Joseph S. Cantie
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Director Since: 2015
Former Chief Financial Officer, TRW Automotive Holdings Corp.
Age: 56
Independent
Committees: Audit (Chair), Compensation and Governance
Audit Committee Financial Expert
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Experience:
Mr. Cantie is the former Executive Vice President and Chief Financial Officer of TRW Automotive Holdings Corp., a diversified global supplier of automotive systems, modules and components, a position he held from February 2003 until January 2016. From 2001 to 2003, Mr. Cantie was Vice President, Finance for the automotive business of TRW, Inc., a global aerospace, systems and automotive conglomerate. Mr. Cantie served as TRW Inc.’s Vice President, Investor Relations from 1999 until 2001. From 1996 to 1999, Mr. Cantie was employed by LucasVarity plc, serving in several executive positions, including Vice President and Controller. Prior to joining LucasVarity, Mr. Cantie was employed as a certified public accountant with the international accounting firm of KPMG. Mr. Cantie is a director of Delphi Technologies PLC (NYSE: DLPH), an automotive parts company, and Summit Materials, Inc. (NYSE: SUM), a vertically-integrated construction materials company.
Skills and Qualifications:
Mr. Cantie has significant experience leading the finance organization of a large company. His background and expertise provide us with a deeper understanding of finance, financial operations, capital markets and investor relations. The Board has affirmatively determined that Mr. Cantie is independent.
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Tina M. Donikowski
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Director Since: 2018
Former Vice President, Global Locomotive Business of General Electric
Age: 60
Independent
Committees: Audit, Compensation and Governance
Audit Committee Financial Expert
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Experience and Qualifications:
Ms. Donikowski retired from General Electric in 2015 after serving for 38 years in a variety of leadership positions. The most recent were Former Vice President, Global Locomotive Business of General Electric and Former Vice President, Propulsion Business of General Electric. Ms. Donikowski currently serves on the Board of Directors of CIRCOR International (NYSE: CIR), Atlas Copco AB (STOCKHOLM: ATCO), and Advanced Energy Industries, Inc. (NASDAQ: AEIS) and ERIEZ Magnetics, a private company, as well as on the Board of Trustees of both Gannon University and The Boys & Girls Club of Erie, Pennsylvania. Ms. Donikowski holds a Bachelor of Science degree in Industrial Engineering and an Honorary Doctorate from Gannon University.
Skills and Qualifications:
Ms. Donikowski brings with her considerable executive leadership experience derived from her 38‑year tenure with General Electric, together with her experience serving as a director of both U.S. and foreign publicly-traded companies. The Board has affirmatively determined that Ms. Donikowski is independent.
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Mark A. Petrarca
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Director Since: 2015
Senior Vice President of Human Resources and Public Affairs, A. O. Smith Corporation
Age: 56
Independent
Committees: Audit, Compensation (Chair) and Governance
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Experience:
Mr. Petrarca has served as the Senior Vice President of Human Resources and Public Affairs of A. O. Smith Corporation, a global manufacturer of residential and commercial water heating equipment, since 2005. In this role, he is responsible for all human resource activities, including policy and strategy development, performance management, employee relations, compensation and benefits and organizational development and succession planning, as well as public affairs and communications. Mr. Petrarca joined A. O. Smith Corporation in 1999, serving as Vice President-Human Resources for its Water Products Company until 2005. Mr. Petrarca was previously employed as Director of Human Resources for Strike Weapon Systems, a division of Raytheon Systems Company, and in various manufacturing and human resources positions at the Defense Systems and Electronics Group of Texas Instruments.
Skills and Qualifications:
Mr. Petrarca brings strong expertise in domestic and international human resources and insight into employee relations issues, public affairs and communications. He provides us with valuable experience in policy and strategy development, performance management, organizational development, succession planning, executive compensation and mergers and acquisitions. He also has a deep understanding of the building products industry. The Board has affirmatively determined that Mr. Petrarca is independent.
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Nancy M. Taylor
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Director Since: 2018
Age: 60
Former President and CEO of Tredegar Corporation
Independent
Committees: Audit, Compensation and Governance (Chair)
Audit Committee Financial Expert
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Experience:
Ms. Taylor served as the President and CEO of Tredegar Corporation, a global manufacturing company, from 2010 until her departure from the company in 2015. During her 24‑year career with Tredegar, Ms. Taylor held a variety of leadership positions, including President of Tredegar Film Products, Senior Vice President, Strategy and General Counsel. Taylor currently serves as Chair of the Board of Lumber Liquidators Holdings, Inc. (NYSE:LL), serves on the Board of Directors of Verso Corporation (NYSE: VRS), and is Chairman of the Board of the Boys & Girls Club of Metro Richmond (Virginia).
Skills and Qualifications:
Ms. Taylor has significant executive and board leadership experience, deep corporate governance knowledge and a strong background in the commercial construction market. She also has significant experience in operations, mergers and acquisitions, strategic planning and risk management. The Board has affirmatively determined that Ms. Taylor is independent.
The Board recommends that you vote “FOR” the election of each of Alec C. Covington, Gerald Volas, Carl T. Camden, Joseph S. Cantie, Tina M. Donikowski, Mark A. Petrarca and Nancy M. Taylor as Directors.
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COMMON STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND SIGNIFICANT SHAREHOLDERS
Directors and Executive Officers
The following table sets forth, as of March 2, 2020, beneficial ownership of TopBuild common stock by each executive officer named in the Summary Compensation Table in this Proxy Statement, each director or director nominee, and by all directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated by footnote and subject to community property laws where applicable, to our knowledge, the persons named in the table below have sole voting and dispositive power with respect to all shares of common stock shown as beneficially owned by them. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options and warrants held by such person that are exercisable as of March 2, 2020 or that will become exercisable within 60 days thereafter are deemed outstanding for purposes of such person’s percentage ownership but not deemed outstanding for purposes of computing the percentage ownership of any other person.
Name of Beneficial Owner(1)
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Shares Beneficially
Owned
(#)
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Percent of
Class(2)
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Gerald Volas(3)
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358,135
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1.1%
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Robert M. Buck
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49,933
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*
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John S. Peterson(4)
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65,084
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*
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Steven P. Raia
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12,586
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*
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Donald Walther(5)
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1,881
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*
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Joseph S. Cantie(6)
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19,250
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*
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Alec C. Covington
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10,500
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*
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Carl T. Camden
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10,500
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*
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Mark A. Petrarca(7)
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10,500
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*
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Nancy M. Taylor
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3,210
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*
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Tina M. Donikowski
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3,210
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*
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All current directors and executive officers of the company as a group (11) persons(8)
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558,586
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1.7%
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*Less than 1%
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(1)
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The address for each beneficial owner listed in this table is 475 North Williamson Boulevard, Daytona Beach, Florida 32114‑7101.
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(2)
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As of March 2, 2020, we had 33,502,605 shares of our common stock outstanding.
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(3)
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Includes options to acquire 113,240 shares of common stock, 131,199 shares held in a revocable living trust, of which Mr. Volas is the trustee, and 294 shares held in a retirement plan.
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(4)
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Includes options to acquire 16,759 shares of common stock.
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(5)
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Pro rata shares according to the Executive Severance Plan. Includes options to acquire 36 shares of common stock.
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(6)
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Includes 8,750 shares held in a revocable living trust, of which Mr. Cantie is the trustee.
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(7)
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Includes 8,800 shares held in a revocable living trust, of which Mr. Petrarca is the trustee.
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(8)
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Includes options to acquire 7,342 shares of common stock.
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TopBuild Corp. - Proxy Statement 24
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Certain Other Shareholders
As of March 2, 2020, the following were beneficial owners of more than 5% of our outstanding common stock. Unless otherwise indicated, each beneficial owner had sole voting and dispositive power with respect to the common stock held. In accordance with SEC rules, information with respect to each shareholder identified in the table below is derived from its most recently dated Schedule 13G or 13D, as filed by it with the SEC. We do not know, nor do we have reason to believe that such information is not complete or accurate or that a statement or amendment should have been filed and was not.
Name of Beneficial Owner
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Shares Beneficially
Owned
(#)
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Percent of Class(1)
(%)
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BlackRock Inc.(2)
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5,434,563
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16.2%
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The Vanguard Group(3)
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3,768,561
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11.2%
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Dimensional Fund Advisors LP(4)
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2,065,788
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6.2%
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(1)
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As of March 2, 2020, we had 33,502,605 shares of our common stock outstanding.
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(2)
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All information about BlackRock, Inc. is based on a Schedule 13G/A filed with the SEC on February 4, 2020, which additionally identifies those subsidiaries through which it beneficially owns the reported shares of common stock. BlackRock, Inc. reported that it has sole voting power with respect to 5,330,972 shares of common stock, sole dispositive power with respect to 5,434,563 shares of common stock, and no shared voting or shared dispositive power. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
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(3)
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All information about The Vanguard Group is based on a Schedule 13G/A filed with the SEC on February 12, 2020, which additionally identifies those subsidiaries through which it beneficially owns the reported shares of common stock. The Vanguard Group reported that it has sole voting power with respect to 70,886 shares of common stock, sole dispositive power with respect to 3,696,909 shares of common stock, and shared dispositive power with respect to 71,652 shares of common stock. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
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(4)
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All information about Dimensional Fund Advisors LP is based on a Schedule 13G/A filed with the SEC on February 12, 2020, which additionally identifies those subsidiaries through which it beneficially owns the reported shares of common stock. Dimensional Fund Advisors LP reported that it has sole voting power with respect to 2,024,645 shares of common stock, sole dispositive power with respect to 2,065,788 shares of common stock, and no shared voting or shared dispositive power. The address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
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TopBuild Corp. - Proxy Statement 25
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The following report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any of TopBuild’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate such report by reference.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis prepared by management and contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee
Mark A. Petrarca (Chair)
Carl T. Camden
Joseph S. Cantie
Alec C. Covington
Tina M. Donikowski
Nancy M. Taylor
COMPENSATION OF EXECUTIVE OFFICERS
Executive Officers
Set forth below is information about our executive officers as of March 2, 2020. There are no family relationships between any director, executive officer, or person nominated or chosen to become a director or executive officer.
Gerald Volas. Mr. Volas, 65, has served as our Chief Executive Officer since June 2015. Mr. Volas was a Group President at Masco from 2006 to June 2015 and prior to that, President of Liberty Hardware Mfg. Corp., a Masco operating company, from 2001 to 2005. From 1996 to 2001, he served as a Group Controller supporting a variety of Masco operating companies; and from 1982 to 1996, he served in progressive financial roles including Vice President/Controller at BrassCraft Manufacturing Company, a Masco operating company. Mr. Volas holds a Bachelor of Business Administration degree from the University of Michigan at Ann Arbor and is a Certified Public Accountant. Mr. Volas is a director of Trex Company, Inc., a manufacturer of wood alternative decking and related products, serving since March 2014. Mr. Volas announced that he will retire as CEO and member of the Board of Directors on December 31, 2020.
Robert Buck. Mr. Buck, 50, has served as our President and Chief Operating Officer since June 2015. Mr. Buck served as Group Vice President of Masco from 2014 until June 2015. In this position, Mr. Buck was responsible for the Installation and Other Services Segment consisting of both Masco Contractor Services and Service Partners. Mr. Buck served as President and Chief Executive Officer of Masco Contractor Services from 2011 until June 2015. Mr. Buck began his career with Masco in 1997 at Liberty Hardware Mfg. Corp., where he spent eight years in several operations leadership roles and worked extensively in international operations. Mr. Buck became Executive Vice President in 2005 and helped lead the merger of another Masco company with Liberty Hardware before being promoted to the office of President in 2007. Mr. Buck holds a Bachelor of Science degree in Information Systems and Operations Management, and an M.B.A. from the University of North Carolina at Greensboro. Mr. Buck has been named the successor to the role of CEO and will be appointed to the Board of Directors upon Mr. Volas’ retirement on December 31, 2020.
John Peterson. Mr. Peterson, 61, has served as our Vice President and Chief Financial Officer since June 2015. Mr. Peterson served as Executive Vice President, Chief Financial Officer of Masco Contractor Services from November 2010 until June 2015. From 2006 to 2010, he was the Chief Financial Officer of Masco Retail Cabinet Group, a Masco subsidiary. From 2001 to 2006, he was the Vice President-Finance for Biolab and from 1998 to 2001, he was the Vice President-Finance, Performance Chemicals Division, both subsidiaries of Great Lakes Chemical, which has since changed its name to Chemtura Corporation. Mr. Peterson holds a Bachelor of Science degree in Accounting from Pennsylvania State University and an M.B.A. from the University of Indianapolis.
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TopBuild Corp. - Proxy Statement 26
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Steven Raia. Mr. Raia, 64, has served as our President, TruTeam Operations since 2017, and previously served as our Senior Vice President of Operations from 2015 to 2017. From 2007 to 2015, Mr. Raia served as an operations consultant to Masco Contractor Services (MCS). Previously, he was the owner/operator of Cary Insulation which had over 35 locations when it was acquired by MCS in 1999. Mr. Raia remained with Masco until 2007, managing MCS’s east coast operations. Mr. Raia began installing insulation as a teenager, working for his father’s company during school breaks and on weekends. He became a full-time installer of Cary Insulation after graduating from high school in 1973. Over time, he was given responsibility for all aspects of managing the business including purchasing, labor productivity initiatives, recruiting, sales and human resources.
David Whan. Mr. Whan, 55 years old, has served as our Chief Human Resources Officer since May 2017. Previously, Mr. Whan was Director of Global Talent Development and HR Strategy at Deere & Company from 2012 to 2017. Prior to that, he held a number of global positions within the Human Resources Department including Director of HR Strategy, Policy, Governance and Business Partners and Manager of Industrial Relations at Deere & Company since 2001. Mr. Whan began his career in the public sector, working in city and county government management. Mr. Whan holds a Bachelor of Arts degree in Public Administration and International Management from Augustana College and an M.B.A. from Northwestern University and an M.P.A. from the University of Kansas.
Compensation Discussion and Analysis
Overview
For purposes of this Compensation Discussion and Analysis and the disclosure under “Compensation of Executive Officers,” our named executive officers are identified below (collectively, our “named executive officers”). The information provided reflects summary information concerning TopBuild’s executive compensation approach developed to date.
Named Executive Officers
Name
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TopBuild Title
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Gerald Volas
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Chief Executive Officer
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Robert Buck
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President and Chief Operating Officer
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John Peterson
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Vice President and Chief Financial Officer
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Steven Raia
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President, TruTeam Operations
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Donald Walther(1)
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Former Vice President, General Counsel and Corporate Secretary
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(1)
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Mr. Walther served as our Vice President, General Counsel and Corporate Secretary until February 24, 2020.
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TopBuild Compensation Programs
We recognize the importance of attracting and retaining executive officers who can effectively lead our business and make effective strategic decisions and motivating them to maximize our company’s performance and create long-term value for our shareholders. We believe in rewarding our executive officers based on our performance. Our Compensation Committee continues to thoughtfully and thoroughly analyze our compensation practices and programs.
Consideration of Shareholder Vote on Executive Compensation
At our 2019 Annual Meeting, our shareholders had the opportunity to cast an advisory vote on our executive compensation, referred to as the say-on-pay proposal. At that meeting, approximately 98% of the votes cast were voted in favor of the say-on-pay proposal, suggesting that an overwhelming majority of our shareholders approve of our executive compensation programs and philosophy. The Compensation Committee considered this vote when considering and approving the 2019 compensation structure for our executives and, accordingly, made few changes to the 2019 program.
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TopBuild Corp. - Proxy Statement 27
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Compensation Philosophy
We believe that effective executive compensation programs are critical to our long-term success. We have developed compensation programs with the following objectives:
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·
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Attracting and retaining world-class executives through a total compensation opportunity that is competitive within the various markets in which we compete for talent.
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·
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Encouraging a pay-for-performance mentality by directly relating variable compensation elements to the achievement of financial and strategic objectives without encouraging undue risk-taking. Incentive plans are designed to recognize and reward accomplishing individual goals, as well as our long-term company objectives.
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·
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Promoting a direct relationship between executive compensation and our shareholder interests.
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Our long-term incentive opportunities link a significant portion of executive compensation to our performance through performance-based restricted stock and stock option awards. We believe that an executive’s total compensation opportunity should increase commensurate with his or her responsibility and capacity to influence our results. Additionally, as an executive’s responsibility and accountability increase, so should the portion of that person’s compensation that is at risk. Therefore, not only do base salaries increase with position and responsibility, but short-term and long-term incentive opportunities as a percentage of total compensation increase as well.
Equity grants in the form of stock awards that vest only upon the achievement of performance goals as well as stock options with extended vesting periods are an important component of compensation for executive officers. The value ultimately realized from equity awards depends on the long-term performance of TopBuild’s common stock.
TopBuild Compensation Practices
TopBuild has adopted the following compensation practices:
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·
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a compensation mix weighted towards performance-based incentives;
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·
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significant portion of executive compensation tied to stock price performance;
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·
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no excise tax gross-ups;
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·
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an annual market analysis of executive compensation levels and trends;
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·
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no individual employment agreements;
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·
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limited perquisites to our executive officers; and
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·
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prohibiting the re-pricing of options under our equity plan.
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As a guideline, we target executive compensation levels within 90%‑110% of market median. However, target pay for any individual executive may be outside this range due to experience levels, unique job qualifications, internal equity considerations or other factors considered by management and the Compensation Committee.
Stock Ownership Guidelines
Our Compensation Committee has adopted a policy requiring our executives to own a multiple of their base salary in our common stock. In the case of our Chief Executive Officer, the multiple is five (5) times base salary. In the case of our President and Chief Operating Officer and our Vice President and Chief Financial Officer, the multiple is three (3) times base salary. In the case of our Vice President, General Counsel and Secretary and our Vice President, Chief Human Resources Officer, the multiple is two (2) times base salary. In the case of all other executives at the level of Vice President and above, the multiple is one (1) times base salary. Individuals have five years from the point of being subject to the ownership guidelines to achieve the prescribed multiple.
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TopBuild Corp. - Proxy Statement 28
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Executive Compensation Approach
TopBuild’s 2019 compensation structure was composed of the following primary components:
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·
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Long-term performance-based restricted stock awards; and
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·
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Long-term stock option awards.
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Our executive officers enter into award agreements in connection with grants of equity awards. The award agreements as well as the Severance Plan contain certain restrictive covenants, including a non-competition covenant during employment and for one (1) year thereafter.
Equity Incentive Compensation
We believe that a combination of performance-based restricted stock and stock options are appropriate vehicles for a public company to focus executives on long-term performance and alignment with shareholder interests. Extended vesting and exercise periods further align our named executive officers with our shareholders. See “Equity Compensation Program,” below.
Market Comparison for Compensation
Just as we compete for market share in highly competitive markets, we compete for talent in equally competitive labor environments. In order to attract and retain critical leadership, we strive to provide a comprehensive and competitive total compensation package. We utilize the resources of an independent compensation consultant to aid in establishing our programs and to monitor how they compare with the marketplace. Specifically, the Compensation Committee has retained Willis Towers Watson, a leading global executive compensation consultant, to advise the Compensation Committee on market trends relative to executive compensation, to provide market data as requested and to share input and views on issues being discussed by the Compensation Committee.
The Compensation Committee has sole authority to approve the independent compensation consultant’s fees and terms of engagement on executive compensation matters. The Compensation Committee annually reviews its relationship with Willis Towers Watson to ensure its independence on executive compensation matters, taking into account the independence analysis and recommendation of the Governance Committee. In making its recommendation, the Governance Committee reviewed the independence of Willis Towers Watson and the individual representatives of Willis Towers Watson who served as the Compensation Committee’s advisors, considering the following specific factors: (i) other services provided to us by Willis Towers Watson; (ii) fees paid by us to Willis Towers Watson as a percentage of Willis Towers Watson’s total revenue; (iii) policies and procedures maintained by Willis Towers Watson that are designed to prevent a conflict of interest; (iv) any business or personal relationships between the individual representatives of Willis Towers Watson who advised the Compensation Committee and any member of the Compensation Committee; (v) any shares of our company’s common stock owned by the individual representatives; and (vi) any business or personal relationships between our executive officers and Willis Towers Watson or the individual representatives.
The Compensation Committee concluded, based on the evaluation described above and recommendation from the Governance Committee, that these nonexecutive compensation services performed by Willis Towers Watson did not raise a conflict of interest or impair Willis Towers Watson’s ability to provide independent advice to the Compensation Committee regarding executive compensation matters.
We endeavor to benchmark our executive compensation levels against similarly situated executives in comparably sized organizations within the building products sector. We believe we compete for executive resources with other non-financial institutions across multiple industrial segments. With that in mind, our consultants use general industry salary surveys and size-adjust the data to organizations with a similar revenue size.
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TopBuild Corp. - Proxy Statement 29
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The following companies were identified to benchmark our executive compensation levels against comparably sized organizations within the building products sector.
American Woodmark Corporation
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Huttig Building Products, Inc.
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Apogee Enterprises, Inc.
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Installed Building Products, Inc.
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Beacon Roofing Supply, Inc.
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Louisiana-Pacific Corporation
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BlueLinx Holdings Inc.
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Masonite International Corporation
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BMC Stock Holdings, Inc.
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Patrick Industries, Inc.
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Boise Cascade Company
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Pool Corporation
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Builders FirstSource, Inc.
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Simpson Manufacturing Co., Inc.
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Comfort Systems USA, Inc.
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Universal Forest Products, Inc.
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Dycom Industries, Inc.
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Watsco, Inc.
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Gibraltar Industries, Inc.
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For 2019, the Compensation Committee targeted our overall compensation and benefits programs and each element of compensation at the median level of the surveyed companies. Since a number of variables can influence the relationship of an individual executive’s pay components to the survey median data, the Compensation Committee considers a range of 90%‑110% of median to be appropriate when reviewing total compensation. Although the Compensation Committee attempts to have each component of compensation in this target range, the Compensation Committee puts greater emphasis on achieving the target at the total compensation level. Variables considered include, but are not limited to, education, position tenure, previous experience, level of performance, additional responsibilities, and, as appropriate, recruitment considerations.
The Compensation Committee authorized Willis Towers Watson to perform a detailed analysis of our executive compensation levels in 2019. For 2020, we will continue to compare ourselves to the labor market median of other companies similar in revenue size to TopBuild, as well as a comparison to a building products peer group. We believe an equal weighting to these two sources creates a market median appropriate target for our total compensation program.
Compensation of Named Executive Officers
The disclosure in the “Summary Compensation Table” relates to the 2017, 2018 and 2019 compensation of our named executive officers. Effective February 17, 2020, our Compensation Committee approved increases to the base salary and long-term incentive opportunity for our named executive officers. The table below summarizes our 2019 compensation levels and the changes approved effective February 17, 2020, for each of our current named executive officers.
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Name
|
|
Position
|
|
Base
Salary as of
December 31,
2019
($)
|
|
Target
Bonus as
Percentage
of Salary
(%)(2)
|
|
Base Salary,
approved as of
February 17,
2020
($)
|
|
Target
Bonus
for 2020
(%)
|
|
LTI Level
as of
February 17,
2020
($)(3)
|
|
Gerald Volas(1)
|
|
Chief Executive Officer
|
|
861,000
|
|
105
|
|
888,000
|
|
105
|
|
2,900,000
|
|
Robert M. Buck
|
|
President and Chief Operating Officer
|
|
567,000
|
|
75
|
|
585,000
|
|
75
|
|
950,000
|
|
John S. Peterson
|
|
Vice President and Chief Financial Officer
|
|
485,000
|
|
70
|
|
500,000
|
|
70
|
|
800,000
|
|
Steven Raia
|
|
President, TruTeam Operations
|
|
415,000
|
|
60
|
|
428,000
|
|
60
|
|
460,000
|
|
Donald Walther
|
|
Former Vice President, General Counsel and Corporate Secretary
|
|
450,000
|
|
65
|
|
—
|
|
—
|
|
550,000
|
|
|
(1)
|
|
TopBuild has entered into agreements with Mr. Volas that would provide him severance benefits under specified termination events. This agreement does not include any “golden parachute” excise tax gross-up payments.
|
|
(2)
|
|
Maximum bonus opportunity of 200% of target.
|
|
(3)
|
|
Allocated 40% to stock options (Black-Scholes value) and 60% to performance-based restricted stock awards (maximum is 200% of target). Mr. Volas, Mr. Buck, Mr. Peterson and Mr. Raia were the only named executive officers who received an increase in long-term incentive opportunity.
|
|
TopBuild Corp. - Proxy Statement 30
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2019 Annual Incentive Performance-Based Cash Bonus Opportunity
TopBuild provided an annual cash bonus opportunity for fiscal 2019 to our named executive officers to emphasize annual performance, provide incentive to achieve critical business objectives and align officers’ interests with those of its shareholders.
The performance metrics were sales, operating income and operating income as a percentage of sales (weighted 80%) and achievement of certain strategic objectives (weighted 20%). The threshold, target and maximum goals set for the 2019 annual performance program are set forth below. These metrics were those believed to most effectively reflect drivers of enhanced shareholder value creation. Operating income was more heavily weighted because it reflects the primary driver of our stock price performance.
The following table shows target and actual performance along with percentage attained for the 2019 annual performance program.
Annual Performance Goals and Achievements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Metric
|
|
Threshold
(25% Payout)
|
|
Target (100%
Payout)
|
|
Maximum
(200%
Payout)
|
|
Actual as
Adjusted
|
|
Actual
Percentage
Attained
Relative to
Target
|
|
Weighting
|
|
Actual
Weighted
Performance
Percentage
|
|
Operating Income, as adjusted, as a percentage of Net Sales, as adjusted (1)
|
|
|
8.8
|
%
|
|
10.4
|
%
|
|
11.4
|
%
|
|
10.8
|
%
|
142.8
|
%
|
30.0
|
%
|
42.8
|
%
|
Operating Income, as adjusted ($ in millions)(1)
|
|
|
$230.0
|
|
|
$271.0
|
|
|
$298.0
|
|
|
$283.6
|
|
146.7
|
%
|
30.0
|
%
|
44.0
|
%
|
Net Sales, as adjusted ($ in millions)(1)
|
|
|
$2,345.0
|
|
|
$2,605.0
|
|
|
$2,866.0
|
|
|
$2,619.4
|
|
105.5
|
%
|
20.0
|
%
|
21.1
|
%
|
Strategic Objectives (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.0
|
%
|
20.3
|
%
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128.2
|
%
|
|
(1)
|
|
For purposes of determining achievement of the performance target, numbers adjusted to exclude impact of acquisitions and other unusual charges not included when targets were set. For a reconciliation of operating income, as adjusted, to operating income and a reconciliation of net sales, as adjusted, to net sales, see Annex A.
|
|
(2)
|
|
Strategic Objectives include attainment of discrete goals relating to working capital as a percentage of sales and safety initiatives.
|
To determine the cash bonus to be granted to our named executive officers based on the 2019 performance achievements set forth above, the target opportunities for each executive officer were multiplied by their applicable payout percentage (that is, 105% for Mr. Volas, 75% for Mr. Buck, 70% for Mr. Peterson, 60% for Mr. Raia and 65% for Mr. Walther), which was in turn multiplied by each executive officer’s base salary. Because Mr. Raia is President of TruTeam Operations, Mr. Raia’s 2019 performance goals included weighting for performance metrics of our TruTeam contractor services business.
Threshold, target and maximum payouts under the 2019 cash bonus program are shown in the 2019 Grants of Plan-Based Awards Table, while actual awards for 2019 are disclosed in the Summary Compensation Table.
Equity Compensation Program
Results for LTIP Awards with Performance Periods Ending in 2019
During 2019, the 3‑year performance period for our 2017 performance equity awards ended. Vesting of these awards were subject to the Company achieving certain pre-determined performance goals relating to our cumulative three (3) year earnings per share (50% of award) and our relative total shareholder return (“TSR”) (50% of award), over the three-year period ending on December 31, 2019. Partial payouts were permitted for performance that falls below target levels (in either of the two measures) and our executive officers may earn up to 200% of their target award level for performance that exceeds target performance. Our Compensation Committee determined payout as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS
Performance
|
|
|
|
|
|
TSR
Performance
|
|
|
|
|
|
Name of Principal
Position(1)
|
|
Shares
Granted
(#)
|
|
Payout
(%)(2)
|
|
Performance
Shares
Earned
(#)
|
|
Shares
Granted
(#)
|
|
Payout
(%)(3)
|
|
Performance
Shares
Earned
(#)
|
|
Amount
Paid on
February 21,
2020(4)
|
|
Gerald Volas
|
|
15,630
|
|
200
|
|
31,260
|
|
15,630
|
|
200
|
|
31,260
|
|
|
$7,690,585
|
|
Robert Buck
|
|
6,250
|
|
200
|
|
12,500
|
|
6,250
|
|
200
|
|
12,500
|
|
|
$3,075,250
|
|
John Peterson
|
|
4,300
|
|
200
|
|
8,600
|
|
4,300
|
|
200
|
|
8,600
|
|
|
$2,115,772
|
|
Steve Raia
|
|
2,660
|
|
200
|
|
5,320
|
|
2,660
|
|
200
|
|
5,320
|
|
|
$1,308,826
|
|
|
(1)
|
|
Does not include Mr. Walther who joined the company after 2017, and as such did not receive a 2017 performance equity award.
|
|
(2)
|
|
Adjusted EPS target of $8.28. For purposes of the LTIP, adjusted EPS is EPS adjusted to exclude impact of acquisitions and other unusual charges not included when targets were set. Under the LTIP, payout is increased up to 200% of target award level for performance that exceeds target performance by up to 10%. The actual result was 12.7% over target, resulting in a payout of 200%.
|
|
(3)
|
|
TSR actual of 185.9%, resulting in Peer Group Rank 1 of 20, in the top quartile.
|
|
(4)
|
|
Represents value of total performance shares earned based on TopBuild’s closing stock price of $123.01 on such date.
|
2019 Equity Awards
On February 18, 2019, our Compensation Committee approved equity awards designed to align executive compensation with market practices, reflect our strategic priorities, create a strong link between compensation and performance, drive compensation consistency by having the same performance metrics for executives and non-executives and assist with the ability to attract and retain key employees. In sizing the grants for our named executive officers, our Compensation Committee considered compensation peer group data, the relative unvested equity position of the applicable named executive officer, and the named executive officer’s expected role in driving our operating results and creating value for our stockholders. The February 2019 equity awards consisted of stock options (40% of targeted total equity grant value) and performance-based restricted stock (60% of total equity grant value) under the Amended and Restated TopBuild Corp. 2015 Long Term Stock Incentive Plan (as amended to the date hereof, the “Amended LTIP”).
The stock options will vest in three equal increments on approximately each of the first three anniversaries of the date of the grant (February 18, 2019) and have an exercise price of $58.08 (the closing price of our common stock on the NYSE on February 15, 2019, the last trading day prior to the date of the grant).
The performance-based restricted stock awards will vest on February 15, 2022, subject to the Company achieving certain pre-determined performance goals relating to our cumulative three (3) year earnings per share (50% of award) and our relative total shareholder return (“TSR”) (50% of award), over the three-year period ending on December 31, 2021. Partial payouts are permitted for performance that falls below target levels (in either of the two measures) and our executive officers may earn up to 200% of their target award level for performance that exceeds target performance. Partial payouts are permitted in cases where one of the performance measures is met and the other is not.
2020 Equity Awards
On February 17, 2020, our Compensation Committee approved equity awards designed to align executive compensation with market practices, reflect our strategic priorities, create a strong link between compensation and performance, drive compensation consistency by having the same performance metrics for executives and non-executives and assist with the ability to attract and retain key employees. In sizing the grants for our named executive officers, our Compensation Committee considered compensation peer group data, the relative unvested equity position of the applicable named executive officer, and the named executive officer’s expected role in driving our operating results and creating value for our stockholders. The February 2020 equity awards consisted of stock options (40% of targeted total equity grant value) and performance-based restricted stock (60% of total equity grant value) under the Amended LTIP.
The stock options will vest in three equal increments on approximately each of the first three anniversaries of the date of the grant (February 17, 2020) and have an exercise price of $118.58 (the closing price of our common stock on the NYSE on February 14, 2020, the last trading day prior to the date of the grant).
|
TopBuild Corp. - Proxy Statement 31
|
The performance-based restricted stock awards will vest on February 15, 2023, subject to the Company achieving certain pre-determined performance goals relating to our cumulative three (3) year earnings per share (50% of award) and our relative TSR (50% of award), over the three-year period ending on December 31, 2022. Partial payouts are permitted for performance that falls below target levels (in either of the two measures) and our executive officers may earn up to 200% of their target award level for performance that exceeds target performance. Partial payouts are permitted in cases where one of the performance measures is met and the other is not.
TopBuild Peer Group Established for Relative TSR Measurement
The following companies were identified as the peer group for the relative TSR measurement in the 2020‑2022 equity incentive program design. The peer group is based on similar business characteristics, including industry and revenue size between $975.3 million and $7.7 billion.
|
|
Toll Brothers Inc.
|
Beazer Homes USA Inc.
|
KB Home
|
BMC Stock Holdings Inc.
|
Taylor Morrison Home Corporation
|
Summit Materials Inc.
|
MSC Industrial Direct Co. Inc.
|
MI Homes Inc.
|
Universal Forest Products Inc.
|
Eagle Materials Inc.
|
Beacon Roofing Supply Inc.
|
Gibraltar Industries Inc.
|
Builders FirstSource Inc.
|
American Woodmark Corp.
|
Meritage Homes Corporation
|
Patrick Industries Inc.
|
Armstrong World Industries Inc.
|
Simpson Manufacturing Co. Inc.
|
|
Installed Building Products Inc.
|
Clawback Policy
Our clawback policy authorizes the Board to recover past incentive compensation awards in the event of a material restatement of our financial statements, other than as a result of changes to accounting rules and regulations, or if an executive officer engages in certain acts of misconduct.
Prohibition Against Hedging
The company’s insider trading policy prohibits directors, officers, employees and consultants of the company from engaging in any hedging transactions involving company stock.
Impact of Tax Treatment
Section 162(m) of the Internal Revenue Code (the “Code”) limits the amount of compensation that we may deduct in any one year for compensation paid to the Chief Executive Officer and certain other most highly compensated executive officers to $1 million. While the Compensation Committee considers the deductibility of compensation as a factor in making compensation decisions, the Compensation Committee retains the flexibility to provide compensation that is consistent with our goals for our executive compensation program even if such compensation is not fully tax deductible. Accordingly, the Compensation Committee may make decisions that result in compensation expense that is not fully deductible under Section 162(m) of the Code.
Compensation-Related Risk Assessment
We have assessed our employee compensation policies and practices and determined that any risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the company. In reaching this conclusion, the Compensation Committee considered all components of our compensation program and assessed any associated risks. The Compensation Committee also considered the various strategies and measures employed by the company that mitigate such risk, including: (i) the overall balance achieved through our use of a mix of cash and equity, annual and long-term incentives and time- and performance-based compensation; (ii) our use of multi-year vesting periods for equity grants; and (ii) the oversight exercised by the Compensation Committee over the performance metrics and results under the annual incentive plan and the LTIP. In addition, compensation programs are reviewed with Willis Towers Watson, the compensation consultant, on an annual basis to ensure plans do not create incentives that would put the company at excessive risk. Based on the assessment described above, the Compensation Committee concluded that any risks associated with our compensation policies and practices were not reasonably likely to have a material adverse effect on the company.
|
TopBuild Corp. - Proxy Statement 32
|
Accounting for Share-Based Compensation
We follow FASB ASC Topic 718 for our share-based compensation awards. FASB ASC Topic 718 requires companies to measure the compensation expense for all share-based compensation awards made to employees and directors, including stock options and restricted stock, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our named executive officers may never realize any value from their awards; FASB ASC Topic 718 also requires companies to recognize the compensation cost of their share-based compensation awards in their income statements over the period that an executive officer is required to render services in exchange for the option or other award.
Summary Compensation Table for Fiscal Years 2017‑2019
The following table sets forth certain information regarding compensation paid to the named executive officers of TopBuild.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Principal
Position
|
|
Year
|
|
Salary
($)(1)
|
|
Bonus
($)
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)(3)
|
|
Non-equity
Incentive Plan
Compensation
($)(4)
|
|
All Other
Compensation
($)(5)
|
|
Total
($)
|
|
Gerald Volas
|
|
2019
|
|
856,667
|
|
—
|
|
1,792,166
|
|
1,000,022
|
|
1,158,993
|
|
8,400
|
|
4,816,248
|
|
Chief Executive Officer
|
|
2018
|
|
830,833
|
|
—
|
|
1,575,397
|
|
880,001
|
|
865,895
|
|
4,625
|
|
4,156,751
|
|
|
|
2017
|
|
802,500
|
|
—
|
|
1,382,474
|
|
799,976
|
|
1,022,200
|
|
4,500
|
|
4,011,650
|
|
Robert Buck
|
|
2019
|
|
564,167
|
|
—
|
|
652,454
|
|
363,952
|
|
545,171
|
|
7,369
|
|
2,133,113
|
|
President and Chief Operating
|
|
2018
|
|
546,667
|
|
—
|
|
608,110
|
|
339,982
|
|
427,763
|
|
4,625
|
|
1,927,147
|
|
Officer
|
|
2017
|
|
525,000
|
|
—
|
|
552,813
|
|
319,990
|
|
501,700
|
|
4,792
|
|
1,904,295
|
|
John Peterson
|
|
2019
|
|
482,500
|
|
—
|
|
502,528
|
|
279,947
|
|
435,239
|
|
1,322
|
|
1,701,536
|
|
Vice President and Chief
|
|
2018
|
|
466,667
|
|
—
|
|
430,300
|
|
240,100
|
|
316,804
|
|
4,625
|
|
1,458,496
|
|
Financial Officer
|
|
2017
|
|
445,000
|
|
—
|
|
380,335
|
|
220,066
|
|
369,100
|
|
4,500
|
|
1,419,001
|
|
Steven Raia
|
|
2019
|
|
408,333
|
|
—
|
|
315,121
|
|
176,051
|
|
306,669
|
|
—
|
|
1,206,174
|
|
President, TruTeam Operations
|
|
2018
|
|
372,500
|
|
300,000
|
(6)
|
272,049
|
|
152,018
|
|
253,915
|
|
—
|
|
1,350,482
|
|
|
|
2017
|
|
356,667
|
|
300,000
|
(6)
|
235,277
|
|
136,025
|
|
227,184
|
|
—
|
|
1,255,153
|
|
Donald Walther
|
|
2019
|
|
295,096
|
|
150,000
|
|
500,364
|
|
—
|
|
246,566
|
|
78,123
|
|
1,270,149
|
|
Former Vice President, General
Counsel and Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This column includes amounts voluntarily deferred by each named executive officer as salary reductions under the 401(k) Savings Plan.
|
|
(2)
|
|
Amounts reflect the aggregate grant date fair value of restricted stock award opportunity under the Amended LTIP at the target level, representing the probable outcome. The grant date fair values were calculated in accordance with FASB ASC 718, utilizing the assumptions discussed in Note 1 and Note 14 to our consolidated financial statements for the year ended December 31, 2019. Assuming the highest level of achievement on performance awards as of the grant date, the aggregate grant date fair value of all stock granted in fiscal 2019 would have been: Mr. Volas– $2,541,979; Mr. Buck– $925,430; Mr. Peterson– $712,778; Mr. Raia– $446,963; and Mr. Walther– $500,364. Assuming the highest level of achievement on performance awards as of the grant date, the aggregate grant date fair value of all stock granted in fiscal 2018 would have been: Mr. Volas– $2,235,467; Mr. Buck–$862,900; Mr. Peterson– $610,590; and Mr. Raia– $386,034. Assuming the highest level of achievement on performance awards as of the grant date, the aggregate grant date fair value of all stock granted in fiscal 2017 would have been: Mr. Volas– $1,982,509; Mr. Buck– $792,750; Mr. Peterson– $545,412; and Mr. Raia– $337,394. The named executive officers do not realize the value of restricted stock awards until those awards vest over the three (3) year vesting period following the grant date depending on company performance.
|
|
(3)
|
|
Amounts in this column reflect the aggregate grant date fair value of stock options, calculated in accordance with FASB ASC Topic 718, utilizing the assumptions discussed in Note 1 and Note 14 to our consolidated financial statements for the year ended December 31, 2019. The named executive officers have no assurance that these amounts will be realized. Actual gains, if any, on stock option exercises will depend on overall market conditions, the future performance of the common stock and the timing of exercise of the option. Values for 2017 include the grants made on February 21, 2017 for 2017 performance. Values for 2018 include the grants made on February 19, 2018 for 2018 performance. Values for 2019 include the grants made on February 18, 2019 for 2019 performance.
|
|
(4)
|
|
Amounts in this column represent annual performance-based incentive compensation.
|
|
(5)
|
|
See All Other Compensation table below.
|
|
(6)
|
|
Represents the completion of a two (2) year retention bonus earned by Mr. Raia on June 1, 2017 and June 1, 2018.
|
|
TopBuild Corp. - Proxy Statement 33
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Principal
Position
|
|
Year
|
|
Relocation
Assistance
($)
|
|
Severance
($)
|
|
401(k) Company
Matching
($)(1)
|
|
Total
($)
|
|
Gerald Volas
|
|
2019
|
|
—
|
|
—
|
|
8,400
|
|
8,400
|
|
Robert Buck
|
|
2019
|
|
—
|
|
—
|
|
7,369
|
|
7,369
|
|
John S. Peterson
|
|
2019
|
|
—
|
|
—
|
|
1,322
|
|
1,322
|
|
Steven Raia
|
|
2019
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Donald Walther
|
|
2019
|
|
78,123
|
|
—
|
|
—
|
|
78,123
|
|
|
(1)
|
|
Does not include any adjustment for non-discrimination testing or annual true-up of the 401(k) plan.
|
2019 Grants of Plan-Based Awards Table
The following table provides information about (i) the potential payouts that were available in 2019 to our named executive officers under our annual performance-based cash bonus opportunity and (ii) the actual grants of restricted stock and stock options made to our named executive officers in respect of 2019 performance under the Amended LTIP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non- Equity Incentive Plan Awards(1)
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
All
Other
Stock
Awards:
|
|
All Other Option Awards:
|
|
Name
|
|
Grant Date
|
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Number of
Shares of
Stock or
Units
(#)
|
|
Number of
Securities
Underlying
Options
(#)
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
Grant
Date Fair
Value of
Stock
and
Options
Awards
($)
|
|
Gerald Volas
|
|
|
|
|
226,013
|
|
904,050
|
|
1,808,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019(2)
|
|
|
|
|
|
|
|
|
6,455
|
|
25,820
|
|
51,640
|
|
25,820
|
|
|
|
|
|
1,792,166
|
|
|
|
2/18/2019(3)
|
|
|
|
|
|
|
|
|
|
|
47,260
|
|
|
|
|
|
47,260
|
|
58.08
|
|
1,000,022
|
|
Robert Buck
|
|
|
|
|
106,313
|
|
425,250
|
|
850,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019(2)
|
|
|
|
|
|
|
|
|
2,350
|
|
9,400
|
|
18,800
|
|
9,400
|
|
|
|
|
|
652,464
|
|
|
|
2/18/2019(3)
|
|
|
|
|
|
|
|
|
|
|
17,200
|
|
|
|
|
|
17,200
|
|
58.08
|
|
363,952
|
|
John Peterson
|
|
|
|
|
84,875
|
|
339,500
|
|
679,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019(2)
|
|
|
|
|
|
|
|
|
1,810
|
|
7,240
|
|
14,480
|
|
7,240
|
|
|
|
|
|
502,528
|
|
|
|
2/18/2019(3)
|
|
|
|
|
|
|
|
|
|
|
13,230
|
|
|
|
|
|
13,230
|
|
58.08
|
|
279,947
|
|
Steven Raia
|
|
|
|
|
62,250
|
|
249,000
|
|
498,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019(2)
|
|
|
|
|
|
|
|
|
1,135
|
|
4,540
|
|
9,080
|
|
4,540
|
|
|
|
|
|
315,121
|
|
|
|
2/18/2019(3)
|
|
|
|
|
|
|
|
|
|
|
8,320
|
|
|
|
|
|
8,320
|
|
58.08
|
|
176,051
|
|
Donald Walther
|
|
|
|
|
73,125
|
|
292,500
|
|
585,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/06/2019(4)
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
6,780
|
|
—
|
|
—
|
|
500,364
|
|
|
(1)
|
|
The amounts shown reflect the threshold, target and maximum opportunities under the 2019 annual cash bonus program. The amounts actually paid under this program are set forth in the “Summary Compensation Table” above.
|
|
(2)
|
|
The amounts shown reflect the number of shares of restricted stock granted on February 18, 2019 under the Amended LITP which accounts for 60% of the 2019 equity program under the Amended LTIP. Performance-based restricted stock has estimated future payout ranges from threshold (25%) to target (100%) to maximum (200%) depending on company performance. These restricted stock awards vest on February 15, 2022, three years after the grant date. The aggregate grant date fair value was calculated in accordance with FASB ASC 718, utilizing the assumptions discussed in Note 1 and Note 14 to our consolidated financial statements for the year ended December 31, 2019. Amounts disclosed are based on current estimates of future performance and attainment of specific annual performance goals; however, the ultimate payouts will be determined based on actual three-year cumulative performance, which may vary from such estimates.
|
|
(3)
|
|
The amounts shown reflect the stock options granted on February 18, 2019, at a per share value of $21.16 calculated in accordance with FASB ASC 718. Stock options account for 40% of the 2019 equity program under the Amended LTIP. These options vest ratably in three equal installments over three years beginning on February 15, 2020, one year after the grant date.
|
|
(4)
|
|
The amount shown represents a sign-on restricted stock grant vesting ratably in three equal installments over three years beginning on May 1, 2019, one year after the grant date.
|
|
TopBuild Corp. - Proxy Statement 34
|
2019 Outstanding Equity Awards at Fiscal Year-End
The following sets forth certain information regarding equity-based awards held by each named executive officer at December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Original
Grant
Date
|
|
Numbers of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Numbers of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
of Stock
that have
not
Vested
(#)(3)
|
|
Market
Value of
Shares of
Stock that
have not
Vested
($)(4)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares that
have not
Vested
(#)(5)
|
|
Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Shares that
have not
Vested
($)(4)
|
|
Gerald Volas
|
|
|
|
|
|
|
|
|
|
|
|
78,972
|
|
8,140,434
|
|
43,540
|
|
4,488,103
|
|
|
|
2/11/2015
|
|
—
|
|
6,981
|
|
27.13
|
|
2/11/2025
|
|
|
|
|
|
|
|
|
|
|
|
7/08/2015
|
|
—
|
|
19,158
|
|
27.10
|
|
7/08/2025
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016
|
|
—
|
|
27,452
|
|
26.30
|
|
2/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2017
|
|
36,933
|
|
18,467
|
(2)
|
38.39
|
|
2/21/2027
|
|
|
|
|
|
|
|
|
|
|
|
2/19/2018
|
|
10,690
|
|
21,380
|
(2)
|
74.50
|
|
2/19/2028
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019
|
|
—
|
|
47,260
|
(2)
|
58.08
|
|
2/18/2029
|
|
|
|
|
|
|
|
|
|
Robert Buck
|
|
|
|
|
|
|
|
|
|
|
|
33,062
|
|
3,408,031
|
|
16,240
|
|
1,674,019
|
|
|
|
7/08/2015
|
|
—
|
|
9,578
|
|
27.10
|
|
7/08/2025
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016
|
|
—
|
|
13,236
|
|
26.30
|
|
2/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2016
|
|
—
|
|
7,387
|
(2)
|
38.39
|
|
2/21/2027
|
|
|
|
|
|
|
|
|
|
|
|
2/19/2017
|
|
—
|
|
8,260
|
(2)
|
74.50
|
|
2/19/2028
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2018
|
|
—
|
|
17,200
|
(2)
|
58.08
|
|
2/18/2029
|
|
|
|
|
|
|
|
|
|
John Peterson
|
|
|
|
|
|
|
|
|
|
|
|
21,922
|
|
2,259,720
|
|
12,080
|
|
1,245,206
|
|
|
|
7/08/2015
|
|
—
|
|
4,790
|
|
27.10
|
|
7/08/2025
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016
|
|
—
|
|
8,704
|
(2)
|
26.30
|
|
2/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2017
|
|
—
|
|
5,081
|
(2)
|
38.39
|
|
2/21/2027
|
|
|
|
|
|
|
|
|
|
|
|
2/19/2018
|
|
—
|
|
5,834
|
(2)
|
74.50
|
|
2/19/2028
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019
|
|
—
|
|
13,230
|
(2)
|
58.08
|
|
2/19/2029
|
|
|
|
|
|
|
|
|
|
Steve Raia
|
|
|
|
|
|
|
|
|
|
|
|
13,886
|
|
1,431,369
|
|
7,600
|
|
783,408
|
|
|
|
2/22/2016
|
|
—
|
|
6,276
|
|
26.30
|
|
2/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2017
|
|
—
|
|
3,141
|
(2)
|
38.39
|
|
2/21/2027
|
|
|
|
|
|
|
|
|
|
|
|
2/19/2018
|
|
—
|
|
3,694
|
(2)
|
74.50
|
|
2/19/2028
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2019
|
|
—
|
|
8,320
|
(2)
|
58.08
|
|
2/18/2029
|
|
|
|
|
|
|
|
|
|
Donald Walther
|
|
|
|
—
|
|
|
|
|
|
|
|
6,780
|
|
698,882
|
|
—
|
|
—
|
|
|
(1)
|
|
Except as otherwise noted, stock options become exercisable or vest in equal annual installments of 20% commencing in the year following the year of grant.
|
|
(2)
|
|
Stock options become exercisable or vest in equal annual installments of 33% commencing in the year following the year of grant.
|
|
(3)
|
|
Represents unvested restricted stock awards and restricted stock awards with performance conditions that have been achieved as of December 31, 2019.
|
|
(4)
|
|
Based on TopBuild’s closing stock price of $103.08 on December 31, 2019.
|
|
(5)
|
|
Represents unvested restricted stock awards with performance conditions that have not been earned as of December 31, 2019. The restricted stock with performance conditions granted in 2018 and 2019 under the Amended LTIP will vest, if at all, based on the Company’s achievement of certain performance measures for the performance periods beginning on January 1, 2018 and 2019 and ending on December 31, 2020 and 2021, respectively. As of December 31, 2019, the achievement level with respect to these metrics was estimated at or above target. Accordingly, the number and value of the shares of performance-vesting restricted stock that are expected to vest reported in the table reflect amounts based on target performance. The actual number of shares that will vest with respect to the performance-vesting shares of restricted stock granted in 2018 and 2019 is not yet determinable.
|
2019 Option Exercises and Stock Vested
The following table provides additional information about stock option exercises and shares acquired upon the vesting of TopBuild Corp. stock awards, including the value realized, during the fiscal year ended December 31, 2019, by the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
Value Realized
on Exercise
($)
|
|
|
Number of Shares Acquired on
Vesting
(#)
|
|
Value Realized on
Vesting
($)
|
|
Gerald Volas
|
|
238,124
|
|
15,033,106
|
|
|
90,123
|
|
5,304,344
|
|
Robert Buck
|
|
38,170
|
|
1,503,046
|
|
|
38,334
|
|
2,277,600
|
|
John Peterson
|
|
24,002
|
|
879,030
|
|
|
22,392
|
|
1,329,626
|
|
Steven Raia
|
|
12,568
|
|
334,365
|
|
|
13,856
|
|
904,593
|
|
Donald Walther
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
TopBuild Corp. - Proxy Statement 35
|
Payments upon a Change of Control
The treatment of outstanding awards upon the occurrence of a change in control, if any, shall be determined by the Compensation Committee at the time such awards are granted and set forth in the applicable award agreement. For purposes of the Amended LTIP, the term “change in control” means the occurrence of any of the following events:
|
(i)
|
|
any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing more than 40% of either the then-outstanding shares of common stock of the Company or the combined voting power of the Company’s then-outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in paragraph (iii)(1) below;
|
|
(ii)
|
|
the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on January 1, 2020, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then in office who either were directors on January 1, 2020 or whose appointment, election or nomination for election was previously so approved or recommended;
|
|
(iii)
|
|
there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates) representing more than 40% of the combined voting power of the Company’s then-outstanding securities; or
|
|
(iv)
|
|
the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
|
For purposes of the definition of Change in Control, the terms “Beneficial Owner” or “Beneficially Owned” have meanings set forth in Rule 13d‑3 under the Exchange Act and “Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term does not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
Executive Severance Plan and Change in Control and Severance Agreement
In order to provide a vehicle to ensure retention of our executive officers, the Board of Directors adopted an Executive Severance and Change-in-Control Plan in February 2016, which was amended and restated on February 18, 2019 (the “Severance Plan”). In addition, on March 1, 2016, we entered into a Change in Control and Severance Agreement, which was amended on February 22, 2019 (the “Severance Agreement”) with Gerald Volas, our Chief Executive Officer and a member of our Board of Directors. The Severance Plan and the Severance Agreement provide severance benefits to certain executive officers in the event their employment is terminated under certain conditions, as outlined below.
|
TopBuild Corp. - Proxy Statement 36
|
In order to be covered, eligible executive officers must sign a non-compete, non-solicitation and confidentiality agreement and a release of all claims against the Company and its affiliates. Under the terms of the Severance Plan and the Severance Agreement, each participant would be entitled to severance payments and benefits in the event that he or she experiences a “qualifying termination” (i.e., termination without cause by the Company or for a good reason by the executive officer). Each event is defined in the Severance Plan and the Severance Agreement.
If an eligible executive officer experiences a qualifying termination under the Severance Plan or the Severance Agreement, the executive officer would be entitled to an incentive payment that is based on the target amount established under the Company’s annual incentive plan for the year in which the termination occurs. The payment would be adjusted on a pro-rata basis according to the number of calendar days the eligible executive officer was actually employed during such plan year and is determined based on actual performance after the performance period ends. The eligible executive officer would also receive salary continuation payments in an amount equal to such multiple as may be identified in the Severance Plan or the Severance Agreement multiplied by the executive officer’s base salary and bonus at target. The salary continuation and incentive continuation, if applicable, would be paid in a lump sum or installments over the severance period and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A. The Company would provide health and wellness benefits to the eligible named executive officer and his or her dependents for the period identified in the Severance Plan or the Severance Agreement.
Executive Severance Plan Elements 2019
Name
|
|
Severance
Plan
Multiple
(#)
|
|
Eligible for
Pro-rata Target
Incentive with
Respect to Year
of Termination
|
|
Eligible for
Salary
Continuation
|
|
Eligible for
Bonus
Continuation
|
|
Medical Plan
Provided
During
Continuation
Period
|
|
Gerald Volas
|
|
2
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Robert Buck
|
|
1
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
John Peterson
|
|
1
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Steven Raia
|
|
1
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Donald Walther
|
|
1
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Executive Severance Compensation Table
Name
|
|
Salary in
Year of
Termination
($)(1)
|
|
Value of
Salary
Continuation
($)(2)
|
|
Value of
Bonus
Continuation
($)(3)
|
|
Value of
Pro rata
Bonus
($)(4)
|
|
Value of
Medical Plan
Provided
During
Continuation
Period
($)(5)
|
|
Total
Company
Severance
Expenses
($)
|
|
Gerald Volas
|
|
861,000
|
|
1,722,000
|
|
1,808,100
|
|
1,158,993
|
|
5,778
|
|
4,694,871
|
|
Robert Buck
|
|
567,000
|
|
567,000
|
|
425,250
|
|
545,171
|
|
3,121
|
|
1,540,542
|
|
John Peterson
|
|
485,000
|
|
485,000
|
|
339,500
|
|
435,239
|
|
8,433
|
|
1,268,172
|
|
Steven Raia
|
|
415,000
|
|
415,000
|
|
249,000
|
|
306,669
|
|
6,084
|
|
976,753
|
|
Donald Walther
|
|
450,000
|
|
450,000
|
|
292,500
|
|
246,566
|
|
8,433
|
|
997,499
|
|
|
(1)
|
|
Represents the salary for the named executive officers if they terminated on December 31, 2019.
|
|
(2)
|
|
Equals the base pay times the multiple.
|
|
(3)
|
|
Represents the bonus at target times the multiple.
|
|
(4)
|
|
Equals the prorated bonus of time worked and target performance. Amount represents Bonus if the named executive was terminated on December 31, 2019.
|
|
(5)
|
|
Benefits continuation is paid for 24 months for Gerald Volas and 12 months for all other named executive officers.
|
Unvested stock options vest pro-rata and must be exercised within three months of the termination date. Unvested performance shares vest pro-rata as of the termination date based on actual performance against target. Unvested restricted stock awards vest pro-rata as of the termination date based on the portion of the vesting period during which the executive officer was an active participant.
|
TopBuild Corp. - Proxy Statement 37
|
Executive Change in Control Plan Elements 2019
Name
|
|
Severance
Plan
Multiple
(#)
|
|
Eligible for
Pro-rata Target
Incentive with
Respect to Year of
Termination
|
|
Eligible for
Salary
Continuation
|
|
Eligible for
Bonus
Continuation
|
|
Medical Plan
Provided
During
Continuation
Period
|
|
Gerald Volas
|
|
3
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Robert Buck
|
|
2
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
John Peterson
|
|
2
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Steven Raia
|
|
2
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Donald Walther
|
|
2
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Yes
|
|
Executive Change in Control Compensation Table
Name
|
|
Salary in
Year of
Termination
($)(1)
|
|
Value of
Salary
Continuation
($)(2)
|
|
Value of
Bonus
Continuation
($)(3)
|
|
Value of
Pro rata
Bonus
($)(4)
|
|
Value of
Medical Plan
Provided
During
Continuation
Period
($)(5)
|
|
Value of
Unvested
Stock
Awards and
Options
($)(6)
|
|
Total
Company
Severance
Expenses
($)
|
|
Gerald Volas
|
|
861,000
|
|
2,583,000
|
|
2,712,150
|
|
1,158,993
|
|
8,668
|
|
17,432,239
|
|
23,895,050
|
|
Robert Buck
|
|
567,000
|
|
1,134,000
|
|
850,500
|
|
545,171
|
|
6,242
|
|
7,025,483
|
|
9,561,395
|
|
John Peterson
|
|
485,000
|
|
970,000
|
|
679,000
|
|
435,239
|
|
16,866
|
|
4,741,451
|
|
6,842,556
|
|
Steven Raia
|
|
415,000
|
|
830,000
|
|
498,000
|
|
306,669
|
|
12,168
|
|
2,831,428
|
|
4,478,265
|
|
Donald Walther
|
|
450,000
|
|
900,000
|
|
585,000
|
|
246,566
|
|
16,866
|
|
698,882
|
|
2,447,314
|
|
|
(1)
|
|
Represents the salary for the named executive officers if they terminated on December 31, 2019.
|
|
(2)
|
|
Equals the base pay times the CIC multiple.
|
|
(3)
|
|
Represents the bonus at target times the CIC multiple.
|
|
(4)
|
|
Equals the prorated bonus of time worked and target performance. Amount represents Bonus if a change in control occurred on December 31, 2019.
|
|
(5)
|
|
Benefits continuation is paid for 36 months for Gerald Volas and 24 months for all other named executive officers.
|
|
(6)
|
|
Calculated based on TopBuild’s closing stock price of $103.08 on December 31, 2019.
|
Unvested stock options become 100% vested following a termination without cause or for good reason in connection with a Change in Control. Outstanding and unvested performance shares become 100% vested based on performance at target levels following a termination without cause or for good reason in connection with a Change in Control. Unvested restricted stock awards become 100% vested following a termination without cause or for good reason in connection with a Change in Control.
Subsequent Events
CEO Employment and Retirement Transition Agreement
On January 10, 2020, the Company announced that as part of its succession planning, Mr. Volas will retire from the Company and the Board of Directors on December 31, 2020 (the “Succession Date”).
In connection with Mr. Volas’s transition, the Company and Mr. Volas entered into an employment and retirement transition agreement (the “Volas Agreement”) on January 9, 2020. At the request of the Board to facilitate a smooth transition, Mr. Volas will resign as CEO and director as of the Succession Date. From the Succession Date to June 30, 2021 (unless sooner terminated in accordance with the terms of the Volas Agreement, the “Post-Succession Period”), Mr. Volas will serve as a nonexecutive employee of the Company in the position of special advisor to the CEO on a part-time basis.
The Volas Agreement provides that Mr. Volas:
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·
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will continue to serve as CEO on the same terms and conditions, including the terms and conditions of his current Severance Agreement, through the Succession Date;
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·
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will continue to be eligible for an annual bonus and long-term incentive grant for fiscal year 2020 (including a grant of performance shares, which will continue to vest during the applicable performance period following Mr. Volas’ retirement);
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TopBuild Corp. - Proxy Statement 38
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·
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during the Post-Succession Period, will continue to receive the same base salary rate as in effect at the Succession Date;
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·
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during the Post-Succession Period, will continue to be eligible for compensation and benefit plans provided by the Company to similarly situated employees (other than paid time off); and
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·
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will not be eligible for an annual bonus opportunity or long-term incentive grant in respect of fiscal year 2021.
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In connection with entering into the Volas Agreement, Mr. Volas executed a release of claims in favor of the Company. In addition, in order to retain the benefits under the Volas Agreement, Mr. Volas must re-execute and not revoke the release within the 15 days prior to June 30, 2021.
Contemporaneously with the Volas Agreement, Mr. Volas entered into a new restrictive covenant agreement, pursuant to which Mr. Volas will be bound, while employed by the Company and for 36 months following his termination of employment, by a non-competition provision and a provision for the non-solicitation of employees, contractors and customers.
The Severance Agreement with Mr. Volas will remain in full force until the Succession Date at which point the Severance Agreement will cease to be of effect, other than certain Severance Agreement provisions relating to accelerated vesting and the extended post-termination exercise period of equity awards in connection with retirement.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Gerald Volas, our Chief Executive Officer:
For 2019, our last completed fiscal year:
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·
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the median of the annual total compensation of all of our employees, other than Mr. Volas, was $53,876; and
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·
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the annual total compensation of Mr. Volas, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $4,816,248.
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Based on this information, for 2019 the ratio of the annual total compensation of Mr. Volas, our CEO, to the median of the annual total compensation of all of our employees was 89 to 1.
We determined that, as of December 31, 2019, our employee population consisted of approximately 10,299 individuals with all of these individuals located in the U.S. This population consisted of our full-time, part-time, temporary employees and seasonal workers. We selected December 31, 2019, which is within the last three months of 2019, as the date upon which we would identify the “median employee” because it enabled us to make such identification in a reasonably efficient and economical manner. To identify the “median employee” from our employee population, we calculated the annual total compensation of all of our employees using the same components that are included for our CEO in the “Total” column of our 2019 Summary Compensation Table included in this Proxy Statement. Additionally, because all our employees are located in the U.S., as is our CEO, we did not make any cost-of living adjustments in identifying the “median employee.” After we identified our median employee, we combined all of the elements of such employee’s compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $53,876. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2019 Summary Compensation Table included in this Proxy Statement.
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TopBuild Corp. - Proxy Statement 39
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PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP, an independent registered public accounting firm (“PwC”), to audit the Company’s financial statements for the fiscal year ending December 31, 2020. The Company is submitting its appointment of PwC for ratification by the shareholders at the Annual Meeting. A representative of PwC, who is expected to be present at the Annual Meeting, will have the opportunity to make a statement and be available to respond to appropriate questions.
Although the selection and appointment of our independent registered public accounting firm is not required to be submitted to a vote of shareholders, the Board deems it desirable to obtain shareholders’ ratification and approval of this appointment. If the appointment is not ratified by our shareholders, the adverse vote will be considered as an indication to the Audit Committee that it should consider selecting another independent registered public accounting firm for the following fiscal year, but it is not required to do so. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a new independent registered public accounting firm at any time during the year if it believes that such a change would be in the Company’s best interest.
In making its recommendation to ratify the appointment of PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020, the Audit Committee considered whether the services provided by PwC are compatible with maintaining the independence of PwC.
Before the Audit Committee selected PwC, it carefully considered the independence and qualifications of that firm, including their past performance as the Company’s independent registered public accounting firm and their reputation for integrity and for competence in the fields of accounting and auditing.
Audit Fees
The following table sets forth the aggregate fees billed to us by PwC for the years ended December 31, 2018 and 2019, all of which were approved by the Audit Committee:
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Year Ended
December 31, 2018 ($)
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Year Ended
December 31, 2019 ($)
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Audit Fees(1)
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2,737,125
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2,079,600
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Audit-Related Fees(2)
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—
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|
—
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Tax Fees(3)
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30,000
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|
—
|
|
All Other Fees(4)
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2,759
|
|
2,700
|
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TOTAL
|
|
2,769,884
|
|
2,082,300
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|
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(1)
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Audit Fees consisted of fees billed or estimated to be billed by PwC for the audit of our annual financial statements included in our Annual Report on Form 10‑K, review of our interim financial statements included in our Quarterly Reports on Form 10‑Q, and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the years ended December 31, 2018 and 2019.
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(2)
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Audit-Related Fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.”
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(3)
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Tax Fees consisted of fees for tax consulting services.
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(4)
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All other Fees consisted of fees other than the services reported above. The services provided in the years ended December 31, 2018 and 2019 consisted of a subscription to an accounting website.
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Audit Committee Pre-Approval Policies and Procedures
The Audit Committee is responsible for appointing, compensating and overseeing the work performed by PwC as well as audit services performed by other independent public accounting firms. The Audit Committee has established a policy governing our use of the services of our independent registered public accounting firm. Under the policy, our Audit Committee is required to pre-approve all audit and non-audit services performed by our independent registered public accounting firm in order to ensure that the provision of such services does not impair the independent registered public accounting firm’s independence.
The Board recommends that you vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm.
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TopBuild Corp. - Proxy Statement 40
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PROPOSAL 3: ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Exchange Act, and more specifically, Section 14A of the Exchange Act which was added under the DoddFrank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide shareholders with the opportunity to vote to approve, on a nonbinding advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s rules (commonly referred to as “SayonPay”).
Our compensation program for named executive officers is intended to link compensation to performance; to provide competitive compensation levels to attract, retain and reward executives; and to align management’s interests with those of our shareholders. The compensation provided to the named executive officers is dependent on the Company’s financial, operational and strategic performance and the named executive officer’s individual performance and is intended to drive creation of long-term shareholder value. In addition, the Amended LTIP provides that, in the event the Company has a restatement of its financial statements, other than as a result of changes to accounting rules and regulations, the Compensation Committee may require the return of cash or equity which a participant may have acquired during the three (3) year period preceding the date of restatement of such restated financial results.
We encourage shareholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, the Summary Compensation Table and the other related tables and disclosure for a detailed description of the fiscal year 2019 compensation of our named executive officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this Proxy Statement appropriately reflects our results during the fiscal year.
The vote on this resolution is not intended to address any specific element of compensation; rather, the advisory vote relates to the overall compensation of our named executive officers. This vote is advisory, which means that it is not binding on the Company, the Board or the Compensation Committee. However, we value the opinion of our shareholders and the Board and the Compensation Committee will review the voting results and will take into account the outcome of the vote when considering future compensation decisions for the named executive officers.
Accordingly, we ask our shareholders to vote on the following resolution:
“RESOLVED, that the Company’s shareholders approve, on a nonbinding advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative discussion.”
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The Board recommends that you vote “FOR” the proposal to approve, on an advisory basis, the compensation of our named executive officers.
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TopBuild Corp. - Proxy Statement 41
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2019, about our common stock that may be issued upon the exercise of options, warrants and rights granted to employees or directors under the Amended LTIP.
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Plan Category
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Number of Securities to be Issued Upon
Exercise of Outstanding Options,
Warrants and Rights
(#)
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Weighted Average Exercise
Price of Outstanding Options,
Warrants and Rights
($)
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|
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans
(#)
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Equity compensation plans approved by shareholders
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|
373,518(1)
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45.90
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|
2,326,603 (2)
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Equity compensation plans not approved by shareholders
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—
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|
—
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—
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TOTAL
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373,518
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|
45.90
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|
2,326,603
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|
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(1)
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Amount includes 373,518 shares issuable upon exercise of outstanding options.
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(2)
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Amount represents the total number of securities remaining available for future issuance under the Amended LTIP.
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OTHER MATTERS
Except as discussed in this Proxy Statement, the Board does not know of any matters that are to be properly presented at the Annual Meeting other than those stated in the Notice of 2020 Annual Meeting of Shareholders and referred to in this Proxy Statement.
If other matters properly come before the Annual Meeting, it is the intention of the persons named in the proxy card to vote thereon in accordance with their best judgment. Moreover, the Board reserves the right to adjourn or postpone the Annual Meeting for failure to obtain a quorum, for legitimate scheduling purposes or based on other circumstances that, in the Board’s belief, would cause such adjournments or postponements to be in the best interests of all of our shareholders.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our directors, certain executive officers, and persons who own more than ten (10) percent of our outstanding common stock to file reports of ownership and changes in ownership with the SEC and the NYSE. SEC regulations require the Company to identify anyone who failed to file a required report or filed a late report during the most recent fiscal year. To the Company’s knowledge, with respect to the year ended December 31, 2019, all applicable filings were timely filed, except for a Form 4 reporting the sale of common stock by Mr. Robert Buck, which was filed late due to an administrative error.
ANNUAL REPORT
The Notice that you received in the mail contains instructions on how to access both the Company’s 2019 Annual Report to Shareholders, which includes the Company’s Annual Report on Form 10‑K for its fiscal year ended December 31, 2019, and this Proxy Statement.
Upon request, the Company will provide a copy of its 2019 Annual Report to Shareholders, which includes the Company’s Annual Report on Form 10‑K for its fiscal year ended December 31, 2019. Upon payment of a reasonable fee, shareholders may also obtain a copy of the exhibits to our Annual Report on Form 10‑K for our fiscal year ended December 31, 2019. All such requests should be directed to:
Mail:
TopBuild Corp. Investor Relations
475 North Williamson Boulevard
Daytona Beach, Florida 32114‑7101
Phone:
(386) 763‑8801
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TopBuild Corp. - Proxy Statement 42
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SHAREHOLDER PROPOSALS FOR 2021 ANNUAL MEETING
Shareholder Proposals and Proxies
Shareholder proposals intended to be included in the Company’s Proxy Statement and form of proxy for use in connection with the Company’s 2021 Annual Shareholder Meeting must be received by the Corporate Secretary at the Company’s principal executive offices at 475 North Williamson Boulevard, Daytona Beach, Florida 32114‑7101, no later than November 18, 2020 (120 calendar days preceding the one (1) year anniversary of the date of this Proxy Statement), and must otherwise satisfy the procedures prescribed by Rule 14a‑8 under the Exchange Act. We suggest that any such proposals be submitted by certified mail, return receipt requested.
Pursuant to Rule 14a‑4 under the Exchange Act, shareholder proxies obtained by our Board in connection with our 2021 Annual Shareholder Meeting will confer on the proxies and attorneysinfact named therein discretionary authority to vote on any matters presented at such Annual Meeting which were not included in the Company’s Proxy Statement in connection with such Annual Meeting, unless notice of the matter to be presented at the Annual Meeting is provided to the Company’s Corporate Secretary before February 1, 2021 (the 45th day preceding the one (1) year anniversary of the date on which we first sent this Proxy Statement for the 2020 Annual Shareholder Meeting).
Director Nominations or Other Business
Under our Amended and Restated Bylaws, for nominations or other business to be properly brought by a shareholder at our 2021 Annual Shareholder Meeting, the shareholder must have given written notice of such nomination(s) or business, either by personal delivery or by U.S. mail, postage prepaid, to the Corporate Secretary of the Company, at the Company’s principal executive offices at 475 North Williamson Boulevard, Daytona Beach, Florida 32114‑7101, not less than 120 days (or December 28, 2020) nor more than 150 days (or November 28, 2020) prior to the first anniversary of the Annual Meeting. Such notice must contain all of the information required by our Amended and Restated Bylaws, including, without limitation, all information that would be required in connection with nomination(s) under the SEC’s proxy rules if such nomination were the subject of a proxy solicitation and the written consent of each nominee for election to our Board named therein to serve if elected. The chairman of the meeting may refuse to acknowledge any nomination(s) or other business not properly brought pursuant to the procedures described above.
If you have any questions, please contact our Investor Relations department by telephone at (386) 763‑8801.
EXPENSES OF SOLICITATION
The Company will bear the cost of the solicitation of proxies. In addition to mail and email, proxies may be solicited personally, via the Internet, by telephone, by facsimile, or by our employees without additional compensation. We will reimburse brokers and other persons holding shares of our common stock in their names, or in the names of nominees, for their expenses for forwarding proxy materials to principals and beneficial owners and obtaining their proxies.
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TopBuild Corp. - Proxy Statement 43
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Annex A – Reconciliation of GAAP to Non-GAAP Financial Measures
This proxy statement includes (1) increase in EPS, as adjusted to exclude the impact of acquisitions, (2) operating income, as adjusted to exclude the impact of acquisitions and other charges and (3) net sales, as adjusted to exclude the impact of acquisitions and other charges, which are important financial measures for the Company but are not financial measures defined by Generally Accepted Accounting Principles (GAAP).
The Company believes that these non-GAAP financial measures, which are used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in the tables below. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results under GAAP. These measures as we have calculated them may not be comparable to similarly titled measures reported by other companies.
EPS, as reported, was $5.56 per diluted share for 2019, and $3.78 per diluted share for 2018. A reconciliation of EPS, as adjusted to exclude the impact of acquisitions, to income before income taxes, as reported, follows:
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Non-GAAP Reconciliations (Unaudited)
|
|
|
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(in thousands, except share and per common share amounts)
|
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|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
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2018
|
|
Adjusted Income Per Common Share Reconciliation
|
|
|
|
|
|
|
|
Income before income taxes, as reported
|
|
$
|
253,778
|
|
$
|
180,824
|
|
|
|
|
|
|
|
|
|
Rationalization charges
|
|
|
1,992
|
|
|
7,736
|
|
Acquisition related costs
|
|
|
1,200
|
|
|
15,925
|
|
Income before income taxes, as adjusted
|
|
|
256,970
|
|
|
204,485
|
|
|
|
|
|
|
|
|
|
Tax rate at 26.5% and 27.0% for 2019 and 2018, respectively
|
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|
(68,097)
|
|
|
(55,211)
|
|
Income, as adjusted
|
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$
|
188,873
|
|
$
|
149,274
|
|
|
|
|
|
|
|
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|
Income per common share, as adjusted
|
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$
|
5.49
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|
$
|
4.19
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares outstanding
|
|
|
34,376,555
|
|
|
35,613,319
|
|
The Company uses EPS, as adjusted to exclude the impact of acquisitions, to evaluate the performance of the Company’s operations because such excluded items impact the comparability of results from period to period over the long term. The Company believes that information about EPS exclusive of these impacts is useful to investors, particularly where the impact of our acquisitions is significant in relation to reported earnings trends, because the measure allows for comparability between periods of the operating performance of the Company’s business.
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TopBuild Corp. - Proxy Statement 44
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A reconciliation of operating income, as adjusted to exclude the impact of acquisitions and other charges, to operating income and net sales, as adjusted to exclude the impact of acquisitions and other charges, to net sales:
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|
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Non-GAAP Reconciliations (Unaudited)
|
|
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(in thousands, except share and per common share amounts)
|
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|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
|
|
|
Adjusted Sales and Operating Income Reconciliation
|
|
|
|
|
|
|
|
|
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Net Sales, as reported
|
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$
|
2,624,121
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|
2019 Acquisitions
|
|
|
(4,680)
|
|
Net Sales, as adjusted
|
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$
|
2,619,441
|
|
|
|
|
|
|
Operating Income, as reported
|
|
$
|
289,523
|
|
Acquisition related (profits) / costs
|
|
|
98
|
|
Amortization of Significant Legal Settlement
|
|
|
(6,000)
|
|
Operating Income, as adjusted
|
|
$
|
283,621
|
|
|
|
|
|
|
Operating Income, as adjusted, as a percentage of Net Sales, as adjusted
|
|
|
10.8%
|
|
|
|
|
|
|
The Company uses operating income, as adjusted to exclude the impact of acquisitions and other charges, and net sales, as adjusted to exclude the impact of acquisitions and other charges, for purposes of determining the achievement of 2019 performance targets for the annual incentive performance-based cash bonus opportunity because such excluded items impact the comparability of results from prior periods when the targets were set.
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TopBuild Corp. - Proxy Statement 45
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 27, 2020
This Proxy Statement and our Annual Report on Form 10‑K for our fiscal year ended December 31, 2019 are available to you on the Internet at www.proxyvote.com.
To view this material, you will need your control number from your proxy card.
The Annual Meeting (for shareholders as of the March 2, 2020, record date) will be held on April 27, 2020, at 10:00 AM Eastern Time at the Hyatt Regency Orlando International Airport, 9300 Jeff Fuqua Boulevard, Orlando, Florida 32827.
For directions to the Annual Meeting and to vote in person, please call Investor Relations at (386) 763‑8801. Shareholders will vote at the Annual Meeting on whether to:
|
1.
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elect Alec C. Covington, Gerald Volas, Carl T. Camden, Joseph S. Cantie, Tina M. Donikowski, Mark A. Petrarca and Nancy M. Taylor as Directors;
|
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2.
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ratify the Company’s appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2020; and
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|
3.
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approve, on an advisory basis, the compensation of our named executive officers as described in the Proxy Statement.
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The Board of Directors recommends that you vote “FOR” the election of each of Alec C. Covington, Gerald Volas, Carl T. Camden, Joseph S. Cantie, Tina M. Donikowski, Mark A. Petrarca and Nancy M. Taylor as Directors;; “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; and “FOR” the approval, on an advisory basis, of the compensation of the Company’s named executive officers.
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March 18, 2020
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TopBuild Corp. - Proxy Statement 46
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ADMISSION TO THE 2020 ANNUAL MEETING
You will need an admission card (or other proof of stock ownership) and proper identification for admission to the Annual Meeting of Shareholders at the Hyatt Regency Orlando International Airport, 9300 Jeff Fuqua Boulevard, Orlando, Florida 32827 on April 27, 2020. If you plan to attend the Annual Meeting, please be sure to request an admittance card by:
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·
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marking the appropriate box on the proxy card and mailing the card using the enclosed envelope if you requested to receive printed proxy materials;
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·
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|
indicating your desire to attend the meeting through our Internet voting procedure; or
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·
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|
calling our Investor Relations department at (386) 763‑8801.
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An admission card will be mailed to you if:
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·
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your TopBuild shares are registered in your name; or
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|
·
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|
your TopBuild shares are held in the name of a broker or other nominee and you provide written evidence of your stock ownership as of the March 2, 2020 record date, such as a brokerage statement or letter from your broker.
|
Your admission card will serve as verification of your ownership.
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TopBuild Corp. - Proxy Statement 47
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TopBuild Corp. - Proxy Statement 48
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TOPBUILD CORP. 475 NORTH WILLIAMSON BOULEVARD DAYTONA BEACH, FL 32114 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E97275-Z76130-P31753 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. TOPBUILD CORP. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! The Board of Directors recommends you vote FOR proposals 2 and 3. 1a. Alec C. Covington For Against Abstain ! ! ! 2. To ratify the Company's appointment of Pricewaterhouse-Coopers LLP to serve as the Company's independent registered public accounting firm for the Company's fiscal year ending December 31, 2020; and 1b. Gerald Volas 1c. Carl T. Camden ! ! ! 1d. Joseph S. Cantie 3. To approve, on an advisory basis, the compensation of the Company's named executive officers. 1e. Tina M. Donikowski NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR the election of the nominees for Director named in Proposal 1 in this proxy card, and FOR Proposals 2 and 3 in this proxy card. 1f. Mark A. Petrarca 1g. Nancy M. Taylor For address changes and/or comments, please check this box and write them on the back where indicated. ! ! Yes ! No Please indicate if you plan to attend this meeting. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E97276-Z76130-P31753 PROXY TOPBUILD CORP. 475 NORTH WILLIAMSON BOULEVARD DAYTONA BEACH, FLORIDA 32114 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Joe Jacumin and Gerald Volas as Proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side, all the shares of the Common Stock of TopBuild Corp. held of record by the undersigned on March 2, 2020 at the Annual Meeting of Shareholders to be held on April 27, 2020 and any adjournment or postponements thereof. The shares represented by this proxy, when properly executed and returned, will be voted as directed herein. IF THIS PROXY IS DULY EXECUTED AND RETURNED, AND NO VOTING DIRECTIONS ARE GIVEN HEREIN, SUCH SHARES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN PROPOSAL 1 IN THIS PROXY CARD, AND "FOR" PROPOSALS 2 AND 3 IN THIS PROXY CARD. The undersigned hereby acknowledges receipt of notice of, and the proxy statement for, the aforesaid Annual Meeting of Shareholders. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side
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*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 27, 2020. TOPBUILD CORP. You are receiving this communication because you hold shares in the company named above. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of TOPBUILD CORP. 475 NORTH WILLIAMSON BOULEVARD DAYTONA BEACH, FL 32114 the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. proxy materials and voting instructions. E97293-Z76130-P31753 See the reverse side of this notice to obtain Meeting Information Meeting Type:Annual Meeting For holders as of:March 2, 2020 Date: April 27, 2020Time: 10:00 AM EDT Location: Hyatt Regency Orlando International Airport 9300 Jeff Fuqua Boulevard Orlando, Florida 32827
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Before You Vote How to Access the Proxy Materials How To Vote Please Choose One of the Following Voting Methods E97294-Z76130-P31753 Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow (located on the following page) available and follow the instructions. Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. XXXX XXXX XXXX XXXX Proxy Materials Available to VIEW or RECEIVE: NOTICE AND PROXY STATEMENTANNUAL REPORT How to View Online: Have the information that is printed in the box marked by the arrow(located on the following page) and visit: www.proxyvote .com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET:www.proxyvote.com 2) BY TELEPHONE: 1-800-579-1639 3) BY E-MAIL*:sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow(located on the following page) in the subject line. Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April 13, 2020 to facilitate timely delivery. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
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Voting Items 2. To ratify the Company's appointment of PricewaterhouseCoopers LLP to serve as the Company's independent registered public accounting firm for the Company's fiscal year ending December 31, 2020; and 3. To approve, on an advisory basis, the compensation of the Company's named executive officers. 1. Election of Directors Nominees: The Board of Directors recommends you vote FOR the following: The Board of Directors recommends you vote FOR proposals 2 and 3. 1b. Gerald Volas 1a. Alec C. Covington 1e. Tina M. Donikowski 1c. Carl T. Camden 1d. Joseph S. Cantie 1f. Mark A. Petrarca 1g. Nancy M. Taylor NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. THIS IS NOT A PROXY CARD. To vote the shares on a proxy card, you must request that a paper copy of the proxy materials be mailed to you by following the instructions in this notice. E97295-Z76130-P31753
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E97296-Z76130-P31753
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