Compensation Discussion and Analysis Other Benefits
In February 2022, the Compensation Committee reviewed the achievement of the performance
goals over the three-year performance period. The Companys relative gross profit percentage, relative return on tangible capital, and relative total shareholder return over the applicable performance period, placed the Companys final
percentile rank achieved as compared to its peers at 93.4%, 68.9%, and 76.2%, respectively, which meant a final payout for each relative metric of 200.0%, 175.6% and 200%, respectively. Relative metrics are determined by reference to Lennars
Peer Group: Beazer Homes USA, Inc., D.R. Horton, Inc., Hovnanian Enterprises, Inc., KB Home, M.D.C. Holdings, Inc., Meritage Homes Corporation, NVR, Inc., PulteGroup, Inc., Taylor Morrison, Toll Brothers, Inc. and TRI Pointe Homes. Hovnanian
Enterprises, Inc.s negative equity skewed the relative return on tangible capital component of the calculations, and the Compensation Committee determined to rank Hovnanian last in the calculation of relative return on tangible capital.
The Companys debt/EBITDA multiple was 1.75, which meant a 200.0% payout for that metric. The average weighting of the four performance metrics resulted in a
193.9% payout. As a result, the total number of shares that each of Messrs. Miller, Beckwitt and Jaffe were entitled to receive was 243,922, 216,597 and 190,200 shares, respectively, of Class A common stock. Since Messrs. Miller, Beckwitt and Jaffe
had already been issued 125,798, 111,706 and 98,092 shares, respectively, at target, those shares vested, and Messrs. Miller, Beckwitt and Jaffe were issued an additional 118,124, 104,891 and 92,108 shares, respectively, of Class A common
stock.
In addition, Messrs. Miller, Beckwitt and Jaffe received accrued dividends on the 243,922, 216,597 and 190,200 shares, respectively, of Class A common
stock over the three-year performance period.
Other Benefits
Our NEOs are eligible to receive a match on their 401(k) contributions up to $12,200 for 2022 and $13,200 for 2023, and to participate in our active associate
health and welfare benefits plans, which are available to all full-time associates. Under our flexible benefits plans, all associates are entitled to medical, vision, dental, life insurance, and long-term disability coverage. We also provide certain
of our executive officers with a car allowance. In 2022 the Company paid on behalf of each of Messrs. Miller and Beckwitt a $125,000 filing fee cost incurred in connection with each officers filing under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 (HSR Act), the related $31,322 in legal fees for each officer and a $257,743 tax gross-up for each officer related to such payments. The HSR Act requires that at any time
certain individuals hold more than a certain amount of value in our stock, those individuals generally must make a filing under the HSR Act unless an exception applies. The HSR Act filings were required because the dollar value of our shares held by
Messrs. Miller and Beckwitt, respectively, exceeded thresholds established under the HSR Act due to stock price appreciation and the acquisition of our shares under the 2016 Equity Plan. Due to their positions as officers of the Company, Messrs.
Miller and Beckwitt were not able to rely on the passive investor exemption contained in the HSR Act regulations. The Compensation Committee considered it appropriate to pay these expenses because they arose as a result of the operation of the
Companys equity compensation program.
Change in Control Effects
Our 2016 Equity Plan provides for accelerated vesting of outstanding equity awards if there is a change in control together with certain employment termination
events (i.e., a double trigger). You can find a summary of potential payments arising from a change in control under the heading Potential Payments Upon Termination after Change in Control in the Executive Compensation
section.
Other Compensation Practices
Stock Ownership Guidelines
Our Board has
adopted stock ownership guidelines that set minimum equity ownership requirements for our executive officers. The guidelines are designed to align the interests of our executives with the interests of stockholders and further promote our commitment
to sound corporate governance. Under our stock ownership guidelines, an executive is expected to own, by a date not later than five years after being appointed to his or her position as an executive officer, shares of our common stock with a value
equal to a multiple (shown below) of the executives annual base salary.
Until the required stock ownership level is achieved, an executive is required
to retain at least 50% of the shares of restricted stock that become vested, other than shares sold to pay taxes resulting from the vesting. If the required level is not achieved within the five-year compliance period, an executive will be required
to retain 100% of the restricted shares that become vested (other than shares sold to pay taxes resulting from the vesting) until the required level is achieved.
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