s risks and develop an approach to address and mitigate each identified risk. Each quarter, and more frequently, if necessary, the ERM committee reports its findings and recommendations to the audit committee, which then reports to the board of directors.

As part of its risk oversight regarding cybersecurity, the ERM committee works with the Company’s Chief Information Officer and the Company’s Cyber-Risk Management Subcommittee (composed of the heads of the Company’s information technology, internal audit and risk management groups) to review on a quarterly basis, or more frequently as necessary, any cyber incidents and the results from the Company’s security self-audits. This cybersecurity evaluation forms a part of the ERM committee’s quarterly reports to the audit committee and the audit committee’s quarterly reports to the board of directors. Our board of directors also receives on an annual basis, or more frequently as necessary, a report from the Company’s Chief Information Officer and/or the Vice President of Information Technology regarding cyber risk matters affecting the Company.

The day-to-day identification and management of risk is the responsibility of our management. As market conditions, industry practices, regulatory requirements and the demands of our business evolve, management and the board of directors intend to respond with appropriate adaptations to risk management and oversight.

Majority Voting and Director Resignation Policy

In December 2021, our board of directors, following its strategic review of our corporate governance program, practices, and policies and the recommendation of our nominating and governance committee, amended and restated

 

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our By-laws to provide, among other things, that director nominees in uncontested elections shall be elected by the affirmative vote of a majority of the votes cast in respect of the shares present in person or represented by proxy at any meeting of stockholders for the election of directors (meaning the number of shares voted for a nominee for director must exceed the total number of shares voted against such nominee for director, with abstentions and broker non-votes not counted as a vote cast either for or against that nominee). In connection with the implementation of this majority vote standard, our board of directors also amended the Company’s Corporate Governance Guidelines to require each incumbent nominee who does not receive the requisite majority vote in an uncontested election to promptly offer to tender her or his resignation following certification of the stockholder vote. The board will then decide whether to accept the resignation, based on the recommendation of the nominating and governance committee, within 90 days following certification of the stockholder vote and will disclose its determination and its reasoning in a filing with the Securities and Exchange Commission. Any director who offers a resignation will not participate in the consideration by the nominating and governance committee or the board concerning whether to accept the offered resignation.

Human Capital

As of December 31, 2021, we employed approximately 3,000 full-time equivalent persons. Of these, approximately 2,500 were engaged in corporate and homebuilding operations, and the remaining approximately 500 were engaged in financial services. As of December 31, 2021, none of our employees were covered by collective bargaining agreements. We act solely as a general contractor, and all construction operations are supervised by our project managers and field superintendents who manage third party subcontractors. We use independent consultants and contractors for some architectural, engineering, advertising and legal services, and we strive to maintain good relationships with our subcontractors and independent consultants and contractors.

The people who work for our company are our most valuable resources and are critical to our continued success and execution of our strategies. Our People Services team focuses on attracting, promoting and retaining qualified employees with the expertise needed to manage and support our operations. Our top division and regional leaders average over seven years of tenure with us. In addition, our executive leadership who are responsible for setting our overall strategy average approximately 14 years with us, and many of them have worked their entire careers in the homebuilding industry.

To attract and retain top talent in our industry, we offer our employees a broad range of company-paid benefits and highly competitive compensation packages. Our employees are eligible for medical, dental and vision insurance, a savings/retirement plan, life and disability insurance, various wellness programs and tuition reimbursement, along with other optional benefits designed to meet individual needs. We engage third party compensation and benefits consulting firms to evaluate our programs and benchmark them against our peers. We believe it is essential to provide opportunities for growth and development to recruit top talent in the labor environment. We offer over 5,000 online courses through our learning system, as well as various leadership programs designed for those in different stages of their leadership journey.

We believe in recognizing and promoting future leaders from within our organization and making diversity, equity, and inclusion (“DEI”) an ongoing important priority. We provide courses which focus on adherence to company policies on DEI, and our leadership team hosts town hall meetings within the organization to ensure employees have a voice, awareness, and commitment to DEI. In addition, we have established subcommittees consisting of diverse team members who meet quarterly to help inform our National DEI Committee’s agenda, as well as our overall DEI strategy. Our leadership team is committed to creating a collaborative and inclusive work environment and continues to develop initiatives, policies and procedures to foster greater DEI. At December 31, 2021, our workforce consisted of approximately 46% females and of these 19% were in managerial roles. The Company has and will continue to demonstrate that there is an open door and a path to leadership for all team members at any level of our company. Accordingly, we are proud to have been included for the fourth consecutive year as one of only 418 companies, and the only U.S. homebuilder, on the 2022 Bloomberg Gender-Equality Index (GEI), fostering greater transparency and an inclusive work environment in a traditionally male-dominated industry.

The safety of our employees, customers, and third party vendors is one of management’s top priorities. Since the onset of the COVID-19 pandemic, our leadership team has utilized a COVID Task Force which continues to meet regularly to discuss, among other things, recent infection and related trends and the latest Center for Disease Control recommendations. The Task Force determines the appropriate protocols and procedures to maintain health and safety within the organization and with our customers and trade partners. We continue to review and adjust our protocols and

 

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procedures to ensure the safety of all parties as well as to ensure all of our locations are operating within applicable local, state, and national guidelines and mandates.

Meetings of our Board of Directors     

Our board of directors and its committees meet periodically during the year, hold special meetings as needed and act by written consent from time to time as deemed appropriate. During 2021, our board of directors met six times.

During 2021, no incumbent director attended fewer than 75% of the aggregate of (a) the total number of meetings of the board of directors and (b) the total number of meetings held by all committees of the board of directors on which such director served.

Each of our directors is encouraged, but is not required, to attend our annual meetings of stockholders. All of our then serving directors attended our 2021 annual meeting of stockholders.

Executive Sessions of our Board of Directors

Generally, an executive session of the independent directors is held in conjunction with each regularly scheduled board meeting and at other times as deemed appropriate. Our lead independent director presides over such executive sessions.

Committees of Our Board of Directors

Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and governance committee. Each of the standing committees operates pursuant to a written charter, which is available on our corporate website at www.taylormorrison.com on the Investor Relations page under the category “Corporate Governance.” The following is a brief description of our committees, including their membership and responsibilities.

Audit Committee

Our audit committee assists the board in fulfilling its responsibilities by overseeing, among other things, (1) the integrity of financial information and other information provided to stockholders, investors and others; (2) the performance of our internal audit function and systems of internal controls; (3) our compliance with legal and regulatory requirements; and (4) risk management and oversight of our ERM committee. The audit committee also has direct responsibility for the appointment, compensation, retention (including termination) and oversight of our independent auditors and is responsible for the preparation of an audit committee report to be included in our annual proxy statement as required by the SEC. The audit committee also reviews and approves related person transactions in accordance with our Related Person Transaction Policy. See “Certain Relationships and Related Person Transactions–Related Person Transaction Policy.” During 2021, the audit committee met nine times.

As of the date of this Proxy Statement, our audit committee was comprised of Mr. Merritt (Chair), Ms. Mariucci and Ms. Warren. Under NYSE rules and SEC requirements, our audit committee must be comprised entirely of independent directors. Our board of directors has determined that each member of our audit committee has the financial literacy required by NYSE rules, is “independent” as defined under the independence requirements of the NYSE and the SEC applicable to audit committee members and qualifies as an “audit committee financial expert” as that term is defined under SEC rules. Information about our audit committee members’ past business and educational experience is included under the caption “Proposal 1: Election of Directors.”

Compensation Committee

Our compensation committee, among other things, reviews and recommends policies and plans relating to the compensation and benefits of our directors, employees and certain other persons providing services to our Company, and is responsible for approving the compensation of our Chief Executive Officer and other executive officers. Our compensation committee also administers our clawback policies and stock ownership guidelines, as well as our incentive plans, our annual bonus plan and other benefit programs. The compensation committee has delegated

 

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authority to our Chief Executive Officer to issue equity awards to employees other than to executive officers and certain other senior members of our management. If at any time the compensation committee includes a member who is not a “non-employee director” within the meaning of Rule 16b-3 under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, then either a subcommittee comprised entirely of individuals who are non-employee directors or the board of directors will approve any grants of equity-based compensation made to any individual who is subject to Section 16 of the Exchange Act. The compensation committee has the sole authority to retain and terminate any compensation consultant to assist in the evaluation of employee compensation and to approve the consultant’s fees and other terms and conditions of the consultant’s retention. During 2021, the compensation committee met five times.

As of the date of this Proxy Statement, our compensation committee was comprised of Ms. Mariucci (Chair), Mr. Hunt, Mr. Lane and Ms. Owen. Under NYSE rules, our compensation committee must be comprised entirely of independent directors. Our board of directors has determined that each member of our compensation committee is “independent” as defined under the independence requirements of the NYSE applicable to compensation committee members.

For additional discussion of the processes and procedures the compensation committee has used for the consideration and determination of executive officer and director compensation, please see “Compensation Discussion and Analysis.”

Nominating and Governance Committee

Our nominating and governance committee, among other things, provides assistance to the board of directors in identifying and recommending individuals qualified to serve as directors of our Company, reviews the composition of the board of directors and periodically evaluates the performance of the board of directors and its committees. The nominating and governance committee also recommends our various board committee memberships based upon, among other considerations, a director’s available time commitment, applicable regulatory considerations, background and/or the skill set it deems appropriate to adequately perform the responsibilities of the applicable committee. In addition, the nominating and governance committee develops and recommends corporate governance policies and procedures for us, including our Corporate Governance Guidelines, and monitors and reviews compliance with those policies. The nominating and governance committee is also responsible for reviewing and overseeing the overall adequacy of the Company’s ESG risk management, strategy, initiatives, and policies, including communications with employees, investors, and other stakeholders of the Company with respect to such ESG matters. During 2021, the nominating and governance committee met three times.

As of the date of this Proxy Statement, our nominating and governance committee was comprised of Mr. Lane (Chair), Mr. Merritt and Mr. Yip. Under NYSE rules, our nominating and governance committee must be comprised entirely of independent directors. Our board of directors has determined that each of Messrs. Lane, Merritt and Yip are “independent” as defined under the independence requirements of the NYSE applicable to nominating and governance committee members.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee in 2021 was, at any time during 2021 or at any other time, an officer or employee of the Company, and none had or has any relationships with us that are required to be disclosed under Item 404 of Regulation S-K. None of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during 2021.

Corporate Governance Guidelines and Code of Conduct and Ethics

Our board of directors has adopted Corporate Governance Guidelines and a Code of Conduct and Ethics that are applicable to all members of our board of directors, executive officers and employees. We have posted these documents on the Investor Relations page of our corporate website at www.taylormorrison.com under the category “Corporate Governance.” We intend to post amendments to or waivers of, if any, certain provisions of our Code of Conduct and Ethics (to the extent applicable to our directors, our executive officers, including our principal executive officer and principal financial officer, or our principal accounting officer or controller, or persons performing similar functions) at this location on our website.

 

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Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors, officers and beneficial holders of more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in such ownership.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations from our executive officers and directors that no other reports were required, all required reports under Section 16(a) of the Exchange Act of our directors, executive officers and beneficial holders of more than 10% of our common stock were timely filed since the beginning of 2021, except that one filing was made late on behalf of Darrell Sherman to report a charitable gift of common stock.

Anti-Hedging Policy

We have a securities trading policy that sets forth guidelines and restrictions on transactions involving our stock, which are applicable to our employees, including our executive officers, and our directors. Our policy prohibits hedging, including, among other things, purchases of stock on margin, calls or similar options on Company stock or from selling our stock short. These types of transactions would allow employees to own Company stock without the full risks and rewards of ownership. When that occurs, employees or directors may no longer have the same objectives as our other stockholders and, therefore, such transactions involving our stock are prohibited.

ESG Report

Our Board has delegated oversight responsibility over the Company’s corporate responsibility matters to the nominating and governance committee. In this capacity, the nominating and governance committee reviews and considers the Company’s policies and practices relating to environmental stewardship, corporate social responsibility and other public policy issues significant to the Company, including as documented in the Company’s corporate responsibility report.

The Company published its inaugural ESG report in April 2019 and published its latest report in April 2022. The reports demonstrate the Company’s commitment to integrating sustainable values into all aspects of its business and are intended to showcase in a single format how the Company makes corporate responsibility core to its business. The reports reference the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) standards in several instances spanning environmental, social and governance performance indicators. The reports signal a significant advance in the Company’s ESG reporting and transparency efforts. A copy of our most recent ESG report is available on our company website at http://investors.taylormorrison.com/financial-reports under “ESG Reports.” The information contained on or accessible through the Taylor Morrison website, including the Company’s ESG report, is not considered part of this proxy statement. Further inquiries about our ESG practices and policies can be directed to ESG@taylormorrison.com.

 

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    DIRECTOR COMPENSATION  

 

Director Compensation

Annual Compensation

Directors who are our employees are not separately compensated by us for their service on our board of directors. For our other directors, referred to collectively as “non-employee directors,” we pay an annual cash retainer for their service on our board, which is payable to such directors in quarterly installments in arrears. The amount of the annual cash retainer depends on whether the director serves as a member or as chairman on any committees of the board of directors.

For 2021, our non-employee directors were entitled to receive the following compensation:

 

   

A base annual cash retainer of $75,000 through September 30, 2021 which was increased to $85,000 on October 1, 2021.

 

   

An additional $35,000 annual cash retainer for the Lead Independent Director of our board of directors.

 

   

An additional $40,000, $30,000 and $20,000 annual cash retainer for the chairman of the audit committee, compensation committee and nominating and governance committee, respectively.

 

   

An additional $10,000 annual cash retainer for each other member of the audit committee, compensation committee and nominating and governance committee, respectively. The annual retainer for members of the audit committee and compensation committee increased to $12,000 on October 1, 2021.

 

   

In addition to cash retainers, our board of directors and compensation committee have determined that it is important to include an equity component in director compensation, because they believe it is vital for our directors who receive compensation from us to build and maintain a long-term ownership position in our business, to further align their financial interests with those of our stockholders and to encourage the creation of long-term value. In furtherance of this objective, each non-employee director receives an annual equity award of restricted stock units (“RSUs”) or, if they so elect as described below, deferred stock units (“DSUs”). For 2021, each non-employee director received an RSU or DSU grant with a grant date fair value of $140,000. Beginning in 2022, the grant date fair value of this grant will be $165,000. The number of shares subject to the RSU or DSU grant is determined by dividing the aggregate grant date fair value by the closing price of our common stock on the grant date. The annual RSU or DSU award vests in full on the first anniversary of the grant date, subject to the director’s continued service through such vesting date. Annual equity awards to our non-employee directors are typically granted following our annual stockholder meeting.

We also reimburse each of our directors for reasonable travel and other related expenses incurred to attend board and committee meetings.

Deferred Compensation Plan

Pursuant to the Taylor Morrison Home Corporation Non-Employee Director Deferred Compensation Plan (the “Director Plan”), non-employee directors may, for any calendar year, irrevocably elect to defer (i) receipt of shares of our common stock the director would have received upon vesting of RSUs granted as an annual equity award and (ii) receipt of all or a portion of their cash compensation earned for their service on our board of directors, in each case, in the form of unfunded DSUs under the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (as amended and restated from time to time, the “2013 Omnibus Plan”). The purpose of the Director Plan is to enhance our ability to attract and retain non-employee directors with training, experience and ability who will promote our interests and to directly align the interests of such non-employee directors with the interests of our stockholders. Other than providing for deferred settlement and receipt of shares, DSUs in respect of deferred equity awards are subject to the same vesting conditions as RSUs granted as annual equity awards and vest in full on the first anniversary of the date the annual RSUs are granted, subject to the director’s continued service on such vesting date.

DSUs in respect of the director’s deferred cash compensation are fully vested as of the grant date and settle in a number of shares of our common stock equal to the amount of cash compensation deferred divided by the closing price of our common stock on the date the cash compensation is deferred. DSUs and dividend equivalents thereon have no voting rights until the common stock underlying such DSUs are delivered and are settled in shares of common stock upon the earlier of a separation from service or a change in control.

 

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Stock Retention Policy

Our board of directors has adopted a stock retention policy that requires non-employee directors to own shares of our common stock having an aggregate value no less than three times such director’s annual base cash retainer. Generally, non-employee directors must achieve the required minimum retention level within three years from the date of their election to our board of directors. Beginning October 1, 2021 the required minimum retention value was increased to no less than five times such director’s annual base cash retainer which should be achieved within five years. As of December 31, 2021, all of our non-employee directors either met the retention level or are on track to meet the retention level within the required time frame.

2021 Director Compensation Table

The following table summarizes the compensation earned by, or awarded or paid to, those of our directors who, for the year ended December 31, 2021, were compensated for their service as directors. Ms. Palmer, our Chairman and CEO, is not compensated for her service as a director.

 

   Name    Fees Earned
or Paid in
Cash
($)(1)
     Stock
Awards
($)(2)(3)
     Total
($)
 

Jeffry L. Flake

   $   75,889      $ 139,990      $ 215,879  

Gary H. Hunt

   $   88,000      $ 139,990      $ 227,990  

Peter Lane

   $ 143,000      $ 139,990      $ 282,990  

William H. Lyon

   $   77,500      $ 139,990      $ 217,490  

Anne L. Mariucci

          $ 257,969      $ 257,969  

David C. Merritt

   $ 127,500      $ 139,990      $ 267,490  

Andrea Owen

   $   88,000      $ 139,990      $ 227,990  

Denise F. Warren

   $   88,000      $ 139,990      $ 227,990  

Christopher Yip

 

   $

 

  11,875

 

 

 

   $

 

           0

 

 

 

   $

 

  11,875

 

 

 

Notes:

 

(1)

For 2021, Mr. Merritt, Ms. Mariucci and Mr. Lane served as the chairman of our audit committee, compensation committee and nominating and governance committee, respectively. On November 16, 2021, Mr. Flake resigned from the board or directors and Mr. Yip was appointed to the board of directors. For 2021, Ms. Mariucci elected to defer all of her 2021 earned cash compensation under the Director Plan and instead received fully vested DSUs, the value of which is reflected in the “Stock Awards” column. The following table sets forth retainer fees earned by our directors in 2021 (prorated for partial year service, if applicable).:

 

   Name    Annual      Lead
Independent
Director
     Audit
Committee
     Compensation
Committee
    

    Nominating and    

    Governance    

    Committee    

Jeffry L. Flake

   $ 67,111                           $ 8,778  

Gary H. Hunt

   $ 77,500                    $ 10,500         

Peter Lane

   $ 77,500      $ 35,000             $ 10,500      $ 20,000  

William H. Lyon

   $ 77,500                              

Anne L. Mariucci

   $ 77,519             $ 10,486      $ 29,974         

David C. Merritt

   $ 77,500             $ 40,000             $ 10,000  

Andrea Owen

   $ 77,500                    $ 10,500         

Denise F. Warren

   $ 77,500             $ 10,500                

Christopher Yip

   $ 10,625                                 1,250  

 

(2)

On May 26, 2021, Messrs. Flake and Lyon and Ms. Mariucci received an annual equity grant of 4,739 RSUs, each valued at $29.54 per share, which was the closing sale price of our common stock on the grant date. Messrs. Hunt, Lane and Merritt and Mses. Owen and Warren each elected to defer all of his or her 2021 annual RSU award under the Director Plan and, instead, each received on May 26, 2021, an annual equity grant of 4,739 DSUs valued at $29.54 per share, which was the closing sale price of our common stock on the grant date. In addition, Ms. Mariucci elected to defer all of her 2021 earned cash compensation under the Director Plan and instead

 

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received fully vested DSUs the value of which is reflected in the “Stock Awards” column. The amount in this column reflects the aggregate grant date fair value of the RSU or DSU award, as applicable, calculated in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The assumptions used in the valuation of stock-based awards are discussed in Note 12 to our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

(3)

As of December 31, 2021, the aggregate number of outstanding stock options, RSUs and DSUs, in each case as described below, subject to awards held by each of our non-employee directors were as set forth in the table below.

 

  Name      Options
(#)
       RSUs
(#)
       DSUs 
(#) 

Jeffry L. Flake(a)

                          

Gary H. Hunt(c)

                         11,963  

Peter Lane(c)

                         57,910  

William H. Lyon(a)

                4,739           

Anne L. Mariucci(a)(b)(c)

       9,960          4,739          17,062  

David C. Merritt(b)(c)

       12,525                   46,304  

Andrea Owen(c)

                         22,603  

Denise F. Warren(c)

 

                        

 

18,932

 

 

 

 

  (a)

The RSUs reported for Mr. Lyon and Ms. Mariucci were unvested as of December 31, 2021 and are scheduled to vest on May 26, 2022. Mr. Flake forfeited his unvested RSUs on November 16, 2021, upon his resignation from the board of directors.

 

  (b)

The stock options reported for each of Ms. Mariucci and Mr. Merritt are fully vested and exercisable and have an exercise price per share of our common stock equal to $25.10 and $19.96, respectively.

 

  (c)

Of the DSUs reported for each of Messrs. Hunt, Lane and Merritt and Mses. Mariucci, Owen and Warren, 4,739 were unvested as of December 31, 2021, and are scheduled to vest on May 26, 2022.

 

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  EXECUTIVE OFFICERS    

 

Executive Officers

The executive officers of the Company as of the date hereof are listed below.

 

  Name    Age   Position

Sheryl D. Palmer

  

60

 

President, Chief Executive Officer and Chairman of the Board of Directors

Louis Steffens

  

54

 

Executive Vice President and Chief Financial Officer

Darrell C. Sherman

  

57

 

Executive Vice President, Chief Legal Officer and Secretary

 

 

    LOGO

 SHERYL D. PALMER

  

 

Ms. Palmer became our predecessor’s President and Chief Executive Officer and a member of its board of directors in August 2007 after previously serving as Executive Vice President for the West Region of Morrison Homes. She has also served as our Chairman of the Board since May 2017. Her previous experience includes senior leadership roles at Blackhawk Corp. and Pulte Homes/Del Webb Corporation, each homebuilders and developers of retirement communities, where she last held the title of Nevada Area President at Pulte/Del Webb Corporation and Division President at Blackhawk Corp. Ms. Palmer brings over 35 years of cross-functional building experience to her position, including leadership in land acquisition, sales and marketing, development and operations management. In addition to her employment with the Company, Ms. Palmer currently serves as a member of the board of directors and the audit and governance committees of OfferPad Solutions Inc, a leading publicly traded tech-enabled platform for buying and selling residential real estate, and as a member of the board of directors and the audit and compensation committees of Interface, Inc., a leading publicly traded global manufacturer of modular carpet (Ms. Palmer will not stand for re-election at Interface, Inc.’s upcoming annual shareholder meeting). In addition, Ms. Palmer is a member of the board of directors and executive committee of HomeAid America, a national non-profit that works with the local building industry to build and renovate multi-unit shelters for homeless families, the Chairman of the Board of Directors for Building Talent Foundation, and a member of the Executive Committee of the Joint Center for Housing Studies at Harvard University.

 

    LOGO

 LOUIS STEFFENS

  

 

Mr. Steffens became our Executive Vice President and Chief Financial Officer effective January 1, 2022 following the retirement of C. David Cone on December 31, 2021. Mr. Steffens joined the company in 2007 and most recently oversaw the organization’s mergers and acquisitions and has been responsible for implementing short and long-term strategic initiatives. Through his tenure, Mr. Steffens has led the Company through six successful acquisitions significantly expanding the company’s portfolio and positioning the Company as one of the largest homebuilders in the nation. Mr. Steffens previously served as the Company’s Regional President and Area President in the organization’s Central, Southeast and Florida Areas, where he oversaw capital allocation strategies for such areas. Mr. Steffens has more than 30 years of experience in the homebuilding industry, having worked for two other national homebuilders, Pulte Homes/Del Webb Corporation and Beazer Homes, where he served in various leadership roles in Finance and Operations. Mr. Steffens started his career as a Senior Auditor with Coopers & Lybrand, prior to their merger with Price Waterhouse forming PricewaterhouseCoopers. He holds a bachelor’s degree in accounting from Michigan State University and is a Certified Public Accountant (inactive).

 

    LOGO

 DARRELL C. SHERMAN

  

 

Mr. Sherman is our Executive Vice President, Chief Legal Officer and Secretary and has served as chief counsel to the Company since June 2009. Mr. Sherman brings over 20 years of experience in the homebuilding industry, having served in senior legal roles at Centex Homes and Pulte Homes/Del Webb Corporation. Prior to joining the homebuilding industry, Mr. Sherman was a finance and real estate lawyer at Snell & Wilmer L.L.P. He also served as an Administrative Law Judge appointed by Arizona Governor Fife Symington, hearing appeals from the Arizona Department of Environmental Quality and as a member of the U.S. Senate Judicial Advisory Committee, recommending the appointment of U.S. District Court judges. He holds a B.A. in Economics with university honors and a J.D., both from Brigham Young University, where he was a member of the BYU Law Review. He is a member of the State Bar of Arizona and the American Bar Association and admitted to the Arizona and U.S. Supreme Courts.

 

 

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    COMPENSATION DISCUSSION AND ANALYSIS  

 

Compensation Discussion and Analysis

This compensation discussion and analysis discusses our executive compensation programs for our named executive officers for our fiscal year ending December 31, 2021 and includes a discussion of our compensation objectives and philosophy and the material elements of compensation earned by, or awarded or paid to, our named executive officers in the year. This section also describes processes we use in reaching compensation decisions and is intended to provide context for understanding the amounts in the tabular disclosure that follows. We have also highlighted our corporate results in 2021 and how these results led to the executive compensation we paid for the year. In addition, we highlight key attributes of our compensation programs for our named executive officers.

2021 was the product of years of acquisition activity which culminated into us delivering very strong results compared to 2020. Highlights for 2021 include:

 

 

Generated $7.5 billion in total revenue and $7.2 billion in home closings revenue, reflecting increases of 22.4% and 22.3%, respectively from 2020;

 

 

Awarded America’s Most Trusted Home Builder® by Lifestory Research for seventh consecutive year;

 

 

Ranked #452 on the Fortune 500 List;

 

 

Honored with Bloomberg’s Gender-Equality Index award for the fourth consecutive year;

 

 

Closed sales of nearly 13,700 homes, an increase of 9.4% more homes compared to 2020; and

 

 

Sheryl Palmer, our CEO, was recognized with the 2021 Hearthstone BUILDER Humanitarian Award.

Consistent with the pay-for-performance and stockholder alignment objectives of our compensation philosophy, which are discussed in further detail below in this compensation discussion and analysis, our compensation programs for 2021 have the following attributes:

 

 

A balanced mix of short-term cash compensation and long-term equity-based compensation;

 

 

Use of multiple performance measures with no guaranteed incentive payouts;

 

 

Payouts in respect of performance awards under our executive compensation programs are capped;

 

 

A majority of the compensation paid to our executive officers is performance-based;

 

 

Limitations on the amount of awards that can be made under our equity incentive plans;

 

 

All programs are designed and overseen by an independent compensation committee that retains their own independent advisor;

 

 

An anti-hedging policy applicable to all employees (including our executive officers and directors) that prohibits purchases of our stock on margin, calls or similar options on our stock or selling our stock short;

 

 

Stock ownership and retention guidelines for our executive officers;

 

 

An appropriate level of severance protection to ensure continuity of service;

 

 

No single-trigger change in control features in any of our programs;

 

 

No gross ups for any excise or other penalty taxes related to compensation paid;

 

 

Forfeiture of equity awards upon violation of certain post-employment restrictive covenants;

 

 

Clawback of certain cash and equity incentive compensation; and

 

 

A modest use of perquisites, which do not make up a material portion of the compensation and benefits provided to our named executive officers.

 

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Prior Year’s Annual Meeting of Stockholders—Advisory Vote to Approve the Compensation of our Named Executive Officers

At our 2021 annual meeting of stockholders, more than 97% of the shares voted were cast in favor of the 2020 compensation of our named executive officers and our compensation philosophy, policies and practices. We were pleased to receive this strong support and took it into account as part of our annual analysis of the effectiveness of our compensation programs for our named executive officers.

We recognize that the business and executive compensation environments continue to evolve, and we are committed to having compensation programs and practices that support our business objectives, promote good corporate governance and align executive pay with our performance. The compensation committee will continue to consider the results from this year’s and future advisory stockholder votes regarding our executive compensation programs. See “Proposal 2: Advisory Vote to Approve the Compensation of our Named Executive Officers (Say on Pay)” for additional information.

Our Named Executive Officers for 2021

 

President, Chief Executive Officer and Chairman of the Board of Directors

  Sheryl D. Palmer

Executive Vice President and Chief Financial Officer

  C. David Cone

Executive Vice President, Chief Legal Officer and Secretary

  Darrell C. Sherman

Mr. Cone served as our Executive Vice President and Chief Financial Officer from January 1, 2021 through December 31, 2021, and effective December 31, 2021 after nearly ten years in the role, retired from employment with the Company. In connection with Mr. Cone’s retirement, Mr. Steffens, who previously served as the Company’s President of Mergers and Acquisitions, was appointed by our board of directors to serve as the Company’s Executive Vice President and Chief Financial Officer, effective January 1, 2022.

Compensation Objectives and Philosophy

Our compensation programs reflect our philosophy to pay all of our executives, including our named executive officers, in ways that support our primary objectives of:

 

 

Encouraging a results-driven culture through a pay-for-performance structure;

 

 

Balancing long-term and short-term compensation and cash and equity-based compensation to ensure our executives are focused on the appropriate short-term financial budget goals and long-term strategic objectives;

 

 

Aligning executives’ interests with stockholder interests in creating long-term value for our stockholders;

 

 

Attracting, retaining and motivating key talent; and

 

 

Aligning total compensation levels with those paid by our direct competitors in the homebuilding sector as well as companies of comparable size and scope in other industries.

Our compensation structure is centered on a pay-for-performance philosophy, which is designed to align the interests of our executives and our stockholders, motivate our executives to achieve our targeted financial and other performance objectives and reward them for their achievements when those objectives are met. To help achieve these objectives, a significant portion of our executive officers’ compensation is at-risk and provided in the form of variable or performance-based compensation with upside potential for strong performance, as well as downside exposure for underperformance. We believe this is appropriate given our executive officers’ ability to influence our overall performance.

We recognize the need for varied incentives to retain talent and encourage both present and future performance. To that end, we seek to provide a balance between short-term incentives, such as cash compensation through our annual incentive plan, and long-term incentives, such as equity-based compensation, which encourages focus on long-term strategic objectives by linking compensation to the satisfaction of our long-term performance goals. Having a long-term compensation component is also consistent with the long-term horizon inherent in the homebuilding industry for the realization of our assets that span over multiple years. In light of such objectives, we have determined that a significant portion of total compensation would be delivered in the form of long-term equity-based compensation using a mix of stock options and restricted stock units, with both service-based and performance-based vesting.

 

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The overall level of total compensation for our executive officers is intended to be reasonable in relation to, and competitive with, the compensation paid by similarly situated peer leaders in the homebuilding industry, subject to variation for factors such as the individual’s experience, performance, duties, scope of responsibility, prior contributions and future potential contributions to our business. With these principles in mind, we structure our compensation programs as a competitive total pay package, which we believe allows us to attract, retain and motivate executives with the skill and knowledge we require and ensure the stability of our management team, which is vital to the success of our business. However, we do not have a policy of setting executive officer compensation levels within a fixed range of benchmarks of our peer companies.

Establishing and Evaluating Executive Compensation

Role of the Independent Compensation Consultant

For 2021, the compensation committee retained Semler Brossy Consulting Group, LLC (“Semler Brossy”) as its independent compensation consultant. Semler Brossy provided the compensation committee with market data on executive compensation levels and practices at our competitors and advised on trends and best practices in the areas of executive compensation, assisted the compensation committee in its review and evaluation of our compensation policies and practices, reviewed our compensation discussion and analysis and provided independent advice on director compensation. Semler Brossy does not provide any other services to us, except at the direction of the compensation committee. We did not have any other relationships with Semler Brossy, and the compensation committee determined that Semler Brossy was independent and the work it performed in 2021 raised no conflicts of interest with us. The compensation committee has the sole authority to retain or terminate advisors to the compensation committee that assist in the evaluation of the compensation to our executive officers and directors.

Process—Role of Officers and Compensation Committee

The compensation committee is responsible for all compensation decisions for our executive officers. Our Senior Vice President, Total Rewards works with Ms. Palmer and the Chairman of the compensation committee to establish compensation committee meeting agendas and provide various types of information, including interim progress against performance targets, information about other homebuilding companies or other topics requested by the compensation committee to assist the compensation committee in making its decisions.

The compensation committee, after consultation with Ms. Palmer as to executive officers other than herself, reviews and determines base salary, annual cash incentive bonuses and long-term incentive compensation levels for each executive officer. The compensation committee reviews and approves for each executive officer the annual base salary, annual bonus performance targets, annual bonuses payable based on achievement of pre-established, compensation committee approved annual performance criteria and targets and long-term incentive compensation awards (including review and approval of target grant values, equity award design/mix, vesting terms, etc.). Ms. Palmer’s compensation levels are established by the compensation committee in its sole discretion. Ms. Palmer does not have any role or authority in determining her own compensation and she is not present for deliberations or decisions regarding her compensation.

Process—Factors Considered in Setting Compensation

The compensation committee believes that compensation decisions for our executive officers are complex and require consideration of many factors, including the overall competitive market environment, industry compensation levels, the officer’s individual performance and the Company’s performance.

Market Data (Competitors and General Industry). As mentioned above, the compensation committee does not set compensation levels for our executive officers within a fixed range of benchmarks of our peer companies; however, the compensation committee reviews such peer company information and market data to better assess the range of compensation needed to attract, retain and motivate executive talent in our highly competitive industry.

In connection with setting compensation, the compensation committee reviews data from the annual proxy statements of publicly traded homebuilders, as well as data from other published compensation survey sources, including FMI Corporation and Equilar, for compensation levels and trends as well as data on all direct pay elements for executives and uses such information to guide its decisions. In 2021, the compensation committee reviewed

 

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compensation data for the following publicly traded homebuilding companies (our “peer group”) in connection with setting compensation for Ms. Palmer and Messrs. Cone and Sherman. No changes were made to the peer group in 2021:

 

  Beazer Homes USA Inc.

  

  Lennar Corporation

  

  PulteGroup Inc.

  D.R. Horton, Inc.

  

  M.D.C. Holdings Inc.

  

  Toll Brothers, Inc.

  Hovnanian Enterprises, Inc.

  

  Meritage Homes Corporation

  

  TRI Pointe Homes, Inc.

  KB Home

  

  M/I Homes, Inc.

  

  NVR, Inc.

Individual Performance. As mentioned above, in addition to considering market data, the compensation committee considers each executive officer’s individual performance in determining executive compensation levels, including the nature and scope of the executive’s responsibilities and the executive’s prior performance and expected future contributions. The compensation committee’s review of individual performance is general and subjective in nature and specific individual performance elements are tailored to the executive.

Company Performance. The compensation committee also considers the Company’s performance, financial plans and budget in setting executive officer compensation levels for any given year taking into account general economic challenges as well as any specific challenges facing our business.

The primary elements of our compensation structure are base salary, annual cash incentive bonuses, long-term equity-based incentive awards and certain employee benefits and perquisites. A brief description of the objectives of each principal element of our executive compensation programs for 2021 are summarized in the following table and described in more detail below.

Key Elements of Our Compensation Programs — Overview

 

  Compensation Element

  

Brief Description

  

Objectives

Base Salary

   Fixed compensation    Provide a competitive, fixed level of cash compensation to attract and retain talented and skilled executives

Annual Cash Incentive Bonuses

   Variable, performance-based cash compensation earned based on achieving pre-established annual goals   

Motivate executives to achieve or exceed our current-year financial goals and reward them for their achievements

 

Aid in retention of key executives in a highly competitive market for talent

Long-Term Incentives — Equity Based

   Variable, equity-based compensation to promote achievement of longer-term goals and align with shareholder value creation   

Align executives’ interests with those of our stockholders and encourage executive decision-making that maximizes growth and stockholder value creation over the long-term

 

Aid in retention of key executives and ensure continuity of management in a highly competitive market for talent

Employee Benefits and Perquisites (discussed below under “Other Program Attributes”)

  

Participation in all broad-based employee health and welfare programs and retirement plans

 

Employee benefits vary based on individual elections; auto allowance and certain commuting expense reimbursements are the only perquisites provided to our named executive officers

   Aid in retention of key executives in a highly competitive market for talent by providing overall benefits package competitive with industry peers

 

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Base Salary

The base salary component of executive officer compensation is intended to provide a competitive, stable level of minimum compensation to each executive officer commensurate with the executive’s role, experience and duties. The compensation committee annually reviews and approves base salaries for our executive officers based on several factors, including the individual’s experience, responsibilities, performance, expected future contribution, our expected financial performance and salaries of similarly situated executives of our public peers in the homebuilding industry and in general industries.

Based on its review of peer data, the compensation committee determined that no changes to the base salaries for our named executive officers were necessary for 2021. Accordingly, consistent with fiscal 2020, base salaries for Ms. Palmer, Mr. Cone and Mr. Sherman were $1,000,000, $575,000 and $500,000, respectively, for 2021.

Annual Cash Incentive Bonuses

The second component of executive officer compensation is annual cash incentive bonuses based on Company performance. Tying a portion of total compensation to annual Company performance permits us to adjust the performance measures each year to reflect changing objectives and those that may be of special importance for a particular year. Through our short-term incentive compensation program, we seek to provide an appropriate amount of pre-established short-term cash compensation that is at-risk and tied to the achievement of certain short-term performance goals. For 2021, our annual short-term cash compensation program included two components: our 2021 annual bonus program and our 2021 profit sharing bonus program. The 2021 annual bonus program was similar to our historic annual bonus program; however, for 2021 the compensation committee reduced the number of performance metrics and decreased the “stretch” (or maximum) attainment percentage to 150% of target. The second part of our short-term incentive compensation program was our 2021 profit sharing bonus program, which provided participants with an opportunity to receive a cash payment based on growth above certain home sales gross margin and earnings before taxes targets.

2021 Annual Bonus Program

Target Amounts. The compensation committee determined, following a review of peer data, that no changes to the target annual cash incentive bonus opportunities for our named executive officers were necessary for 2021. For 2021, the target and maximum annual cash incentive bonus opportunities (rounded to the nearest whole percent) set by the compensation committee for each of our named executive officers were as follows:

 

  Name    2021 Target Annual
Bonus as a Percentage
of Base Salary Paid in
2021
     2021 Maximum Annual
Bonus as a Percentage
of Base Salary Paid in
2021
 

Sheryl D. Palmer

  

 

200

  

 

300

C. David Cone

  

 

150

  

 

225

Darrell C. Sherman

  

 

150

  

 

225

The actual 2021 annual cash incentive bonus amounts were calculated based on a combination of objective performance measures and using the following formula:

 

2021 Base Salary Paid During Performance Period   x   Target Bonus Percentage   x  

Actual

Attainment

Percentage

  =  

Bonus

Payout

Our “Actual Attainment Percentage” is an aggregated measure of the attainment of specific financial and operational performance goals for the Company as a whole expressed in the table below as a percentage. These performance goals are based on corporate and business objectives and are not tied to individual performance. Each goal (1) has an associated “threshold” and “target” percentage attainment level and includes a “stretch” percentage attainment level, which represents the maximum award level, with straight-line interpolation for attainment between levels, and (2) is weighted to reflect the compensation committee’s assessment of the goal’s importance in relation to our overall business objectives. Specifically, the percentage attainment of each goal is applied to the weighting factor (itself a percentage), and these numbers are totaled to set the Actual Attainment Percentage for the applicable performance period.

 

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Establishing Performance Goals for 2021 Annual Bonus Program. The approach to goal setting for the 2021 annual bonus program involved a process of reviewing, among other things, our prior year’s financial performance and our short-term and long-term strategic objectives. The compensation committee also took into account the need for setting goals that are challenging yet reasonably achievable so as to provide a competitive pay package necessary for the retention of our talent. The target payout level was designed to be achievable with strong management performance and the stretch level was designed to encourage and reward our named executive officers for outstanding performance.

Achievement of Corporate Performance Goals. The 2021 annual bonus program performance goals applicable to Ms. Palmer, Mr. Cone and Mr. Sherman were based 100% on total Company performance. The total actual attainment percentage for the 2021 bonus program was 150% of target.

For the period commencing January 1, 2021 through December 31, 2021, the applicable corporate performance goals were as follows:

 

Performance Period: January 1, 2021 – December 31, 2021 Corporate Performance ($ in millions)  
Performance Goals    Weight     Threshold     Target     Stretch     Actual
Attainment
    Actual
  Attainment  
Percentage
 

Attainment level percentage

    

 

 

 

 

 

60

 

 

 

 

 

    100     150    

Order Book and Closings(1)

     50    

 

 

20,250

 

 

 

 

 

    21,250       22,250       22,813       150

Attainment level percentage

      

 

 

60

 

 

 

 

    100     150    

Home Sales Gross Margin(2)

     50    

 

18.0

 

 

    18.8     19.6     20.32     150

Actual Attainment Percentage Performance Period

                                          

 

 

 

 

150

 

 

 

 

(1)

“Order Book and Closings” for the performance period is calculated by adding the total number of closings from January through December plus the ending backlog for the current year.

 

(2)

“Home Sales Gross Margin” is calculated in accordance with GAAP.

In order for the bonus under our annual bonus program to pay out above threshold performance, a minimum Customer Satisfaction Score of 82% for the performance period had to be achieved. The “Customer Satisfaction Score” for the performance period is calculated by survey scores received from customers from December 2020 through January 2022. For 2021, the Customer Satisfaction Score achieved was 85.9%.

We selected each performance metric and goal in our 2021 annual bonus program to target performance across multiple levels of our business. The table below sets forth each of the performance metrics used in our 2021 bonus program and the objective for selecting such metric.

 

  Metric    Objectives

   Order Book and Closings

  

  An operational metric that measures our ability, and incentivizes our executives, to grow our core business

   Home Sales Gross Margin

  

  Encourages our executives to balance the price of our homes with the pace at which we sell and construct them

   Customer Satisfaction Score

  

  A measurement of customer experience

2021 Profit Sharing Bonus Program

For 2021, our compensation committee approved a profit sharing program to further motivate and to provide an additional meaningful compensation opportunity to our leadership team and senior operators, including our named executive officers for delivering extraordinary results by exceeding our profit and margin goals. Under the program, each of our named executive officers was eligible for a cash bonus based upon the Company’s achievement of certain performance targets, which in 2021 included earnings before taxes (EBT) and home sales gross margin. The EBT and home sales gross margin objectives were based on our annual growth objectives and approved by the compensation committee with input from members of our senior management at the beginning of the fiscal year. Under the profit sharing program, each named executive officer was eligible to receive an additional bonus equal to 125% of their

 

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annual target bonus opportunity under our 2021 annual bonus program if the Company achieved specified home sales gross margin and EBT performance goals. There is no payout under the 2021 profit sharing program if either the target home sales gross margin or the EBT performance goals are not achieved. The profit sharing program bonus opportunities for each of our named executive officers is set forth in the table below:

 

  Name    2021 Profit Sharing Program
Bonus Opportunity(1)
 

Sheryl D. Palmer

   $ 2,500,000  

C. David Cone

   $ 1,078,125  

Darrell C. Sherman

   $ 937,500  

 

  (1)

Calculated by multiplying annual rate of base salary for 2021, by annual target bonus percentage under the 2021 annual bonus program, by 125%.

For a participant to receive a bonus under the profit sharing program for 2021, the Company had to exceed its EBT plan target of $715 million by $95 million to over $810 million and realize a home sales gross margin greater than 19.6% (i.e., the performance necessary for stretch performance under our 2021 annual bonus program described above).

For 2021, the Company realized EBT of $878.9 million and a home sales gross margin of 20.32%, resulting in each of our named executive officers earning a bonus under the profit sharing program.

Bonus Payments

Actual cash incentive bonus amounts for each of our named executive officers for the performance period based on actual achievement of Company performance targets under both our annual bonus program and our profit sharing program are set forth below and paid on March 11, 2022.

 

     

2021 Annual Bonus Program

2021 Target Bonus Opportunity

 
  Executive Officer    Aggregate
Base Salary
Paid in
Performance
Period
($)
    % Base
Salary
    Annual
Target
Bonus
($)
 

Sheryl D Palmer

   $ 1,000,000       200   $ 2,000,000  

C. David Cone

   $ 575,000       150   $ 862,500  

Darrell C. Sherman

   $ 500,000       150   $ 750,000  
      
     

2021 Annual Bonus Program

2021 Bonuses Paid

 
  Executive Officer    Performance
Period
Actual
Attainment
Percentage
           Earned
Annual
Bonus ($)
 

Sheryl D Palmer

     150     $ 3,000,000  

C. David Cone

     150     $ 1,293,750  

Darrell C. Sherman

     150           $ 1,125,000  

Under our 2021 profit sharing program, our named executive officers earned were paid the following: Ms. Palmer—$2,500,000, Mr. Cone—$1,078,125 and Mr. Sherman $937,500.

Long-Term Incentives—Equity Based

Philosophy. As mentioned earlier, we believe that equity awards are an important component of our executive compensation programs. Equity compensation aligns our executives’ and stockholders’ interests by linking rewards with achievement of return to our stockholders based on our long-term growth plan. Our equity compensation programs are designed to foster a long-term commitment to us by our named executive officers, provide a balance to the short-term cash components of our compensation programs and reinforce our pay-for-performance structure.

 

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Overview. Equity-based compensation awards to our named executive officers in 2021 consisted of the following:

 

   

Options to purchase our common stock, upon satisfaction of service vesting conditions, granted under the 2013 Omnibus Plan. Stock options are intended to reward absolute stock appreciation and have no value unless the Company’s stock price increases above the stock price on the grant date;

 

   

Service-vesting RSUs, representing the right to receive, upon satisfaction of service vesting conditions, shares of our common stock, granted under the 2013 Omnibus Plan. The ultimate value of RSUs is tied to the future value of the Company’s stock price at future service-vesting dates, providing alignment with stockholder expectations for value creation over time. We also believe that service vesting RSUs provide a strong retention device for our key leaders; and

 

   

Performance-vesting RSUs, representing the right to receive, upon satisfaction of performance conditions, shares of our common stock, granted under the 2013 Omnibus Plan. These conditional RSUs may only be earned if the Company successfully executes on multi-year performance objectives that encourage long-term stockholder value creation and the named executive officer remains with the Company over the entire performance period.

A more detailed discussion of the terms of these awards follows.

Equity Awards

All equity awards issued to our named executive officers have been made pursuant to the terms of the 2013 Omnibus Plan. Awards granted under the 2013 Omnibus Plan are subject to the terms and conditions established by the compensation committee in the applicable award agreement and need not be the same for each participant. To date, all stock options granted under the 2013 Omnibus Plan have a term of ten years. Generally, equity awards are granted to our eligible employees, including our named executive officers, in connection with our annual award process. Equity awards are generally made in the first quarter of the year, on a consistent schedule shortly following the public release of our annual earnings.

2021 Equity Awards

The compensation committee determined that, like previous years, the annual equity grant for 2021 should include a mix of stock options and RSUs, a portion of which RSUs are subject to service vesting conditions and a portion of which are subject to performance vesting conditions. For 2021, the mix of equity awards remained highly performance-based thus providing alignment with stockholders on long-term value creation and also continuing to encourage retention.

In February 2021, the compensation committee approved annual equity awards for our employees, including our named executive officers. Based on recommendations from Semler Brossy, reviewing compensation best practices of public companies generally, reviewing compensation practices of our peer group, and consideration of other factors deemed appropriate, the compensation committee decided to grant long-term incentive equity awards for 2021 as follows: 40% of the annual grant was awarded in the form of performance vesting RSUs (“Performance RSUs”), which vest based on the Company’s return on net assets (“RONA”) and a relative TSR modifier, as described below; 40% of the annual grant was awarded in the form of service vesting RSUs (“Service RSUs”); and 20% of the annual grant was awarded in the form of service vesting nonqualified stock options.

The Performance RSUs are eligible to vest based on performance over a three-year period (with performance goals for each calendar year during the performance period applicable to each award tranche), and will be payable (or settled) in shares of our common stock as soon as practicable following the date that the compensation committee determines and certifies the applicable level of performance achieved following the end of such three-year performance period, subject to continued employment through such certification date.

Performance RSUs based on a RONA performance goal are eligible to vest based upon our achievement of RONA over a three-year performance period beginning on January 1, 2021, and ending on December 31, 2023, subject to the named executive officer’s continued employment through the date that the compensation committee determines and certifies the applicable level of performance achieved for the fiscal 2023 tranche. RONA for this purpose is calculated as the quotient of (x) our net income from continuing operations in each of fiscal 2021, fiscal 2022, and fiscal 2023, respectively, divided by (y) our net average assets in each of fiscal 2021, fiscal 2022, and fiscal 2023, respectively

 

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(using our net asset balances (i.e., total assets less cash and less total liabilities) at the beginning and end of fiscal 2021, fiscal 2022 and fiscal 2023, respectively). The levels of RONA performance that will result in an award of the “threshold,” “target” or “maximum” number of shares under these Performance RSUs are as shown in the following table, with linear interpolation used in the event that the actual results do not fall directly on one of the performance levels. If RONA is below the threshold, no Performance RSUs based on RONA will vest.

 

  Performance Level    RONA
Performance Goal
    Attainment
Percentage(1)
 

 

Threshold

  

 

 

 

14

 

 

 

 

 

50

 

 

Target

  

 

 

 

15

 

 

 

 

 

100

 

 

Maximum

  

 

 

 

16

 

 

 

 

 

200

 

 

  (1)

Number of shares earned for each tranche is calculated by multiplying the attainment percentage by one-third of the target number of shares subject to the award. The RONA performance goals for each fiscal year in the performance period are identical.

For the avoidance of doubt, while performance is measured with respect to each fiscal year during the performance period, the Performance RSUs based on RONA that are earned generally will not vest until the third anniversary of the grant date.

The 2021 Performance RSUs also have a “catch-up” feature for 2021 and 2022 to enhance the incentive power of the award through the entire performance period, allowing for the ability to recapture up to target level performance if achievement over target levels are met in subsequent years. This feature provides that if the actual RONA achieved for 2021 or 2022 is less than the target RONA for such year, the named executive officer will have the opportunity to catch-up in the subsequent year up to a maximum of 100% of the target RONA for 2021 and 2022. In order for the catch-up feature to apply, actual 2022 and/or 2023 results must exceed target levels by the amount necessary that, when added to the prior year’s achievement, will equal or exceed target level results. In no event will the catch-up result in a RONA payout factor in excess of 100% (prior to application of the TSR Modifier) for any year in which the target RONA was initially missed.

The 2021 Performance RSUs are also subject to an additional adjustment of -20% or +20%, based on the Company’s relative TSR performance (the “TSR Modifier”), as shown in the following chart:

 

  Relative TSR Performance     TSR Modifier

75th percentile

  

+20% (Payout Factor increased by 20%)

25th percentile, but <75th percentile

  

0% (No adjustment to the Payout Factor)

<25th percentile

  

-20% (Payout Factor decreased by 20%)

After the end of the performance period, we will (i) calculate the total shareholder return (”TSR”) for the Company and for each company included in our peer group (as described above) at the time of such calculation, (ii) rank each such company by TSR (lowest to highest), and (iii) determine the percentile rank of the Company’s TSR in such ranking to come up with our relative TSR performance for the performance period.

The TSR Modifier is applied at the end of the three-year performance period. Notwithstanding the preceding, if our TSR is negative, then the maximum RONA payout factor that may be achieved is “target” (i.e., not more than a 100% adjusted payout factor). The number of earned RONA PSUs will not be determinable until the conclusion of the performance period when the TSR Modifier has been calculated.

The compensation committee selected these performance measures, RONA and relative TSR, for our 2021 long-term incentive program as it believes they best align with our current stockholder interests of strong financial performance and increased profitability per share. Additionally, RONA assessed from absolute measurement approach, thereby providing an internal performance perspective. Relative TSR provides an external performance perspective and encourages our executives to drive Company growth, stimulate high performance, and build long-term stockholder value. Finally, the measures assess performance over three years, linking compensation opportunity to performance over an extended period.

 

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The Service RSUs granted as part of the 2021 long-term incentive compensation program vest over a three-year period, with approximately 33 1/3% of the RSUs granted vesting on each of the first, second and third anniversaries of the grant date, subject to continued employment through the applicable vesting date, and will be payable in shares of our common stock.

The nonqualified stock options granted as part of the 2021 long-term incentive compensation program vest over a four-year period, with approximately 25% of the stock options granted vesting on each of the first, second, third, and fourth anniversaries of the grant date, subject to continued employment through the applicable vesting date. Stock options are granted at an exercise price equal to the fair market value (the closing price on the NYSE) of our common stock on the grant date.

The table below shows the long-term incentive award opportunities established by the compensation committee relating to the 2021 long-term incentive compensation program. The compensation committee determined, following a review of peer data, that no changes to the target long-term incentive opportunities for Messrs. Cone and Sherman were necessary for 2021. The target long-term incentive opportunity for Ms. Palmer was increased from 400% of her 2020 base salary to 550% of her 2021 base salary. The increase to Ms. Palmer’s target long-term incentive opportunity was determined to be advisable to bring her long-term compensation in line with her peers.

Award Opportunity Under 2021 Long-Term Incentive Program

 

  Name    Base
Salary
     Target as % of
Base Salary
    Target Long-Term
Incentive Opportunity
 

Sheryl D. Palmer

  

$

1,000,000

 

  

 

550

 

$

5,500,000

 

C. David Cone

  

$

575,000

 

  

 

225

 

$

1,293,750

 

Darrell C. Sherman

  

$

500,000

 

  

 

160

 

$

800,000

 

On February 16, 2021, each of our named executive officers were granted the following equity awards under the 2013 Omnibus Plan and pursuant to our 2021 long-term incentive program:

 

  Name    Options
(#)(1)
     Service-
based
RSUs
(#)
     RONA
Performance
RSUs (#)
 

Sheryl D. Palmer

  

 

151,307

 

  

 

77,684

 

  

 

77,684

 

C. David Cone

  

 

35,591

 

  

 

18,273

 

  

 

18,273

 

Darrell C. Sherman

  

 

22,008

 

  

 

11,299

 

  

 

11,299

 

 

  (1)

Stock options have an exercise price of $28.32 per share of common stock.

The actual number of awards granted were calculated by dividing the target long term incentive opportunity by the fair market value on grant date for both Service RSUs and Performance RSUs and the calculated Black Scholes value for stock options. For further information on the 2021 long-term incentive awards granted to our named executive officers, see the “Grants of Plan-Based Awards” table below.

2021 Performance Determinations With Respect to Outstanding Equity Awards

2019 Performance RSUs

In fiscal 2019, we granted our named executive officers Performance RSUs, half of which vested based on a relative TSR goal, and the remaining half of which vested based on achievement of RONA goals.

Performance RSUs based on a RONA performance goal were eligible to vest based upon our achievement of RONA over a three-year performance period beginning on January 1, 2019 and ending on December 31, 2021, subject to the named executive officer’s continued employment through the date that the compensation committee determines and certifies the applicable level of performance achieved. RONA for this purpose is calculated as the quotient of (x) our net income from continuing operations in each of fiscal 2019, fiscal 2020, and fiscal 2021, respectively, divided by (y) our net average assets in each of fiscal 2019, fiscal 2020, and fiscal 2021, respectively (using our net asset balances (i.e., total assets less cash and less total liabilities) at the beginning and end of fiscal 2019, fiscal 2020 and fiscal 2021, respectively). The levels of RONA performance that would result in an award of the “threshold,” “target” or

 

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“maximum” number of shares under these Performance RSUs are as shown in the following table, with linear interpolation used in the event that the actual results do not fall directly on one of the performance levels. If RONA is below the threshold, no shares will vest.

 

  Performance Level    2019 RONA
Performance Goal
   2020 RONA
Performance Goal
   2021 RONA
Performance Goal
   Attainment
Percentage(1)

Threshold

   12%    13%    13%    50%

Target

   14%    15%    15%    100%

Maximum

   16%    17%    17%    200%

 

  (1)

Number of shares earned is calculated by multiplying the attainment percentage by one-third of the target number of shares subject to award.

In March 2020, our compensation committee certified the 2019 RONA Performance Goal to be achieved at 14.4% resulting in an attainment percentage of 118.0%. In March 2021, our compensation committee certified the 2020 RONA Performance Goal to be achieved at 15.2% resulting in an attainment percentage of 108.0%. In March 2022, our compensation committee certified the 2021 RONA Performance Goal to be achieved at 20.8% resulting in an attainment percentage of 200%. Based on these results, our named executive officers earned the number of Performance RSUs set forth in the following table:

 

  Name    2019
Tranche
Target 2019
RONA-Based
Performance
RSUs
     2019
Tranche
Earned 2019
RONA-Based
Performance
RSUs
     2020
Tranche
Target 2019
RONA-Based
Performance
RSUs
     2020
Tranche
Earned 2019
RONA-Based
Performance
RSUs(1)
     2021
Tranche
Target 2019
RONA-Based
Performance
RSUs
     2021
Tranche
Earned 2019
RONA-Based
Performance
RSUs
        

Sheryl D. Palmer

     18,316        21,635        18,316        19,759        18,374        36,748    

C. David Cone

     5,666        6,693        5,666        6,112        5,685        11,370    

Darrell C. Sherman

     3,480        4,111        3,480        3,753        3,491        6,982          

 

(1)

Number of shares earned is calculated by multiplying the attainment percentage by approximately one-third of the target number of shares subject to award; however due to an administrative rounding error the 2019 tranche was reported as earned with respect to a number of RSUs greater than actually earned, accordingly, the earned RSUs in respect of the 2020 tranche was adjusted downward slightly to correct for the administrative error. The 2020 tranche for the earned 2019 RONA-Based Performance RSUs were adjusted downward by 22 RSUs for Ms. Palmer, 7 RSUs for Mr. Cone and 5 RSUs for Mr. Sherman.

For the avoidance of doubt, while performance is measured with respect to each fiscal year during the performance period, the Performance RSUs based on RONA that are earned generally will not vest until the third anniversary of the grant date.

The performance levels and payout factors with respect to the 2019 Performance RSUs based on a TSR performance goal are summarized in the table below:

 

  Performance Level    2019 Performance RSU
Relative TSR Goal(1)
   Payout
Factor

Threshold

   35th Percentile      50%

Target

   55th Percentile    100%

Maximum

   75th Percentile    200%

 

  (1)

The maximum payout factor for the TSR-based Performance RSUs was limited to 100% if TSR for the performance period was negative.

 

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In March 2022, our compensation committee certified our relative TSR for the 2019-2021 performance period was in the 8th percentile, resulting in a payout factor of 0%. To determine the number of 2019 TSR-based Performance RSUs earned, the target number of RSUs was multiplied by the payout factor. Based on these results, our named executive officers earned the number of Performance RSUs set forth in the following table:

 

  Name    Target 2019
TSR-Based
Performance
RSUs
     TSR
Payout
Factor
     Earned
TSR-Based
Performance
RSUs
      

Sheryl D. Palmer

     55,006        0      0    

C. David Cone

     17,017        0      0    

Darrell C. Sherman

     10,451        0      0      

2020 Performance RSUs

In fiscal 2020, we granted our named executive officers Performance RSUs, half of which vest based on the Company’s EBT and a relative TSR modifier, and half of which vest based on the Company’s EBT margin and a relative TSR modifier. For 2021, the performance goals and payout factors for the EBT and EBT Margin Performance RSU awards were as follows:

 

  Performance Level    2021 EBT
Performance
Goal
     2021 EBT
Margin
Performance
Goal
     Payout
Factor
      

Threshold

   $ 675 million        9.40      50  

Target

   $ 715 million        9.90      100  

Maximum

   $ 750 million        10.40      200    

In March 2022, our compensation committee certified the 2021 EBT Performance Goal for the 2020 Performance RSU award to be achieved at $863.1 million resulting in an initial attainment percentage of 200% for the 2021 tranche, and the 2021 EBT Margin Performance Goal for the 2020 Performance RSU award to be achieved at 11.5% resulting in an initial attainment percentage of 200% for the 2021 tranche. The initial attainment percentages for the 2021 tranche are not final and are subject to further adjustment (upward or downward) at the conclusion of the three-year performance period based on the applicable TSR Modifier. Given the strong EBT Margin performance for 2021, the 2020 tranche of the 2020 EBT Margin Performance RSU award will be earned at target level of performance through the application of the “catch up” feature of the award, as previously described in our annual proxy statement filed April 16, 2021.

2021 Performance RSUs

In March 2022, our compensation committee certified the 2021 RONA Performance Goal for the 2021 Performance RSU award to be achieved at 21.4% resulting in an initial attainment percentage of 200% for the 2021 tranche. The initial attainment percentage for the 2021 tranche is not final and is subject to further adjustment (upward or downward) at the conclusion of the three-year performance period based on the applicable TSR Modifier as described further above.

Long-Term Incentives—Cash

Build to Rent Incentive Plan

On December 1, 2020, the compensation committee approved the Build to Rent Incentive Plan (the “BTR Incentive Plan”), a project-based cash bonus plan for certain of our employees. Ms. Palmer and Mr. Sherman are each currently eligible participants in the BTR Incentive Plan.

The BTR Incentive Plan establishes a bonus pool for each project (or group of projects) that will be funded based on the percentage of EBT achieved by the Company in connection with the completion of the sale of each build to rent project. Each bonus pool will be divided into three sub-pools: a division bonus pool (for eligible division participants), a corporate bonus pool (for eligible corporate participants) and a discretionary bonus pool (generally, for employees who

 

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are not otherwise specifically designated as participants in the BTR Incentive Plan, but who contributed in a meaningful way to the build to rent project). Unless otherwise determined by the compensation committee, it is not contemplated that bonuses would be payable in respect of any project which does not achieve an EBT level to the Company of at least 10%. The amount of the bonus pool to be funded for each project will range from 15% up to 25% of the achieved EBT for such project. Each participant’s share of the applicable project bonus sub-pool will be determined based on the relative amount of his or her annual target bonus among all the participants in that sub-pool, weighted by a factor specified by the compensation committee to reflect the participant’s relative contribution to the project. Bonuses may be prorated if the participant was not involved in the specific project for the entire project period.

Participants and their applicable share of the project bonus pool may vary for each build to rent project. Based on the current timeline for completion of the first build to rent project covered by the BTR Incentive Plan, the first payout under the BTR Incentive Plan, if any, will occur towards the end of the fourth quarter of 2022.

Other Program Attributes

Stock Ownership & Retention Requirements (Executive Officers)

The compensation committee believes it is important for key members of our senior management team and directors to build and maintain a long-term ownership position in our Company, to further align their financial interests with those of our stockholders and to encourage the creation of long-term value. Our compensation structure for these individuals provides for a significant percentage of compensation to be equity-based, which places a substantial portion of compensation at risk over a long-term period.

In March 2018, our board of directors adopted stock ownership and retention guidelines that require our executive officers to own shares of our common stock having an aggregate value no less than the following:

 

  Position    Share Ownership Guideline

Chief Executive Officer

 

  

6 x annual base salary

 

Other Executive Officers

 

  

2 x annual base salary

 

Generally, our executive officers must achieve the required ownership level within four years from the date that he or she first became an executive officer; however, with respect to our executive officers who were serving as of March 2018, such executive officers had until March 2022 to achieve the required minimum ownership level. Until the minimum ownership level is attained, executive officers must retain at least 50% of their equity, on a net, after-tax basis, in the Company (e.g., all forms of equity of the Company or convertible or exercisable into equity of the Company, whether vested or unvested, owned or beneficially owned, including stock option and restricted stock units granted under the under the 2013 Omnibus Plan). As of December 31, 2021, all of our executive officers met the minimum ownership guidelines.

See “Director Compensation—Stock Retention Policy” for additional information relating to our equity ownership policy for non-employee directors.

Anti-Hedging Policy

We have an anti-hedging policy in place that is applicable to all employees (including our executive officers and directors), prohibiting purchases of our stock on margin, calls or similar options on our stock, or selling our stock short.

Clawback Policies

Under our bonus clawback policy, we may recover all or part of any incentive annual cash bonus compensation awarded or paid to these employees in the event that we determine that our financial results must be restated to correct an accounting error due to material financial restatement, where our board of directors determines that fraud or misconduct led to the need for such restatement and where cash bonuses paid for the years subject to restatement would have been materially lower. In addition, if an equity plan participant receives an amount in excess of what should have been received under the terms of the award due to material noncompliance by the Company with any financial reporting requirement under the U.S. securities laws, any mistake in calculations or other administrative error, then the award will be cancelled with respect to any excess value, and the individual must promptly repay to us any such amount already received.

 

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Our equity-based awards provide that all vested equity-based awards will be forfeited by our executives automatically upon a breach by them of any of the post-employment restrictive covenants (e.g., non-competes) to which they are subject. The executive would also be responsible for damages suffered by us in connection with any such breach. We view this recovery of awards feature as a necessary element of our equity-based program as it deters competitive activities that would likely cause significant harm to our business.

In addition, we reserve the right to adopt any additional clawback policies as may be necessary to protect our compensation policies and objectives and as may be required by law.

Employee Benefits and Perquisites

We provide a number of benefit plans to all eligible employees, including our named executive officers. These benefits include programs such as medical, dental, life insurance, business travel accident insurance, short-and long-term disability coverage, a 401(k) defined contribution plan and a home purchase rebate program providing employees with a 5.5% rebate on purchases of homes built by us.

Employees who have been with us since on or before December 31, 2010, including certain of our named executive officers, were eligible to accrue pension benefits under a cash balance pension plan, which was frozen to new accruals and participants as of December 31, 2010. Under this plan, prior to 2011, our predecessor company contributed a specified percentage of each employee’s salary each quarter (generally based on the participant’s age) to the participant’s account balance, and employees vested in their accounts after five years of service. For further information on pension benefits for our named executive officers, see the “Pension Benefits” table below.

Perquisites for our named executive officers are limited to monthly auto allowances and Ms. Palmer is permitted occasional approved personal use of a rented jet chartered by the Company and is also provided a gross up for the taxes associated with such benefit. While perquisites help to provide competitive total compensation packages to the named executive officers in a cost-efficient manner by providing a benefit with a high perceived value at a relatively low cost, we do not generally view perquisites as a material component of our executive compensation programs. In the future, we may provide additional or different perquisites or other personal benefits in limited circumstances, such as where we believe doing so is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment, motivation and/or retention purposes.

Employment Agreements

Each of Ms. Palmer and Mr. Sherman is party to an employment agreement with Taylor Morrison, Inc., which specifies the terms of the executive’s employment including certain compensation levels and is intended to assure us of the executive’s continued employment and provide stability in our senior management team. In addition to the terms of the employment agreements described under the heading “—Employment Agreements” which follows the “Summary Compensation Table” below, each employment agreement provides salary continuation and other benefits in the event of certain terminations of employment.

In October 2021, our compensation committee approved and Taylor Morrison, Inc. entered into amended and restated employment agreements with each of Ms. Palmer and Mr. Sherman, to increase certain severance payments and benefits under certain circumstances while retaining in all material respects the terms of each named executive officers previous employment agreement. The decision to modify the severance payments and benefits under the employment agreements was made at the recommendation of Semler Brossy, as a result of a market analysis completed by them indicating that the severance payments and benefits provided to our named executive officers were below market norms in certain respects. The compensation committee has been advised by Semler Brossy that the payments and benefits provided under the 2021 employment agreements are consistent with peer company and broader market practices and are fair and reasonable. These payments and benefits are designed to provide financial security in the event of certain corporate transactions and/or termination of employment, as well as consideration for the executive’s compliance with certain post-employment restrictive covenants. We believe these provisions aid in the retention of our executives who are critical to the success and operation of our business while also protecting important business objectives through restrictive covenants. See “Potential Payments upon Termination of Employment or Change in Control” for a discussion of severance and change in control payments payable to our named executive officers pursuant to their employment agreements.

 

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In connection with Mr. Steffens’ appointment to serve as our Chief Financial Officer, effective as of January 1, 2022, the compensation committee approved an amended and restated employment agreement for Mr. Steffens, dated as of October 26, 2021 and effective as of January 1, 2022. Pursuant to the terms of the employment agreement, Mr. Steffens’ employment with us will continue in effect until terminated by us or by Mr. Steffens, and Mr. Steffens will be entitled to receive (i) an annual base salary of $575,000; (ii) a target annual cash bonus award equal to 150% of Mr. Steffens’ base salary under our annual bonus program; and (iii) equity-based compensation awards under our 2013 Omnibus Plan, as determined by our board or directors or the compensation committee in its sole discretion. Mr. Steffens is also eligible to participate in the employee benefit plans, programs, and arrangements of the Company in effect from time to time, in accordance with their terms, including, without limitation, retirement, medical and welfare benefits. In addition, Mr. Steffens’ employment agreement provides salary continuation and other benefits in the event of certain terminations of employment which are consistent with those described for Mr. Sherman under the heading “—Employment Agreements” which follows the “Summary Compensation Table” below.

Retirement Agreement

In June 2021, Mr. Cone informed the Company of his intention to retire. In order to provide an orderly transition of Mr. Cone’s responsibilities and duties, the compensation committee approved and the Company and Taylor Morrison, Inc. entered into a transition and retirement agreement with Mr. Cone on June 21, 2021 (the “Retirement Agreement”). The Retirement Agreement generally superseded the terms of Mr. Cone’s employment agreement. In return for Mr. Cone’s services through the retirement date (i.e., December 31, 2021), Mr. Cone continued to receive base salary and benefits through the retirement date. In addition, following his retirement and in exchange for him providing a release of claims in favor of the Company, the Retirement Agreement provides Mr. Cone with salary continuation and other benefits. In addition, pursuant to the terms of his Retirement Agreement, the vesting terms of certain of Mr. Cone’s outstanding equity awards were modified. See “Potential Payments upon Termination of Employment or Change in Control-Retirement Agreement” for a discussion of severance payments and benefits provided to Mr. Cone pursuant to his Retirement Agreement.

Accounting Matters

Each element of the compensation paid to our executives is expensed in our financial statements as required by U.S. generally accepted accounting principles. The financial statement impact of various compensation awards is an important factor that the compensation committee considers in determining the amount, form and design of each pay component for our named executive officers, but it is only one of many factors considered in setting such compensation.

Certain Tax Matters

Section 162(m) of the Code

For income tax purposes, public companies may not deduct any portion of compensation that is in excess of $1 million paid in a taxable year to certain “covered employees,” including our NEOs, under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Once an individual becomes a “covered employee” under Section 162(m) of the Code, all current and future compensation to these individuals will remain subject to the limitation under Section 162(m) of the Code.

These tax effects are only one factor considered by our compensation committee when entering into compensation arrangements. Our compensation committee believes that it should not be constrained by the requirements of Section 162(m) of the Code if those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives. We intend to continue to compensate our executive officers in a manner consistent with the best interests of our stockholders and reserve the right to award compensation that may not be deductible under Section 162(m) of the Code where the Company believes it is appropriate to do so.

Section 280G of the Code

Section 280G of the Code disallows a tax deduction with respect to certain payments to executives of companies that undergo a change in control, and Section 4999 of the Code imposes a 20% penalty on the individual receiving “excess

 

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parachute payments.” Generally, parachute payments are compensation that is linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans, including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G based on the executive’s prior compensation.

The employment agreements with Ms. Palmer and Mr. Sherman each provide that, to the extent the executive would be subject to Section 280G or 4999 of the Code, the executive’s parachute payments would be reduced to the extent that no portion of the payment shall be subject to the excise tax, but only if the executive’s net after-tax benefit would exceed what the net after-tax benefit would have been if such reduction were not made, and the executive paid the applicable excise tax. We do not provide any gross ups for excise or other penalty taxes related to compensation paid to any of its executives, including our named executive officers.

Compensation Committee Report

The compensation committee reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with our management. Based on its reviews and discussion with management, the compensation committee recommended to the board of directors, and the board of directors approved, that the Compensation Discussion and Analysis be included in this Proxy Statement for the Taylor Morrison Home Corporation 2022 Annual Meeting of Stockholders and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2021.

 

COMPENSATION COMMITTEE

Anne L. Mariucci (Chair)

Gary H. Hunt

Peter Lane

Andrea Owen

 

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Summary Compensation Table

 

The following table summarizes the compensation earned by, or awarded or paid to, each of our named executive officers for the years ended December 31, 2021, 2020 and 2019.

 

  Name and Principal Position

 

 

Year

 

   

Salary

($)

 

   

Bonus
($)

 

   

Stock
Awards
($)(1)

 

   

Option
Awards
($)(2)

 

   

Non-Equity
Incentive Plan
Compensation
($)(3)

 

   

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($)(4)

 

   

All Other
Compensation
($)(5)

 

   

Total
($)

 

 
  Sheryl D. Palmer     2021       1,000,000             4,400,022       1,100,002       5,500,000       772       62,681       12,063,477  
  President, Chief Executive     2020       1,000,000             3,200,010       3,800,003       2,331,000       8,884       37,892       10,377,789  

Officer and Chairman of the Board of Directors

 

   

 

2019

 

 

 

   

 

1,000,000

 

 

 

   

 

 

 

 

   

 

3,035,781

 

 

 

   

 

1,000,000

 

 

 

   

 

3,230,677

 

 

 

   

 

11,674

 

 

 

   

 

26,756

 

 

 

   

 

8,304,888

 

 

 

  C. David Cone     2021       575,000             1,034,983       258,747       2,371,875         23,915       4,264,518  
  Executive Vice President and     2020       567,420             990,020       247,498       985,102             16,464       2,806,504  

  Chief Financial Officer

 

   

 

2019

 

 

 

   

 

550,000

 

 

 

   

 

 

 

 

   

 

939,168

 

 

 

   

 

309,373

 

 

 

   

 

1,332,654

 

 

 

   

 

 

 

 

   

 

36,737

 

 

 

   

 

3,167,932

 

 

 

  Darrell C. Sherman     2021       500,000             639,975       159,998       2,062,500         25,713       3,388,186  
  Executive Vice President, Chief     2020       491,867             608,014       151,998       853,983       2,530       18,909       2,127,301  

  Legal Officer and Secretary

 

   

 

2019

 

 

 

   

 

475,000

 

 

 

   

 

 

 

 

   

 

576,790

 

 

 

   

 

190,002

 

 

 

   

 

1,150,929

 

 

 

   

 

3,173

 

 

 

   

 

19,979

 

 

 

   

 

2,415,874

 

 

 

(1)

The amounts shown in this column are the aggregate grant date fair values, assuming no risk of forfeiture, calculated in accordance with FASB ASC Topic 718 for Performance RSUs and Service RSUs granted during the applicable year using the assumptions discussed in Note 12 to our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The grant date fair value of the Service RSU awards was calculated using the closing price of our common stock on the grant date multiplied by the number of shares underlying the Service RSU award. The grant date fair value of the Performance RSUs to be earned based on our RONA performance with a TSR Modifier was calculated using grant date fair value on the grant date.

The following amounts represent the grant date fair value of the 2021 RONA-based RSUs assuming maximum level of performance achievement at the end of the three-year performance period, determined at the time of grant (220% of the target award, which assumes application of a +20% TSR modifier): Ms. Palmer—$4,840,024, Mr. Cone—$1,138,481 and Mr. Sherman—$703,973.

 

(2)

The stock-based compensation amounts shown in this column reflect the aggregate grant date fair value, assuming no risk of forfeiture, of stock option awards calculated in accordance with FASB ASC Topic 718. We use the Black-Scholes option pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions. The assumptions used in the valuation of stock-based awards are discussed in Note 12 to our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

(3)

The amounts reported in this column were earned under our annual cash incentive bonus program for the applicable year, which is described above (see “Compensation Discussion and Analysis—Key Elements of Our Executive Compensation Programs—Overview—Annual Cash Incentive Bonuses”).

 

(4)

These amounts do not represent realized compensation; rather, they represent an actuarial adjustment to the present value of accumulated benefits under our Taylor Morrison Cash Balance Pension Plan from the pension plan measurement date used for financial statement reporting purposes with respect to our audited financial statements for the applicable fiscal year to the pension plan measurement date used for financial statement reporting purposes with respect to our audited financial statements for the applicable fiscal year. For Mr. Sherman, the value of the accumulated benefits decreased in 2021 by $111. See below under the heading “Pension Benefits” for additional details.

 

(5)

For each of our named executive officers, “All Other Compensation” for 2021 consists of the payments that are shown in the table below:

 

  Name

 

          

401(k)
Company Match
($)

 

    

Company Paid
Life Insurance
Premiums

($)

 

    

Auto
Allowance
($)

 

    

Perquisites(a)
($)

 

    

Total  
($)  

 

 

Sheryl D. Palmer

     2021        21,000        966        14,455        26,260        62,681    

C. David Cone

     2021        15,721        966          7,288        0        23,915    

Darrell C. Sherman

     2021        17,519        966          7,288        0        25,713    

 

  (a)

This amount includes taxable benefits for the occasional approved personal use of a rented jet chartered by the Company ($14,824) and a gross up for the taxes on such benefit ($11,436).

 

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  COMPENSATION DISCUSSION AND ANALYSIS    

 

Grants of Plan-Based Awards

 

The following table summarizes awards under our annual cash incentive bonus program, annual profit sharing program and awards granted under the 2013 Omnibus Plan as part of our 2021 long-term incentive plan to each of our named executive officers in the year ended December 31, 2021. All numbers have been rounded to the nearest whole dollar or share.

 

  Name and

  Type of Award

        

 

Estimated Future

Payouts Under

Non-Equity Incentive

Plan Awards(1)

   

 

Estimated Future

Payouts Under

Equity Incentive

Plan Awards(2)

   

All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)

 

   

All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)

 

   

Exercise or
Base Price
of Option
Awards
($/sh)

 

   

Grant Date
Fair Value
of Stock
and
Option
Awards
($)(3)

 

 
 

Grant Date

 

   

Threshold
($)

 

   

Target
($)

 

   

Maximum
($)

 

   

Threshold
(#)

 

   

Target

(#)

 

   

Maximum
(#)

 

 

  Sheryl D. Palmer

                     

2021 Annual Bonus Program

      600,000       2,000,000       3,000,000                

2021 Profit Sharing Program(4)

        2,500,000                  

Options(5)

    2/16/2021                     151,307       28.32       1,100,002  

Service RSUs(5)

    2/16/2021                   77,684           2,200,011  

Performance RSUs(5)(6)

    2/16/2021             23,305            77,684       170,905             2,200,011  

  C. David Cone

                     

2021 Annual Bonus Program

      258,750       862,500       1,293,750                

2021 Profit Sharing Program(4)

        1,078,125                  

Options(5)

    2/16/2021                     35,591       28.32       258,747  

Service RSUs(5)

    2/16/2021                   18,273           517,492  

Performance RSUs(5)(6)

    2/16/2021             5,482       18,273       40,201             517,492  

  Darrell C. Sherman

                     

2021 Annual Bonus Program

      225,000       750,000       1,125,000                

2021 Profit Sharing Program(4)

        937,500                  

Options(5)

    2/16/2021                     22,008       28.32       159,998  

Service RSUs(5)

    2/16/2021                   11,299           319,988  

Performance RSUs(5)(6)

    2/16/2021                               3,390       11,299       24,858                               319,988  

 

(1)

Under our 2021 annual bonus program, each named executive officer is eligible to receive an annual cash incentive bonus for the fiscal year, the amount of which will vary depending on the degree of attainment of certain performance goals, as described in “Compensation Discussion and Analysis—Key Elements of Our Executive Compensation Programs—Overview—Annual Cash Incentive Bonuses—2021 Annual Bonus Program.” Under our 2021 profit sharing bonus program, each named executive officer is eligible to receive an annual profit sharing bonus for the fiscal year if the Company attains certain performance goals, as described in “Compensation Discussion and Analysis—Key Elements of Our Executive Compensation Programs—Overview—Annual Cash Incentive Bonuses—2021 Profit Sharing Bonus Program.” These columns show the potential amount of the bonus if performance goals were attained at certain threshold, target or stretch (maximum) levels. Note that for the 2021 annual bonus program, the “threshold” amount assumes that the only performance goal achieved (at the threshold level) was the goal that accounts for the least weight in our calculation of the Actual Attainment Percentage when achieved at the threshold level.

 

(2)

Amounts reflect the Performance RSUs granted under our 2021 long-term incentive program. Performance RSUs will be eligible to vest at the end of the three-year performance period based upon the Company’s performance against RONA goals, subject to the named executive officer’s continued employment through the date after the performance period that the compensation committee determines and certifies the applicable level of performance achieved. The threshold amounts shown reflect the number of shares which will be delivered assuming that threshold attainment is met for the performance goals, including application of a -20% TSR modifier. The maximum amounts shown reflect the number of shares which will be delivered assuming maximum attainment against performance goals, including application of a +20% TSR modifier. Please refer to the “Compensation Discussion and Analysis—Key Elements of Our Executive Compensation Programs—Overview—Long-Term Incentives—Equity Based—2021 Equity Awards” for additional information.

 

(3)

Amounts in this column show the grant date fair value of the stock options, Service RSU awards and Performance RSU awards granted to our named executive officers using the assumptions discussed in Note 12 to our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The stock options have an exercise price per share equal to the closing price of the Company’s common stock as reported on the NYSE on the date of grant. The grant date fair value of the Performance RSU awards were computed in accordance with FASB ASC Topic 718 based upon the probable outcome of the performance conditions as of the grant date.

 

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(4)

Represents the payout opportunity under the 2021 Profit Sharing Program, which is equal to 125% of each named executive officer’s annual target bonus opportunity under our annual bonus program with respect to 2021.

 

(5)

Amounts represent grants of stock options, Service RSUs and Performance RSUs with respect to our annual long-term incentive plan.

 

(6)

Represents Performance RSUs which vest subject to our RONA with a relative TSR Modifier.

Employment Agreements

Sheryl D. Palmer

Ms. Palmer is party to an amended and restated employment agreement with Taylor Morrison, Inc. dated October 12, 2021, pursuant to which she serves as our President and Chief Executive Officer. Ms. Palmer’s employment agreement provides that her employment under the terms of the employment agreement will continue in effect until it is terminated by us or by her. Under her employment agreement, Ms. Palmer receives an annual base salary of $1,000,000, which is subject to review and adjustment from time to time. In addition, she is eligible to receive an annual cash bonus based on the attainment of objective financial and/or other subjective or objective criteria. For 2021, Ms. Palmer’s target annual bonus was 200% of base salary under our annual bonus program. In December 2021, the compensation committee approved an increase to Ms. Palmer’s target annual bonus to 250% of base salary for the 2022 annual bonus program. Pursuant to the terms of her employment agreement, Ms. Palmer is eligible to receive equity-based compensation awards from time to time, as determined by our board of directors or our compensation committee in its sole discretion. Ms. Palmer currently participates in our long-term incentive plan, and for 2021 was eligible to receive long-term incentive awards with a target value equal to 550% of her base salary. She is also eligible to participate in the employee benefit plans, programs, and arrangements of the Company in effect from time to time, in accordance with their terms, including, without limitation, retirement, medical and welfare benefits.

Ms. Palmer’s employment agreement provides for certain severance benefits to be paid in the event of employment termination in certain circumstances, as well as post-termination restrictive covenant provisions, which are described below under “—Potential Payments upon Termination or Change in Control—Severance Payments and Benefits under Employment Arrangements with Named Executive Officers”

Darrell C. Sherman

Mr. Sherman is party to an amended and restated employment agreement with Taylor Morrison, Inc. dated October 12, 2021, pursuant to which he serves as our Executive Vice President and Chief Legal Officer. Mr. Sherman’s employment agreement provides that his employment under the terms of the employment agreement will continue in effect until it is terminated by us or by him. Under his employment agreement, Mr. Sherman receives an annual base salary of $500,000, which is subject to review and adjustment from time to time. In addition, he is eligible to receive an annual cash bonus based on the attainment of objective financial and/or other subjective or objective criteria. Mr. Sherman’s target annual bonus is currently 150% of base salary under our annual bonus program. Pursuant to the terms of his employment agreement, Mr. Sherman is eligible to receive equity-based compensation awards from time to time, as determined by our board of directors or our compensation committee in its sole discretion. Mr. Sherman currently participates in our long-term incentive plan, and for 2021 was eligible to receive long-term incentive awards with a target value equal to 160% of his base salary. He is also eligible to participate in the employee benefit plans, programs, and arrangements of the Company in effect from time to time, in accordance with their terms, including, without limitation, retirement, medical and welfare benefits.

Mr. Sherman’s employment agreement provides for certain severance benefits to be paid in the event of employment termination in certain circumstances, as well as post-termination restrictive covenant provisions, which are described below under “—Potential Payments upon Termination or Change in Control—Severance Payments and Benefits under Employment Arrangements with Named Executive Officers.”

See “Compensation Discussion and Analysis—Annual Cash Incentive Bonuses” and “Compensation Discussion and Analysis—Long-Term Incentives—Equity Based” for additional details regarding the grants made to each of our named executive officers under the terms of our short-term and long-term incentive compensation programs.

 

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Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information concerning the unexercised stock options outstanding and unvested stock awards for each of our named executive officers as of the end of 2021. All numbers have been rounded to the nearest whole dollar or share.

 

            Option Awards

 

    Stock Awards

 

 

  Name

 

 

Grant Date

 

   

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

 

   

Number  of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)

 

   

Option
Exercise
Price

($)

 

   

Option
Expiration
Date

 

   

Number of
Shares or Units
That

Have Not
Vested

(#)(1)

 

   

Market Value
of
Units

That
Have Not
Vested

($)(2)

 

   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Units

That
Have Not
Vested
(#)(1)

 

   

 

Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Units
That
Have Not
Vested
($)(2)

 

 

  Sheryl D. Palmer

                 

   Options(3)

    2/8/2016       141,270             11.30       2/8/2026          

   Options(3)

    2/2/2017       160,256             18.74       2/2/2027          

   Options(3)

    2/12/2018       113,122       37,708       23.84       2/12/2028          

   Options(3)

    2/19/2019       106,383       106,383       18.18       2/19/2029          

  Service RSUs(4)

    2/19/2019               18,336       641,027              

  Performance RSUs(5)

    2/19/2019               78,142       2,731,844              

   Options(3)

    2/10/2020       28,090       84,270       26.28       2/10/2030          

  Service RSUs(4)

    2/19/2020               40,589       1,418,991              

  Performance RSUs(5)

    2/19/2020                           81,127       2,836,200  

   Options(3)

    2/16/2021             151,307       28.32       2/16/2031          

  Service RSUs(4)

    2/16/2021               77,684       2,715,833              

  Performance RSUs(5)

    2/16/2021                           77,684       2,715,833  

  C. David Cone

                 

   Options(3)

    2/12/2018             11,136       23.84       2/12/2028          

   Options(3)

    2/19/2019             16,456       18.18       2/19/2029          

  Service RSUs(4)

    2/19/2019               5,673       198,328              

  Performance RSUs(5)

    2/19/2019               24,175       845,158            

   Options(3)

    2/10/2020             8,690       26.28       2/10/2030          

  Service RSUs(4)

    2/10/2020               6,279       219,514              

  Performance RSUs(5)

    2/10/2020                           21,952       767,442  

   Options(3)

    2/16/2021             8,897       28.32       2/16/2031          

  Service RSUs(4)

    2/16/2021               6,091       212,941              

  Performance RSUs(5)

    2/16/2021                           12,182       425,883  

  Darrell C. Sherman

                 

   Options(3)

    2/8/2016       8,782             11.30       2/8/2026          

   Options(3)

    2/2/2017       14,595             18.74       2/2/2027          

   Options(3)

    2/12/2018       13,122       6,561       23.84       2/12/2028          

   Options(3)

    2/19/2019       20,213       20,213       18.18       2/19/2029          

  Service RSUs(6)

    2/19/2019               3,484       121,801              

  Performance RSUs(5)

    2/19/2019               14,846       519,016              

   Options(3)

    2/10/2020       5,337       16,011       26.28       2/10/2030          

  Service RSUs(6)

    2/10/2020               7,712       269,612              

  Performance RSUs(5)

    2/10/2020                           15,414       538,873  

   Options(3)

    2/16/2021             22,008       28.32       2/16/2031          

  Service RSUs(6)

    2/16/2021               11,299       395,013              

  Performance RSUs(5)

    2/16/2021                                                   11,299       395,014  

 

(1)

For additional information on vesting upon specified termination events or a change in control, see “—Potential Payments Upon Termination of Employment or Change in Control.”

 

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(2)

Calculated using the NYSE closing price of $34.96 per share of our common stock on December 31, 2021, the last trading day of 2021.

 

(3)

These stock options vest and become exercisable ratably in four substantially equal installments of 25% of the stock options granted on each of the first, second, third and fourth anniversaries of the grant date, subject to continued employment through the applicable vesting date.

 

(4)

Service RSUs vest ratably in three substantially equal installments of 33 1/3% of the RSUs granted on each of the first, second and third anniversaries of the grant date, subject to continued employment through the applicable vesting date.

 

(5)

Performance RSUs vest based on the achievement of performance goals over a three-year performance period, generally subject to continued employment through the final date that the compensation committee determines and certifies the level of performance achieved under the applicable performance measures following the end of the three-year performance period for Performance RSUs that vest based on TSR and at the end of each year in the three-year performance period for Performance RSUs that vest based on RONA, EBT and EBT Margin; provided that the Performance RSUs that vest on EBT and EBT Margin and RONA (granted in 2021) will not be finally determinable until the end of the three-year performance period when the TSR modifier is applied to each tranche of the awards.

Amounts in the “Number of Units That Have Not Vested” column reflect the number of Performance RSUs for which the performance has been determined (based on performance through December 31, 2021).

Amounts in the “Equity Incentive Plan Awards: Number of Unearned Units That Have Not Vested” column reflect the number of Performance RSUs that could vest as of the end of the performance period based on performance through December 31, 2021. Performance RSUs that vest based on EBT that were granted in 2020 are reported in the table with respect to each tranche as follows: 2020 tranche at maximum level, the 2021 tranche at maximum level and the 2022 tranche at threshold level. Performance RSUs that vest based on EBT Margin that were granted in 2020 are reported in the table with respect to each tranche as follows: 2020 tranche at target, the 2021 tranche at maximum and the 2022 tranche at threshold level. Performance RSUs that vest based on RONA that were granted in 2021 are reported in the table with respect to each tranche as follows: 2021 tranche at maximum level and the 2022 and 2023 tranches at threshold level.

For Mr. Cone, the numbers reflected in the table above are with respect to the portion of each of his outstanding Performance RSU awards that will remain outstanding and eligible to vest in accordance with the terms of his Retirement Agreement.

See “Compensation Discussion and Analysis—Key Elements of Our Executive Compensation Programs—Overview—Long-Term Incentives—Equity Based” for additional information regarding the performance periods applicable to the respective performance measures.

Option Exercises and Stock Vested Table

 

The following table provides information concerning the exercise and/or vesting of equity awards during 2021 on an aggregated basis for each of our named executive officers. . All numbers have been rounded to the nearest whole dollar or share.

 

      Option Awards(1)      Stock Awards(2)
  Name   

Number of
Shares
Acquired on
Exercise

(#)

   

  Value  

  Realized on  

  Exercise  

  ($)  

    

Number of
Shares
Acquired on
Vesting

(#)

 

  Value  

  Realized on  

  Vesting  

  ($)  

Sheryl D. Palmer

  

 

400,000

 

 

 

5,686,151

 

  

124,020

 

3,601,913

C. David Cone

  

 

388,777

 

 

 

3,461,943

 

  

  37,240

 

1,081,417

Darrell C. Sherman

  

 

 

 

 

 

  

  22,326

 

   648,166

 

(1)

Computed by determining the spread value per share of the shares acquired based on the difference between: (a) the closing price of our common stock on the NYSE on the date of exercise and (b) the exercise price of the stock options.

 

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  COMPENSATION DISCUSSION AND ANALYSIS    

 

  a.

Ms. Palmer’s value is based on the following:

 

  Award    Exercise
Date
     Number of
Options
Exercised
   

  Closing Price  

  per Share on  

  at Exercise  

   Exercise Price per
Share

  2013 Option Award

     3/29/2021        6,840     $30.19    $22.00

  2013 Option Award

     4/1/2021        37,757     $31.67    $22.00

  2013 Option Award

     4/5/2021        95,127     $32.48    $22.00

  2013 Option Award

     4/6/2021        11,502     $32.23    $22.00

  2013 Option Award

     4/16/2021        12,723     $32.36    $22.00

  2013 Option Award

     4/19/2021        100     $32.04    $22.00

  2013 Option Award

     4/27/2021        35,951     $32.70    $22.00

  2015 Option Award

     11/12/2021        9,115     $32.52    $18.73

  2015 Option Award

     11/15/2021        20,654     $32.50    $18.73

  2015 Option Award

     11/16/2021        70,231     $33.27    $18.73

  2015 Option Award

     11/17/2021        2,199     $33.42    $18.73

  2016 Option Award

     11/17/2021        22,638     $33.42    $11.30

  2016 Option Award

     11/18/2021        13,431     $33.50    $11.30

  2016 Option Award

     11/19/2021        61,732     $33.50    $11.30

 

  b.

Mr. Cone’s value is based on the following:

 

  Award    Exercise
Date
     Number of
Options
Exercised
   

  Closing Price  

  per Share on  

  at Exercise  

  Exercise Price per
Share

  2016 Option Award

     1/21/2021        34,153     $29.66   $11.30

  2016 Option Award

     3/26/2021        34,153     $31.37   $11.30

  2013 Option Award

     4/27/2021        39,251     $32.70   $22.00

  2013 Option Award

     4/28/2021        1,013     $32.80   $22.00

  2019 Option Award

     8/18/2021        32,912     $27.12   $18.18

  2015 Option Award

     8/18/2021        22,387     $27.12   $18.73

  2017 Option Award

     8/18/2021        48,077     $27.12   $18.74

  2018 Option Award

     8/18/2021        33,406     $27.12   $23.84

  2013 Option Award

     8/18/2021        134,736     $27.12   $22.00

  2020 Option Award

     10/27/2021        8,690     $30.21   $26.28

 

(2)

The values realized on vesting was based on the closing price of our common stock on the NYSE on the applicable vesting dates as set forth below for each of our named executive officers.

 

  a.

Ms. Palmer’s value is based on the following:

 

  Award    Vesting
Date
     Number of
RSUs
Vested/Settled
 

  Closing Price  

  per Share on  

  Vesting Date  

  2017 Service RSU

     2/2/2021      15,564   $27.15

  2020 Service RSU

     2/10/2021      20,294   $29.41

  2018 Service RSU

     2/12/2021      13,982   $29.40

  2019 Service RSU

     2/19/2021      18,335   $28.61

  2018 RONA Performance RSUs

     3/10/2021      55,845   $29.49

 

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  b.

Mr. Cone’s value is based on the following:

 

  Award    Vesting
Date
     Number of
RSUs
Vested/Settled
 

  Closing Price  

  per Share on  

  Vesting Date  

  2017 Service RSU

     2/2/2021      4,669   $27.15

  2020 Service RSU

     2/10/2021      6,278   $29.41

  2018 Service RSU

     2/12/2021      4,129   $29.40

  2019 Service RSU

     2/19/2021      5,672   $28.61

  2018 RONA Performance RSUs

     3/10/2021      16,492   $29.49

 

  c.

Mr. Sherman’s value is based on the following:

 

  Award    Vesting
Date
     Number of
RSUs
Vested/Settled
 

  Closing Price  

  per Share on  

  Vesting Date  

  2017 Service RSU

     2/2/2021      2,835   $27.15

  2020 Service RSU

     2/10/2021      3,856   $29.41

  2018 Service RSU

     2/12/2021      2,433   $29.40

  2019 Service RSU

     2/19/2021      3,484   $28.61

  2018 RONA Performance RSUs

     3/10/2021      9,718   $29.49

Pension Benefits

 

 

  Name

   Plan Name    Number of
Years Credited
Service
(#)(1)
  

Present
Value of
Accumulated
Benefit

($)(2)

 

  Payments  

  During Last  

  Fiscal Year  

  ($)  

 Sheryl D. Palmer

    

 

 

 

 

Taylor Morrison Cash
Balance Pension Plan

 

 


 

    

 

 

 

16.0

 

    

 

 

 

121,643

 

   

 

 

 

 

 Darrell C. Sherman

    

 

 

 

 

Taylor Morrison Cash
Balance Pension Plan

 

 


 

    

 

 

 

13.0

 

    

 

 

 

26,778

 

   

 

 

 

 

 

(1)

As of December 31, 2021, each participating named executive officer was fully vested in his or her respective retirement plan benefit. Pursuant to the terms of the Taylor Morrison Cash Balance Pension Plan, a year of service is credited once a participant has worked 1,000 hours in that year. Mr. Cone does not participate in the Taylor Morrison Cash Balance Pension Plan as he began employment with us on October 15, 2012, and the plan was frozen as of December 31, 2010.

 

(2)

These amounts represent the actuarial present value of the total retirement benefit that would be payable to each respective named executive officer under the Taylor Morrison Cash Balance Pension Plan as of December 31, 2021. The following key actuarial assumptions and methodologies were used to calculate the present value of accumulated benefits under the Taylor Morrison Cash Balance Pension Plan: a discount rate of 2.78% and Adjusted Pri-2012 Mortality Tables with MP-2021 projection scale.

Pension benefits are provided to our named executive officers under the Taylor Morrison Cash Balance Pension Plan (the “Pension Plan”). Effective December 31, 2010, the Pension Plan was frozen as to new participants and future accruals. Ms. Palmer and Mr. Sherman were each eligible for early retirement under the Pension Plan.

 

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The following table is an overview of the current terms and provisions of the frozen Pension Plan.

 

    

Pension Plan

 

Purpose

 

 

To provide a retirement benefit for eligible employees in recognition of their contributions to the overall success of our business.

 

Eligibility

 

 

U.S. salaried and hourly employees, including the named executive officers. The Pension Plan was frozen effective December 31, 2010. Employees hired January 1, 2011, or later are not eligible to participate in the Pension Plan.

 

Retirement Date & Early Retirement Date

 

 

Normal Retirement: The first day of the month coinciding with or next following the participant’s 65th birthday, or if later the participant’s fifth anniversary of joining the Pension Plan.

Early Retirement: The first day of the month coinciding with or next following the participant’s 50th birthday and has completed at least five years of service with us.

 

Pension Formula

 

 

Normal Retirement: Quarterly credits based on the employee’s age and eligible compensation (including regular compensation for services, commissions, bonuses, leave cash-outs, deferred compensation, but excluding separation payments), with the size of our contributions increasing based on the participant’s age. Our contributions range from 2% to 4% of eligible compensation, plus 1% of eligible compensation over the social security wage base. As of December 31, 2010, the Pension Plan was frozen with regard to pay credits.

 

Early Retirement: Same as normal retirement, however, if the participant elects to receive payments as of the early retirement date, the benefit will be equal to the actuarial equivalent of the normal retirement benefit.

 

Form of Benefit

 

 

Normal Retirement: Paid as a monthly pension commencing on the participant’s retirement date and continuing for the participant’s life, with survivor benefits following the participant’s death continuing to the participant’s spouse during the spouse’s life at a rate equal to 50% of the rate at which such benefits were payable to the participant (i.e., a joint and 50% survivor annuity). A participant who is unmarried at the time benefits become payable under the Pension Plan shall be entitled to a monthly pension continuing for the participant’s life. However, the form of distribution of such benefit shall be determined pursuant to the provisions of the pension plan (i.e., one lump-sum cash payment, monthly pension payable over the life of the participant, etc.).

 

Early Retirement: Same as normal retirement.

 

Potential Payments Upon Termination of Employment or Change in Control

The following summaries and tables describe and quantify the potential payments and benefits that we would provide to our named executive officers in connection with termination of employment and/or change in control. In determining amounts payable, we have assumed in all cases that the termination of employment and/or change in control occurred on December 31, 2021. The amounts that would actually be paid to our executive officers upon a termination of employment will depend on the circumstances and timing of termination or change in control.

Severance Payments and Benefits under Employment Arrangements with Named Executive Officers

Employment Agreements. Under the employment agreements with Ms. Palmer and Mr. Sherman, upon a termination without “cause” or a resignation for “good reason” (each as defined in the employment agreements and referred to herein as a “Qualifying Termination”), in addition to receiving the executive’s accrued but unpaid base salary, benefits, vacation pay, reimbursable expenses, and annual bonus earned but not paid in respect of a prior year (together, the “Accrued Benefits”), each named executive officer would be entitled to receive, subject to execution of a release of claims:

 

  (a)

An amount of cash severance equal to a specified multiple of the sum of the named executive officer’s base salary and the higher of his or her target bonus or average annual bonus paid in or payable in respect of

 

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(whichever results in a higher average) the three completed calendar years that preceded the date of termination. For Ms. Palmer the severance multiple is 2.0 and her aggregate severance amount is paid in equal installments in accordance with our customary payroll practices over the 30-month period following such termination of employment. For Mr. Sherman the severance multiple is 1.5 and his aggregate severance payment is paid in equal installments in accordance with our customary payroll practices over the 18-month period following such termination of employment;

 

  (b)

a COBRA subsidy (up to 30 months for Ms. Palmer and up to 12 months for Mr. Sherman);

 

  (c)

a prorated annual bonus for the year of termination, based on actual performance; and

 

  (d)

up to 12 months of outplacement assistance.

However, if such termination occurs at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a “change in control” (as defined in the 2013 Omnibus Plan), but before such transaction is consummated (and subject to such consummation), or (y) within 24 months following a “change in control” ((x) or (y), as applicable, a “CIC Qualifying Termination”), then the amount of cash severance payable under clause (a) above will be paid as a lump sum payment and the severance multiple for Ms. Palmer is 2.5 and the severance multiple for Mr. Sherman is 2.0.

Ms. Palmer’s employment agreement also provides her with an opportunity to receive a special retirement bonus in the amount of $1,000,000, if she voluntarily terminates her employment from the homebuilding industry and does not resume employment in the industry in any capacity for a period of five years following such departure. The special retirement bonus is payable in equal installments over the period that the first $1,000,000 in cash severance would have otherwise been payable if Ms. Palmer resigned for good reason or if we had terminated her employment without cause. In the event that Ms. Palmer resumes employment in the homebuilding industry within such five-year period, she will be required to repay the special retirement bonus to us.

Ms. Palmer and Mr. Sherman are each party to a restrictive covenant agreement, which includes an 18-month post-employment non-compete and non-solicit of customers and employees in connection with certain terminations of employment; however, for Mr. Sherman, if termination is without cause by us or the executive resigns for good reason, the covenants apply only through the duration of the period in which the executive is receiving severance. In addition to the restrictive covenant agreements, each employment agreement includes restrictive covenants pertaining to confidential information, nondisparagement and intellectual property, and, in addition, Mr. Sherman has a two-year post-termination non-solicit of employees and non-solicit of customers and suppliers.

For purposes of the employment agreements, “cause” generally means (i) a material breach by the named executive officer of his or her respective employment agreement, any equity agreement or any of our policies (subject to up to a 15-day period to cure such breach or failure if reasonably susceptible to cure); (ii) the named executive officer’s gross negligence or willful misconduct, which is injurious to us (subject to up to a 15-day period to cure such breach or failure if reasonably susceptible to cure); or (iii) the named executive officer’s conviction of, or guilty plea (or plea of nolo contendere) or confession to, a felony or other crime involving dishonesty, fraud, breach of any fiduciary obligation to our board of directors or any of our equity holders, or unethical business conduct.

For purposes of the employment agreements, “good reason” generally means (i) any material diminution in the nature or status of named executive officer’s title, duties, responsibilities or authority, including by reason of such executive’s no longer holding a certain position of a publicly traded company following a change in control, (ii) any material diminution in the named executive officer’s base salary or bonus opportunity, other than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees, (iii) a material breach of the employer’s obligations under the Employment Agreement, or (iv) a change of the named executive officer’s principal place of business to a location more than 50 miles from its then present location; provided, that the named executive officer provides us with written notice of any fact or circumstance believed by him or her to constitute good reason within 90 days of the occurrence of such fact or circumstance and subject to a 30-day period to cure such fact or circumstance.

For purposes of the employment agreements, “change in control” has the same meaning contained in the 2013 Omnibus Plan (or any successor plan thereto).

Retirement Agreement. Mr. Cone retired from employment on December 31, 2021. Following his retirement, and in exchange for him providing a release of claims in favor of the Company, Mr. Cone will receive; (i) 12 months of

 

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continued base salary; (ii) a full 2021 annual cash incentive bonus and profit sharing bonus, in each case, based on actual attainment of performance goals; and (iii) subject to his timely election of continued health coverage, a COBRA subsidy for up to 12 months.

In addition, Mr. Cone will remain eligible to vest in any outstanding stock option and service-based restricted stock unit awards scheduled to vest in February 2022 pursuant to the terms of the Retirement Agreement. Following his retirement, to the extent not otherwise exercised, each outstanding and vested stock option will expire on September 30, 2022. With respect to Mr. Cone’s outstanding restricted stock unit awards subject to performance-based vesting conditions: (i) each Performance RSU award granted in 2019; (ii) shares subject to the 2020 and 2021 tranches of each performance RSU award granted in 2020; and (iii) shares subject to the 2021 tranche of the Performance RSU award granted in 2021, will remain outstanding and eligible to be earned and vest, as applicable, in accordance with the terms of the applicable award agreement as if Mr. Cone had remained employed through the applicable performance period, vesting date and performance certification. Consistent with the terms of the award agreements governing Mr. Cone’s outstanding equity awards, all other unvested equity awards held by Mr. Cone as of his retirement date were forfeited for no consideration. The Retirement Agreement contains customary confidentiality, cooperation, non-competition (through severance period), non-solicitation of employees, customers and suppliers (two-years post-employment) and non-disparagement provisions.

Treatment of Equity Awards upon Termination (Not in Connection with a Change in Control).

Generally. Under the terms of our 2013 Omnibus Plan and the award agreements for awards issued thereunder, generally, upon any termination of employment, whether with or without “cause” or “good reason,” or by reason of an employee’s death or disability, unvested stock options and RSUs (both Service RSUs and Performance RSUs) are forfeited for no consideration. Vested stock options may be exercised for a period of 90 days following a termination without “cause” or for “good reason,” and for a period of one year following a termination by reason of death or disability. If an employee is terminated for cause, all of the employee’s stock options, whether vested or unvested, expire immediately upon termination.

Retirement. For each of our named executive officers, upon an Eligible Retirement with respect to their equity awards granted in February 2018 and later:

 

 

Performance RSUs will continue to be eligible to vest at the end of the applicable three-year performance period (based on actual performance); and

 

 

Service RSUs and stock options will vest in full, and our named executive officers will generally be permitted to exercise such vested stock options during the one year following such Eligible Retirement.

Under the equity award agreements, an “Eligible Retirement” as a retirement by the named executive officer that is at least 12 months following the applicable grant date at a time when (i) he or she has completed a minimum of five years of employment with the Company and its subsidiaries and attained at least 55 years of age, and (ii) his or her age plus years of consecutive employment equals at least 70. As of December 31, 2021, only Ms. Palmer was qualified to resign for an Eligible Retirement.

Death; Disability. Pursuant to the terms of Ms. Palmer’s and Mr. Sherman’s employment agreement, upon a termination of employment by the Company as a result of the named executive officer’s death or disability (as defined in their respective employment agreements) with respect to any equity awards granted to the named executive officer:

 

 

All equity awards subject to performance conditions, will continue to be eligible to vest at the end of the applicable performance period (based on actual performance); however, the executive will only be eligible to vest in a prorated portion of each such award. Such proration will be based on a fraction, the numerator of which is the number of completed months in the applicable performance period (or term of similar meaning) at the time of such termination and the denominator of which is the number of months in the applicable performance period, multiplied by the number of shares of common stock which are finally determined to be earned and subject to the performance award following the completion of the performance period; and

 

 

All equity awards subject to service-based vesting conditions only, will vest in full as of the date of such termination, and our named executive officers (or their beneficiaries, if applicable) will generally be permitted to exercise such vested stock options during the one year following such termination.

 

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Change in Control Benefits

We do not provide our named executive officers with any single-trigger change in control payments or benefits. If a change in control were to have occurred on December 31, 2021, and our named executive officers remained employed by us, there would have been no payments due to our named executive officers under any of our plans.

In addition to the enhanced severance described above following a CIC Qualifying Termination, Ms. Palmer’s and Mr. Sherman’s outstanding stock options will become immediately vested and exercisable and outstanding Service RSU awards will become 100% vested upon a CIC Qualifying Termination. For equity awards subject to a performance condition (including Performance RSUs), upon a change in control, all performance goals applicable to awards that vest based on both the completion of a period of service and the satisfaction of a performance condition will be deemed achieved at the “target” level, and such named executive officer will be eligible to vest in the performance award on the last date of the applicable service period, subject to each grantee’s continued employment through that date. However, if the named executive officer experiences a CIC Qualifying Termination, then the grantee will vest in the performance award on the date of termination (or the date of the change in control, if later).

The employment agreements provide that, to the extent a named executive officer would be subject to Section 280G or 4999 of the Code, the named executive officer’s parachute payments would be reduced to the extent that no portion of the payment shall be subject to the excise tax, but only if the named executive officer’s net after-tax benefit would exceed what the net after-tax benefit would have been if such reduction were not made and the named executive officer paid the applicable excise tax. No named executive officer has any right to receive a “gross up” for any excise tax imposed by Section 4999 of the U.S. Internal Revenue Code, or any other U.S. federal, state, and local income tax.

Calculations of Benefits to Which Executives Would be Entitled

The following table summarizes the severance benefits that would have been payable to Ms. Palmer and Mr. Sherman upon (i) a Qualifying Termination, (ii) a retirement, (iii) a CIC Qualifying Termination, and (iv) a termination by the Company due to the named executive officer’s death or disability, assuming, in each case, that the triggering event or events occurred on December 31, 2021. For Mr. Cone, the table includes his severance payments and benefits as provided for under the Retirement Agreement only. All numbers have been rounded to the nearest whole dollar. The dollar value of the payments and other benefits to be provided to each of the named executive officers are estimated to be as follows:

 

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Estimated Payments and Benefits upon Termination or in Connection with a Change in Control

 

 

  Name and Form of Compensation    Qualifying
Termination
($)
    Retirement
($)
    CIC
Qualifying
Termination
($)
    Death/
Disability
($)
 

  Sheryl D. Palmer

        

  Base Severance

     6,544,318 (1)            8,180,398 (7)       

  Prorated Bonus

     3,000,000 (2)            3,000,000 (2)       

  Continued Benefits

     24,950 (3)            24,950 (3)       

  Outplacement Services

     10,000 (4)            10,000 (4)       

  Accelerated Vesting of Equity Awards(11)

           10,563,945 (5)      17,406,733 (8)      12,366,655 (9) 

  Retirement Bonus

           1,000,000 (6)             

  Total

 

    

 

9,579,268

 

 

 

   

 

11,563,945

 

 

 

   

 

28,622,081

 

 

 

   

 

12,366,655

 

 

 

  C. David Cone(10)

        

  Base Severance

           575,000              

  2021 Annual Bonus

           1,293,750              

  2021 Profit Sharing Bonus

           1,078,125              

  Continued Benefits

           29,158              

  Additional Vesting of Equity Awards(11)

           3,203,735              

  Total

 

    

 

 

 

 

   

 

6,179,768

 

 

 

   

 

 

 

 

   

 

 

 

 

  Darrell C. Sherman

        

  Base Severance

     1,970,900 (1)            2,627,866 (7)       

  Prorated Bonus

     1,125,000 (2)            1,125,000 (2)       

  Continued Benefits

     31,501 (3)            31,501 (3)       

  Outplacement Services

     10,000 (4)            10,000 (4)       

  Accelerated Vesting of Equity Awards(11)

                 3,013,830 (8)      2,096,550 (9) 

  Total

 

    

 

3,137,401

 

 

 

   

 

 

 

 

   

 

6,808,197

 

 

 

   

 

2,096,550

 

 

 

 

(1)

Under her employment agreement, Ms. Palmer is entitled to a severance amount equal to two times the sum of (x) her annual base salary and (y) the higher of her (A) target bonus or (B) average annual bonus paid in or payable in respect of (whichever results in a higher average) the three completed calendar years that preceded the date of termination. Severance is paid in equal installments over a period of 30 months. Under his employment agreement, Mr. Sherman is entitled to a severance amount equal to 1.5 times the sum of (x) his annual base salary and (y) the higher of his (A) target bonus or (B) average annual bonus paid in or payable in respect of (whichever results in a higher average) the three completed calendar years that preceded the date of termination. Severance is paid in equal installments over a period of 18 months.

 

(2)

Pursuant to their respective employment agreements, Ms. Palmer and Mr. Sherman are entitled to a prorated annual bonus for the fiscal year in which employment terminates based on actual performance. For purposes of this table, we have calculated the bonuses assuming that the executive would have received his or her annual bonus based on the actual performance results under our 2021 annual bonus program. We have assumed that the financial targets in the 2021 annual bonus program were able to be determined as of December 31, 2021.

 

(3)

These amounts reflect the estimated COBRA premiums for the executives and their respective eligible dependents enrolled (if any) in any then-existing group health plans for one year (or in the case of Ms. Palmer, 30 months) as required by their respective employment agreements and assumes that the executive does not become eligible for other health coverage.

 

(4)

This amount reflects the value of 12 months of outplacement services.

 

(5)

As of December 31, 2021, only Ms. Palmer would have satisfied the age and service requirements with respect to her 2019 and 2020 equity awards (the 2021 equity awards would not be eligible for retirement treatment) to be able to resign due to an Eligible Retirement and benefit from the additional equity vesting opportunities described above. Following an Eligible Retirement, retirement eligible Service RSUs and stock options will vest in full and retirement eligible Performance RSUs remain outstanding and eligible to be earned and vest as if the named executive officer had remained employed through the end of the performance period. For purposes of this table, we have included the estimated value of the outstanding Performance RSUs that were retirement eligible as reported in the Outstanding Equity Awards at Fiscal Year-End above. See the Outstanding Equity Awards at Fiscal Year-End above for additional information with respect to outstanding unvested options, Service RSUs and Performance RSUs.

 

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(6)

Pursuant to the terms of her employment agreement, in the event Ms. Palmer voluntarily terminates employment in connection with her retirement from the homebuilding industry, in lieu of the salary continuation, prorated bonus and continued benefits payments set forth above, we will pay her a special retirement bonus equal to $1,000,000, which is payable in equal installments as described above.

 

(7)

Pursuant to their respective employment agreements, Ms. Palmer and Mr. Sherman will receive a lump sum payment equal to two and a half times (two times Mr. Sherman) the sum of such executive’s (x) base salary and (y) the higher of his or her (A) target bonus or (B) average annual bonus paid in or payable in respect of (whichever results in a higher average) the three completed calendar years that preceded the date of termination.

 

(8)

Represents the in-the-money value of unvested stock options, unvested Service RSUs, and unvested Performance RSUs (at target-level of performance) associated with the acceleration of the vesting of such equity awards under the terms of each named executive officer’s respective employment agreement.

 

(9)

Pursuant to their respective employment agreements, if Ms. Palmer or Mr. Sherman’s employment is terminated by us on account of her or his death or disability, then Service RSUs and stock options will vest in full and Performance RSUs remain outstanding and eligible to be earned and vest in a prorated portion of each such performance RSU award as if the named executive officer had remained employed through the end of the performance period. For purposes of this table, we have included the estimated value of the outstanding Performance RSUs that were reported in the Outstanding Equity Awards at Fiscal Year-End above, but have excluded any value attributable to the shares allocable to the 2022 and 2023 tranches of the outstanding Performance RSU awards. See the Outstanding Equity Awards at Fiscal Year-End above for additional information with respect to outstanding unvested options, Service RSUs and Performance RSUs.

 

(10)

The values for Mr. Cone reflect the severance payments and benefits provided under the terms of his Retirement Agreement, including: (i) 12 months of continued base salary; (ii) his 2021 annual cash incentive bonus and 2021 profit sharing bonus, in each case, based on actual attainment of performance goals; and (iii) an amount representing the estimated COBRA premiums for Mr. Cone and his eligible dependents for one year. In addition, while none of Mr. Cone’s outstanding equity vested on the date of his retirement, he remains eligible to vest in any outstanding stock options and Service RSUs scheduled to vest in February 2022. With respect to Mr. Cone’s outstanding Performance RSUs, he will remain eligible to vest in (i) the Performance RSU award granted in 2019; (ii) the 2020 and 2021 tranches of each Performance RSU award granted in 2020; and (iii) the 2021 tranche of the Performance RSU award granted in 2021, in each case, based on actual performance. For purposes of this table, we have included the estimated value of the outstanding Performance RSUs that were reported in the Outstanding Equity Awards at Fiscal Year-End above. See the Outstanding Equity Awards at Fiscal Year-End above for additional information with respect to Mr. Cone’s outstanding unvested stock options, Service RSUs and Performance RSUs.

 

(11)

For RSUs, the values in the table above were based on the NYSE closing price of $34.96 per share of our common stock on December 31, 2021, the last business day of 2021, and, in the case of stock options, were based on the difference between such closing price and the exercise price of the stock option.

The severance benefits set forth in the preceding table exclude the amounts that would be payable to Ms. Palmer and Mr. Sherman pursuant to the Taylor Morrison Cash Balance Plan, which is described under the heading “Pension Benefits.”

CEO Pay Ratio Disclosure

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the ratio of the annual total compensation, calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K (the “Annual Total Compensation”) of our median employee and the Annual Total Compensation of our CEO, Sheryl D. Palmer.

For 2021, our last completed fiscal year:

 

 

The median Annual Total Compensation of all employees of our Company (other than our CEO), was $107,478.

 

 

The Annual Total Compensation of Ms. Palmer was $12,063,477.

Accordingly, the ratio of Ms. Palmer’s Annual Total Compensation to the median employee’s Annual Total Compensation was 112.2 to 1. We believe this ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

SEC rules require a company to identify the median-compensated employee only once every three fiscal years, absent material changes to the employee population during that period. Because there were no such material changes in our employee population since we undertook to identify the median-compensated employee for determination of the ratio for fiscal 2020, we elected to use the same employee for calculating the fiscal 2021 ratio. For a discussion of how we identified our median employee, see our annual proxy statement filed April 16, 2021 under “CEO Pay Ratio Disclosure.”

 

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  PROPOSAL 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED  EXECUTIVE OFFICERS (SAY ON PAY)    

 

Proposal 2: Advisory Vote to Approve the Compensation of our Named Executive Officers (Say on Pay)

Pursuant to Section 14A of the Exchange Act, we are asking our stockholders to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers, commonly referred to as the “say-on-pay” vote. In accordance with the requirements of the SEC, we are providing our stockholders with an opportunity to express their views on our named executive officers’ compensation. Although this advisory vote is nonbinding, our board of directors and compensation committee will review and consider the voting results when making future decisions regarding our named executive officer compensation and related executive compensation programs. We are required to present a stockholder proposal on the frequency of the advisory say-on-pay vote every six years. In 2020, our board of directors recommended, and our stockholders approved, an annual advisory say-on-pay vote. Accordingly, we intend to conduct future advisory votes on the compensation of our named executive officers every year. The next advisory say-on-frequency vote is schedule for 2026.

As described in more detail in the Compensation Discussion and Analysis, our executive compensation programs are designed to have the following attributes:

 

 

A balanced mix of short-term cash compensation and long-term equity-based compensation;

 

 

Use of multiple performance measures with no guaranteed incentive payouts;

 

 

Payouts in respect of performance awards under our executive compensation programs are capped;

 

 

Limitations on the amount of awards that can be made under our equity incentive plans;

 

 

All programs are designed and overseen by an independent compensation committee that retains their own independent advisor;

 

 

An anti-hedging policy applicable to all employees (including our executive officers and directors) that prohibits purchases of our stock on margin, calls or similar options on our stock, or selling our stock short;

 

 

An appropriate level of severance protection to ensure continuity of service;

 

 

No single-trigger change in control features in any of our programs;

 

 

No gross ups for any excise or other penalty taxes related to compensation paid;

 

 

Forfeiture of equity awards upon violation of certain post-employment restrictive covenants;

 

 

Clawback of certain cash and equity incentive compensation; and

 

 

A modest use of perquisites, which do not make up a material portion of the compensation and benefits provided to our named executive officers.

We encourage stockholders to read the Compensation Discussion and Analysis in this Proxy Statement, which describes the processes our compensation committee used to determine the structure and amounts of the compensation of our named executive officers in 2021 and how our executive compensation philosophy, policies and procedures operate and are designed to achieve our compensation objectives. The compensation committee and our board of directors believe that our executive compensation strikes the appropriate balance between utilizing responsible, measured pay practices and effectively incentivizing our named executive officers to dedicate themselves fully to value creation for our stockholders.

Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and any other related disclosure in this Proxy Statement.”

The proposal will be approved by the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote on the matter. Abstentions will have the effect of voting against the proposal, and broker non-votes will have no effect on the outcome of the proposal.

The Board of Directors Recommends a Vote “FOR” the Advisory Vote to Approve the Compensation of our Named Executive Officers.

 

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Table of Contents
 

  PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE  LLP AS OUR INDEPENDENT REGISTERED  

  PUBLIC ACCOUNTING FIRM  

 

 

Proposal 3: Ratification of the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm

The audit committee has appointed Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. Deloitte & Touche LLP has served as our independent public accounting firm since 2011. We expect that representatives of Deloitte & Touche LLP will be present virtually at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Our board of directors is submitting the appointment of Deloitte & Touche LLP to our stockholders for ratification as a matter of corporate practice. If our stockholders fail to ratify the appointment, the audit committee may reconsider whether to retain Deloitte & Touche LLP. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of us and our stockholders.

The following table provides information regarding the fees billed by Deloitte & Touche LLP for the fiscal years ended December 31, 2021 and 2020. All fees described below paid to Deloitte & Touche LLP were pre-approved by the audit committee.

 

     

2021

 

    

2020

 

 

Audit Fees

   $ 1,368,436      $ 2,138,010   

Audit-Related Fees

            336,500  

Tax Fees

     1,074,358        1,045,640  

All Other Fees

     1,895        1,895  
  

 

 

    

 

 

 

Total

   $ 2,444,689      $ 3,522,045  

Audit Fees

This category includes the aggregate fees during 2021 and 2020 for audit services provided by the independent registered public accounting firm or its affiliates, including for the audits of our annual consolidated financial statements, reviews of each of the quarterly financial statements included in our Quarterly Reports on Form 10-Q and certain subsidiary financial statement audits.

Audit-Related Fees

This category includes the aggregate fees during 2020 for services related to the performance of the audits and reviews described in the preceding paragraph that are not included in the Audit Fees category, including fees associated with (i) assistance in undertaking and applying financial accounting and reporting standards, (ii) accounting assistance with regard to actual and proposed transactions, (iii) services rendered in connection with registration statements and similar securities offering materials and (iv) the preparation and review of documents related to our securities offerings.

Tax Fees

This category includes the aggregate fees during 2021 and 2020 for professional tax services provided by the independent registered public accounting firm or its affiliates, including for tax compliance and tax advice.

All Other Fees

Other fees include fees to the independent registered public accounting firm or its affiliates for annual subscriptions to online accounting and tax research software applications and data.

 

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Table of Contents

  PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP  AS OUR INDEPENDENT REGISTERED  

  PUBLIC ACCOUNTING FIRM   

 

 

 

Audit Committee Review and Pre-Approval of Independent Registered Public Accounting Firm’s Services

Our audit committee’s policy is to pre-approve all audit and non-audit services (including the fees and terms thereof) to be performed by our independent registered public accounting firm. The audit committee’s authority to pre-approve such services is set forth in the charter of the audit committee, which is available on the Investor Relations page of our corporate website, www.taylormorrison.com, under the category “Corporate Governance.” The audit committee considered whether the non-audit services rendered by and fees paid to Deloitte & Touche LLP were compatible with maintaining Deloitte & Touche LLP’s independence as the independent registered public accounting firm of our financial statements and concluded that they were.

The proposal will be approved by the affirmative vote of the majority of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote on the matter. Abstentions will have the effect of voting against the proposal. Brokers may vote shares with respect to this proposal in the absence of client instructions and, thus, there will be no broker non-votes with respect to this proposal.

The Board of Directors Recommends a Vote “FOR” the Ratification of the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2022.

 

56 | Taylor Morrison Home Corporation Notice of 2022 Annual Meeting of Stockholders and Proxy Statement


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    AUDIT COMMITTEE REPORT  

 

Audit Committee Report

The audit committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2021 with our management and Deloitte & Touche LLP, our independent registered public accounting firm. Management is responsible for the preparation, presentation and integrity of the financial statements, accounting and financial reporting principles and internal control over financial reporting. Deloitte & Touche LLP is responsible for performing an independent audit of the financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”), for expressing opinions on the conformity of the financial statements with accounting principles generally accepted in the United States and for expressing opinions on our internal control over financial reporting.

The audit committee has discussed with Deloitte & Touche LLP the matters required to be discussed by the applicable standards of the PCAOB and has received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the audit committee concerning independence. The audit committee has also discussed with Deloitte & Touche LLP their independence.

Based on its reviews and discussions referred to above, the audit committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the SEC.

 

AUDIT COMMITTEE

David C. Merritt (Chair)

Anne L. Mariucci

Denise F. Warren

 

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  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TAYLOR  MORRISON HOME CORPORATION  

  2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

 

Proposal 4: Approval of the Amendment and Restatement of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan

General

At the Annual Meeting, our stockholders will be asked to approve the amendment and restatement of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (as amended and restated as of May 31, 2017) (the “2013 Omnibus Plan,” and when referred to herein as proposed to be amended and restated, the “Amended and Restated Plan”).

On April 7, 2022, our Board adopted, subject to stockholder approval, the Amended and Restated Plan. A copy of the Amended and Restated Plan is attached to this proxy statement as Appendix A. We are seeking stockholder approval of the Amended and Restated Plan to comply with NYSE listing rules that require stockholder approval of material changes to equity compensation plans.

The changes included in the Amended and Restated Plan would:

 

 

Increase in Aggregate Share Limit. The 2013 Omnibus Plan currently limits the aggregate number of shares of common stock that may be delivered pursuant to all awards granted under the 2013 Omnibus Plan to 14,178,459 shares. The proposed amendments would increase this limit by an additional 983,000 shares so that the new aggregate share limit under the Amended and Restated Plan would be 15,161,459 shares, which increase represents approximately 0.82% of the Company’s common stock outstanding as of the Record Date.

 

 

Extend the Term. The proposed amendments would extend the term of the 2013 Omnibus Plan, which currently expires on April 8, 2023, by nine years with a new expiration date of May 26, 2032.

Additionally, amendments to Section 162(m) Internal Revenue Code of 1986, as amended (the “Code”), which removed the “qualified performance-based compensation” exemption from the $1 million per year compensation deduction limitation for certain executive officers, became effective in 2018. As a result, the Amended and Restated Plan removes language that was intended to ensure performance-based awards qualified for this exemption, since it is no longer relevant. However, although no longer required by Section 162(m) of the Code, the Company has not eliminated (or increased) the per-participant limits on awards in the 2013 Omnibus Plan discussed below.

As of the Record Date, there were a total of 5,002,080 shares of our common stock subject to outstanding awards under the 2013 Omnibus Plan and 4,491,157 remaining shares of our common stock reserved for issuance under the 2013 Omnibus Plan. The Amended and Restated Plan would increase the reserved shares of common stock under the plan by 983,000 shares. Based solely on the closing price of our common stock, as reported by the NYSE on the Record Date ($29.12), the maximum aggregate market value of the additional 983,000 new shares of common stock that could be issued under the Amended and Restated Plan is approximately $28.6 million.

We believe that the increase in the reserved shares of common stock for issuance under the Amended and Restated Plan is necessary to ensure that we have adequate capacity to continue to attract and retain talented employees and non-employee directors. We believe that this number represents a reasonable amount of potential equity dilution and allows us to continue to award equity incentives, which are an important component of our overall compensation program.

 

58 | Taylor Morrison Home Corporation Notice of 2022 Annual Meeting of Stockholders and Proxy Statement


Table of Contents
 

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE  TAYLOR MORRISON HOME CORPORATION  

2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

Overhang

The following table provides certain additional information on “overhang” with respect to our equity incentive program.

 

     

As of March 15, 2022     

 

Total number of shares of common stock subject to outstanding stock options

   3,582,800

Weighted-average exercise price of outstanding stock options

   $23.10

Weighted -average remaining term of outstanding stock options

   7.22 years

Total number of shares of common stock subject to outstanding full value awards

   1,946,686

Total number of shares of common stock available for grant under the 2013 Omnibus Plan

   4,491,157

 

   
     

As of the Record Date     

 

Total number of shares of common stock outstanding

   120,369,695

Per-share closing price of common stock as reported on the New York Stock Exchange

   $29.12

Burn Rate

The following table provides information regarding our annual “burn rate” (see footnote 3 to the table below) for the past three fiscal years under the 2013 Omnibus Plan. We currently expect the number of shares authorized for issuance under the Amended and Restated Plan will be sufficient to provide for future awards for at least three years.

 

Burn Rate

 

 

  Fiscal Year

 

  

Awards
Granted(1)

 

    

Diluted
Weighted
Average
Number of
Shares of
Common
Stock
Outstanding(2)

 

    

Burn
Rate(3)

 

 

2021

     1,681,982        126,077,000        1.33

2020

     1,965,797        127,812,000        1.54

2019

     2,215,122        106,997,000        2.07

 

(1)

Includes stock options, service-based vesting restricted stock units, performance-based vesting restricted stock units (assuming achievement of the target level of performance) and DSUs.

 

(2)

As reported in the Company’s financial statements filed with the Annual Report on Form 10-K for 2021.

 

(3)

Burn rate = (# of Awards Granted) / (Diluted Weighted Average Number of Shares of Common Stock Outstanding).

If our stockholders approve the Amended and Restated Plan, the Amended and Restated Plan will be effective as of May 26, 2022. If our stockholders do not approve the Amended and Restated Plan, the 2013 Omnibus Plan will remain in effect in its current form and awards may continue to be made from the remaining shares under the 2013 Omnibus Plan until its expiration date.

Reasons Why You Should Vote in Favor of this Proposal

Our Board recommends a vote FOR the approval of the Amended and Restated Plan because it believes that the Amended and Restated Plan is in the best interests of the Company and its stockholders for the following reasons:

 

 

Attracts and retains talent. Talented executives and employees are essential to executing our business strategies. The purpose of the Amended and Restated Plan is to promote the success of the Company by giving the Company a competitive edge in attracting, retaining and motivating key personnel and providing participants with a plan that provides incentives directly related to increases in the value of the Company.

 

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  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TAYLOR  MORRISON HOME CORPORATION  

  2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

 

 

Aligns director, employee and stockholder interests. We currently provide long-term incentives primarily by (i) compensating participants with equity awards, including incentive compensation awards measured by reference to the value of the Company’s equity, (ii) rewarding such participants for the achievement of performance targets with respect to a specified performance period and (iii) motivating such participants by giving them opportunities to receive awards directly related to such performance. If the Amended and Restated Plan is approved, we will be able to maintain our means of aligning the interests of key personnel with the interests of our stockholders.

 

 

Approval is necessary to continue an equity-based compensation program. If these proposed amendments are not approved, the 2013 Omnibus Plan will expire on April 8, 2023. In order to provide competitive compensation opportunities to attract and retain employees without equity compensation, the Company would need to replace the compensation previously delivered in equity awards with cash awards or other vehicles. These alternative forms of compensation may not align employee interests with those of stockholders as efficiently as stock-based awards.

If this proposal is not approved by our stockholders and, as a consequence, we are unable to continue to make equity grants at competitive levels, the Board believes that our ability to hire and retain highly qualified personnel and our ability to manage future growth will be negatively affected. In addition, if stockholders do not approve the Amended and Restated Plan, we would be unable to make grants of awards after April 8, 2023.

Summary of Sound Governance Features of the Amended and Restated Plan

Our Board and the compensation committee of the Board believe the Amended and Restated Plan contains several features that are consistent with the interests of our stockholders and sound corporate governance practices, including the following:

 

 

No “evergreen” provision. The number of shares of our common stock available for issuance under the Amended and Restated Plan does not automatically refresh annually based on the number of shares outstanding.

 

 

No liberal change in control definition. The change in control definition in the Amended and Restated Plan is not a “liberal” definition and, for example, would not be achieved merely upon stockholder approval of a transaction. A change in control (or the approval of a plan of complete dissolution or liquidation) must actually occur in order for the change in control provisions in the Amended and Restated Plan to be triggered.

 

 

No dividends on unearned awards. The Amended and Restated Plan prohibits the current payment of dividends or dividend equivalent rights on unearned awards subject to performance-vesting.

 

 

No repricing without stockholder approval. The Amended and Restated Plan prohibits the repricing of outstanding stock options or stock appreciation rights (“SARs”) without stockholder approval.

 

 

Clawback provision. The Amended and Restated Plan contains a provision that subjects awards to clawback or forfeiture to the extent called for by applicable law or Company policy.

 

 

No discounted stock options or SARs. The Amended and Restated Plan includes a provision requiring that all stock options and SARs are to be granted at a price not less than fair market value on the date of grant.

 

 

No tax gross-ups. The Amended and Restated Plan does not provide for any tax gross-ups.

 

 

Limit on non-employee director awards. The Amended and Restated Plan includes an aggregate limit on the amount of equity compensation that may generally be paid to a non-employee director in any plan year.

 

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Table of Contents
 

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE  TAYLOR MORRISON HOME CORPORATION  

2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

Equity Compensation Plan Information

The following table provides information as of December 31, 2021 with respect to the 2013 Omnibus Plan under which our equity securities are authorized for issuance.

 

Equity Compensation Plan Information  
Plan Category   

Number of
securities
to be

issued upon
exercise of

outstanding
options,

warrants
and rights

(a)

    

Weighted-
average
exercise

price of
outstanding

options,
warrants
and

rights

(b)

   

Number of
securities

remaining
available for

future
issuance
under

equity
compensation
plans

excluding
securities

reflected in
column (a)

(c)

 

Equity compensation plans approved by security holders(1)

     4,896,270        $22.02 (2)      5,404,025 (3) 

Equity compensation plans not approved by security holders

                   
  

 

 

    

 

 

   

 

 

 

Total

     4,896,270        $22.02(2)       5,404,025  

 

(1)

Equity compensation plans approved by security holders consist of the 2013 Omnibus Plan. The 2013 Omnibus Plan is currently our only compensation plan pursuant to which our equity is awarded. This figure includes 123,515 shares of our common stock subject to substitute awards issued under 2013 Omnibus Plan relating to option, restricted stock unit and restricted stock awards assumed and substituted in connection with the acquisition of William Lyon Homes in 2020. These substitute awards do not count against the aggregate shares of our common stock available for awards under the 2013 Omnibus Plan pursuant Section 5(e) of the 2013 Omnibus Plan.

 

(2)

Column (a) includes (i) 804,465 shares of our common stock underlying outstanding time-based vesting RSUs, restricted stock awards and DSUs; (ii) 926,193 shares of our common stock underlying outstanding performance-based vesting RSUs; and (iii) 3,165,612 shares of our common stock issuable upon exercise of outstanding stock options. Amount assumes achievement of the maximum level of performance in respect of RSUs that are subject to performance-based vesting conditions. Because there is no exercise price associated with RSUs, restricted stock awards and DSUs, such equity awards are not include in the weighted-average exercise price calculation in column (b).

 

(3)

A total of 14,178,459 shares of our common stock have been authorized for issuance pursuant to the terms of the 2013 Omnibus Plan, including pursuant to incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs, and other stock-based awards and performance compensation awards.

Summary of the Amended and Restated Plan

The following description of the Amended and Restated Plan is a summary of certain provisions of the Amended and Restated Plan and is qualified in its entirety by the text of the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan, as amended and restated, a copy of which is attached as Appendix A, and should be read in conjunction with the following summary.

Purpose. The purpose of our Amended and Restated Plan is to give us a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide us with a stock plan providing incentives directly related to increases in our stockholder value.

Administration. Pursuant to the Amended and Restated Plan, our compensation committee (or subcommittee of delegated directors or officers) will have authority to grant awards under the plan, determine the types of awards to be granted, the recipients of awards, and the terms and conditions of awards (including the number of shares of our common stock (or dollar value) subject thereto, the vesting schedule and term, and to what extent and when awards may be settled in cash, shares of common stock, restricted shares or other property) and to establish rules relating to the plan and interpret the plan and awards.

Eligibility. The compensation committee may grant awards, including common stock, stock options, share appreciation rights, restricted stock, restricted stock units, other stock-based awards, performance compensation awards (in the form of cash or equity) or any combination of the foregoing, to our non-employee directors and employees, consultants or advisors. As of the Record Date, approximately 3,080 employees and 8 non-employee directors were eligible for awards under the 2013 Omnibus Plan.

 

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  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TAYLOR  MORRISON HOME CORPORATION  

  2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

 

Number of Shares Authorized.

Subject to adjustment in connection with changes in capitalization and other corporate or non-recurring events, the Amended and Restated Plan will provide for an aggregate of 15,161,459 shares of our common stock to be available for awards. As of the Record Date, there was an aggregate of 5,559,080 shares of our common stock remaining available for future grants of awards.

As noted above, we are seeking stockholder approval to increase the aggregate maximum number of shares of our common stock authorized and reserved for issuance under the Amended and Restated Plan from 14,178,459 to 15,161,459 (an increase of 983,000 shares of our common stock). The Amended and Restated Plan will continue to provide that: (i) no more than 4,000,000 shares of common stock may be subject to grants of stock options or stock appreciation rights under the Amended and Restated Plan to any single participant during any calendar year and no more than 14,178,459 shares of common stock may be subject to grants of stock options or stock appreciation rights under the Amended and Restated Plan; (ii) no more than 3,903,748 shares of common stock may be issued in respect of incentive stock options under the Amended and Restated Plan; (iii) no more than 2,000,000 shares of common stock may be granted under the Amended and Restated Plan with respect to performance compensation awards to any participant in any one year; and (iv) the maximum amount payable to any participant under the Amended and Restated Plan for any single fiscal year during a performance period for a cash-denominated award is $5,000,000. In addition, under the Amended and Restated Plan, the maximum amount (based on the fair market value of shares of common stock on the date of grant as determined in accordance with applicable financial accounting rules) of awards that may be granted in any single fiscal year to any non-employee director shall be $250,000; provided that the foregoing limitation shall neither apply to nor take into account any restricted stock units issued to a non-employee director in lieu of payment of cash director compensation or board or committee fees or in respect of any one-time initial equity grant upon a non-employee director’s appointment to the Board.

If any award is forfeited, or if any option or stock appreciation right terminates, expires or lapses without being settled or exercised or any share is surrendered or tendered to the Company in payment of the exercise price of any taxes required to be withheld, shares of our common stock subject to such award surrendered or tendered will again be available for future grant under the Amended and Restated Plan. If there is any change in our corporate capitalization, our compensation committee shall make any equitable substitutions or adjustments it deems necessary or appropriate in its sole discretion to the number of shares reserved for issuance under the Amended and Restated Plan, the number of shares covered by awards then outstanding under the Amended and Restated Plan, the limitations on awards under the Amended and Restated Plan, the exercise price of outstanding options and such other adjustments as it may determine appropriate.

The 2013 Omnibus Plan had an initial term of ten years, which will expire on April 8, 2023. The Amended and Restated Plan will extend the term of the plan by nine years and will expire on May 26, 2032. No further awards may be granted under the 2013 Omnibus Plan after April 8, 2023 unless the term of the Amended and Restated Plan is extended by the Company’s stockholders.

Awards Available for Grant. The compensation committee may grant awards of nonqualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance compensation awards (including cash-based awards), other stock-based awards or any combination of the foregoing.

Options. The compensation committee will be authorized to grant options to purchase shares of common stock that are either “qualified,” meaning they satisfy the requirements of Section 422 of the Code for incentive stock options, or “nonqualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. These options will be subject to the terms and conditions established by the compensation committee. Under the terms of our Amended and Restated Plan, the exercise price of the options will not be less than the fair market value of our common stock at the time of grant. Options granted under the Amended and Restated Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the compensation committee and specified in the applicable award agreement. The maximum term of an option granted under the Amended and Restated Plan will be ten years from the date of grant (or five years in the case of a qualified option granted to a stockholder that holds 10% or more of the Company’s voting power). Payment in respect of the exercise of an option may be made in cash, check, by surrender of shares of common stock, or by such other method as the compensation committee may permit in its sole discretion.

SARs. The compensation committee is authorized to award SARs under the Amended and Restated Plan. SARs will be subject to the terms and conditions established by the compensation committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the

 

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Table of Contents
 

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE  TAYLOR MORRISON HOME CORPORATION  

2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

appreciation, if any, in the value of a share over a certain period of time less applicable withholding (in the case of cash-settled SARs). An option granted under the Amended and Restated Plan may include SARs, and the compensation committee may also award SARs to a participant independent of the grant of an option. SARs granted in connection with an option shall be subject to terms similar to the option corresponding to such SARs. The terms of SARs granted independent of options shall be subject to terms established by the compensation committee and reflected in the award agreement.

Restricted Stock. The compensation committee will be authorized to award restricted stock under the Amended and Restated Plan. Awards of restricted stock will be subject to the terms and conditions established by the compensation committee. Restricted stock is common stock that generally is non-transferable and is subject to other restrictions determined by the compensation committee for a specified period. Unless the compensation committee determines otherwise, or specifies otherwise in an award agreement, if the participant terminates employment during the restricted period, any then unvested restricted stock will be forfeited. Subject to any restrictions set forth in the applicable award agreement, holders of restricted stock shall generally be entitled to vote and receive dividends with respect to such restricted stock, however, dividends shall only be payable to the holder following the date on which the restrictions on such restricted stock lapse.

Restricted Stock Unit Awards. The compensation committee will be authorized to award restricted stock units, or RSUs. RSU awards will be subject to the terms and conditions established by the compensation committee. Unless the compensation committee determines otherwise, or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the RSUs are to be earned, any then unvested RSUs will be forfeited. At the election of the compensation committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares, at the expiration of the period over which the units are to be earned, or at a later date set forth in the applicable award agreement, less any taxes required to be withheld. The holder of any RSUs may be entitled to be credited with dividend equivalent payments upon the payment by us of dividends on our common stock, in the form of shares or cash and payable at the same time and under the same restrictions as the underlying RSUs.

Stock-Based Awards. The compensation committee is authorized to grant awards of unrestricted shares, either alone or in tandem with other awards, under such terms and conditions as the compensation committee may determine.

Performance Compensation Awards. The compensation committee may grant any award under the Amended and Restated Plan in the form of a performance compensation award by conditioning the vesting of the award on the satisfaction of certain performance goals. In addition, the compensation committee may denominate an award in cash or shares of common stock to any participant. The compensation committee shall establish performance criteria based on one or more of the following:

 

 

basic or diluted earnings per share (before or after taxes);

 

 

pre- or after-tax income (before or after allocation of corporate overhead and bonus);

 

 

operating income (before or after taxes);

 

 

revenue, net revenue, net revenue growth or product revenue growth;

 

 

gross profit or gross profit growth;

 

 

net operating profit (before or after taxes);

 

 

earnings, including earnings before or after interest, depreciation and/or taxes;

 

 

return measures (including, but not limited to, return on assets, net assets, capital, total capital, tangible capital, invested capital, equity, sales, or total shareholder return);

 

 

cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on capital, cash flow return on investment, and cash flow per share (before or after dividends));

 

 

margins, gross or operating margins, or cash margin;

 

 

operating efficiency;

 

 

productivity ratios;

 

 

share price (including, but not limited to, growth measures and total shareholder return);

 

Taylor Morrison Home Corporation Notice of 2022 Annual Meeting of Stockholders and Proxy Statement  | 63


Table of Contents

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TAYLOR  MORRISON HOME CORPORATION  

  2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

 

 

expense targets or cost reduction goals;

 

 

general administrative expense savings;

 

 

objective measures of client or customer satisfaction;

 

 

working capital targets;

 

 

measures of economic value added, or economic value-added models or equivalent metrics;

 

 

inventory control;

 

 

enterprise value;

 

 

net sales;

 

 

appreciation in and/or maintenance of the price of our Company’s Common Stock;

 

 

market share;

 

 

comparisons with various stock market indices;

 

 

reductions in costs;

 

 

improvement in or attainment of expense levels or working capital levels;

 

 

year-end cash;

 

 

debt reductions;

 

 

shareholder equity;

 

 

regulatory achievements;

 

 

implementation, completion or attainment of measurable objectives with respect to diversity and inclusion, environmental policy, health and safety, strategy, research, development, products or projects, production volume levels, acquisitions, divestitures, reorganizations or other corporate transactions or capital raising transactions, expansion of specific business operations, meeting divisional proposal budgets, and recruiting and maintaining personnel;

 

 

customer or client retention;

 

 

employee retention;

 

 

comparisons of continuing operations to other operations; or

 

 

any combination of the foregoing.

Any one or more of the performance criterion may be used to measure the performance of the Company and/or an affiliate as a whole or a business unit or division of the Company and/or an affiliate or any combination thereof, as the compensation committee may deem appropriate, or any of the above performance criteria as compared to the performance of a group of comparator companies, or published or special index that the compensation committee, in its sole discretion, deems appropriate, or the Company may select the share price performance criteria as compared to various stock market indices. The compensation committee also has the authority to provide for accelerated vesting of any award based on the achievement of performance goals pursuant to the performance criteria specified in this paragraph. Unless otherwise restricted under applicable tax and/or securities laws, the compensation committee shall have sole discretion to alter the governing performance criteria without obtaining shareholder approval of such alterations.

Effect of a Change in Control. Unless otherwise provided in an award agreement, the compensation committee has the right to provide for, in the event of a change in control of our company or certain other significant corporate transactions, as described in the Amended and Restated Plan: (i) an adjustment of the number and class of shares subject to the award and/or the exercise price or grant price of a stock option or SAR, as applicable, or other terms of the award including performance measures; (ii) cancellation and cash-out of outstanding awards, including cancellation of options and SARs without payment if the fair market value of one share of common stock on the date of the change in control is less than the per share option exercise price or SAR grant price; and (iii) substitution and assumption of awards. In addition, unless otherwise provided in an award agreement, if a participant’s employment terminates within 24 months following a change in control of our company: (i) outstanding options and SARs will immediately vest and be

 

64 | Taylor Morrison Home Corporation Notice of 2022 Annual Meeting of Stockholders and Proxy Statement


Table of Contents
 

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE  TAYLOR MORRISON HOME CORPORATION  

2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

fully exercisable, (ii) the restrictions, limitations and other conditions applicable to outstanding restricted shares and restricted stock units will lapse, and restricted shares and restricted stock units will be free of all restrictions, limitations and conditions (including, without limitation, a waiver of applicable performance goals); and (iii) any deferred awards will be settled as soon as possible in a manner intended to be consistent with Section 409A of the Code.

Transferability. In general, no awards or shares may be assigned, transferred, sold, pledged or encumbered, other than by will or the laws of descent and distribution. Awards may be exercised only by the participant or the participant’s guardian, executor, administrator or legal representative. However, awards other than incentive stock options may, with the approval of and subject to terms set by the compensation committee, be transferred to certain family members and estate planning vehicles, as set out in the Amended and Restated Plan.

Amendment. Our Board may amend, suspend or terminate our Amended and Restated Plan at any time; however, stockholder approval may be necessary if the law so requires. No amendment, suspension or termination will materially and adversely impair the rights of any participant or recipient of any award without the consent of the participant or recipient.

Term of Amended and Restated Plan. Unless sooner terminated in accordance with its terms, the Amended and Restated Plan will terminate on May 26, 2032. After the Amended and Restated Plan is terminated, no awards may be granted under the Amended and Restated Plan, but awards previously granted will remain outstanding in accordance with their applicable terms and conditions and the Amended and Restated Plan’s terms and conditions.

Clawback/Forfeiture. In the compensation committee’s discretion, an award agreement may provide for cancellation of an award without payment if the participant violates a non-compete, non-solicit, non-disparagement, or non-disclosure agreement or otherwise engages in activity in conflict with or adverse to the interests of our company or any subsidiary, as determined by the compensation committee in its sole discretion. The compensation committee may also provide that in such circumstances the participant or any person to whom any payment has been made will forfeit any compensation, gain or other value realized thereafter on the vesting, exercise or settlement of an award, the sale or transfer of an award or the sale of the common stock acquired in respect of an award, and must promptly repay such amounts to us. The compensation committee may also provide in an award agreement that if the participant receives an amount in excess of what the participant should have received under the terms of the award due to material noncompliance by our Company with any financial reporting requirement under the U.S. securities laws or any mistake in calculations or other administrative error, then the award will be cancelled and the participant must promptly repay any excess value to us. To the extent required by applicable law and/or the rules and regulations of any U.S. national securities exchange or inter-dealer quotation system on which shares are listed or quoted, or pursuant to a written company policy, awards shall be subject (including on a retroactive basis) to clawback, forfeiture or other similar action.

U.S. federal income tax consequences

The following is a general summary of the material U.S. federal income tax consequences of the grant, exercise and vesting of awards under the Amended and Restated Plan and the disposition of shares acquired pursuant to the exercise or settlement of such awards and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. This summary assumes that all awards described in the summary are exempt from, or comply with, the requirements of Section 409A of the Code. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.

Options-Qualified and nonqualified. The Code requires that, for favorable tax treatment of a qualified option (an “incentive stock option”), shares of our common stock acquired through the exercise of a qualified option cannot be disposed of on or before the later of (i) two years from the date of grant of the option or (ii) one year from the date of exercise. Holders of qualified options will generally incur no U.S. federal income tax liability at the time of grant or upon exercise of those options. However, the difference between the exercise price and fair market value of one share will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares on or before two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to us for U.S. federal income tax purposes in connection with the grant or exercise of the qualified option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of a qualified option disposes of those shares, the

 

Taylor Morrison Home Corporation Notice of 2022 Annual Meeting of Stockholders and Proxy Statement  | 65


Table of Contents

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TAYLOR  MORRISON HOME CORPORATION  

  2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

 

participant will generally realize ordinary compensation income at the time of such disposition equal to the difference between the exercise price and the lesser of the fair market value of the shares on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by us for U.S. federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise qualified option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the grant date value), the portion of the qualified option in respect of those excess shares will be treated as a non-qualified stock option for U.S. federal income tax purposes. No income will be realized by a participant upon the grant of any stock option. Upon the exercise of a non-qualified stock option, the participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

Restricted stock. A participant will not be subject to U.S. federal income tax upon the grant of an award of restricted stock unless the participant elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the participant will have ordinary compensation income equal to the difference between the fair market value of the shares on such date over the amount the participant paid for such shares, if any, unless the participant made an election under Section 83(b) of the Code to be taxed at the time of grant. If the participant made an election under Section 83(b) of the Code, the participant will have ordinary compensation income at the time of grant equal to the difference between the fair market value of the shares on the date of grant over the amount the participant paid for such shares, if any. (Special rules may apply to the receipt and disposition of restricted shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”)). We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

Restricted stock units. A participant will not be subject to U.S. federal income tax upon the grant of a restricted stock unit award. Rather, upon the delivery of shares or cash pursuant to a restricted stock unit award, the participant will have ordinary compensation income equal to the fair market value of the number of shares (or the amount of cash) the participant actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

SARs. A participant will not be subject to U.S. federal income tax upon the grant of a SAR. Upon the exercise of a SAR, the participant will recognize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the SAR. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

Stock-based awards. A participant will have ordinary compensation income equal to the difference between the fair market value of the shares on the date the award is made over the amount the participant paid for such shares, if any. We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

Section 162(m). For income tax purposes, public companies may not deduct any portion of compensation that is in excess of $1 million paid in a taxable year to certain “covered employees,” including our named executive officers, under Section 162(m) of the Code. Once an individual becomes a “covered employee” under Section 162(m) of the Code, all current and future compensation to these individuals will remain subject to the limitation under Section 162(m) of the Code. We reserve the right to award compensation as to which a deduction may be limited under Section 162(m) of the Code where we believe it is appropriate to do so.

New Plan Benefits

The Company has not approved any awards that are conditioned upon stockholder approval of the Amended and Restated Plan. Other than with respect to annual RSUs awarded to our non-employee directors, awards under the Amended and Restated Plan will be determined by the compensation committee in its discretion. It is, therefore, not

 

66 | Taylor Morrison Home Corporation Notice of 2022 Annual Meeting of Stockholders and Proxy Statement


Table of Contents
 

  PROPOSAL 4: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE  TAYLOR MORRISON HOME CORPORATION  

2013 OMNIBUS EQUITY AWARD PLAN  

 

 

 

possible to predict the awards that will be made to particular officers in the future under the Amended and Restated Plan. If the proposed amendments to the Amended and Restated Plan had been in effect in fiscal year 2021, we expect that our award grants for fiscal year 2021 would not have been different from those actually made in that year under the 2013 Omnibus Plan. For information regarding grants made under the 2013 Omnibus Plan during 2021 to our named executive officers, see the table entitled “Grants of Plan-Based Awards” above. For information regarding grants made under the 2013 Omnibus Plan during 2021 to our non-employee directors, see the table entitled “2021 Director Compensation Table” above.

For 2022, we intend to award our non-employee directors an annual grant of restricted stock units on the date of the Annual Meeting. The number of restricted stock units to be issued to non-employee directors will be determined by dividing the dollar amount of the award by the closing price of a share of our common stock on the NYSE on the date of grant (which is the date of the Annual Meeting). For information regarding director compensation made to our non-employee directors, see “Director Compensation” above.

Stock Awards Previously Granted Under the 2013 Omnibus Plan

The following table sets forth information on awards granted under the 2013 Omnibus Plan since its adoption in 2013 through the Record Date and includes shares subsequently forfeited. The closing price of the common stock on the NYSE on March 30, 2022 (the Record Date for the Annual Meeting) was $29.12.

 

  Name and Position   

Stock
Options

# of
Shares

Covered

    

Service-Based
Vesting

RSUs/Restricted
Stock Awards

# of Shares

Covered(1)

    

Performanc