SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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 Rule 14a-11(c) or Rule 14a-12
TOLL BROTHERS, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
[INSERT NAME OF FILER WHEN APPLICABLE]
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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<PAGE>
[ LOGO ]
TOLL BROTHERS, INC.
3103 PHILMONT AVENUE
HUNTINGDON VALLEY, PA 19006
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MARCH 7, 1996
------------------
The Annual Meeting of Shareholders (the 'Meeting') of Toll Brothers, Inc.
(the 'Company') will be held on Thursday, March 7, 1996, at 10:00 a.m., at the
offices of the Company, 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania
19006, for the following purposes:
1. To elect two directors to hold office until the 1999 Annual Meeting
of Shareholders and until their respective successors are duly elected and
qualified. (The terms of office of the other five directors do not expire
until 1997 or 1998.)
2. To consider and act upon the selection of Ernst & Young LLP as the
Company's independent auditors for the 1996 fiscal year.
3. To transact such other business as may properly come before the
Meeting.
The Board of Directors has fixed the close of business on January 16, 1996
as the record date for the Meeting. Only shareholders of record at that time are
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached proxy statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to sign, date and return the enclosed proxy promptly, although you are
cordially invited to attend the Meeting in person. The return of the enclosed
proxy will not affect your right to vote in person if you do attend the Meeting.
BRUCE E. TOLL
Secretary
February 6, 1996
<PAGE>
TOLL BROTHERS, INC.
3103 PHILMONT AVENUE
HUNTINGDON VALLEY, PA 19006
------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MARCH 7, 1996
------------------
GENERAL
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Toll Brothers, Inc., a Delaware corporation
(the 'Company'), for use at the Company's Annual Meeting of Shareholders (the
'Meeting'), which will be held on the date, at the time and place, and for the
purposes set forth in the foregoing notice, and any adjournment or postponement
thereof. This proxy statement, the foregoing notice and the enclosed proxy are
first being sent to shareholders of the Company (the 'Shareholders') on or about
February 6, 1996.
The Board of Directors does not intend to bring any matter before the
Meeting except as specifically indicated in the notice and does not know of
anyone else who intends to do so. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
constituted substitutes acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their judgment on such matters. If the
enclosed proxy is properly executed and returned prior to voting at the Meeting,
the shares represented thereby will be voted in accordance with the instructions
marked thereon. In the absence of instructions, the shares will be voted 'FOR'
the nominees of the Board of Directors in the election of the two directors
whose terms of office will extend until the 1999 Annual Meeting of Shareholders
and until their respective successors are duly elected and qualified, and 'FOR'
the approval of Ernst & Young LLP as the Company's independent auditors for the
current fiscal year ending October 31, 1996.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later date,
or by attending the Meeting and voting in person.
<PAGE>
VOTING SECURITIES AND SECURITY OWNERSHIP
VOTING SECURITIES
At the close of business on December 31, 1995, there were 33,800,826 shares
of the Company's common stock (the 'Common Stock') outstanding. The record date
fixed by the Board of Directors for the determination of Shareholders entitled
to notice of and to vote at the Meeting is the close of business on January 16,
1996. At the Meeting, such Shareholders will be entitled to one vote for each
share of Common Stock owned at the record date. There is no other class of
voting securities outstanding. The presence at the Meeting, in person or by
proxy, of persons entitled to cast the votes of a majority of such outstanding
shares of Common Stock will constitute a quorum for consideration of the matters
expected to be voted on at the Meeting. In the election of directors,
Shareholders entitled to vote will not have cumulative voting rights.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information as of December 31, 1995
respecting the holdings of: (i) each person who was known to the Company to be
the beneficial owner of more than 5% of the Common Stock of the Company; (ii)
each director and nominee for director of the Company and each executive officer
named in the Summary Compensation Table; and (iii) all directors and executive
officers of the Company as a group. Each of the persons named in the table below
as beneficially owning the shares set forth therein has sole voting power and
sole investment power with respect to such shares, unless otherwise indicated.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) STOCK(1)
- -------------------------------------------------------------- ------------------------ -------------
<S> <C> <C>
Robert I. Toll................................................ 6,388,235(2)(3) 18.7
Bruce E. Toll................................................. 6,340,283(2) 18.6
FMR Corp...................................................... 3,373,603(4) 10.0
Wellington Management Company................................. 2,403,178(5) 7.1
Zvi Barzilay.................................................. 264,500 *
Robert S. Blank............................................... 53,500 *
Richard J. Braemer............................................ 63,500 *
Roger S. Hillas............................................... 68,500 *
Carl B. Marbach............................................... 51,850(6) *
Paul E. Shapiro............................................... 24,900 *
Joel H. Rassman............................................... 125,000 *
All directors and executive officers as a group (9 persons)... 13,380,268(3)(6)(7) 38.1
</TABLE>
- ------------------
* Less than 1%
(Footnotes continued on next page)
2
<PAGE>
(Footnotes continued from previous page)
(1) Shares issuable pursuant to options exercisable within 60 days of
December 31, 1995 are deemed to be beneficially owned; accordingly,
information includes the following number of shares of Common Stock
underlying options held by the following individuals, and all
directors and executive officers as a group: Robert I. Toll and
Bruce E. Toll, 346,000 shares each; Mr. Barzilay, 259,000 shares;
Messrs. Blank, Braemer and Hillas, 52,500 shares each; Mr. Marbach,
47,500 shares; Mr. Shapiro, 22,500 shares; Mr. Rassman, 125,000
shares; and all directors and executive officers as a group,
1,303,500 shares.
(2) The address for Robert I. Toll and Bruce E. Toll is c/o Toll
Brothers, Inc., 3103 Philmont Avenue, Huntingdon Valley,
Pennsylvania 19006.
(3) Includes 17,500 shares owned by the Robert and Jane Toll Foundation
of which Robert I. Toll is a trustee, with dispositive power, as to
which he disclaims beneficial ownership.
(4) Based on a Schedule 13G of December 31, 1994 which states that the
address of FMR Corp. ('FMR') is 82 Devonshire Street, Boston,
Massachusetts 02109, that the amount of shares is as of December 31,
1994 and that FMR has sole voting power with respect to 165,963
shares and sole investment power with respect to all shares
indicated as beneficially owned by it.
(5) Based on a Schedule 13G of December 31, 1994 which states that the
address of Wellington Management Company ('WMC') is 75 State Street,
Boston, Massachusetts 02109, that the amount of shares is as of
December 31, 1994 and that WMC has shared dispositive power with
respect to all shares indicated as beneficially owned. Includes
2,200,000 shares which are beneficially owned by Vanguard/Windsor
Fund, Inc. which has shared dispositive power and sole voting power
of the shares beneficially owned by them. The address of
Vanguard/Windsor Fund is 222 Bay Street, Suite 900, P.O. Box 9,
Toronto, Ontario, Canada M5K1P1.
(6) Includes 2,350 shares beneficially owned by individual retirement
accounts for the benefit of Mr. Marbach and his wife. Mr. Marbach
disclaims beneficial ownership of the 1,175 shares held by his
wife's IRA.
(7) The Board of Directors, after reviewing the functions of all of the
Company's officers, both in terms of designated function and
functions actually performed, has determined that for purposes of
Section 16 of the Securities Exchange Act of 1934 and the rules
thereunder, and Regulation S-K, that only the Chief Executive
Officer, Chief Operating Officer, Executive Vice President, and
Senior Vice President and Chief Financial Officer are deemed to be
an officer or executive officer of the Company for reporting
purposes under such provisions, respectively.
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Meeting, the Shareholders will elect two directors to hold office
until the 1999 Annual Meeting of Shareholders and until their respective
successors have been duly elected and qualified. The Company's Board of
Directors is divided into three classes serving staggered three-year terms, with
the term of one class of directors expiring each year. The directors whose terms
of office expire at the Meeting are Messrs. Robert I. Toll and Bruce E. Toll.
The Board of Directors has nominated Messrs. Robert I. Toll and Bruce E.
Toll to serve as directors until the 1999 Annual Meeting of Shareholders and
until their respective successors have
3
<PAGE>
been duly elected and qualified. Such nominees have indicated a willingness to
continue to serve as directors. Should a nominee become unavailable to accept
election as a director, the persons named in the enclosed proxy will vote the
shares which such proxy represents for the election of such other person as the
Board of Directors may recommend. Unless contrary instructions are given on the
proxy, the shares represented by a properly executed proxy will be voted 'FOR'
the election of Messrs. Robert I. Toll and Bruce E. Toll.
The nominees for election as the directors to be elected at the Meeting and
the directors whose terms of office continue after the Meeting, together with
certain information about them, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE SINCE EXPIRES POSITIONS WITH THE COMPANY
- --------------------------- --- ----------- ----------- -------------------------------------------------
<S> <C> <C> <C> <C>
Robert I. Toll............. 55 1986 1996 Chairman of the Board of Directors and Chief
Executive Officer
Bruce E. Toll.............. 52 1986 1996 President, Chief Operating Officer, Secretary and
Director
Robert S. Blank............ 55 1986 1997 Director
Roger S. Hillas............ 68 1988 1997 Director
Paul E. Shapiro............ 54 1993 1997 Director
Zvi Barzilay............... 49 1994 1998 Executive Vice President and Director
Richard J. Braemer......... 54 1986 1998 Director
Carl B. Marbach............ 54 1991 1998 Director
</TABLE>
Robert I. and Bruce E. Toll, who are brothers, co-founded the Company's
predecessors' operations in 1967 and have been members of the Board of Directors
since the Company's inception in May 1986. Both are also members of the Stock
Option Committee which administers the Company's Amended and Restated Stock
Option Plan (1986) (the '1986 Plan'), the Stock Option Committee for the Stock
Option and Incentive Stock Plan (1995) (the '1995 Plan'), the Shelf Terms
Committee and the Compensation Committee of the Board of Directors. Their
principal occupations since the Company's inception have been related to their
various homebuilding and other real estate related activities.
Robert S. Blank became a member of the Board of Directors in September
1986. For more than five years, Mr. Blank has been a partner in Whitcom
Partners, a partnership with offices in New York City, which owns and operates
newspapers and cable television systems and formerly owned and operated
broadcast television stations and radio stations, in some cases in partnership
with others. Mr. Blank is a member of the Subordinated Debt-Repurchase
Authorization Committee. Mr. Blank is a member of the Board of Directors of
Devon Group, Inc. a publicly traded reporting company.
Roger S. Hillas became a member of the Board of Directors in April 1988.
From July 1988 until December 1992, Mr. Hillas was chairman and chief executive
officer of Meritor Savings Bank, a publicly traded reporting company; since that
time, he has been retired. In December 1992, Meritor Savings Bank was taken over
by the Federal Deposit Insurance Corporation. Prior to July 1988, Mr. Hillas was
chairman of PNC Financial Corp. and of Provident National Bank. Mr. Hillas is a
member of the Subordinated Debt-Repurchase Authorization Committee. Mr. Hillas
is a member of the Board of Directors of P.H. Glatfelter Company, Consolidated
Rail Corporation, VF Corporation and The Bon-Ton Stores, Inc., each of which is
a publicly traded reporting company.
4
<PAGE>
Paul E. Shapiro became a member of the Board of Directors in December 1993
and is a member of the Audit Committee, the Stock Option Committee for the Key
Executives and Non-Employee Directors Stock Option Plan (1993) (the '1993
Plan'), the Performance Based Compensation Committee for the 1986 Plan and the
Administrative Committee for the Cash Bonus Plan. Since January 1994, Mr.
Shapiro has been an Executive Vice President/Chief Administrative
Officer/General Counsel of Marvel Entertainment Group, Inc., a publicly traded
reporting company. From March 1991 to December 1993, Mr. Shapiro was a
shareholder of the West Palm Beach, Florida law firm of Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quental and was of counsel to that firm until January
1, 1996. From September 1988 to February 1991, Mr. Shapiro was a shareholder in
the West Palm Beach, Florida law firm of Shapiro & Bregman, P.A.
Zvi Barzilay became a member of the Board of Directors in June 1994. Mr.
Barzilay joined the Company in 1980 and held the position of Executive Vice
President-Operations of the Company from September 1989 until October 1992 when
he was appointed to the position of Executive Vice President of the Company.
Richard J. Braemer became a member of the Board of Directors in September
1986. Since January 1994, Mr. Braemer has been a partner in the Philadelphia law
firm of Ballard Spahr Andrews & Ingersoll. From May 1992 to December 1993, Mr.
Braemer was a shareholder in the Philadelphia law firm of Hangley Connolly
Epstein Chicco Foxman & Ewing, P.C. For more than five years prior to May 1992,
Mr. Braemer was a shareholder or partner in the Philadelphia law firm of Braemer
Abelson & Hitchner, and its predecessors. Mr. Braemer is a member of the
Subordinated Debt-Repurchase Authorization Committee. Mr. Braemer is a member of
the Board of Directors of Advanta Corp., a publicly traded reporting company.
Carl B. Marbach became a member of the Board of Directors in December 1991
and is a member of the Compensation Committee, the Audit Committee, the Stock
Option Committee for the 1993 Plan the Performance Based Compensation Committee
for the 1986 Plan, the Performance Based Compensation Committee for the 1995
Plan, the Shelf Terms Committee and the Administrative Committee for the Cash
Bonus Plan. Since January 1995, Mr. Marbach has been President of Internetwork
Publishing Corp., an electronic publisher, which he founded. From September 1992
to December 1994, Mr. Marbach was the President of M-2 Systems, Inc., a
consulting firm which he founded. For more than five years prior to September
1992, Mr. Marbach had been President of Professional Press, a suburban
Philadelphia-based publisher of computer periodicals and books, of which he was
the founder.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings (four formal meetings and one
telephonic meeting) during the Company's last fiscal year and also acted by
unanimous consent in writing. Mr. Barzilay was unable to attend one of the
formal meetings and to participate in the telephonic meeting.
The Board of Directors currently has an Audit Committee, a Stock Option
Committee for the 1986 Plan, a Performance Based Compensation Committee for the
1986 Plan, a Stock Option Committee for the 1993 Plan, a Stock Option Committee
for the 1995 Plan, a Performance Based Compensation Committee for the 1995 Plan,
an Administrative Committee for the Cash Bonus Plan, a Compensation Committee, a
Subordinated Debt-Repurchase Authorization Committee and a Shelf Terms
Committee. The Audit Committee held two formal meetings during the last fiscal
year, which
5
<PAGE>
were attended by the Company's independent auditors, to discuss the scope of the
annual audit and questions of accounting policy and internal control. The Stock
Option Committee for the 1986 Plan held no formal meetings during the Company's
last fiscal year but met informally. During the Company's last fiscal year, the
Performance Based Compensation Committee for the 1986 Plan, the Stock Option
Committee for the 1993 Plan and the Administrative Committee for the Cash Bonus
Plan each held one formal meeting and two telephonic meetings. The Performance
Based Compensation Committee for the 1995 Plan held one formal meeting during
the Company's last fiscal year. The Stock Option Committee for the 1995 Plan,
the Compensation Committee, the Subordinated Debt-Repurchase Authorization
Committee and the Shelf Terms Committee did not have any meetings in the
Company's last fiscal year.
COMPENSATION OF DIRECTORS
Non-employee directors receive $4,000 for each full-day meeting that they
attend, $2,000 for each half-day meeting that they attend, and $1,500 for each
telephonic Board of Directors' meeting or committee meeting in which they
participate. In addition, each non-employee director receives an annual grant of
options for 15,000 shares of the Company's Common Stock under the 1993 Plan.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING 'FOR' EACH OF THE NOMINEES FOR DIRECTOR.
PROPOSAL TWO
APPROVAL OF THE COMPANY'S INDEPENDENT AUDITORS
The Company's Board of Directors recommends that the Shareholders consider
and approve a proposal to select Ernst & Young LLP, which served as the
Company's independent auditors for the last fiscal year, to serve as the
Company's independent auditors for the current fiscal year ending October 31,
1996. A representative of Ernst & Young LLP is expected to be present at the
Meeting, will have the opportunity to make a statement if he desires to do so
and will be available to respond to appropriate questions of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS VOTING 'FOR'
THE APPROVAL OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1996 FISCAL YEAR.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the other executive officers of the Company.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(2)
- ----------------------------------------- --------- --------- -------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Robert I. Toll........................... 1995 748,804 1,177,198 190,000 7,788
Chairman of the Board 1994 691,912 771,444 67,000 11,282
and Chief Executive Officer 1993 677,960 544,861 59,000 11,315
Bruce E. Toll............................ 1995 748,804 1,177,198 190,000 7,788
President, Chief Operating 1994 691,912 771,444 67,000 11,282
Officer and Secretary 1993 677,960 544,861 59,000 11,315
Zvi Barzilay............................. 1995 515,801 120,000 100,000 7,788
Executive Vice President(3) 1994 334,242 120,000 100,000 12,602
1993 314,238 335,000 100,000 9,995
Joel H. Rassman.......................... 1995 461,908 120,000 50,000 7,788
Senior Vice President, 1994 361,164 120,000 50,000 12,610
Chief Financial Officer 1993 341,149 215,000 35,000 9,987
and Treasurer(3)(4)
</TABLE>
- ------------------
(1) Cash bonuses for services rendered in fiscal years 1995, 1994 and 1993 have
been listed in the year earned, but were actually paid in subsequent years.
(2) The compensation reported represents the Company's contribution and matching
payments under its 401(k) salary deferred plan for each executive listed.
(3) Due to a change in the Company's methodology of compensating certain
executives, the bonuses awarded Messrs. Barzilay and Rassman for fiscal 1994
were reduced to $120,000 each, and their annual salary rate commencing
December 30, 1994 was increased to $555,000 for Mr. Barzilay and $485,000
for Mr. Rassman (see note (1) above).
(4) Under the terms of an Agreement dated June 30, 1988 between the Company and
Mr. Rassman, in the event of Mr. Rassman's termination by the Company
without cause (as defined), any material reduction or material adverse
change (as defined) in Mr. Rassman's duties, any failure by the Company to
provide Mr. Rassman with compensation, including salary and bonus, in an
amount less than $350,000 and the exercise of an election by Mr. Rassman to
terminate his employment or the removal of fringe benefits (as defined), Mr.
Rassman will receive $250,000, and, in certain instances, an additional
amount equal to the difference between $350,000 and his actual total
compensation during a specified period prior to his termination.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in the fiscal
year ended October 31, 1995 to the named executive officers and information
relating to all outstanding common shares as of October 31, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ----------------------------------
NAME GRANTED(#) FISCAL YEAR(3) ($/SH) DATE 5% 10%
- ---------------------------- ------------- ----------------- --------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert I. Toll(1)(4)........ 30,000 3.17% 11.000 11/01/02 $ 157,560 $ 377,384
Robert I. Toll(1)(4)........ 160,000 16.89 10.875 01/29/05 1,094,277 2,773,112
Bruce E. Toll(1)(4)......... 30,000 3.17 11.000 11/01/02 157,560 377,386
Bruce E. Toll(1)(4)......... 160,000 16.89 10.875 01/29/05 1,094,277 2,773,112
Zvi Barzilay(2)............. 100,000 10.56 9.9375 12/20/04 624,964 1,583,782
Joel H. Rassman(2).......... 50,000 5.28 9.9375 12/20/04 312,482 791,891
All Outstanding Common
Shares(5)................. 33,638,026 N/A N/A N/A 218,400,910 671,123,957
</TABLE>
- ------------------
(1) Options granted in fiscal 1995 become fully exercisable on the first
anniversary of the date of the grant.
(2) Options granted in fiscal 1995 become exercisable starting on the first
anniversary of the grant, with 50% becoming exercisable at that time and
with the remaining 50% becoming exercisable on the second anniversary date.
(3) The Company granted options representing 947,200 shares of Common Stock to
employees and 75,000 shares to non-employee directors in fiscal 1995.
(4) Issued pursuant to formula grant provisions of the 1986 Plan. In addition,
options for 43,000 shares of Common Stock were granted to each of Robert I.
Toll and Bruce E. Toll on January 29, 1996 pursuant to formula grant
provisions of the 1986 Plan based upon pre-tax return on equity, as defined
in the 1986 Plan, of 39% for fiscal 1995.
(5) Illustrates the aggregate appreciation in value of all shares of Common
Stock outstanding on October 31, 1995 based on the assumed 5% and 10% rates
of appreciation that produced the realizable value of the options granted to
executive officers shown in this table (measured from the dates of grant of
the options to their expiration, on a weighted average basis).
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information with regard to the
aggregated option exercises in the fiscal year ended October 31, 1995 and the
option values as of the end of that year for the chief executive officer and
other executive officers of the Company.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
OCTOBER 31, OCTOBER 31,
SHARES 1995(#) 1995($)(1)
ACQUIRED ON VALUE EXERCISABLE(E) EXERCISABLE(E)
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- ---------------------------------------------- ------------ ------------ ---------------- ----------------
<S> <C> <C>
Robert I. Toll................................ None N/A 156,000(E) 576,625(E)
190,000(U)(2) 1,326,250(U)
Bruce E. Toll................................. None N/A 156,000(E) 576,625(E)
190,000(U)(2) 1,326,250(U)
Zvi Barzilay.................................. 31,000 274,500 187,000(E) 927,750(E)
150,000(U) 893,750(U)
Joel H. Rassman............................... 9,500 106,281 95,000(E) 515,625(E)
75,000(U) 446,875(U)
</TABLE>
- ------------------
(1) Based upon the difference between the exercise price of the option and the
closing price of $17.875 per share of the Company's Common Stock as reported
on the New York Stock Exchange on October 31, 1995.
(2) See note (4) to table under 'Option Grants in Last Fiscal Year'.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Robert I. Toll, Bruce E. Toll and Carl B. Marbach. Robert I. Toll is the
Company's Chairman of the Board and Chief Executive Officer and Bruce E. Toll is
the Company's President and Chief Operating Officer. In naming these individuals
to the Compensation Committee, the Board decided that salary, bonus and option
grants for the Company's Chief Executive Officer and Chief Operating Officer
should be determined pursuant to certain objective measurements of the Company's
performance and base salary percentage increases for other executives of the
Company and that the Company's Chief Executive Officer and Chief Operating
Office should have the primary roles in determining compensation for the
Company's other executive officers.
In order to help provide for an orderly market in the Company's Common
Stock in the event of the death of either Robert I. Toll or Bruce E. Toll (the
'Tolls'), or both of them, the Company and the Tolls have entered into
agreements in which the Company has agreed to purchase from the estate of each
of the Tolls $10 million of the Company's Common Stock (or a lesser amount under
certain circumstances), at a price equal to the greater of fair market value (as
defined) or book value (as defined). Further, the Tolls have agreed to allow the
Company to purchase $10 million of life insurance on each of their lives. In
addition, the Tolls granted the Company, at no cost to the Company, an option to
purchase up to an additional $30 million (or a lesser amount under certain
circumstances) of Common Stock from each of their estates. The agreements expire
in October 2005.
9
<PAGE>
In addition to the performance of their duties for the Company, Messrs.
Robert I. Toll and Bruce E. Toll have engaged, and continue to engage, in
certain other businesses in real estate. These businesses include the purchase,
sale and management of townhome, apartment, condominium, commercial and
industrial real estate projects for rental. The Company leases, at what it
believes to be competitive market rates certain office space from a business
which was 50% owned by Messrs. Robert I. Toll and Bruce E. Toll. During the last
fiscal year, the Company paid such business approximately $24,200.
The Company has engaged the services of a company owned by Robbi Toll, the
wife of Bruce E. Toll, the President and Chief Operating Officer of the Company,
to perform interior design work for a number of its communities' model homes.
The Company paid $382,620 during the last fiscal year to this company for
interior design services. The Company believes that these transactions were
entered into on a competitive basis.
During the past fiscal year, the Company purchased seven vehicles with an
aggregate purchase price of $140,503 from an auto dealership which was owned by
Bruce E. Toll. The Company believes that the purchases were at competitive
prices.
On December 14, 1994, the Company provided Zvi Barzilay a loan of $71,500
at an interest rate per annum that is equal to the Applicable Federal Rate for
short-term loans on the last business day of each calendar year that the loan is
outstanding. The loan was due on demand by the Company. Under the terms of the
loan, Mr. Barzilay pledged as security for the loan 11,000 shares of the
Company's Common Stock. Mr. Barzilay repaid the loan in August 1995.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
BASIC POLICY CONSIDERATIONS
The Company's compensation policies with respect to its executive officers,
as established by the Compensation Committee of the Board of Directors, together
with the members of the Audit Committee, the Performance-Based Compensation
Committee for the 1986 Plan and the 1995 Plan, the Stock Option Committee for
the 1993 Plan and the Administrative Committee of the Cash Bonus Plan,
(collectively, the 'Compensation Committee' or the 'Committee'), continue to be
based on the principles that compensation should, to a significant extent, be
reflective of the financial performance of the Company, and that a significant
portion of executive officers' compensation should provide long-term incentives.
Executive compensation is set at levels that are sufficiently competitive so
that the Company may attract, retain and motivate the highest quality
individuals to contribute to the Company's goals and objectives and its overall
financial success. Methods of compensation are designed to provide incentives
for performance that result in continuing improvements in the Company's
financial results or condition, over both the short-term and the long-term, and
to assure continued service to the Company. Stock options constitute payment of
a significant portion of incentive compensation, which causes the ultimate
interests of the executives to be aligned with the interests of the Shareholders
in increasing the value of their investment. Each executive officer's
compensation is based largely upon both individual and Company performance.
The compensation program is comprised of two elements: annual salary and
possible short-term incentive awards in the form of cash bonuses, and a
long-term incentive program (namely, stock
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options) based on stock ownership and performance. The details of this
compensation program, with specific discussion of the programs applicable to the
Chief Executive Officer and the Chief Operating Officer are set out below.
ANNUAL COMPENSATION
For salary levels other than those for the Chief Executive Officer and the
Chief Operating Officer, the Committee establishes annual salaries by evaluating
individual performance and considering marketplace valuations of comparable
executives, although salary determinations have not been based upon any specific
constant criteria.
Executives other than the Chief Executive Officer and the Chief Operating
Officer are eligible for annual incentive bonuses granted at the discretion of
the Committee. These awards are not intended to be in addition to market level
compensation but instead are designed to make a significant part of an
executive's annual compensation dependant on the Committee's assessment of the
executive's performance. Factors the Committee considers include the Company's
overall financial results, as well as the individual's contributions to the
Company's economic and strategic objectives, the efforts required and expended
by the individual, the individual's abilities to develop, execute and implement
short-term and long-term corporate goals and the executive's role in maximizing
Company profitability, managing costs and reducing the impact of economic and
demographic restrictions on Company performance. The Committee continues to be
cognizant of its competitors' results of operations, including earnings,
margins, return on equity and other factors, all of which, when considered in
the context of the Company's comparative results, contribute to the
determination of compensation for the Company's executives. Since executive
performance constitutes such a major factor in the Company's success, such
incentive bonuses in prior years generally have represented approximately 30% or
more of total annual cash compensation for executive officers; however, in order
to remain competitive at the base salary level for executive officers (other
than the Chief Executive Officer and Chief Operating Officer) the ratio between
salary and bonus was changed in 1994 by shifting a portion of the bonus factor
to base salary (see note (3) to table under 'Summary Compensation Table').
LONG TERM COMPENSATION -- STOCK OPTIONS
The stock option component of the executive officers' compensation package
has been designed to provide incentives for the enhancement of shareholder
value, since the full benefit of stock option grants will not be realized unless
there has been appreciation in per share values over several years. In this
regard, options have been granted at fair market value on the date of grant and
generally vest over a number of years, usually not less than two years, with
significant restrictions, for a typical period of three years, on the
executive's ability to exercise the options and sell the shares received without
the consent of the respective stock option committee. As with the grant of
incentive cash bonuses, no constant criteria are used year after year; instead,
the Committee makes a determination of the effectiveness of the executive and
the level of contributions to the Company's success. Because the options are
granted at fair market value relative to the date of grant, any value which
ultimately accrues to the executives is based entirely on the Company's
performance, as perceived by investors who establish the price for the Company's
shares.
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1995 COMPENSATION FOR CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER
Messrs. Robert I. Toll and Bruce E. Toll continued to be viewed by the
Board of Directors to have the primary roles in determining compensation for the
Company's executive officers other than themselves. Accordingly, the Board
decided, in 1990, that salary, bonus and option grants for Messrs. Robert I.
Toll and Bruce E. Toll should be determined pursuant to objective measurements,
including appropriate performance criteria, in addition to compensation that
reflected market rates for comparable executives. Commencing January 1, 1995,
the Board of Directors determined that the formula for increasing the base
salaries of Messrs. Robert I. Toll and Bruce E. Toll should be based on no less
than the increase in the Consumer Price Index (as defined, using U.S. Department
of Labor definitions) and no more than the average percentage increase in
compensation of the highest five percentage compensation increases of the
Company's next ten most highly compensated employees other than Messrs. Robert
I. Toll and Bruce E. Toll for the adjustment year. Cash bonuses for Messrs.
Robert I. Toll and Bruce E. Toll in addition to such annual salaries also have
been determined since 1990 based on the formula contained in the Company's Cash
Bonus Plan approved by shareholders in 1992. Under the Cash Bonus Plan, each of
Robert I. Toll and Bruce E. Toll is entitled to receive a bonus equal to the sum
of (a) 1.5% of the Company's income before income taxes (as defined in the Cash
Bonus Plan) in excess of 10% and up to 20% of shareholders' equity (as defined
in the Cash Bonus Plan) of the Company as of the end of the preceding fiscal
year, plus (b) 2.0% of the Company's income before income taxes in excess of 20%
and up to 30% of shareholders' equity of the Company as of the end of the
preceding fiscal year, plus (c) 2.25% of the Company's income before income
taxes in excess of 30% of shareholders' equity of the Company as of the end of
the preceding fiscal year. This method of compensation ties the compensation of
these executive officers to the Company's performance. Accordingly, in the past
five years, this method generated no bonus in 1991, a substantial bonus in 1992,
a bonus in 1993 that was twice the size of the bonus for 1992, a bonus in 1994
that was approximately 42% higher than the bonus for 1993 and a bonus in 1995
that was 53% higher than the bonus for 1994. With respect to stock option grants
under amendments to the Company's 1986 Plan approved by shareholders in 1992, in
addition to a grant of 30,000 shares on April 6, 1992 and annual grants of
30,000 shares commencing November 1, 1992 and ending on and including November
1, 1995, Messrs. Robert I. Toll and Bruce E. Toll may receive additional option
grants only if certain defined targets for the Company's pre-tax return on
equity, after-tax return on equity and increase in common stock value, over one
year, three year and two year fiscal periods, respectively, are met. In future
years, all of these grants, amended as to the number of shares underlying
options granted upon achievement of date or performance targets and the vesting
of such options, will be governed by provisions of the Company's Stock Option
and Incentive Plan (1995) relating to Messrs. Robert I. Toll and Bruce E. Toll,
approved by shareholders on March 16, 1995.
COMPENSATION COMMITTEE (As Defined)
OF THE BOARD OF DIRECTORS
Robert I. Toll
Bruce E. Toll
Carl B. Marbach
Paul E. Shapiro
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PERFORMANCE GRAPH
The following graph compares the five year cumulative total return of the
Company's Common Stock, assuming reinvestment of dividends, with the S & P 500
Index and the S & P Homebuilding Index:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG TOLL BROTHERS, THE S & P 500 INDEX
AND THE S & P HOMEBUILDING INDEX
Toll Brothers S & P 500 Index S & P Homebuilding
10/90 100 100 100
10/91 265 133 204
10/92 360 147 304
10/93 630 169 446
10/94 440 175 246
10/95 715 222 335
*$100 INVESTED ON 10/31/90 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING OCTOBER 31.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, and the regulations
thereunder, requires the Company's officers and directors and persons who own
more than ten percent of a registered class of the Company's equity securities
(collectively, the 'reporting persons') to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish the
Company with copies of these reports. Based on the Company's review of the
copies of these reports received by it, and written representations received
from reporting persons, the Company believes that all filings required to be
made by the reporting persons for the period November 1, 1994 through October
31, 1995 were made on a timely basis.
CERTAIN TRANSACTIONS
The Company entered into an agreement in October 1993 to acquire a parcel
of land in Pennsylvania (the 'Parcel') from various persons and entities
directly and indirectly related to Robert S. Blank, a director (collectively,
'Sellers'). The purchase price for the Parcel is approximately $7 million net of
the Sellers' required contribution towards the cost of a common sewer plant. The
Sellers, who had previously owned a 60% interest in the Parcel and adjoining
properties, acquired the remaining 40% minority interest in the Parcel and the
adjoining properties from a third party in November 1992 after the 40% holder
had refused to invest additional funds to pursue needed approvals, which
appeared likely to involve litigation. The Sellers' purchase price for the 40%
minority interest was based on a value of $5 million for 100% of the Parcel and
the adjoining properties. The Company has been advised that no portion of the $2
million price paid by the Sellers for the 40% minority interest was specifically
allocated to the Parcel as distinguished from the adjoining properties;
moreover, due to differences among the Parcel and the adjoining properties,
including a variety of approval problems, which ultimately resulted in
litigation only as to the adjoining properties, any attempt to estimate such a
specific allocation would be speculative. The transaction was approved by
separate actions of both the Audit Committee and the Board of Directors (Mr.
Blank having withdrawn from the meetings). The Audit Committee and the Board,
basing their determinations upon comparable sales of property in the area, the
competitive price for the property compared to market and the attractiveness of
the area, for home building purposes, determined that the transaction was fair
to the Company and was entered into in good faith. The Company acquired the
Parcel in January 1996.
Ballard Spahr Andrews & Ingersoll, the law firm of which Director Richard
J. Braemer is a partner, acted as counsel to the Company in various matters
during fiscal 1995 and was paid aggregate fees of $134,369 during that period.
For information regarding certain other transactions, see 'Compensation
Committee Interlocks and Insider Participation,' elsewhere in this proxy
statement.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1997 Annual Meeting
of Shareholders must be received by the Company at the address appearing on the
first page of this proxy statement by October 9, 1996 in order to be considered
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting.
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SOLICITATION OF PROXIES
The enclosed form of proxy is being solicited on behalf of the Company's
Board of Directors. The Company will bear the cost of the solicitation of
proxies for the Meeting, including the cost of preparing, assembling and mailing
proxy materials, the handling and tabulation of proxies received, and charges of
brokerage houses and other institutions, nominees and fiduciaries in forwarding
such materials to beneficial owners.
In addition to the mailing of the proxy material, such solicitation may be
made in person or by telephone, telegraph or telecopy by directors, officers or
regular employees of the Company, or by a professional proxy solicitation
organization engaged by the Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED BY THIS PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULE THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE
DIRECTED TO JOSEPH R. SICREE, DIRECTOR OF INVESTOR RELATIONS, AT THE ADDRESS OF
THE COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
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