DEF 14A 1 tol2016def14a.htm DEFINITIVE PROXY STATEMENT DEF 14A


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.     )
Filed by the Registrant ý 
Filed by a Party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12

TOLL BROTHERS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
(1
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Title of each class of securities to which transaction applies:
 
 
(2
)
 
Aggregate number of securities to which transaction applies:
 
 
(3
)
 
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
(4
)
 
Proposed maximum aggregate value of transaction:
 
 
(5
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Total fee paid:
 
 
 
 
 
¨
 
Fee paid previously with preliminary materials.
¨
 
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
(1
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Amount Previously Paid:    
 
 
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Date Filed:  





TOLL BROTHERS, INC.
250 Gibraltar Road
Horsham, Pennsylvania 19044
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on Tuesday, March 8, 2016
The 2016 Annual Meeting of Stockholders (the “Meeting”) of Toll Brothers, Inc. (the “Company”) will be held on Tuesday, March 8, 2016 at 12:00 noon EST, at the offices of the Company, 250 Gibraltar Road, Horsham, Pennsylvania 19044, for the following purposes:
1.
To elect the eleven directors nominated by the Board of Directors of the Company (the “Board” or "Board of Directors") and named in the proxy statement to hold office until the 2017 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified.
2.
To ratify, in a non-binding vote, the re-appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2016 fiscal year.
3.
To approve, in an advisory and non-binding vote, the compensation of the Company’s named executive officers as disclosed in the proxy statement.
4.
To approve the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016).
5.
To approve an amendment to the Company’s Second Restated Certificate of Incorporation, as amended, to provide that the Company’s stockholders may remove any director from office, with or without cause.
6.
To transact such other business as may properly come before the Meeting or any adjournment or postponement thereof.
The Board has fixed the close of business on January 20, 2016 as the record date for the Meeting (the "Record Date"). Only stockholders of record at that time are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof.
The enclosed proxy card is solicited by the Board. Reference is made to the attached proxy statement for further information with respect to the business to be transacted at the Meeting. This proxy statement, our annual report, and the enclosed proxy card are first being sent to stockholders on or about February 9, 2016. The Board urges you to sign, date, and return the enclosed proxy card promptly, although you are cordially invited to attend the Meeting in person. The return of the enclosed proxy card will not affect your right to vote in person if you do attend the Meeting.
Please note the admission policy and procedures regarding attendance at the Meeting, which are set forth below.
By Order of the Board of Directors,
MICHAEL I. SNYDER
Secretary
February 2, 2016





IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MARCH 8, 2016
The proxy statement and 2015 Annual Report of Toll Brothers, Inc. are available at:
https://materials.proxyvote.com/889478
ANNUAL MEETING INFORMATION
The Meeting will be held at the Company’s offices at 250 Gibraltar Road, Horsham, Pennsylvania 19044 and will begin promptly at 12:00 noon EST. Directions to the Meeting are available under “Directions” at www.tollcareercenter.com. You must present a valid photo identification to be admitted to the Meeting. Cameras (including cellular phones or personal digital assistants, or “PDAs”, with photographic capabilities), recording devices and other electronic devices, and the use of cellular phones or PDAs, will not be permitted at the Meeting. Representatives will be at the entrance to the Meeting, and these representatives will have the authority, on the Company’s behalf, to determine whether the admission policy and procedures have been followed and whether you will be granted admission to the Meeting.
Attendance at the Meeting is limited to stockholders, who may own shares directly in their names (“record holders”), or in “street name” by banks, brokerages, or other intermediaries (“beneficial holders”). In addition to photo identification, you must present evidence of ownership as of the Record Date, such as a letter from the bank, broker, or other intermediary confirming ownership, or the relevant portion of a bank or brokerage firm account statement. If you are the authorized representative of an entity that is a beneficial holder, you must present a letter from the entity certifying the beneficial ownership of the entity and your status as an authorized representative.
FOR RECORD HOLDERS:
FOR BENEFICIAL HOLDERS:
If you plan to vote by proxy but attend the Meeting in person:
 
1. Indicate your votes on your proxy card;
 
2. Mark the box on your proxy card indicating your intention to attend;
 
3. Return the proxy card to the address indicated therein; and
 
4. Follow all admissions policies set forth above.
If you plan to vote by proxy but attend the Meeting in person:
 
1. Indicate your votes on the voting instruction card;
 
2. Mark the box on the voting instruction card indicating your intention to attend;
 
3. Return the card to the address indicated therein; and
 
4. Follow all admissions policies set forth above.
If you plan to attend and vote at the Meeting:
 
1. Bring your proxy card with you to the Meeting;
 
2. Send written notice* of your intention to attend
       the Meeting to the Company's headquarters by February 26, 2016 to the attention of
       Michael I. Snyder, Secretary; and
 
3. Follow all admissions policies set forth above.
If you plan to attend and vote at the Meeting:
 
1. Contact your bank or broker to obtain a written
       legal proxy form in order to vote your shares at the Meeting; failure to obtain a legal proxy form from
       your bank or broker will prevent you from voting
       your shares at the Meeting;
 
2. Send written notice* of your intention to attend
       the Meeting to the Company's headquarters by
       February 26, 2016 to the attention of
       Michael I. Snyder, Secretary; and
 
3.    Follow all admissions policies set forth above.
         
*
Written notice should include: (1) your name, complete mailing address and phone number, (2) if you are a beneficial holder, evidence of your ownership, and (3) if you are a beneficial holder who is not a natural person and will be naming a representative to attend on your behalf, the name, complete mailing address and phone number of that individual. If you do not provide the requested information by February 26, 2016, please be prepared to show it at the entrance to the Meeting in order to gain admission. Failure to provide such information either in advance or at the Meeting may result in non-admission to the Meeting.





TABLE OF CONTENTS
 
Page
A-1
B-1







TOLL BROTHERS, INC.
PROXY STATEMENT
Annual Meeting of Stockholders
Tuesday, March 8, 2016
PROXY SUMMARY
Highlights of certain information in this proxy statement are provided below. Please review the complete proxy statement and 2015 annual report for Toll Brothers, Inc. (the “Company,” “we,” “us” or “our”) before you vote.
Fiscal 2015 Performance Highlights
In determining fiscal 2015 compensation for our named executive officers ("NEOs"), the Executive Compensation Committee of our Board of Directors (the "Compensation Committee") considered the contributions of each of our executive officers to the Company’s strategy to improve earnings and grow and diversify its businesses, including growth in targeted markets, growth of our apartment business, and geographic broadening of our active-adult product. The Compensation Committee also considered Company performance in fiscal 2015 and paid particular attention to the notable areas of our performance and our management’s achievements in fiscal 2015 in the following areas:
Revenues: Our revenues in fiscal 2015 of $4.17 billion and home building deliveries of 5,525 units rose 7% in dollars and 2% in units compared to fiscal 2014 and were the highest for any fiscal year since fiscal 2007.
Income: Our pre-tax income improved to $535.6 million in fiscal 2015, compared to pre-tax income of $504.6 million in fiscal 2014. We reported net income of $363.2 million in fiscal 2015, or $1.97 per share diluted, compared to net income of $340.0 million in fiscal 2014, or $1.84 per share diluted.
Gross Margin: Our gross margin for fiscal 2015 was 21.6%, compared to 21.2% for fiscal 2014.
Contracts: Our net contracts signed in fiscal 2015 of $4.96 billion rose 27% in dollars and 12% in units compared to fiscal 2014. The average price of net signed contracts in the fourth quarter of fiscal 2015, at $872,000, was the highest average price for any quarter in our history.
Backlog: Our fiscal year-end 2015 backlog was $3.50 billion, up 29% compared to fiscal 2014. The $862,000 average price of homes in backlog at fiscal year-end 2015 was the highest in our history.
Selling, General and Administrative Expenses (“SG&A”): Our SG&A as a percentage of revenue improved to 10.9% for fiscal 2015 compared to 11.1% for fiscal 2014.
Operating Margin: Our operating margin improved to 10.7% for fiscal 2015 from 10.2% for fiscal 2014.
Joint Venture and Other Income: In fiscal 2015, we produced $88.7 million in pre-tax income from our joint ventures, ancillary operations, and other sources, compared to $107.3 million in fiscal 2014. The difference was due primarily to the fiscal 2014 benefit from the sale of substantially all of the assets of an unconsolidated entity.
The Compensation Committee recognized management’s efforts in achieving the performance outcomes set forth above. Our “Compensation Discussion and Analysis” is on pages 32 to 51, the “Compensation Committee Report” is on page 51, and our Summary Compensation Table and the other compensation tables and narrative discussion are on pages 52 to 61.

1



Meeting Agenda Items
Proposal One—Election of Directors. We are asking stockholders to elect eleven director nominees to hold office until the 2017 Annual Meeting of Stockholders and until his or her respective successor has been duly elected and qualified. The Board has nominated the ten current directors and a new director nominee for election at the Annual Meeting. All of our current directors attended over 75% or more of the meetings of the Board and Board Committees on which they served.
Set forth below is summary information concerning our director nominees. For more information regarding the experience and qualifications of our directors, see “Proposal One—Election of Directors” on page 7.
Name
Age
Director
Since
Principal Occupation
Independent
 
 
 
 
 
Robert I. Toll
75
1986
Executive Chairman of the Board of Directors, Toll Brothers, Inc.
 
Bruce E. Toll
72
1986
Vice Chairman of the Board of Directors, Toll Brothers, Inc., Principal, BET Investments
 
Douglas C. Yearley, Jr.
55
2010
Chief Executive Officer, Toll Brothers, Inc.
 
Robert S. Blank
75
1986
Co-Chairman & Co-CEO, Whitney Communications Company
Senior Partner, Whitcom Partners
ü
Edward G. Boehne
75
2000
Retired President, Federal Reserve Bank of Philadelphia
ü
Richard J. Braemer
74
1986
Senior Counsel, Ballard Spahr LLP
ü
Christine N. Garvey
70
2009
Retired Global Head of Corporate Real Estate Services,
  Deutsche Bank AG
ü
Carl B. Marbach
74
1991
President, Greater Marbach Airlines, Inc.
ü
John A. McLean
46
n/a
Chief Executive Officer and Distribution Principal, Hartford
  Funds Distributors
ü
Stephen A. Novick
75
2003
Senior Advisor, The Andrea and Charles Bronfman
  Philanthropies
ü
Paul E. Shapiro
74
1993
Chairman, Q Capital Holdings LLC
ü
The Board of Directors recommends that you vote “FOR” all Nominees
Proposal Two—Ratification of the Re-Appointment of Independent Registered Public Accounting Firm. We are asking stockholders to ratify, in a non-binding vote, the re-appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm (“independent auditors”) for the fiscal year ending October 31, 2016. As part of its oversight of the Company’s relationship with our independent auditors, the Audit and Risk Committee reviews annually our independent auditors’ qualifications, performance, and independence. Based on the results of this review, the Audit and Risk Committee re-appointed Ernst & Young LLP to serve as the Company’s independent auditors for fiscal 2016.
For more information regarding our engagement of Ernst & Young LLP including the fees earned for services rendered by Ernst & Young LLP in fiscal 2015, see “Proposal Two—Ratification of the Re-Appointment of Independent Registered Public Accounting Firm” on page 12.
The Board of Directors recommends that you vote “FOR” Proposal Two

2



Proposal Three—Advisory and Non-Binding Vote on Executive Compensation (Say on Pay). As described on page 13 under “Proposal Three—Advisory and Non-Binding Vote on Executive Compensation (Say on Pay)," we are asking stockholders to approve, on an advisory basis, the compensation of our NEOs. We hold this advisory vote on an annual basis.
The Board of Directors recommends that you vote “FOR” Proposal Three
Proposal Four—Approval of the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016). We are asking stockholders to approve the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016) (the "Director Plan") to make shares of stock in the Company available for grants to non-executive members of our Board of Directors, consisting of the independent directors and Mr. Bruce E. Toll ("Non-Executive Directors"), of options and incentive stock awards, subject to the terms and conditions set forth in the Director Plan. The Director Plan is intended, by means of grants of options and incentive stock awards, to form a part of the Company’s overall compensation program for Non-Executive Directors of the Company, and it is intended to align their interests with those of our stockholders and to incentivize the Non-Executive Directors to devote themselves to the future success of the Company.
For more information regarding the Director Plan, see “Proposal Four—Approval of the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016)” on pages 14 to 18.
The Board of Directors recommends that you vote “FOR” Proposal Four
Proposal Five—Approval of Amendment to the Toll Brothers, Inc. Second Restated Certificate of Incorporation, as Amended. As described on page 20 under “Proposal Five—Approval of Amendment to the Toll Brothers, Inc. Second Restated Certificate of Incorporation, as Amended,” we are asking stockholders to approve an amendment to our Second Restated Certificate of Incorporation, as amended, to provide that the Company’s stockholders may remove any director from office, with or without cause.
The Board of Directors recommends that you vote “FOR” Proposal Five
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Toll Brothers, Inc., a Delaware corporation, for use at the Meeting, which will be held on the date, at the time and place, and for the purposes set forth in the foregoing notice, and any adjournment or postponement thereof. The Board does not intend to bring any matter before the Meeting except as specifically indicated in the notice and does not know of anyone else who intends to do so; however, if any other matters properly come before the Meeting, Mr. Robert I. Toll and Mr. Douglas C. Yearley, Jr., or either of them, will vote or otherwise act thereon in accordance with his or their judgment on such matters, acting as proxies for stockholders who have returned an executed proxy to us.
If the enclosed proxy card is properly executed and returned to and received by us prior to voting at the Meeting, the shares represented thereby will be voted in accordance with the instructions marked thereon. If the enclosed proxy card is properly executed, returned, and received by us prior to voting at the Meeting without specific instructions, Mr. Robert I. Toll and Mr. Douglas C. Yearley, Jr., or either of them, acting as your proxies, will vote your shares “FOR” all nominees under Proposal One and “FOR” each of the other proposals. Any proxy card may be revoked at any time before its exercise by notifying the Secretary of the Company in writing, by delivering a duly executed proxy card bearing a later date, or by attending the Meeting and voting in person.

3



VOTING SECURITIES AND BENEFICIAL OWNERSHIP
The Record Date fixed by our Board for the determination of stockholders entitled to notice of and to vote at the Meeting is January 20, 2016. At the close of business on the Record Date, there were 170,523,454 shares of our common stock outstanding and eligible to vote at the Meeting. We have no other class of voting securities outstanding. At the Meeting, stockholders will be entitled to one vote for each share of common stock owned at the close of business on the Record Date.
The presence at the Meeting, in person or by proxy, of persons entitled to cast the votes of a majority of such outstanding shares of common stock will constitute a quorum for the proposals expected to be voted on at the Meeting. Abstentions and broker non-votes represented by submitted proxies will be included in the calculation of the number of the shares present at the Meeting for the purposes of determining a quorum. “Broker non-votes” are shares held of record by a broker that are not voted on a matter because the broker has not received voting instructions from the beneficial owner of the shares and lacks the authority to vote the shares in its discretion.
Under the New York Stock Exchange (“NYSE”) rules, your brokerage firm or other nominee may not vote your shares with respect to Proposals One, Three, Four, and Five without specific instructions from you as to how to vote, because each of these proposals is not considered a “routine” matter under the NYSE rules. Proposal Two is considered a “routine” matter and therefore brokerage firms and nominees that are members of the NYSE are permitted to vote their customers’ shares if the customers have not furnished voting instructions prior to the Meeting. To elect directors and adopt the other proposals, the following votes are required under our governing documents and Delaware law:
 
 
 
 
 
 
 
Effect of Broker Non-Votes and Abstentions/Withhold Votes
Proposal
 
Vote Required
 
Broker
Discretionary
Voting Allowed
 
Broker Non-
Votes
  
Abstentions/ Withhold Votes
 
 
 
 
 
 
 
 
 
 
1.
Election of Directors
 
Plurality of votes cast
 
No
 
No effect
  
No effect
2.
Ratification of Independent Auditors
 
Majority of votes cast
 
Yes
 
Not applicable
  
No effect
3.
Advisory Say on
Pay Vote
 
Majority of votes cast
 
No
 
No effect
  
No effect
4.
Approval of the Director Plan
 
Majority of votes cast
 
No
 
No effect
  
Against
5.
Approval of Charter Amendment
 
66 2/3% of shares
  outstanding
 
No
 
Against
 
Against


4



Security Ownership of Principal Stockholders and Management
The following table sets forth beneficial ownership, as of the Record Date, of our common stock by: (1) each person known to us to be the beneficial owner of more than 5% of our common stock; (2) each of our directors (which includes nominees for director) and NEOs; and (3) all of our directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated.
Name of Beneficial Owner
 
Amount and Nature of
Beneficial Ownership (1)
 
Percent of
Common Stock
 
 
 
 
 
BlackRock, Inc. (2)
 
18,711,374

 
10.97
%
40 East 52nd Street
New York, New York 10022
 
 
 
 
JPMorgan Chase & Co. (3)
 
13,671,728

 
8.02
%
270 Park Ave.
New York, NY 10017
 
 
 
 
The Vanguard Group (4)
 
10,048,290

 
5.89
%
100 Vanguard Blvd.
Malvern, PA 19355
 
 
 
 
Goldman Sachs Asset Management (5)
 
8,958,394

 
5.25
%
200 West Street
New York, NY 10282
 
 
 
 
Robert I. Toll (6)
 
12,567,205

 
7.30
%
250 Gibraltar Road
Horsham, Pennsylvania 19044
 
 
 
 
Bruce E. Toll (7)
 
3,391,534

 
1.99
%
Robert S. Blank
 
111,217

 
*

Edward G. Boehne
 
153,283

 
*

Richard J. Braemer
 
214,243

 
*

Christine N. Garvey
 
27,155

 
*

Carl B. Marbach (8)
 
219,571

 
*

Stephen A. Novick
 
117,033

 
*

Paul E. Shapiro
 
238,999

 
*

Douglas C. Yearley, Jr.
 
846,808

 
*

Richard T. Hartman
 
248,774

 
*

Martin P. Connor
 
156,714

 
*

All directors and executive officers as a group (12 persons) (1)
 
18,292,536

 
10.51
%
        
*    Less than 1%
(1)
Shares issuable pursuant to restricted stock units (“RSUs”) vesting and options exercisable within 60 days after the Record Date are deemed to be beneficially owned. Accordingly, the information presented above includes the following numbers of shares of common stock underlying RSUs and options held by the following individuals, and all directors and executive officers as a group: Mr. Robert I. Toll, 1,656,660 shares; Mr. Bruce E. Toll, 98,642 shares; Mr. Blank, 105,658 shares; Mr. Boehne, 112,168 shares; Mr. Braemer, 98,642 shares; Ms. Garvey, 25,150 shares; Mr. Marbach, 112,176 shares; Mr. Novick, 111,668 shares; Mr. Shapiro, 108,418 shares; Mr. Yearley, 707,232 shares; Mr. Hartman, 216,441 shares; Mr. Connor, 139,151 shares; and all directors and executive officers as a group, 3,492,006 shares.


5



(2)
BlackRock, Inc. (“BlackRock”) filed a Schedule 13G/A on January 8, 2016, which states that BlackRock has sole voting power with respect to 17,688,883 shares and sole dispositive power with respect to 18,711,374 shares. According to the Schedule 13G/A filed by BlackRock, various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares, and no one person’s interest in our common stock was more than 5% of the total outstanding common stock, as of the date the Schedule 13G/A was filed.
(3)
JPMorgan Chase & Co. ("JPM Chase") filed a Schedule 13G on February 1, 2016, which states that JPM Chase has sole voting power with respect to 11,956,121 shares, shared voting power with respect to 61,514 shares, sole dispositive power with respect to 13,563,666 shares, and shared dispositive power with respect to 107,637 shares. According to the Schedule 13G filed by JPM Chase, various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares, and no one person’s interest in our common stock was more than 5% of the total outstanding common stock, as of the date the Schedule 13G was filed.
(4)
The Vanguard Group ("Vanguard") filed a Schedule 13G on February 10, 2015, which states that Vanguard has sole dispositive power with respect to 9,900,863 shares, sole voting power with respect to 161,784 shares, and shared dispositive power with respect to 147,427 shares. According to the Schedule 13G filed by Vanguard, various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares, and no one person’s interest in our common stock was more than 5% of the total outstanding common stock, as of the date the Schedule 13G was filed.
(5)
Goldman Sachs Asset Management L.P. and GS Investment Strategies, LLC ("GSAM") filed a Schedule 13G on February 13, 2015, which states that GSAM has shared voting power with respect to 8,773,728 shares and shared dispositive power with respect to 8,958,394 shares. According to the Schedule 13G filed by GSAM, various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares, and no one person’s interest in our common stock was more than 5% of the total outstanding common stock, as of the date the Schedule 13G was filed.
(6)
Amount includes 145,530 shares held by trusts for Mr. Robert I. Toll’s children and grandchildren, of which Mrs. Jane Toll, Mr. Robert I. Toll’s spouse, is a trustee with voting and dispositive power and as to which he disclaims beneficial ownership. Amount includes 4,950,316 shares pledged to financial institutions to secure personal obligations of Mr. Robert I. Toll.
(7)
Amount includes 3,092,932 shares pledged to financial institutions to secure obligations of The Bruce E. Toll Revocable Trust (of which Mr. Bruce E. Toll is the sole trustee).
(8)
Amount includes an aggregate of 9,400 shares beneficially owned by individual retirement accounts (“IRAs”) for the benefit of Mr. Marbach and his wife. Mr. Marbach disclaims beneficial ownership of the 4,700 shares held by his wife’s IRA.


6



PROPOSAL ONE—ELECTION OF DIRECTORS
Board Membership Criteria
The Nominating and Corporate Governance Committee of the Board of Directors (the "Governance Committee") identifies individuals qualified to become members of the Board of Directors consistent with criteria approved by the Board of Directors. The Governance Committee, in selecting, or in recommending the selection of, nominees for directors, considers applicable statutory, regulatory, case law, and NYSE requirements, including when appropriate those applicable to membership on the Audit and Risk Committee and the Compensation Committee, as well as other criteria it deems appropriate.
The Governance Committee requires that, at a minimum, candidates possess a background that includes a strong education, extensive business experience, and the requisite reputation, character, integrity, skills, judgment, and temperament, which, in the view of the Governance Committee, have prepared them for dealing with the multi-faceted financial, business, governance, and other issues that confront a Board of Directors of a corporation with the size, complexity, reputation, and success of the Company. Although the Governance Committee does not have a formal policy regarding diversity, it values diversity of viewpoints, background, and experience in considering candidates for Board membership.
Board Composition
The Governance Committee assesses annually the composition of the Board, including a review of Board size, the skills and qualifications represented on the Board, and director tenure. The findings of the Governance Committee's annual review of Board composition are reported to and discussed with the full Board. Based on its evaluation, the Governance Committee may recommend an increase or decrease in the size of the Board or changes in the composition of the Board so as to best reflect the objectives and needs of the Company and the desired skill sets of the directors. Similarly, the Governance Committee may establish processes for developing candidates for Board membership and conducting searches for Board candidates.
In its review of the skills and qualifications of each director, the Governance Committee considers the characteristics that the Committee believes should be represented on the Board as a whole. The Governance Committee also reviews the composition of the Board, as well as the skills and qualifications represented on the boards of the Company's peer group. As part of this annual review of Board composition, the Governance Committee also reviews director tenure, including a comparison of director tenure to the Company's peer group.
Our Lead Independent Director (who also is the Chair of the Governance Committee) leads the annual Board self-evaluation procedure to review the Board's effectiveness and to identify any opportunities for improvement. As part of this process, the Lead Independent Director receives feedback from each director regarding Board and committee composition, Board practices, Board accountability, and director standards of conduct. The Lead Independent Director leads the discussion with the Board to review this information and to identify any areas for improvement.
The Board believes that, through this annual review of Board composition and nomination process, coupled with its annual self-evaluation procedure, the Board will continue to meet the needs of the Company. In fiscal 2015, the Governance Committee addressed director succession and reviewed the qualifications of a number of potential director candidates. At the beginning of fiscal 2016, the Governance Committee recommended that the Board nominate Mr. McLean as a director nominee for election at the Annual Meeting and increase the size of the Board to 11 members.

7



Our Director Nominees
Upon the recommendation of the Governance Committee, the Board has nominated the ten current directors for re-election and has nominated Mr. McLean, who is not currently a director, for election at the Annual Meeting. Mr. McLean was initially identified to the Governance Committee as a candidate by our Chief Executive Officer ("CEO"). The Governance Committee determined that Mr. McLean was qualified to become a Director based on the Board membership criteria set forth above. The Governance Committee considered Mr. McLean’s candidacy and evaluated his skills and qualifications in early fiscal 2016 as part of its annual review of Board composition.
The Governance Committee specifically considered Mr. McLean's expertise in areas that were previously identified as the skills and qualifications that the Board believes should be represented on the Board. Based on its evaluation of the Board’s composition and Mr. McLean’s qualifications, the Governance Committee recommended that the Board increase the size of the Board to 11 directors and nominate Mr. McLean as a director, which the Board approved.
Director Qualifications
The Governance Committee has reviewed the business experience and qualifications of each director nominee and has concluded that the directors possess business experience in the areas set forth below. The Governance Committee believes that the directors' business experience in these areas brings value to the Board and to the Company in light of our business strategy, structure, and direction.
This business experience, coupled with our directors' knowledge and understanding of the Company's operations, governance, personnel, and business ethic gained by them over time, have led the Governance Committee and the Board of Directors to the conclusion that each director provides the Company with unique perspective, insight, and skills that enable him or her to provide strong guidance and leadership during all phases of the cycle of the real estate market and in times of management transition, and, therefore, that each should serve as a director of the Company.
The table below summarizes certain key qualifications and skills of each director nominee that were relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director does not possess that qualification or skill; rather, a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director's biography below describes his or her qualifications and relevant experience in more detail.
Skills and Qualifications of our Director Nominees
Name
Leadership
Industry
Operating
Accounting
 and
Financial
Business Development and Marketing
Corporate Governance and Law
Other Board Experience
 
 
 
 
 
 
 
 
Robert I. Toll
ü
ü
ü
 
ü
ü
ü
Bruce E. Toll
ü
ü
ü
ü
ü
 
ü
Douglas C. Yearley, Jr.
ü
ü
ü
 
ü
ü
 
Robert S. Blank
ü
 
 
ü
ü
ü
ü
Edward G. Boehne
ü
 
 
ü
ü
ü
ü
Richard J. Braemer
ü
ü
 
ü
ü
ü
ü
Christine N. Garvey
ü
ü
ü
ü
 
ü
ü
Carl B. Marbach
ü
 
ü
ü
ü
 
 
John A. McLean
ü
 
ü
ü
ü
 
 
Stephen A. Novick
ü
 
 
 
ü
ü
ü
Paul E. Shapiro
ü
 
ü
ü
ü
ü
ü

8



In addition to the skills and qualifications referenced above, we include below other information about the backgrounds and experience of our director nominees, including specific qualifications, experience, skills, and expertise considered by the Governance Committee as relevant to each of the nominee's candidacy as a director.
Robert I. Toll, with his brother Bruce E. Toll, founded our predecessor’s operations in 1967. He has been a member of our Board since our inception in May 1986. He served as our Chief Executive Officer and Chairman of the Board from our inception until June 2010 when he assumed the position of Executive Chairman of the Board. He brings to the Board his dynamic entrepreneurial and leadership experience as a founder, Chairman of the Board, Chief Executive Officer and, currently, Executive Chairman of the Company, and has established the Company as the country’s leading luxury home builder.
Bruce E. Toll, with his brother Robert I. Toll, founded our predecessor’s operations in 1967. He been a member of our Board since our inception in May 1986 and served as our Chief Operating Officer until May 1998 and our President until November 1998. He is a member of the Public Debt and Equity Securities Committee. He is the founder and Principal of BET Investments, a commercial real estate company, and the owner of several automobile dealerships. From June 2006 through August 2009, he was the Chairman of Philadelphia Media Holdings, L.L.C., the parent company of the Philadelphia Inquirer and the Philadelphia Daily News, and from December 2007 through February 2009, he served on the board of directors of Fifth Street Finance Corp., a company that lends to and invests in small and mid-sized companies. He brings to the Board his knowledge and experience as a co-founder of the Company and his service in various executive, director, and advisory positions with the Company since its formation in 1986; his ownership of several significant businesses has provided him with extensive managerial and leadership experience in the real estate industry and other fields, and his service on various public company boards of directors has been of added value to our Board.
Douglas C. Yearley, Jr. has been a member of our Board since June 2010. He joined us in 1990, specializing in land acquisitions from financial institutions. He has been an officer since 1994, holding the position of Senior Vice President from January 2002 until November 2005, and the position of Regional President from November 2005 until November 2009, when he was promoted to Executive Vice President. Since June 2010, he has been our Chief Executive Officer. Prior to joining us, Mr. Yearley practiced law in New Jersey as a commercial litigator. He brings to the Board a deep understanding of our industry and our business as a result of the significant operational roles in which he has served over the 25 years he has been with the Company, his managerial and leadership experience, and his legal background.
Robert S. Blank has been a member of our Board since September 1986. He is a member of the Nominating and Corporate Governance and the Public Debt and Equity Securities Committees. Since 2003, Mr. Blank has been Co-Chairman and Co-Chief Executive Officer of Whitney Communication Company (“WCC”) and Senior Partner of Whitcom Partners. Whitcom Partners and its two partners individually make investments in public and non-public companies. Mr. Blank brings to the Board the skills and experience gained in his executive leadership roles in a major company in the communications industry, as well as in the investment field.
Edward G. Boehne has been a member of our Board since July 2000 and our Lead Independent Director since March 2011. He is the Chair of the Nominating and Corporate Governance Committee and a member of the Audit and Risk Committee. From 1981 until his retirement in May 2000, Mr. Boehne was the President of the Federal Reserve Bank of Philadelphia. Mr. Boehne is a member of the board of directors of Beneficial Bancorp, Inc. and its subsidiary, Beneficial Bank, and Penn Mutual Life Insurance Co. Mr. Boehne is also a member of the board of directors of, and Senior Economic Advisor to, the Haverford Trust Company. He brings to the Board his reputation and accomplishments as a leader and expert in the Federal bank regulatory field, as well as his current service in various board and advisory positions with high profile companies in the banking and insurance industries.

9



Richard J. Braemer has been a member of our Board since September 1986. He is the Chair of the Public Debt and Equity Securities Committee. He is senior counsel at the law firm of Ballard Spahr LLP, where he was a partner from 1994 through 2008. Mr. Braemer is a director and past Chairman of the Board of Directors of the Albert Einstein Healthcare Network, a Philadelphia-based, non-profit healthcare network. In addition to his professional skills as an attorney practicing primarily in the field of mergers and acquisitions, including real estate transactions, he brings to our Board the experience gained both as a former board member and audit committee chair of a public company and as an advisor to boards, board committees, and independent directors of publicly and privately held corporations.
Christine N. Garvey has been a member of our Board since September 2009. She is a member of the Audit and Risk Committee. She was the Global Head of Corporate Real Estate Services at Deutsche Bank AG from 2001 to 2004. Prior to that, she served as Vice President of Worldwide Real Estate and Workplace Resources at Cisco Systems, Inc. and as Group Executive Vice President at Bank of America. Ms. Garvey has been a member of the board of directors of HCP, Inc. since 2007. She also has served as a member of the board of ProLogis since September 2005, when Catellus Development Corporation, of which she had been a member of the board since 1995, merged into a subsidiary of ProLogis. Ms. Garvey served on the board of directors of Hilton Hotels Corporation through October 2007. She brings to the Board her extensive knowledge of and background in real estate and banking and her experience in executive leadership positions and board memberships with various public entities in the national real estate market.
Carl B. Marbach has been a member of our Board since December 1991. He is the Chair of the Executive Compensation Committee and a member of the Audit and Risk Committee and the Public Debt and Equity Securities Committee. Since January 2004, Mr. Marbach has been President of Greater Marbach Airlines, Inc., a company that provides aviation and consulting services. From January 1995 to January 2004, Mr. Marbach was President of Internetwork Publishing Corp., an electronic publisher, which he founded. He brings to the Board his expertise in the field of information technology, as well as his entrepreneurial experiences in building businesses in that and other industries.
John A. McLean is the Chief Executive Officer and Distribution Principal for Hartford Funds Distributors, a subsidiary of Hartford Funds, a position he has held since January 2013. From April 2009 to May 2012, he was the Head of U.S. Retail and Offshore Sales at Eaton Vance Investment Managers. Prior to that time, Mr. McLean held positions of increasing responsibility at MFS Fund Distributors. He serves on the Board of Trustees of Gateway to Leadership. Mr. McLean brings to the Board his expertise in building and leading high performance sales and marketing organizations and his strategic and tactical leadership skills.
Stephen A. Novick has been a member of our Board since January 2003. He is a member of the Executive Compensation and the Nominating and Corporate Governance Committees. Mr. Novick serves as Senior Advisor to The Andrea and Charles Bronfman Philanthropies, a private family foundation. Until December 2006, Mr. Novick was a consultant to Grey Global Group, a marketing communications company. From 1990 until his retirement in December 2004, Mr. Novick was Chief Creative Officer-Worldwide, and from April 2000 to December 2004 was Vice Chairman, of Grey Global Group. Mr. Novick is also a member of the board of directors of Ark Restaurant Corp. In April 2015, he was elected to the Board of Trustees of The Julliard School. In addition to the experience gained in his roles in the corporate and non-profit sectors, he brings to our Board his creative skills, leadership, and expertise in the field of marketing communications.

10



Paul E. Shapiro has been a member of our Board since December 1993. He is the Chair of the Audit and Risk Committee and a member of the Executive Compensation Committee. Since June 2004, Mr. Shapiro has been Chairman of the Board of Q Capital Holdings LLC, and he is Chairman of the Board of its two operating companies that are in the life settlement business. From January 2004 to June 2004, Mr. Shapiro was Senior Vice President of MacAndrews & Forbes Holdings, Inc., a private holding company of operating businesses. From June 2001 to December 2003, Mr. Shapiro was Executive Vice President and Chief Administrative Officer of Revlon Inc. Prior thereto, Mr. Shapiro practiced corporate and securities law as a managing shareholder of the Palm Beach County office of Greenberg Traurig LLP (which acquired Shapiro and Bregman, a firm he co-founded) and was a partner in Wolf, Block, Schorr and Solis-Cohen. He brings to the Board his extensive business experience in executive positions with various nationally known companies, which he has served in a wide variety of capacities that have drawn upon his legal and entrepreneurial skills, including those in the areas of corporate governance and the regulatory corporate environment.
Required Vote
Director nominees are elected by a plurality of the votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ALL NOMINEES.


11



PROPOSAL TWO—RATIFICATION OF THE RE-APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As part of its oversight of the Company’s relationship with our independent auditors, the Audit and Risk Committee (the "Audit Committee") reviews annually our independent auditors’ qualifications, performance, and independence. Based on the results of this review, the Audit Committee re-appointed Ernst & Young LLP to serve as the Company’s independent auditors for the fiscal year ending October 31, 2016. Ratification is being sought at the Meeting in a non-binding vote of stockholders. Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification because we value our stockholders' views on the Company’s independent auditors. If our stockholders fail to ratify the selection, it will be considered notice to the Board and Audit Committee to consider the selection of a different firm.
A representative of Ernst & Young LLP is expected to be present at the Meeting, will be afforded the opportunity to make a statement, and is expected to be available to respond to appropriate questions. We have been advised by Ernst & Young LLP that neither the firm, nor any member of the firm, has any financial interest, direct or indirect, in any capacity in us or our subsidiaries.
Audit and Non-Audit Fees
The following table sets forth the fees earned for services rendered by Ernst & Young LLP for professional services for the fiscal years ended October 31, 2015 and 2014:
 
 
2015
 
2014
 
 
 
 
 
Audit Fees (1)
 
$
1,257,500

 
$
1,313,831

Audit-Related Fees (2)
 
31,990

 
40,485

Tax Fees (3)
 
51,343

 
40,000

All Other Fees
 

 

 
 
$
1,340,833

 
$
1,394,316

 
(1)
“Audit Fees” include fees billed for (a) the audit of Toll Brothers, Inc. and its consolidated subsidiaries, (b) the audit of the Company’s internal control over financial reporting, (c) the review of quarterly financial information, and (d) the issuance of consents and comfort letters to underwriters in various filings with the Securities and Exchange Commission ("SEC").
(2)
“Audit-Related Fees” include fees billed for audits of a certain joint venture in which we have an interest, workpaper review of an acquired entity, and fees for the use of the independent auditors’ technical accounting research tool.
(3)
“Tax Fees” include fees billed for consulting on tax planning matters and tax compliance matters.
The Audit Committee meets and agrees upon the annual audit fee directly with our independent auditors. The Audit Committee also establishes pre-approved limits for which our management may engage our independent auditors for specified services. Any work that exceeds these pre-approved limits for the specified services in a quarter requires the advance approval of the Audit Committee. Each quarter the Audit Committee reviews the matters worked on by the independent auditors during the previous quarter and establishes any pre-approved limits for the current quarter. All fees and services for fiscal 2015 were approved by the Audit Committee. The Audit Committee also reviewed and approved the compatibility of non-audit services, including tax services, with Ernst & Young LLP’s independence. The Audit Committee reviewed and pre-approved the services provided by Ernst & Young LLP and approved the fees paid to Ernst & Young LLP for all services for fiscal 2015.
Required Vote
To be approved, this proposal must receive an affirmative majority of the votes cast on the proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL TWO.

12



PROPOSAL THREE—ADVISORY AND NON-BINDING VOTE
ON EXECUTIVE COMPENSATION (SAY ON PAY)
Our stockholders voted in 2011, in a non-binding vote, in favor of the submission of the Company’s compensation of its NEOs annually to our stockholders on a non-binding basis, and our Board has adopted that approach. In accordance with this outcome of that stockholder vote and regulations under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are including in this proxy statement a separate resolution, subject to a non-binding stockholder vote, to approve the compensation of our NEOs as disclosed in this proxy statement. In considering their vote, we encourage stockholders to carefully review our compensation policies and decisions regarding our NEOs as presented in the “Compensation Discussion and Analysis” and the tabular (and accompanying narrative) disclosure on pages 32 to 61.
Our Compensation Committee has developed and maintained a compensation program that is intended to reward performance and encourage actions that drive success in our short- and long-term business strategy. In December 2015, the Compensation Committee changed several components of our executive compensation program to strengthen the linkage between pay and performance. These changes reflect feedback from stockholders and proxy advisory firms, current market practice, input from the Compensation Committee’s independent compensation consultant, and the Compensation Committee’s consideration of the results of the Say on Pay advisory vote held in 2015. Our executive compensation program received the support of 87%, 98%, 99%, 98%, and 99% of our stockholders who voted at our Annual Meeting of Stockholders in 2015, 2014, 2013, 2012, and 2011, respectively.
In determining fiscal 2015 compensation for our NEOs, as described in the “Compensation Discussion and Analysis” starting on page 32, the Compensation Committee considered the contributions of each of our executive officers to the Company’s strategy to improve earnings and grow and diversify its businesses, including growth in targeted markets, growth of its apartment business, and expansion of our active-adult product in the West region. The Compensation Committee also considered Company performance in fiscal 2015 and paid particular attention to the notable areas of our performance and our management’s achievements in fiscal 2015 set forth under “Compensation Discussion and Analysis—Fiscal 2015 Company Performance” on pages 33 to 34.
Accordingly, we are asking our stockholders to approve, in a non-binding vote, the following resolution in respect of this Proposal Three:
“RESOLVED, that the stockholders approve, in a non-binding vote, the compensation paid to the Company’s named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the “Compensation Discussion and Analysis” beginning on page 32 of the proxy statement and the related compensation tables and narrative discussion.
Required Vote
To be approved, this proposal must receive an affirmative majority of the votes cast on the proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL THREE.


13



PROPOSAL FOUR—APPROVAL OF THE TOLL BROTHERS, INC.
STOCK INCENTIVE PLAN FOR NON-EXECUTIVE DIRECTORS (2016)
 On December 15, 2015, the Board of Directors of the Company adopted, subject to stockholder approval, the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016) (the “Director Plan”), making shares of stock in the Company available for grants to Non-Executive Directors of options (“Options”) and awards of stock (“Stock Awards”), subject to the terms and conditions set forth in the Director Plan. The Director Plan is intended, by means of grants of Options and Stock Awards, to form a part of the Company’s overall compensation program for Non-Executive Directors, and it is intended to align their interests with those of our stockholders and to incentivize the Non-Executive Directors to devote themselves to the future success of the Company.
The Company’s predecessor stock plan covering directors, the Company’s Amended and Restated Stock Incentive Plan for Non-Employee Directors (2007) (the “2007 Director Plan”), is scheduled to expire in accordance with its terms on December 13, 2016. It is intended that the new Director Plan will supersede and replace the Company’s 2007 Director Plan. Accordingly, if the new Director Plan is approved, no further grants will be made under the 2007 Director Plan. If the new Director Plan is not approved by stockholders, the Company will be unable to make new equity grants to directors after December 13, 2016. For a discussion of the equity granted to directors under the Company’s current compensation program, see "Director Compensation" page 28.
Material Provisions of the Director Plan
The material provisions of the Director Plan are as follows:  
1. Number of Shares; Maximum Annual Grants.  An aggregate maximum of two million shares of the Company’s common stock may be issued under the Director Plan, subject to adjustment in the event there is a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, or similar transaction with respect to the common stock (in such event, the Nominating and Corporate Governance Committee has the authority to determine what adjustments are appropriate). If the Director Plan is approved by stockholders, we will cancel the remaining shares available for grant under the 2007 Director Plan (approximately 1,241,697 shares as of the Record Date). The maximum number of shares of common stock subject to grants made during a calendar year to any Non-Executive Director for service as a director, taken together with any cash fees paid to such Non-Executive Director for service as a director, during such calendar year, shall not exceed $1,000,000 in total value, calculating the value of any such grants based on grant date fair value for financial reporting purposes.
2. Administration.  The Director Plan will be administered by the Governance Committee, along with the Board.
3. Eligibility.  All Non-Executive Directors are eligible under the terms of the Director Plan to receive Stock Awards, non-qualified stock options (“NQSO”), stock appreciation rights ("SARs"), and RSUs. The Governance Committee, in its sole discretion, determines whether an individual qualifies to receive any issuance under the Director Plan. As of December 31, 2015, eight Non-Executive Directors were eligible to participate in the Director Plan.
4. Term of Director Plan.  No issuance may be made under the Director Plan after December 15, 2025.
5. Issuances.  Each issuance under the Director Plan will be set forth in a document that will specify the number of shares subject to the grant. A Director may receive more than one issuance and may be issued NQSOs, SARs, RSUs, and Stock Awards, or a combination of each.
6. Term of Options and SARs.  In general, any Option or SAR issued under the Director Plan will terminate on the first to occur of the following events:

14



(a) The end of the term specified in the Option or SAR document, which may not be more than ten years from the date of issuance.
(b) The end of the three-month period (or the end of a shorter period set forth in the Option or SAR document for this purpose by the Governance Committee) from the date the Director’s service on the Board of Directors or its affiliates terminates other than by reason of the Director’s disability or death.
(c) The end of the one-year period from the date the Director’s service on the Board of Directors of the Company terminates by reason of the Director’s death or disability.
(d) The occurrence of the date, if any, which is established by the Governance Committee as an accelerated expiration date in the event of a “Change in Control” (as defined below) provided a Director who received an Option or SAR issuance is given written notice at least 30 days before the date so fixed.
(e) A finding by the Governance Committee, after full consideration of the facts presented on behalf of both the Company and the Director, that the Director has breached his or her fiduciary duty to the Company or an affiliate, or has been engaged in any sort of disloyalty to the Company or an affiliate, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her service or has disclosed trade secrets of the Company or an affiliate. In such event, the Director will also automatically forfeit all shares subject to Options or SARs previously exercised that have not yet been delivered to the Director and the Director will receive a refund of any amounts paid for such shares.
During the period following a Director termination of service with the Company or its affiliates, the Director may only exercise his or her Option or SAR to acquire the shares which could have been acquired under that Option or SAR as of the date the Director’s service with the Company or its affiliates terminated.
Notwithstanding the general termination provisions described above, the Governance Committee has the authority under the Director Plan to permit an Option or SAR to continue to vest following a Director’s termination of service, and may extend the period during which an Option or SAR may be exercised to a date no later than the date of the expiration of the term originally specified in the Option or SAR document.
7. Option Exercise Price.  The option exercise price for all Options will in all cases be at least equal to the fair market value of the shares subject to the Option determined on the date of issuance. Under the Director Plan, fair market value generally is the closing price on the relevant date on the NYSE or on such other national securities exchange where the Company’s common stock is listed. In all events, determinations as to the fair market value of the Company’s stock will be made by the Governance Committee.
8. Payment of Exercise Price.  A Director may pay for shares in cash, certified or cashier’s check, or by such mode of payment as the Governance Committee may approve, including payment through a broker. The Governance Committee also has the authority to provide in an Option document that the Director may make payment for his or her shares in whole or in part using shares of the Company’s held by the Director for more than one year, subject to the Governance Committee’s right to refuse to accept such shares as payment, at its sole discretion. In addition, the Director Plan, as amended, permits the payment for shares to be made in whole or in part by relinquishing a portion of the shares that would otherwise be issued on exercise of the grant, and further permits the withholding of shares sufficient to pay amounts required to be made available to satisfy federal, state and local tax withholding requirements.
9. Documents Governing Issuance; Restriction on Transferability; Other Provisions.  All issuances will be evidenced by a document containing provisions consistent with the Director Plan and such other provisions as the Governance Committee deems appropriate. No Option or SAR issued under the Director Plan may be transferred, except by will, the laws of descent and distribution. In addition, the Governance Committee may permit a NQSO to be transferred by the Director to a “family member,” as

15



such term is defined in the Instructions to Form S-8 as published by the SEC. The Governance Committee also has the authority under the Director Plan to include other terms and conditions in the issuing document to the extent such terms and conditions are not inconsistent with applicable provisions of the Director Plan.
10. Stock Appreciation Rights.  The Director Plan provides that any Non-Executive Directors to whom a NQSO may be issued may also be issued an SAR. Each SAR issued under the Plan shall convey to the recipient rights that are in all respects the economic equivalent of an NQSO and shall include in the SAR document all of the material terms and conditions that would be included in a corresponding Option document, including the number of shares of common stock deemed to be subject to the SAR, the exercise price (which cannot be less than the fair market value per share of the underlying shares of common stock determined as of the date the SAR is issued), the time or times at which the SAR may be exercised, and an expiration date. The economic benefit to the recipient of an SAR shall be equal to the value of the shares of common stock underlying the SAR as of the date the SAR is exercised, reduced by the deemed exercise price of the SAR applicable to the portion of the SAR being exercised. On exercise, the holder of the SAR shall be entitled to receive either cash or shares of common stock, having a value equal to the value of the SAR (or portion being exercised). Whether the recipient of an SAR is entitled to cash or shares of common stock upon exercise may be specified in the SAR document.
11. Stock Awards.  The terms of the Director Plan provides that the Governance Committee has the authority to make Stock Awards, in which case the terms are set forth in a written “Award Agreement.” These Stock Awards will be consistent with the terms of the Director Plan and may have such other terms or conditions including conditions which may result in a forfeiture) which the Governance Committee deems appropriate, which may be established on a case by case basis. The restrictions, if any, on a Stock Award may lapse (i.e., the Stock Award may become vested) at specific times or on the occurrence of events. This vesting may occur as to all of the shares subject to a Stock Award or may occur in installments. The Governance Committee also has the authority under the Director Plan to shorten or waive any condition or restriction with respect to all or any portion of a Stock Award. Any shares issued under a Stock Award will become fully vested and transferable if they have not been forfeited as of the date the recipient becomes disabled or dies. The Award Agreement will specify the following information: (a) the number of shares issued, (b) the purchase price, if any, to be paid by the recipient, (c) the date on which shares issued are to be transferred, (d) the terms and conditions under which the shares may be forfeited, and (e) the manner in which the restrictions, if any, will lapse (i.e., become vested).
Once the shares of common stock issued under a Stock Award become fully vested, a stock certificate for those shares will be delivered free of all restrictions other than those that may be imposed by law or under the terms of any shareholders agreement in effect at the time. If a Stock Award includes any fractional shares, the Company may, at its option, pay the fair market value of the fractional share rather than deliver a certificate for the fractional share.
If the shares of common stock issued under a Stock Award are subject to restrictions and the recipient of such a Stock Award files an election with the Internal Revenue Service to include the fair market value of any shares of common stock issued pursuant to a Stock Award in gross income without regard to such restrictions, the recipient must promptly provide a copy of that election to the Company, along with the amount of any federal, state, local or other taxes required to be withheld in order to enable the Company to claim an income tax deduction with respect to such election.
If the Governance Committee determines that the recipient of a Stock Award has breached his or her fiduciary duty to the Company or an affiliate, or has been engaged in disloyalty to the Company or an affiliate, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her service on the Board of Directors, or has disclosed trade secrets or confidential information of the Company or any of its affiliates, the shares subject to the Stock Award that have not previously become fully vested or for which certificates have not yet been delivered will be forfeited. The Company has the right to withhold delivering any certificates for any shares pending the resolution of an inquiry that could lead to a finding resulting in a forfeiture.

16



The Governance Committee generally has the right to amend the terms of outstanding Stock Awards, subject to the consent of the recipient of the Stock Award if the proposed amendment is not favorable to him or her. This requirement for the recipient’s consent does not apply if the amendment to the Stock Award is made in connection with a Change of Control of the Company.
12. Restricted Stock Units.  The Director Plan provides that the Governance Committee is authorized to issue RSUs to any person eligible to receive a Stock Award. An RSU constitutes the economic equivalent of a share of restricted stock that may be issued as a Stock Award and represents the right in the recipient to receive, at the time the RSU vests (or at such later date as may be specified under the terms of the relevant RSU document), a cash payment equal to the value of a number of shares of the Company’s common stock, or to receive delivery of that number of shares in kind. To the extent an RSU provides for payment of cash or delivery of shares of the Company’s common stock at a time later than the date the recipient vests in his or her RSUs, the arrangement will constitute a form of nonqualified deferred compensation that is subject to certain requirements under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Under the terms of the Director Plan, RSUs that represent a form of nonqualified deferred compensation are intended to have provision for payment of cash or delivery of shares of the Company’s common stock that are compliant with the distribution requirements of Code Section 409A. This may require, therefore, that delivery of payment be made on a specified date, or by reference to the occurrence of an event that is a permitted distribution event (e.g., separation from service) under Code Section 409A.  
13. Provisions Relating to a “Change of Control” of the Company.  In the event of a Change of Control (as defined below), the Governance Committee may take whatever action with respect to outstanding Options, SARs, Stock Awards or RSUs that it deems necessary or desirable, including, without limitation, accelerating the expiration or termination date of any Options or SARs to a date no earlier than 30 days after notice of the acceleration is given to the Directors. In addition to the foregoing and to the extent applicable, issuances pursuant to the Director Plan will become immediately fully vested, will become exercisable in full, and all restrictions, if any, as may be applicable to shares issued pursuant to the Director Plan, will lapse, immediately prior to a Change of Control.  
A “Change of Control” occurs under the Director Plan on the date any of the following events occurs:  
(a) The consummation of a sale or other disposition of all or substantially all of the assets of the Company.
(b) The consummation of a merger or consolidation of the Company with or into another corporation, other than, in either case, a merger or consolidation of the Company in which holders of shares of the common stock immediately prior to the merger or consolidation will hold at least a majority of the ownership of common stock of the surviving corporation (and, if one class of common stock is not the only class of common stock entitled to vote on the election of directors of the surviving corporation, a majority of the voting power of the surviving corporation’s voting securities) immediately after the merger or consolidation, which common stock (and, if applicable, voting securities) is to be held in the same proportion as such holders’ ownership of common stock immediately before the merger or consolidation.
(c) Any entity, person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, (other than (A) the Company or any of its subsidiaries or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (B) any person who, on the date the Director Plan is effective, shall have been the beneficial owner of at least fifteen percent of the outstanding common stock), shall have become the beneficial owner of, or shall have obtained voting control over, more than fifty percent of the outstanding shares of the common stock.
(d) Directors are elected such that a majority of the Board of Directors shall have been members of the Board of Directors for less than twenty-four months (unless the nomination for election of each new director who was not a director at the beginning of such twenty-four month period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period).

17



14. Amendments to Documents and the Director Plan.  Subject to the provisions of the Director Plan, the Governance Committee may amend any document issued under the Director Plan, subject to the consent of the Director if the amendment is not favorable to the Director and is not being made pursuant to provisions of the Director Plan relating to a “Change of Control” of the Company. The Board of Directors may amend the Director Plan from time to time in such manner as it may deem advisable. Nevertheless, the Board of Directors may not, without obtaining approval by vote of a majority of the outstanding voting stock of the Company, within twelve months before or after such action, extend the expiration date of the Director Plan, or increase the maximum number of shares as to which Options, Stock Awards, SARs or RSUs may be issued.
15. Tax Aspects of the Director Plan.  The following discussion is intended to summarize briefly the general principles of federal income tax law applicable to Options granted under the Director Plan as of the date hereof.  
Taxation of Non-Qualified Stock Options.  A recipient of a NQSO will not recognize taxable income at the time of issuance, and the Company will not be allowed a deduction by reason of the issuance. Such a Director will generally recognize ordinary income in the taxable year in which the Director exercises the NQSO in an amount equal to the excess of the fair market value of the shares received upon exercise at the time of exercise of such Options over the option exercise price of the Option. The Company will, subject to various limitations, be allowed a deduction in the same amount. Upon disposition of the shares subject to the Option, a Director will recognize capital gain or loss equal to the difference between the amount realized on disposition and the Director’s basis in the share (which ordinarily would be the fair market value of the share on the date the Option was exercised).
Taxation of SARs and RSUs.  A recipient of an SAR or an RSU will not recognize taxable income at the time of issuance, and the Company will not be allowed a deduction by reason of the issuance. In the case of an SAR, the recipient will generally recognize ordinary income in the taxable year in which he or she exercises the SAR and receives payment (either in cash or in the form of the Company’s common stock) equal to the cash received upon exercise or the excess of the fair market value of the shares underlying the SAR over the deemed Option Price associated with the SAR for such underlying shares. In the case of an RSU, the recipient will generally recognize ordinary income equal to the value of the number of shares of Company common stock represented by the RSU at the time cash payment is made, or the shares are transferred, to the recipient. The Company will, subject to various limitations, be allowed a deduction in the same amount that is treated as taxable income to a grantee of an RSU or SAR.
Withholding.  Whenever the Company would otherwise transfer a share of Company common stock under the terms of the Director Plan, the Company has the right to require the recipient to make available sufficient funds to satisfy all applicable federal, state and local withholding tax requirements as a condition to the transfer, or to take whatever other action the Company deems necessary with respect to its tax liabilities. In general, under current tax rules, there is no withholding obligation triggered by reason of the compensation of Non-Executive Directors.
New Plan Benefits
The benefits or amounts that will be received by or allocated to any Non-Executive Director under the Director Plan Amendment are not currently determinable because no specific grants have been decided upon.
Required Vote
To be approved, this proposal must receive an affirmative majority of the votes cast on the proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL FOUR.



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Equity Compensation Plan Information
The following table provides information as of October 31, 2015 with respect to compensation plans (including individual compensation arrangements) under which the Company’s equity securities are authorized for issuance. There are no plans that have not been approved by stockholders.
Plan Category
 
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants
and Rights(1)
 
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants
and Rights(2)
 
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column(a))
 
 
 
 
 
 
 
 
 
(a)
 
(b)
 
(c)
 
 
(In thousands)
 
 
 
(In thousands)
Equity compensation plans approved by security holders
 
9,685

 
$
25.7451

 
7,541

Equity compensation plans not approved by security holders
 

 
 
 

Total
 
9,685

 
$
25.7451

 
7,541

        
(1)
Amount includes 8,025,000 shares and 1,660,000 shares of stock options and RSUs, respectively, outstanding as of October 31, 2015. The amount of performance-based RSUs, which is included in the RSU amount, reflects the maximum number of shares that could be issued under the fiscal 2015 award as further described under "2015 Performance-Based RSUs" on page 44.
(2)
The weighted-average exercise price does not take into account the 1,660,000 shares of RSUs outstanding as of October 31, 2015.

19



PROPOSAL FIVEAPPROVAL OF AMENDMENT TO THE TOLL BROTHERS, INC.
SECOND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
The Board has approved an amendment to our Second Restated Certificate of Incorporation, as amended, to provide that the Company’s stockholders may remove any director from office, with or without cause.
Article Five, Part IV of our Second Restated Certificate of Incorporation, as amended, currently provides that the Company’s stockholders may remove directors from office only for cause. The Delaware General Corporation Law, as applicable to corporations without a classified Board of Directors (such as the Company at this time), requires that stockholders be afforded the right to remove directors from office with or without cause. The proposed amendment to the Company’s Second Restated Certificate of Incorporation, as amended, is intended to conform the certificate of incorporation to the requirements of Delaware law as applicable to the Company following the complete declassification of the Board as of the 2014 Annual Meeting of Stockholders.
The Board has approved, and recommends for approval by the stockholders, amending and restating Article Five, Part IV of the Company’s the Second Restated Certificate of Incorporation, as amended to give effect to the changes set forth in Annex B. The Board also has approved an amendment to the Company’s bylaws to provide that the Company’s stockholders may remove any director from office, with or without cause.
Required Vote
To be approved, the votes that our stockholders cast “FOR” this proposal must equal at least 66 2/3% of our outstanding shares of common stock. The amendment, if adopted, would become effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware incorporating the amendment, which we would expect to do as soon as practicable after the amendment is adopted.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL FIVE.


20



CORPORATE GOVERNANCE
We are committed to operate within a comprehensive plan of corporate governance for the purpose of defining independence, assigning Board committee responsibilities, setting high standards of professional and personal conduct, and assuring compliance with such responsibilities and standards. The Board and the Governance Committee regularly monitor developments in the area of corporate governance to ensure that our corporate governance practices continue to evolve as appropriate.
Corporate Governance Guidelines and Practices
The Board has adopted Corporate Governance Guidelines, which describe the Board’s views on a number of governance topics. The guidelines are posted on, and can be obtained free of charge from, our website at www.tollbrothers.com under “Investor Relations: Corporate Governance.”
Leadership Structure
In connection with the appointments of Mr. Douglas C. Yearley, Jr. as CEO and Mr. Robert I. Toll as Executive Chairman of the Board, each effective June 16, 2010, the Board separated the roles of Chairman and Chief Executive Officer. As our CEO, Mr. Yearley is responsible for our day-to-day operations and for formulating and executing our long-term strategies in collaboration with Mr. Robert I. Toll and the Board. As Executive Chairman of the Board, Mr. Robert I. Toll continues to play a significant role and is actively involved in our business by chairing the Board, acting as advisor to the executive officers, and regularly engaging in the review of land transactions and in planning our long-term business strategy, particularly with respect to product and geographic expansion.
In the Board’s view, an appropriate leadership structure depends on the opportunities and challenges facing a company at a given time. The Board believes that the current leadership structure is appropriate for us at this time as it enables us and the Board to continue to benefit from Mr. Robert I. Toll’s vast experience, skills, expertise, and knowledge of the Company and the home building industry.
In fiscal 2011, the Board designated Edward G. Boehne as the Lead Independent Director of the Board of Directors until his successor is duly designated and qualified. The Lead Independent Director helps ensure that there is an appropriate balance between management and the independent directors and that the independent directors are fully informed and able to discuss and debate the issues that they deem important. The role of the Lead Independent Director includes:
presiding over all executive sessions and other meetings of the independent directors;
acting as principal liaison between the Executive Chairman of the Board, the CEO and the non-independent directors, on the one hand, and the independent directors, on the other hand;
serving as the director whom stockholders may contact;
leading the process for evaluating the Board of Directors and the committees of the Board of Directors;
participating in the communication of sensitive issues to the other directors; and
performing such other duties as the Board of Directors may deem necessary and appropriate from time to time.
Codes of Business Conduct and Ethics
Management has adopted a Code of Ethics for Principal Executive Officer and Senior Financial Officers, violations of which must be reported to the Audit Committee or to our CEO or General Counsel. This code and any waiver or amendment to the code are available free of charge from our website at www.tollbrothers.com under “Investor Relations: Corporate Governance.”

21



We operate under a comprehensive Code of Ethics and Business Conduct that we review annually and that applies to all directors, officers, and employees and includes provisions ranging from conflicts of interest and acceptance of gifts to harassment, discrimination, and other employment-related matters. Upon employment with us, all employees are required to affirm in writing their receipt and review of the code and their compliance with its provisions. This code can be obtained free of charge from our website at www.tollbrothers.com under “Investor Relations: Corporate Governance.”
Director Independence
Under the NYSE rules and the standards adopted by the Board, a director is not “independent” unless the Board affirmatively determines that the director has no direct or indirect material relationship with us. In addition, the director must meet the requirements for independence set forth by the NYSE rules.
The Board has established categorical standards of director independence to assist it in making independence determinations. These standards, which are described below, set forth certain relationships between us and the directors, and their immediate family members or entities with which they are affiliated, that the Board, in its judgment, has determined to be material in assessing a director’s independence. The standards applied by the Board in affirmatively determining whether a director is “independent” provide that a director is not independent if:
(1)
the director is, or has been within the last three years, our employee or an immediate family member (defined as including a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone, other than domestic employees, who shares such person’s home) of, or is, or has been within the last three years, one of our executive officers;
(2)
the director has received, or has an immediate family member who has received, during any 12-month period within the last three years, more than $120,000 per year in direct compensation from us, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
(3)
(a) the director is a current partner or employee of a firm that is our internal or external auditor; (b) the director has an immediate family member who is a current partner of such a firm; (c) the director has an immediate family member who is a current employee of such a firm and personally works on our audit; or (d) the director or an immediate family member was, within the last three years, a partner or employee of such a firm and personally worked on our audit within that time;
(4)
the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee;
(5)
the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to or received payments from us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or two percent of such other company’s consolidated gross revenues; and
(6)
the director or an immediate family member is, or within the past three years has been, an affiliate of another company in which, in any of the last three years, any of our present executive officers directly or indirectly either: (a) owned more than five percent of the total equity interests of such other company, or (b) invested or committed to invest more than $900,000 in such other company.

22



The Board annually reviews the independence of all directors. The Board, in applying the above-referenced standards, has affirmatively determined that all of our directors are independent, other than Mr. Robert I. Toll, Mr. Bruce E. Toll, and Mr. Yearley. As part of the Board’s process in making such determination, the Board determined that all of the above-cited objective criteria for independence are satisfied, and that no independent director has any material relationship with us that could interfere with his or her ability to exercise independent judgment.
Compensation Committee Interlocks and Insider Participation
None of the members who served on the Compensation Committee during the fiscal year ended October 31, 2015 has ever been an officer or employee of the Company or its subsidiaries. None of the members has any relationship required to be disclosed under this caption under the rules of the SEC.
Personal Loans to Executive Officers and Directors
We do not permit personal loans from the Company to or for the benefit of our directors or executive officers.
Communication with the Board
Any person who wishes to communicate with the Board or specific individual directors, including the Lead Independent Director or the independent directors as a group, may do so by directing a written request addressed to such directors or director in care of the General Counsel, Toll Brothers, Inc., at the address appearing on the cover page of this proxy statement. Communications directed to members of the Board who are management directors will be referred to the intended Board member(s) except to the extent that it is deemed unnecessary or inappropriate to do so pursuant to the procedures established by the independent directors. Communications directed to independent directors will be referred to the intended Board member(s).
Committees of the Board and Meetings
The Board currently has the following standing committees: Audit and Risk Committee; Executive Compensation Committee; Nominating and Corporate Governance Committee; and Public Debt and Equity Securities Committee. The following table lists our four Board committees, as well as the chairs and members of each committee, for our entire 2015 fiscal year and at present.
Name
Independent
Audit and Risk Committee
Executive Compensation
Committee
Nominating
& Corporate
Governance
Committee
Public Debt & Equity
Securities
Committee
 
 
 
 
 
 
Robert I. Toll
 
 
 
 
 
Bruce E. Toll
 
 
 
 
M
Douglas C. Yearley, Jr.
 
 
 
 
 
Robert S. Blank
ü
 
 
M
M
Edward G. Boehne
ü
M
 
C
 
Richard J. Braemer
ü
 
 
 
C
Christine N. Garvey
ü
M
 
 
 
Carl B. Marbach
ü
M
C
 
M
Stephen A. Novick
ü
 
M
M
 
Paul E. Shapiro
ü
C
M
 
 
        
C-Chair     M-Member


23



Audit and Risk Committee
The Audit Committee is, and for the entire 2015 fiscal year was, composed of Paul E. Shapiro (Chair), Edward G. Boehne, Christine N. Garvey, and Carl B. Marbach, each of whom has been determined by the Board to meet the standards of independence required of audit committee members by the NYSE and applicable SEC rules. The Board has also determined that all members of the Audit Committee are financially literate, and that Edward G. Boehne possesses accounting and related financial management expertise within the meaning of the listing standards of the NYSE and is an “audit committee financial expert” within the meaning of the applicable SEC rules. For a description of Mr. Boehne’s relevant experience, see “Proposal One—Election of Directors.”
The duties and responsibilities of the Audit Committee are set forth in its charter, which may be found at www.tollbrothers.com under “Investor Relations: Corporate Governance,” and include, among other things:
acting on behalf of our Board to discharge the Board’s responsibilities relating to the quality and integrity of our financial statements;
overseeing our compliance with legal and regulatory requirements;
overseeing risk oversight and assessment;
the appointment, qualifications, performance and independence of the independent registered public accounting firm;
pre-approval of all audit engagement fees and terms, all internal-control related services, and all permitted non-audit engagements (including the terms thereof) with the independent auditor;
review of the performance of our internal audit function; and
management of the Company’s significant risks and exposures, including strategic, operational, compliance, and reporting risks.
The duties of the Audit Committee with respect to oversight of the Company’s financial reporting process are described more fully on page 62 under “Audit and Risk Committee Report.” During fiscal 2015, the Audit Committee held 11 meetings. All of its meetings were attended by representatives from Ernst & Young LLP, our independent registered public accounting firm. The Audit Committee meets regularly in executive session with management, the company’s Chief Audit Officer, and our independent registered public accounting firm.
Executive Compensation Committee
The Compensation Committee is, and for the entire 2015 fiscal year was, composed of Carl B. Marbach (Chair), Stephen A. Novick, and Paul E. Shapiro, each of whom has been determined by the Board to meet the NYSE’s standards for independence required of compensation committee members. In addition, each committee member qualifies as a “Non-Employee Director” as defined in Rule 16b-3 under the Exchange Act and as an “outside director” as defined for purposes of Section 162(m) of the Code.
The duties and responsibilities of the Compensation Committee are set forth in its charter, which may be found at www.tollbrothers.com under “Investor Relations: Corporate Governance,” and include, among other things:
establishing our compensation philosophy and objectives;
overseeing the implementation and development of our compensation programs;
annually reviewing and approving corporate goals and objectives relevant to the compensation of the Executive Chairman of the Board and the CEO;

24



evaluating the performance of the Executive Chairman of the Board and the CEO in light of those goals and objectives and determining each of the Executive Chairman of the Board’s and CEO’s compensation level based on these evaluations;
reviewing and approving all elements and levels of compensation for our executive officers and any other officers recommended by the Board;
discussing the results of the stockholder advisory vote on Say on Pay;
making recommendations to the Board with respect to incentive compensation plans and equity-based plans;
administering (in some cases, along with the Board) all of our stock-based compensation plans, as well as the Senior Officer Plan and the Supplemental Executive Retirement Plan ("SERP");
reviewing and approving, or making recommendations to the full Board regarding, equity-based awards; and
reviewing our regulatory compliance with respect to compensation matters.
In fulfilling its responsibilities, the Compensation Committee may delegate any or all of its responsibilities to a subcommittee of the committee. For a discussion concerning the process and procedures for determining executive compensation and the role of executive officers and compensation consultants in determining or recommending the amount or form of compensation, see the “Compensation Discussion and Analysis” beginning on page 32. The Compensation Committee held six meetings during fiscal 2015. During fiscal 2015, the Compensation Committee's independent compensation consultant and its affiliates did not provide any services to the Company or its affiliates other than advising the Compensation Committee on executive officer compensation.
Nominating and Corporate Governance Committee
The Governance Committee is, and for the entire 2015 fiscal year was, composed of Edward G. Boehne (Chair), Robert S. Blank, and Stephen A. Novick, each of whom has been determined by the Board to meet the NYSE’s standards for independence.
The duties and responsibilities of the Governance Committee are set forth in its charter, which may be found at www.tollbrothers.com under “Investor Relations: Corporate Governance,” and include, among other things:
identifying individuals qualified to become members of the Board and recommending to the Board the nominees for election to the Board;
evaluating from time to time the appropriate size of the Board and recommending any changes in the composition of the Board so as to best reflect our objectives;
assessing annually the composition of the Board, including a review of Board size, the skills and qualifications represented on the Board, and director tenure;
evaluating and making recommendations to the Board with respect to the compensation of the non-management directors;
adopting and reviewing, at least annually, corporate governance guidelines consistent with the requirements of the NYSE;
establishing procedures for submission of recommendations or nominations of candidates to the Board by stockholders;
reviewing the Board’s committee structure;

25



reviewing proposed changes to our governance instruments;
reviewing and recommending director orientation and continuing orientation programs; and
reviewing and approving related person transactions.
The Governance Committee is responsible for evaluating and making recommendations to the Board with respect to compensation of our directors. The Governance Committee, along with the Board, administers the 2007 Director Plan and is expected to administer, along with the Board, the Director Plan once approved by stockholders. See "Proposal Four—Approval of the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016)" on page 14 for a description of the Director Plan. The Governance Committee held four meetings during fiscal 2015.
Public Debt and Equity Securities Committee
The Public Debt and Equity Securities Committee is, and for the entire 2015 fiscal year was, composed of Richard J. Braemer (Chair), Robert S. Blank, Carl B. Marbach, and Bruce E. Toll.
The duties and responsibilities of the Public Debt and Equity Securities Committee are set forth in its charter, which may be found at www.tollbrothers.com under “Investor Relations: Corporate Governance,” and include reviewing and approving, pursuant to authority granted by the Board, certain transactions relating to our public debt and equity securities and those of our affiliates. The Public Debt and Equity Securities Committee held one meeting during fiscal 2015.
Director Attendance
Attendance at Board Meetings
The Board held four meetings during fiscal 2015.
All directors attended over 75% or more of the meetings of the Board and Board Committees on which they served.
Our independent directors hold separate meetings. Edward G. Boehne, our Lead Independent Director, acts as chair at meetings of the independent directors. During fiscal 2015, the independent directors met four times.
Attendance at Annual Meetings of Stockholders
It is the policy of our Board that all directors attend annual meetings of stockholders except where the failure to attend is due to unavoidable circumstances or conflicts discussed in advance by the director with the Executive Chairman of the Board. All of our Directors attended our 2015 Annual Meeting of Stockholders.

26



Risk Oversight
Our Audit Committee regularly receives reports from a risk management committee comprised of representatives from various business functions within the Company that are charged with risk assessment and business continuity planning. This committee meets on a regular basis and selects topics related to specific risks and potential vulnerabilities related to particular business functions of the Company, which topics are then presented to the Audit Committee along with a summary of the measures we have taken or plan to take in order to define and mitigate such risks and prepare for and address such vulnerabilities. These presentations have included reports regarding risks and vulnerabilities relating to, among other things, operations, assets, land investments, competition, personnel, credit and debt covenant compliance, joint venture relationships, financial reporting, insurance, financing, mortgages, treasury, storm water compliance, safety, litigation exposure, and information technology.
In addition, our Compensation Committee oversees risks arising from our compensation practices, and our Governance Committee oversees succession risks. Each of these committees regularly reports to the full Board, which is ultimately responsible for overseeing risks at the enterprise level. In addition, our full Board oversees strategic risks through its focus on overall corporate strategy and execution. The Compensation Committee has reviewed the design and operation of our compensation structures and policies as they pertain to risk and has determined that our compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on us.

27



DIRECTOR COMPENSATION
The Governance Committee is responsible for evaluating and recommending compensation for Non-Executive Directors to the Board. Our Non-Executive Directors are compensated in cash, stock options, and RSUs for their service as directors. The equity portion of annual compensation is paid following the end of the fiscal year, so the equity grant for service in the fiscal year ended October 31, 2014 was made in fiscal 2015.
The compensation program in effect for fiscal 2014 and 2015 for Non-Executive Directors consisted of the following components:
Board Retainer. The principal form of compensation for Non-Executive Directors for their service as directors is an annual retainer, consisting of a combination of cash and equity, with an annual aggregate value of $160,000 as follows:
Cash. Each Non-Executive Director receives one-third of the annual retainer in cash.
Equity. The equity portion of the annual retainer for a Non-Executive Director consists of two components: (a) non-qualified stock options having a grant date fair value of one-third of the annual retainer and (b) RSUs having a grant date fair value of one-third of the annual retainer, except that fractional share units and options are not issued. These equity grants are issued pursuant to the 2007 Director Plan for the non-employee directors and the Stock Incentive Plan for Employees (2014) for Mr. Bruce E. Toll.
Stock options are granted on a date within the last 15 days of December that is determined in advance by the Compensation Committee for service during the immediately preceding fiscal year and are granted by the Board with an exercise price equal to the fair market value of the underlying common stock on the date of grant. Each option grant made to a Non-Executive Director has a ten-year term and vests in equal annual installments over a two-year period, with a provision for automatic vesting upon a change of control of the Company. For directors with five or more years of service, options continue to vest and remain exercisable for the ten-year term in the event of the director's death, disability, or retirement.
RSUs are also granted on a date within the last 15 days of December that is determined in advance by the Compensation Committee for service during the immediately preceding fiscal year. RSUs granted as director compensation vest in equal annual installments over two years, and shares underlying RSUs are deliverable 30 days after the vesting of the second installment. Upon a change of control of the Company or upon the death, disability, or retirement of the director, RSUs granted as director compensation will vest immediately and will be deliverable 30 days after vesting.
Committee Retainer. Each member of the Audit Committee, the Governance Committee, and the Compensation Committee receives annually, for service on each such Committee, a combination of cash and equity with a grant date fair value of $20,000 as follows (except that fractional share units and options are not issued): (a) one-third of this amount in cash; (b) non-qualified stock options having a grant date fair value of one-third of this amount; and (c) RSUs having a grant date fair value of one-third of this amount, in each case with the same material terms described above under “Equity.” In addition, the Chair of each of these committees receives an additional annual cash retainer of $10,000.
Each member of the Public Debt and Equity Securities Committee receives annually in any year in which the Committee meets or takes official actions, for service on such Committee, a combination of cash and equity with a grant date fair value of $10,000 as follows (except that fractional share units and options are not issued): (a) one-third of this amount in cash; (b) non-qualified stock options having a grant date fair value of one-third of this amount; and (c) RSUs having a grant date fair value of one-third of this amount, in each case with the same features

28



described above under “Equity.” In addition, the Chair of that Committee receives an additional cash retainer of $5,000 in any year in which the Committee meets or takes official action.
Attendance at Board and Committee Meetings. Directors, Committee Chairs and Committee members do not receive any additional compensation for attendance at Board or Committee meetings.
Lead Independent Director. The Lead Independent Director, Mr. Edward G. Boehne, receives annually $10,000 in cash for his services in that capacity.
Other Director Compensation Arrangements
Mr. Bruce E. Toll entered into an Advisory and Non-Competition Agreement (the “Advisory Agreement”) with the Company as of November 1, 2010. The Advisory Agreement expires on October 31, 2016. The purpose of the Advisory Agreement is to provide us with the valuable and special knowledge, expertise, and services of Mr. Bruce E. Toll, one of our co-founders and a director of the Company since our inception, on a continuing basis, as well as to provide that Mr. Toll does not engage in specified activities. The Advisory Agreement provides, among other things, that we will retain Mr. Bruce E. Toll as Special Advisor to the Executive Chairman of the Board and the CEO until October 31, 2016, at a compensation rate of $675,000 for the first year of the term of the Advisory Agreement, with such compensation rate to be reduced by $75,000 in each of the remaining five years of the term of the Advisory Agreement. In fiscal 2015, he received compensation in the amount of $375,000 under the Advisory Agreement.
The Advisory Agreement provides that during the term of the Advisory Agreement, Mr. Bruce E. Toll will be an employee and entitled to receive the health plan benefits provided to our NEOs, which in fiscal 2015 were the same as those provided to all of our employees after 60 days of service with us. Mr. Bruce E. Toll is a participant in the Company’s 401(k) retirement plan. During fiscal 2015, we provided Mr. Bruce E. Toll with a contribution to the Company’s 401(k) retirement plan in the amount of $10,477. Mr. Bruce E. Toll is also a participant in the SERP, which provides an annual benefit to him of $230,000 for 20 years; however, no payments are to be made to him under the SERP until the expiration of the term (or termination) of the Advisory Agreement. See “Executive Compensation Tables—Pension Benefits During Fiscal 2015—Supplemental Executive Retirement Plan” for a more detailed description of the SERP.

29



Director Compensation Table
The following table sets forth information concerning the fiscal 2015 compensation awarded to or earned by our Non-Executive Directors. Executive directors are not compensated for their service as directors. The compensation received by our executive directors for their services as employees is shown in the Summary Compensation Table on page 52 of this proxy statement.
Director Compensation during Fiscal 2015
Name
 
Fees
Earned or
Paid in
Cash ($)
 
Stock
Awards
($)(1)(2)
 
Option
Awards
($)(3)(4)
 
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)(5)
 
All Other
Compensation
($)(6)
 
Total ($)
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert S. Blank
 
63,336

 
63,350

 
63,323

 

 

 
190,009

Edward G. Boehne
 
86,670

 
66,687

 
66,669

 

 

 
220,026

Richard J. Braemer
 
61,668

 
56,676

 
56,663

 

 

 
175,007

Christine N. Garvey
 
60,002

 
60,013

 
60,009

 

 

 
180,024

Carl B. Marbach
 
80,004

 
70,007

 
69,983

 

 

 
219,994

Stephen A. Novick
 
66,670

 
66,687

 
66,669

 

 

 
200,026

Paul E. Shapiro
 
76,670

 
66,687

 
66,669

 

 

 
210,026

Bruce E. Toll
 
56,668

 
56,676

 
56,663

 
106,195

 
385,477

 
661,679

        
(1)
Annual RSU grants to Non-Executive Directors are made during the first quarter of each fiscal year for service on the Board and Board committees during the immediately preceding fiscal year; accordingly, the values reflected in the table above are values of grants for service in fiscal 2014.
Each Non-Executive Director received RSUs for Board and Board Committee service having a value of $53,333 for Board service. In addition, Non-Executive Directors received RSUs having a value of $6,666 for service on the Audit Committee, the Governance Committee, and the Compensation Committee, and RSUs having a value of $3,333 for service on the Public Debt and Equity Securities Committee. For purposes of determining the number of RSUs that are awarded, the RSU grant date fair value per share is the closing price of our common stock on December 19, 2014, the grant date of the awards. Fractional RSUs are not granted.
(2)
The Non-Executive Directors held the following amounts of outstanding unvested RSUs at October 31, 2015: Mr. Blank, 2,850 units; Mr. Boehne, 3,000 units; Mr. Braemer, 2,550 units, Ms. Garvey, 2,700 units; Mr. Marbach, 3,150 units; Mr. Novick, 3,000 units; Mr. Shapiro, 3,000 units; and Mr. Toll, 2,550 units. The Non-Executive Directors held the following amounts of outstanding vested RSUs at October 31, 2015: Mr. Blank, 900 units; Mr. Boehne, 948 units; Mr. Braemer, 806 units, Ms. Garvey, 853 units; Mr. Marbach, 995 units; Mr. Novick, 948 units; Mr. Shapiro, 948 units; and Mr. Toll, 806 units.
(3)
The annual stock option grants to Non-Executive Directors are made during the first quarter of each fiscal year for service on the Board and Board committees during the immediately preceding fiscal year; accordingly, the values reflected in the table above are values of grants for service in fiscal 2014.
Each Non-Executive Director received options for Board and Board committee service having a value of $53,333 for Board service. In addition, Non-Executive Directors received options having a value of $6,666 for service on the Audit Committee, the Governance Committee, and the Compensation Committee; and options having a value of $3,333 for service on the Public Debt and Equity Securities Committee. Options for fractional shares are not granted. The option grant values reflected in the table may vary from these amounts because the option grant date fair value per share is determined as follows:
For purposes of determining the number of shares that are subject to the options granted, the assigned value per share of the options was determined by multiplying the closing price of our stock on December 19, 2014, the date of the awards, by the average of the “Fair Value Quotient” for the three immediately previous fiscal years of the Company. The “Fair Value Quotient” is the fraction in which (x) the denominator is the closing price of our common stock on the date of the awards for each of the three years immediately preceding the current year, and (y) the numerator is the grant date fair value of the options granted in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation ("ASC 718"); assumptions used in the calculation of the ASC 718 amounts are included in Note 10 to our audited

30



financial statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2015, excluding the effect of estimated forfeitures.
(4)
The Non-Executive Directors held unexercised stock options to acquire the following amounts of our common stock at October 31, 2015 : Mr. Blank, 122,507 shares; Mr. Boehne, 130,061 shares; Mr. Braemer, 114,401 shares; Ms. Garvey, 66,954 shares; Mr. Marbach, 129,613 shares; Mr. Novick, 129,061 shares; Mr. Shapiro, 125,311 shares; and Mr. Bruce E. Toll, 114,401 shares.
(5)
The amount in this column represents the increase in the actuarial present value of accumulated benefits under the SERP for Mr. Bruce E. Toll.
(6)
“All Other Compensation” consists of the following annual compensation and benefits provided to Mr. Bruce E. Toll pursuant to the Advisory Agreement. See “Other Director Compensation Arrangements,” above.
Annual compensation under Advisory Agreement
 
$
375,000

Contribution to Company 401(k) plan
 
10,477

Total
 
$
385,477


31



EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis ("CD&A") focuses on how our NEOs are compensated and how their compensation aligns with the Compensation Committee's objectives in setting compensation for our NEOs. We also highlight certain changes the Compensation Committee made for fiscal 2016. In our CD&A, we will discuss:
 
Page

 
 
New Developments for Fiscal 2016
32

Fiscal 2015 Company Performance
33

Compensation Philosophy and Objectives
34

Performance Assessment Process
36

Elements of Compensation
38

Cash Compensation Decisions
39

Long-Term Incentive Compensation Decisions
41

Compensation Decision-Making Process
46

Benefits and Perquisites
47

Other Compensation Practices and Policies
49

New Developments for Fiscal 2016
In December 2015, the Compensation Committee changed several components of our executive compensation program to further support the linkage between pay and performance. These changes took into account feedback from stockholders and proxy advisory firms, current market practice, input from the Compensation Committee’s independent compensation consultant, and the Compensation Committee’s consideration of the results of the Say on Pay advisory vote held in 2015.
Summary of Executive Compensation Program Changes for Fiscal 2016
Prior Program
 
New Program
Annual incentive bonus based 100% on qualitative performance assessment, with
 cap subject to negative discretion
è
Payout of 60% of annual incentive bonus based on pre-tax income targets, with qualitative performance assessment limited to 40%
Long-term incentive award performance metrics based on pre-tax income, home building margin, and units delivered
è
Addition of relative total shareholder return ("TSR") as long-term incentive award performance metric
One-year performance period for all
performance-based RSUs
è
Three-year performance period for those performance-based RSUs based on relative TSR
Mix of equity awards varies among NEOs
è
Mix of 60% performance-based RSUs and 40% stock options awarded to all NEOs
other than the Executive Chairman
No clawback policy
è
Incentive compensation, including stock-based compensation, is subject to a clawback policy
Additional detail regarding these executive compensation program changes can be found under "Cash Compensation Decisions—Annual Incentive Bonus—Fiscal 2016 Bonus Performance Goals" on page 41, "Long-Term Incentive Compensation Decisions—Performance-Based RSUs—2016 Restricted Stock Units (Performance-Based)" on page 44, and "Other Compensation Practices and Policies—Clawback Policy" on page 50.

32



Consideration of Say on Pay Results
At our 2015 Annual Meeting of Stockholders, 87% of those stockholders voting on the Say on Pay proposal voted in support of the compensation of our NEOs. In the prior four consecutive years, at least 98% of stockholders who voted at our Annual Meeting of Stockholders supported our Say on Pay vote. In response to this decrease in support last year, the Compensation Committee undertook a comprehensive review of the Company's executive compensation program.
As part of this review, we held discussions with a number of our largest institutional stockholders, representing in the aggregate more than 20% of the Company's voting stock, regarding their views on the existing and proposed new components of the program. We also considered the assessments of our program by the two major proxy advisory firms. As a result of this review and the feedback received from stockholders, proxy advisory firms, and the Compensation Committee’s independent compensation consultant, the Compensation Committee made the changes summarized above to the executive compensation program effective for fiscal 2016.
Fiscal 2015 Company Performance
In determining NEO compensation for fiscal 2015, the Compensation Committee considered the contributions of each of our NEOs to the Company’s strategy to improve earnings and grow and diversify its businesses, including growth in targeted markets, growth of our apartment business, and geographic broadening of our active-adult product. The Compensation Committee also considered Company performance in fiscal 2015 and paid particular attention to the Company's performance in the areas of revenues, pre-tax income, and contracts:
Revenues: Our revenues in fiscal 2015 of $4.17 billion and home building deliveries of 5,525 units rose 7% in dollars and 2% in units compared to fiscal 2014 and were the highest for any fiscal year since fiscal 2007.
Income: Our pre-tax income improved to $535.6 million in fiscal 2015, compared to pre-tax income of $504.6 million in fiscal 2014. We reported net income of $363.2 million in fiscal 2015, or $1.97 per share diluted, compared to net income of $340.0 million in fiscal 2014, or $1.84 per share diluted, a 7% increase in diluted earnings per share.
Gross Margin: Our gross margin for fiscal 2015 was 21.6%, compared to 21.2% for fiscal 2014.
Contracts: Our net contracts signed in fiscal 2015 of $4.96 billion rose 27% in dollars and 12% in units compared to fiscal 2014. The average price of net signed contracts in the fourth quarter of fiscal 2015, at $872,000, was the highest average price for any quarter in our history.
The Compensation Committee also considered the following results and achievements:
Backlog: Our fiscal year-end 2015 backlog was $3.50 billion, up 29% compared to fiscal 2014. The $862,000 average price of homes in backlog at fiscal year-end 2015 was the highest in our history.
Selling, General and Administrative Expenses (“SG&A”): Our SG&A as a percentage of revenue improved to 10.9% for fiscal 2015 compared to 11.1% for fiscal 2014.
Operating Margin: Our operating margin improved to 10.7% for fiscal 2015 from 10.2% for fiscal 2014.
Joint Venture and Other Income: In fiscal 2015, we produced $88.7 million in pre-tax income from our joint ventures, ancillary operations, and other sources, compared to $107.3 million in fiscal 2014. The difference was due primarily to the fiscal 2014 benefit from the sale of substantially all of the assets of an unconsolidated entity.

33



Growth in an Improving Economy: On a compound average annual basis, our revenues, fiscal year-end backlog (in dollars) and contracts (in dollars) at fiscal year-end grew 30%, 33%, and 25%, respectively, since their recent respective lows in fiscal 2011, 2010 and 2009.
Growth in Targeted Markets: We expanded our presence in high-growth affluent markets, including our growth in Texas, and our expansion in California and New York City.
In California, our contracts and backlog in dollars grew by 93% and 195% in fiscal 2015 compared to fiscal 2014, with our average price of homes in backlog reaching $1.5 million at the end of fiscal 2015.
Toll Brothers City Living, which is heavily concentrated in the urban metro New York City market, was involved in nine existing projects totaling 918 units at fiscal year-end, with an attractive pipeline of future deals totaling 1,180 units in various stages of design and approval.
Geographic Broadening of Our Active-Adult Product: We expanded our active-adult product lines to the West Coast in fiscal 2015 and are building active-adult homes in Colorado and Nevada.
Growth of our Apartment Business: Toll Brothers Apartment Living continued to expand our pipeline of urban and suburban for-rent projects. At fiscal year-end, we were:
Managing two stabilized communities totaling over 1,400 units;
Leasing up four new communities totaling over 1,500 units; and
In construction on three other rental communities totaling approximately 1,000 units, with nearly 3,500 additional units in our pipeline.
Honors: In fiscal 2015, we were named by Fortune magazine as The Most Admired Company in the Homebuilding Sector in a survey of over 4,100 executives, directors and security analysts. We were also named America’s Most Trusted Home Builder™ by Lifestory Research, based on a survey of 43,200 home shoppers in 27 markets.
Compensation Philosophy and Objectives
We face intense competition from a number of other home builders in each market in which we operate. It is vital to our success and long-term viability that our business continues to be managed by highly experienced, focused, and capable executives who possess the experience and vision to anticipate and respond to market developments.
The Board and the Compensation Committee believe that our ability to retain and motivate NEOs who possess the skills, experience, and capabilities to succeed in our competitive industry has been essential to our long-term success during all phases of the cycle of the real estate market and a significant factor in creating long-term value for our stockholders. Base salaries, annual incentive bonuses, long-term equity compensation, retirement benefits, and competitive employee benefits are the primary tools used to retain and motivate our NEOs to deliver superior performance and to enhance long-term value to our stockholders. The Compensation Committee believes it has developed a compensation program that rewards outstanding short-term and long-term performance and encourages actions that successfully deliver on our business strategy.
The Compensation Committee also believes that long-term incentives should be a significant factor in the determination of the actual compensation realized over time, particularly because the many actions and decisions that are required of our NEOs in the business of home building, including evaluating and purchasing land, planning the use of that land and the timing of that use, obtaining approvals, completing development, and generating revenues, require a long time horizon before we realize tangible financial benefits. The Compensation Committee’s primary objectives in setting compensation for our NEOs are:

34



Set compensation levels that are sufficiently competitive to attract, motivate, and reward the highest quality individuals to contribute to our goals and overall financial success. By keeping compensation competitive during times of growth as well as contraction, the Compensation Committee attempts to achieve these objectives.
Retain executives and encourage continued service. The Compensation Committee seeks not only to attract but also to maintain the continuity of our excellent management team. The Compensation Committee believes our stockholders have historically benefited from the continued employment of our NEOs over an extended period of time—the Executive Chairman, who co-founded our business in 1967 and has served as Executive Chairman since 2010; the CEO, who joined the Company in 1990 and served in various senior management positions during the 20 years preceding his appointment as CEO in 2010; the President and Chief Operating Officer ("COO"), who joined the Company in 1980 and had served in various positions during the 31 years preceding his appointment as COO in 2012 and as President in 2013; and the Chief Financial Officer ("CFO"), who joined the Company in 2008 and assumed the role of CFO in 2010. It is important that we concentrate on retaining and developing the capabilities of our current leaders and emerging leaders to ensure that we continue to have an appropriate depth of executive talent.
Incentivize executives to manage risks appropriately while attempting to improve our financial results, performance, and condition over both the short-term and the long-term. The Compensation Committee provides both short-term and long-term compensation for current performance, as well as to provide incentives to achieve short- and long-term goals. Because of the nature of our business and the way we operate our business and implement our strategies, we may not witness for several years the positive results of many decisions made or actions taken by our NEOs in any current fiscal year, including those in connection with land purchased and strategies implemented to manage risks and position us for growth. The Compensation Committee, by seeking a balance of short-term and long-term compensation, seeks to motivate and reward NEOs for decisions made today that may not produce immediate or short-term results, but are intended to have a positive long-term effect. 
Align executive and stockholder interests. The Compensation Committee believes that the use of equity compensation, including use of performance-based RSU grants as a key component of executive compensation, is a valuable tool for aligning the interests of our NEOs with those of our stockholders, including the use of such compensation to reward actions that demonstrate long-term vision. Stock ownership requirements for our NEOs also support this alignment. The Compensation Committee believes that stock options further support this alignment over a long-term time horizon. When management and stockholder interests are aligned, the Compensation Committee believes management’s focus on creating long-term growth and value is increased.
Consider tax deductibility for incentive compensation. The Compensation Committee believes that tax deductibility for the Company is a favorable feature for an executive incentive compensation program. Although the Compensation Committee may award compensation to NEOs that is not tax-deductible when it deems that such compensation is in the best interests of the Company, it generally attempts to structure compensation for NEOs to meet the Code requirements for deductibility, including deductibility of compensation awarded under performance-based compensation plans.
Use pay practices that support good governance. We do not enter into employment agreements with NEOs or agreements that provide “golden parachute" cash payouts or excise tax gross-ups for our NEOs. Benefits conditioned upon a change of control are limited to vesting and potential payment of existing SERP benefits and and vesting of previously granted equity awards. Perquisites are limited. We maintain policies restricting NEOs hedging and pledging of Company shares. Incentive compensation, including stock-based compensation, is subject to a clawback policy starting in fiscal 2016.

35



Performance Assessment Process
Compensation Decision-Making Timeline
The Compensation Committee reviews and determines base salary, annual incentive bonuses, and long-term incentive compensation, as well as benefits and perquisites, on an annual basis. For compensation relating to fiscal 2015, the primary steps taken by the Compensation Committee to establish and award compensation to our NEOs were as follows:
 
 
Compensation Committee Action Taken
 
 
 
December 2014
 
Set 2015 performance goals for fiscal 2015 annual incentive bonus and performance-based RSU awards and fixed target number of 2015 performance-based RSU awards for NEOs
Set 2015 base salaries for the NEOs
 
 
 
June 2015
 
Reviewed the Say on Pay voting results from the 2015 annual meeting of stockholders, as well as feedback received from stockholders and proxy advisory firms on our executive compensation program
Reviewed 2014 NEO compensation compared to our Peer Group (as defined on page 47)
Reviewed a market assessment prepared by the Compensation Committee's independent compensation consultant of 2014 senior executive pay versus performance for the Company compared to the Peer Group
Reviewed Company financial results compared to the Peer Group for the prior fiscal year and the current fiscal year to date
Consulted with the independent compensation consultant regarding industry trends in executive compensation
 
 
 
November 2015
 
Reviewed market assessment prepared by the independent compensation consultant of Company 2014 senior executive pay versus projected Company fiscal 2015 performance compared to the Peer Group
Commenced new discussions with our largest stockholders and proxy advisory firms to gain their input on our executive compensation program
Held preliminary discussions regarding NEO individual performance during fiscal 2015
 
 
 
December 2015
 
Reviewed market assessment prepared by the independent compensation consultant of 2014 Company senior executive pay versus actual Company fiscal 2015 performance compared to the Peer Group
Reviewed each NEO’s individual performance during fiscal 2015
Reviewed fiscal 2015 performance goals and certified the level of performance attained for annual incentive bonus eligibility and performance-based RSU payouts
Determined fiscal 2015 annual incentive bonuses for the NEOs
Determined and granted equity awards for fiscal 2015 performance
Review of Company Performance
Throughout the fiscal year, the full Board monitored our financial performance in relation to our recent historical performance and in relation to our Peer Group. The Compensation Committee also reviewed our financial performance during the fiscal year, which it considered when making final fiscal 2015 compensation decisions. See "Fiscal 2015 Company Performance" above.

36



The Compensation Committee also considered fiscal 2015 financial performance and TSR of the Company compared to peer home building companies:
Based on equally-weighted revenue growth, pre-tax profit margin, and fiscal 2015 TSR, overall performance was positioned between median and 75th percentile compared to the Peer Group.
Relative TSR performance over one-, three-, five-, seven-, and ten-year periods was generally positive and typically positioned between median and 75th percentile compared to the Peer Group.
Review of Individual Performance
In making fiscal 2015 compensation determinations, the Compensation Committee considered the roles and responsibilities of our NEOs, in addition to the expertise gained during their tenure at the Company:
Robert I. Toll served as our Chief Executive Officer and Chairman of the Board from our inception until June 2010 when he assumed the new position of Executive Chairman of the Board. The Compensation Committee noted his continuing guidance and oversight with respect to Company strategy, particularly with respect to land acquisition as well as product and geographic expansion.
Douglas C. Yearley has been our Chief Executive Officer since June 2010. The Compensation Committee particularly noted his leadership in planning and guiding our growth and profitability, diversifying our business lines, growing our land holdings in key markets, and enhancing the Company's brand. The Compensation Committee also noted his ability to communicate with, and represent us before, the media, banking, and investor communities.
Richard T. Hartman has been our Chief Operating Officer since January 2012 and our President since January 2013. The Compensation Committee noted his leadership as the principal officer in charge of sales and home building activities, including geographical and product expansion, in addition to his ability to drive process and margin improvements.
Martin P. Connor has been our Chief Financial Officer since September 2010. The Compensation Committee recognized his ability to work productively with all divisions and personnel in controlling our costs, preserving our cash, raising and deploying capital, enhancing our balance sheet, and containing risk.
The Compensation Committee particularly noted the contributions of each NEO to the Company’s achievements described under “Fiscal 2015 Company Performance” above. In particular, the Compensation Committee considered:
The contributions of each of our NEOs to the Company’s strategy to improve earnings and grow and diversify its businesses in fiscal 2015, including growth in targeted markets, growth of its apartment business, and expansion of our active-adult product in the West region;
The contributions of Mr. Toll, Mr. Yearley, and Mr. Hartman to the Company’s land acquisition, backlog growth, and exit from under-performing markets in fiscal 2015;
The contributions of each of our NEOs to fiscal 2015 earnings per share growth and gross margin improvement;
Mr. Yearley's and Mr. Hartman's efforts to enhance the Company’s brand, which was reflected in industry honors received in fiscal 2015;
The contributions of Mr. Yearley and Mr. Connor to the Company's exploration of potential strategic transactions in fiscal 2015; and

37



Mr. Connor's contributions in the areas of new joint ventures formed; managing the Company’s balance sheet, including strategic and opportunistic repurchases of the Company's stock and the Company's public debt offering in fiscal 2015; and guidance toward improving the Company’s information technology infrastructure.
Elements of Compensation
Performance-Based Compensation
The Compensation Committee recognizes changing economic and industry conditions and changing compensation trends in its choice of methods to achieve the objectives discussed above, using a variety of compensation elements to accomplish its goals. In December 2015, the Compensation Committee changed certain features of our annual incentive bonus and long term incentive awards to further strengthen the linkage between pay and performance, as described more fully under "New Developments for Fiscal 2016" on page 32 and in the specific decisions discussed below.
 
 
Annual Incentive
 
Long-Term Incentives
 
 
 
 
 
Form of
Fiscal 2015 Compensation
 
Cash Bonus
(Senior Officer Bonus Plan)
 
Performance-Based RSUs
Stock Options
Both subject to 4-year vesting
 
 
 
 
 
Fiscal 2015
Performance Metrics
 
Consolidated Revenues (50%)
Pre-tax Income (50%) (1)
 
Performance-Based RSUs:
Pre-tax Income (1/3)
Home Building Margin (1/3)
Units Delivered (1/3)
 
 
 
 
 
Fiscal 2015
Performance Targets
 
Revenues ≥ $3.550 billion
Pre-tax Income ≥ $478,298,700
 
Performance-Based RSUs:
Pre-tax Income: $531,443,000
Home Building Margin: 25.79%
Units Delivered: 5,500
 
 
 
 
 
Fiscal 2015
Results
 
Revenues: $4.17 billion
Pre-tax Income: $582,994,000
 
Performance-Based RSUs:
103.94% average payout
Pre-tax Income: $582,994,000 (109.70%)
Home Building Margin: 26.22% (101.67%)
Units Delivered: 5,525 (100.45%)
 
 
 
 
 
Fiscal 2016 Performance Metrics
 
60% Formulaic Component
Pre-tax Income
40% Discretionary Component
(Senior Officer Bonus Plan)
Consolidated Revenues (50%)
Pre-tax Income (50%)
 
New Performance-Based RSU Measure:
Pre-tax Income (1/4)
Home Building Margin (1/4)
Units Delivered (1/4)
Relative TSR (1/4) over 3-year period (2)
Mix defined as 60% Performance-Based RSUs and 40% Stock Options (2)
        
(1)
Pre-tax income in the table above excludes impairments and certain other items considered non-recurring in nature in accordance with the Senior Officer Plan. Additional information regarding the calculation of the pre-tax income performance metric can be found under "Long-Term Incentive Compensation Decisions—Performance-Based RSUs—2015 Performance-Based RSUs" on page 44.
(2)
The performance-based RSU awards based on relative TSR were phased in by making a one-time grant of awards with performance periods of one and two years, in addition to the regularly recurring grant with a three-year performance period. For the NEOs other than Mr. Toll, the target dollar amount of performance-based RSUs based on relative TSR with a three-year performance period, plus the target number of performance-based RSUs based on the other three performance metrics, approximates 60% of the dollar value of equity awards granted to the NEOs in fiscal 2015.

38



Cash Compensation Decisions
Base Salary
Generally, when establishing annual base salaries, the Compensation Committee takes into account each NEO’s performance of his role and responsibilities over time and, to the extent useful, the range of compensation of comparable executives within our Peer Group. The Compensation Committee believes that its compensation objectives are more effectively met when most of an executive’s compensation package is composed of at-risk performance-based bonuses and long-term incentive compensation, rather than fixed compensation such as base salaries.
Fiscal 2015 Salary. In December 2014, the Compensation Committee determined that, for calendar year 2015, the base salaries of Mr. Toll, Mr. Yearley, and Mr. Hartman would remain at $1,000,000; and the base salary of Mr. Connor would be increased to $950,000. The increase in the base salary for Mr. Connor for calendar year 2015 was based on a consideration of his performance in fiscal 2014 and his increased tenure at the Company.
Fiscal 2016 Salary. In December 2015, the Compensation Committee determined that, for calendar year 2016, the base salaries of Mr. Toll, Mr. Yearley, and Mr. Hartman would remain at $1,000,000; and the base salary of Mr. Connor would be increased to $975,000. The increase in the base salary for Mr. Connor for calendar year 2016 was based on a consideration of his performance in fiscal 2015 and his increased tenure at the Company.
 
 
Calendar 2016 Salary
 
Calendar 2015 Salary
 
Calendar 2014 Salary
 
 
 
 
 
 
 
Robert I. Toll
 
$
1,000,000

 
$
1,000,000

 
$
1,000,000

Douglas C. Yearley, Jr.
 
$
1,000,000

 
$
1,000,000

 
$
1,000,000

Richard T. Hartman
 
$
1,000,000

 
$
1,000,000

 
$
1,000,000

Martin P. Connor
 
$
975,000

 
$
950,000

 
$
850,000

Annual Incentive Bonus
Senior Officer Bonus Plan. The stockholder-approved Senior Officer Plan is designed to be sufficiently flexible to allow the Compensation Committee to make awards in appropriate amounts and with appropriate performance periods and performance goals to the plan participants designated by the Compensation Committee. All of our NEOs have been designated as participants in the Senior Officer Plan. Awards paid under the Senior Officer Plan are designed to be tax deductible “qualified performance-based compensation” under Section 162(m) of the Code.
In order to maximize tax deductibility of awards under the Senior Officer Plan, the Compensation Committee has established that no award payable under the Senior Officer Plan can exceed an award cap of $8.5 million (the "Award Cap"). The Compensation Committee has no discretion to increase the amount of any awards beyond the Award Cap but may, in its sole discretion, reduce or completely eliminate an award based on such facts and circumstances as it deems relevant.
Fiscal 2015 Bonus Performance Goals. For fiscal 2015, the Compensation Committee met in December 2014 and established that eligibility for the full amount available to the NEOs under the Senior Officer Plan was conditioned upon our achievement of equally weighted consolidated revenue and pre-tax income targets. The Compensation Committee chose to maintain an equal weighting of consolidated revenue, as a measure of growth, and pre-tax income, as a measure of both operating profitability and the Company’s performance in its joint venture and non-home building activities.

39



Eligibility goals were set by the Compensation Committee based on forecasted results for the fiscal year and performance under the Senior Officer Plan in prior years. Eligibility for 50% of the amount available to the NEOs under the Senior Officer Plan was conditioned upon our achievement of at least 80% of these targets:
Performance Metric
 
100% Eligibility
 
50% Eligibility (80%)
 
 
 
 
 
Consolidated Revenues
 
 $3.550 billion (50%)
 
   ≥ $2.840 billion (25%)
Pre-tax Income (1)
 
 ≥ $478,298,700 (50%)
 
 ≥ $382,638,960 (25%)
        
(1)
Excluding impairments and certain other items considered non-recurring in nature in accordance with the Senior Officer Plan. Additional information regarding the calculation of the pre-tax income performance metric can be found under "Long-Term Incentive Compensation Decisions—Performance-Based RSUs—2015 Performance-Based RSUs" on page 44.
2015 Cash Annual Incentive Bonuses. The Compensation Committee met in December 2015 and determined that we had exceeded the consolidated revenues and pre-tax income targets for 100% eligibility during fiscal 2015 and, therefore, the maximum amount was potentially available to each of the NEOs. The awarding of cash incentive bonuses under the Senior Officer Plan considers actual results against financial performance goals but allows the Compensation Committee to use judgment in making a qualitative assessment of the overall individual performance of each NEO and Company performance during fiscal 2015.
For fiscal 2015 performance, the Compensation Committee awarded cash annual incentive bonuses that were well below the maximum amounts allowable under the Senior Officer Plan, which has been true since adoption of the initial plan in 2010. In exercising its discretion to determine the actual cash incentive bonus amount to be paid to each NEO, the Compensation Committee did consider, however, that fiscal 2015 revenues and pre-tax income exceeded the eligibility goals set forth above.
The Compensation Committee further considered actual results compared to performance targets for pre-tax income, home building margin, and units delivered, which were the metrics established by the Committee at the beginning of the fiscal year for the 2015 performance-based RSUs. For a further discussion of these performance metrics and actual results, see “2015 Performance-Based RSUs” on page 44. The Compensation Committee reviewed fiscal 2015 results in each of these areas both on an absolute basis and relative to the prior fiscal year. The Compensation Committee also considered that 2015 performance in the areas of pre-tax income, home building margin, and units delivered exceeded 2014 results.
In its evaluation of individual performance, the Compensation Committee considered each NEO’s contribution to the financial and other business achievements highlighted above, as well as the Company’s fiscal 2015 results in the areas of contracts, backlog, and SG&A. Additionally, the Compensation Committee recognized the contributions of each of our NEOs to the Company’s strategy to improve earnings and grow and diversify its businesses in fiscal 2015, including growth in targeted markets, growth of its apartment business, and expansion of its active-adult product in the West region. For further discussion of these considerations, see “Fiscal 2015 Company Performance” on pages 33 to 34 and "Performance Assessment Process” starting on page 36. The Compensation Committee did not establish any individual performance goals for the NEOs at the commencement of fiscal 2015.
The Compensation Committee believed that, by surpassing the established fiscal 2015 Senior Officer Plan performance goals and by performing in an outstanding manner in fiscal 2015, Mr. Toll, Mr. Yearley, Mr. Hartman, and Mr. Connor merited cash annual incentive bonuses for fiscal 2015 performance of $1,500,000, $2,500,000, $875,000, and $875,000, respectively.    

40



Fiscal 2016 Bonus Performance Goals. In December 2015, the Compensation Committee set the 2016 performance goals for the Senior Officer Plan and determined that it would retain consolidated revenues and pre-tax income as the fiscal 2016 performance metrics under the Senior Officer Plan but adopted other changes to the annual incentive bonus.
Pre-Tax Income Bonus Target. In December 2015, the Compensation Committee determined that payout of 60% of the annual incentive bonus for performance in fiscal 2016 would be based on achievement of a target level of pre-tax income (excluding impairments and other items considered non-recurring in nature).
For fiscal 2016, the bonus payment based on pre-tax income performance may range between 80% and 120% of the target bonus amount to the extent that the Company’s pre-tax income for fiscal 2016 is between 80% and 120% of the pre-tax income target. No amounts will be paid for pre-tax income performance if the Company’s actual pre-tax income for fiscal 2016 is less than 80% of the pre-tax income target. The bonus payment for pre-tax income performance will be paid at the maximum level of 120% of the target bonus amount if the Company’s pre-tax income for fiscal 2016 is equal to or greater than 120% of the pre-tax income target.
In addition, the Compensation Committee anticipates that the NEOs will be eligible to earn the remaining 40% of their target level bonus based on the Company’s and the NEOs' performance during fiscal 2016, as determined by the Committee in its qualitative assessment of individual and Company performance and subject to achievement of the 2016 performance goals under the Senior Officer Plan.
Eligibility goals for fiscal 2016 were set by the Compensation Committee based on forecasted results for the fiscal year and performance under the Senior Officer Plan in prior years. Since adoption of the initial plan in 2010, NEOs have been incentivized to exceed the pre-established eligibility goals, and the Compensation Committee has used its discretion under the Senior Officer Plan to reduce annual incentive bonuses that were well below the maximum amounts allowable under the plan.
Total Fiscal 2015 Cash Compensation
Total cash compensation (base salary and annual incentive bonus) paid to or earned by the NEOs for fiscal 2015 is set forth below. Details on total compensation, measured and presented in the format required by the SEC, can be found in the Summary Compensation Table on page 52 of this proxy statement.
 
 
Base Salary
 
Annual Incentive
Bonus
 
Total Fiscal 2015
Cash Compensation
 
 
 
 
 
 
 
Robert I. Toll
 
$
1,000,000

 
$
1,500,000

 
$
2,500,000

Douglas C. Yearley, Jr.
 
$
1,000,000

 
$
2,500,000

 
$
3,500,000

Richard T. Hartman
 
$
1,000,000

 
$
875,000

 
$
1,875,000

Martin P. Connor (1)
 
$
933,333

 
$
875,000

 
$
1,808,333

        
(1)
Reflects base salary earned during fiscal 2015. Base salary is paid on a calendar year basis; the 2015 calendar year salary for Mr. Connor was $950,000.
Long-Term Incentive Compensation Decisions
The Compensation Committee awards equity compensation to our NEOs in the form of stock options and performance-based RSUs. These equity awards are based on its assessment of the Company’s performance for a given fiscal year, as well as its determinations of the effectiveness of each NEO and the extent of his contributions to our success, and the economic climate in which we operate.

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Stock Options
Stock options for all employees, including NEOs, are granted on a date within the last 15 days of December that is set in advance by the Compensation Committee. Because options are granted with exercise prices equal to the fair market value of the underlying common stock on the date of the grant, any value that may ultimately be realized by an employee is based entirely upon our future stock price performance and return of capital to stockholders, which supports alignment with stockholder interests.
Options granted to our NEOs have a term of ten years from the date of the grant, and these options vest in equal annual amounts over a four-year period, beginning on the first anniversary of the date of the grant. Options would continue to vest and be exercisable for the remainder of the ten-year term upon death, disability, or, in most cases, qualified retirement, and would fully vest upon a change of control of the Company. In addition, all unexercised stock options, vested and unvested, granted to NEOs are subject to forfeiture in the event that, after the NEO retires or otherwise leaves our employ, the NEO competes with us. See “Potential Payments upon Termination or Change of Control” starting on page 58 of this proxy statement.
2015 Options. At the beginning of fiscal 2015, the Compensation Committee granted stock options to each of the NEOs, as set forth in the Grants of Plan-Based Awards During Fiscal 2015 table on page 54 of this proxy statement. These grants were awarded on December 19, 2014 in recognition of the respective NEO’s performance during fiscal 2014.
2016 Options. In December 2015, the Compensation Committee granted stock options to each of the NEOs in recognition of their fiscal 2015 performance in order to further the Compensation Committee’s objectives, as set forth above. These grants were based on a dollar value and converted to a number of stock options as described below.
The Compensation Committee determined a dollar value of stock options to be granted to each NEO (other than Mr. Toll) by reference to 40% of the total dollar value of equity awards granted in fiscal 2015 in order to generally provide a mix of 40% stock options and 60% RSUs (performance-based) as further discussed below. Such grants have an exercise price of $32.85, the closing price on the Company's stock on December 18, 2015. Because they were granted in fiscal 2016, the grants below will be reflected in the executive compensation tables in next year’s proxy statement.

The following table sets forth the number of stock options granted on December 18, 2015, in recognition of the respective NEOs' performance in fiscal 2015.
 
 
Option Grant for
2015 Performance (1)
 
 
Robert I. Toll
144,579

Douglas C. Yearley, Jr.
137,584

Richard T. Hartman
41,939

Martin P. Connor
34,658

        
(1)
For purposes of determining the number of shares that are subject to the options granted, the assigned value per share of the options was determined by multiplying the closing price of our stock on December 18, 2015, the date of the awards, by the average of the “Fair Value Quotient” for the three immediately previous fiscal years of the Company. The “Fair Value Quotient” is the fraction in which (x) the denominator is the closing price of our common stock on the date of the awards for each of the three years immediately preceding the current year, and (y) the numerator is the grant date fair value of the options granted in accordance with ASC 718; assumptions used in the calculation of these amounts are included in Note 10 to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2015, excluding the effect of estimated forfeitures.

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Performance-Based RSUs
Starting in fiscal 2012, the Compensation Committee has awarded performance-based RSUs to each of the NEOs in addition to granting stock options as described above. The Compensation Committee chose to award performance-based RSUs based on the recommendation of the Committee’s independent compensation consultant to further encourage our growth and profitability through use of a medium-term equity award tied to pre-established performance metrics.
To measure performance in fiscal 2015, the Compensation Committee determined that it would grant performance-based RSUs measuring performance in pre-tax income (excluding impairments and other items considered non-recurring in nature), home building margin, and units delivered as performance metrics ("PRSUs"). In making this determination at the beginning at fiscal 2015, the Compensation Committee considered that the inclusion of pre-tax income would measure operating profitability as well as the Company’s performance in its joint venture and non-home building activities. The Compensation Committee selected the number of units delivered as one of the performance metrics because it is a measure of growth, and it selected home building margin because it measures profitability and efficiency.
Each performance metric has a minimum threshold level, which, if achieved, would earn 90% of the PRSUs allocated to that metric; a target level, which, if achieved, would earn 100% of the PRSUs allocated to that metric; and a maximum level, which, if achieved, would earn 110% of the PRSUs allocated to that metric. To the extent that actual performance results fall between these levels, the PRSUs earned would be determined proportionately between those levels. Because the Compensation Committee views these three PRSU performance metrics as being equally important, they are evenly weighted in determining a blended average to calculate the payout for the PRSUs. If the minimum threshold performance level of 90% is not achieved, no award is made.
The performance levels and payout for the 2015 PRSUs are set forth below under “2015 Performance-Based RSUs.” For fiscal 2014 performance, our NEOs earned 106.00%, 97.78%, and 96.38% of the 2014 PRSUs allocated to achievement of pre-tax income, home building margin, and units delivered, respectively. For fiscal 2013 performance, our NEOs earned 108.13%, 101.66%, and 104.60% of the 2013 PRSUs allocated to achievement of income from operations (which preceded pre-tax income as a performance measure), home building margin, and units delivered, respectively. For fiscal 2012 performance, our NEOs earned 110%, 110%, and 109.53% of the 2012 PRSUs allocated to achievement of income from operations, home building margin, and units delivered, respectively.
If the minimum performance criteria have been met, each PRSU is subject to vesting in equal annual amounts over four years from the date of grant and the PRSUs will not be delivered until the end of the four-year service vesting period, except that in the event of termination of service, the NEO would be entitled to receive shares underlying vested PRSUs. Shares subject to PRSUs held by an NEO fully vest and all restrictions immediately lapse upon a NEO’s termination of his employment due to death or disability. In addition, all shares subject to PRSUs fully vest and all restrictions lapse upon a change of control of the Company. See “Potential Payments upon Termination or Change of Control” starting on page 58 of this proxy statement.

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2015 Performance-Based RSUs. In December 2014, the Compensation Committee granted 2015 PRSUs relating to target levels of 133,667 shares to Mr. Toll, 100,000 shares to Mr. Yearley, 30,000 shares to Mr. Hartman, and 25,000 shares to Mr. Connor, respectively. The target level of shares for each NEO remained unchanged from the prior year, in light of the Compensation Committee's consideration of the amount determined to yield appropriate total direct compensation over the vesting period based on the historical payout of the PRSU awards. The 2015 PRSUs were divided into three evenly weighted performance metrics: pre-tax income, home building margin, and units delivered. The minimum, target, and maximum performance goals for the three 2015 PRSU metrics, as well as actual fiscal 2015 performance, are set forth below.
2015 Performance Metric
 
Minimum (90%)
 
Target (100%)
 
Maximum (110%)
 
Fiscal 2015 Actual
 
 
 
 
 
 
 
 
 
Pre-tax Income (1)
 
$478,298,700
 
$531,443,000
 
$584,587,300
 
$582,994,000
Home Building Margin (1)(2)
 
23.21
%
 
25.79
%
 
28.37
%
 
26.22
%
Units Delivered
 
4,950

 
5,500

 
6,050

 
5,525

        
(1)
The following items, to the extent disclosed in a press release or conference call, are excluded from these performance metrics:
Restructuring and severance costs pursuant to a plan approved by the Board, CEO and/or President and COO
Gains or losses from litigation or claims, natural disasters, terrorism, fraud, or fraud investigations
Effect of changes in laws, regulations, or accounting principles
The gain or loss from the sale or discontinuance of a business segment, division, or unit and the budgeted, unrealized earnings before interest, taxes, depreciation, and amortization (EBITDA) for this business segment, division, or unit
Extraordinary items as defined by generally accepted accounting principles or non-recurring items
In addition, the following items are also excluded from these performance metrics:
Write-down or impairment of assets or joint venture investments
Stock-based compensation overages or underages compared to budget
Out-of-period charges or credits
Expense of an acquisition
Gains or losses from derivative transactions
(2)    Defined as home building cost of sales, excluding interest expense, as a percentage of home building revenue
In December 2015, the Compensation Committee determined the level of the performance criteria that had been met for the 2015 PRSUs awarded in December 2014. The Compensation Committee determined that the percent achieved for pre-tax income, home building margin, and units delivered was 109.70%, 101.67% and 100.45%, respectively, and the payout for the 2015 PRSUs, based on a blended average of the metrics, would be at 103.94% of target.
Based on this payout at 103.94% of target, our NEOs earned the following numbers of 2015 PRSUs: Mr. Toll – 138,933; Mr. Yearley – 103,940; Mr. Hartman – 31,182; and Mr. Connor – 25,985. One-fourth of the 2015 PRSUs vested on December 19, 2015, the first anniversary of the grant date and the remaining three-fourths of these RSUs remain subject to service-based vesting.
2016 Restricted Stock Units (Performance-Based). The Compensation Committee decided that, starting in fiscal 2016, it would determine the amount of these awards on a fixed dollar basis and that it generally would fix the mix of equity awards to be 60% RSUs (performance-based) and 40% stock options based on input from its independent compensation consultant and its review of programs at other Peer Group companies. The Compensation Committee generally determined the target level of RSUs (performance-based) by reference to 60% of the total dollar value of stock options and PRSUs granted to each NEO in fiscal 2015. The number of target RSUs (performance-based) granted to each NEO in December 2015 was based on the closing price of the Company's common stock on December 18, 2015.

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2016 PRSUs. In December 2015, the Compensation Committee approved the grant of PRSUs for fiscal 2016 performance, subject to achievement of the award performance metrics in fiscal 2016, relating to the target levels of 59,818 shares to Mr. Toll, 81,049 shares to Mr. Yearley, 24,429 shares to Mr. Hartman, and 20,092 shares to Mr. Connor. The Compensation Committee determined that, generally, PRSUs would account for three-fourths of RSUs (performance-based) awarded to any NEO for the target level of shares for fiscal 2016 performance for the reasons stated below. The Compensation Committee determined that it would retain pre-tax income, home building margin, and units delivered as three equally-weighted performance metrics for the 2016 PRSUs.
2016 TSR Performance-Based RSUs ("TSR PRSUs"). In December 2015, the Compensation Committee determined that it would add TSR as a performance metric for long-term incentive awards and award PRSUs based on relative TSR ("TSR PRSUs"). The Compensation Committee determined that, generally, TSR would be weighted equally with the three performance metrics under the PRSUs, so TSR PRSUs would account for one-fourth of RSUs (performance-based) awarded to any NEO.
The Compensation Committee determined that TSR PRSUs generally will have a three-year performance period, with vesting and settlement of the award to occur upon the conclusion of the performance period. At the conclusion of the TSR PRSU performance period, the Compensation Committee will determine TSR for the performance period for the Company and each member of the Peer Group.
The Company’s relative TSR percentile rank will be determined by ranking the Peer Group companies from the highest to the lowest according to their respective TSR, then calculating the TSR percentile ranking of the Company relative to other companies in the Peer Group. At that time, the Compensation Committee will determine the number of TSR PRSUs earned by multiplying the target award by the TSR multiplier. The TSR multiplier will be based on the TSR percentile ranking of the Company as follows:
Relative TSR Percentile Rank
 
TSR Multiplier (1)
 
 
 
Less than 25th Percentile
 
0%
25th Percentile
 
50% (threshold)
50th Percentile
 
100% (target)
75th Percentile or Above
 
200% (maximum)
        
(1)
The Total Shareholder Return Multiplier will be determined by linear interpolation for any achievement of the Relative TSR Percentile Rank which falls between the target percentages above.
In December 2015, the Compensation Committee also determined that it would phase in the TSR PRSU awards by making a one-time grant of TSR PRSU target awards with performance periods of one and two years, in addition to the regularly recurring grant with a three-year performance period as follows:
 
 
December 2015 TSR PRSU Target Awards
 
 
1-Year
Performance Period
(11/1/2015-10/31/2016)
 
2-Year
Performance Period
(11/1/2015-10/31/2017)
 
3-Year
Performance Period
(11/1/2015-10/31/2018)
 
 
 
 
 
 
 
Robert I. Toll
 
19,939

 
15,373

 
10,822

Douglas C. Yearley, Jr.
 
27,017

 
27,017

 
27,017

Richard T. Hartman
 
8,143

 
8,143

 
8,143

Martin P. Connor
 
6,697

 
6,697

 
6,697


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As discussed above, the Compensation Committee decided that it would determine the amount of these awards on a fixed dollar basis and that it generally would fix the mix of equity awards to be 60% RSUs (performance-based) and 40% stock options. The number of target RSUs (performance-based) granted to each NEO in December 2015 was based on the closing price of the Company's common stock on December 18, 2015.
For the NEOs other than Mr. Toll, the target dollar amount of TSR PRSUs with a three-year performance period, plus the target number of PRSUs, approximates 60% of the dollar value of equity awards granted to the NEOs in fiscal 2015, with the three-year TSR PRSUs representing 25% of the target number of RSUs (performance-based). The one-time grants of TSR PRSU target awards with performance periods of one and two years were fixed at the number of three-year TSR PRSUs for the NEOs other than Mr. Toll. For Mr. Toll, given his role of Executive Chairman, the target numbers of TSR PRSUs were adjusted to award fewer TSR PRSUs with longer performance periods.
Compensation Decision-Making Process
Participation by Management
The Compensation Committee worked with management to establish its meeting agendas and determine the participants. Throughout the year, the Compensation Committee requested information from management and the Committee’s independent compensation consultant, including information about the compensation practices and financial performance of other companies in the home building industry and other industries. Our CEO and CFO were invited by the Compensation Committee to attend certain of its meetings in order to provide information and answer questions regarding the Company’s strategic objectives and financial performance. Our other NEOs were also available to Compensation Committee members and to attend its meetings upon request.
With regard to compensation decisions relating to the Executive Chairman, the Compensation Committee, in addition to its own assessment of the Executive Chairman’s performance during fiscal 2015, gained significant insight into the performance of the Executive Chairman during that same period from its many exchanges with the other NEOs, other Company officers, and the other directors. The Executive Chairman submitted recommendations to the Compensation Committee regarding salary, bonus, equity compensation, and overall compensation levels for the CEO. Our CEO, in conjunction with the Executive Chairman, submitted recommendations to the Compensation Committee regarding salary, bonus, equity compensation, and overall compensation levels for the President and COO and the CFO. The Compensation Committee, after consideration of all of these inputs, determined the actual awards to the Executive Chairman, the CEO, the President and COO, and the CFO.
Use of Independent Compensation Consultant
The Compensation Committee engaged Compensation Advisory Partners LLC (“CAP”) to serve as its independent compensation consultant for fiscal 2015. CAP received instructions from, and reported to, the Compensation Committee on an independent basis. CAP was also authorized by the Compensation Committee to share with and request and receive from management specified information in order to prepare for Compensation Committee meetings.
The Compensation Committee requested CAP’s advice on a variety of matters, including the amount and form of executive compensation, compensation strategy, market comparisons, pay and performance alignment versus industry peers, executive pay trends, compensation best practices, compensation-related legislative matters and related rulemaking, and potential compensation plan designs and modifications. The Compensation Committee met with CAP, both with and without management, on several occasions during fiscal 2015, and also in early fiscal 2016 with respect to compensation decisions for fiscal 2015 performance. During fiscal 2015, CAP did not provide any services to the Company or its affiliates other than advising the Compensation Committee on executive officer compensation.

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The Compensation Committee conducts a formal evaluation of the independence of CAP annually in the first quarter of the fiscal year. Based on this review, the Compensation Committee did not identify any conflict of interest raised by the work CAP performed in fiscal 2015. When conducting this evaluation, the Compensation Committee took into consideration the factors set forth in Rule 10C-1 under the Exchange Act and the NYSE’s listing standards.
Market Comparisons
Although the Compensation Committee does not believe that it is appropriate to establish compensation levels based solely on market comparisons or industry practices, it believes that information regarding pay practices at other companies is useful in three respects. First, marketplace information is one of many factors considered in assessing the reasonableness of compensation. Secondly, our compensation practices must be generally competitive for executive talent in the home building industry and in the overall market. Thirdly, marketplace information reflects emerging and changing components and forms of compensation. While the Compensation Committee considers peer compensation levels and practices when making its compensation decisions, it does not target compensation at any particular point within a range established by a comparison of the financial performance or compensation levels of our peer companies.
In 2015, the Compensation Committee, with guidance from its independent compensation consultant, reviewed our NEOs’ compensation against a peer group of publicly-traded home building companies (the “Peer Group”). The Peer Group consisted of the following companies with whom the Compensation Committee believes we primarily compete for talent and market share:
Beazer Homes USA, Inc.
 
KB Home
 
Meritage Homes Corporation
CalAtlantic Group, Inc. (1)
 
Lennar Corporation
 
NVR, Inc.
D. R. Horton, Inc.
 
M. D. C. Holdings, Inc.
 
PulteGroup, Inc.
Hovnanian Enterprises, Inc.
 
M/I Homes, Inc.
 
Taylor Morrison Home Corporation
 
 
 
 
Tri Pointe Group, Inc. (2)
        
(1)
CalAtlantic Group, Inc. was formed in the merger between The Ryland Group, Inc. and Standard Pacific Corp., both of which were in the Peer Group prior to the merger.
(2)
Tri Pointe Group, Inc, was added to the Peer Group in December 2015.
Of the companies within our Peer Group, only CalAtlantic Group, Inc. and D.R. Horton, Inc. have an executive chairman. The Compensation Committee considered the executive chairman compensation information for these two companies in its review of Peer Group pay practices. Our independent compensation consultant also discussed compensation practices generally for executive chairmen in companies of similar size outside of the home building sector but noted that the role of executive chairman is highly individualized and therefore compensation for this role varies considerably.
Benefits and Perquisites
We provide all of our employees (after 60 days of service with us), including our NEOs, with specified employee benefits programs. These include the opportunity to save for retirement through the Toll Brothers 401(k) Savings Plan (the “401(k) Plan”) and various health and welfare benefit programs, including medical, dental, life insurance, and long-term disability insurance.
The 401(k) Plan is a qualified retirement savings plan under the Code. Participants in the 401(k) Plan may contribute a portion of their compensation, subject to IRS regulations and specified limitations applicable to “highly compensated employees,” as such term is defined in the Code. After a year of service, we may match a portion of each participant’s contribution and also may make an annual discretionary contribution to each active participant’s account. All of the NEOs were participants in the 401(k) Plan during fiscal 2015. We share the cost of the above programs with our employees. Our NEOs participate in these programs on the same terms as our other employees. These programs are intended

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to promote the health and financial security of our employees and are provided at competitive market levels to attract, retain, and reward employees.
Supplemental Executive Retirement Plan
We also maintain a SERP, which provides retirement benefits to our NEOs. The Board’s intention when adopting the SERP was to provide competitive retirement benefits, to protect against reductions in retirement benefits due to tax law limitations on qualified plans, and to encourage continued employment or service with the Company. For a discussion of the material terms of the SERP, please see “Executive Compensation Tables—Pension Benefits During Fiscal 2015—Supplemental Executive Retirement Plan.”
In December 2014, the Compensation Committee determined to increase the SERP annual benefit payable to Mr. Yearley to $200,000 from $175,000, and to increase the SERP annual benefit payable to Mr. Hartman and Mr. Connor to $145,000 from $125,000. The Compensation Committee took into consideration the use of the SERP to encourage retention of the Company’s NEOs. The annual benefit amounts to our NEOs under the SERP as of the end of fiscal 2015 are set forth in the table below under “Executive Compensation Tables—Pension Benefits During Fiscal 2015—Supplemental Executive Retirement Plan.”
Perquisites
Perquisites did not constitute a material portion of the compensation paid to our NEOs for fiscal 2015. We provide our NEOs with limited perquisites and personal benefits that the Compensation Committee believes are consistent with our executive compensation philosophy and objectives. Each fiscal year, the Compensation Committee reviews and approves those perquisites that are to be provided to our NEOs. The Compensation Committee believes the perquisites for fiscal 2015, which included auto and gas allowances, insurance, and tax and financial statement preparation assistance, as more fully described in the footnotes to the Summary Compensation Table in this proxy statement, are reasonable, consistent with our past practices, and consistent with general practices in our industry.
Deferred Compensation Plan
The Toll Bros., Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) was designed to enable certain management and highly compensated employees, including our NEOs, to defer a portion of their cash compensation during any calendar year. In December 2014, the Company amended and restated the Deferred Compensation Plan (the "2015 Plan"), which had been frozen for compensation earned after December 31, 2011, to enable employees to defer a portion of their cash compensation starting in January 1, 2015. Mr. Hartman and Mr. Connor are participants in the 2015 Plan. Any amounts deferred prior to January 1, 2015, which are not re-deferred under the 2015 Plan, will continue to be governed by the terms of the Deferred Compensation Plan in effect prior to January 1, 2015. Mr. Hartman is the only NEO who participated in the Deferred Compensation Plan prior to January 1, 2015. We have the right under the 2015 Plan to make discretionary contributions for the benefit of any participant in the 2015 Plan. We did not make discretionary contributions to any NEO under the 2015 Plan in fiscal 2015.
Interest earned during fiscal 2015 on NEO deferred compensation that is considered above-market interest under SEC rules is included under “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table in this proxy statement, and further information about NEO deferred compensation is contained in the Nonqualified Deferred Compensation During Fiscal 2015 table in this proxy statement.

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Other Compensation Practices and Policies
Employment Agreements, Change of Control Provisions and Severance Payments
None of our NEOs has an employment agreement with us. We do not have a severance plan for our NEOs. We have no change of control agreements relating to employment benefits or additional benefits that arise simply from a change of control or severance related thereto; however, under our equity compensation plans and our SERP, awards and benefits are generally subject to special provisions upon a defined “change of control” transaction. Upon a change of control, any outstanding options, RSUs, deferred cash, or other plan awards will generally immediately vest, and any restrictions will immediately lapse. Under the SERP, if there is a change of control of the Company, all participants in the SERP would be fully vested in their SERP benefits and potentially eligible for a lump sum payout. See “Potential Payments upon Termination or Change of Control” starting on page 58 of this proxy statement.
Stock Ownership Guidelines
We maintain stock ownership guidelines pursuant to which our executive officers and non-management directors are expected to acquire a meaningful level of stock ownership in the Company so as to further align their interests with those of our stockholders. Under the guidelines, the executive officers and non-management directors are expected to own shares equivalent in value to a multiple of his or her base salary or annual cash retainer, as applicable, as set forth below:
Position
  
Multiple
 
 
 
Executive Chairman and CEO
  
3.0 x base salary
Other Executive Officers
  
1.0 x base salary
Directors
  
3.0 x annual cash retainer
Executive officers and directors are expected to achieve compliance with these levels of ownership within the later of five years from adoption of the guidelines in December 2012, or the date he or she assumes the position of executive officer or director, and may not sell net shares of stock received upon the exercise of stock options (that is, shares other than those sold to pay withholding taxes, brokerage fees, and the exercise price) unless and until he or she has met these required levels of ownership.
On an annual basis, the Governance Committee reviews adherence to the stock ownership guidelines. For purposes of the guidelines, the following are included as “owned”:
shares of stock owned by the executive officer or director, including shares held in a trust controlled by the executive officer or director, by a spouse or by minor children that are deemed beneficially owned by the executive officer or director under Rule 13d-3 under the Exchange Act;
one-third of the shares underlying vested stock options that were “in the money” at the beginning of the fiscal year of review; and
shares of stock underlying vested performance stock units, RSUs, and restricted stock awards, regardless of provisions relating to delivery.
Specifically excluded from ownership under the guidelines as “owned” shares are any shares of stock or other equity-based awards which are pledged as collateral for a loan to a third party so long as such pledge remains in effect.
If an executive officer or director satisfies these guidelines, they are generally deemed satisfied for subsequent annual review periods, regardless of decreases in the Company’s stock price so long as the executive officer or director continues to hold the shares originally included in determining compliance. At the time of the Governance Committee's review of adherence to the stock ownership guidelines in December 2015, each NEO and director had achieved a stock ownership level in excess of the applicable level set forth above.

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Anti-Hedging Policy
We have an insider trading policy that sets forth guidelines and restrictions applicable to employees’ transactions involving our stock. Among other things, this policy prohibits our employees from engaging in puts, calls, or similar options on our stock or in any derivative equity securities of the Company, or selling our stock short. In addition, this policy prohibits directors and executive officers from entering into hedging arrangements with respect to our equity securities that are designed to offset or reduce the risk of price fluctuations in the underlying security (such as covered calls, collars, or other transactions that sever the ultimate alignment with our stockholders’ interests).
Pledging Policy
In fiscal 2013, the Governance Committee adopted a policy that prohibits any pledging of the Company’s equity securities by executive officers and directors with limited exceptions. At the time it established this policy, the Governance Committee considered the particular circumstances of Mr. Robert I. Toll and Mr. Bruce E. Toll as co-founders of the Company with substantial ownership of the Company’s equity securities and included specific exceptions for the two co-founders.
Subsequent to the adoption of the policy, the Governance Committee and Mr. Bruce E. Toll have agreed that he will not increase the aggregate number of shares of Company stock he has pledged, and the Governance Committee revised the Company’s pledging policy in January 2014 to reflect this agreement. In fiscal 2015, Mr. Bruce E. Toll reduced the aggregate number of shares of Company stock he has pledged.
With respect to Mr. Robert I. Toll, any increase in the aggregate number of shares of Company stock that he has pledged is prohibited under the policy except in situations, and on conditions, pre-approved by the Company’s General Counsel. Approvals will be based on the particular facts and circumstances of the request, including, but not limited to:
the percentage of the individual’s equity holdings that are currently pledged;
the percentage of the Company’s outstanding class of equity securities represented by the number of securities of that class being pledged;
the market value of the securities being pledged and the total market value of the Company’s outstanding equity securities;
the historical trading volume of the Company’s equity securities; and
any compelling needs of the individual justifying the pledge transaction under the circumstances.
The General Counsel’s decisions are reviewed by the Governance Committee.
As a result of this policy, no executive officer or director, other than Mr. Robert I. Toll and Mr. Bruce E. Toll, has Company shares that are pledged as of the date of this proxy statement. The number of shares pledged by Mr. Robert I. Toll and Mr. Bruce E. Toll as of the Record Date represents 2.9% and 1.8%, respectively, of the Company’s outstanding stock. The Governance Committee continues to monitor and seek reductions in the shares pledged by the Company’s co-founders.
Clawback Policy
In January 2016, the Board adopted a policy regarding the recoupment of incentive compensation from executives in certain situations involving fraud or intentional misconduct. The policy provides that, subject to the discretion and approval of the Board, the Company will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any cash bonus or other incentive compensation subject to the policy, including vested and unvested stock-based compensation, awarded to an executive officer where all of the following factors are present: (a) the award was predicated upon the achievement of specified financial results that were

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subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. Under this policy, the Board may seek to recover payments of incentive compensation if the financial results leading to the award of incentive compensation are subsequently the subject of a restatement. The Board may use its judgment in determining the amount to be recovered where the incentive compensation was awarded on a discretionary basis.
Tax and Accounting Implications
Tax Regulations. Section 162(m) of the Code generally disallows a tax deduction to a public company for compensation over $1 million paid to specified “covered employees” (its chief executive officer and to any of its three other most highly-compensated executive officers other than its chief financial officer). Performance-based compensation will not be subject to the deduction limitation if specified requirements set forth in the Code and applicable Treasury Regulations are met. We intend to structure our compensation plans for our NEOs to comply with the performance-based compensation exemption requirements of Section 162(m) of the Code; however, since corporate objectives may not always be consistent with the requirements for full deductibility, the Board and the Compensation Committee may award non-deductible compensation to our NEOs as they deem appropriate. Our Senior Officer Plan, stock option grants, PRSUs, and TSR PRSUs are currently designed to be tax deductible under Section 162(m).
Accounting Considerations. When making decisions about executive compensation, the Compensation Committee considers the accounting implications of the various elements of our compensation program, including the impact on our financial results and the dilutive impact to stockholders of various forms of compensation. For equity compensation grants, ASC 718 requires us to recognize compensation expense for all share-based payment arrangements based upon the grant date fair value of those awards and period of vesting. The aggregate expense estimated to be recognized over the period of vesting is included in the Summary Compensation Table contained in this proxy statement as part of the NEOs’ total compensation in the fiscal year of the grant. This number, while required by the SEC rules and important for understanding the impact of granting equity on our financial statements, may not accurately represent the value received by the NEO.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with our management the Compensation Discussion and Analysis section of this proxy statement. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015.
Respectfully submitted by the members of the Compensation Committee of the Board of Directors.
Carl B. Marbach (Chair)
Stephen A. Novick
Paul E. Shapiro

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EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
Name and Principal
Position
 
Year
 
Salary
($)
 
Stock
Awards
($)(1)
 
Option
Awards
($)(1)
 
Non-Equity
Incentive Plan
Compensation
($)(2)
 
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(3)
 
All Other
Compensation
($)(4)
 
Total
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert I. Toll
 
2015
 
1,000,000

 
4,342,841

 
1,026,000

 
1,500,000

 

 
148,601

 
8,017,442

Executive Chairman of the Board
 
2014
 
1,000,000

 
4,699,732

 
1,302,000

 
1,500,000

 
368,131

 
163,356

 
9,033,219

2013
 
1,000,000

 
5,049,939

 
1,351,000

 
1,500,000

 

 
124,045

 
9,024,984

Douglas C. Yearley, Jr.
 
2015
 
1,000,000

 
3,249,000

 
2,662,400

 
2,500,000

 
359,321

 
39,166

 
9,809,887

Chief Executive Officer
 
2014
 
1,000,000

 
3,516,000

 
3,016,230

 
2,300,000

 
198,902

 
40,922

 
10,072,054

2013
 
1,000,000

 
3,778,000

 
2,494,500

 
2,200,000

 
57,070

 
33,744

 
9,563,314

Richard T. Hartman
 
2015
 
1,000,000

 
974,700

 
715,520

 
875,000

 
396,975

 
30,726

 
3,992,921

President and Chief Operating Officer
 
2014
 
991,667

 
1,054,800

 
796,740

 
800,000

 
163,969

 
31,079

 
3,838,255

 
2013
 
936,538

 
1,133,400

 
665,200

 
550,000

 
206,804

 
30,707

 
3,522,649

Martin P. Connor
 
2015
 
933,333

 
812,250

 
565,760

 
875,000

 
244,696

 
24,410

 
3,455,449

Chief Financial Officer
 
2014
 
841,667

 
879,000

 
626,010

 
800,000

 
142,288

 
24,635

 
3,313,600

2013
 
780,769

 
944,500

 
498,900

 
500,000

 
69,143

 
23,765

 
2,817,077

 
(1)
These columns present the aggregate grant date fair value of RSUs and stock options, respectively, granted in the indicated fiscal year, calculated in accordance with ASC 718 utilizing the assumptions discussed in Note 10 in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2015, excluding the effect of estimated forfeitures. The amounts shown in these columns do not reflect compensation actually received by the NEOs. The actual value, if any, that a NEO may realize from an award is contingent upon the satisfaction of the conditions to vesting in that award, including performance conditions in the case of PRSUs, and, for stock options, upon the excess of the share price over the exercise price, if any, on the date the options are exercised. Thus, there is no assurance that the value, if any, eventually realized by the NEOs will correspond to the amount shown in the table.
With respect to the PRSUs granted in fiscal 2015, the estimate of the grant date fair value determined in accordance with ASC 718 assumes the vesting of 100% of the RSUs granted. Assuming the highest level of performance is achieved (which would result in the vesting of 110% of the RSUs granted), the aggregate grant date fair value of the RSUs set forth in the stock awards column above for fiscal 2015 would be: Mr. Toll—$4,777,125; Mr. Yearley—$3,573,900; Mr. Hartman—$1,072,170; and Mr. Connor—$893,475. The actual performance achieved for fiscal 2015 resulted in 103.94% of the PRSUs granted being earned, subject to service-based vesting.
(2)
The annual incentive bonuses for Mr. Toll, Mr. Yearley, Mr. Hartman, and Mr. Connor for fiscal 2015 were earned based upon the terms of the Senior Officer Plan, as described on page 39 of this proxy statement.
(3)
The amounts in this column represent the increase in the actuarial present value of accumulated benefits under the SERP for each NEO and the amount of above-market interest earned on their respective balances, if applicable, in the Deferred Compensation Plan. Mr. Toll and Mr. Yearley did not participate in the Deferred Compensation Plan during the fiscal years indicated in the table above. The amounts attributed to the increase or decrease in actuarial present value of SERP benefits and above-market interest on deferred compensation are as follows (see also the Pension Benefits During Fiscal 2015 table on page 56 of this proxy statement):

52



Name
 
Fiscal
Year
 
Increase (Decrease) in
Actuarial Present Value of
Accumulated
SERP Benefits ($)
 
Above-Market
Interest Earned on
Deferred
Compensation ($)
 
Total ($)
Robert I. Toll
 
2015
 
(8,614
)
 
N/A

 
(8,614
)
 
 
2014
 
368,131

 
N/A

 
368,131

 
 
2013
 
(1,093,556
)
 
N/A

 
(1,093,556
)
Douglas C. Yearley, Jr.
 
2015
 
359,321

 
N/A

 
359,321

 
 
2014
 
198,902

 
N/A

 
198,902

 
 
2013
 
57,070

 
N/A

 
57,070

Richard T. Hartman
 
2015
 
313,163

 
83,812

 
396,975

 
 
2014
 
139,583

 
24,386

 
163,969

 
 
2013
 
172,414

 
34,390

 
206,804

Martin P. Connor
 
2015
 
244,647

 
49

 
244,696

 
 
2014
 
142,288

 
N/A

 
142,288

 
 
2013
 
69,143

 
N/A

 
69,143

(4)
Fiscal 2015 “All Other Compensation” consists of:
 
 
Fiscal 2015
 
 
Robert I.
Toll
 
Douglas C.
Yearley, Jr.
 
Richard T.
Hartman
 
Martin P.
Connor
Payments for tax and financial statement preparation assistance
 
$
90,266

 
$
7,843

 
$

 
$

Contribution to 401(k) Plan
 
10,500

 
10,500

 
10,500

 
10,500

Life and disability insurance premiums (5)
 
3,660

 
3,723

 
4,056

 
4,010

Auto and gas allowance
 
19,500

 
15,900

 
15,900

 
9,900

Non-business use of cars and drivers
 
24,675

 
1,200

 
270

 

Total
 
$
148,601

 
$
39,166

 
$
30,726

 
$
24,410

 
(5)
Includes annual premiums for annual life, accidental death and dismemberment, and long term disability insurance provided to all employees; supplemental long-term disability insurance provided to executives.

53



Grants of Plan-Based Awards During Fiscal 2015
 
 
 
 
 
 
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
 
Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
 
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
 
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3)
 
Exer-
cise
or Base
Price of
Option
Awards
($/Sh)
 
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)(4)
Name
 
Grant
Date
 
Action
Date(1)
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
Robert I. Toll
 
 
 
 
 
(5)
 
(6)
 
8,500,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
120,300

 
133,667

 
147,034

 
 
 
 
 
 
 
4,342,841

 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000

 
32.49

 
1,026,000

Douglas C. Yearley, Jr.
 
 
 
(5)
 
(6)
 
8,500,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
90,000

 
100,000

 
110,000

 
 
 
 
 
 
 
3,249,000

 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
160,000

 
32.49

 
2,662,400

Richard T. Hartman
 
 
 
(5)
 
(6)
 
8,500,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
27,000

 
30,000

 
33,000

 
 
 
 
 
 
 
974,700

 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43,000

 
32.49

 
715,520

Martin P. Connor
 
 
 
(5)
 
(6)
 
8,500,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
22,500

 
25,000

 
27,500

 
 
 
 
 
 
 
812,250

 
 
12/19/2014
 
12/4/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34,000

 
32.49

 
565,760

        
(1)
The Compensation Committee met on December 4, 2014 and made determinations regarding stock option grants for fiscal 2014 performance and PRSU grants relating to performance to occur during fiscal 2015. All grants of equity compensation were made on December 19, 2014, which is consistent with our practice of awarding equity compensation described under “Compensation Discussion and Analysis—Long-Term Incentive Compensation Decisions.”
(2)
Reflects PRSUs the Compensation Committee awarded to our NEOs under the 2014 Stock Incentive Plan for Employees (the "2014 SIP"). See “Compensation Discussion and Analysis—Long-Term Incentive Compensation Decisions—Performance-Based RSUs” for further information.
(3)
See “Compensation Discussion and Analysis—Long-Term Incentive Compensation Decisions—Stock Options” for a discussion of these option grants, which were awarded under the 2014 SIP. The exercise price of the options granted in fiscal 2015 is the closing price of our common stock on the grant date.
(4)
Amount represents the aggregate grant date fair value of RSUs and stock options, respectively, granted in fiscal 2015, calculated in accordance with ASC 718 utilizing the assumptions discussed in Note 10 in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2015. The calculation of these amounts disregards the estimate of forfeitures related to time-based vesting conditions. With respect to the PRSUs, the estimate of the grant date fair value determined in accordance with ASC 718 assumes the vesting of 100% of the RSUs awarded.
(5)
Awards to Mr. Toll, Mr. Yearley, Mr. Hartman, and Mr. Connor were made pursuant to the terms of the Senior Officer Plan. The plan does not include a threshold amount; awards in any fiscal year could be as low as $0.
(6)
The Senior Officer Plan does not include a target amount and, when the Compensation Committee met on December 4, 2014 to establish performance goals for fiscal 2015 for each of Mr. Toll, Mr. Yearley, Mr. Hartman, and Mr. Connor, it did not establish a target amount for their awards. For a detailed discussion of the formula and criteria applied for such performance-based awards, see “Compensation Discussion and Analysis—Cash Compensation Decisions—Annual Incentive Bonus” in this proxy statement.
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
Please see the “Compensation Discussion and Analysis” section of this proxy statement for a detailed description of the fiscal 2015 salary, annual incentive bonus, and equity awards with respect to each NEO.

54



Outstanding Equity Awards at October 31, 2015
 
 
Option Awards
 
Stock Awards
Name
 
Grant
Date
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(9)
 
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
($)(10)
 
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not
Vested
(#)
 
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
Robert I. Toll
 
12/20/2006
 
550,000

 
 
 
 
31.82

 
12/20/2016
 
 
 
 
 
 
 
 
 
 
 
12/20/2007
 
550,000

 
 
 
 
20.76

 
12/20/2017
 
 
 
 
 
 
 
 
 
 
 
12/20/2010
 
100,000

 


 
 
19.32

 
12/20/2020
 
 
 
 
 
 
 
 
 
 
 
12/20/2011
 
75,000

 
25,000

(1)
 
20.50

 
12/20/2021
 
54,922

(5)
 
1,975,544

 
 
 
 
 
 
12/17/2012
 
50,000

 
50,000

(2)
 
32.22

 
12/17/2022
 
70,040

(6)
 
2,519,339

 
 
 
 
 
 
12/20/2013
 
25,000

 
75,000

(3)
 
35.16

 
12/20/2023
 
100,302

(7)
 
3,607,863

 
 
 
 
 
 
12/19/2014
 


 
100,000

(4)
 
32.49

 
12/19/2024
 
138,933

(8)
 
4,997,420

 
 
 
 
Douglas C. Yearley, Jr.
 
12/20/2007
 
16,250

 
 
 
 
20.76

 
12/20/2017
 
 
 
 
 
 
 
 
 
 
 
12/20/2008
 
17,500

 
 
 
 
21.70

 
12/20/2018