<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:
-----------------------------------------------------------------------
(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:
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<PAGE>
[LOGO]
M.D.C. HOLDINGS, INC.
3600 SOUTH YOSEMITE STREET, SUITE 900
DENVER, COLORADO 80237
March 31, 1999
To Our Shareowners:
You are invited to attend the 1999 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 Monday, May
24, 1999, 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 some of our shareowners have exercised their right to vote their
shares in person at past meetings, we recognize that many of you are unable to
attend the Meeting. Accordingly, enclosed is a proxy card that enables
shareowners to vote their shares on the matters to be considered at the Meeting,
even if they 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,
/s/ Larry A. Mizel
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 1999 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 Monday, May 24, 1999, at 8:00 a.m.,
Denver time, to consider and act upon the following matters:
1. the election of Gilbert Goldstein and William B. Kemper, two Class II
Directors, for three-year terms expiring in 2002; and
2. 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 26, 1999, 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,
/s/ Daniel S. Japha
Daniel S. Japha
SECRETARY
March 31, 1999
<PAGE>
[LOGO]
M.D.C. HOLDINGS, INC.
3600 SOUTH YOSEMITE STREET, SUITE 900
DENVER, COLORADO 80237
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREOWNERS
May 24, 1999
------------------------
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 Monday, May 24,
1999, 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 referred to as the "Proxy
Materials," are first being sent to shareowners on or about March 31, 1999.
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 26, 1999, (the "Record Date"), are
entitled to notice of, and to vote at, the Meeting. As of February 28, 1999,
approximately 22,061,000 shares of Common Stock were outstanding. The presence,
in person or by 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.
1
<PAGE>
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.
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 are presented to the
shareowners for action properly 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 of a shareowner
to vote in person. 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 to 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 1998 Annual Report on Form 10-K is enclosed with these Proxy
Materials. The 1998 Annual Report on Form 10-K 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 two
Class I Directors whose terms expire in 2001, two Class II Directors whose terms
expire in 1999 and two Class III Directors whose terms expire in 2000. At the
Meeting, two Class II Directors are to be elected to three-year terms expiring
in 2002. The nominees for the Class II Directors are Messrs. Gilbert Goldstein
and William B. Kemper. Both 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. Goldstein and Kemper. Management and the Board of Directors
are not aware of any reasons which would cause Messrs. Goldstein or Kemper to be
unavailable to serve as Directors. If Messrs. Goldstein or Kemper 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. Goldstein and Kemper as Directors.
2
<PAGE>
Certain information with respect to Messrs. Goldstein and Kemper, the
nominees for election, and the continuing Directors of the Company, furnished in
part by each such person, appears below:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED AS OF THE
POSITIONS AND OFFICES WITH THE COMPANY RECORD DATE PERCENTAGE OF
NAME AGE AND OTHER PRINCIPAL OCCUPATIONS (1)(2) CLASS (3)
- ----------------------- --- ------------------------------------------------ ----------------- --------------
<S> <C> <C> <C> <C>
NOMINEES:
CLASS II
TERMS EXPIRE IN 2002
Gilbert Goldstein 80 Principal in the law firm of Gilbert Goldstein, 45,000 *
P.C.
William B. Kemper 61 Private real estate investor 75,000 *
CONTINUING DIRECTORS:
CLASS III
TERMS EXPIRE IN 2000
Steven J. Borick 46 President, Texakota, Inc. and a General Partner 500 *
in Texakota Oil Company
David D. Mandarich 51 Executive Vice President-Real Estate and Chief 1,639,252 7.3%
Operating Officer of the Company
CLASS I
TERMS EXPIRE IN 2001
Herbert T. Buchwald 68 Principal in the law firm of Herbert T. 34,926 *
Buchwald, P.A. and President and Chairman of
the Board of Directors of BPR Management
Corporation
Larry A. Mizel 56 Chairman of the Board of Directors, President 4,623,442(4) 20.6%
and Chief Executive Officer of the Company
</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.
(2) Includes the following shares of Common Stock that such persons have the
right to acquire within 60 days of the Record Date by the exercise of stock
options at prices ranging from $6.75 to $18.625 per share: Gilbert Goldstein
25,000, William B. Kemper 75,000, Steven J. Borick - 0 -, Herbert T.
Buchwald 25,000, Larry A. Mizel 341,666 and David D. Mandarich 291,666.
(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. 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
3
<PAGE>
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 94,032 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 94,032 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 nominee for the Board of Directors of the
Company and of the continuing members of the Board.
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 Chairman of the
Audit Committee and a member of the Compensation Committee.
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 a member of the Audit,
Compensation and Legal Committees.
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 has been a Director of the Company
since founding the Company in January 1972. Mr. Mizel also serves as a director
of Richmond American Homes of Colorado, Inc., a wholly owned subsidiary of the
Company ("Richmond American Homes"). Mr. Mizel also is a Trustee of Marsico
Investment Fund, an open-end investment company that currently offers two
investment portfolios, the Marsico Focus Fund and the Marsico Growth and Income
Fund. Mr. Mizel is a member of the Legal Committee.
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 and a vice president of Superior Industries International,
Inc., a New York Stock Exchange-listed manufacturer of automobile accessories,
and Richmond American Homes. 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 American Homes. Mr. Mandarich also was a Director
of the Company from September 1980 until April 1989.
4
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1998, the Board of Directors held 10 regularly scheduled and two
special board meetings. The Directors also considered Company matters and had
numerous communications with the Chairman of the Board of Directors and other
officials of the Company wholly apart from the formal Board meetings. In 1998,
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.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists currently of Messrs.
Borick, Buchwald and Kemper, who serves as its Chairman. The Audit Committee met
10 times during 1998. The Audit Committee 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 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.
COMPENSATION COMMITTEE
The Compensation Committee currently consists of Messrs. Buchwald, Kemper
and Borick, who serves as its Chairman. During 1998, the Compensation Committee
met five times. The Compensation Committee 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 the "Report of the Compensation
Committee" below.
LEGAL COMMITTEE
The Legal Committee currently consists of Messrs. Goldstein, Buchwald and
Mizel. During 1998, the Legal Committee did not meet. The Legal Committee is
chaired by Mr. Goldstein and has been active in reviewing legal issues and
interacting with the Company's inside and outside legal counsel.
OTHER COMMITTEES
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.
DIRECTOR COMPENSATION
Each Director who is not an officer of the Company is paid $3,000 per month
as a retainer, $1,500 for each board meeting attended and $750 for attending
each meeting of the Legal, Audit and Compensation Committees and is granted
options to purchase 25,000 shares of Common Stock annually. Each Director
5
<PAGE>
who is not an officer of the Company also received $35,000 in December 1998 as a
bonus based on the Company's performance in 1998. Each Director also is
reimbursed for expenses related to his attendance at Board of Directors and
committee meetings.
Mr. Borick received fees of $1,500 per meeting during 1998 for services as a
director of Richmond American Homes. Richmond American Homes' board held 11
meetings in 1998.
Mr. Kemper and his wife are 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 September 30, 1998, Mr. Kemper paid premiums in
excess of the cost of claims paid on behalf of Mr. Kemper and his wife.
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 for 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, 44, 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.
MICHAEL TOUFF, 54, 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, 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SHARES
--------------------------------- OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(4) AWARDS(4) OPTIONS
- ------------------------------------- --------- --------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel, Chairman of the Board 1998 $ 660,000 $ 2,525,809(2) N/A -0- 100,000(5)
of Directors, President and Chief 1997 $ 600,000 $ 1,027,100(2) N/A -0- 100,000
Executive Officer 1996 $ 560,000 $ 825,780(2) N/A -0- 350,000
David D. Mandarich, Chief Operating 1998 $ 550,000 $ 2,525,809(2) N/A 100,000(5)
Officer, Executive Vice 1997 $ 500,000 $ 1,027,100(2) N/A -0- 100,000
President-Real Estate and a 1996 $ 460,000 $ 825,780(2) N/A -0- 350,000
Director -0-
Paris G. Reece III, Senior Vice 1998 $ 228,800 $ 170,000 N/A $ 185,000 30,000(5)
President and Chief Financial 1997 $ 208,000 $ 248,200(3) N/A -0- 20,000
Officer 1996 $ 200,000 $ 210,000(3) N/A -0- -0-
Michael Touff Vice President and 1998 $ 248,768 $ 165,000 N/A $ 20,000 10,000(5)
General Counsel 1997 $ 239,200 $ 164,400(3) N/A -0- 10,000
1996 $ 230,000 $ 375,000(3) N/A -0- -0-
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(1)
- ------------------------------------- -------------------
<S> <C>
Larry A. Mizel, Chairman of the Board $ 5,200
of Directors, President and Chief $ 2,850
Executive Officer $ 2,945
David D. Mandarich, Chief Operating $ 5,200
Officer, Executive Vice $ 2,850
President-Real Estate and a $ 2,945
Director
Paris G. Reece III, Senior Vice $ 5,200
President and Chief Financial $ 2,850
Officer $ 2,945
Michael Touff Vice President and $ 5,200
General Counsel $ 2,850
$ 2,945
</TABLE>
- ------------------------------
(1) The amounts in this column consist of Company contributions allocated to the
Executive Officers' accounts pursuant to the Company's 401(k) Savings Plan.
One hundred percent of the Company's 1998 contribution is to be funded with
shares of Common Stock valued at $20.875 per share, the closing price of the
Common Stock on January 25, 1999, the date as of which the Company approved
the stock portion of the allocation.
(2) These bonuses were paid in February following the year indicated 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"). The amount
of these bonuses is determined based on the Company's "Adjusted Pre-Tax
Return on Average Stockholders' Equity" (as defined in the Executive
Compensation Plan). Bonuses are not payable under the Executive Compensation
Plan unless the Company's Adjusted Pre-Tax Return on Average Stockholders'
Equity equals or exceeds 10%. In 1998, 20% of these bonuses, or $505,162,
was paid in the form of 24,611 shares of Common Stock in accordance with the
Executive Compensation Plan.
(3) Portions of these bonuses were paid in shares of the Common Stock valued at
the closing price of the Common Stock on the New York Stock Exchange on the
date the Compensation Committee of the Board of Directors approved the
bonuses ($7.75 for 1996 and $11.375 for 1997). In 1996, 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.
In 1997, Mr. Reece elected to receive $95,000 of his bonus (8,348 shares)
and Mr. Touff elected to receive $75,000 of his bonus (6,591 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 $26,277 and $70,856, respectively, in 1996 and $52,581 and
$41,511, respectively, in 1997. These amounts were secured by a pledge of
the number of shares of Common Stock equal to 125% of the original amounts
borrowed, divided by the price of the Common Stock on the respective date of
the loan. The loans bear interest at LIBOR plus one percent, are amortized
over 10 years with annual principal and interest payments due each December
30 of each year of employment and mature on the earliest of (i) five years
from the date of the notes; (ii) 90 days after the date of termination for
cause; or (iii) one year after termination without cause.
(4) The Company granted restricted stock awards to 19 employees, including
Messrs. Touff and Reece, pursuant to Restricted Stock Agreements that became
effective as of November 20, 1998. The awards were valued at $18.0625 per
share, the closing price of the Common Stock on the date of the awards. The
restrictions on the vesting of the shares granted pursuant to the Restricted
Stock Agreements lapse as to 25% of such shares each year, commencing on the
first anniversary of the grant. All of the restrictions on vesting of the
restricted shares lapse in the event of (1) the closing of a change in
control transaction; (2) the employee's termination of employment as a
result of death or disability; or (3) the employee's termination of
employment by the Company other than for cause.
(5) See "Option Grants in Last Fiscal Year," below.
N/A: Disclosure is not applicable under the Securities and Exchange
Commission's rules.
7
<PAGE>
Severance benefits for Messrs. Mizel and Mandarich are included in their
employment agreements. Severance benefits for Messrs. Reece and Touff are
included in their change in control agreements. See "Employment Agreements and
Change in Control Agreements" below.
The Company's severance pay policy also 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 under this policy if involuntarily
terminated after 90 days of employment. The amount of severance pay under the
policy 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 12 weeks; provided, however, the Compensation Committee of the
Board of Directors may approve additional severance payments for situations
involving management personnel.
OPTION GRANTS IN LAST FISCAL YEAR
The table below provides information on option grants in fiscal 1998 to the
named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
--------------------------------------------------------------- STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
NUMBER OF SHARES OPTIONS GRANTED TO EXERCISE OPTION TERM
UNDERLYING EMPLOYEES IN FISCAL PRICE EXPIRATION --------------------
NAME OPTIONS(1) YEAR(2) ($/SH) DATE 5% 10%
- --------------------------- ----------------- ------------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Larry A. Mizel............. 100,000 24.4% $ 18.0625 11/20/03 $ 499,034 $1,102,734
David D. Mandarich......... 100,000 24.4% $ 18.0625 11/20/03 $ 499,034 $1,102,734
Paris G. Reece III......... 30,000 7.3% $ 18.0625 11/20/03 $ 149,710 $ 330,820
Michael Touff.............. 10,000 2.4% $ 18.0625 11/20/03 $ 49,903 $ 110,273
</TABLE>
- ------------------------------
(1) Options granted in 1998 are exercisable beginning on November 20, 1999. The
closing price of the Common Stock on the New York Stock Exchange on the date
of the grants was $18.0625.
(2) The Company granted options representing 409,000 shares of Common Stock to
employees in fiscal 1998.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The table below provides information on option exercises in fiscal 1998 by
the named executive officers and the value of such officers' unexercised options
at December 31, 1998.
<TABLE>
<CAPTION>
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES 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 0 341,666 208,334 $4,767,844 $ 1,520,235
David D. Mandarich(2).............. 175,000 $1,779,688 341,666 208,334 $4,776,949 $ 1,547,551
Paris G. Reece III................. 0 0 55,000 45,000 $ 906,225 $ 249,300
Michael Touff...................... 0 0 52,500 17,500 $ 843,738 $ 108,088
</TABLE>
- ------------------------------
(1) The closing price of the Common Stock on December 31, 1998 on the New York
Stock Exchange was $21.375.
(2) Mr. Mandarich borrowed $200,000 to pay a portion of the sum of the exercise
price and the federal and state 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.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
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
PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILING.
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.
There are three primary objectives of the Company's executive compensation
program. First, this program is designed to attract, retain and reward highly
qualified executives. Second, the stock-based portion of the compensation
program is designed to create and maintain a strong and direct link between
executive pay, the Company's financial performance and total returns to
shareowners. Third, the Company's compensation program is intended to address,
among other things, the Committee's concern that the Company's highly
experienced executives could be targeted by the Company's competitors.
The three main components of the Company's executive compensation program
are: base salary, annual performance-based incentive compensation and
stock-based, long-term incentive. The Company operates with comparatively few
middle management employees. Because of this, base salaries for the Company's
executive officers, including the Chief Executive Officer, are at or above the
average rates paid by competitors in order to enable the Company to retain its
experienced and skilled executives. However, based upon a study of executive
compensation sponsored by another major homebuilding company, the Committee
believes that the Company's overall management costs are reasonably comparable
to those of other major homebuilders, 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, local economic and
employment conditions, the Company's performance and the compensation paid for
similar positions at comparable companies.
1998 COMPENSATION
The Committee considered the following factors in setting total compensation
for 1998, including incentive compensation: the Company's record earnings per
share, home closings, revenues, orders for homes, year-end backlog, annual
operating earnings and homebuilding profits; the substantial increase in home
gross margins; the Company's 21% return on average stockholders' equity;
additional coverage by Wall Street analysts; the rating upgrade of the Company's
senior notes by Duff & Phelps Credit Rating Co.; the completion of the
refinancing of the Company's public senior debt, the 42% increase in the Common
Stock price during 1998, the continued reduction of debt and the Company's
improved financial ratios.
Incentive compensation paid to Messrs. Mizel and Mandarich for 1998 was
based upon the Company's Executive Compensation Plan. This plan was 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 1998 performance goals for these
performance criteria, the Committee authorized the bonuses set forth in the
summary compensation table for Messrs. Reece and Touff, the named executive
officers other than Messrs. Mizel and Mandarich.
9
<PAGE>
The Committee also uses long-term, stock-based incentives in the form of
stock options and grants of restricted stock to provide compensation to
executive officers and other key employees that is linked directly to the
performance of the Company's Common Stock. In 1998, the Committee awarded stock
options to acquire 409,000 shares of Common Stock to a total of 29 employees,
and 26,574 shares of restricted stock to 19 employees, including the named
executive officers. These incentives are designed and intended to link
management and shareowner interests 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 contained in the option grants and
restricted stock award agreements serve as an additional long-term incentive to
retain key officers and other employees.
CEO COMPENSATION
Mr. Mizel's base salary for 1998 was $660,000 and was based on the factors
described below. The Committee approved a bonus of $2,525,809 for Mr. Mizel for
1998 in accordance with the terms of the Executive Compensation Plan described
above.
The Committee approved Mr. Mizel's 1998 base salary based on the following
factors, in order of importance to the Committee: (i) the Company's record
operating results during 1998; (ii) the comparative performance of the Company's
Common Stock as reflected in the performance graph; and (iii) the refinancing of
the Company's senior notes.
The primary financial performance improvements on which the Committee relied
in determining Mr. Mizel's 1998 base salary were the 52% increase in the
Company's diluted operating earnings per share in 1998; the 42% increase in the
price of the Common Stock in 1998; and the 21% return on average stockholders'
equity during 1998.
COMPENSATION COMMITTEE
Steven J. Borick, Chairman
William B. Kemper
Herbert T. Buchwald
10
<PAGE>
PERFORMANCE GRAPH
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 of other
homebuilders over the five-year period ending on December 31, 1998.
It is assumed in the graph that $100 was invested (1) in the Company's
Common Stock; (2) in the stocks of the companies in the Standard & Poor's 500
Index; and (3) 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, Pulte 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., Beazer Homes USA, Inc. and NVR Inc.
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>
M.D.C. HOLDINGS, INC. WEIGHTED AVG. PEER GROUP S&P 500
<S> <C> <C> <C>
12/31/93 $100.00 $100.00 $100.00
12/31/94 $86.05 $60.74 $98.45
12/31/95 $124.77 $96.37 $131.28
12/31/96 $153.59 $97.48 $158.80
12/31/97 $271.60 $164.77 $208.05
12/31/98 $388.72 $206.77 $263.53
</TABLE>
11
<PAGE>
EMPLOYMENT AGREEMENTS AND
CHANGE IN CONTROL AGREEMENTS
EMPLOYMENT AGREEMENTS
Mr. Mizel and Mr. Mandarich ("Executive" or the "Executives") each entered
into an Employment Agreement with the Company effective October 1, 1997 (the
"Employment Agreements"). The Employment Agreements provide for each Executive's
continued employment by the Company; Mr. Mizel as Chairman, President and Chief
Executive Officer and Mr. Mandarich as Executive Vice President-Real Estate and
Chief Operating Officer, until September 30, 2002 (the Initial Term). Unless
either the Company on the one hand or either Executive on the other hand elects
by notice in writing delivered to the other at least six months prior to the
expiration of the Initial Term or any extension thereof, such term shall be
extended automatically for two additional years, subject to earlier termination
by either Executive's voluntary resignation or otherwise as provided pursuant to
the terms of the Employment Agreement (the "Employment Term").
Pursuant to the Employment Agreements, the Executives' base salaries ("Base
Salaries") are subject to annual review by the Board of Directors. Messrs. Mizel
and Mandarich also are to be paid incentive compensation pursuant to the
Executive Compensation Plan ("Annual Incentive Compensation") and long-term
incentive compensation pursuant to the Company's Employee Equity Incentive Plan
(the "Equity Plan").
Each Executive will be entitled to a retirement benefit under the Employment
Agreement. Mr. Mizel's retirement benefit requires that he remain employed by
the Company through September 30, 1999, and Mr. Mandarich's requires that he
remain employed by the Company through September 30, 2002, in each case unless
such employment is terminated by the Company without cause, in the event of the
Executive's death or total disability or if the Executive elects to terminate
his employment upon a "Change in Control" or because of a "Material Change" (as
those terms are described below). The retirement benefit shall be equal to 70%
of the Executive's highest Base Salary during the final three years of the
Employment Term and shall be payable for the duration of the Executive's life.
In addition, the Employment Agreements provide for medical insurance benefits,
reimbursement of certain expenses, and entitle each of the Executives to
participate in the Company's benefit plans. If Messrs. Mizel and Mandarich
retire at the end of 1999 and 2002, respectively, assuming their Base Salaries
remain the same as in 1998, their annual retirement benefits would approximate
$462,000 and $385,000, respectively.
Messrs. Mizel and Mandarich may be terminated for cause, as defined in the
Employment Agreements. If an Executive is terminated without cause (including
the Company's election not to extend the term of the Employment Agreement)
during the Employment Term, he will be entitled to receive (i) an amount equal
to the aggregate Base Salary earned by the Executive during the three years
prior to such termination, plus (ii) an amount equal to 100% of the Annual
Incentive Compensation paid for the year prior to termination, and (iii) the
retirement benefits payable under the Employment Agreement commencing on the
date of termination. In addition, in the event of termination without cause,
each Executive's options and other rights under the Equity Plan shall vest
immediately and the Executive and his spouse and dependents shall be entitled to
continued medical benefits.
If a Change in Control occurs, all options, dividend equivalents and other
rights granted to Executives under the Equity Plan and any other Company plans
shall be accelerated and become exercisable immediately prior to the occurrence
of the transaction giving rise to the Change in Control.
Within two years after a Change in Control or a Material Change, the
Executive may terminate his employment, if not already terminated by the
Company. In the event of such termination or a termination of employment by the
Company without cause upon or within two years following a Change in Control,
then (A) each Executive shall receive the amounts payable in the event the
Executive's employment were terminated without cause as described above, (B)
with respect to the retirement benefit, either (1) the
12
<PAGE>
Company shall establish and fund an irrevocable grantor trust in conformance
with the model trust set forth in IRS Revenue Procedure 92-64, or (2) the
Company shall, if it so elects, pay to the Executive, in a lump sum cash
payment, the amount that otherwise would be required to be contributed to such
trust.
If the amounts payable upon the occurrence of a Change in Control or
Material Change, either alone or together with any other payments which the
Executive has the right to receive, would be subject to an excise tax as an
"excess parachute payment" under Section 4999 of the Internal Revenue Code, each
Executive agrees in his Employment Agreement that such aggregate amounts shall
be paid in annual installments over the shortest period of time over which such
aggregate amounts may be paid and not be treated as "excess parachute payments"
under Section 4999.
For purposes of this description of the Employment Agreements, a "Change in
Control" shall occur if:
(i) a report on Schedule 13D is filed with the Securities and Exchange
Commission disclosing that any person, other than the Company or any employee
benefit plan sponsored by the Company, or any director of the Company as of the
date of the Employment Agreements, or affiliate of such director, is the
beneficial owner, directly or indirectly, of twenty percent (20%) or more of the
combined voting power of the then-outstanding securities of the Company;
(ii) any person, other than the Company or any employee benefit plan
sponsored by the Company or any director of the Company as of the date of the
Employment Agreements, or affiliate of such director, shall purchase securities
pursuant to a tender offer or exchange offer to acquire any Common Stock of the
Company (or securities convertible into Common Stock) for cash, securities or
any other consideration, provided that after consummation of the offer, the
person in question is the beneficial owner of twenty percent (20%) or more of
the combined voting power of the then outstanding securities of the Company;
(iii) the shareowners of the Company shall approve: (A) any consolidation or
merger of the Company (1) in which the Company is not the continuing or
surviving corporation; or (2) pursuant to which shares of Common Stock of the
Company would be converted into cash, securities or other property; or (B) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company; or
(iv) there shall have been a change in a majority of the members of the
Board of Directors of the Company within a twelve month period, unless the
election or nomination for election by the Company's shareowners of each new
director during such twelve month period was approved by the vote of two-thirds
of the directors then still in office who were directors at the beginning of
such twelve month period.
For purposes of the Employment Agreements, a "Material Change" shall occur
if:
(i) the Company makes any of certain specified adverse changes in an
Executive's reporting relationship, titles, functions, duties or
responsibilities from those that the Executive occupied on October 1, 1997 or,
if the Employment Agreements have been renewed or extended, the date of the last
renewal or extension;
(ii) the Company assigns or reassigns the Executive (without his written
permission) to another place of employment;
(iii) the Company reduces the Executive's Base Salary, Annual Incentive
Compensation or long-term incentive compensation or the manner in which such
compensation is determined, or retirement benefits, unless such reduction
similarly applies to all "Senior Executive Officers of the Company," as defined
in the Employment Agreements, or the Company breaches the terms of the
Employment Agreements; provided, however, that nothing in this clause (iii)
shall be construed to permit the Company to reduce either Executive's retirement
benefit, as provided in the Employment Agreements, in any event, and regardless
of whether such reduction would similarly apply to all Senior Executive Officers
of the Company; or
(iv) a purchaser of all or substantially all of the Company's assets or any
successor or assignee of the Company fails to assume the Employment Agreements.
13
<PAGE>
CERTAIN OTHER CHANGE IN CONTROL AGREEMENTS
Messrs. Reece and Touff have entered into change in control Agreements with
the Company (the "Agreements")*. The Agreements are effective January 26, 1998
and terminate on the earlier of termination of the employee's employment or
December 31, 2000. Unless either party elects by notice in writing delivered to
the other by September 30, 2000, or at least 90 days prior to December 31 of
each subsequent year, the term of the Agreement will be renewed automatically
for successive one year terms. In addition, if an Agreement has not been
terminated prior to a "Change in Control" (as defined below), upon a Change in
Control, the term of an Agreement shall extend automatically for two years.
For purposes of the Agreements, the definition of "Change in Control" is
generally the same as the definition of "Change in Control" in the description
of the Employment Agreements as described above.
For purposes of the Agreements, a "Change in Control Event" occurs if a
Change in Control is followed by a "Material Change" within two years. A
Material Change is defined in the Agreements to occur if the employee's
employment is terminated without "cause" (as defined in the Agreements) or if
any of the events set forth under the definition of "Material Change" described
above with respect to the Employment Agreements takes place, taking into account
the titles, positions and reporting relationships of Messrs. Reece or Touff.
Pursuant to the Agreements, if a Change in Control Event occurs, the
employee may elect within 90 days after the Change in Control Event to terminate
the employee's employment, if not previously terminated by the Company, and to
receive a Change in Control payment. The Change in Control payment equals two
times the sum of the employee's Base Salary, in effect immediately prior to the
Change in Control Event, plus the amount of the employee's last regular annual
bonus, provided that the amount of such annual bonus shall not exceed 50% of the
employee's annual Base Salary in effect immediately prior to the Change in
Control Event.
If a Change in Control as defined above occurs, all options, dividend
equivalents and other rights granted to the employee under any Company equity
incentive plan shall be accelerated and become exercisable immediately prior to
the closing of the Change in Control. If the Change in Control is not
consummated, the employee's election to exercise such options and other rights
shall be of no effect and the employee's options shall remain subject to their
original restrictions.
Any amounts payable pursuant to the Change in Control Agreement are in
addition to any payments otherwise payable to the employee pursuant to any
agreement, plan or policy of the Company. If the amounts payable upon the
occurrence of a Change in Control Event, either alone or together with other
payments which the employee has the right to receive, would be subject to an
excise tax as a "excess parachute payment" under Section 4999 of the Internal
Revenue Code. Each employee agrees in the Change in Control Agreement that such
aggregate amounts shall be paid in annual installments over the shortest period
of time over which such amounts may be paid and not be treated as "excess
parachute payments" under Section 4999.
- ------------------------
* Certain other employees of the Company (the "Covered Employees") have been
provided change in control agreements containing the same terms and
conditions as the Agreements described above for Messrs. Reece and Touff,
taking into account the respective titles, positions and reporting
relationships of the other Covered Employees and with changes to certain
other provisions. If the Agreements for the Covered Employees have not been
terminated prior to a Change in Control, upon a Change in Control, the term
of the Agreements for the other Covered Employees shall extend automatically
for one year, rather than two years as in the cases of Messrs. Reece and
Touff. The Change in Control payment for the a Covered Employee would equal
the sum of the Covered Employee's Base Salary in effect immediately prior to
the Change in Control Event plus an amount equal to the Covered Employee's
last regular annual bonus, provided that the amount of such bonus shall not
exceed 50% of the Covered Employee's annual Base Salary in effect
immediately prior to the Change in Control Event.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the Company sold its Denver office headquarters building to an
unaffiliated third party. The Company leases its headquarters office space from
the purchaser of its building. Approximately 7,000 square feet in the Company's
Denver office building is subleased by various affiliates of Mr. Mizel for which
they collectively paid rent, including for parking, to the Company of
approximately $93,000 in 1998.
During 1998, 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 $3,647,000 for plumbing, door and millwork services.
Effective October 1, 1998, the Company entered into a two-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. In return, the Company (i) from
October 1, 1998 through September 30, 1999, pays Mr. Goldstein's firm $18,000
per month for a minimum of 25 hours per week in legal services and from October
1, 1999 through September 30, 2000, pays Mr. Goldstein's firm $15,000 per month
for a minimum of 20 hours per week in legal services; (ii) from October 1, 1998
through September 30, 1999, pays Mr. Goldstein's firm $100 per hour for services
performed in excess of 100 hours in any month and from October 1, 1999 through
September 30, 2000, $180 per hour for services performed in any month in excess
of 80 hours; (iii) provides office space with an estimated annual rental value
of $16,200 in the Company's leased office space; (iv) provides one full-time
secretary (in 1998, this secretary received a salary of approximately $30,000
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 $243,000 was made directly to Mr. Goldstein's firm in 1998
for services performed.
During 1998, the Company paid to PageWorks Communication Design
("PageWorks"), a marketing and communications firm, approximately $418,000 for
annual report design, advertising and marketing design services. PageWorks is
owned by Mr. Mizel's brother-in-law.
During 1998, the Company paid a firm owned by Carol Mizel, Mr. Mizel's wife,
approximately $80,000 for consulting services.
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. Pursuant to the
Option Purchase Program, prior to November 4, 1997, Messrs. Mizel and Mandarich
each were able to borrow up to $810,000 and Mr. Reece could 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. On November 4, 1997 the Company's Board of Directors
adopted Amendment Number 1 to the Option Purchase Program. This amendment added
Michael Touff as an eligible participant to the program and increased the amount
that each of Messrs. Mizel and Mandarich may borrow to $1,000,000 and the amount
that each of Messrs. Reece and Touff may borrow to $300,000. 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. Principal and accrued
interest are 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.
15
<PAGE>
The following table shows, as of December 31, 1998, the number of shares
exercised, the date of borrowings, and the principal and interest due as of that
date for each loan outstanding for the executive officers who have participated
in the Option Purchase Program:
<TABLE>
<CAPTION>
NUMBER OF ACCRUED
SHARES DATE OF NOTE BALANCE INTEREST AT
BORROWER EXERCISED NOTE AT 12/31/98 12/31/98
- ----------------------------------------------------- ----------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Larry A. Mizel....................................... 175,000 10/3/97 $ 720,000 -0-
David D. Mandarich................................... 497,000 4/17/95 $ 602,259 -0-
David D. Mandarich................................... 1/12/96 $ 97,741 -0-
David D. Mandarich................................... 175,000 5/19/98 $ 200,000 -0-
</TABLE>
As of December 31, 1998, Mr. Mandarich owed $280,080 to the Company under an
unsecured promissory note (the "Promissory Note") which was issued to the
Company in February 1994 in exchange for $280,080 in notes held by the Company
which were executed by Mr. Mandarich in connection with his (and Mr. Mizel's)
December 1989 purchase from the Company of the Richmond American Homes common
stock. The Promissory Note bears interest at 8%, payable annually in December
and matures in December 1999. On February 2, 1994, the Company acquired 35% of
the outstanding shares of Richmond American Homes common stock (the only
remaining shares of Richmond American Homes not then owned by the Company) from
Messrs. Mizel and Mandarich. The Promissory Note requires that Mr. Mandarich pay
to the Company the cash proceeds of the sale of any of the 202,956 shares of
Common Stock he received in exchange for the shares of Richmond American Homes
common stock he sold to the Company, to the extent of the unpaid balances of the
Promissory Note, plus accrued but unpaid interest thereon at the time of such a
sale. The Company recognized interest income of $22,406 on the Promissory Note
in 1998.
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.
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 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.
16
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK OWNED PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY CLASS(2)
- ------------------------------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Wellington Management Co. LLP ................................................. 1,156,000(3) 5.24%
75 State Street
Boston, Massachusetts 02109
Paris G. Reece III ............................................................ 113,810(4) *
3600 S. Yosemite St., #900
Denver, Colorado 80202
Michael Touff ................................................................. 89,354(5) *
3600 S. Yosemite St., #900
Denver, Colorado 80202
</TABLE>
- ------------------------
* Less than 1%.
(1) The address of Messrs. Mizel and Mandarich, the Directors who beneficially
own more than 5% of the outstanding shares of Common Stock is 3600 South
Yosemite Street, Suite 900, Denver, Colorado 80237. (See "Election of
Directors" above).
(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 13G filed with the Commission on or
about December 31, 1998, Wellington Management Company, LLP exercises sole
voting power over none of such shares, shared voting power over none of such
shares and shared dispositive power over all such shares.
(4) Includes 55,000 shares of Common Stock that Mr. Reece has the right to
acquire within 60 days of the Record Date by the exercise of 50,000 stock
options at a price of $4.25 per share and 5,000 stock options at a price of
$11.38 per share.
(5) Includes 52,500 shares of Common Stock that Mr. Touff has the right to
acquire within 60 days of the Record Date by the exercise of 50,000 stock
options at a price of $5.00 and 2,500 stock options at a price of $11.38 per
share.
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 Stock Exchange and
Pacific Exchange, Inc. 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, 1998, except for one
report filed late by each of Messrs. Goldstein, Kemper and Buchwald for January
of 1998, all such reports were filed on a timely basis.
17
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INDEPENDENT PUBLIC ACCOUNTANTS
The Company has not yet selected or retained independent accountants for the
year ended December 31, 1999. PricewaterhouseCoopers LLP examined the Company's
financial statements for the year ended December 31, 1998. A representative of
PricewaterhouseCoopers LLP is expected to be present at the Meeting and
available to respond to appropriate questions. Although PricewaterhouseCoopers
LLP 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.
SHAREOWNER PROPOSALS
Any proposal which a shareowner may desire to present at the 2000 Annual
Meeting of Shareowners must be received in writing by the Secretary of the
Company prior to December 15, 1999.
BY THE ORDER OF THE BOARD OF DIRECTORS,
/s/ Larry A. Mizel
Larry A. Mizel
CHAIRMAN OF THE BOARD
18
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M.D.C. HOLDINGS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF SHAREOWNERS -- MAY 24, 1999
PROXY
The undersigned hereby appoints Paris G. Reece III, and Michael Touff, or
either one of them, as proxies or proxy for the undersigned, each with full
power of substitution and resubstitution, to attend the 1999 Annual Meeting of
Shareowners and any adjournments or postponements thereof (the "Meeting") 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 26, 1999. 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.
GOLDSTEIN AND KEMPER.
Election of Directors
NOMINEES: Gilbert Goldstein and William B. Kemper
FOR / / WITHHELD / /
FOR, except vote withheld from the following
nominee(s):
/ / ________________________________________________
PLEASE SPECIFY YOUR CHOICE BY CLEARLY MARKING THE APPROPRIATE BOX. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ITEM 1. 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: _____________________________
