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
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-1(c) or Rule 14a-12
Continental Homes Holding Corporation
-----------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)((1) or
14a-6(j)(2).
[ ] $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: _/
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4) Proposed maximum aggregate value of transaction:
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_/ Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ X ] 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CONTINENTAL HOMES HOLDING CORP.
7001 N. Scottsdale Road, Suite 2050, Scottsdale, Arizona 85253
(602) 483-0006
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held
August 29, 1996
--------------------
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
to be held on August 29, 1996, at 9:00 A.M. (Phoenix time) at the Company's
executive offices located at 7001 N. Scottsdale Road, Suite 2050, Scottsdale,
Arizona 85253, for the following purposes:
(1) To elect eight directors; and
(2) To amend the By-Laws of the Company to provide (i) for the
classification of the Board of Directors into three classes; (ii) that a
director may be removed by shareholders only for cause and only with the
approval of eighty percent (80%) of the outstanding shares; (iii) that the Board
of Directors shall be composed of not fewer than three and not more than ten
directors; and (iv) that these amendments may be amended or repealed only by an
affirmative vote of seventy-five percent (75%) of the outstanding shares.
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of Common Stock of record at the close of business of June
26, 1996 will be entitled to receive notice of and to vote at the meeting or at
any adjournment thereof.
By Order of the Board of Directors
Julie E. Collins
Secretary
Scottsdale, Arizona
July 25, 1996
Whether or not you intend to be present at the meeting, please date and
sign the enclosed proxy card and mail it promptly in the enclosed postage-paid,
addressed envelope.
<PAGE>
PROXY STATEMENT
The Annual Meeting of Stockholders of Continental Homes Holding Corp.
(the "Company") will be held at the Company's executive offices located at 7001
N. Scottsdale Road, Suite 2050, Scottsdale, Arizona 85253, on August 29, 1996 at
9:00 A.M. (Phoenix time) for the purposes set forth in the foregoing notice of
meeting. The accompanying form of proxy for use at the meeting and at any
adjournments thereof is solicited by the Board of Directors of the Company. Any
proxy may be revoked by the stockholder by written notice to the Secretary of
the Company, if such notice is actually received by her before such proxy is
exercised, or by attending and voting at the meeting in person.
The vote of a plurality of the shares held by persons present at the
meeting in person or by proxy is required for the election of directors as
outlined in Proposal One and the vote of a majority of shares of stock eligible
to vote at the meeting is required to amend the By-Laws as outlined in Proposal
Two. Abstentions and votes withheld by brokers in the absence of instructions
from street-name holders (broker non-votes) will be counted for purposes of
determining whether a quorum is present, will have the effect of a vote against
a proposal for which a majority of the outstanding shares is required, and will
have no effect on the election of directors.
Proxies in the accompanying form which are properly executed by
stockholders, duly returned to the Company and not revoked will be voted in the
manner indicated below. This proxy statement and the accompanying proxy are
being mailed to stockholders on or about July 25, 1996.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the close of business on June 26, 1996, the record date for the
meeting, the Company had 7,001,330 shares of its common stock, par value $.01
per share (the "Common Shares") outstanding and entitled to vote at the meeting.
Each Common Share will be entitled to one vote on each matter presented at the
meeting. The presence in person or by proxy of a majority of Common Shares
entitled to vote at the meeting shall constitute a quorum.
The following table sets forth certain information as of the close of
business on July 5, 1996 concerning (i) the beneficial ownership of the Common
Shares by each director, nominee for director and named executive officer and by
all directors and executive officers of the Company as a group and (ii) each
person who, to the knowledge of the Company, is the beneficial owner of more
than 5% of the Common Shares.
1
<PAGE>
Number of Percent
Common Shares of
Name and Address Beneficially Common
of Beneficial Owner (1) Owned Shares
----------------------- ----- ------
Donald R. Loback 543,350 7.7%
W. Thomas Hickcox 36,375 (2) *
Robert B. Ryan 19,000 (3) *
Timothy C. Westfall 15,250 (4) *
Bradley S. Anderson 200 *
Peter D. O'Connor -0- *
Jo Ann Rudd -0- *
William Steinberg 500 *
Directors and officers as a group
(9 persons) 615,425 (5) 8.7%
FMR Corp. (6) 750,800 10.7%
Wellington Management Company (7) 463,500 6.6%
Mitchell Hutchins Asset Management, Inc. (8) 460,000 6.5%
First Union Corporation (9) 453,300 6.4%
Dimensional Fund Advisors, Inc. (10) 405,348 5.8%
- - ----------
*Denotes less than 1% of outstanding Common Shares
(1) Except as set forth in Notes 6 through 10, the address for each
beneficial owner is c/o Continental Homes Holding Corp., 7001 N.
Scottsdale Road, Suite 2050, Scottsdale, Arizona 85253.
(2) Includes options to purchase 22,875 Common Shares granted under the
Amended and Restated 1988 Stock Incentive Plan and the Restated 1986
Stock Incentive Plan.
(3) Includes options to purchase 5,500 Common Shares granted under the
Amended and Restated 1988 Stock Incentive Plan and the Restated 1986
Stock Incentive Plan.
(4) Includes options to purchase 15,250 Common Shares granted under the
Amended and Restated 1988 Stock Incentive Plan and the Restated 1986
Stock Incentive Plan.
(5) Includes options to purchase 44,375 Common Shares granted under the
Amended and Restated 1988 Stock Incentive Plan and the Restated 1986
Stock Incentive Plan.
(6) As reflected in Schedule 13-G dated May 9, 1996 filed by FMR Corp.
Their address is 82 Devonshire Street, Boston, Massachusetts 02109.
(7) As reflected in Schedule 13-G dated February 9, 1996 filed by
Wellington Management Company. Their address is 75 State Street,
Boston, Massachusetts 02109.
(8) As reflected in schedule 13-G dated February 13, 1996 filed by Mitchell
Hutchins Asset Management, Inc. Their address is 1285 Avenue of the
Americas, New York, New York 10019.
(9) As reflected in Schedule 13-G dated February 12, 1996 filed by First
Union Corporation. Their address is One First Union Center, Charlotte,
North Carolina, 28288.
(10) As reflected in Schedule 13-G dated February 7, 1996 filed by
Dimensional Fund Advisors. Their address is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Eight Directors, constituting the entire Board of Directors, are to be
elected at the meeting to serve until their successors are elected and
qualified. If the proposal to amend the Company's By-Laws to provide for a
classified Board of Directors is approved, assuming their election, Class I
nominees will serve for a term expiring at the 1997 Annual Meeting, Class II
nominees will serve for a term expiring at the 1998 Annual Meeting and Class III
nominees will serve for a term expiring at the 1999 Annual Meeting. If the
proposal is not approved, then all eight nominees, if elected, will serve for a
term expiring at the 1997 Annual Meeting or until their respective successors
are elected and qualified. The Board of Directors proposes the elections of the
following nominees and intends that the persons named in the accompanying proxy
will vote the shares represented by each proxy for the election as Directors of
such nominees unless a contrary direction is indicated. If prior to the meeting
any nominee is unable or unwilling to serve as a Director, which the Board of
Directors does not expect, the persons named in the accompanying proxy will vote
for such alternate nominee, if any, as may be selected by them.
Certain information is given below for each nominee for Director and
the Class in which each will initially serve if the proposed amendments to the
By-Laws of the Company are adopted.
<TABLE>
<CAPTION>
Nominee, Year First Elected Position with the Company, Present Principal Occupation,
as Director Principal Occupations During the
and Class Age Last Five Years and Other Directorships
- - ---------------------------- --- --------------------------------------------------------------------------------------
<S> <C> <C>
Donald R. Loback 44 Chairman and Chief Executive Officer of the Company since September 1995, Co-Chief
1985 (Class III) Executive Officer since July 1986.
W. Thomas Hickcox 43 President and Chief Operating Officer of the Company since September 1995 and
1992 (Class III) December 1994, respectively. Senior Vice President of Continental Homes, Inc., a
subsidiary of the Company ("CHI") since May 1991 and Vice President of Sales and
Marketing of CHI from May 1985 to May 1991.
Robert B. Ryan 39 Vice President of Management Information Systems of the Company since September
(Class II) 1995, Vice President of CHI since March 1986.
Timothy C. Westfall 50 Vice President and General Counsel of the Company since October 1994, Vice President
(Class II) and General Counsel of CHI since February 1990.
Bradley S. Anderson 35 Senior Associate, Commercial Properties Division of CB Commercial Real Estate Group,
1993 (Class II) Inc., a real estate brokerage company in Scottsdale, Arizona since January 1987.
Peter D. O'Connor 53 Vice President of First Highland, an industrial real estate development company
(Class I) since 1989.
Jo Ann Rudd 51 Owner/President of the accounting firm of Jo Ann Rudd CPA, P.C. in Phoenix, Arizona
1992 (Class I) since April 1986.
3
<PAGE>
Nominee, Year First Elected Position with the Company, Present Principal Occupation,
as Director Principal Occupations During the
and Class Age Last Five Years and Other Directorships
- - ----------------------------- --- --------------------------------------------------------------------------------------
William Steinberg 41 Vice President, AMB Institutional Realty Advisors, Inc., a pension fund advisor in
1992 (Class III) Boston, Massachusetts since August 1994. President and Founder of Saxe Investments,
a real estate services and consulting company in Scottsdale, Arizona from
February 1993 through July 1994. From August 1988 through February 1993 he was
a Partner/Principal of Trammell Crow Company, a real estate development
company in Phoenix, Arizona.
</TABLE>
During fiscal 1996, the Board of Directors had the following committees:
The Audit Committee is composed of Bradley S. Anderson, Jo Ann Rudd and
William Steinberg. The function of the Audit Committee is to review the
Company's internal controls, its financial reporting and the scope and results
of the audit engagement. It meets with appropriate Company financial personnel
and independent public accountants in connection with these reviews. The
Committee also recommends to the Board the appointment of the independent public
accountants, who have access to the Committee at any time. In fiscal 1996 one
Audit Committee meeting was held.
The Compensation Committee is composed of Bradley S. Anderson, Jo Ann
Rudd and William Steinberg. The function of the Compensation Committee is to
establish the amount and form of compensation awarded to Messrs. Loback and
Hickcox, including salary, bonuses and stock option awards and to monitor
compensation of the other executive officers of the Company. In fiscal 1996,
five Compensation Committee meetings were held.
The Stock Incentive Committee and Incentive Compensation Committee are
comprised of Donald R. Loback and W. Thomas Hickcox. The function of the Stock
Incentive and Incentive Compensation Committees is to administer the Company's
Amended and Restated 1988 Stock Incentive Plan and Restated 1986 Stock Incentive
Plan, respectively (except with respect to Messrs. Loback and Hickcox). During
fiscal 1996, the Stock Incentive Committee held one meeting and the Incentive
Compensation Committee held no meetings.
The Board of Directors does not have a nominating committee.
During fiscal 1996, the Board of Directors had a total of seven
meetings. All of the directors attended more than 85% of the meetings of the
Board of Directors and meetings of each of the Committees on which they served.
In fiscal 1996 each director who is not an employee was paid an annual fee of
$7,500 and an additional $500 for each Board and Committee meeting attended. In
fiscal 1997 each non-employee director will be paid an annual fee of $12,000 and
$500 for each Board and Committee meeting attended.
4
<PAGE>
EXECUTIVE OFFICERS
The following information is furnished with respect to executive
officers of the Company who are not nominees to serve on the Board of Directors.
<TABLE>
<CAPTION>
Position with the Company and
Name Age Principal Occupations During the Last Five Years
- - ---- --- ---------------------------------------------------------------------------------------
<S> <C> <C>
Julie E. Collins 36 Financial Vice President, Treasurer and Secretary of the Company since July 1996,
Controller of CHI prior to that date.
</TABLE>
The following table sets forth the annual compensation, long-term
compensation and all other compensation for the last three fiscal years for the
Company's Chief Executive Officer and the four next most highly compensated
executive officers (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Awards
--------------------------------------------------- ------
Name and Principal Fiscal Salary Bonus Other Annual Options All Other
Position Year $ $ Compensation (1) # Compensation (2)
- - ----------------------- --------- -------------- --------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Loback 1996 $250,000 $540,000 $-- -0- $6,273
Chief Executive 1995 200,000 100,000 -- -0- 4,415
Officer 1994 200,000 92,429 -- -0- 4,398
W. Thomas Hickcox 1996 232,692 368,000 -- -0- 4,623
President and 1995 192,308 125,000 -- 5,000 4,307
Chief Operating 1994 178,462 81,890 -- 4,000 3,399
Officer
Timothy C. Westfall 1996 154,750 115,000 -- 5,000 4,493
Vice President and 1995 148,385 50,000 -- 3,000 4,409
General Counsel 1994 141,616 30,000 -- 3,000 3,912
Kathleen R. Wade 1996 69,708 200,000 -- -0- 4,602
(3) 1995 200,000 100,000 -- -0- 4,074
1994 200,000 83,714 -- -0- 4,202
Kenda B. Gonzales 1996 108,092 125,000 -- 5,000 3,608
(4) 1995 96,131 65,000 -- 3,000 2,898
1994 102,308 50,437 -- 3,000 2,150
</TABLE>
(1) The amount of perquisites and other personal benefits received by each
of the Named Officers for a fiscal year does not exceed the lesser of
$50,000 or 10 percent of the total annual salary and bonus of such
Named Officer for such fiscal year.
(2) Includes Company contributions to the Company's 401(k) retirement plan
and premiums and administrative service fees paid by the Company under
the executive split dollar life insurance program. The Company is
entitled to recover the premiums and administrative service fees from
any amounts paid by the insurer on such split dollar life policies and
has retained a collateral interest in each policy to the extent of the
premiums and administrative service fees paid with respect to such
policy. The following table sets forth the value of all other
compensation:
5
<PAGE>
<TABLE>
<CAPTION>
D.R. W.T. T.C. K.R. K.B
Loback Hickcox Westfall Wade Gonzales
------ ------- -------- ---- --------
<S> <C> <C> <C> <C> <C>
Fiscal 1996
401(K) Company Contribution $ 5,115 $ 3,651 $ 3,299 $ 3,634 $ 3,111
Economic Benefit of Split Dollar Plan 1,158 972 1,194 968 497
------- ------- ------- ------- -------
$ 6,273 $ 4,623 $ 4,493 $ 4,602 $ 3,608
======= ======= ======= ======= =======
Fiscal 1995
401(K) Company Contribution $ 3,449 $ 3,396 $ 3,294 $ 3,234 $ 2,408
Economic Benefit of Split Dollar 966 911 1,115 840 490
------- ------- ------- ------- -------
$ 4,415 $ 4,307 $ 4,409 $ 4,074 $ 2,898
======= ======= ======= ======= =======
Fiscal 1994
401(K) Company Contribution $ 3,433 $ 2,719 $ 2,981 $ 3,363 $ 1,751
Economic Benefit of Split Dollar 965 680 931 839 399
------- ------- ------- ------- -------
$ 4,398 $ 3,399 $ 3,912 $ 4,202 $ 2,150
======= ======= ======= ======= =======
</TABLE>
(3) Ms. Wade was Co-Chief Executive Officer prior to her resignation in
September 1995.
(4) Ms. Gonzales was Chief Financial Officer, Treasurer and Secretary prior
to her resignation in July 1996.
The following table sets forth information on options grants in fiscal
1996 to each of the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
- - ------------------------------------------------------------------------------------------------- ---------------
% of Total
Options
Granted to Exercise
Options Employees in Price Expiration
Name Granted #(1) Fiscal Year ($/Sh) Date 5% 10%
---- ------------ ----------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Donald R. Loback -0- -0- % $ -- -- $ -- $
--
W. Thomas Hickcox -0- -0- -- -- --
--
Timothy C. Westfall 5,000 14.3 18.25 11/29/05 57,387 145,429
Kathleen R. Wade -0- -0- -- -- --
--
Kenda B. Gonzales 5,000 14.3 18.25 11/29/05 57,387 145,429
</TABLE>
(1) All options granted are for Common Shares and are exercisable in
cumulative 25% installments commencing one year from the date of grant,
with full vesting occurring on the fourth anniversary date.
6
<PAGE>
The following table sets forth information on option exercises in
fiscal 1996 by each of the Named Officers and the value of such officers'
unexercised options at May 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal Year End (#) Fiscal Year End ($)
------------------- -------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Loback -0- $ -- -0- -0- $ -- $ --
W. Thomas Hickcox 5,695 96,535 22,875 6,375 316,047 56,412
Timothy C. Westfall 3,000 61,500 15,250 9,500 210,719 71,243
Kathleen R. Wade -0- -0- -0- -- --
--
Kenda B. Gonzales 10,000 166,769 16,195 9,500 221,478 71,243
</TABLE>
Compensation Committee Report
The Compensation Committee of the Board of Directors is comprised of
three non-employee directors of the Company, currently Messrs. Anderson and
Steinberg and Ms. Rudd. The Committee is responsible for establishing the
compensation levels for Messrs. Loback and Hickcox. The Committee is also
responsible for reviewing and monitoring, but not approving compensation to
other executives of the Company.
The Company's executive compensation programs are intended to enable
the Company to attract, retain and reward highly qualified executives while
maintaining a strong and direct link between executive pay, the Company's
financial performance and return on stockholders' equity.
In fiscal 1996 the Company had three Executive Officers excluding
Messrs. Loback and Hickcox. Compensation for executive officers is determined by
Messrs. Loback and Hickcox. Commencing in fiscal 1994, such compensation levels
were reviewed by the Compensation Committee. It is recognized that management is
most familiar with the individual employees, with prevailing levels for
compensation within certain markets and other factors affecting compensation.
However, Compensation Committee review is to ensure that compensation decisions
relative to executives of the Company are made responsibly.
The committee sets compensation for Messrs. Loback and Hickcox. In
keeping with the Company's compensation objectives; Messrs. Loback's and
Hickcox's compensation is largely driven by cash incentives that are directly
tied to the Company's financial performance. Accordingly, it was determined that
Mr. Loback's fiscal 1996 compensation would be comprised of a base salary of
$250,000 plus a cash bonus equal to 1.25% of the Company's pre-tax,
pre-incentive income.
Mr. Loback has the same arrangement for fiscal 1997.
Mr. Hickcox's fiscal 1996 compensation was comprised of a base salary
of $250,000 plus a cash bonus equal to .75% of the Company's pre-tax,
pre-incentive income. In fiscal 1997, Mr. Hickcox will
7
<PAGE>
have the same base salary and his bonus will be increased to 1.0% of the
Company's pre-tax, pre-incentive income.
As a part of the decision making process, the Committee reviewed prior
years compensation of Chief Executive Officers and Presidents of selected
homebuilding companies deemed comparable to the Company, noting that during the
periods the average compensation paid to comparable officers had been in
considerable excess of the compensation paid to Messrs. Loback and Hickcox.
The only long-term incentive plans maintained by the Company are the
stock option plans. The compensation of the executive officers consists
principally of salary, annual bonus and income and potential gain from stock
options. Mr. Loback has never been granted stock options under any of the
Company's stock option plans, however he is eligible to receive such grants. The
perquisites and other benefits received by executive officers are incidental to
employment.
The above Committee Report to Shareholders of the Compensation
Committee shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates this information by
reference and shall not otherwise be deemed under such acts.
COMPENSATION COMMITTEE
Bradley S. Anderson
Jo Ann Rudd
William Steinberg
8
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total return of Continental
Homes Holding Corp., the S&P 500 Index and the S&P Homebuilding Index:
<TABLE>
<CAPTION>
- - ------------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
May-91 May-92 May-93 May-94 May-95 May-96
- - ------------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Continental 100.00 133.54 151.51 163.42 182.34 297.25
- - ------------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
S&P Homebuilding 100.00 109.85 122.61 127.83 153.64 197.33
- - ------------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
S&P 500 100.00 112.21 152.24 125.14 137.79 144.83
- - ------------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
The above graph is based upon common stock and index prices calculated
as of May 31 for each of the last five fiscal year-end periods. The Company's
May 31, 1996 closing price per Common Share was $24.625. As of July 3, 1996 the
Company's Common Shares closed at $21.50 per share. The stock price performance
of Continental Homes Holding Corp. depicted in the graph above represents past
performance only and it not indicative of future performance.
9
<PAGE>
PROPOSAL TWO
This proposal is to approve amendments to the Company's By-Laws. The
amendments would (1) classify the Board of Directors into three classes as
nearly equal in size as possible; (2) provide that the Board of Directors shall
be composed of not fewer than three and not more than ten directors; (3) provide
that directors may be removed for cause and only with the affirmative vote of
eighty percent (80%) of the outstanding shares; and (4) provide that these
provisions may be amended or repealed only by an affirmative vote of
seventy-five percent (75%) of the outstanding shares.
Classified Board
To enhance continuity and stability of the Board of Directors, the
Company's Board of Directors has unanimously approved and recommended that the
stockholders of the Company approve an amendment to Section 2.1 of the By-Laws
to provide for the classification of the Board of Directors into three classes
of directors, with staggered terms of office.
The Company's By-Laws currently provide that all directors are to be
elected to the Board of Directors annually for a term of one year. Delaware law
permits provisions in a certificate of incorporation or by-law approved by
stockholders that provide for a classified board of directors. The proposed
amendment to the By-Laws, described in Exhibit A to this Proxy Statement, would
provide that (exclusive of directors who may be elected by the holders of one or
more series of preferred stock) directors would be classified into three
classes, as nearly equal in number as possible. One class would hold office
initially for a term expiring at the 1997 Annual Meeting, another class would
hold office initially for a term expiring at the 1998 Annual Meeting and one
class would hold office initially for a term expiring at the 1999 Annual
Meeting. At each Annual Meeting following this initial classification and
election, the successors to the class of directors whose terms expire at that
meeting would be elected for a term of office to expire at the third succeeding
Annual Meeting after their election and until their successors have been duly
elected and qualified. A director appointed in between terms due to vacancies or
newly created directorships would hold office until the end of the unexpired
portion of the term of the class to which they have been elected. See "Election
of Directors" as to the composition of each class of directors if this proposal
is adopted.
The proposed classified board amendment will significantly extend the
time required to effect any change in control of the Board of Directors and may
discourage hostile takeover bids for the Company. Currently, a change in control
of the Board of Directors can be made by stockholders holding a plurality of the
votes cast at a single Annual Meeting. If the Company implements a classified
board of directors, it will take at lease two Annual Meetings for stockholders
to make a change in control of the Board of Directors because only a minority of
the directors will be elected at each meeting. The Company's management knows of
no specific effort or plan to accumulate the common shares or to obtain control
of the Company. The purpose and intended effect of the amendment is to enhance
the continuity and stability of the Company's management and Board of Directors
by making it more difficult for stockholders to remove or change the incumbent
members of the Board of Directors.
ADVANTAGES
The classified board proposal is designed to assure continuity and
stability in the Board of Directors' leadership and policies. While management
has not experienced any problems with such continuity in the past, it wishes to
ensure that this experience will continue. The Board of Directors also
10
<PAGE>
believes that the classified board proposal will assist the Board of Directors
in protecting the interest of the Company's stockholders in the event of an
unsolicited offer for the Company.
DISADVANTAGES
Because of the additional time required to change control of the Board
of Directors, the classified board proposal will tend to perpetuate present
management. Because the classified board proposal will increase the amount of
time required for a takeover bidder to obtain control of the company without the
cooperation of the Board of Directors it may discourage the acquisition of large
blocks of the Company's shares by causing it to take longer for a person or
group of persons who acquire such a block of shares to effect a change in
management. The classified board proposal will also make it more difficult for
the stockholders to change the composition of the Board of Directors even if the
stockholders believe such a change would be desirable and in their best
interest.
Size of Board; Removal of Directors and Amendments
The Company's current By-Laws require that the Board be composed of a
minimum of three directors but set no maximum number of directors. The proposed
amendment provides that the number of directors that constitutes the entire
board may not exceed ten, except in the case of any increase in the number of
directors by reason of any provision entitling the holders of any one or more
series of preferred stock of the Company, voting as a class, to elect additional
directors in specified circumstances. The number of directors may be changed by
resolution of a majority of the entire Board or by the holders of seventy-five
percent (75%) of the outstanding shares entitled to vote, but no decrease may
shorten the term of any incumbent director. Under Delaware law, unless the
Certificate of Incorporation provides otherwise, directors serving on a
classified board may only be removed for cause. Since the Company's Certificate
of Incorporation does not provide otherwise, and the current By-Laws provide
that a director may be removed with or without cause, the proposed amendment to
the By-Laws provides that the directors may be removed only for cause and only
by the affirmative vote of holders of eighty percent (80%) of the Company's
common stock. The proposed amendment also provides this provision may be amended
or repealed only by an affirmative vote of 75% of the outstanding shares
ADVANTAGES
The primary purpose of the provision limiting the number of directors
to ten is to reinforce the intended effect of the classified board by negating
the possibility of a change in control of the Board by an increase in its size
to a number which gives control of the Board to members appointed to newly
created directorships. The primary purpose of the provisions regarding removal
for cause is to preclude the removal of any director or directors by a takeover
bidder or otherwise, unless removal is warranted for reasons other than control
of the Board. For a takeover bidder to obtain effective control of the Company,
it presently would need to control at least a majority of the Board votes. One
popular method for a takeover bidder to obtain control is to acquire a majority
of the outstanding shares of a company through a tender offer or open market
purchases and to use that voting power to remove the existing directors and
replace them with persons chosen by the takeover bidder. Requiring cause in
order to remove a director would defeat this strategy, thereby encouraging
potential takeover bidders to obtain the cooperation of the existing Board
before attempting a takeover. Under the amendment, directors can still be
removed but only by a vote of eighty percent (80%) of the shareholders at an
annual meeting or a special meeting of the shareholders called for such purpose,
and only for cause. The proposal is not being made as a result of any prior
effort to remove a director. The provisions of the amendment can only be amended
or repealed by a vote of 75% of the outstanding shares to prevent a takeover
bidder or their
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entity from eliminating the protections of the amendment by a majority vote in
the course of a takeover attempt. The Board believes this 75% vote requirement
is an essential part of the protection provided by the amendment. All of these
provisions are consistent with, and supportive of, the concept of a classified
board in that they tend to moderate the pace of change in the Board of
Directors. The Board believes that the amendments will properly condition a
director's continued service upon his ability to serve rather than his position
relative to a dominant shareholder.
DISADVANTAGES
The amendment will make the removal of any director more difficult,
even if such removal is believed by the shareholders to be in their best
interests, and will eliminate the shareholder's ability to remove a director at
will. Since the amendment will make the removal of directors more difficult, it
will increase the directors' security in their positions and, since the Board
has the power to retain and discharge management, could perpetuate incumbent
management. Furthermore, the limit on the size of the Board will make an
increase in the size of the Board in excess of the specified limit impossible
without Board and shareholder approval, thus, perhaps eliminating the
opportunity to elect additional members to the Board.
Shareholders should recognize that the amendment will make more
difficult the removal of a director in circumstances which do not constitute a
takeover attempt and where, in the opinion of the holders of a majority of the
Company's outstanding shares, cause for such removal may exist. Moreover, the
proposed amendment may have the effect of delaying an ultimate change in
existing management which might be desired by a majority of the shareholders.
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Required Vote
In order to be adopted, this proposal must receive the affirmative vote
of the holders of a majority of the shares of stock eligible to vote at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent public accountants, to audit the consolidated financial statements
of the Company for the fiscal year ending May 31, 1997. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting of
Stockholders and to be available to respond to appropriate questions. Such
representatives will have the opportunity to make a statement at the Annual
Meeting if they desire to do so.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the next Annual
Meeting must be received by the Company on or before March 26, 1997 in order to
be included in the Proxy Statement and proxy for the 1997 meeting. The mailing
address of the Company for submission and any such proposals is 7001 N.
Scottsdale Road, Suite 2050, Scottsdale, Arizona 85253, Attn.: Secretary.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and certain of its officers, and persons who own more than
10 percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10 percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
the Company believes that during the year ended May 31, 1996, all filing
requirements applicable to its officers, directors and greater than 10 percent
beneficial owners were complied with.
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OTHER MATTERS
The Board of Directors knows of no matters other than those described
above which are likely to come before the meeting. If any other matters properly
come before the meeting, the persons named in the accompanying form of proxy
intend to vote the proxies in accordance with their best judgment.
The entire cost of solicitation of proxies in the accompanying form
will be borne by the Company. The Company will reimburse brokers for their costs
associated with transmitting these materials to persons from whom such brokers
hold Common Shares. In addition to the use of the mails, proxies may be
solicited by directors, officers and regular employees of the Company, by
personal interview, telephone and telecopy.
The Company's Annual Report to Stockholders (which is not a part of the
proxy solicitation material) is being mailed to stockholders together with the
Proxy Statement.
Stockholders wishing to receive a copy of the Company's Fiscal 1996
Annual Report on Form 10-K (including the financial statement and schedules
thereto) filed with the Securities and Exchange Commission may obtain one
without charge by making a written request to Investor Relations, Continental
Homes Holding Corp., 7001 N. Scottsdale Road, Suite 2050, Scottsdale, Arizona
85253.
By Order of the Board of Directors
JULIE E. COLLINS
Secretary
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EXHIBIT A
Text to Amendment to Section 2.1 of the Company's By-Laws.
"Section 2.1 Number, Qualification, Election and Term of Directors. The business
of the corporation shall be managed by the Board, which shall consist of not
fewer than three and not more than ten directors, except in the case of any
increase in the number of directors by reason of any provision entitling the
holders of any one or more series of preferred stock of the Company, voting as a
class, to elect additional directors in specified circumstances. The number of
directors may be changed by resolution of a majority of the entire Board or by
the holders of seventy-five percent (75%) of the outstanding shares entitled to
vote, but no decrease may shorten the term of any incumbent director. Directors
shall be elected by the holders of record at annual meetings of stockholders.
The directors (exclusive of directors who may be elected by the holders of one
or more series of preferred stock) shall be divided into three classes, each
class to contain as near as possible to one-third (1/3) of the whole number of
directors of the Board of Directors. The initial term of office for members of
the first class shall expire at the annual meeting of stockholders next
following; the initial term of office for members of the second class shall
expire at the annual meeting one year thereafter; and the initial term for
members of the third class shall expire at the annual meeting of stockholders
two years thereafter. At the expiration of the initial term, and the succeeding
term of each class, the directors of each class shall be elected to serve for a
term of three years. In the interim between annual meetings of stockholders,
newly created directorships, and any vacancies in the board of directors,
including vacancies created from the removal of directors for cause, may be
filled by election by a majority of the remaining directors then in office. Any
director so elected shall serve for the unexpired term of office or until his
successor is elected and qualified or until his earlier resignation or removal
as further defined in Section 2.9. This classified board provision may be
amended or repealed and any provision that is inconsistent may be adopted only
by an affirmative vote of holders of seventy-five percent (75%) of the Company's
common stock."
Text of Amendment to Section 2.9 of the Company's By-Laws.
"Section 2.9 Resignation and Removal of Directors. Any director may resign at
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of the resignation, unless required by its terms, shall not be
necessary to make it effective. Any director or the entire Board of Directors
may be removed from office by stockholders only for cause and only by the
affirmative vote of holders of eighty percent (80%) of the Company's common
stock. Any director may be removed by the Board of Directors for cause. This
provision may be amended or repealed and any provision that is inconsistent may
be adopted only by an affirmative vote of holders of seventy-five percent (75%)
of the Company's common stock."
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CONTINENTAL HOMES HOLDING CORP.
7001 N. Scottsdale Road, Suite 2050, Scottsdale, AZ 85253
This Proxy is Solicited on Behalf of The Board of Directors
The undersigned hereby appoints Donald R. Loback and W. Thomas Hickcox,
and each of them severally, as Proxies of the undersigned, each with the power
to appoint his substitute, and hereby authorizes them to represent and to vote
as designated below all the shares of Common Stock of Continental Homes Holding
Corp. (the "Company") held of record by the undersigned on June 26, 1996, at the
Annual Meeting of Stockholders to be held on August 29 1996 and any adjournment
thereof.
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS ONE AND TWO
<S> <C>
(1) FOR ELECTION AS DIRECTORS OF ALL NOMINEES LISTED BELOW TO SERVE UNTIL THE 1997 ANNUAL MEETING OF
STOCKHOLDERS (except as indicated to the contrary below).
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as indicated to the contrary below) for all nominees listed below
Donald R. Loback, W. Thomas Hickcox, Robert B. Ryan, Timothy C. Westfall, Jo Ann Rudd, William Steinberg, Bradley S. Anderson,
Peter D. O'Connor (INSTRUCTION: To withhold authority to vote for any nominee, indicate the individual nominee's name on space
provided below.)
____________________________________________________________________________________________________________
(2) TO AMEND THE BY-LAWS OF THE COMPANY TO PROVIDE (I) FOR THE CLASSIFICATION OF THE BOARD OF DIRECTORS
INTO THREE CLASSES; (II) THAT A DIRECTOR MAY BE REMOVED BY SHAREHOLDERS ONLY FOR CAUSE AND ONLY
WITH THE APPROVAL OF EIGHTY PERCENT (80%) OF THE OUTSTANDING SHARES; (III) THAT THE BOARD OF DIRECTORS
SHALL BE COMPOSED OF NOT FEWER THAN THREE AND NOT MORE THAN TEN DIRECTORS; AND (IV) THAT THESE
AMENDMENTS MAY BE AMENDED OR REPEALED ONLY BY AN AFFIRMATIVE VOTE OF SEVENTY-FIVE PERCENT (75%)
OF THE OUTSTANDING SHARES.
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] ABSTAIN
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
</TABLE>
This proxy when properly executed will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
Proposals (1) and (2).
Please sign exactly as name appears
below. When Shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please sign your name and indicate
full title as such. If a
corporation, an authorized officer
should sign his name and indicate
his title. If a partnership, please
sign in partnership name by
authorized person.
Dates:______________________________
Receipt of Notice of Meeting and
Proxy Statement is hereby acknowledged. ____________________________________
Signature
____________________________________
Signature if held jointly
Please sign, date and mail in the enclosed envelope
P
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