<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
M.D.C. HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
0
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
M.D.C. HOLDINGS, INC.
3600 SOUTH YOSEMITE STREET, SUITE 900
DENVER, COLORADO 80237
March 24, 1997
To Our Shareowners:
You are invited to attend the 1997 Annual Meeting of Shareowners (the
"Meeting") of M.D.C. Holdings, Inc. (the "Company") to be held at 3600 South
Yosemite Street, Lower Level Conference Room A, Denver, Colorado, on Friday,
April 25, 1997, at 8:00 a.m., Denver time.
Following this letter is the formal notice of the Meeting and a proxy
statement describing the matters to be acted upon at the Meeting. Shareowners
also are entitled to vote on any other matters which properly come before the
Meeting.
While many of our shareowners have exercised their right to vote their
shares in person at past meetings, we recognize that many shareowners are not
able to attend the Meeting. Accordingly, enclosed is a proxy card that will
enable you to vote your shares on the matters to be considered at the Meeting
even if you are unable to attend. All you need to do is mark the proxy card to
indicate your vote, date and sign the proxy card and return it to the Company in
the enclosed postage-paid envelope as soon as conveniently possible. If you
desire to vote in accordance with management's recommendations, you need not
mark your vote on the proxy card but need only sign, date and return it to the
Company in the enclosed postage-paid envelope.
WHETHER YOU OWN FEW OR MANY SHARES OF STOCK, PLEASE BE SURE YOU ARE
REPRESENTED AT THE MEETING BY ATTENDING IN PERSON OR BY RETURNING YOUR PROXY
CARD AS SOON AS POSSIBLE.
Sincerely,
[SIG]
Larry A. Mizel
CHAIRMAN OF THE BOARD
<PAGE>
[LOGO]
M.D.C. HOLDINGS, INC.
3600 SOUTH YOSEMITE STREET, SUITE 900
DENVER, COLORADO 80237
------------------------
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
---------------------
To Our Shareowners:
The 1997 Annual Meeting of Shareowners (the "Meeting") of M.D.C. Holdings,
Inc. (the "Company") will be held at 3600 South Yosemite Street, Lower Level
Conference Room A, Denver, Colorado, on Friday, April 25, 1997, at 8:00 a.m.,
Denver time, to consider and act upon the following matters:
1. the election of Steven J. Borick and David D. Mandarich, two Class III
Directors, for three-year terms expiring in 2000 and the election of
Larry A. Mizel, a Class I Director, for a one-year term expiring in 1998;
2. an amendment to the Company's Director Equity Incentive Plan in order to
increase by 350,000 the number of shares of common stock authorized for
issuance pursuant to the Plan;
3. a shareowner proposal to provide for cumulative voting in the election
of directors; and
4. such other business as properly may come before the Meeting and any
postponements or adjournments thereof.
Only shareowners of record at the close of business on March 14, 1997, the
record date, will be entitled to vote at the Meeting.
Management and the Board of Directors desire to have maximum representation
at the Meeting and respectfully request that you date, execute and timely return
the enclosed proxy in the postage-paid envelope provided.
BY ORDER OF THE BOARD OF DIRECTORS,
[SIG]
Daniel S. Japha
SECRETARY
March 24, 1997
<PAGE>
[LOGO]
M.D.C. HOLDINGS, INC.
3600 SOUTH YOSEMITE STREET, SUITE 900
DENVER, COLORADO 80237
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREOWNERS
APRIL 25, 1997
---------------------
To Our Shareowners:
This proxy statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors (the "Board of Directors")
of M.D.C. Holdings, Inc. (the "Company") to be used at the Annual Meeting of
Shareowners of the Company (the "Meeting") to be held at 3600 South Yosemite
Street, Lower Level Conference Room A, Denver, Colorado, on Friday, April 25,
1997, at 8:00 a.m., Denver time, and any postponements or adjournments thereof.
The Meeting is being held for the purposes set forth in the accompanying Notice
of Annual Meeting of Shareowners. This Proxy Statement, the accompanying proxy
card and the Notice of Annual Meeting (collectively, the "Proxy Materials") are
first being sent to shareowners on or about March 24, 1997.
GENERAL INFORMATION
SOLICITATION
The enclosed proxy is being solicited by the Board of Directors of the
Company. In addition to solicitations by mail, solicitations may be made by
personal interview, telephone and telegram by directors, officers and regular
employees of the Company. No compensation will be paid for the solicitation of
proxies, although the Company will reimburse bankers, brokers and others holding
shares in their names or in the names of nominees or otherwise for reasonable
out-of-pocket expenses incurred in sending the Proxy Materials to the beneficial
owners of such shares.
VOTING RIGHTS
Holders of shares of the Company's common stock, $.01 par value (the "Common
Stock"), at the close of business on March 14, 1997 (the "Record Date"), are
entitled to notice of, and to vote at, the Meeting. On the Record Date,
17,432,789 shares of Common Stock were outstanding. The presence, in person or
by
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<PAGE>
proxy, of the holders of one-third of the total number of shares of Common Stock
outstanding constitutes a quorum for transacting business at the Meeting. Each
share of Common Stock outstanding on the Record Date is entitled to one vote on
each matter presented at the Meeting.
VOTING PROXIES
Shares of Common Stock represented by properly executed proxy cards received
by the Company in time for the Meeting will be voted in accordance with the
choices specified in the proxies. Unless contrary instructions are indicated on
a proxy, the shares of Common Stock represented by such proxy will be voted FOR
the election as Directors of the nominees named in this Proxy Statement; FOR the
amendment to the Directors Equity Incentive Plan; and will be voted AGAINST
providing cumulative voting in the election of directors. Abstentions and broker
non-votes (proxies that do not indicate that brokers or nominees have received
instructions from the beneficial owner of shares) will be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulating the total number of votes cast
on proposals presented to shareowners, whereas broker non-votes are not counted
for purposes of determining the total number of votes cast.
Management and the Board of Directors of the Company know of no other
matters to be brought before the Meeting. If other matters properly are
presented to the shareowners for action at the Meeting and any adjournments or
postponements thereof, it is the intention of the proxy holders named in the
proxy to vote in their discretion on all matters on which the shares of Common
Stock represented by such proxy are entitled to vote.
REVOCABILITY OF PROXY
The giving of the enclosed proxy does not preclude the right to vote in
person, should the shareowner giving the proxy so desire. A proxy may be revoked
at any time prior to its exercise by notice of revocation in writing sent to the
Secretary of the Company, by presenting the Company a later-dated proxy card
executed by the person executing the prior proxy card or by attending the
Meeting and voting in person.
ANNUAL REPORT
The Company's 1996 Annual Report to Shareowners is enclosed with these Proxy
Materials. The 1996 Annual Report to Shareowners is not incorporated into this
Proxy Statement by reference nor is it a part of the Proxy Materials.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for three classes of
Directors with staggered terms of office, to be divided as equally as possible.
Nominees of each class serve for terms of three years (unless a nominee is
changing to a different class) and until election and qualification of their
successors or until their resignation, death, disqualification or removal from
office.
The Board of Directors currently consists of six members, including one
Class I Director whose term expires in 1998, two Class II Directors whose terms
expire in 1999 and three Class III Directors whose terms expire in 1997. To
equalize the number of Directors in each class, Larry A. Mizel will change from
a Class III Director to a Class I Director. At the Meeting, two Class III
Directors are to be elected to three-year terms expiring in 2000 and one Class I
Director is to be elected to a one-year term expiring in 1998. The nominees for
the Class III Directors are Messrs. Steven J. Borick and David D. Mandarich and
the nominee for the Class I Director is Mr. Larry A. Mizel. All of the nominees
presently serve on the Board of Directors of the Company.
Unless otherwise specified, the enclosed proxy card will be voted FOR the
election of Messrs. Borick, Mandarich and Mizel. Management and the Board of
Directors are not aware of any reasons which would
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cause Messrs. Borick, Mandarich or Mizel to be unavailable to serve as
Directors. If Messrs. Borick, Mandarich or Mizel become unavailable for
election, discretionary authority may be exercised by the proxy holders named in
the enclosed proxy card to vote for a substitute nominee or nominees proposed by
the Board of Directors.
The affirmative vote of the holders of a plurality of the shares present or
represented and entitled to vote at the Meeting will be required for election to
the Board of Directors. The Board of Directors recommends a vote FOR the
election of Messrs. Borick, Mandarich and Mizel as Directors.
Certain information with respect to Messrs. Borick, Mandarich and Mizel, the
nominees for election, and the continuing Directors of the Company, furnished in
part by each such person, appears below:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
POSITIONS AND OFFICES WITH THE COMPANY OWNED AS OF THE PERCENTAGE OF
NAME AGE AND OTHER PRINCIPAL OCCUPATIONS RECORD DATE(1)(2) CLASS (3)
- ----------------------- --- -------------------------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
NOMINEES:
CLASS I
TERM EXPIRES IN 1998
Larry A. Mizel 54 Chairman of the Board of Directors, President and 4,381,439(4) 24.88%
Chief Executive Officer of the Company
CLASS III
TERMS EXPIRE IN 2000
Steven J. Borick 44 President, Texakota, Inc. and a General Partner in 125,000 *
Texakota Oil Company
David D. Mandarich 49 Executive Vice President-Real Estate and Chief 1,506,198 8.55%
Operating Officer of the Company
CONTINUING DIRECTORS:
CLASS I
TERM EXPIRES IN 1998
Herbert T. Buchwald 66 Principal in the law firm of Herbert T. Buchwald, 60,526 *
P.A. and President and Chairman of the Board of
Directors of BPR Management Corporation
CLASS II
TERMS EXPIRE IN 1999
Gilbert Goldstein 78 Principal in the law firm of Gilbert Goldstein, 175,151 1.00%
P.C.
William B. Kemper 59 Private real estate investor 75,000 *
</TABLE>
- ------------------------
* Represents less than one percent of the outstanding shares of Common Stock.
(1) Includes, where applicable, shares of Common Stock owned by such person's
minor children and spouse and by other related individuals or entities over
whose shares such person has custody.
3
<PAGE>
(2) Includes the following shares of Common Stock that such persons had the
right to acquire within 60 days of the Record Date by the exercise of stock
options at prices ranging from $3.00 to $7.50 per share: Gilbert Goldstein
125,000, William B. Kemper 75,000, Steven J. Borick 125,000, Herbert T.
Buchwald 50,000, Larry A. Mizel 175,000 and David D. Mandarich 175,000.
(3) The percentage shown includes shares of Common Stock actually owned and
shares of Common Stock which the person had the right to acquire within 60
days of the Record Date. In calculating the percentage of ownership, all
shares of Common Stock which the person had the right to acquire within 60
days of the Record Date are deemed to be outstanding for the purpose of
computing the percentage of shares of Common Stock owned by such person but
are not deemed to be outstanding for the purpose of computing the percentage
of shares of Common Stock owned by any other person.
(4) Includes 5,500 shares held jointly with Mr. Mizel's wife, 1,115 shares owned
by Mr. Mizel's children and 405,314 shares of Common Stock with respect to
which Mr. Mizel may be considered the "beneficial owner," as defined under
the Securities Exchange Act of 1934 (the "1934 Act"), because he is a
beneficiary of certain trusts which own all of the outstanding stock of
CVentures, Inc., a corporation which controls the voting of these shares of
Common Stock. Mr. Mizel is a director and officer of CVentures, Inc. Also
includes 194,032 shares of Common Stock owned by certain trusts for the
benefit of Mr. Mizel and certain members of his immediate family, over which
shares Mr. Mizel does not exercise voting control, although he has a limited
power of appointment allowing him to direct the trustee to gift all or a
portion of such shares to any person other than himself or a creditor. Mr.
Mizel disclaims beneficial ownership of the 194,032 shares.
OTHER INFORMATION RELATING TO DIRECTORS
The following is a brief description of the business experience during at
least the past five years of each member and nominee for the Board of Directors
of the Company.
STEVEN J. BORICK has been the president of Texakota, Inc., an oil and gas
exploration and development company, and a general partner in Texakota Oil
Company, a private oil and gas partnership, for more than the past five years.
He also is a director of Superior Industries International, Inc., a New York
Stock Exchange-listed manufacturer of automobile accessories, and Richmond
American Homes of Colorado, Inc., formerly known as Richmond Homes, Inc. I, a
wholly owned subsidiary of the Company ("Richmond Homes"). For additional
information concerning Richmond Homes and its relationship with the Company, see
"Certain Relationships and Related Transactions" below. Mr. Borick has been a
Director of the Company since April 1987 and is a member of the Audit Committee
and Chairman of the Compensation Committee.
DAVID D. MANDARICH was elected Chief Operating Officer of the Company in
March 1996, Co-Chief Operating Officer in September 1994 and Executive Vice
President-Real Estate in April 1993 and appointed a Director of the Company in
March 1994. From April 1989 to April 1993, Mr. Mandarich served as a consultant
to the Company. In April 1990, Mr. Mandarich was elected as chairman of the
board of directors of Richmond Homes. Mr. Mandarich also was a Director of the
Company from September 1980 until April 1989.
LARRY A. MIZEL was elected President of the Company in March 1996 and has
served as Chairman of the Board of Directors and Chief Executive Officer of the
Company for more than five years. Mr. Mizel also serves as a director of
Richmond Homes. Until September 30, 1996, Mr. Mizel also was chairman of the
boards of directors of Asset Investors Corporation ("Asset Investors"), a New
York Stock Exchange-listed real estate investment trust ("REIT") and Commercial
Assets, Inc. ("Commercial Assets"), an American Stock Exchange-listed REIT, both
of which were managed by a subsidiary of the Company. Mr. Mizel has been a
Director of the Company since founding the Company in January 1972 and is a
member of the Legal Committee.
4
<PAGE>
GILBERT GOLDSTEIN has been engaged in private law practice for more than the
past five years as the principal in the law firm of Gilbert Goldstein, P.C. See
"Certain Relationships and Related Transactions" below. Mr. Goldstein has been a
Director of the Company since January 1976. Mr. Goldstein also is the Chairman
of the Legal Committee.
WILLIAM B. KEMPER has been engaged in private real estate investments, real
estate development and property management since May 1982. Prior to May 1982, he
was president of Gold Crown, Inc., a real estate development company. Mr. Kemper
has been a Director of the Company since January 1972. He is a member of the
Audit and the Compensation Committees.
HERBERT T. BUCHWALD has been a principal in the law firm of Herbert T.
Buchwald, P.A. and president and chairman of the board of directors of BPR
Management Corporation, a property management company located in Denver,
Colorado, for more than the past five years. Mr. Buchwald was appointed to the
Company's Board of Directors in March 1994 and is Chairman of the Audit
Committee and a member of the Compensation and Legal Committees.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors consists currently of Messrs.
Borick, Buchwald and Kemper. The Audit Committee met 12 times during 1996. The
Audit Committee is chaired by Mr. Buchwald and is responsible for reviewing and
approving the scope of the annual audit undertaken by the Company's independent
accountants and meets with them to review the progress and results of their work
as well as their resulting recommendations. The Audit Committee recommends to
the Board of Directors the appointment of, has direct access to and reviews the
fees of the Company's independent accountants. In connection with the internal
accounting controls of the Company, the Audit Committee reviews internal audit
procedures and reporting systems.
The director of Internal Audit for the Company reports directly to the Audit
Committee on, among other things, the Company's compliance with certain Company
procedures which are designed to enhance management's consideration of all
aspects of major transactions involving the Company. The Audit Committee has
direct control over staffing and compensation of the internal audit department.
Additionally, the Audit Committee reviews annually the Company's Corporate Code
of Conduct. On at least a quarterly basis, the Company's Chief Financial Officer
reports directly to the Audit Committee on significant accounting issues, if
any.
The Compensation Committee currently consists of Messrs. Buchwald, Kemper
and Borick. During 1996, the Compensation Committee met seven times. The
Compensation Committee is chaired by Mr. Borick and is active in approving the
design of executive compensation plans, reviewing salaries, bonuses and other
forms of compensation for officers and key employees of the Company,
establishing salaries, benefits and other forms of compensation for new
employees and in other compensation and personnel areas as the Board of
Directors from time to time may request. For a discussion of the criteria
utilized and factors considered by the Compensation Committee in reviewing and
making recommendations with respect to executive compensation, see "Report of
the Compensation Committee" below.
The Legal Committee currently consists of Messrs. Goldstein, Buchwald and
Mizel. During 1996, the Legal Committee did not meet. The Legal Committee is
chaired by Mr. Goldstein and is active in reviewing legal issues and interacting
with the Company's inside and outside legal counsel.
The Company has no executive or nominating committees. Procedures for
nominating persons for election to the Board of Directors are contained in the
Company's By-laws.
During 1996, the Board of Directors held 11 regularly scheduled board
meetings. The Directors also held four special meetings and considered Company
matters and had numerous communications with the
5
<PAGE>
Chairman of the Board of Directors and other officials of the Company wholly
apart from the formal meetings. In 1996, all of the Company's Directors attended
at least 75% of the total number of meetings of the Board of Directors and of
the committees of the Board of Directors on which they served.
COMPENSATION
Each Director who is not an officer of the Company is paid $3,000 per month,
$750 for each Board of Directors meeting and each meeting of the Audit and
Compensation Committees. Each Director also is reimbursed for expenses related
to his attendance at Board of Directors and committee meetings.
In addition, Mr. Borick received fees of $1,500 per month during 1996 for
services as a director of Richmond Homes.
Mr. Kemper is covered by the Company's self-funded contributory medical plan
for which he pays 100% of the premiums. For the medical plan's fiscal year ended
February 28, 1997, Mr. Kemper paid premiums in excess of the cost of claims paid
on Mr. Kemper's behalf.
EXECUTIVE OFFICERS
Set forth below are the names and offices held by the executive officers of
the Company as of the Record Date. The executive officers of the Company are
elected annually and hold office until their successors are duly elected and
qualified or until their resignation, retirement, death or removal from office.
Biographical information on Messrs. Mizel and Mandarich, who serve as Directors
and executive officers of the Company, is set forth in "Election of Directors"
above. Biographical information on the other executive officers of the Company
is set forth below.
<TABLE>
<CAPTION>
NAME OFFICES HELD AS OF THE RECORD DATE
- ------------------------ --------------------------------------------------------------------
<S> <C>
Larry A. Mizel Chairman of the Board of Directors, President and Chief Executive
Officer
David D. Mandarich Executive Vice President-Real Estate, Chief Operating Officer and a
Director
Paris G. Reece III Senior Vice President, Chief Financial Officer and Principal
Accounting Officer
Michael Touff Vice President and General Counsel
</TABLE>
PARIS G. REECE III, 42, was elected as a Vice President of the Company in
August 1988, as Secretary in February 1990, as Chief Financial Officer in June
1990, as Treasurer in September 1993 and as Senior Vice President in September
1994. Mr. Reece resigned as Secretary of the Company in May 1996 and as
Treasurer of the Company in November 1996. Mr. Reece also is an officer,
director or both of most of the Company's subsidiaries. Until September 30,
1996, Mr. Reece also was an Executive Vice President and the Chief Financial
Officer of Asset Investors and Commercial Assets.
MICHAEL TOUFF, 52, was elected as a Vice President and the General Counsel
of the Company in December 1994. From August 1992 through December 1994, he was
an officer in the law firm of Ireland, Stapleton, Pryor & Pascoe, P.C. Prior to
August 1992, Mr. Touff was an officer in the law firm of Holmes & Starr, A
Professional Corporation.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Chief
Executive Officer and the three other executive officers for the three fiscal
years ended December 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SHARES
NAME AND ------------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (8) OPTIONS COMPENSATION (1)
- --------------------------------------- --------- --------- --------- ----------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel (2), 1996 $ 560,000 $ 825,780(3) N/A 350,000(9) $ 2,945
Chairman of the Board of Directors, 1995 $ 560,000 $ 668,000(4) N/A -0- $ 2,310
President and Chief Executive Officer 1994 $ 540,000 $ 700,000(5) N/A 75,000 $ 2,310
David D. Mandarich, 1996 $ 460,000 $ 825,780(3) N/A 350,000(9) $ 2,945
Chief Operating Officer, Executive 1995 $ 460,000 $ 668,000(4) N/A -0- $ 2,310
Vice President-Real Estate and a 1994 $ 432,000 $ 700,000(5) N/A 75,000 $ 2,310
Director
Paris G. Reece III, 1996 $ 200,000 $ 210,000(7) N/A -0- $ 2,945
Senior Vice President, 1995 $ 167,000 $ 135,000 N/A -0- $ 2,310
Chief Financial Officer and Principal 1994 $ 162,000 $ 125,000 N/A 50,000 $ 2,310
Michael Touff (6), 1996 $ 230,000 $ 375,000(7) N/A -0- $ 2,945
Vice President and General Counsel 1995 $ 210,000 $ 90,000 N/A -0- $ 2,310
</TABLE>
- ------------------------
(1) The amounts disclosed in this column consist of Company contributions
allocated to the Executive Officers' accounts pursuant to the Company's
401(k) Plan. Fifty percent of the Company's 1996 contribution will be funded
with shares of Common Stock valued at $8.25 per share, the closing price of
the Common Stock on January 27, 1997, the date the Company's Board of
Directors approved the stock portion of the allocation.
(2) Asset Investors and Commercial Assets granted Mr. Mizel the options and
dividend equivalent rights ("DERs") set forth below during the three years
indicated as consideration for serving as the chairman of the board of
directors of those companies until September 30, 1996 when the Company sold
the subsidiary that managed Asset Investors and Commercial Assets:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------- --------------------------------------- -----------
TAXABLE TAXABLE
OPTIONS DERS* COMPENSATION OPTIONS DERS* COMPENSATION OPTIONS
----------- ----------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Investors............. 200,000 92,633 $ 588,735 70,000 44,181 $ 91,123 102,540
Commercia1 Assets 30,000 59,720 $ 387,995 30,000 20,981 $ 91,806 60,000
<CAPTION>
TAXABLE
DERS* COMPENSATION
----------- -------------
<S> <C> <C>
Asset Investors............. 29,102 $ 469,491
Commercia1 Assets 11,729 79,917
</TABLE>
- ------------------------
* Until May 1996, DERs were calculated and accrued as of each dividend record
date and could be paid either in shares of Asset Investors or Commercial
Assets common stock, respectively, cash or property distributed as a
dividend and could be distributed either prior to or in connection with the
exercise of the related option, each as determined by the board of directors
of Asset Investors or compensation committee of Commercial Assets. DERs
automatically were distributed quarterly. Asset Investors and Commercial
Assets terminated the DER provisions of those companies' stock option plans
as of May 1996. Mr. Mizel received 83,658 shares of Asset Investors stock
and 54,222 shares of Commercial Assets stock as compensation for termination
of the DERs. Taxable compensation in 1994 includes 64,362 shares of
Commercial Assets stock valued at $7.47 per share paid to Mr. Mizel as a
dividend on Asset Investors shares related to the formation of Commercial
Assets in 1993. None of the other named executive officers of the Company
was granted options or DERs by Asset Investors or Commercial Assets during
1994, 1995 or 1996.
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<PAGE>
(3) This bonus was paid on February 12, 1997 in accordance with the terms of the
M.D.C. Holdings, Inc. Executive Officer Performance-Based Compensation Plan
approved by the Company's stockholders at the 1994 Annual Meeting (the
"Executive Compensation Plan").
(4) This bonus was paid on March 1, 1996 in accordance with the terms of the
Executive Compensation Plan. Twenty percent of the bonus was paid by issuing
18,562 shares of Common Stock valued at $7.20 per share, the fair market
value of the stock as determined under the Executive Compensation Plan.
(5) 15% of this bonus was paid by issuing 22,105 shares of Common Stock valued
at $4.75 per share, the closing price of the Common Stock on the New York
Stock Exchange on November 18, 1994, the date the Compensation Committee of
the Board of Directors determined the initial amount and form of the
bonuses.
(6) On December 19, 1994, Mr. Touff and the Company entered into an Employment
Agreement that provides the terms of Mr. Touff's employment, which commenced
December 31, 1994, including base salary, annual incentive compensation, the
option grant described in the Summary Compensation Table and other
provisions.
(7) A portion of this bonus was paid in shares of the Common Stock valued at
$7.375 per share, the closing price of the Common Stock on the New York
Stock Exchange on November 18, 1996, the date the Compensation Committee of
the Board of Directors approved the bonus. Mr. Reece elected to receive
$75,000 of his bonus (10,170 shares) and Mr. Touff elected to receive
$150,000 of his bonus (20,339 shares) in the form of Common Stock. The
Compensation Committee also granted the employees who received bonuses in
the form of stock the right to borrow from the Company the taxes due on the
stock portion of the bonus. Messrs. Reece and Touff borrowed $26,276.79 and
$70,856.05, respectively. These amounts are secured by a pledge of shares of
Common Stock equal to the amounts borrowed plus 25%, divided by $7.50, the
price of the Common Stock on the date of the loans. The loans bear interest
at LIBOR plus one percent, are amortized over 10 years with annual principal
and interest payments due each December 30, commencing December 30, 1997 and
mature on the earliest of (i) December 30, 2001; (ii) 90 days after the date
of termination for cause; or (iii) one year after termination without cause,
when the entire amount of principal plus accrued interest are due.
(8) N/A: Disclosure is not applicable under the Securities and Exchange
Commission's rules.
(9) See "Option Grants in Last Fiscal Year," below.
Each of the named executive officers is covered by the Company's severance
pay policy which provides severance pay to eligible employees, including each of
the named executive officers, whose employment is involuntarily terminated by
the Company for reasons other than gross misconduct. Employees are eligible for
severance pay if involuntarily terminated after ninety (90) days of employment.
The amount of severance pay is based on the length of service with the Company.
For each of the named executive officers, the amount of pay would be one week
for each year of service to a maximum of twelve (12) weeks; provided, however,
the Compensation Committee of the Board of Directors may approve additional
severance payments for situations involving management personnel. See "Certain
Relationships and Related Transactions."
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The table below provides information on option grants in fiscal 1996 to the
named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR
SHARES GRANTED TO EXERCISE OPTION TERM
UNDERLYING EMPLOYEES IN PRICE EXPIRATION --------------------
NAME OPTIONS (1) FISCAL YEAR (2) ($/SH) DATE 5% 10%
- ------------------------------------------------ ----------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel.................................. 250,000 34.97% $ 7.00 11/17/01 $ 483,493 $1,068,393
Larry A. Mizel.................................. 100,000 13.99% $ 7.375 11/17/01 $ 203,758 $ 450,251
David D. Mandarich.............................. 250,000 34.97% $ 7.00 11/17/01 $ 483,493 $1,068,393
David D. Mandarich.............................. 100,000 13.99% $ 7.375 11/17/01 $ 203,758 $ 450,251
</TABLE>
- ------------------------
(1) Options for 250,000 shares granted in 1996 are exercisable in whole or in
part beginning on May 17, 1997. Options for 250,000 shares granted in
November 1993 to each of Messrs. Mizel and Mandarich that were exercisable
at $3.00 per share if certain prices of the Common Stock were achieved were
cancelled prior to the 1996 grants of options for 250,000 shares. Options
for 100,000 shares granted in 1996 are exercisable, 33 1/3% on November 18,
1997 and cumulatively as to an additional 33 1/3% on each of November 18,
1998 and 1999. The closing price of the Common Stock on the New York Stock
Exchange on the date of grants was $7.00 and $7.375, respectively.
(2) The Company granted options representing 715,000 shares of Common Stock to
employees in fiscal 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The table below provides information on option exercises in fiscal 1996 by
the named executive officers and the value of such officers' unexercised options
at December 31, 1996.
<TABLE>
<CAPTION>
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel............................. -0- -0- 175,000 350,000 $ 580,625 $ 531,250
David D. Mandarich (2)..................... 100,000 $ 437,500 175,000 350,000 $ 590,625 $ 531,250
Paris G. Reece III......................... -0- -0- 50,000 -0- $ 218,750 -0-
Michael Touff.............................. -0- -0- 37,500 12,500 $ 135,938 $ 45,313
</TABLE>
- ------------------------
(1) The closing price of the Common Stock on December 31, 1996 on the New York
Stock Exchange was $8.625.
(2) Mr. Mandarich borrowed two-thirds of the exercise price and income taxes due
on the exercise of options pursuant to the M.D.C. Holdings, Inc. Executive
Option Purchase Program. See "Certain Relationships and Related
Transactions" below.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE
PERFORMANCE GRAPHS SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILING.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is comprised solely of Directors who are not employees of the
Company. The Committee is responsible for setting executive compensation
policies and determining the compensation paid to executive officers of the
Company.
The purposes of the Company's executive compensation programs are to
attract, retain and reward highly qualified executives while maintaining a
strong and direct link between executive pay, the Company's financial
performance and total shareowner return. The Committee also believes that
executive officers and other key employees of the Company should have a
significant stake in the Company's stock price performance in order to link
total executive compensation to shareowner return. Additionally, the Company's
executive compensation programs are intended to address the Committee's concern
that the Company's highly experienced executive team, which has been successful
in the Company's principal markets, potentially could be targeted by the
Company's competitors.
The Company's executive compensation program consists of three main
components: base salary, annual performance-based incentive compensation and
stock-based, long-term incentive. The Company's management philosophy calls for
maintaining relatively few middle management employees in order to speed
decision making and to operate more efficiently. Because of this, base salaries
for the Company's executive officers, including the Chief Executive Officer, are
paid at or above the average rates paid by competitors in order to enable the
Company to retain its experienced and skilled executives. However, the Committee
believes that, based upon studies by a major independent human resources
consulting firm retained by the Committee in prior years, the Company's overall
management costs are lower than those of other, comparable companies, including
those that are part of the Peer Group Index shown on the performance graph
below.
Base salaries are reviewed annually and adjusted based on individual
performance, annual salary increases in the industry and the going rate for
similar positions at comparable companies. The factors considered by the
Committee in setting compensation for 1996 included the following components:
the increase in the Company's stock price and cumulative return to shareowners
as reflected on the performance graph below, the Company's increased earnings
per share, increased home closings, record revenues, additional coverage by Wall
Street analysts, the rating upgrade of the Company's senior notes to "B+" by
Standard and Poor's, the acquisition of the Company's new $150 million unsecured
line of credit, the Company's performance compared to that of its competitors,
the reduction of debt and the Company's improved debt-to-equity ratio.
As demonstrated in the five-year performance graph below, the continued
strengthening of the Company's balance sheet, the increase in the Company's
financial flexibility and the improvement in the Company's operating results
have contributed to the 21% increase in the Company's share price during 1996
and the 381% cumulative return to shareowners since 1992. These returns are
substantially higher than returns recorded by the Standard & Poor's 500 and Peer
Group Index during the same period.
Incentive compensation paid to Messrs. Mizel and Mandarich for 1996 was
based strictly upon the M.D.C. Holdings, Inc. Executive Compensation Plan
adopted in April 1994 and approved by the Company's shareowners. This plan is
designed (i) to provide the Company's most senior executive officers annual
incentive compensation based on achievement of specific performance objectives
linked to return on equity; and (ii) to permit the Company to deduct executive
compensation for tax purposes.
The Company also maintains an annual bonus program for the Company's other
officers and key management employees. Bonuses are intended to compensate
management and other employees for the attainment of the Company's annual
financial performance goals and other criteria, as determined by the Committee.
Because the Company met or exceeded the 1996 performance goals for these
performance criteria, the Committee authorized the bonuses set forth in the
summary compensation table for the named
10
<PAGE>
executive officers other than Messrs. Mizel and Mandarich. Mr. Touff's bonus
also reflected his contribution to the resolution in November 1996 of litigation
that had been brought against the Company in Colorado concerning expansive
soils.
Historically, the Committee has granted long-term, stock-based incentives in
the form of stock options to executive officers and other key management
employees. These incentives are designed and intended to more closely link
management and shareowner interest and to motivate executives to make long-term
decisions and investments that will serve to increase the long-term total return
to shareowners. Vesting requirements in the option grants also serve to provide
long-term incentive to retain key officers and other employees.
CEO COMPENSATION
The Committee determined Mr. Mizel's compensation in accordance with the
principles described above. Mr. Mizel's salary for 1996 was $560,000. The
Committee approved a bonus of $825,780 for Mr. Mizel for 1996 in accordance with
the terms of the Executive Officer Performance-Based Compensation Plan described
above.
The Committee approved Mr. Mizel's salary based on the following factors, in
order of importance to the Committee: (i) the Company's significantly improved
operating results during 1996 compared to prior years' results; (ii) the
comparative performance of the Company's Common Stock as reflected in the
performance graph; and (iii) the rating upgrade of the Company's senior notes to
"B+" by Standard and Poor's.
The primary financial performance improvements on which the Committee relied
were the 24% increase in the Company's fully diluted operating earnings per
share and the 23% shareowner return in 1996.
COMPENSATION COMMITTEE
Steven J. Borick, Chairman
William B. Kemper
Herbert T. Buchwald
11
<PAGE>
PERFORMANCE GRAPHS
Set forth below is a graph comparing the yearly change in the cumulative
total return of the Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index and with that of a peer group over the
five-year period ending on December 31, 1996.
It is assumed in the graph that $100 was invested (i) in Common Stock; (ii)
in the stocks of the companies in the Standard & Poor's 500 Index; and (iii) in
the stocks of the peer group companies just prior to the commencement of the
period and that all dividends received within a quarter were reinvested in that
quarter. The peer group index is composed of the following companies: Centex
Corporation, PH Corporation, U.S. Home Corporation, The Ryland Group, Inc., Toll
Brothers, Inc., Kaufman and Broad Home Corporation, Lennar Corporation,
Hovnanian Enterprises, Inc., Del Webb Corporation, D.R. Horton Inc., M/I
Schottenstein Homes, Inc., Continental Homes Holding Corp., Beazer Homes USA,
Inc. and NVR Inc. The composition of the peer group index has changed in order
to include the 14 largest publicly traded homebuilders (other than the Company).
Standard Pacific Corp. was removed from the peer group index because of its
small size and diversity of its businesses and Capital Pacific Holdings, Inc.
and UDC Homes Inc., were eliminated from the peer group index because those
companies' shares no longer are traded actively.
Note: The stock price performance shown on the following graph is not
indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF MDC COMMON STOCK, THE S&P 500 INDEX
AND A SELECTED PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FIVE YEARS
<S> <C> <C> <C>
Weighted Avg. Peer Group M.D.C. Holdings S&P 500
31-Dec-91 $100.00 $100.00 $100.00
31-Dec-92 122.61 220.00 105.57
31-Dec-93 172.31 313.33 113.02
31-Dec-94 121.51 269.62 111.27
31-Dec-95 198.45 390.95 148.37
31-Dec-96 217.76 481.24 179.47
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Approximately 7,000 square feet in the Company's building is leased by
various affiliates of Mr. Mizel for which they collectively paid rent, including
for parking, to the Company of approximately $96,000 in 1996.
During 1996, the Company paid Premier Building Group, Inc., a company in
which Mr. Mandarich's brother-in-law is an owner and the vice president,
approximately $11,489,000 for plumbing, door and millwork services.
Effective October 1, 1996, the Company entered into a three-year agreement
with Gilbert Goldstein, P.C., of which Gilbert Goldstein, a Director of the
Company, is the sole shareholder. Pursuant to the agreement, Mr. Goldstein acts
as a consultant to the Company on legal matters and, in return, the Company (i)
pays Mr. Goldstein's firm $21,000 per month for a minimum of 160 hours per month
in legal services; (ii) pays Mr. Goldstein's firm $150 per hour for services
performed in excess of 160 hours in any month; (iii) provides office space with
an estimated annual rental value of $14,000 in the Company's office building;
(iv) provides one full-time secretary (in 1996, this secretary received an
annual salary of $28,000 plus benefits); and (v) reimburses actual expenses
incurred related to services provided. In the event that Mr. Goldstein retires
from the practice of law, becomes disabled or dies during the term of the
Agreement, the Company will pay to Mr. Goldstein or his estate $7,000 per month
during the remaining term of the Agreement. Payment of $189,000 was made
directly to Mr. Goldstein's firm in 1996 for services performed, including
amounts paid pursuant to the Agreement. Mr. Goldstein also was paid $150,000 in
January 1997 as compensation for services during 1994, 1995 and 1996 related to
the resolution in November 1996 of litigation that had been brought against the
Company in Colorado concerning expansive soils.
During 1996, the Company paid to PageWorks Communication Design
("PageWorks"), a marketing and communications firm, approximately $305,000 for
annual report design, advertising and marketing design services. PageWorks is
owned by Mr. Mizel's brother-in-law.
On April 12, 1995, the Company's Board of Directors adopted the Option
Purchase Program. The purpose of the Option Purchase Program is to permit the
Company's key executive officers to increase their ownership of Common Stock and
more closely align their interests with those of the Company's other shareowners
by facilitating the exercise of options that would expire shortly. Pursuant to
the Option Purchase Program, Messrs. Mizel and Mandarich may borrow up to
$810,000 and Mr. Reece may borrow up to $243,000 for the purpose of paying
two-thirds of the sum of the exercise price of options exercised and federal and
state income taxes due as a result of the exercise of the options. All
borrowings under the Option Purchase Program are secured by a pledge of 100% of
the stock acquired upon exercise, are full recourse to the borrower and bear
interest at the average one month LIBOR plus 1%, adjusted monthly. Certain
principal and accrued interest is payable on April 1st of each year based on a
10-year amortization. Additional principal is due on each April 1st in an amount
required to reduce the outstanding aggregate principal amount of the loans under
the Option Purchase Program to each borrower in an amount depending on each
borrower's maximum permitted borrowings. The unpaid principal balance is due on
the earlier of: (i) the fifth anniversary of the loan; (ii) 90 days after the
borrower's employment with the Company has been terminated for cause; or (iii)
one year after the borrower's employment with the Company has been terminated
other than for cause.
The following table shows, as of December 31, 1996, the number of shares
exercised pursuant to the Option Purchase Program, the date of borrowings under
the Option Purchase Program and the principal
13
<PAGE>
and interest due as of that date for each of the executive officers eligible to
participate under the Option Purchase Program:
<TABLE>
<CAPTION>
NUMBER OF ACCRUED
SHARES DATE OF NOTE BALANCE INTEREST AT
BORROWER EXERCISED NOTE AT 12/31/96 12/31/96
- ----------------------------------------------------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Larry A. Mizel....................................... 100,000 5/8/95 $ 257,900 $ 12,284
David D. Mandarich(1)................................ 496,914 4/17/95 $ 709,372 $ 132
David D. Mandarich................................... 100,000 11/26/96 $ 64,955 $ 142
</TABLE>
- ------------------------
(1) On January 12, 1996, Mr. Mandarich increased his borrowings by $137,761 to
pay 2/3 of additional taxes due on his exercised options. At December 31,
1996, the outstanding balance of this note was $125,670, plus $33 of accrued
interest.
As of December 31, 1996, Messrs. Mizel and Mandarich owed $559,920 and
$280,080, respectively, to the Company under unsecured promissory notes (the
"Promissory Notes") which were issued to the Company in February 1994 in
exchange for an aggregate of $840,000 in notes held by the Company which were
executed by Messrs. Mizel and Mandarich in connection with their December 1989
purchase from the Company of the Richmond Homes common stock. The Promissory
Notes bear interest at 8% payable annually in December and mature in December,
1999. The Promissory Notes require that Mr. Mizel and Mr. Mandarich pay to the
Company the cash proceeds of the sale of any of the 405,739 and 202,956 shares
of MDC Common Stock, respectively, they received in exchange for the shares of
Richmond Homes common stock they sold to the Company, to the extent of the
unpaid balances of the Promissory Notes, plus accrued but unpaid interest
thereon at the time of such a sale. The Company recognized interest income of
$67,384 on the Promissory Notes in 1996. Mr. Mizel repaid his Promissory Note,
plus accrued interest, on February 17, 1997 at which time Mr. Mizel's Promissory
Note was cancelled.
In the ordinary course of its business, HomeAmerican Mortgage Corporation, a
wholly owned subsidiary of the Company, has made loans to certain officers and
employees of the Company. Such loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collection or present other unfavorable features.
REORGANIZATION AND SALE OF FINANCIAL ASSET MANAGEMENT LLC
In March 1996, the Company, Mr. Spencer I. Browne (previously President,
Co-Chief Operating Officer and Director of the Company), M.D.C. Residual
Holdings, Inc., a wholly owned subsidiary of the Company ("Residual") and
Financial Asset Management Corporation ("Management Corporation") entered into
an agreement (the "Agreement") effective as of April 1, 1996, pursuant to which
Mr. Browne, Residual and Management Corporation formed Financial Asset
Management LLC ("FAMC"). From April 1, 1996 to September 30, 1996, Mr. Browne
owned 20% of FAMC, and Management Corporation and Residual owned the remaining
80% of FAMC.
Pursuant to the Agreement, (i) Mr. Browne resigned as President, Co-Chief
Operating Officer and Director of the Company; (ii) Mr. Browne and the Company
entered into an employment agreement (the "Employment Agreement"); (iii) Mr.
Browne was appointed President and Chief Executive Officer of FAMC; and (iv)
FAMC assumed Management Corporation's business of managing Asset Investors and
Commercial Assets and performing certain other asset management functions.
In September 1996, the Company sold its 80% interest in FAMC for
$11,450,000, Mr. Browne resigned his positions with FAMC and the Employment
Agreement was terminated. The sales proceeds consisted of $6,000,000 cash and
$5,450,000 of subordinated notes which are payable at specified dates during the
next 10 years and are convertible, under certain circumstances, into as much as
a 47.6% ownership interest in FAMC. The sale resulted in the recognition of a
gain of $4,042,000. An additional
14
<PAGE>
gain of $5,450,000 attributable to the notes has been deferred and may be
recognized, in whole or in part, in future periods based upon a number of
factors, including collection of the notes' principal and the expiration of the
conversion features.
ACQUISITION OF RICHMOND HOMES COMMON STOCK
On February 2, 1994, the Company acquired 35% of the outstanding shares of
Richmond Homes common stock (the only remaining shares of Richmond Homes not
then owned by the Company) from Messrs. Mizel and Mandarich. Messrs. Mizel and
Mandarich had purchased the shares in December 1989. In exchange for their
shares of Richmond Homes, Messrs. Mizel and Mandarich received an aggregate of
608,695 shares of MDC Common Stock based upon a value of the Richmond Homes
shares determined by a special committee of the Board of Directors which relied
on an independent appraisal of such shares. The Company now owns 100% of
Richmond Homes.
ACQUISITION OF REAL PROPERTY
On May 3, 1996, the Company's Board of Directors, with Messrs. Mizel and
Buchwald not participating, approved the acquisition of a parcel of land on the
opposite side of Yosemite Street from the Company's current headquarters for a
purchase price of up to $1,100,000. On October 21, 1996, the Company acquired
the parcel for $1,089,000 in cash. A special committee of the Board of Directors
reviewed this transaction and obtained an appraisal to determine that the price
paid was fair to the Company. Messrs. Mizel and Buchwald are direct or indirect
minority owners of the entity that owned this parcel of land.
HOLDERS OF FIVE PERCENT OR MORE OF VOTING SHARES
OF THE COMPANY AND OWNERSHIP OF MANAGEMENT
The table below sets forth those persons known by the Company to have owned
beneficially 5% or more of the outstanding shares of Common Stock individually
and the number of shares beneficially owned by the Company's named officers
individually and by all of the Company's officers and Directors as a group, each
as of the Record Date. The information as to beneficial ownership is based upon
statements furnished to the Company by such persons. Information with respect to
the beneficial ownership of shares
15
<PAGE>
of Common Stock held by each of the Directors of the Company, two of whom
beneficially own more than 5% of the outstanding shares of Common Stock, is set
forth in "Election of Directors" above.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
OWNED PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY CLASS (2)
- ------------------------------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
SC Fundamental Value Fund, L.P.
SC Fundamental Value BVI, Inc.
SC Fundamental, Inc.
712 Fifth Avenue
New York, New York 10019............................................................. 1,835,597(3) 10.53%
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109.......................................................... 1,253,500(4) 7.19%
Investment Counselors of Maryland, Inc.
803 Cathedral Street
Baltimore, Maryland 21201............................................................ 960,000(5) 5.51%
Donald Smith & Co., Inc.
East 80 Route 4
Paramus, New Jersey 07652............................................................ 955,900(6) 5.48%
Paris G. Reece III
3600 S. Yosemite St., #900
Denver, Colorado 80237............................................................... 105,170(7) *
Michael Touff
3600 S. Yosemite St., #900
Denver, Colorado 80237............................................................... 62,839(7) *
All executive officers and directors as a group (8 persons).......................... 6,491,323 35.58%
</TABLE>
- ------------------------
* Less than 1%.
(1) The addresses of Messrs. Mizel and Mandarich, the Directors who beneficially
own more than 5% of the outstanding shares of Common Stock (see "Election of
Directors" above), are 3600 South Yosemite Street, Suite 900, Denver,
Colorado 80237 and 4600 South Ulster Street, Suite 400, Denver, Colorado
80237, respectively.
(2) In calculating the percentage of ownership, all shares of Common Stock the
identified person or group had the right to acquire within 60 days of the
Record Date by the exercise of options are deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by
such person or group but are not deemed to be outstanding for the purpose of
computing the percentage of the shares of Common Stock owned by any other
person.
(3) Based upon information in a Schedule 13D filed with the Commission on
December 31, 1996, the named beneficial owners hold shared voting and
dispositive power over all such shares; includes an aggregate of 819,354
shares of Common Stock underlying convertible debentures. On the Record
Date, the Company's Common Stock closed at $9.125.
(4) Based upon information in a Schedule 13G filed with the Commission on or
about January 24, 1997, Wellington Management Company LLP exercises sole
voting power over none of such shares, shared voting power over 344,500 of
such shares and shared dispositive power over all such shares.
16
<PAGE>
(5) Based upon information in a Form 13F filed with the Commission on February
14, 1997, Investment Counselors of Maryland, Inc. exercises sole voting
power over 890,000 of such shares and sole dispositive power over all such
shares.
(6) Based upon information in a Schedule 13G filed with the Commission on
February 7, 1997, Donald Smith & Co., Inc. exercises sole voting and
dispositive power over all such shares.
(7) Includes 50,000 shares and 37,500 of Common Stock that Messrs. Reece and
Touff have the right to acquire within 60 days of the Record Date by the
exercise of stock options at a price of $4.25 and $5.00 per share,
respectively.
No change in control of the Company has occurred since the beginning of the
last fiscal year. The Company knows of no arrangement the operation of which
may, at a subsequent date, result in a change in control of the Company.
The Company's executive officers and Directors are required under Section
16(a) of the 1934 Act to file initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company
with the Securities and Exchange Commission and the New York and Pacific Stock
Exchanges. Copies of those reports also must be furnished to the Company. Based
solely upon a review of the copies of reports furnished to the Company and
written representations that no other reports were required, the Company
believes that during the year ended December 31, 1996 all such reports were
filed on a timely basis.
AMENDMENT OF M.D.C. HOLDINGS, INC.
DIRECTOR EQUITY INCENTIVE PLAN
GENERAL
The Board of Directors recommends that the Company's shareowners approve an
amendment to the Director Equity Incentive Plan (the "Director Plan"). The
amendment would provide that an additional 350,000 shares of Common Stock be
authorized for issuance under the Director Plan. Pursuant to the terms of the
Director Plan, the maximum number of shares so authorized will be increased
annually by 10% of the then authorized shares of Common Stock under the Director
Plan. The amendment was approved by the Company's Board of Directors on January
27, 1997, subject to approval of the Company's shareowners at the Meeting.
The amendment is proposed to allow for the continuation of annual grants of
options to acquire 25,000 shares of Common Stock to Eligible Directors on each
December 1 as set forth in Section 3.2 of the Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE DIRECTOR PLAN.
The following is a summary of the material features of the Director Plan, a
copy of which is attached as Exhibit A.
DESCRIPTION OF THE DIRECTOR PLAN
The purpose of the Director Plan is to encourage the Company's non-employee
directors to own shares of Common Stock and to enable the Company to obtain and
retain the services of highly qualified non-employee directors. Any director who
is a director on the date on which options are granted and who is not also an
employee of the Company or any of its subsidiaries is eligible to participate in
the Director Plan. The Company currently has four non-employee Directors,
Messrs. Goldstein, Kemper, Borick and Buchwald.
17
<PAGE>
On each December 1 during the term of the Director Plan, eligible directors
are granted options to purchase 25,000 shares of Common Stock, all of which vest
six months after the date of grant. The exercise price of the options is the
fair market value of Common Stock on the date of grant. The Compensation
Committee of the Board of Directors or such other committee as may be designated
by the Board (the "Director Plan Committee") administers the Director Plan. With
the exception of options granted under the Director Plan, no equity securities
of the Company may be granted to any member of the Director Plan Committee under
any plan of the Company during the term of his membership on the Director Plan
Committee.
Each option granted under the Director Plan will expire five years after the
date of grant. Options continue to be exercisable after termination of
directorship, except where termination of directorship is for cause, in which
case the options expire immediately, or where termination is a result of death,
in which case the options expire after one year. The option price may be paid in
cash, or upon the consent of the Director Plan Committee, by tendering shares of
Common Stock or by a combination of the two. Shares of Common Stock tendered in
exercise of an option are valued at their fair market value on the date of
delivery to the Company. Options granted to Directors under the Director Plan
are treated as Non-Statutory Stock Options under the Internal Revenue Code.
The Director Plan provides that the total number of option shares covered by
such plan, the number of shares covered by each option and the exercise price
per share may be proportionately adjusted by the Director Plan Committee in the
event of a stock split, stock dividend, recapitalization, reclassification or
similar capital adjustment effected without receipt of consideration by the
Company.
Options granted under the Director Plan become exercisable upon the
effective date of either the merger or consolidation of the Company with or into
another corporation, or the acquisition by another corporation or person of all
or substantially all of the Company's assets or 80% or more of the Company's
then outstanding voting stock, or the liquidation or dissolution of the Company.
Those options not exercised prior to such transaction will be canceled and
exchanged for a cash payment equal to the greater of the trading price for the
Company's shares immediately prior to such transaction or the per share
consideration provided in such transaction, less the exercise price for the
option. However, no such acceleration of exercisability or cancellation and
settlement will occur if the corporation remaining or resulting after any such
transaction offers the Director an option similar to the Director's existing
option. Acceleration of exercisability is also subject to limitations in the
event that such acceleration results in the loss of the deductibility to the
Company of payments pursuant to the exercise or settlement of accelerated
options.
The Board of Directors or the Director Plan Committee may amend the Director
Plan at any time or may terminate it without the approval of the stockholders;
provided, however, that to the extent required by Rule 16b-3 under the
Securities Exchange Act of 1934, stockholder approval is required for any
amendment which increases the number of shares for which options may be granted,
changes the designation of the class of persons eligible to participate or
changes in any material respect the limitations or provisions of the options
subject to the Director Plan; and, provided further that the aforementioned
Director Plan provisions may not be amended more than once every six months.
However, no action by the Board of Directors, the Director Plan Committee or
stockholders may alter or impair any option previously granted without the
consent of the optionee.
Adoption of the proposal to amend the Director Plan requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock on
the Record Date. Unless otherwise instructed, it is the intent of the persons
named in the Proxy to vote all proxies FOR the adoption of this proposal.
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SHAREOWNER PROPOSAL TO PROVIDE
CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS
Shareowner proponents have stated that they intend to have the following
proposal and supporting statement presented at the Meeting. Approval of the
proposal requires the affirmative vote of the holders of a majority of the
shares represented in person or by proxy and entitled to vote at the Meeting.
The adoption of the proposal would only constitute a recommendation to the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE PROPOSAL.
John J. Gilbert, the owner of 1,000 shares of Common Stock, and Margaret R.
Gilbert, the owner of 1,000 shares of Common Stock, both of 29 E. 64th St., New
York, NY 10021-7043 and Dan Fuhrman, the holder of 1,000 shares of Common Stock,
P.O. Box 110543, Aurora, CO 80042, have given notice that they intend to present
the following resolution at the Meeting:
"RESOLVED: That the stockholders of M.D.C. Holdings, Inc., assembled in
annual meeting in person and by proxy, hereby request the Board of
Directors to take the steps necessary to provide for cumulative voting
in the election of directors, which means each stockholder shall be
entitled to as many votes as shall equal the number of shares he or she
owns multiplied by the number of directors to be elected, and he or she
may cast all of such votes for a single candidate, or any two or more of
them as he or she may see fit."
REASONS:
"A California law provides that all state pension holdings and state
college funds, invested in shares must be voted in favor of cumulative
voting proposals, showing increasing recognition of the importance of
this democratic means of electing directors."
"Cumulative voting might help enlarge the board of directors, as well as
help end the stagger system, which more and more companies are now
properly doing. In the past the company had sent out a post-meeting
report but this year did not do so. Cumulative voting would help get
directors on the board who would see that a post-meeting report is sent
out after the meeting; enlarge the board of directors and end the
stagger system, which received 2,964,217 shares in favor at the last
meeting."
"The National Bank Act (sic) provides for cumulative voting. In many
cases companies get around it by forming holding companies without
cumulative voting. Banking authorities have the right to question the
capability of directors to be on banking boards. In many cases
authorities come in after and say the director or directors were not
qualified. We were delighted to see the SEC has finally taken action to
prevent bad directors from being on boards of public companies. The SEC
should have hearings to prevent such persons becoming directors before
they harm investors."
"Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Ingersoll-Rand, also having
cumulative voting won two awards. FORTUNE magazine ranked it second in
its industry as "America's Most Admired Corporations" and the WALL
STREET TRANSCRIPT noted "on almost any criteria used to evaluate
management, Ingersoll-Rand excels." In 1994 and 1995 they raised their
dividend."
"Lockheed-Martin, as well as VWR Corporation now have a provision that
if anyone has 40% of more of the shares cumulative voting applies; it
does apply at the latter company."
"In 1995 American Premier adopted cumulative voting. Alleghany Power
System tried to take away cumulative voting, as well as put in a stagger
system, and stockholders defeated it, showing stockholders are
interested in their rights."
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"If you agree, please mark your proxy FOR; if you disagree mark AGAINST.
NOTE: PROXIES NOT MARKED WILL BE VOTED AGAINST THIS RESOLUTION."
THE BOARD OF DIRECTORS HAS CONSIDERED THIS PROPOSAL AND RECOMMENDS THAT
SHAREOWNERS VOTE AGAINST IT.
As was stated when a proposal to eliminate staggered terms was brought to a
vote of the Company's shareowners last year, the Board of Directors believes
that the Company's current stockholder voting methods enhance the continuity and
stability of the Board of Directors and its policies. When directors are elected
by classes, a change in the composition of the majority of the Board of
Directors normally requires at least two shareowner meetings instead of one.
Board classification also is intended to encourage any person seeking to acquire
control of the Company to initiate such an action through arm's length
negotiations with management and the Board of Directors, who are in the position
to negotiate a transaction which is fair to all of the Company's shareowners. As
noted elsewhere in this Proxy Statement, the members of the Board of Directors
own approximately 5,600,314 shares of Common Stock of the Company as well as
options to acquire 725,000 additional shares exercisable within 60 days of the
Record Date. Thus the interests of the members of the Board of Directors are
aligned with those of the Company's shareowners.
In support of their proposal, the shareowner proponents state that
"Cumulative voting would help get directors on the board who would see that a
post-meeting report is sent out after the meeting . . . ." Management of the
Company did not prepare or send out a report of last year's annual meeting in
order to save the significant expense of doing so. Because last year's meeting
dealt with routine matters, other than the shareowners' proposal to eliminate
the staggered election of directors which was defeated by a large margin,
management of the Company did not feel it was appropriate to spend a large
amount of time and money producing and mailing a report of the meeting. Mr.
Gilbert suggested sending the report as part of the Company's quarterly reports
to shareowners. However, the Company's new quarterly report format, which saves
the Company approximately $20,000 per year and which has received favorable
comments from shareowners, does not easily accommodate the annual meeting
report.
The Board of Directors sees no reason to expand the number of Directors at
this time, whether as a result of cumulative voting or otherwise. Cumulative
voting would not necessarily result in a larger board. Furthermore, the board,
which currently consists of four independent, non-employee Directors and the two
most senior members of the Company's management team, has proven itself adept at
responding to the Company's changing business needs. The Company's financial
accomplishments for 1996 speak very highly of the Board of Directors' and the
Company's system of electing Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE AGAINST
THIS PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company presently is negotiating the terms for retaining Price
Waterhouse LLP as the Company's independent accountants for the year ended
December 31, 1997. The Company has not yet finalized these negotiations. Price
Waterhouse examined the Company's financial statements for the year ended
December 31, 1996. A representative of Price Waterhouse is expected to be
present at the Meeting and available to respond to appropriate questions.
Although Price Waterhouse has indicated that no statement will be made, an
opportunity for a statement will be provided.
OTHER MATTERS
Management and the Board of Directors of the Company know of no matters to
be brought before the meeting other than as set forth above. However, if any
other matters are properly presented to the shareowners for action, it is the
intention of the proxy holders named in the enclosed proxy to vote in their
discretion on all matters on which the shares represented by such proxy are
entitled to vote.
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SHAREOWNER PROPOSALS
Any proposal which a shareowner may desire to present at the 1998 Annual
Meeting of Shareowners must be received in writing by the Secretary of the
Company prior to December 15, 1997.
BY THE ORDER OF THE BOARD OF DIRECTORS,
[SIG]
Larry A. Mizel
CHAIRMAN OF THE BOARD
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M.D.C. HOLDINGS, INC.
DIRECTOR EQUITY INCENTIVE PLAN
M.D.C. HOLDINGS, INC., a corporation organized under the laws of the State
of Delaware, hereby adopts this Director Equity Incentive Plan. The purposes of
this Equity Incentive Plan are as follows:
(1) To further the growth, development and financial success of the Company
by providing additional incentives to certain of its Directors by assisting them
to become owners of Common Stock of the Company and thus to benefit directly
from its growth, development and financial success; and
(2) To enable the Company to obtain and retain the services of the type of
Directors considered essential to the long-range success of the Company by
providing and offering them an opportunity to become owners of Common Stock of
the Company by means of the grant of stock options.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter and the singular
shall include the plural, where the context so indicates.
SECTION 1.1--BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.2--CODE
"Code" shall mean the Internal Revenue Code of 1986, as it may be amended
from time to time.
SECTION 1.3--COMMITTEE
"Committee" shall mean the committee designated by the Board pursuant to
Section 6.1 to administer the Plan.
SECTION 1.4--COMMON STOCK
"Common Stock" shall mean the Common Stock, par value $.01 per share, of the
Company.
SECTION 1.5--COMPANY
"Company" shall mean M.D.C. Holdings, Inc., a Delaware corporation.
SECTION 1.6--DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.7--ELIGIBLE DIRECTOR
"Eligible Director" shall mean a Director who is, pursuant to Section 3.1,
eligible to be granted Options under the Plan.
SECTION 1.8--EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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SECTION 1.9--FAIR MARKET VALUE
"Fair Market Value" of a share of the Common Stock as of a given date shall
mean (i) the closing price of the Common Stock on the New York Stock Exchange on
such date or, if shares were not traded on such date, then on the next preceding
trading day during which a sale occurred; or (ii) if such Common Stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(1) the last sales price (if the Common Stock is then listed as a National
Market Issue under the NASD National Market System) or (2) the mean between the
closing representative bid and asked prices (in all other cases) for the Common
Stock on such date as reported by NASDAQ or such successor quotation system; or
(iii) if such Common Stock is not publicly traded on an exchange and not quoted
on NASDAQ or a successor quotation system, the mean between the closing bid and
asked prices for the Common Stock, on such date, as determined in good faith by
the Committee; or (iv) if the Common Stock is not publicly traded, the fair
market value established by the Committee acting in good faith. In determining
the Fair Market Value of the Common Stock under paragraph (i) of this Section
1.9, the Committee may rely on the closing price as reported in the New York
Stock Exchange composite transactions published in The Wall Street Journal.
SECTION 1.10--INSIDE DIRECTOR
"Inside Director" shall mean a member of the Board who is an employee or
Officer of the Company or any Subsidiary.
SECTION 1.11--OFFICER
"Officer" shall mean an officer of the Company or any Subsidiary.
SECTION 1.12--OPTION
"Option" shall mean a non-statutory stock option to purchase Common Stock
granted under the Plan.
SECTION 1.13--OUTSIDE DIRECTOR
"Outside Director" shall mean a member of the Board who is not also an
Officer or employee of the Company or any Subsidiary.
SECTION 1.14--PLAN
"Plan" shall mean this Director Equity Incentive Plan.
SECTION 1.15--PURCHASE PRICE
"Purchase Price" shall be the per share purchase price of shares subject to
an Option determined pursuant to Section 4.2.
SECTION 1.16--SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.17--SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.18--SUBSIDIARY
"Subsidiary" shall have the same meaning as the term "subsidiary
corporation" defined in Section 424(f) of the Code and shall refer to
Subsidiaries of the Company.
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SECTION 1.19--TERMINATION OF DIRECTORSHIP
"Termination of Directorship" shall mean the time when an Eligible Director
ceases to be a Director of the Company for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation, removal,
death, retirement or failure to be reelected by the Company's stockholders.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1--SHARES SUBJECT TO PLAN
The shares of common stock subject to Options shall be shares of Common
Stock. The maximum aggregate number of such shares which may be issued under
this Plan shall be 300,000 shares. This authorization shall be increased
automatically on each succeeding annual anniversary of the adoption of the Plan
by the Board by an amount equal to 10% of the then authorized shares under the
Plan.
SECTION 2.2--UNEXERCISED OPTIONS
If any Option expires or is cancelled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may again be utilized
hereunder, subject to the limitations of Section 2.1.
SECTION 2.3--CHANGES IN COMMON STOCK
In the event that the outstanding shares of Common Stock are hereafter
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up, stock
dividend, combination of shares, rights offering, issuance of warrants or
otherwise, appropriate adjustments shall be made by the Committee in the number
and kind of shares for the purchase of which Options may be granted, including
adjustments of the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued on exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1--ELIGIBILITY
Any Outside Director who is a Director on the date on which Options are
granted under this Plan pursuant to Section 3.2 shall be eligible to be granted
Options under this Plan.
SECTION 3.2--GRANTING OF OPTIONS
On the first day of each December during the term of this Plan, each
Eligible Director shall be granted an Option to purchase 25,000 shares of Common
Stock.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1--STOCK OPTION AGREEMENT
As soon as possible after an Eligible Director becomes entitled to the grant
of an Option under Section 3.2 above, the Secretary shall issue such Option and
shall cause to be executed a Stock Option Agreement for the number of Options
set forth in Section 3.2 which shall be executed by such Eligible Director and
an authorized Officer of the Company.
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SECTION 4.2--PURCHASE PRICE OF SHARES SUBJECT TO OPTIONS
The Purchase Price of the shares subject to each Option shall be 100% of the
Fair Market Value on the date of grant.
SECTION 4.3--COMMENCEMENT OF EXERCISABILITY
Options granted under this Plan shall become exercisable six months after
the later to occur of:
(a) The date the Option is granted; or
(b) The date the Plan is approved by the Company's stockholders.
SECTION 4.4--EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
(a) The expiration of five years from the date the Option was granted;
or
(b) The expiration of one year from the date of the Director's
Termination of Directorship by reason of the Director's death; or
(c) The date of the Director's Termination of Directorship if such
Termination of Directorship was for cause as determined by the Board in its
absolute discretion.
SECTION 4.5--ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding shares of the Common Stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, rights offering, issuance of warrants, recapitalization,
reclassification, stock split-up, stock dividend, combination of shares or
otherwise, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares as to which all outstanding Options, or portions
thereof then unexercised, shall be exercisable, to the end that after such event
the optionee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in an outstanding Option shall be made
without change in the total price applicable to the Option or the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding off of share quantities or prices) and with any necessary
corresponding adjustment in Option price per share.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1--PERSONS ELIGIBLE TO EXERCISE
During the lifetime of the Eligible Director, only he may exercise an Option
granted to him or any portion thereof. After the death of the Eligible Director,
any exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under Section 4.4, be exercised by his personal
representative or by any person empowered to do so under the deceased Eligible
Director's will or under the then applicable laws of descent and distribution.
SECTION 5.2--PARTIAL EXERCISE
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under Section 4.4,
such Option or portion thereof may be exercised in whole or in part; provided,
however, that the Company shall not be required to issue fractional shares
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and the Committee may, by the terms of the Option, require any partial exercise
to be with respect to a specified minimum number of shares.
SECTION 5.3--MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the following prior
to the time when such Option or such portion becomes unexercisable under Section
4.4:
(a) Notice in writing signed by the Eligible Director or other person
then entitled to exercise such Option or portion, stating that such Option
or portion thereof is exercised in such form as is determined by the
Secretary of the Company; and
(b) (i) Full payment by check for the shares with respect to which such
Option or portion is thereby exercised; or
(ii) Subject to the Committee's consent, full payment by delivery to
the Company of shares of Common Stock owned by the Eligible Director duly
endorsed for transfer to the Company by the Eligible Director or other
person then entitled to exercise such Option or portion thereof with a
Fair Market Value equal to the Option price of shares with respect to
which such Option or portion is thereby exercised; or
(iii) Any combination of the considerations provided for in the
foregoing subsections (i) and (ii); and
(c) In the event that the Option or portion thereof shall be exercised
by any person or persons other than the Eligible Director, appropriate proof
of the right of such person or persons to exercise the Option or portion
thereof.
SECTION 5.4--RIGHTS AS STOCKHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
ARTICLE VI
ADMINISTRATION
SECTION 6.1--COMMITTEE
(a) The Plan shall be administered by the Committee unless a different
committee is appointed by the Board. The Committee shall be comprised of not
less than two persons (or such other number as may be required under Rule 16b-3
which has been adopted by the Securities and Exchange Commission under the
Exchange Act, if and as such Rule is then in effect ("Rule 16b-3")) appointed by
and holding office during the pleasure of the Board.
(b) Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee shall be filled by the Board.
SECTION 6.2--DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have the
power to interpret the Plan, the Stock Option Agreements and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. However,
the Committee shall
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have no authority, discretion or power to select the Eligible Directors who will
receive any Option, determine the number of shares to be issued hereunder or the
time at which such Options are to be granted, establish the duration of the
Options or alter any other terms or conditions specified in the Plan, except, in
the sense of administering the Plan subject to the provisions of the Plan. In
its absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under the Plan.
SECTION 6.3--COMPENSATION, PROFESSIONAL ASSISTANCE AND GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities
incurred by members of the Committee in connection with the administration of
the Plan shall be borne by the Company. The Committee may, with the approval of
the Board, employ attorneys, consultants, accountants, appraisers, brokers or
other persons. The Committee, the Company and its Officers and Directors shall
be entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Eligible Directors,
the Company and all other interested persons. No member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Options, and all members of the
Committee shall be fully protected by the Company in respect to any such action,
determination or interpretation.
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1--CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
(a) The Common Stock shall not be issued in respect of an Option granted
hereunder unless the exercise of such Option and the issuance and delivery of
shares of Common Stock pursuant thereto shall comply with all relevant
provisions of law, including the law of the Company's state of incorporation,
the Securities Act, the Exchange Act, the rules and regulations thereunder and
the requirements of any stock exchange upon which the Common Stock may then be
listed, and shall be further subject to the approval of the Company's counsel
with respect to such compliance.
(b) The Plan, the grant and exercise of the Option to purchase shares of
Common Stock hereunder, and the Company's obligation to sell and deliver shares
upon the exercise of rights to purchase shares shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency which may, in the opinion of counsel
for the Company, be required.
SECTION 7.2--OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Eligible Director or successors in
interest or shall be subject to disposition by transfer, alienation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law, by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7.2 shall prevent transfers by
will or by the applicable laws of descent and distribution.
SECTION 7.3--AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Board or the Committee;
provided, that to the extent required by Rule 16b-3 or any successor provision,
(i) without approval of the Company's stockholders given within 12 months before
or after the action by the Board or the Committee, no action of the Board or the
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Committee may, except as provided in Section 2.3, increase any limit imposed in
Section 2.1 on the maximum number of shares which may be issued on exercise of
Options, modify the eligibility requirements of Section 3.1, reduce the minimum
Option price requirements of Section 4.2 or extend the limit imposed in this
Section 7.3 on the period during which Options may be granted; and (ii) the Plan
provisions set forth in clause (i) may not be amended more than once every six
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act or the rules thereunder. Neither the amendment, suspension
nor termination of the Plan shall, without the consent of the holder of the
Option, alter or impair any rights or obligations under any Option theretofore
granted. No Option may be granted and during any period of suspension nor after
termination of the Plan, and in no event may any Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of five years from the date the Plan is adopted by
the Board; or
(b) The expiration of five years from the date the Plan is approved by
the Company's stockholders under Section 7.5.
SECTION 7.4--ACCELERATION OF EXERCISABILITY
(a) Notwithstanding the provisions in Section 7.3 but subject to Sections
4.3, 7.4(c) and 7.4(d), all Options granted under the Plan that are not yet
exercisable shall become exercisable immediately prior to the occurrence of a
merger or consolidation of the Company with or into another corporation, the
acquisition by another corporation or person of all or substantially all of the
Company's assets or 80% or more of the Company's then outstanding voting stock
or the liquidation or dissolution of the Company (each, a "Transaction"). At
least ten days prior to the effective date of such Transaction, the Company
shall give each Director holding an Option notice of such event if the Option
has then neither been fully exercised nor become unexercisable. During this
ten-day period, the Director electing to exercise his or her Options shall
comply with all of the requirements of Sections 5.3 and 5.4 of the Plan. In the
event that such Transaction becomes effective, the Option so exercised shall be
deemed to have been exercised immediately prior to the effective date of such
Transaction. In the event that such Transaction fails to transpire, the
Director's election under this paragraph shall be of no effect and the
Director's Options shall remain subject to the restrictions to which it was
originally subject.
(b) In the event that a Transaction occurs, any Option that is not exercised
prior to the occurrence of a Transaction shall be cancelled and the Director
holding such cancelled Option shall receive in exchange therefor a cash payment
equal to the greater of (i) the Fair Market Value of a share of Common Stock
measured on the date immediately prior to such Transaction less the per share
exercise price set forth in the Director's Option, multiplied by the number of
shares of Common Stock purchasable under the Option; or (ii) the fair market
value, as determined by the Board in its sole discretion, of the cash,
securities or other consideration into which a share of Common Stock is to be
exchanged pursuant to the Transaction, less the exercise price set forth in the
Director's Option, multiplied by the number of shares of Common Stock
purchasable under the Option.
(c) Notwithstanding the foregoing, Options that are not exercisable on the
date of a Transaction shall only become exercisable as described in subsection
(a) hereof or cancelled and settled for cash or other consideration as described
in subsection (b) hereof to the extent that such exercise and issuance of shares
of Common Stock or payment with respect to a particular Director continues to be
deductible by the Company pursuant to Section 280G of the Code. All
determinations in applying this Section 7.4 shall be made by the Board in its
sole discretion and all such determinations shall be final and binding on each
Director, the Company and any interested party.
(d) Notwithstanding the foregoing, no such acceleration of exercisability
described in subsection (a) hereof or cancellation and settlement described in
subsection (b) hereof shall take place if:
(i) The Director's Option becomes unexercisable under Section 4.4; or
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(ii) In connection with a Transaction, provision is made for an
assumption of the Director's Option or a substitution therefor of a new
Option by the resulting or acquiring corporation or a parent or subsidiary
of such corporation under similar terms and conditions as reflected in the
Director's Stock Option Agreement.
SECTION 7.5--APPROVAL OF PLAN BY STOCKHOLDERS
This Plan will be submitted for the approval of the Company's stockholders
within 12 months after the date of the Board's initial adoption of this Plan.
Options granted following the adoption of the Plan by the Board but prior to
such stockholder approval shall not be exercisable to the time when the Plan is
approved by the stockholders; provided, that if such approval has not been
obtained at or before the end of said 12-month period, all Options granted
during such time period under the Plan shall thereupon be cancelled and become
null and void.
SECTION 7.6--EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company or any Subsidiary (a)
to establish any other forms of incentives or compensation for Directors of the
Company or any Subsidiary; or (b) to grant or assume options or to issue
restricted or unrestricted stock otherwise than under this Plan in connection
with any proper corporate purpose, including, but not by way of limitation, the
grant or assumption of options or the issuance of restricted or unrestricted
stock in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
firm or association.
SECTION 7.7--TAX WITHHOLDING
The Company shall be entitled to require payment or deduction from other
compensation payable to each Director of any sums required by federal, state or
local tax laws to be withheld with respect to any Option. The Committee may in
its discretion allow such Director to elect to have the Company withhold shares
of Common Stock (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld. If the Director elects
to advance such sums directly, written notice of that election shall be
delivered on or prior to such exercise and, whether pursuant to such election or
pursuant to a requirement imposed by the Company, payment by check of such sums
for taxes shall be delivered within two days after the date of exercise. If, as
allowed by the Committee, the Director elects to have the Company withhold
shares of Common Stock (or allow the return of shares of Common Stock) having a
Fair Market Value equal to sums required to be withheld, the value of the shares
of Common Stock to be withheld (or returned as the case may be) will be equal to
the Fair Market Value of such shares on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). Elections by such persons to have
shares of Common Stock withheld for this purpose will be subject to the
following restrictions: (1) the election must be made on or prior to the Tax
Date, (2) the election must be irrevocable, (3) the election shall be subject to
the disapproval of the Committee, and (4) the election shall be subject to such
additional restrictions as the Committee may impose in an effort to secure the
benefits of any regulations under Section 16 of the Exchange Act. The Committee
shall not be obligated to issue shares and/or distribute cash to any person upon
exercise of any Option until such payment has been received or shares have been
so withheld, unless withholding (or offset against a cash payment) as of or
prior to the date of such exercise is sufficient to cover all such sums due or
which may be due with respect to such exercise.
SECTION 7.8--NO RIGHT TO CONTINUED MEMBERSHIP ON THE BOARD
Nothing in this Plan or in any Stock Option Agreement hereunder shall confer
upon any Director any right to continue as a Director of the Company or shall
interfere with or restrict in any way the rights of the
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<PAGE>
Company and its stockholders, which are hereby expressly reserved, to remove any
Eligible Director at any time for any reason whatsoever, with or without cause.
SECTION 7.9--COMPLIANCE WITH RULE 16B-3
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
SECTION 7.10--TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
******
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of M.D.C. Holdings, Inc. on May , 1993.
Executed on this day of , 1993.
--------------------------------------
SECRETARY
Corporate Seal
******
I hereby certify that the foregoing Plan was duly approved by the
stockholders of M.D.C. Holdings, Inc. on , 1993.
Executed on this day of , 1993.
--------------------------------------
SECRETARY
Corporate Seal
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<PAGE>
FIRST AMENDMENT TO
M.D.C. HOLDINGS, INC.
DIRECTOR EQUITY INCENTIVE PLAN
First Amendment to the M.D.C. Holdings, Inc. Director Equity Incentive Plan
as approved by the Board of Directors of the Corporation on April 20, 1993 (the
"Plan"). Capitalized terms used herein shall have the meanings ascribed in the
Plan, unless otherwise defined herein.
The following amendment was adopted by the Board of Directors on January 27,
1997 subject to receipt of stockholder approval, which approval was received at
the Annual Meeting of Shareowners of the Corporation held on April 25, 1997 and
became effective April 25, 1997.
1. Section "2.1--SHARES SUBJECT TO PLAN" hereby is amended to provide for
an increase in the number of shares available under the Plan by deleting Section
2.1 in its entirety and substituting the following:
The shares of common stock subject to Options shall be shares of Common
Stock. The maximum aggregate number of such shares which may be issued under
this Plan shall be 650,000 shares. This authorization shall be increased
automatically on each succeeding annual anniversary of the adoption of the
Plan by the Board by an amount equal to 10% of the then authorized shares
under the Plan.
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<PAGE>
M.D.C. HOLDINGS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF SHAREOWNERS -- APRIL 25, 1997
PROXY
The undersigned hereby appoints Larry A. Mizel and Paris G. Reece III, or
any one of them, as proxies or proxy for the undersigned, each with full power
of substitution and resubstitution, to attend the 1997 Annual Meeting of
Shareowners and any adjournments or postponements thereof and to vote as
designated below, all the shares of Common Stock of M.D.C. Holdings, Inc. held
of record by the undersigned on March 14, 1997. In their discretion, the proxies
are hereby authorized to vote upon such other business as may properly come
before the Meeting and any adjournments or postponements thereof.
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MESSRS.
BORICK, MANDARICH AND MIZEL.
Election of Directors
NOMINEES: Steven J. Borick, David D. Mandarich and Larry A. Mizel
FOR / / WITHHELD / /
FOR, except vote withheld from the following
nominee(s):
/ / ________________________________________________
2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S DIRECTOR EQUITY INCENTIVE PLAN.
Approval of amendment to company's Director Equity Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
3. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE PROPOSAL TO PROVIDE
FOR CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS.
Shareowner proposal to provide for cumulative voting in the election of
directors.
FOR / / AGAINST / / ABSTAIN / /
PLEASE SPECIFY YOUR CHOICES BY CLEARLY MARKING THE APPROPRIATE BOXES. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ITEMS 1. AND 2. ABOVE AND
"AGAINST" ITEM 3. ABOVE.
<PAGE>
Please sign exactly as your name appears on this proxy. Joint owners should
each sign individually. If signing as attorney, executor, administrator, trustee
or guardian, please include your full title. Corporate proxies should be signed
by an authorized officer.
Signature(s): _____________________
Date: _____________________________
Signature(s): _____________________
Date: _____________________________
