DEF 14A 1 mdc-20210302xdef14xa.htm DEF 14A Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
 
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¨    Soliciting Material Pursuant to 240.14a-12

 M.D.C. Holdings, Inc.

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(Name of Registrant as Specified In Its Charter)

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

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M.D.C. HOLDINGS, INC.
4350 South Monaco Street, Suite 500
Denver, Colorado 80237
 
March 2, 2021
 
Dear Fellow Shareholders,
 
On behalf of the Board of Directors we would like to express our appreciation for your continued investment in the Company.
 
The year 2020 was challenging for our nation and the world. The COVID-19 pandemic began impacting the U.S. economy in the latter part of March, and we quickly adapted our operations to serve our customers, employees, subcontractors and shareholders in the best way possible, tapping into the seasoned business judgment that has sustained us through turbulent economic periods of the past. We began experiencing a resurgence in demand in May that continued through year-end and resulted in a remarkable year for our Company. The housing industry has emerged as one of the few bright spots in our economy, and MDC enters 2021 in a position of strength thanks to our sizable backlog, our strong margin profile and our considerable liquidity position.

In 2020, the Company continued to build on more than four decades of operations during which it has become one of the leading homebuilding companies in the nation. We have grown from a net worth of $50,000 in 1972 to over $2.1 billion at the 2020 fiscal year end by providing quality homes to over 210,000 families – all while persevering through housing cycles over the years. Highlights of the Company’s financial and operational performance include:

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DEDICATED TO SHAREHOLDER RETURNS

Total shareholder return for 2020 exceeded 30% as we approach the 50th anniversary of our founding;
Continuous and uninterrupted cash dividend since 1994 (unequaled by any member of our peer group);
Increased cash dividend by 21% in October 2020;
Declared an 8% stock dividend in January 2021.
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REMARKABLE OPERATING RESULTS

Home sale revenues of $3.77 billion, which was $560 million higher than 2019 (+17%);
Unit deliveries grew 17% to 8,158 from 6,974;
Gross margin from home sales increased 200 basis points to 20.8% from 18.8%;
Pretax income of $457.5 million was $152.5 million higher than 2019 (+50%);
Dollar value of net new orders increased 56% to $5.46 billion from $3.50 billion.

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POSITIONED FOR CONTINUED GROWTH

Backlog value of homes sold but not closed at the end of 2020 grew to $3.26 billion (+87%);
Highest year-end backlog dollar value ever;
Active subdivision count grew by 5% year-over-year to 194;
Total lot supply to end 2020 was 8% higher than 2019
Approval of 154 land transactions covering more than 13,000 lots (approximately 68% are approved for our more affordable product offerings).



STEADFAST FOCUS ON BALANCE SHEET STRENGTH
Expanded our homebuilding line of credit by $200 million to $1.2 billion (+20%);
Issued $350 million of 10-year senior notes in January 2021 at a record-low 2.5% interest rate;
Rating outlook raised to positive from stable by S&P Global Ratings in October 2020;
Upgraded Corporate Family Rating raised to Ba1 from Ba2 by Moody's Investors Services in November 2020.
ONGOING COMMITMENT TO SOUND GOVERNANCE AND SUSTAINABLE BUSINESS PRACTICES
As we enter 2021, we seek to leverage the core principles and practices that we attribute to past achievements, while welcoming new perspectives that allow our organization to evolve with a changing environmental and economic landscape. We are excited about the opportunities available to our Company, and we will maintain our longstanding focus on balancing environmental and social concerns with business fundamentals. Striking this balance is not only a matter of conscience, but key to maximizing long-term shareholder success. Growing and maintaining a sustainable business goes hand in hand with fostering an environment where that business can flourish.
PROMOTING DIVERSITY IN LEADERSHIP
One major way to build a solid foundation for continued success is through a commitment to advancing leadership and increasing diversity. In October, we announced many exciting promotions designed to leverage new perspectives and position us for growth. David Viger, now an experienced executive after starting as a superintendent many years ago, was named Chief Operating Officer for our homebuilding operations. Other promotions included Staci Woolsey’s step up to Chief Accounting Officer and Rebecca Givens’ move to Senior Vice President and General Counsel of MDC. Dawn Huth was also promoted to Senior Vice President of National Finance and Anthony Berris is now President of Financial Services.

Strong, diverse leaders are only one piece of the puzzle. Our corporate governance and sustainable business practices are vital to creating an environment where we can effectively achieve long-term financial success. With climate concerns on the forefront, an investment in the environment is an investment back into our company, employees and shareholders. Richmond American is dedicated to developments that are sensitive to maintaining the integrity of our environment by designing neighborhoods that include generous open spaces, greenbelts and newly planted trees and foliage. Every one of our homes comes standard with energy-efficient features that help cut down energy usage. Since the introduction of our Energy Wise program in 2009, we have offered both standard and optional features that help cut down on energy usage, reduce waste and promote a healthy environment.
SUPPORTING OUR LOCAL COMMUNITIES
On the philanthropic side, the MDC/Richmond American Homes Foundation was created more than twenty years ago and is committed to building stronger communities near and far. We believe that our history of success translates to a responsibility to make a difference in the regions where we operate. What we contribute to the greater economy when we build new homes and neighborhoods coincides with what we do to build up a broader community in which our employees and homebuyers can thrive. Nonprofit endeavors that the MDC/Richmond American Homes Foundation supports are wide-ranging in scope, selected to promote diversity, education, mental health and so much more.
COMMITTED TO SUPPORTING OUR EMPLOYEES
While we have always prioritized the health and welfare of our employees, we would be remiss not to mention the additional measures taken in 2020 to help limit the spread of COVID-19, both in the field and at the corporate office. The safety and comfort of home has become more important than ever before and we do not take our increased responsibility as homebuilders lightly.

We are confident that our shareholders are aligned with our vision for long-term growth, success and contribution to a greater community. On behalf of the full Board of Directors, we strongly encourage you to vote your shares – your vote and support are valuable elements in our passion to succeed.
 
 Sincerely,
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Larry A. Mizel
Executive Chairman
M.D.C. Holdings, Inc.




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M.D.C. HOLDINGS, INC.
4350 South Monaco Street, Suite 500
Denver, Colorado 80237

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
 
To Our Shareholders:
 
The 2021 Annual Meeting of Shareholders (the "Meeting") of M.D.C. Holdings, Inc. (the "Company") will be held virtually by live audio webcast, on Monday, April 26, 2021, at 10:00 a.m., Mountain Time. Only shareholders of record at the close of business on February 26, 2021, the record date, will be entitled to vote. At the Meeting, we plan to consider and act upon the following matters:
 
1.The election of Raymond T. Baker, David E. Blackford and Courtney L. Mizel as Class III Directors for three-year terms expiring in 2024;
2.A non-binding advisory vote to approve the compensation of our named executive officers disclosed in this proxy statement (Say on Pay);
3.Approval of the M.D.C. Holdings, Inc. 2021 Equity Incentive Plan; and
4.Ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the 2021 fiscal year.

And such other business as properly may come before the Meeting and any postponements or adjournments thereof.
 
Our Board of Directors recommends that you vote FOR all Proposals.

In light of COVID-19 and for the safety of our shareholders, employees, and other members of the community, our 2021 Annual Shareholders' Meeting will be held in a virtual format only. Shareholders can attend from any geographic location with Internet connectivity. We believe this is an important step to enhancing accessibility to our Meeting for all of our shareholders and reducing the carbon footprint of our activities, and is particularly important this year in light of public health and safety considerations posed by COVID-19. Shareholders may attend the live audio webcast of the Meeting and submit questions digitally during the meeting at www.virtualshareholdermeeting.com/MDC2021. Please refer to the "Who is entitled to vote at or attend the Meeting" section of the Proxy Statement for more details.
 
Management and the Board of Directors desire to have maximum representation at the Meeting and request that you vote promptly, even if you plan to attend the virtual meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
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Joseph H. Fretz
Secretary
Denver, Colorado
March 2, 2021



Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to Be Held on April 26, 2021:
The Proxy Statement and the Annual Report on Form 10-K are available at:
https://mdc-holdings-inc.ir.rdgfilings.com/
 
 
Important Voting Information
 
Under New York Stock Exchange rules, unless you provide specific instructions, your broker is not permitted to vote on your behalf on the election of Directors or on proposals other than ratification of the selection of the Company’s auditors. It is important that you provide specific instructions by completing and returning the broker’s Voting Instruction Form or following the instructions provided to you to vote your shares by telephone or the Internet.



TABLE OF CONTENTS
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APPENDIX A – M.D.C. HOLDINGS, INC. 2021 EQUITY INCENTIVE PLAN




M.D.C. HOLDINGS, INC.
4350 South Monaco Street, Suite 500
Denver, Colorado 80237
_____________

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS

April 26, 2021
___________

COMMITMENT TO SOUND ENVIRONMENTAL, SOCIAL AND GOVERNANCE PRACTICES

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) HIGHLIGHTS
Environment and Climate Change

ir.richmondamerican.com/environmental
Every Richmond American home comes standard with energy efficient features that help cut down on energy usage.
In 2020, our average HERS rating improved by 8% to 55, 75 percent more energy efficient than a typical resale home.
Goal of decreasing our average HERS rating to 50 or less within the next five years. Longer term, we are evaluating the implementation of a net-zero ready home strategy.
Human Capital

ir.richmondamerican.com/socialoutreach
Committed to fostering and promoting a diverse and inclusive work environment.
Diverse employee base comprising 24% non-white employees and 47% female employees; 43% of employees in a position of manager and above are female.
Competitive benefits package including medical coverage, paid time off and 401(k) match.
Social Responsibility

ir.richmondamerican.com/socialoutreach
The Company has donated nearly $10 million to the MDC/Richmond American Homes Foundation in the last five years.
In 2020, 56% of the new homes we delivered were from one of our more affordable homes series. Since, 2017 we have increased the number of more affordable homes delivered by nearly 200%.
Governance

ir.richmondamerican.com/corporategovernance
Engaged and experienced Board of Directors actively participate in 12 regular meetings per year. Our non-management directors have an average tenure of 11.9 years.
Our Code of Conduct training takes place for all employees at the time of hire, as well as for all employees and directors on an annual basis. Topics covered include business ethics, conflicts of interest and appropriate standards of workplace conduct.
Focus on succession planning, including recent promotions of an increasingly diverse senior leadership team.
Formal procedure in place for confidential reporting of any suspected violations of law.


As a leader in the homebuilding industry, we have a responsibility to conduct our operations in a socially and environmentally acceptable manner. Not only is this an obligation, but it is also sound business that drives long-term value creation. In order to maintain our tradition of building attractive, affordable and desirable homes, we must be focused on preserving the integrity and quality of our local neighborhoods. To illustrate that effort, select areas of environmental and social emphasis by the Company’s Board of Directors and management team are briefly summarized below. Our Board is committed to further study and develop a set of additional initiatives to better assure the sustainability of our communities and the environment in which we operate.


The approximate date on which this Proxy Statement and the form of Proxy
are first being sent to shareholders is March 5, 2021.
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Environment and Climate Change
We promote energy efficiency, water conservation, healthier indoor environments and waste reduction. We are proud to be an industry leader in working to protect the quality of our environment through our efforts to reduce energy consumption. Our homes are designed with standard energy efficient features as described below.


Energy efficiency features

Every Richmond American home comes standard with energy-efficient features that help cut down energy usage. Since the introduction of our Energy Wise program in 2009, the Richmond American companies in each region have offered both standard and optional features that help cut down on energy usage, reduce waste, and promote a healthy environment. National features include:

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Our homes are rated for energy efficiency using the Home Energy Rating System (“HERS”). In 2020 alone, our average HERS Index rating improved by 8% to 55, 75 percent more energy efficient than a typical resale home. Further, our offering of high-efficiency solar power systems, in select markets, generate much of a home’s annual expected energy needs. We have and will continue to use our nationwide purchasing power to explore offering low cost solar and other alternative energy options to our home buyers. We continue to expand our use of high energy efficient appliances and low chemical carpeting and floor coverings. We have a goal of decreasing our average HERS rating to 50 or less within the next five (5) years. Longer term, we are evaluating the implementation of a net-zero ready home strategy.











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How our homes are rated

Working toward greater home energy efficiency starts with measuring energy performance, making improvements and continuing to rate and adjust. The Richmond American companies use the HERS® Index to gauge a home's comparative energy efficiency. HERS stands for Home Energy Rating System, a system created by The Residential Energy Services Network (RESNET®), an industry standard for rating home energy efficiency. A third-party RESNET-certified home energy rater assesses the energy efficiency of every new Richmond American home, assigning it a relative performance score.

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Our HERS scores

The current average HERS score for homes built by Richmond American Homes companies in 2020 is 55, a much lower score than a typical resale home. In fact, our current homes are on average 75% more efficient than typical resale homes according to the HERS Index. We lowered our national average HERS rating by 10 points between 2013 and 2020:

National Average HERS Index by Year
20132014201520162017201820192020
6562616062636055
Additionally, MDC, like other homebuilders, also plays an important role in the conservation of protected animal and plant species, including those listed under the Endangered Species Act (ESA). We cause to be performed biological impact and other ecological studies to determine the proximity of endangered species to our communities and take precautions to prevent or minimize adverse impacts to any species identified in such studies. We also are committed to preserving or replacing any wetlands that may be impacted by our construction activities, and to expanding green space available to our homebuyers.

Sustainable Forestry
As a major purchaser of wood, MDC specifies wood products that are not only cost-effective for our homebuyers, but which primarily are from new and high-growth forests or harvested from specific tree farms used by the building industry. Our wood varieties typically are new softwoods and firs, which most often come from inland areas of the western U.S., not the coastal areas that are populated by the endangered redwoods and other old growth species.


+ This information is presented for educational and illustration purposes only.
++ Typical resale home is based on the U.S. Department of Energy definition with a HERS® index of 130.
+++ Standard new home is based on the RESNET® Reference Home definition with a HERS® index of 100 (based on the 2006 International Energy Conservation Code). The Vendor registered trademark set forth above is the property of the owner, who is not affiliated with, connected to or sponsored by the Richmond American Homes companies. The vendor listed has provided consideration to Richmond American Homes Corporation for marketing services.
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Health and Safety
MDC has an excellent safety record that underscores the Company’s commitment to worker safety. Examples of our safety practices include:
MDC maintains a job site Safety Policy. We encourage our superintendents to be trained on this policy in order to guard against infractions on his or her job site. If an incident does occur, the superintendent is required to report it to the appropriate authorities in the Company.
In addition to job sites, our Company has a policy to provide for the safety and security of all employees, customers, visitors, and Company property. Acts or threats of violence, including intimidation, harassment, or coercion, which involve or affect the Company or which occur on Company property or during the course of the Company's business are not tolerated.
In order to perform tasks for the Company, subcontractors must supply us with evidence of their written safety program before becoming an approved vendor, and they must adhere to all health and safety policies of the Company, including but not limited to standards set by OSHA.
In response to the COVID-19 pandemic, we implemented safety protocols and procedures to protect our employees, our subcontractors and our customers. These protocols include complying with social distancing and other health and safety standards as mandated by state and local government agencies, taking into consideration guidance from the Centers for Disease Control and Prevention and other public health authorities.

Increasingly Diverse Senior Management Team as a Part of Succession Planning
A dedication to diversifying leadership means women are rising in the ranks. Not only were the last two board members women, but women are in key leadership roles across the organization. The promotions highlighted below, in addition to the appointment of Larry A. Mizel as Executive Chairman and David D. Mandarich as President and Chief Executive Officer, were a part of the reorganization of the Company's senior leadership in connection with succession planning.
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Rebecca Givens
Senior Vice President and General Counsel
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Staci Woolsey
Chief Accounting Officer
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David Viger
Chief Operating Officer, Richmond American Homes
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Anthony Berris
President of Financial Services
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Dawn Huth
Senior Vice President of National Finance


Community
The Company takes seriously its responsibility to fortify the communities in which its homebuilding subsidiaries operate. Since 2015 alone, the Company has donated nearly $10 million to the MDC/Richmond American Homes Foundation, a Delaware not-for-profit corporation. The Foundation has supported numerous charitable efforts in communities served by the Richmond American Homes companies, which support survivors of domestic violence, support arts and culture, promote quality healthcare, support youth, assist foster children, fight hunger, support public servants, help the homeless and others in need, and promote wellness.

Affordability
Affordable home ownership is an increasing challenge throughout the United States and in the areas in which we operate. Our Company is among the leaders in building more affordable homes. Indeed, providing more affordable homes is a major part of our business strategy. For example:

A majority of the lots we own or control are targeted for the construction of more affordable homes.
In 2020, 56% of the new homes we delivered were from one of our more affordable homes series. Since 2017, we have increased the number of more affordable homes delivered by nearly 200%.
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GENERAL INFORMATION 

Why am I receiving these materials?

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board of Directors" or the "Board") of M.D.C. Holdings, Inc. (the "Company") to be used at the Annual Meeting of Shareholders of the Company (the "Meeting") to be held virtually by audio webcast, on Monday, April 26, 2021, at 10:00 a.m., Mountain Time and at www.virtualshareholdermeeting.com/MDC2021, including any postponements or adjournments thereof. The record date for determining shareholders entitled to vote at the Meeting is February 26, 2021 (the “Record Date”). The Meeting is being held for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. Our shareholders are invited to attend the Meeting and are encouraged to vote on the matters described in this Proxy Statement. 

What proxy materials are being delivered? 

We are utilizing the rules of the Securities and Exchange Commission ("SEC") that allow us to deliver proxy materials to our shareholders on the Internet. Under these rules, we are sending many of our shareholders a Notice of Internet Availability of Proxy Materials (the "Notice") instead of a full set of proxy materials. If you receive the Notice, you will not receive printed copies of the proxy materials unless you specifically request them. Instead, the Notice tells you how to access and review on the Internet all of the important information contained in the proxy materials. The Notice also tells you how to vote your proxy card on the Internet and how to request a printed copy of our proxy materials. We expect to mail, or provide the Notice and electronic delivery of, this Proxy Statement, the proxy card and the Notice of Annual Meeting (the "Proxy Materials") on or about March 5, 2021. 

The Company's 2020 Annual Report on Form 10-K, which includes the Company's 2020 audited financial statements, will accompany these Proxy Materials. Except to the extent expressly referenced in this Proxy Statement, the Annual Report is not incorporated into this Proxy Statement. 

Who is paying for this proxy solicitation? 

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

We have retained the services of Alliance Advisors, LLC to solicit proxies. We will pay all reasonable costs associated with such firm, which we anticipate will cost approximately $10,000 plus costs and expenses.

Who is entitled to vote at or attend the Meeting? 

Holders of shares of the Company's common stock, $.01 par value, at the close of business on the Record Date are entitled to notice of, and to vote at, the Meeting. We are conducting a Meeting so our shareholders can attend from any geographic location with Internet connectivity. To attend the Meeting, including to vote and to view the list of registered shareholders as of the record date during the meeting, you must access the meeting website at www.virtualshareholdermeeting.com/MDC2021 and enter the 16-digit control number found on the Notice of Internet Availability of Proxy Materials or on the proxy card or voting instruction form provided to you. A shareholder list is available in advance of the Meeting by contacting investor relations at IR@mdch.com.

Whether or not you plan to attend the Meeting, it is important that your shares be represented and voted. We encourage you to vote your shares in advance of the Meeting.

Shareholders will be able to submit questions for the question and answer session following the meeting through www.virtualshareholdermeeting.com/MDC2021. Additional information regarding the rules and procedures for participating in the Meeting will be set forth in our meeting rules of conduct, which shareholders can view during the meeting at the meeting website.

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We encourage you to access the Meeting website before the meeting begins. Online check-in will be available at www.virtualshareholdermeeting.com/MDC2021 approximately 15 minutes before the meeting starts on April 26, 2021. If you have difficulty accessing the meeting, please call the technical support number on the meeting page.

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

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

Beneficial Owners. If, on the Record Date, your shares were not held in your name, but rather were held in an account at a brokerage firm, bank or other nominee (commonly referred to as being held in "street name"), or through our 401(k) savings plan, you are the beneficial owner of those shares. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Meeting. As a beneficial owner, you have the right to direct your broker or other nominee regarding how to vote the shares held in your account. You are also invited to attend the Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the Meeting unless you make arrangements with your broker or other nominee to do so. (For shares held through our 401(k) savings plan, you must vote those shares as provided below.) If you want to attend the Meeting, but not vote at the Meeting, please see the information provided above.

How do I vote my shares?

By Telephone or the Internet. Shareholders can vote their shares via telephone or the Internet as instructed in the Notice of Internet Availability of Proxy Materials. The telephone and Internet procedures are designed to authenticate a shareholder's identity, allow shareholders to vote their shares and confirm that their instructions have been properly recorded. The telephone and Internet voting facilities will close at 11:59 p.m., Eastern Time, on April 25, 2021. (Participants in our 401(k) savings plan have an earlier deadline – see below.) 

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

401(k) Savings Plan. If your shares are held through our 401(k) savings plan, you will receive the Notice of Internet Availability of Proxy Materials, or copies of the Proxy Materials, and you are entitled to instruct the plan trustee how to vote the shares allocated to your account following the instructions described above. You must provide your instructions no later than 11:59 p.m., Eastern Time, on April 21, 2021. 

At the Meeting. Shares held in your name as the shareholder of record may be voted by you online during the Meeting at www.virtualshareholdermeeting.com/MDC2021. Shares held beneficially in street name may be voted by you in person at the Meeting only if you make prior arrangements with the broker or other agent that holds your shares, giving you the ability to vote the shares.


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

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

Can I change my vote or revoke my proxy? 

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

How are votes counted? 

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

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

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

What are the voting entitlements and requirements? 

Each share of common stock issued and outstanding on the Record Date, other than shares held by the Company or a subsidiary, is entitled to one vote on each matter presented at the Meeting. As of the Record Date, approximately 65,072,429 shares of common stock were issued, outstanding and entitled to vote.

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

The affirmative vote of the holders of a plurality of the shares of common stock present in person or represented by proxy and entitled to vote at the Meeting will be required for the election of a nominee to the Board of Directors (which means that the three nominees who receive the most votes will be elected).

The affirmative vote of the holders of a majority of the shares of Common Stock represented and entitled to vote at the Meeting is necessary to (1) approve, on an advisory basis, the executive compensation practices disclosed in this proxy statement; (2) approve the 2021 Equity Incentive Plan; and (3) ratify the appointment of the Company’s auditor. Because your vote on executive compensation is advisory, it will not be binding upon the Company.


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

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

 Proposal Vote Required Effect of Broker Non-Votes, Withhold Votes and Abstentions
1.Election of Directors The three nominees who receive the most votes will be elected. Broker non-votes and withhold votes have no effect.
2.Advisory vote to approve executive compensation (Say on Pay) Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting. Broker non-votes have no effect; abstentions have the same effect as a vote against the proposal.
3.Approval of the 2021 Equity Incentive Plan Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting. Broker non-votes have no effect; abstentions have the same effect as a vote against the proposal.
4.Selection of Auditor Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the Meeting. Abstentions have the same effect as a vote against the proposal.

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

8

DELIVERY OF PROXY MATERIALS TO SHAREHOLDERS WITH SHARED ADDRESSES 

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

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

ANNUAL REPORT ON FORM 10-K

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

9


PROPOSAL ONEELECTION OF DIRECTORS

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

Our Board has ten members, consisting of four Class I Directors whose terms expire in 2022, three Class II Directors whose terms expire in 2023 and three Class III Directors whose terms expire in 2021. At the Meeting, three Class III Directors are to be elected to three‑year terms expiring in 2024. The nominees for the Class III Directors are Raymond T. Baker, David E. Blackford and Courtney L. Mizel. All of the nominees presently serve on the Board of Directors of the Company. Based on the recommendation of the Corporate Governance/Nominating Committee, the Board approved the nomination of Mr. Baker, Mr. Blackford and Ms. Mizel for election as Class III Directors at the 2021 Annual Meeting.

Certain information, as of February 26, 2021, the Record Date, with respect to Mr. Baker, Mr. Blackford and Ms. Mizel, the nominees for election, and the continuing Directors of the Company, furnished in part by each such person, appears below:

NameAgeIndependentPositions and Offices with the Company
and Other Principal Occupations
Committee Memberships
NOMINEES:AuditCompensationCorporate
Governance /
Nominating
Legal
 Class III: Terms Expire in 2021    
Raymond T. Baker70üPresident of Gold Crown Management Company and Co-Director of the Gold Crown FoundationC
David E. Blackford71üExecutive Chairman of California Bank & TrustMM
Courtney L. Mizel47Attorney, Principal, Mizel Consulting and Community PhilanthropyM
CONTINUING DIRECTORS:
Class I: Terms Expire in 2022
Michael A. Berman70üChairman, Applied Capital ManagementM   
Herbert T. Buchwald89üPrincipal in the law firm of Herbert T. Buchwald, P.A. and President and Chairman of the Board of Directors of BPR Management CorporationMMMC
Larry A. Mizel78 Executive Chairman of the Company    
Leslie B. Fox62üReal estate advisor and Community PhilanthropyM   
 Class II: Terms Expire in 2023    
David D. Mandarich73 President and Chief Executive Officer of the Company    
Paris G. Reece III66üPrivate Investor and Community PhilanthropyC   
David Siegel64üPrivate Investor and Former Partner, Irell & Manella LLP (retired)  CM
 
C = Chair; M = Member

10


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

None of the business organizations identified below (excluding HomeAmerican Mortgage Corporation) are affiliates of the Company. Other than for Ms. Fox, who until January 2021 was a member of the Board of Directors of Front Yard Residential Corporation, a Maryland corporation (NYSE: RESI), none of the continuing Directors or Director nominees holds, or has held during the past five years, any directorship in any company with a class of securities registered pursuant to Section 12 of the Exchange Act, subject to the requirements of Section 15(d) of the Exchange Act or registered as an investment company under the Investment Company Act of 1940.

Class III Directors: Terms Expire in 2021

Raymond T. Baker
Raymond T. Baker has served as President of Gold Crown Management Company, a real estate asset management company, from 1978 to present. He is the founder and has served as Co-Director of the Gold Crown Foundation since 1986. He also is a member of the Board of Directors of Alpine Banks of Colorado and Land Title Guarantee Company. Mr. Baker is currently serving as Chairman of the Board of the Denver Metropolitan Major League Baseball Stadium District and Chairman of the Board of the Metropolitan Football Stadium District (Denver). From February 2004 until May 2007, he served as a director of Central Parking Corporation. He has over thirty-five years of experience in the real estate and banking industries. Mr. Baker became a member of the Company's Board of Directors in January 2012.  His experience and knowledge of the real estate and banking industries directly complement and support the Company’s real estate activities and the financing of those activities.
portrait81a.jpg
Director Since: 2012
 
Committee Memberships:
●Compensation Committee Chairman

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

Courtney L. Mizel
Courtney L. Mizel is a Principal at Mizel Consulting where she has worked for over twenty years. In this role, Ms. Mizel consults with companies in various industries on matters relating to their business management and strategy, including operations, business development, marketing, as well as legal matters. She is also a Founding Director of The Counterterrorism Education Learning Lab, an organization dedicated to preventing terrorism through education, empowerment, and engagement. She is active in a number of other non-profit activities, including serving on the Boards of Directors of Zimmer Children’s Museum, Sharsheret National, and JQ International. Ms. Mizel received her Bachelor of Science in Economics with honors from The Wharton School of the University of Pennsylvania and her Juris Doctor from the University of Southern California Gould School of Law. Ms. Mizel became a member of the Company's Board of Directors in June 2017. She is the daughter of the Company’s Executive Chairman, Larry A. Mizel. Ms. Mizel’s professional and business achievements, intellect and diverse experiences contribute to the business, governance and legal perspectives of the Board.
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Director Since: 2017
 
Committee Memberships:
●Legal Committee 

11

Class I Directors: Terms Expire in 2022

Larry A. Mizel
Executive Chairman
Larry A. Mizel founded the Company in 1972 and has served as a Director since its inception. He was appointed Chairman of the Board in 1972 and Chief Executive Officer of the Company in 1988. Then, in October 2020, he was appointed as Executive Chairman. Mr. Mizel has provided the Company with leadership and judgment, previously serving as the Chief Executive Officer and Chairman of the Board of Directors, and now as Executive Chairman, while advancing the long-term interests of the Company's shareholders. One of the most experienced leaders in the homebuilding industry, his knowledge and foresight provide the Board with invaluable guidance.  
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Director Since: 1972

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


Michael A. Berman 
Michael A. Berman has over thirty-five years of experience in the financial services industry. He is a member of Applied Capital Management, a private investment management firm located in Scottsdale, Arizona, and has served as its chairman from 2002 to date. From 2005 to 2006, he also served as the chief executive officer of First Ascent Capital, a financial services firm located in New York. From July 2006 until December 2008, he served as president and Chief Executive Officer of Real Estate Equity Exchange, Inc. (Rex & Co.), a financial services firm located in San Francisco, California. From January 1990 to March 1999, Mr. Berman was employed by The Nomura Securities Co., Ltd. (Tokyo) group of companies, where he held several senior executive positions, including that of President and CEO of Nomura Holding America Inc. and Chairman of Capital America, Nomura's commercial real estate lending subsidiary. In April 2006, Mr. Berman became a Director of the Company. Since 2006, he has been a director of HomeAmerican Mortgage Corporation, the Company’s mortgage lending subsidiary.   Mr. Berman’s experience as a senior executive in corporate finance, in general, and the residential mortgage market, in particular, provide the Company with a valuable resource.
portrait31a.jpg
Director Since: 2006
 
Committee Memberships:
●Audit Committee

12

Leslie B. Fox
Leslie B. Fox has served in an executive capacity at multiple companies in the real estate industry. She was the Chief Operating Officer of Invitation Homes LP, the largest owner/operator of single family housing rentals in the United States, from March 2014 to March 2016. Before that, Ms. Fox served as the Chief Operating Officer of American Residential Communities LLC, one of the largest manufactured home companies in the United States, and as the President of the affordable housing division at Equity Residential and as an Executive Vice President of that company. Ms. Fox also has served as an independent advisor in the real estate sector. Starting in October 2019, she began advising Discovery Land Company, assisting in the rebuilding of a resort in the Bahamas after Hurricane Dorian. From May 2019 until January 2021, Ms. Fox was a director of Front Yard Residential Corporation (RESI) and, currently, Ms. Fox is serving on the Endowment Board and the Finance Committee for Craig Hospital in Denver, Colorado. Ms. Fox holds a Juris Doctor/Master of Business Administration from the University of Denver. Ms. Fox became a member of the Company's Board of Directors in June 2018. Ms. Fox's experience as a senior executive in the real estate and housing industries, and her experience as an independent advisor in the real estate sector, provide the Company with a valuable resource and contribute to the business perspectives of the Board.
portrait41a.jpg
Director Since: 2018
 
Committee Memberships:
●Audit Committee

 

Class II Directors: Terms Expire in 2023

David D. Mandarich
David D. Mandarich has been associated with the Company since 1977.  He was a Director from September 1980 until April 1989, and has been a Director continuously since March 1994. He was appointed President and Chief Operating Officer of the Company in June 1999. Then, in October 2020, he was appointed President and Chief Executive Officer. A skilled and experienced leader in the homebuilding industry, Mr. Mandarich provides the Board with the benefit of his judgment and his knowledge and understanding of the Company's homebuilding business and operations.
portrait51a.jpg
Director Since: 1994

Paris G. Reece III
Paris G. Reece III was formerly the Company’s Chief Financial Officer and Principal Accounting Officer, and retired on August 1, 2008. Since his retirement, Mr. Reece has performed consulting work and served in a volunteer position as the President of Cancer League of Colorado, a leading non-profit organization that was established over fifty years ago to raise money for cancer research and patient care. He joined the Company's Board of Directors in May 2013. As a Certified Public Accountant (Texas, non-practicing), a former Chief Financial Officer and a highly respected person within the homebuilding industry, Mr. Reece is uniquely qualified to provide the Company with strong oversight of accounting and financial matters, as well as the operation of the Company's homebuilding and financial services businesses.
portrait61a.jpg
Director Since: 2013
 
Committee Memberships:
●Audit Committee Chairman

David Siegel 
David Siegel was a partner in the law firm of Irell & Manella LLP for more than twenty-five years, where he led that firm's securities litigation practice and was the firm's Managing Partner.  He retired from the active practice of law in 2019. Mr. Siegel's law practice, for which he is nationally recognized, was concentrated on securities class actions, corporate governance, risk management, SEC reporting standards and regulatory compliance.  Mr. Siegel has chaired and has been a frequent speaker at various seminars on securities litigation, class actions, and trial techniques.  He has been named by his peers as one of the "Best Lawyers in Commercial Litigation" in The Best Lawyers in America guide. Mr. Siegel has been a member of the Company's Board of Directors since June 2009. Mr. Siegel's knowledge and experience in corporate governance and litigation matters provide the Company with significant guidance and oversight.
portrait71a.jpg
Director Since: 2009
 
Committee Memberships:
●Corporate Governance/
Nominating Committee Chairman
●Legal Committee

13

NON-EMPLOYEE DIRECTORJOINED BOARD
TENURE1
Raymond T. Baker20128.9 years
Michael A. Berman200614.7 years
David E. Blackford200119.8 years
Herbert T. Buchwald199426.9 years
Leslie B. Fox20182.5 years
Courtney L. Mizel20173.6 years
Paris G. Reece III20137.6 years
David Siegel200911.5 years
1 As of December 31, 2020


Our Board is committed to active refreshment, and balancing fresh perspectives with continuity and institutional knowledge.

chart-5ee99068a73a493bb321a.jpg


Unless otherwise specified, proxies will be voted FOR the election of Mr. Baker, Mr. Blackford and Ms. Mizel. Management and the Board of Directors are not aware of any reasons that would cause any of Mr. Baker, Mr. Blackford and Ms. Mizel to be unavailable to serve as Directors. If any of them become unavailable for election, discretionary authority may be exercised by the proxy holders named in the proxy to vote for a substitute candidate or candidates nominated by the Board of Directors. For additional information on our Board of Directors, see "Information Concerning the Board of Directors and its Committees" later in this document.

The Board of Directors recommends a vote FOR the election of Mr. Baker, Mr. Blackford and Ms. Mizel as Directors.


14

BENEFICIAL OWNERSHIP OF COMMON STOCK
 
Ownership of Directors and Officers

Certain information, as of February 26, 2021, the Record Date, with respect to common stock beneficially owned by the Company's named executive officers, the nominees for election as Directors and the current Directors of the Company, furnished in part by each such person, appears below (unless stated otherwise, the named beneficial owner possesses the sole voting and investment power with respect to such shares). None of the shares beneficially owned by the executive officers and Directors have been pledged as security.


Name of Executive Officer/Director
Number of Shares of
Common Stock Owned
Beneficially 1
 
Percent
of Class 2
Raymond T. Baker88,321  *
Michael A. Berman27,040  *
David E. Blackford22,796  *
Herbert T. Buchwald30,773  *
Leslie B. Fox19,636  *
Rebecca B. Givens6,915 *
David D. Mandarich5,653,838  8.5%
Robert N. Martin135,888  *
Courtney L. Mizel28,174  *
Larry A. Mizel9,669,443 
3
14.5%
Paris G. Reece III53,807 
3
*
David Siegel41,913 
3
*
Michael Touff (former officer)206,537  *
All current executive officers and Directors as a group (12 persons)15,778,544  23.1%
_______________
* Represents less than one percent of the shares of common stock outstanding and entitled to vote. 

1 Includes, where applicable, shares of common stock owned by related individuals or entities over whose shares such person may be deemed to have beneficial ownership. Also includes the following shares of common stock subject to options that are exercisable or become exercisable within 60 days of the Record Date at prices ranging from $20.35 to $35.55 per share: Raymond T. Baker 57,618; David D. Mandarich 1,502,054; Robert N. Martin, 30,617; Larry A. Mizel 1,502,054; and Michael Touff 91,854. As a group, the executive officers and Directors had the right to acquire within 60 days of the Record Date by the exercise of options an aggregate of 3,184,197 shares of common stock.

2 The percentage shown is based on the number of shares of common stock outstanding and entitled to vote as of the Record Date. All shares of common stock that the person or group had the right to acquire within 60 days of the Record Date are deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by such person or group, but are not deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by any other person or group.

3 Mr. Mizel has sole voting power and sole investment power over 1,591,614 shares and shared voting power and shared investment power over 8,077,829 shares. Mr. Reece has sole voting power and sole investment power over 19,291 shares and shared voting power and shared investment power over 34,516 shares. Mr. Siegel has sole voting power and sole investment power over 32,362 shares and shared voting power and shared investment power over 9,551 shares.


15

Ownership of Certain Beneficial Owners 

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

Name and Address of Beneficial OwnerNumber of Shares of
Common Stock
Owned Beneficially
Percent
of Class 1
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
9,988,492 
2
15.4 %
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
5,372,363 
3
8.3 %
Dimensional Fund Advisors LP
6300 Bee Cave Road
Austin, TX 78746
4,625,443 
4
7.1 %
___________________
1 The percentage shown is based on the number of shares outstanding and entitled to vote as of the Record Date. 

2 Schedule 13G filed with the SEC on January 25, 2021 disclosed that: BlackRock, Inc. has sole voting power over 9,673,902 shares, shared voting power over no shares, sole dispositive power over 9,988,492 shares and shared dispositive power over no shares. 

3  Schedule 13/A filed with the SEC on February 10, 2021 disclosed that: The Vanguard Group has sole voting power over no shares, shared voting power over 52,195 shares, sole dispositive power over 5,276,651 shares and shared dispositive power over 95,712 shares. 

4 Schedule 13G/A filed with the SEC on February 12, 2021 disclosed that: the Dimensional Fund Advisors LP has sole voting power over 4,491,109 shares, shared voting power over no shares, sole dispositive power over 4,625,443 shares and shared dispositive power over no shares. Dimensional Fund Advisors LP and/or its subsidiaries disclaim beneficial ownership. 


16

EXECUTIVE OFFICERS
 
Set forth below are the names and offices held by the executive officers of the Company as of the Record Date. The Board of Directors, after reviewing the functions performed by the Company's officers, has determined that, for purposes of Item 401 of SEC Regulation S-K, only these officers are deemed to be executive officers of the Company. 
The executive officers of the Company hold office until their successors are duly elected and qualified or until their resignation, retirement, death or removal from office. Biographical information on Messrs. Mizel and Mandarich, who serve as Directors and executive officers of the Company, is set forth under "Election of Directors" above. Biographical information for Mr. Martin and Ms. Givens is set forth below.
NameAgeOffices Held
Larry A. Mizel78Executive Chairman, an Officer and a Director
David D. Mandarich73President, Chief Executive Officer and a Director
Robert N. Martin42Senior Vice President and Chief Financial Officer
Rebecca B. Givens57Senior Vice President and General Counsel

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Robert N. Martin
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TENURE: 18 YEARS
rbgpicturepng2a.jpg
REBECCA B. GIVENS
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
TENURE: 8 YEARS

Robert N. Martin was appointed Senior Vice President and Chief Financial Officer in May 2015. He also served as Principal Accounting Officer from May 2015 until August 2020. He previously served as Vice President – Finance and Business Development. In April 2013, he was promoted to the position of Vice President of Finance and Corporate Controller. Over the last five years, Mr. Martin has had direct oversight of the Company's division and corporate accounting, tax, treasury, investor relations, information technology and finance, planning and analysis functions. Additionally, he has served on all of the Company’s AMCs and has performed a key role in the Company's capital markets activities. He is an officer, director or both of many of the Company’s subsidiaries. Mr. Martin received a bachelor’s degree in Accounting and Computer Applications from the University of Notre Dame and is both a Certified Public Accountant and a CFA charterholder.

Rebecca B. Givens joined the Company in July 2020 as Senior Vice President - Legal and was appointed Senior Vice President and General Counsel of the Company in November 2020. For over eight years preceding the start of her current employment with the Company, Ms. Givens was employed as an attorney by Spectrum Retirement Communities, LLC, most recently serving as that company’s Senior Vice President and General Counsel. Prior to her employment with Spectrum, Ms. Givens was employed as a real estate attorney with the Company for nearly eight years. Ms. Givens received a bachelor’s degree in Business Administration from the University of Nebraska – Lincoln and a J.D. degree from Creighton University.
17

COMPENSATION DISCUSSION AND ANALYSIS 

This Compensation Discussion and Analysis (this “CD&A”) discusses the compensation of our Named Executive Officers (“NEOs”) for fiscal year 2020. The CD&A is organized as follows:

CD&A Table of Contents

  
  

18

Executive Summary

For fiscal 2020, our named executive officers were:

Named Executive Officers
Larry A. MizelExecutive Chairman
David D. MandarichPresident and Chief Executive Officer (“CEO”)
Robert N. MartinSenior Vice President, Chief Financial Officer (“CFO”)
Rebecca B. Givens1
Senior Vice President and General Counsel (“CLO”)
Michael Touff 1
Senior Vice President and General Counsel (“CLO”)
1Mr. Touff retired as General Counsel and as an executive officer of the Company, effective as of the close of business on October 30, 2020. Ms. Givens was appointed as Senior Vice President and General Counsel and designated as an executive officer and named executive officer of the Company effective as of November 1, 2020.

Over 40 Years of Shareholder Value Creation 

Our Company is one of the leading homebuilders in the United States. Founded in 1972, we have delivered over 210,000 Richmond American homes to homebuyers across the nation. 

Our business consists of two primary operations: homebuilding and financial services. The homebuilding operation is comprised of wholly-owned subsidiary companies that primarily construct and market single-family detached houses to first-time and first-time move-up homebuyers under the name “Richmond American Homes.” Our financial services operations support our homebuilding business.

 image4a.jpg

We strive to generate sustainable long-term value for our shareholders, focusing on our core strength: designing, building and selling quality homes. Homebuilding is a cyclical, often unpredictable, industry. Our business strategy is distinctive among the publicly traded US homebuilders, maximizing risk-adjusted returns while minimizing the risks of excess leverage and land ownership – a strategy designed to outperform over the years.
19

HOW MDC IS DIFFERENT WHY IT MATTERS
BUILT FOR SUCCESS THROUGH THE HOUSING CYCLE

ü Strong balance sheet
ü 2-3 years land supply
ü Limited amount of speculative inventory
ü Industry leading dividend
à
We’re focused on homebuilding, not land speculation, which positions us to withstand, and ultimately benefit from, downturns.
Allows us to reward shareholders with an industry leading cash dividend, which has remained consistent / increased each year since 1994.
DIVERSE PRODUCT MIX WITH A CONTINUED FOCUS ON THE MORE AFFORDABLE SEGMENT

ü Appeal to a number of buyer demographics
ü Benefiting from the increase in millennial homebuying
ü More affordable without sacrificing quality or design elements
à
Allows us to have faster cycle times, increase our absorption pace and improve our gross margin through better pricing power.
Attracts both new homebuyers and move down buyers focused on affordability.
Unique products help differentiate us from peers.
BUILD-TO-ORDER MODEL

ü Allows for personalization
ü Differentiates us in the market as more builders move to a spec strategy
ü "Build-to-order" strategy limits risk vs. speculative building of unsold homes by peer group
à
Allows us to manage the customer experience from end-to-end.
Personalization leads to higher margin sales. We’ve proven we can generate order rates above peer group average without the use of specs.
Model is consistent with our risk conscious operating philosophy.

Strong execution of our strategic initiatives has resulted in a five-year total shareholder return of 181% (see comparison to peer group below) and positioned the Company for continued growth as we look forward to 2021, while the financial stability afforded by our operating strategy has enabled us to reward our shareholders with a consistent dividend program unmatched in the homebuilding industry.


COMPARISON OF CUMULATIVE TOTAL RETURN*

performancegraphv21a.jpg
*It is assumed in the graph that $100 was invested (1) in our common stock; (2) in the stocks of the companies in the S&P500® Stock Index; and (3) in the stocks of the peer group companies (See Peer Data section for a list of peer group companies included above), just prior to the commencement of the period and that all dividends received within a quarter were reinvested in that quarter.
20

Business Performance Highlights

Fiscal year 2020 results (comparisons are to the prior year) and other highlights:

REVENUEPRETAX
INCOME
HOME DELIVERIESNET ORDERSBACKLOG*
$3.90B$457.5M8,15811,012$3.26B
△ 17%△ 50%△ 17%△ 40%△ 87%
* Dollar value of homes in backlog at December 31, 2020


Total Shareholder Return. Our respective one, three and five year total shareholder returns of 32%, 84% and 181% all exceeded our peer group average for the respective time periods.
Consistent Industry Leading Dividend. We paid $89.0 million in cash dividends in 2020, extending our track record of reliable capital return to our shareholders to over 25 years and increasing our annual dividend by 21% to $1.60 during the year. We further rewarded shareholders with an 8% stock dividend declared by our Board of Directors in January 2021.
Continued Improvement to Balance Sheet and Liquidity. We ended the year with total liquidity of $1.70 billion following the expansion of our credit facility in December 2020, which increased the total amount available under the facility to $1.20 billion and increased the maturity on the majority of the facility through December 2025. Additionally, on January 11, 2021, we issued $350 million of 10-year senior notes at a rate of 2.500%, which represented the lowest rate ever achieved by a non-investment grade company for a 10-year issuance at that time.
Increasing Community Count. Our land acquisition strategy coupled with our strong balance sheet has allowed us to react quickly during these uncertain times. Our year-end active community count increased for the third consecutive year to 194 active communities at December 31, 2020. We were able to deliver this continued community count growth during a period of time when many within our peer group were experiencing year-over-year declines.
Improving Operating Margin. Our homebuilding operating margin improved 260 basis points from 7.5% to 10.1%. Several of our operations in places like California, Florida and the Pacific Northwest have reached volume levels that allow for better economies of scale, which has translated into better margin contributions for those areas, while our established positions in places like Colorado continue to generate strong margins and returns for our Company.
Diverse Product Mix & Build-to-Order Model. Our focus continues to be on designing innovative homes that allow for personalization with an eye towards affordability. During 2020, 56% of our deliveries were from our more affordable product lines, compared to just 31% two years ago. Our build-to-order model has continued to prove effective even during these uncertain times as evidenced by the year-over-year increases in net new home orders and the dollar value of homes in backlog at year-end. The dollar value of our homes in backlog at December 31, 2020 was our highest year-end value ever.

21

Executive Compensation Program Structure: Aligning Pay with Performance

Our compensation program is designed to align executive pay with the drivers of long-term value creation and reward execution of our strategic program.

The annual incentive and long-term compensation programs for our Executive Chairman and CEO are primarily performance-based utilizing our annual and long term business goals and predetermined challenging metrics tied to the drivers of our long-term shareholder value. The following table outlines our executive compensation program structure in 2020.

execcompstructure1a.jpg

2020 Pay Performance Metrics and Outcomes Summarized 

2020 Annual Incentive Program – Bonus Determination for Executive Chairman and CEO

2020 Short-Term Incentive Program
% Change from Prior Year in Parenthesis
Performance Goal
Performance Required at Threshold
Performance Required at Target
Actual PerformanceBonus Earned
Adjusted pre-tax return* on equity
6.0% hurdle achieved at 25.9%
$1,500,000 
 
Additional Bonus Opportunity
Home sale revenues$3,200 million$3,700 million$3,765 million (+17%)$1,500,000 
Net new orders7,800 homes9,500 homes11,012 homes (+40%)$1,500,000 
Adjusted pre-tax income*$305 million$424 million$460.9 million (+51%)$1,500,000 
Adjusted EBITDA** $412 million$540 million$581.4 million (+41%)$1,500,000 
Total Additional Bonus
$6,000,000 
Total Incentive Bonus (Lesser of $6 million or the calculated amount)
$6,000,000 
*  Adjusted pre-tax return / income is a non-GAAP financial measure and is defined as pre-tax income before unrealized gains or losses on investments, expenses derived from impairments, executive stock-based compensation expense above a budgeted amount, warranty reserve adjustments, non-recurring or out-of-period charges and the effect of changes in laws, regulations or accounting principles.
** Adjusted EBITDA is a non-GAAP financial measure and is defined as earnings before interest, taxes, depreciation, amortization, unrealized gains or losses on investments and other non-cash charges derived from impairments, stock-based compensation expense, abandoned project costs, warranty reserve adjustments, non-recurring or out-of-period charges and the effect of changes in laws, regulations or accounting principles.
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2020 Long-Term Incentive Program

The long-term incentive program in 2020 includes metrics that measure the Company’s long-term value drivers related to the Company’s core business. The majority of the program is performance-based and designed to retain, motivate and reward our executive officers for achieving our strategic and financial long-term objectives through the use of performance share units that vest three years from the date of grant provided specific performance targets are achieved.

Additionally, our long-term incentive program in 2020 includes the use of stock options. During 2020, stock options covering 200,000 shares were granted to both the Executive Chairman and CEO that vest annually over three years subsequent to the grant date. These stock options represented approximately 27% of overall long-term incentive grants to the Executive Chairman and CEO during 2020 (based on the grant date fair value of the awards), whereas the above-referenced performance share grants represented the remaining 73%.

Compensation Governance Best Practices

In order to continue to provide long-term value to our shareholders, our Compensation Committee is committed to maintaining independent and thorough oversight of our executive compensation program and the following governance best practices are key to achieving this goal. 

Compensation Governance Best Practices
ü Executive compensation program design and refinements incorporate shareholder feedback
ü  Significant Executive Chairman and CEO pay is performance based and at risk
ü  Compensation Committee sets rigorous targets and metrics
ü  Compensation Committee performs thorough assessment of Company and individual performance
ü  100% of Compensation Committee is independent
ü  Compensation Committee works with an independent compensation consultant
ü  Executives are subject to significant stock ownership guidelines
ü  Company maintains policies prohibiting hedging Company stock
ü  Clawback policy authorizes Company to recover compensation under certain circumstances
ü  Vesting of cash remuneration under Executive Chairman and CEO employment agreements is subject to double trigger change-in-control provisions

2020 Say-on-Pay Vote

Our Compensation Committee is committed to improving our executive compensation programs and modifying them as necessary to maintain the alignment of our executives and shareholders. We continue to engage investors on executive compensation topics and will continue to seek their feedback. We received a positive vote at the 2020 annual shareholders meeting, where our say-on-pay proposal received 74.9% support. We continue to seek feedback and actively engage with our shareholders and reached out to holders representing nearly 70% of our non-affiliated outstanding shares following the 2020 annual meeting. These conversations and feedback helped inform our Board of Directors’ decision-making process with respect to our compensation and governance practices. For example, a few of the more frequent inquiries from our shareholders included:

Succession planning
Diversity
Environmental sustainability

We achieved significant progress on each of these topics during 2020. Please see "Commitment to Sound Environmental, Social and Governance Practices" above for further discussion. These and other topics raised by our shareholders were discussed with the Board and various committees.

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Executive Compensation Program: Plan Design & Components

Key Goals and Objectives

The Compensation Committee aims to design a compensation program that rewards and retains talented executives while motivating them to drive short- and long-term performance. We believe that our ability to retain and motivate our executive officers with their exceptional skills, experience and capacity to succeed in our competitive industry has been essential to the success of our Company and a significant factor in creating long-term value for our shareholders.

Our compensation program reflects the above philosophy and, additionally, prioritizes the following:

Attracting and retaining talented executives and encouraging their long-term service and loyalty

Supporting our long-term business goals and driving performance by closely aligning our compensation metrics and goals with our long-term growth strategy

Maintaining a firm link between our executives’ and shareholders’ long-term interests

Prioritizing growth, risk management and financial stability

Reflecting shareholder feedback in the compensation program design and related considerations, through regular, ongoing shareholder engagement

Components of Executive Compensation
The Compensation Committee designed our compensation program to support the drivers of value and shareholder return over the long term. It is comprised of three primary elements: (i) base salary, (ii) annual incentive award; and (iii) long-term incentive award.
Compensation ComponentDescriptionPurposeKey
Characteristic
Base SalaryCash compensation based on executive officer’s role and employment agreement, if any. Salary levels are evaluated annually and may be adjusted for length of service, competitive considerations or recognition of a change in responsibilities.
● Provide financial certainty and stability
● Attract and retain executive talent
● Recognize experience, length of service, competitive market conditions and individual performance
Fixed
Annual
Incentive Award
Each year the Compensation Committee approves awards for the Executive Chairman and CEO, and establishes Key Performance Indicators (“KPIs”) for the CFO and CLO. The Compensation Committee determines the extent to which an award is earned and the amount of such award is based on individual and Company performance against pre-established goals.
● Motivate executive officer to achieve key annual goals and position the Company for long-term success
● Reward executive officer for individual performance and overall Company performance
Variable
Long-Term
Incentive Award
Each executive officer is eligible to receive an award at the discretion of the Compensation Committee based upon long-term performance potential.
● Provide an incentive for executive officers to achieve long-term sustainable success for the Company and to promote shareholder value
● Attract, motivate, reward and retain executive talent
Variable






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CEOOther NEOs
ceofixedpay1.jpg
neofixedpay1.jpg
The net effect of our pay design is that both for the CEO and the other NEOs, a large majority of total direct compensation is at-risk, and dependent on Company, individual, or stock performance.

Fixed Compensation

Base Salary

The Compensation Committee sets executive officer base salaries at a level that reflects the competitive market for these roles as well as each individual’s performance, skills and experience. In 2020, the Compensation Committee determined to maintain Executive Chairman and CEO base salaries unchanged from their 2019 levels, meaning Executive Chairman and CEO base salary have remained unchanged for over a decade. In light of exceptional performance and to ensure alignment with peer group levels, the Compensation Committee approved an $80,000/year increase to the CFO’s base salary. Ms. Givens' base salary remained unchanged at $450,000.

Variable and Performance-Based Compensation

2020 Executive Chairman and Chief Executive Officer Annual Incentive Bonus

Our annual incentive compensation program is designed to retain, motivate and reward the Executive Chairman and CEO for their respective contributions in achieving the Company’s annual financial goals by focusing their attention on the following key economic drivers: return on equity, home sale revenues, pre-tax income, net new orders and EBITDA. Significant year-over-year performance is essential to our short-term financial results and, ultimately, our long-term success. 

Annual Bonus Calculation Formula: Links to Key Metrics

annualincentive1a.jpg
The 2020 performance goal included a condition precedent for any bonus earned by requiring a minimum consolidated adjusted pre-tax return on beginning equity to exceed 6.0% (the “ROE Condition”). The actual adjusted pre-tax ROE was 25.9%, satisfying the ROE Condition, and as such, the Executive Chairman and CEO earned a $1.5 million bonus. 

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Once the ROE Condition was met, the Executive Chairman and CEO each had the opportunity to earn additional bonuses (the “Additional Bonus Opportunity”) as described below. 

Outcomes Reflect Alignment with Performance 

Based in part on shareholder feedback, the Additional Bonus Opportunity for the Executive Chairman and CEO for 2020 was based on four distinct sets of financial goals, as set forth below. The Compensation Committee believes that achievement of these goals, in concert, is important for long term shareholder value creation. 

The targets set forth below represent performance at or above our actual 2019 performance. 

Home Sale RevenuesBonus
(thousands)
Goal
(millions)
Adjusted Pre-Tax IncomeBonus
(thousands)
Goal (millions)
Target$1,500 $3,700 Target$1,500 $424 
Threshold$800 $3,200 Threshold$800 $305 

 
Net New Orders
Bonus
(thousands)
Goal
(homes)
Adjusted EBITDABonus
(thousands)
Goal
(millions)
Target$1,500 9,500 Target$1,500 $540 
Threshold$800 7,800 Threshold$1,000 $412 

The appropriateness of the categories selected for 2020, along with target and threshold goal amounts, were carefully considered by the Compensation Committee given the Company’s emphasis on prioritizing growth, risk management, financial stability and pursuit of long-term value. Specifically, with respect to the Home Sale Revenues, Adjusted Pre-Tax Income, Net New Orders and Adjusted EBITDA goals, the minimum performance criteria was established based on the prior year actual performance with target levels based on the 2020 Business Plan. The target goals represent performance at or above our actual 2019 performance. Bonuses earned for each metric were adjusted on a pro-rata basis if actual results were between Threshold and Target.

The 2020 Business Plan was developed by the Executive Chairman, CEO, CFO and other senior leaders from the “ground up” utilizing (i) forecasts submitted by the presidents for each of the Company’s homebuilding divisions detailing their operational projections for each of their divisions’ communities, (ii) the forecast submitted for the mortgage company by its president; and (iii) forecasts from the CFO regarding the insurance companies, any other income producing divisions of the Company, and all the corporate general and administrative departments. The 2020 Business Plan was reviewed by the Board. The process of developing the business plan incorporates a disciplined evaluation of risks identified by management and the Board to establish a reasonable range of potential performance goals for the year including general economic conditions, fluctuations in interest rates, variations in projected mortgage lending programs, the availability and cost of capital, the availability and acquisition cost of land, materials and contractors in the homebuilding operations, potential for shortages and the increased cost of labor, and increased governmental regulation, including the adverse interpretation of tax, labor and environmental laws. 

Target performance goals were established to reflect outstanding performance in light of the risks and market conditions anticipated for 2020.


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Based on the achievements in these categories, both the Executive Chairman and CEO earned an additional bonus of $6.0 million (subject to the bonus cap discussed below) related to the Additional Bonus Opportunity as shown below.

Short-Term Incentive Program
Performance Goal
Performance Required at Threshold
Performance Required at Target
Actual PerformanceBonus Earned
Home sale revenues$3,200 million$3,700 million$3,765 million$1,500,000 
Net new orders7,800 homes9,500 homes11,012 homes$1,500,000 
Adjusted pre-tax income$305 million$424 million$460.9 million$1,500,000 
Adjusted EBITDA$412 million$540 million$581.4 million$1,500,000 

Bonus Payment Cap

The 2020 annual incentive bonus (the ROE Condition Bonus plus the Additional Bonus Opportunity) was subject to a $6.0 million cap (the “Bonus Cap”) established by the Compensation Committee based on guidance from its Compensation Consultant taking into account each executive’s historic compensation, reference to executive compensation being awarded to the Company’s peer group and feedback from the Company's shareholders. 

In addition, any bonus earned in excess of $4.0 million would be paid in restricted stock vesting in equal amounts on the first, second and third anniversaries of the date of grant. The Compensation Committee believes that remuneration of a portion of the bonus in the form of restricted stock serves as a retention tool and reflects the alignment of interests between the Executive Chairman/CEO and other shareholders.

2020 CFO and General Counsel Annual Incentive Bonus 

The CFO and CLO positions are primarily responsible for accounting, finance, legal and regulatory compliance and, in the judgment of the Compensation Committee, their incentive compensation should not directly depend on the Company’s financial performance. During 2020, the CFO was awarded a bonus opportunity measured by specific Key Performance Indicators (“KPIs”) established by the Compensation Committee, their attainment and a bonus payment commensurate with a percentage of their base pay. The Compensation Committee consults with the Executive Chairman and CEO with regard to their achievements. While KPIs have been used in prior years in determining the CLO bonus amount, none were established in the current year given the planned retirement of Mr. Touff and the subsequent transition of the role. For 2020, the Compensation Committee established the following KPIs for the CFO:

Shareholder relations management and oversight
Timely and accurate handling of financial regulatory filings
Oversight of accounting, finance, information technology and treasury functions, including capital markets and bank financing transactions, if applicable
Successful completion of special projects
 
The KPIs were weighted equally, with bonus amounts based on the level of the performance achieved:

A target bonus of 100% of base salary if the Compensation Committee determined that each KPI was achieved.
A maximum bonus of 200% of base salary if the Compensation Committee determined that each KPI has been exceeded at a level doubling the targeted performance.
Proportionate bonus levels as a percentage of base salary to the extent some KPIs were partially achieved or exceeded.

Based on its evaluation of performance relative to the established KPIs, the Compensation Committee awarded Mr. Martin an annual incentive bonuses for 2020 of $1,500,000. Based on consultation with the Executive Chairman and CEO with regard to their achievements during the year, the Compensation Committee awarded Mr. Touff and Ms. Givens an annual incentive bonus of $417,000 and $300,000, respectively. Mr. Martin’s incentive bonus is comprised of $1,000,000 payable in cash and $500,000 in restricted stock. Ms. Givens' incentive bonus is comprised of $200,000 payable in cash and $100,000 in restricted stock. Mr. Touff’s incentive bonus was paid in cash upon his retirement as General Counsel and as an executive officer of the Company. The restricted stock awarded to Mr. Martin and Ms. Givens vest in equal amounts on the first, second and third anniversaries of the date of grant.

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Long-Term Incentive Compensation
 
For our Executive Chairman and CEO, the 2020 long-term equity grants were delivered approximately 73% in performance stock units and 27% in stock options (based on the grant date fair value of the awards), while the CFO grant was entirely in performance stock units. Our long-term incentive program is heavily weighted in performance stock units in order to objectively align the incentives of the Company’s management team with the interests of our shareholders.
 
Performance Stock Units (PSUs): Metrics
 
Executives will have their PSU awards vest if they meet the challenging financial and operating goals which have been established to improve our long-term performance.
 
Long-Term Incentive Metrics
MetricLink to Value Drivers
Home Sale Revenues
üHome sale revenues are an industry standard directly linked to the Company’s financial stability and revenue growth
Minimum Gross Margin from Home Sales Before Impairments Threshold
üGross margin is an industry standard that investors use to gauge the strength of our business as a measure that costs are being managed effectively
 
2020 Long-Term Incentive Compensation Awards
 
ltip1a.jpg

The awards will vest based on increasing average home sale revenues over a three-year performance period compared to home sale revenues over a base period, while maintaining a minimum average gross margin from home sales (excluding impairments) of at least fifteen percent (15%).

2020 Long-Term Incentive Compensation Target-Setting Process
 
The Compensation Committee set clear, ambitious, long-term revenue growth targets over a three-year period. In determining the appropriate targets, the Compensation Committee considered the Company’s long term strategic plan, historic performance, peer group performance, anticipated broader business, market conditions and the Company’s current backlog.
 

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The Target Goal established for each award was based on the Company achieving a three-year average Revenue over the period commencing January 1, 2020 and ending December 31, 2022 (the “Performance Period”) that was at least 10% but less than 20% greater than the Revenue over the period commencing January 1, 2019 and ending December 31, 2019 (the “Base Period”). The Threshold Goal was based on three-year average Revenue over the Performance Period that was at least 5% but less than 10% greater than Revenue over the Base Period. The Maximum Goal was based on three-year average Revenue over the Performance Period that was at least 20% greater than Revenue over the Base Period. The number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals.
 
Long-Term Incentive Program
Performance MetricBaseThresholdTargetMaximum
Gross Margin from Home Sales (Excluding Impairments)15% Average Gross Margin from Home Sales requirement
Home Sale Revenues (in billions)$3.20$3.37*$3.50*$3.85*
* Average over Performance Period
 
Upon the Company satisfying the gross margin from home sales (excluding impairments) precondition, the following shares of Company stock would vest depending on the Revenue performance relative to Base Period achieved:

ExecutiveTargetThresholdMaximum
Executive Chairman/CEO120,000 shares50% of Target200% of Target
CFO30,000 shares50% of Target200% of Target
 
Peer Data
 
The Compensation Committee utilized peer data as a reference when it considered the incentives and compensation plan design. It was not employed for benchmarking purposes. Rather, the peer group information was considered for broad subjective comparisons and not as an objective metric. 

Homebuilder Peer Group Companies (the “Peer Group”)
Lennar Corporation
Toll Brothers, Inc.
M/I Homes Inc.
Meritage Homes Corporation
D.R. Horton, Inc.
Hovnanian Enterprises, Inc.
NVR, Inc.
KB Home
PulteGroup, Inc.
Beazer Homes USA, Inc.
 
The Compensation Committee chose these companies for their parallels to MDC's core business and markets, recognizing that their corporate structure, business strategies and risk profile may significantly vary from those of our Company.   For example, significant differences include (1) MDC’s exceptional strategic focus on risk management, including its land-light operating model and conservative utilization of leverage, (2) senior management’s high percentage of stock ownership – they beneficially own approximately 23% of the Company’s outstanding stock, the highest among the Peer Group and (3) the Company’s annual dividend yielding approximately 3.3%, far exceeding the closest Peer Group member.  Nevertheless, the Committee believes that the companies in the Peer Group were appropriate for reference purposes since they compete for the same executive talent, as well as competing in core areas of business such as land acquisitions and sales.
 
The Compensation Committee refers to the Peer Group not only for compensation purposes, but also for business model and risk evaluation purposes, as discussed in more detail, below.


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Role of Compensation Committee and Management
 
The Compensation Committee conducted a series of meetings beginning in April 2020 and continuing into February 2021, at which time the Compensation Committee developed its determinations regarding 2020 executive officer compensation. The following table summarizes the roles of the Compensation Committee, the Consultant and management in formulating their decisions on executive officer compensation:

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

Role of the Independent Compensation Consultant
 
The Compensation Committee has the authority to retain outside counsel, consultants and other advisors to assist it in evaluating compensation or in otherwise discharging its duties and responsibilities. After consideration of independence factors as required by the NYSE, the Compensation Committee engaged WealthPoint, LLC to advise the Committee in connection with year-end 2020 compensation determinations, the structuring of executive compensation for 2021 and the compensation disclosures to be included in this proxy statement. This consultant also assisted the Compensation Committee in determining appropriate peers for purposes of comparing (but not benchmarking) market compensation, and provided other related services.

WealthPoint, LLC has not provided any services to the Company other than the services provided to the Compensation Committee. After considering, among other matters, the absence of any business or personal relationship between the consultants and any member of the Compensation Committee or any executive officer of the Company, the Compensation Committee has concluded the consultant's services do not raise any conflicts of interest.
 

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Other Compensation Considerations

Stock Ownership Guidelines

The Company has adopted formal equity ownership guidelines for the executive officers in order to expressly promote their continued short and long term financial alignment with the interests of the shareholders of the Company. Under the guidelines, each executive officer is encouraged to acquire and maintain ownership of common stock of the Company having an acquisition value of not less than the following multiple of the executive officer’s base annual salary:

Executive OfficerMultiple
Executive Chairman5X
CEO5X
All Others1X

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

Anti-Hedging and Anti-Pledging Policies
 
Our executive officers (but not other employees) and our Directors are prohibited from acquiring an interest in financial instruments intended to hedge or offset any decrease in the market value of the Company’s stock held directly or indirectly by that person. They also are required to inform the Company’s compliance committee and obtain pre-clearance prior to purchasing Company stock on margin, margining Company stock or pledging Company stock as collateral for a loan.

Clawback Policy

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

Compensation and Risk Management

As part of its annual risk assessment, the Compensation Committee reviews the Company’s compensation policies and practices to confirm that the programs are designed in a manner that does not motivate individuals or groups to take risks reasonably likely to have a material adverse effect on the Company. Based on the Compensation Committee’s annual risk assessment, the Company believes that its compensation policies and practices for its employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on the Company, and that such policies and practices are designed with strong oversight mechanisms in place.


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Tax Considerations

Effective for tax years beginning on January 1, 2018 and later, Internal Revenue Code Section 162(m) was amended by the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017. The tax reform legislation, with limited exception, repealed the performance-based compensation exception to the Section 162(m) $1 million deduction limitation. The definition of a “covered employee” was revised to include the principal financial officer and any individual who held the position of either principal executive officer or principal financial officer at any time during the taxable year.

Medical Insurance Benefits
 
Under the terms of their respective employment agreements, each of the Executive Chairman and CEO is entitled to medical insurance benefits for the duration of his life (described in more detail below under “Employment Agreements”).
 
Other Compensation

In 2020, our executive officers also received compensation in the form of 401(k) employer contributions, incremental travel expenses incurred by the Company in support of not-for-profit organizations (as approved by the Board) and cell phone allowances.

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

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

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COMPENSATION COMMITTEE REPORT
 
The following Report of the Compensation Committee shall not be deemed to be "filed" with the SEC or to be subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. The report shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except that it will be deemed "furnished" in the Company's Annual Report on Form 10-K for 2020, but shall not be deemed incorporated by reference into any filing as a result of being furnished in the Annual Report.
 
The Compensation Committee hereby confirms that it has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

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

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SUMMARY COMPENSATION TABLE
 
For the fiscal years ended December 31, 2020, 2019 and 2018, the following table summarizes the compensation of the Company’s named executive officers.

Name and
Principal Position
YearSalary
($)
Bonus
($)
Stock Awards
 ($) 1
Option Awards
 ($) 2
Non-Equity Incentive Plan Compensation ($) 3
All Other Compensation
($)
Total
($)
Larry A. Mizel, Executive Chairman 4
2020$1,000,000 N/A$7,117,543 $1,885,060 $4,000,000 $88,422 $14,091,025 
2019$1,000,000 N/A$4,911,969 $1,576,080 $4,000,000 $297,539 $11,785,588 
2018$1,000,000 N/A$4,030,967 $1,383,620 $5,000,000 $190,961 $11,605,548 
David D. Mandarich, President and Chief Executive Officer 4
2020$830,000 N/A$7,117,543 $1,885,060 $4,000,000 $32,164 $13,864,767 
2019$830,000 N/A$4,911,969 $1,576,080 $4,000,000 $8,760 $11,326,809 
2018$830,000 N/A$4,030,967 $1,383,620 $5,000,000 $8,610 $11,253,197 
Robert N. Martin, Senior Vice President and Chief Financial Officer
2020$787,692 $1,000,000 $1,742,240 N/A N/A $9,270 $3,539,202 
2019$713,077 $850,000 $1,252,984 N/A N/A $9,120 $2,825,181 
2018$653,077 $750,000 $1,048,547 N/A N/A $8,970 $2,460,594 
Rebecca B. Givens, Senior Vice President and General Counsel 5
2020$180,577 $200,000 $199,972 N/AN/A$311 $580,860 
Michael Touff,
Senior Vice President and General Counsel 5
2020$505,329 $417,000 $74,984 N/A N/A $9,270 $1,006,583 
2019$444,231 $500,000 $74,984 N/A N/A $9,120 $1,028,335 
2018$400,000 $500,000 $50,000 N/A N/A $8,970 $958,970 
 
1 The amounts shown in the "Stock Awards" column are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of the following:

2020
For Messrs. Mizel, Mandarich and Martin, Performance Share Units ("PSUs") were granted to each individual on August 20, 2020. These awards are performance based, and, therefore, the amounts in the table above include $5,117,549, $5,117,549 and $1,367,277 for Messrs. Mizel, Mandarich and Martin, respectively, reflecting the aggregate grant date fair value of the awards multiplied by the probable outcome of the performance conditions as of the grant date. Assuming achievement of the highest level of performance for these awards, the grant date fair value of the performance-based equity awards for Messrs. Mizel, Mandarich and Martin total $10,235,098, $10,235,098 and $2,734,554, respectively.
For each of Messrs. Mizel and Mandarich, this column also includes $1,999,994 in Restricted Stock Awards ("RSAs") that were granted February 3, 2020 pursuant to the 2019 performance goals established under the terms of the 2018 Performance-Based Plan.
For Mr. Martin and Mr. Touff, this column also includes $374,963 and $74,984, respectively, in RSAs that were granted on February 3, 2020 based on their 2019 performance.
For Ms. Givens, this column includes RSAs granted in connection with her hiring during 2020.

2019
For Messrs. Mizel, Mandarich and Martin, Performance Share Units ("PSUs") were granted to each individual on August 5, 2019. These awards are performance based, and, therefore, the amounts in the table above include $3,912,000, $3,912,000 and $978,000 for Messrs. Mizel, Mandarich and Martin, respectively, reflecting the aggregate grant date fair value of the awards multiplied by the probable outcome of the performance conditions as of the grant date. Assuming achievement of the highest level of performance for these awards, the grant date fair value of the performance-based equity awards for Messrs. Mizel, Mandarich and Martin total $7,824,000, $7,824,000 and $1,956,000, respectively.
For each of Messrs. Mizel and Mandarich, this column also includes $999,969 in Restricted Stock Awards ("RSAs") that were granted February 1, 2019 pursuant to the 2018 performance goals established under the terms of the shareholder-approved 2013 Performance-Based Plan.
For Mr. Martin and Mr. Touff, this column also includes $274,984 and $74,984, respectively, in RSAs that were granted on February 1, 2019 based on their 2018 performance.


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2018
For Messrs. Mizel, Mandarich and Martin, Performance Share Units ("PSUs") were granted to each individual on May 23, 2018. These awards are performance based, and, therefore, the amounts in the table above include $3,314,295, $3,314,295 and $828,574 for Messrs. Mizel, Mandarich and Martin, respectively, reflecting the aggregate grant date fair value of the awards multiplied by the probable outcome of the performance conditions as of the grant date. Assuming achievement of the highest level of performance for these awards, the grant date fair value of the performance-based equity awards for Messrs. Mizel, Mandarich and Martin total $6,628,590, $6,628,590 and $1,657,147, respectively.
For each of Messrs. Mizel and Mandarich, this column also includes $716,672 in Restricted Stock Awards ("RSAs") that were granted February 2, 2018 pursuant to the 2017 performance goals established under the terms of the shareholder-approved 2013 Performance-Based Plan.
For Mr. Martin and Mr. Touff, this column also includes $219,973 and $50,000, respectively, in RSAs that were granted on February 2, 2018 based on their 2017 performance.

For a description of assumptions used in valuing the awards, please see Note 22 (Stock Based Compensation) to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K, for the year ended December 31, 2020.

2 The amounts shown in the "Option Awards" column are based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For Messrs. Mizel and Mandarich, the option awards granted in 2020, 2019 and 2018 were service based, were assigned a fair value of $9.43, $7.88 and $6.41 per share, respectively, on the date of grant using the Black-Scholes option pricing model and are being expensed on a straight-line basis over the three year vesting period. For a description of the assumptions used in valuing the awards, please see Note 22 (Stock Based Compensation) to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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

4 On October 26, 2020, the Company's Board, as part of its senior leadership succession planning, appointed Larry A. Mizel, as Executive Chairman and David D. Mandarich, as President and Chief Executive Officer.

5 Mr. Touff retired as General Counsel and as an executive officer of the Company, effective as of the close of business on October 30, 2020. Ms. Givens was appointed as Senior Vice President and General Counsel and designated as an executive officer and named executive officer of the Company effective as of November 1, 2020.


35

All Other Compensation
 
The table below provides a breakdown of all other compensation for 2020 for the named executive officers:

NameNon-
Business
Use of
Aircraft
 
401(k)
Match 2
Other 3
Total
Larry A. Mizel— 
1
$8,550 $79,872 $88,422 
David D. Mandarich— 
1
$8,550 $23,614 $32,164 
Robert N. Martin—  $8,550 $720 $9,270 
Rebecca B. Givens— $— $311 $311 
Michael Touff—  $8,550 $720 $9,270 
 
1 The incremental costs of non-business use of the Company's aircraft are calculated as the total variable operating costs directly associated with non-business trips, which include fuel, pilot travel related costs, catering, landing fees, flight communications and trip-related maintenance (the “Incremental Cost”). For their non-business use of the aircraft in 2020, Messrs. Mizel and Mandarich each reimbursed the Company amounts in excess of the Incremental Cost to the Company.

2 401(k) match represents amounts paid in 2021 based on 2020 401(k) deferrals.

3 For Mr. Mizel and Mr. Mandarich, the amounts shown for “Other” include $79,152 and $23,254, respectively, of Incremental Costs incurred by the Company in support of Mr. Mizel and Mr. Mandarich's service to not-for-profit organizations, consistent with the Company’s commitment to sustainability and as approved by the Company's Board. The remainder of the amount shown for Mr. Mizel and Mr. Mandarich and all of the amounts shown for the other NEOs represent cell phone allowances.

36

GRANTS OF PLAN-BASED AWARDS IN 2020
 
The following table sets forth certain information with respect to awards granted during 2020 to our named executive officers. All equity awards were made under the 2011 Equity Incentive Plan.

  
Estimated payouts under equity
incentive plan awards 3
  All other stock
awards: Number
of shares of stock or units
(#)
  Exercise or
Base Price
of Option Awards
($/Sh)
  Grant Date
Fair Value of
Stock and Option Award
($)
NameGrant DateThreshold
(#)
Target
(#)
Maximum
(#)
Larry A. Mizel 2/3/202045,903 
1
$1,999,994 
Larry A. Mizel 4/27/2020200,000 
2
$25.81 $1,885,060 
Larry A. Mizel 8/20/202060,000 120,000 240,000 
 
$5,117,549 
David D. Mandarich 2/3/202045,903 
1
$1,999,994 
David D. Mandarich 4/27/2020200,000 
2
$25.81 $1,885,060 
David D. Mandarich 8/20/202060,000 120,000 240,000 
 
$5,117,549 
Robert N. Martin2/3/20208,606 
1
$374,963 
Robert N. Martin8/20/202015,000 30,000 60,000 
 
$1,367,277 
Rebecca B. Givens7/15/20205,142 
4
$199,972 
Michael Touff2/3/20201,721 
1
$74,984 
 
1 The restricted stock award vests equally over three years, starting with February 3, 2021. Dividends are paid on the restricted stock. The restricted stock granted in 2020 was based on 2019 performance.

2 The option granted will become exercisable equally over three years, starting with the first anniversary of the grant date. The option granted was part of the executive’s 2020 long term incentive compensation.

3 The PSUs will be earned based upon the Company’s performance, over a three year period commencing January 1, 2020 and ending December 31, 2022 (the “Performance Period”), measured by increasing average home sale revenues over the Base Period. The “Base Period” for the awards is January 1, 2019 to December 31, 2019. The awards are conditioned upon the Company achieving a minimum average gross margin from home sales percentage (excluding impairments) of at least fifteen percent (15%) over the Performance Period. If Performance Revenues exceed the Base Revenues by at least 5% but less than 10% (“Threshold Goals”), 50% of the Target Goals will be earned. If Performance Revenues exceed the Base Revenues by at least 20%, 200% of the Target Goals will be earned (“Maximum Goals”). The number of PSUs earned under these grants shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals.

4 The restricted stock award will vest equally over four years, starting with the first anniversary of the grant date. Dividends are paid on the restricted stock. The restricted stock award was granted in connection with Ms. Givens' hiring during 2020.

37

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2020
 
The table below sets forth information with respect to all unexercised options, unvested restricted stock and unvested performance stock units awarded to our named executive officers that were outstanding as of December 31, 2020.

 
 Option AwardsStock Awards
NameNumber of
Securities Underlying Unexercised
Options (#) Exercisable
Number of
Securities Underlying Unexercised
Options (#) Unexercisable
 Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
 
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Units That
Have Not
Vested
(#)
 Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Units That
Have Not
Vested ($)
Larry A. Mizel125,000 — 19.96 3/8/2022— — — — 
 1,224,720 — 23.18 5/18/2025— — — — 
 144,000 72,000 
1
28.51 5/23/2028— — — — 
 66,667 133,333 
2
35.55 8/5/2029— — — — 
 — 200,000 
3
25.81 4/27/2030— — — — 
 — — — — 12,520 
4
608,472 — — 
 — — — — 8,060 
5
391,716 — — 
 — — — — 21,930 
6
1,065,798 — — 
 — — — — 45,903 
7
2,230,886 — — 
 — — — — — — 259,200 
8
12,597,120 
 — — — — — — 60,000 
9
2,916,000 
 — — — — — — 60,000 
10
2,916,000 
David D. Mandarich1,224,720 — 23.18 5/18/2025— — — — 
 144,000 72,000 
1
28.51 5/23/2028— — — — 
 66,667 133,333 
2
35.55 8/5/2029— — — — 
 — 200,000 
3
25.81 4/27/2030
 — — — — 12,520 
4
608,472 — — 
 — — — — 8,060 
5
391,716 — — 
 — — — — 21,930 
6
1,065,798 — — 
 — — — — 45,903 
7
2,230,886 — — 
 — — — — — — 259,200 
8
12,597,120 
 — — — — — — 60,000 
9
2,916,000 
 — — — — — — 60,000 
10
2,916,000 
Robert N. Martin12,247 — 25.34 1/22/2024— — — — 
18,370 — 23.11 5/23/2025— — — — 
— — — — 2,474 
5
120,236 — — 
— — — — 6,031 
6
293,107 — — 
— — — — 8,606 
7
418,252 — — 
— — — — — — 64,800 
8
3,149,280 
— — — — — — 15,000 
9
729,000 
— — — — — — 15,000 
10
729,000 
38


 Option AwardsStock Awards
NameNumber of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities Underlying Unexercised
Options (#) Unexercisable
 Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
 Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Units That
Have Not
Vested
(#)
 Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Units That
Have Not
Vested($)
Rebecca B. Givens— — — — 5,142 
11
249,901 — — 
Michael Touff30,618 — 32.37 2/1/2023— — — — 
30,618 — 23.67 2/6/2024— — — — 
30,618 — 20.35 1/26/2025— — — — 
— — — — 562 
5
27,313 — — 
— — — — 1,644 
6
79,898 — — 
— — — — 1,721 
7
83,641 — — 
1 This option vests as to 100% of the remaining shares on May 23, 2021.

2 This option vests as to 50% of the remaining shares on each of August 5, 2021 and 2022.

3 This option vests as to 33-1/3% of the shares on each of April 27, 2021, 2022 and 2023.

4 The restrictions on these shares lapse as to 100% of the remaining shares on December 31, 2021.

5 The restrictions on these shares lapse as to 100% of the remaining shares on February 2, 2021.

6 The restrictions on these shares lapse as to 50% of the remaining shares on each of February 1, 2021 and 2022.

7 The restrictions on these shares lapse as to 33-1/3% of the shares on each of February 3, 2021, 2022 and 2023.

8 The PSUs will be earned based upon the Company’s performance, over a three year period commencing April 1, 2018 and ending March 31, 2021. For more detail of the vesting terms see Note 22 (Stock Based Compensation) to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

9 The PSUs will be earned based upon the Company’s performance, over a three year period commencing January 1, 2019 and ending December 31, 2021. For more detail of the vesting terms see Note 22 (Stock Based Compensation) to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

10 The PSUs will be earned based upon the Company’s performance, over a three year period commencing January 1, 2020 and ending December 31, 2022. For more detail of the vesting terms see GRANTS OF PLAN-BASED AWARDS IN 2020 section above or Note 22 (Stock Based Compensation) to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

11 The restrictions on these shares lapse as to 25% of the remaining shares on each of July 15, 2021, 2022, 2023 and 2024.
39

OPTION EXERCISES AND STOCK VESTED IN 2020

The following table provides additional information about value realized by the named executive officers on option award exercises and restricted stock award vestings during the year ended December 31, 2020.

 Option AwardsStock Awards
 Number of
Shares Acquired
on Excercise
(#)
Value
Realized on
Exercise
($)
Number of
Shares Acquired
on Vesting
(#)
Value
Realized on
Vesting
($)
Larry A. Mizel707,808 $16,103,786 175,227 $9,452,164 
David D. Mandarich832,808 $19,391,740 175,243 $9,452,164 
Robert N. Martin21,432 $458,559 45,147 $2,318,581 
Michael Touff— — 1,365 $87,609 

PENSION BENEFITS AT DECEMBER 31, 2020 

The following table shows, as of December 31, 2020, the present value of accumulated post-retirement medical insurance benefits under the employment agreements of Mr. Mizel and Mr. Mandarich.

NamePlan NameNumber of
Years Credited
Service (#)
Present Value of
Accumulated
Medical Insurance
Benefits
($)
Payments During
Last Fiscal Year
($)
Larry A. MizelEmployment AgreementN/A$222,032 N/A
David D. MandarichEmployment AgreementN/A$297,968 N/A
Robert N. MartinN/AN/AN/AN/A
Rebecca B. GivensN/AN/AN/AN/A
Michael TouffN/AN/AN/AN/A

40

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table provides information, as of December 31, 2020, with respect to the Company’s existing equity compensation plans.

Plan category(a)
Shares to be issued upon
exercise of outstanding
options, warrants and rights
(b)
Weighted-average exercise
price of outstanding
options, warrants and rights
(c)
Number of shares
remaining available for
future issuance under
equity compensation plans
(excluding shares reflected
in column (a))
Equity compensation plans approved by shareholders6,086,75125.241,594,698
Equity compensation plans not approved by shareholders
Total6,086,75125.241,594,698

EMPLOYMENT AGREEMENTS

Messrs. Mizel and Mandarich

On October 26, 2020, the Board appointed Larry A. Mizel (previously, Chairman and Chief Executive Officer) as Executive Chairman and David D. Mandarich (previously President and Chief Operating Officer) as President and Chief Executive Officer. In connection with these changing roles, as of October 26, 2020, the Company and each of Messrs. Mizel and Mandarich (each, an “Executive”) entered into new employment agreements (“Employment Agreements”) that replaced the prior employment agreements with each of the Executives. The material terms of the Employment Agreements are summarized below.

Employment Term: Mr. Mizel’s Employment Agreement has an initial term of December 31, 2022 and Mr. Mandarich’s Employment Agreement has an initial term of December 31, 2024. The Employment Agreements automatically extend for two-year terms unless (i) the Company or the Executive elects to terminate by six months written notice, or (ii) the Executive is terminated earlier.

Base Salaries: The Employment Agreements retain the Executives’ base salaries specified by the prior employment agreements. Mr. Mizel's base salary may not be less than $1,000,000 per year. Mr. Mandarich's base salary may not be less than $830,000 per year. The base salary for the Executive may only be reduced below his prior year's base salary with the consent of the Executive and the Company.

Incentive Compensation: Messrs. Mizel and Mandarich participate in the Company’s annual and long-term incentive compensation plans (“Performance Plans”).

Group Medical Insurance Benefits: The Company provides group medical, dental and vision insurance benefits to Messrs. Mizel and Mandarich. This applies to each of them while he is employed and for the rest of his life after employment. The group medical insurance benefits also provide comparable coverage for the Executive’s spouse for the duration of the Executive’s life and, if she survives the Executive, for an additional sixty months after his death.

Long-Term Disability Benefits: The Company will provide the Executive with long-term disability benefits. Under the benefits, the annual after-tax amount received by the Executive would equal the after-tax amount of his base salary for the year in which he becomes disabled. This long-term disability benefit would be paid monthly until the earlier of the end of the Executive's disability or prior to his becoming totally disabled.

41

Vacation: The Executive is entitled to receive not less than six weeks of vacation each year without carryover from year to year.

Termination for Cause: An Executive may be terminated for “Cause,” as defined in the Employment Agreements. If terminated for Cause, he will only be entitled to his “Accrued Benefits” of base salary through the termination date, annual incentive compensation earned but unpaid with respect to the year prior to the year of termination, any long-term incentive compensation earned but unpaid with respect to performance periods that ended in the year preceding the year of termination.

“Cause” is defined in the Employment Agreements as: (i) the Executive’s willful refusal to perform material duties reasonably required or requested of him by the Board for thirty days after having received written notice of such refusal from the Board and having failed to commence to perform such duties within such period, (ii) the Executive’s commission of material acts of fraud, dishonesty or misrepresentation in the performance of his duties, (3) any final, non-appealable conviction of the Executive for an act or acts on the Executive’s part constituting a felony under the laws of the United States or any state thereof, or (4) any material uncured breach of the provisions of the confidentiality and non-competition provisions of the Employment Agreement which continues for thirty days after the Executive has received written notice of such breach from the Company.

Termination by the Company without Cause or Termination by the Executive for “Good Reason”: An Executive’s employment may be terminated by the Company at any time without Cause. If so, the Executive, in addition to Accrued Benefits is entitled to a lump sum “Termination Payment” of (i) an amount equal to his aggregate base salary during the 36 months prior to the termination, (ii) an amount equal to 300%, for Mr. Mizel, and 200%, for Mr. Mandarich, of the annual incentive compensation paid for the year prior to termination, and (iii) the lifetime group medical insurance benefits described above. The Termination Payment remains the same as in the prior employment agreements. Under the Employment Agreements, termination without Cause includes the Company's election not to extend the term of the Employment Agreement. If the Executive terminates his employment for “Good Reason” as defined in the Employment Agreements, he is entitled to the same Accrued Benefits and Termination Payment.

“Good Reason” is defined in the Employment Agreements as: (i) a material diminution or change, adverse to the Executive, in the Executive’s positions, titles, status, rank, nature of responsibilities, or authority with the Company, including the Executive’s removal as a member of the Board or if the Executive is not nominated for re-election by the Board, (ii) Mr. Mizel having to report to anyone other than the Board or Mr. Mandarich having to report to anyone other than Mr. Mizel or the Board, (iii) a decrease in the Executive’s annual base salary, annual incentive compensation or long-term incentive compensation opportunity, including the Company’s termination of the Performance Plans or the Company’s amendment of the Performance Plans to provide for payments to the Executive in any calendar year which are less than the amount calculated in accordance with Article III of the Performance Plans, as the same may be amended from time to time, without the Executive’s written consent, (iv) a material reduction in the aggregate benefits for which the Executive is eligible under the Company’s benefit plans, (v) the Company requiring the Executive to relocate to another place of employment more than fifty miles from his primary residence, or (vi) a material breach by the Company of the Employment Agreement or any equity award agreement.
 
Change in Control Provisions: If the Executive’s employment is terminated by the Company within two years following a “Change in Control” (as defined in the Performance Plan) of the Company occurs, the Executive will receive his Accrued Benefits and the Termination Payment.

“Change in Control” is defined in the Performance Plan as the occurrence of:
(a) the acquisition by any individual, entity, or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors;
(b) the individual directors of the Board as of the Effective Date (the “Incumbent Directors”) cease to constitute at least half of the Board within a twelve-month period; provided, however, that for purposes of this paragraph, any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a of two-thirds of the Incumbent Directors at the beginning of such twelve-month period shall be considered an Incumbent Director;
(c) consummation, in one transaction or a series of related transactions, of a reorganization, merger, or consolidation of the Company or sale or other disposition, direct or indirect, of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, the Persons who were the “beneficial owners” of outstanding voting securities of the Company immediately prior to such Business Combination “beneficially own,” by reason of such ownership of the Company’s voting securities immediately before the Business Combination, more than 50% of the combined voting power of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such Business Combination; or
42

(d) approval by those Persons holding the voting securities of the Company of a complete liquidation or dissolution of the Company.

Termination due to Retirement, Death, Presumed Death or Disability: If the Executive’s employment hereunder is terminated due to the Executive’s “Retirement” as defined in the Employment Agreement, death, presumed death or disability, the Executive, or the Executive’s beneficiary or estate, as applicable, will receive the Accrued Benefits and the Termination Payment. Retirement means the termination at the election of the Executive of the Executive’s employment after December 31, 2022 in the case of Mr. Mizel and December 31, 2024 in the case of Mr. Mandarich or the non-renewal by the Executive of the Employment Agreement after his respective initial term.

Auto-Acceleration of Awards: The Employment Agreements provide that in the event of a Retirement, death, presumed death, total disability, termination of the Executive’s employment by the Company without Cause (which includes a non-renewal by the Company of the Employment Agreement for each additional term) or termination by the employee for Good Reason, or in the event of a Change in Control following which the employment of the Executive is terminated by the Company, all outstanding non-vested awards under the Company’s equity incentive plans will be fully vested, exercisable, and/or payable at the maximum level regardless of whether all vesting conditions relating to length of service, attainment of performance goals, or otherwise have been satisfied. In the case of outstanding performance share unit (“PSU”) awards that are outstanding on the date of the Executive’s Retirement, the number of shares to be issued and delivered to the Executive, if any, for such outstanding PSUs will be determined at the end of the three-year performance period in which such Retirement occurs, as certified by the compensation committee of the Board, and will be issued and paid to the Executive as though he continued to be employed through the end of the performance period.

In connection with the auto-acceleration of awards, the Company will amend the Executives’ existing PSU and other award agreements, as necessary, to conform them to the terms of the Employment Agreements.

Excess Parachute Payments: Certain payments that Messrs. Mizel and Mandarich may receive could be subject to an excise tax as an “excess parachute payment” under the Internal Revenue Code. This could occur following a Change in Control or through other payments made to the Executives. The Employment Agreements provide that any such payments will be reduced so that the maximum amount of such payments (after reduction) will be one dollar less that the amount that would cause such payments to be subject to the excise tax.

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

Certain Other Change in Control Agreements
 
Mr. Martin and Ms. Givens entered into change in control agreements with the Company effective May 23, 2015 and July 15, 2020, respectively. Each agreement will terminate on the earlier of termination of employment or the end of the current term of the agreement (December 31, 2021 for both executives). However, unless either party to the agreement elects by notice in writing delivered to the other at least 90 days prior to December 31 of the current term, the term of the agreement will be renewed automatically for successive one-year terms. In addition, if the agreement has not been terminated prior to a change in control (as defined below), upon a change in control, the term of the agreement will extend automatically following such change in control for two years.

A “change in control” occurs if:

a report on Schedule 13D is filed with the SEC disclosing that any person other than the Company (or one of its subsidiaries or one of their employee benefit plans), or any director of the Company or an affiliate of the director, is the beneficial owner of 50 percent or more of the combined voting power of the outstanding securities of the Company;
any person other than the Company (or one of its subsidiaries or one of their employee benefit plans), or any director of the Company or an affiliate of the director, purchases securities, pursuant to a tender offer or exchange offer such that, after consummation of the offer, the person is the beneficial owner of 50 percent or more of the combined voting power of the outstanding securities of the Company;
the shareholders of the Company approve (A) any consolidation or merger of the Company (1) in which the Company is not the continuing or surviving corporation, or (2) pursuant to which shares of common stock of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer of all or substantially all the assets of the Company; or
there is a change in a majority of the members of the Board within a twelve month period, unless the election or nomination for election by the Company's shareholders of each new director during such twelve month period was
43

approved by the vote of two-thirds of the directors then still in office who were directors at the beginning of such twelve month period.


For purposes of Mr. Martin’s and Ms. Givens' agreements, a “change in control event” occurs if a change in control is followed by a material change within two years. A material change is defined in the agreements to occur if:

employment is terminated without cause (as defined in the agreements);
the Company makes certain adverse changes in the employee's reporting relationship, titles, functions or duties;
the Company assigns or reassigns the employee, without the employee's written permission, to another place of employment more than fifty miles from the current place of employment;
the Company reduces the employee's base salary, annual or long-term incentive compensation, or the manner in which the compensation is determined unless the reduction applies to other officers of the Company; or
a purchaser of all or substantially all of the Company's assets or any successor or assignee of the Company fails to assume the agreement.

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

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

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

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

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

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

On November 23, 2020, the Compensation Committee, as directed by the Board, amended the existing equity award agreements (restricted stock, stock option and performance share unit agreements) of Messrs. Mizel and Mandarich to correspond to the provisions of their new employment agreements. The Compensation Committee also amended the existing performance share unit agreements of Mr. Martin to conform the agreements to incorporate similar amended terms.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
 
The following table shows potential payments to our named executive officers under existing contracts for various scenarios involving a change in control or termination of employment, assuming a triggering event on the last business day of 2020. Please see the narrative above under "Employment Agreements" and "Certain Other Change in Control Agreements" for a description of payments contemplated by these agreements.

NameBenefitTermination
w/o Cause or
Material
Change
 
Change in
Control
 
After Change
in Control –
Material
Change or w/o
Cause1
 
Voluntary
Termination
 
Death
 
Disability
 
Larry A. MizelSeverance Pay$3,000,000 
2
 
 
$3,000,000 
2
 
 
 
 
 
 
Ann. Incentive Comp.$12,000,000 
3
 
 
$12,000,000 
3
 
 
 
 
 
 
 Stock/Option Vesting$47,966,467 
4
$47,966,467 
4
$47,966,467 
4
 
 
$47,966,467 
11
$47,966,467 
11
 Health Care Benefits$222,032 
5
 
$222,032 
5
$222,032 
5
$90,704 
5
$222,032 
5
David D. MandarichSeverance Pay$2,490,000 
2
 
$2,490,000 
2
 
 
 
Ann. Incentive Comp.$8,000,000 
3
 
$8,000,000 
3
 
 
 
 Stock/Option Vesting$47,966,467 
4
$47,966,467 
4
$47,966,467 
4
 
$47,966,467 
11
$47,966,467 
11
 Health Care Benefits$297,968 
5
 
 
$297,968 
5
$297,968 
5
$90,704 
5
$297,968 
5
Robert N. MartinSeverance Pay 
 
 
 
$1,600,000 
6
 
 
 
 
Bonus Payment 
 
 
 
$800,000 
7
 
 
 
 
 Stock/Option Vesting$9,812,875 
8
$9,812,875 
9
$9,812,875 
9
 
 
$9,812,875 
11
$9,812,875 
11
 Health Care Benefits
 
 
$28,389 
10
 
 
 
 
Rebecca B. GivensSeverance Pay
 
 
$900,000 
6
 
 
 
 
Bonus Payment
 
 
$400,000 
7
 
 
 
 
 Stock/Option Vesting$249,901 
8
$249,901 
9
$249,901 
9
 
 
$249,901 
11
$249,901 
11
 Health Care Benefits 
 
 
$148 
10
 
 
 
 
 
 
Michael TouffSeverance Pay$240,000 12$240,000 12
Stock/Option Vesting$190,852 
8
$190,852 
9
$190,852 
9
$190,852 
11
$190,852 
11
 
1 Following both a change in control and a material change, Messrs. Mizel, Mandarich and Martin and Ms. Givens may elect to terminate employment and receive the identified benefits.
 
2 Calculated as the aggregate base salary earned by the executive during the prior three years. This amount does not include any amount that may be payable upon a two-tier tender offer that results in a change of control. See footnote 4 below.
 
3 Under the executive's employment agreement, this is calculated as of December 31, 2020 at 300% for Mr. Mizel and 200% for Mr. Mandarich of the "Annual Incentive Compensation" paid for 2019.
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4 Amount is the value of unvested restricted stock at December 31, 2020 plus an amount representing the difference between MDC’s stock price at December 31, 2020 and the exercise price of unvested options, to the extent that the stock price exceeds the exercise price. Under the executive's employment agreement, the vesting of all options, dividend equivalents and other rights granted under equity incentive plans and any other Company plans would be accelerated so as to permit the executive to fully exercise all outstanding options and rights, if any, granted to the executive. In the event a change in control involves a two-tier tender offer, the Company would pay the executive (at the executive's election) the difference between the exercise price of the otherwise unvested options and the price offered in the first tier, or adjust the option terms to provide the executive with an equivalent value. In addition, this amount also includes the value of all unvested performance share units pursuant to the terms of the performance share unit grant agreement.
 
5 The amount shown is the total projected medical insurance benefit obligation for the executive, which would provide medical benefits that are at least comparable to those provided to the executive at the time his employment agreement was signed. After the end of his employment term, the date the executive becomes totally disabled, the date of the executive's termination without cause or the executive's election to terminate his employment following a change in control (but not in the event of termination for cause), the Company will pay the medical insurance benefit for the duration of the executive's life. The medical insurance benefit also provides comparable coverage for the executive's spouse for duration of the executive's life and, if she survives him, for an additional 60 months after his death. This amount is estimated based on 2020 costs incurred by the Company.
 
6 Upon the occurrence of the specified event, Mr. Martin and Ms. Givens shall be entitled to receive an amount equal to 200% of their respective annual base salaries.
 
7 For each of Mr. Martin and Ms. Givens the amount is calculated as two times the amount equal to each named executive’s last regular annual bonus, provided that for these purposes, such regular annual bonus amount shall not exceed 50% of his annual base salary at the rate in effect immediately before the change in control event.

8 Represents the value of all unvested restricted stock and performance share unit awards, which would become fully vested upon a termination by the Company without cause, pursuant to the terms of the restricted stock award and performance share unit agreement.
 
9 Amount is the value of unvested restricted stock at December 31, 2020, plus an amount representing the difference between MDC’s stock price at December 31, 2020 and the exercise price of unvested options, to the extent that the stock price exceeds the exercise price. If a change in control occurs, all options, dividend equivalents and other rights granted to the employee under any Company equity incentive plans shall be accelerated and shall become exercisable immediately prior to the closing of the change in control so as to permit the employee fully to exercise all outstanding options and rights. In addition, this amount also includes the value of all unvested performance share units pursuant to the terms of the performance share unit grant agreement.
 
10 The employee shall also be entitled to continue to participate in each of the Company's employee benefit plans, policies or arrangements which provide insurance and medical benefits on the same basis as was provided to the employee prior to the change in control event for a period of 12 months after the date of termination of employee's employment. This amount is estimated based on 2020 costs incurred by the Company.

11 Represents the value of all unvested restricted stock, performance share unit awards plus an amount representing the difference between MDC’s stock price at December 31, 2020 and the exercise price of unvested options, to the extent that the stock price exceeds the exercise price., which would become fully vested upon death or disability, pursuant to the terms of the respective agreement.

12 Represents Mr. Touff's remaining salary through the end of his employment term.
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INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES  

The Board of Directors 

The Board of Directors convenes on a monthly basis and is comprised of a majority of independent Directors. This independent majority and our regular governance practices, including periodic executive sessions of the independent Directors at which the Lead Director presides, provide an effective and independent oversight of management. The Company’s Board is composed of Directors who provide diverse experience and talent to our Company. Four of our ten Directors have Board tenure of nine years or less, with two of these Directors serving as chairs of key Board Committees. New Directors bring a fresh perspective to our Board’s deliberations. The remaining Directors continue to provide their knowledge, experience and understanding of the Company’s approach to balancing risk and reward inherent in the homebuilding industry, which is fundamental to achieving long-term shareholder value. The professional qualifications of the Directors include a diverse range of talents and experiences well suited to guiding the Company in our challenging industry and drive long-term value.

Our Board is Uniquely Qualified to Oversee Company Strategy
ü  Real Estate
ü Homebuilding
ü  Senior Leadership
ü  Risk Management
ü  Banking
ü Finance
ü Accounting
ü Legal
ü Regulatory
ü Business Management

The Board of Directors and the Audit Committee meet monthly. The other committees meet regularly, as required. Directors also consider Company matters and participate in numerous communications with the Executive Chairman and other officials of the Company wholly apart from the formal Board meetings. 

The following table shows the frequency of the Board and Board committee meetings over the last three years:

 202020192018
Board of Directors131212
Audit Committee111112
Compensation Committee877
Corporate Governance/Nominating Committee736
Legal Committee1099
 
In 2020 – all of the Company's Directors attended 100% of the monthly meetings of the Board of Directors and the meetings of the committees on which they served.

Directors are expected to attend the Company's annual meeting of shareholders. To facilitate their attendance, the annual meetings typically are scheduled the same day as a monthly Board meeting. In 2020, nine of the ten Directors attended the annual meeting.

Board Leadership.

Larry A. Mizel serves as Executive Chairman and principal executive officer of the Company. Mr. Mizel, who founded our Company, has served the Company for 47 years and is one of the two largest shareholders of the Company. He provides effective leadership and guidance in the development of the Company's risk profile, pursuit of its strategic goals and recognition of business opportunities that present themselves.

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

For the foregoing reasons, and in light of the Board's role in risk oversight described below, the Company has determined that its leadership structure is appropriate.

Risk Oversight.

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

Board Oversight of Sustainability Initiatives.

MDC’s Board of Directors brings industry leadership and experience in providing oversight of and guidance to sustainability initiatives at the Company. The Board works closely with management in establishing and communicating Company culture and values. MDC’s senior management regularly updates the Board on environmental, health and safety, and community involvement by the Company. The Board receives reports at least annually of shareholder engagements related to sustainability and considers investor feedback when providing oversight of management on topics related to sustainable business practices and corporate responsibility. While we are proud of the commitments made to date, we are committed to pursuing even more steps to promote environmental and social sustainability for our customers and communities.

Director Independence. 

Each of Ms. Fox and Messrs. Baker, Berman, Blackford, Buchwald, Reece and Siegel are independent. NYSE listing standards require that the Board be comprised of a majority of independent directors. SEC rules and NYSE listing standards require that audit committees be comprised solely of independent directors. NYSE listing standards also require that corporate governance/nominating committees and compensation committees be comprised solely of independent directors. 

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

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

The Company's Board of Directors has determined the independence of Directors based on a review conducted by the Corporate Governance/Nominating Committee. This determination included consideration of the deposit and payroll accounts the Company maintained at two banking divisions of Zions Bancorporation, National Association (“Zions”), of which Mr. Blackford is an officer. The Board also considered the participation by Zions as the smallest lender in the Company’s revolving credit facility, in which there are several lenders. Mr. Blackford had no direct or indirect material interest in the foregoing transactions and the Board concluded that the amounts involved (less than 0.016% of Zion’s revenues) were not significant.

With respect to the determination of Mr. Reece’s independence, the Board considered that, until his retirement on August 1, 2008, he was the Executive Vice President and Chief Financial Officer of the Company. Mr. Reece is serving in a volunteer position as president of a non-profit organization (Cancer League of Colorado), which, in 2020, received charitable
48

contributions from a number of Company officers and directors (totaling less than $25,000). The Board concluded that the amount was not significant.

The Board determined that Ms. Fox and each of Messrs. Baker, Berman, Blackford, Buchwald, Reece and Siegel have no material relationship with the Company, each is independent under the NYSE listing standards and each meets the foregoing standards of Director independence adopted by the Board, including for Audit and Compensation Committee membership. The Board determined that each of the foregoing Directors meets the independence standards for Audit Committee membership under the rules of the SEC and they each qualify as a “non-employee director” as defined in Rule 16b-3 of the Exchange Act.

Lead Director. 

By vote of the independent directors, Herbert T. Buchwald, an independent member of the Board, was elected Lead Director. In his capacity as our Lead Director, Mr. Buchwald has the following responsibilities: 


ü Presides at Board meetings if the Executive Chairman and the Chief Executive Officer are not present;
Uniquely Engaged: Attended 49 Board and committee meetings in 2020 (Board meets monthly)
ü Approves the schedule of Board and committee meetings and the agendas and topics to be considered at Board and committee meetings;
ü Approves information being sent to the Board;
ü Coordinates activities of the various Board committees;
Compensation established in 2013 based upon an analysis and recommendation of our Compensation Committee's independent consultant; has not increased since that time
ü Advises the Executive Chairman as to the quality, quantity and timeliness of the flow of information necessary to permit the independent Directors to effectively and responsibly perform their duties;
ü Coordinates the agenda for and presides at executive sessions of the independent Directors;
ü Acts as a liaison between the independent Directors and the Executive Chairman as needed;
Leads investor engagement effort (reached out to investors representing nearly 70% of non-affiliated shares outstanding in 2020)
ü Is available for communication and engagement with major shareholders, and engaged with institutional shareholders in 2020 and 2021;
ü Facilitates the process of conducting committee and Board self-evaluations;
ü Promotes effective practices to achieve a high standard of corporate governance; and
Re-election to the Board was supported by nearly 90% of the shares voted in 2019
ü Provides guidance to the committee chairmen and independent Directors in the performance of their duties. 

Our Lead Director provides critical boardroom skills necessary for ensuring sound and effective Board oversight of company strategy, governance, executive compensation, investor engagement, and sustainable business practices that drive long-term shareholder value creation.


A description of the role of the Lead Director is posted on the investor relations section of the Company's website, www.mdcholdings.com. 


49

Board Committees and Related Matters 

Audit Committee. 

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

The Audit Committee met eleven times during 2020. The organization, functions and responsibilities of the Audit Committee are described in the restated charter for the Audit Committee, which is posted on the investor relations section of the Company's website, www.mdcholdings.com. The Audit Committee's functions include, among others:

ü Assisting the Board in its oversight of the Company's compliance with legal and regulatory requirements;
ü Setting the “tone at the top” and emphasizing the importance of an environment that supports integrity in the financial reporting process;
ü Oversight of the Company's external auditors, including processes for monitoring auditor independence;
ü Review of the Company's financial statements, including non-GAAP measures and related Company policies and disclosure controls;
ü Review of the annual audit plan and results of the audit, including communicating with the external auditor on critical audit matters expected to be described in the auditor’s report;
ü Review of related party transactions, significant reserves and any significant modification in accounting policies, including oversight of the implementation of new accounting standards;
ü Oversight of the duties of the Company's internal audit department, including oversight and participation in the resolution of internal control issues where identified; and
ü Review and discussion of policies with respect to risk assessment and risk management, including disaster recovery and cybersecurity risks.

Compensation Committee.

The Compensation Committee met eight times during 2020. The Compensation Committee consists of Mr. Baker, who serves as Chairman, and Mr. Buchwald. Each member of the Committee is independent in the judgment of the Board of Directors, as defined in the listing standards of the NYSE, and has been determined by the Board to qualify as a “non-employee director” as defined in Rule 16b-3 of the Exchange Act. The Compensation Committee approves executive compensation plans, reviews salaries, bonuses and other forms of compensation for officers and key employees of the Company, establishes salary levels, benefits and other forms of compensation for employees and addresses other compensation and personnel matters as the Board of Directors from time to time may request. The organization, functions and responsibilities of the Compensation Committee are described in the Compensation Committee's restated charter, which is posted on the investor relations section of the Company's website, www.mdcholdings.com.

For a discussion of the Company's compensation philosophy and a description of the Company's processes and procedures for the consideration and determination of executive and director compensation, see the "Compensation Discussion and Analysis" above and "2020 Director Compensation" below. 

Scope of Authority of Compensation Committee 

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

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

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

Annual bonuses are awarded to Mr. Mizel, the Executive Chairman, and Mr. Mandarich, the President and Chief Executive Officer, pursuant to the terms of the Company’s 2018 Performance-Based Plan, adopted by the Compensation Committee and the Board in December 2018. This Performance-Based Plan provides for a broad range of incentive criteria and the adoption of performance goals.

Annual bonuses for Mr. Martin, the Chief Financial Officer, may be awarded based on an assessment by the Executive Chairman and the Chief Executive Officer of his achievement of Key Performance Indicators (KPIs) established for his position. The 2020 annual bonus for Ms. Givens, the General Counsel, was awarded based on the the offer made to her in connection with her employment.

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

Historically, the Company's Board of Directors, and not the Compensation Committee, has exercised the authority to consider and determine Director compensation, including retainer and meeting fees. Each Director, who was not an employee of the Company ("Non-Employee Directors") has received equity compensation pursuant to the M.D.C. Holdings, Inc. 2020 Equity Incentive Plan for Non-Employee Directors approved by the shareholders in 2020 (the “2020 Director Plan”), under which each Non-Employee Director is granted an option to purchase 30,618 shares of common stock annually. The amount of shares covered by the option will be proportionally increased or decreased for any increase or decrease in the number of shares of stock outstanding on account of any recapitalization, split, reverse split, combination, exchange, dividend or other distribution payable in shares of stock.

The options are fully vested on the date of the grant and exercisable six months thereafter. In lieu of an option, each Non-Employee Director can elect in advance to receive a restricted stock award that would result in the same reportable expense to the Company as the stock option. Each restricted stock award vests on March 1st of the following year.

Role of Executive Officers regarding Employee and Executive Compensation 

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

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

Corporate Governance/Nominating Committee.

The Corporate Governance/Nominating Committee met seven times during 2020. The Corporate Governance/Nominating Committee consists of Mr. Siegel, who serves as Chairman, Mr. Blackford and Mr. Buchwald.  Each member of the Committee is independent in the judgment of the Board of Directors, as defined in the listing standards of the NYSE.  The organization, functions and responsibilities of the Corporate Governance/Nominating Committee are described in the Committee's charter, which is posted on the investor relations section of the Company's website, www.mdcholdings.com.  The functions of the Corporate Governance/Nominating Committee include development of and recommendations as to corporate governance principles and the Company's Code of Conduct, identification of individuals qualified to become Board members, the review of Director independence, the selection process for Director nominees and oversight of the self-evaluations of the Board and the Audit, Compensation and Corporate Governance/Nominating Committees. 

Procedures for nominating persons for election to the Board are contained in the Company's By-Laws and, accordingly, those procedures constitute the Company's policy with regard to the nomination and consideration of Director candidates recommended by shareholders. The Corporate Governance/Nominating Committee will consider candidates identified by
51

shareholders following the procedures set forth in the By-Laws. There have been no changes to these procedures in the last year.

The By-Laws provide that nominations of persons for election to the Board of Directors may be made at a meeting of shareholders by any shareholder entitled to vote for the election of Directors and who complies with the notice procedures set forth in the By-Laws. Specifically, such nominations shall be made pursuant to timely notice in writing to the Secretary of the Company. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal offices of the Company not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 75 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such shareholder's notice shall set forth in writing the information required by the By-Laws. The chairman of the meeting will determine whether or not the nomination was made in accordance with the foregoing procedure. If it was not, the chairman will so declare and the defective nomination will be disregarded. If it was, the nomination will be considered. The Corporate Governance/Nominating Committee may request that additional information be provided in connection with consideration of the nomination.

The Corporate Governance/Nominating Committee believes that all candidates for the Board, including candidates recommended by shareholders, should have experience in appropriate areas and disciplines and, ideally, will add to the experience of current Board members. While the Committee does not have a formal diversity policy, in identifying Director nominees and recommending candidates for nomination by the Board, the Committee considers and assesses, in addition to applicable requirements of law and of the NYSE, the diversity of the candidate's experience, qualifications and background including business experience, specific expertise, strength of character, judgment, and other factors (such as gender, ethnicity and age) deemed appropriate to contribute meaningfully to the Board’s capability to serve as effective, engaged stewards of shareholders’ interests. The Committee, as well as the full Board, understands that our long-term future depends on broadening our diversity in the boardroom and among the senior management team. Our current Board members are from various backgrounds and bring