<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Confidential, for use of the Commission only as permitted by Rule 14a-6(e)(2)
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCHULER HOMES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / 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:
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:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee previously paid 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:
</TABLE>
<PAGE>
SCHULER HOMES, INC.
828 FORT STREET MALL
FOURTH FLOOR
HONOLULU, HI 96813
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 1997
------------------------
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
SCHULER HOMES, INC. (the "Company") which will be held at Room #1 on the 8th
Floor of the Pacific Tower at 1001 Bishop Street, Honolulu, Hawaii, at 10:00
a.m. on May 23, 1997 for the following purposes:
1. To elect to the Board two directors;
2. To consider and vote upon a proposal to ratify the selection of Ernst &
Young LLP as independent public accountants for the Company for the
fiscal year ending December 31, 1997; and
3. To act upon such other business as may properly come before the meeting
or any adjournment or postponement thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
The Board of Directors has fixed the close of business on April 10, 1997 as
the record date for determining those stockholders who will be entitled to vote
at the meeting. The stock transfer books will not be closed between the record
date and the date of the meeting.
Representation of at least a majority of the shares of Common Stock of
Schuler Homes, Inc. entitled to vote, whether present in person or represented
by proxy, is required to constitute a quorum. Accordingly, it is important that
your shares be represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE. Your proxy may be revoked at any time prior to the time
it is voted.
Please read the proxy material carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
Very truly yours,
/S/ JAMES K. SCHULER
James K. Schuler
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Honolulu, Hawaii
April 18, 1997
<PAGE>
STOCKHOLDERS SHOULD READ THE ENTIRE PROXY STATEMENT
CAREFULLY PRIOR TO RETURNING THEIR PROXIES
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF
SCHULER HOMES, INC.
TO BE HELD MAY 23, 1997
------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of SCHULER HOMES, INC. ("Schuler Homes" or the "Company") of
proxies to be voted at the Annual Meeting of Stockholders which will be held at
10:00 a.m. on May 23, 1997 at Room #1 on the 8th Floor of the Pacific Tower at
1001 Bishop Street, Honolulu, Hawaii 96813 or at any adjournments or
postponements thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. This Proxy Statement and the proxy card were
first mailed to stockholders on or about April 18, 1997.
VOTING RIGHTS AND SOLICITATION
The close of business on April 10, 1997 was the record date for stockholders
entitled to notice of and to vote at the Annual Meeting. As of that date,
Schuler Homes had 20,874,177 shares of common stock, $.01 par value per share
(the "Common Stock"), issued, 20,100,177 of which were outstanding. All of the
shares of the Company's Common Stock outstanding on the record date are entitled
to vote at the Annual Meeting, and stockholders of record entitled to vote at
the meeting will have one (1) vote for each share so held on the matters to be
voted upon.
Shares of the Company's Common Stock represented by proxies in the
accompanying form which are properly executed and returned to Schuler Homes will
be voted at the Annual Meeting of Stockholders in accordance with the
stockholders' instructions contained therein. In the absence of contrary
instructions, shares represented by such proxies will be voted FOR the election
of the directors as described herein under "Proposal 1--Election of Directors"
and FOR ratification of the selection of accountants as described herein under
"Proposal 2--Ratification of Selection of Independent Public Accountants."
Management does not know of any matters to be presented at this Annual Meeting
other than those set forth in this Proxy Statement and in the Notice
accompanying this Proxy Statement. If other matters should properly come before
the meeting, the proxy holders will vote on such matters in accordance with
their best judgment. Any stockholder has the right to revoke his or her proxy at
any time before it is voted by (i) delivering to the Company at its principal
executive office at 828 Fort Street Mall, Fourth Floor, Honolulu, Hawaii 96813,
Attention: Chief Financial Officer, a written notice of revocation or duly
executed proxy bearing a later date, or (ii) attending the meeting and voting in
person. Election of directors by stockholders shall be determined by a plurality
of the votes cast by the stockholders entitled to vote at the election present
in person or represented by proxy. Abstentions and broker non-votes are each
included in the determination of the number of shares present for quorum
purposes. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
The entire cost of soliciting proxies will be borne by Schuler Homes.
Proxies will be solicited principally through the use of the mails, but, if
deemed desirable, may be solicited personally or by telephone, telegraph
1
<PAGE>
or special letter by officers and regular Schuler Homes employees for no
additional compensation. Arrangements may be made with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material to
the beneficial owners of the Company's Common Stock, and such persons may be
reimbursed for their expenses.
PROPOSAL 1
ELECTION OF DIRECTORS
The members of the Board of Directors of Schuler Homes are classified into
three classes, one of which is elected at each Annual Meeting of Stockholders to
hold office for a three-year term and until successors of such class have been
elected and qualified. The nominees for the Board of Directors are set forth
below. The proxy holders intend to vote all proxies received by them in the
accompanying form for the nominees for director listed below. In the event that
any nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them for any nominee listed
below. As of the date of this Proxy Statement, the Board of Directors is not
aware that any nominee is unable or will decline to serve as a director.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
NOMINEES LISTED BELOW.
NOMINEES TO BOARD OF DIRECTORS
<TABLE>
<CAPTION>
CLASS AND YEAR
DIRECTOR IN WHICH TERM
NAME PRINCIPAL OCCUPATION SINCE WILL EXPIRE AGE
- ---------------------------------------- ---------------------------------------- ----------- -------------- ---
<S> <C> <C> <C> <C>
Pamela S. Jones......................... Senior Vice President of Finance and 1992 Class II 2000 36
Chief Financial Officer of Schuler
Homes, Inc.
Martin T. Hart.......................... Independent businessman 1992 Class II 2000 62
</TABLE>
Pamela S. Jones has been the Company's Senior Vice President of Finance and
Chief Financial Officer since January 1992. From July 1988 to January 1992, Ms.
Jones served as Vice President of Finance and Chief Financial Officer of JPS
Hawaii, Inc., the predecessor of the Company. From September 1983 to May 1988,
Ms. Jones worked as a Certified Public Accountant as Manager of the Enterprise
Group for the Seattle, Washington office of Touche Ross & Co., a national
accounting firm. Ms. Jones is a member of the Washington State Society of
Certified Public Accountants and the American Institute of Certified Public
Accountants.
Martin T. Hart has served as a director of the Company since April 1992. Mr.
Hart is a businessman and investor and has owned and managed a number of
companies over the years. Most recently, Mr. Hart was an owner and the
co-manager of the Lake Catamount joint venture, which was sold in 1996. Mr. Hart
also served as Chairman of the Board and Chief Executive Officer of Steamboat
Ski Corporation from 1980 to 1989. Mr. Hart also serves as a director of P. J.
America, a franchisee of Papa John's Pizza, Pacific National Bank Financial
Group, a bank holding company, MassMutual Corporate Investors, a publicly held
investment fund, MassMutual Participation Investors, a publicly held investment
fund, and Optical Securities Corporation, a holographic technology company.
2
<PAGE>
DIRECTORS NOT STANDING FOR ELECTION
The members of the Board of Directors who are not standing for election at
this year's Annual Meeting are set forth below.
<TABLE>
<CAPTION>
CLASS AND YEAR
DIRECTOR IN WHICH TERM
NAME PRINCIPAL OCCUPATION SINCE WILL EXPIRE AGE
- ---------------------------------------- ---------------------------------------- ----------- -------------- ---
<S> <C> <C> <C> <C>
James K. Schuler........................ Chairman of the Board, President and 1992 Class I 58
Chief Executive Officer of Schuler 1998
Homes, Inc.
Michael T. Jones........................ Executive Vice President of Operations 1992 Class I 1998 37
of Schuler Homes, Inc.
Bert T. Kobayashi....................... Attorney, Kobayashi, Sugita & Goda (law 1992 Class III 1999 56
firm)
Thomas A. Bevilacqua.................... Attorney, Brobeck, Phleger & Harrison 1997 Class III 1999 40
LLP (law firm)
</TABLE>
James K. Schuler was the founder of the Company and has been the Company's
Chairman of the Board, President and Chief Executive Officer since the Company's
incorporation in Delaware in January 1992. From 1988 to January 1992, Mr.
Schuler served as Chairman of the Board, President and Chief Executive Officer
of JPS Hawaii, Inc., the predecessor of the Company. Since 1973 he has been
President of James K. Schuler & Associates, Inc., a private single- and
multi-family development company that constructs homes in Hawaii, California,
Washington and Texas ("JKS"). Mr. Schuler is licensed to practice architecture
in the State of California.
Michael T. Jones has been the Company's Executive Vice President of
Operations since January 1992. From July 1988 to January 1992, Mr. Jones served
as Executive Vice President of Real Estate Development and Marketing of JPS
Hawaii, Inc. From 1983 to June 1988, Mr. Jones was Construction Project Manager
for Pacific West Sport & Racquet Clubs, a developer and operator of athletic and
recreational facilities, and Vice President of Real Estate Development for JKS.
Bert T. Kobayashi has served as a director of the Company since June 1992.
Mr. Kobayashi is a senior partner of the Honolulu law firm Kobayashi, Sugita &
Goda. Mr. Kobayashi has been a Director of First Hawaiian Bank since 1976 and
has served as a director of FHB Holding Company, Inc., the parent company of
First Hawaiian Bank, since 1990. Mr. Kobayashi served on the State of Hawaii's
Judicial Selection Commission from 1985 through 1991, and was its chairperson
from 1987 through 1989. Mr. Kobayashi is a member of the American Trial Lawyers
Association, the American Board of Trial Advocates, the American Arbitration
Association and the Executive Committee of the Japan-Hawaii Economic Council.
Thomas A. Bevilacqua has been a director of the Company since April 1997. Mr
Bevilacqua ia a partner of Brobeck, Phleger & Harrison LLP and is also a
director of E*Trade Online Ventures. Mr. Bevilacqua has a BS and JD from the
University of California.
Pamela S. Jones is the daughter of James K. Schuler. Michael T. Jones and
Pamela S. Jones are husband and wife.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
fiscal 1996. Each director attended at least 75% of the aggregate of (i) the
total number of meetings of the Board and (ii) the total number of meetings held
by all committees of the Board on which he or she served.
The Company has an Audit Committee and a Compensation Committee of the Board
of Directors. There is no nominating committee or committee performing the
functions of such committee.
The Audit Committee meets with the Company's financial management and its
independent accountants and reviews internal control conditions, audit plans and
results, and financial reporting procedures. This Committee, currently
consisting of Michael T. Jones, Martin T. Hart and Bert T. Kobayashi, held one
meeting during fiscal 1996.
The Compensation Committee reviews and approves the Company's compensation
arrangements for key employees and administers the 1992 Stock Option Plan. This
Committee, currently consisting of Martin T. Hart, Bert T. Kobayashi and James
K. Schuler, held three meetings during fiscal 1996.
DIRECTOR REMUNERATION
Non-employee members of the Board are each paid an annual retainer fee of
$20,000 plus a fee of $500 per Board meeting and are reimbursed for all
out-of-pocket costs incurred in connection with their attendance at such
meetings. Upon joining the Board, each non-employee Board member also receives
an option grant for 20,000 shares of Common Stock under the Company's 1992 Stock
Option Plan. The exercise price per share for the initial grant made to Thomas
A. Bevilacqua was $5.625, the fair market value per share of Common Stock on the
grant date. Similar automatic option grants in the amount of 5,000 shares are
made annually to each individual who continues to serve as a non-employee Board
member on the date of each subsequent Annual Meeting of Stockholders.
Accordingly, in May 1996, Martin T. Hart and Bert T. Kobayashi each received an
option grant for 5,000 shares of Common Stock with an exercise price of $7.188
(May 1996).
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws provide for
indemnification of all directors and officers. Each director and officer of the
Company has entered into a separate indemnification agreement with the Company.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1997 by (i) each person
who is known to the Company to own beneficially more than 5% of the outstanding
shares of the Common Stock of the Company, (ii) each director, (iii) each
officer listed in the Summary Compensation Table and (iv) all directors and
executive officers as a group. All shares are subject to the named person's sole
voting and investment power except where otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED COMMON STOCK
- ----------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
James K. Schuler (1)(2)
828 Fort Street Mall, 4th Floor
Honolulu, Hawaii 96813..................................... 11,507,178 57.2%
State of Wisconsin Investment Board (3)
P.O. Box 7842
Madison, Wisconsin 53707................................... 1,520,000 7.6%
Franklin Resources, Inc. (4)
777 Mariners Island Boulevard
San Mateo, California 94404................................ 1,415,000 7.0%
David L. Babson and Company
Incorporated (DLB) (5)
One Memorial Drive
Cambridge, Massachusetts 02142-1300........................ 1,058,500 5.3%
Michael T. Jones (6)....................................... 72,436 (7)
Harvey L. Goth (8)......................................... 12,388 (7)
Pamela S. Jones (2)(9)..................................... 72,436 (7)
Mary K. Flood (10)......................................... 5,917 (7)
Martin T. Hart (11)........................................ 23,350 (7)
Bert T. Kobayashi (12)..................................... 24,167 (7)
Thomas A. Bevilacqua....................................... 0 (7)
All directors and executive officers as a group
(10 persons) (2)(13)..................................... 11,660,758 58.0%
</TABLE>
- ------------------------
(1) Excludes 24,501 shares, of which Mr. Schuler has no voting or investment
power, owned by Mrs. Schuler.
(2) Excludes 200,000 shares held by a nonprofit corporation for which Mr.
Schuler and Ms. Jones serve as directors. The other four directors consist
of Mr. Schuler's wife and three of their respective children not sharing the
same household. Each of Mr. Schuler and Ms. Jones disclaims beneficial
ownership of such shares.
(3) Information as of December 31, 1996 per Schedule 13G filed pursuant to Rule
13d-1(b) or 13d-2(b) of the Securities Exchange Act of 1934, as amended. The
State of Wisconsin Investment Board retains sole voting and dispositive
power for all shares.
(4) Information as of December 31, 1996, per Schedule 13G filed pursuant to Rule
13d-1(b) or 13d-2(b) of the Securities Exchange Act of 1934, as amended.
Such shares are owned by one or more closed-end
5
<PAGE>
investment companies or other managed accounts which are advised by
subsidiaries of Franklin Resources Inc. ("FRI"), which subsidiaries have
sole voting and investment power over such shares. The Schedule 13G was
filed by FRI, Charles B. Johnson and Rupert H. Johnson, Jr., (each of whom
owns in excess of 10% of the outstanding Common Stock of FRI), both with the
same address, and Templeton Investment Counsel, Inc. (investment adviser to
Franklin Resources, Inc.), 500 E. Broward Blvd., Suite 2100, Ft. Lauderdale,
FL 33394.
(5) Information as of December 31, 1996, per Schedule 13G filed pursuant to Rule
13d-1(b) or 13d-2(b) of the Securities Exchange Act of 1934, as amended.
Such 1,058,500 shares were owned by various investors for which DLB acts as
investment advisor, and, therefore, may be deemed to be the beneficial
owner. DLB had sole voting power with respect to 362,900 of such shares.
(6) Includes (i) 1 share, of which Mr. Jones has no voting or investment power,
owned by Ms. Jones, (ii) 6,800 shares, of which Mr. Jones and Ms. Jones have
shared voting and investment power, held by Mr. Jones and Ms. Jones as
custodian for their children, (iii) 32,317 shares which Mr. Jones has the
option to purchase within 60 days of March 31, 1997, and (iv) 31,817 shares
which Ms. Jones has the option to purchase within 60 days of March 31, 1997.
(7) Less than 1%.
(8) Represents 12,388 shares which Mr. Goth has the option to purchase within 60
days of March 31, 1997.
(9) Includes (i) 1 share, of which Ms. Jones has no voting or investment power,
owned by Mr. Jones, (ii) 6,800 shares, of which Mr. Jones and Ms. Jones have
shared voting and investment power, held by Mr. Jones and Ms. Jones as
custodian for their children, (iii) 31,817 shares which Ms. Jones has the
option to purchase within 60 days of March 31, 1997, and (iv) 32,317 shares
which Mr. Jones has the option to purchase within 60 days of March 31, 1997.
(10) Represents 5,917 shares which Ms. Flood has the option to purchase within
60 days of March 31, 1997.
(11) Represents 23,350 shares which Mr. Hart has the option to purchase within
60 days of March 31, 1997.
(12) Includes 24,167 shares which Mr. Kobayashi has the option to purchase
within 60 days of March 31, 1997.
(13) Includes shares which the directors and executive officers have the option
to purchase within 60 days of March 31, 1997. Does not include an aggregate
of 96,500 shares issuable upon exercise of stock options which are not
currently exercisable and will not be exercisable within 60 days of March
31, 1997. See also footnotes 6 and 9 above.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's four other highest-paid executive
officers for services rendered in all capacities to the Company and its
subsidiaries for the fiscal years ended December 31, 1996, 1995 and 1994,
respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
AWARDS
ANNUAL COMPENSATION --------------
--------------------------------- SECURITIES ALL OTHER
SALARY UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS($) OPTIONS ($)(2)
- --------------------------------------------------- --------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C>
James K. Schuler 1996 $ 650,000 0 0 0
Chairman of the Board, President and Chief 1995 $ 650,000 0 0 0
Executive Officer 1994 $ 625,203 $ 250,000 0 0
Michael T. Jones 1996 $ 181,253 0 15,000 $ 5,422
Executive Vice President of Operations 1995 $ 168,750 $ 13,000 10,000(3) $ 4,642
1994 $ 161,000 $ 65,000 5,000 $ 4,574
Harvey L. Goth 1996 $ 149,000 0 5,000 $ 8,625
Senior Vice President of Acquisitions 1995 $ 148,000 $ 13,000 5,000(3) $ 8,625
1994 $ 143,750 $ 35,000 2,500 $ 8,266
Pamela S. Jones 1996 $ 137,784 0 10,000 $ 4,478
Senior Vice President of Finance and Chief 1995 $ 145,000 $ 13,000 9,000(3) $ 4,058
Financial Officer 1994 $ 140,000 $ 55,000 5,000 $ 4,051
Mary K. Flood 1996 $ 60,000 $ 62,190 3,000 $ 7,135
Vice President of Sales and Marketing 1995 $ 50,250 $ 62,850 5,500(3) $ 6,620
1994 $ 47,250 $ 78,750 2,500 $ 2,853
</TABLE>
- ------------------------
(1) Salary includes amounts deferred pursuant to the 401(k) Retirement Savings
Plan.
(2) Represents the Company's discretionary and matching contributions made to
the 401(k) Retirement Savings Plan.
(3) Includes the following related to options originally granted in 1994 and
exchanged in 1995 at a new exercise price:
<TABLE>
<S> <C>
Michael T. Jones 5,000
Harvey L. Goth 2,500
Pamela S. Jones 5,000
Mary K. Flood 2,500
</TABLE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1992 Stock Option Plan for the 1996 fiscal year to
the named executive officers. No stock appreciation rights were granted to the
named executive officers during such fiscal year. The table also lists potential
realizable values of such options on the basis of assumed annual compounded
stock appreciation rates of 5% and 10% over the life of the options which are
set at a maximum of 10 years.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM
OPTIONS FISCAL BASE PRICE($/ EXPIRATION ----------------------
NAME GRANTED(#)(1) YEAR(2) SH)(3) DATE 5% ($)(4) 10% ($)(4)
- ------------------------------------ ------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James K. Schuler (5)................ 0 0 0 0 0 0
Michael T. Jones.................... 15,000 16.9% $ 6.00 11/12/07 $ 146,601 $ 233,437
Harvey L. Goth...................... 5,000 5.6% $ 6.00 11/12/07 $ 48,867 $ 77,812
Pamela S. Jones..................... 10,000 11.3% $ 6.00 11/12/07 $ 97,734 $ 155,625
Mary K. Flood....................... 3,000 3.4% $ 6.00 11/12/07 $ 29,320 $ 46,687
</TABLE>
- ------------------------
(1) Each option will become exercisable for 25% of the option shares after 12
months of continued service from the date of grant. The balance of the
option shares will become exercisable in a series of 36 successive equal
monthly installments upon the optionee's completion of each additional month
of service measured from the first anniversary of the date of grant. The
options listed in the above table for the named executive officers at an
exercise price of $6.00 were granted on November 13, 1996.
Each option will become immediately exercisable for all of the option shares
in the event the Company is acquired by merger or sale of substantially all
of the Company's assets or outstanding Common Stock, unless the option is
assumed or otherwise replaced by the acquiring entity. The Compensation
Committee has authority to provide for the acceleration of each option in
connection with certain hostile tender offers or proxy contests for Board
membership. Each option includes a limited stock appreciation right pursuant
to which the option, if in effect for at least six months, will
automatically be cancelled upon the occurrence of certain hostile tender
offers, in return for a cash distribution from the Company based on the
tender offer price per share. Each option has a maximum term of 10 years,
subject to earlier termination in the event of the optionee's cessation of
service with the Company.
(2) Includes options granted pursuant to the Company's Automatic Option Grant
Program for non-employee directors.
(3) The exercise price of each option may be paid in cash, in shares of Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and the
federal and state tax liability incurred in connection with such exercise.
The Compensation Committee has the authority to reprice outstanding options
through the cancellation of those options and the grant of replacement
options with an exercise price equal to the lower fair market value of the
option shares on the regrant date.
(4) The potential realizable value is reported net of the option price, but
before income taxes associated with exercise. These amounts represent
assumed annual compounded rates of appreciation at 5% and 10% only from the
date of grant to the expiration date of the option. These amounts are
calculated based on the requirements of the Securities and Exchange
Commission. There is no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the assumed 5% and 10%
levels or at any other defined level. Unless the market price of the Common
Stock does in fact appreciate over the option term, no value will be
realized from the option grants made to the executive officers.
(5) James K. Schuler has not been granted options under the 1992 Stock Option
Plan.
8
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the named executive
officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the last fiscal year. No stock
appreciation rights were exercised during, or held by such named executive
officers as of the end of, fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
MONEY OPTIONS AT FY-END ($)
NUMBER OF SECURITIES (MARKET PRICE OF SHARES AT
VALUE REALIZED ($) UNDERLYING UNEXERCISED FY-END ($6.25) LESS EXERCISE
(MARKET PRICE AT OPTIONS AT FY-END (#) PRICE)
SHARES ACQUIRED EXERCISE, LESS -------------------------- --------------------------------
NAME ON EXERCISE (#) EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------------- ------------------- ----------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James K. Schuler.............. 0 0 0 0 0 0
Michael T. Jones.............. 0 0 30,233 21,667 0 $ 3,750
Harvey L. Goth................ 0 0 11,450 8,250 0 $ 1,250
Pamela S. Jones............... 0 0 29,838 16,063 0 $ 2,500
Mary K. Flood................. 0 0 5,031 6,469 0 $ 750
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors sets
the base salary of the Company's executive officers and approves individual
bonus programs for executive officers. Option grants to executive officers are
made by the Committee, and the Committee has complete discretion in establishing
the terms of each such grant.
CEO COMPENSATION
The following is a summary of policies of the Committee that affect the
compensation paid to executive officers, as reflected in the tables and text set
forth elsewhere in this Proxy Statement. In January 1992, prior to the Company's
initial public offering, the Company entered into an employment agreement with
James K. Schuler, the Company's Chief Executive Officer, providing for the
payment of a base annual salary of $420,000 or an amount otherwise agreed upon
by the parties. The Committee took action during 1994 to increase Mr. Schuler's
annual base salary to $650,000 effective April 1, 1994 (resulting in a 1994 base
salary of $625,203). The employment agreement had an initial term of three
years, and requires Mr. Schuler to devote substantially all of his time to
Company affairs. The employment agreement is automatically renewable for a
one-year term commencing on each anniversary of the date of such agreement,
unless either party notifies the other party otherwise. No such notice of
termination was given for 1995 or 1996 or 1997. The Committee played no role in
the negotiation of this agreement. However, Mr. Schuler's base compensation is
influenced by the following policies.
COMPENSATION PHILOSOPHY
The Committee applies a consistent philosophy to compensation for all
employees, including executive officers. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
customers and stockholders.
- THE COMPANY PAYS COMPETITIVELY. The Company is committed to providing a
pay program that helps attract and retain quality employees. To ensure
that pay is competitive, the Company compares its pay practices with those
of companies in its industry and in the Hawaiian market and sets its pay
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parameters based on this review. The base salary for the Company's
executive officers approximate the average for the comparison group,
reflecting the Company's relative position within the group. The public
homebuilders included in the comparison group are substantially the ones
included in the peer group index reflected on the Performance Graph.
- THE COMPANY PAYS FOR RELATIVE SUSTAINED PERFORMANCE. Executive officers
are rewarded based upon corporate performance and individual performance.
Corporate performance is evaluated by reviewing the extent to which
strategic and business plan goals are met, including such factors as
operating profit and performance relative to competitors. Individual
performance is evaluated by reviewing development progress against set
objectives and the degree to which Company values are fostered.
- THE COMPANY STRIVES FOR FAIRNESS IN THE ADMINISTRATION OF PAY. The Company
strives to balance the compensation paid to a particular individual and
the compensation paid to other persons both inside the Company and at
comparable companies.
GENERAL COMPENSATION POLICY
The Committee's overall policy is to offer the Company's executive officers
competitive cash- and equity-based compensation opportunities based upon their
personal performance, the financial performance of the Company and their
contribution to that performance. One of the Committee's primary objectives is
to have a substantial portion of each officer's compensation contingent upon the
Company's performance as well as upon his or her own level of performance.
The principal factors taken into account in establishing each executive
officer's compensation package are summarized below. Additional factors may be
taken into account to a lesser degree, and the relative weight given to each
factor varies with each individual in the sole discretion of the Committee. The
Committee may in its discretion apply entirely different factors, such as
different measures of financial performance, for future fiscal years.
CASH-BASED COMPENSATION. The Committee sets base salary for executive
officers on the basis of personal performance, the salary levels in effect for
comparable positions with other companies in the industry (as discussed above)
and in the Hawaiian market and internal comparability considerations. There have
been no meaningful increases in the base salaries of executive officers since
1994. The aggregate amount of the Company's annual bonus pool is based on a
percentage of the Company's pre-tax income. This amount is allocated to
executive officers, including the Chief Executive Officer, taking into
consideration the officer's salary level and individual performance. No bonus
was paid to the Chief Executive Officer or any other executive officer for 1996
(except for the Vice President of Sales and Marketing) since the bonus pool was
insufficient. The 1996 bonus pool was allocated to all other employees. The
Company also has a 401(k) retirement savings plan to which it can contribute a
portion of profits and such contribution is allocated to eligible participants
in proportion to their total compensation for the year relative to the total
aggregate compensation for all eligible participants. The Company believes that
all employees share the responsibility of achieving profits.
LONG-TERM EQUITY-BASED COMPENSATION. The Committee intends to make stock
option grants on an annual basis. Each grant is designed to align the interests
of the executive officers with those of the stockholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant
generally allows the officer to acquire shares of the Company's Common Stock at
a fixed price per share (the market price on the grant date) over a specified
period of time (up to 10 years), thus providing a return to the officer only if
he or she remains in the employ of the Company and the market price of the
shares appreciates over the option term. The size of the option grant to each
executive officer generally is set at a level that is intended to create a
meaningful opportunity for stock ownership based upon the individual's current
position with the Company, but there is also taken into account the size of
comparable awards made to individuals in similar positions in
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the industry as reflected in external surveys, the individual's potential for
future responsibility and promotion over the option term, the individual's
personal performance in recent periods and the number of options held by the
individual at the time of grant. Generally, as an officer's level of
responsibility increases, a greater portion of his or her total compensation
will be dependent upon Company performance and stock price appreciation rather
than base salary. The relative weight given to these factors varies with each
individual in the sole discretion of the Committee.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the corporation's executive officers. The
limitation applies only to compensation which is not considered to be
performance-based. The non-performance based compensation to be paid to the
Company's executive officers for fiscal 1996 did not exceed the $1 million limit
per officer, nor is it expected that the non-performance based compensation to
be paid to the Company's executive officers for fiscal 1997 will exceed that
limit. Because it is very unlikely that the cash compensation payable to any of
the Company's executive officers in the foreseeable future will approach the $1
million limit, the Committee has not taken any action to limit or restructure
the elements of cash compensation payable to the Company's executive officers.
The Committee will reconsider this matter should the individual compensation of
any executive officer ever approach the $1 million level.
Submitted by the Compensation Committee of the Company's Board of Directors:
Martin T. Hart
Bert T. Kobayashi
James K. Schuler
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PERFORMANCE GRAPH
The following performance graph shows the percentage change in cumulative
total return to a holder of the Company's Common Stock, assuming dividend
reinvestment, compared with the cumulative total return, assuming dividend
reinvestment, of the Standard & Poor's 500 Stock Index and the peer group
indicated below, during the period from March 19, 1992 (the date prior to the
Company's initial public offering) through December 31, 1996.
TOTAL SHAREHOLDER RETURNS*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEARS ENDING SCHULER HOMES INC S&P 500 INDEX PEER GROUP DOLLARS
<S> <C> <C> <C> <C>
19-Mar-92 $100.00 $100.00 $100.00
Dec 92 105.65 108.76 89.88
Dec 93 180.65 119.72 113.26
Dec 94 91.94 121.30 68.55
Dec 95 50.40 166.89 98.88
Dec 96 40.32 205.20 95.37
</TABLE>
- ------------------------
* $100 invested on 3/19/92 in stock, group or index.
Peer Group Companies
<TABLE>
<S> <C>
CENTEX CORP PRESLEY COMPANIES/DE
CONTINENTAL HOMES HOLDING CP PULTE CORP
ENGLE HOMES INC RYLAND GROUP INC
HOVNANIAN ENTRPRS INC -CL A STANDARD PACIFIC CP
KAUFMAN & BROAD HOME TOLL BROTHERS INC
LENNAR CORP UDC HOMES INC -LP
ORIOLE HOMES CORP -CL B WEBB (DEL E) CORP
</TABLE>
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James K. Schuler, the Chairman of the Board, President and Chief Executive
Officer of the Company, was a member of the Compensation Committee during the
fiscal year ended December 31, 1996.
TRANSACTIONS WITH JAMES K. SCHULER AND ENTITIES CONTROLLED BY JAMES K.
SCHULER
The Company and James K. Schuler & Associates, Inc. ("JKS"), a corporation
controlled by James K. Schuler, have entered into a management agreement
pursuant to which certain management and administrative personnel of the Company
will perform certain functions for JKS. JKS will reimburse the Company on a
quarterly basis for its cost in providing such services. During fiscal 1996,
$116,000 was charged to JKS by the Company pursuant to this agreement.
From time to time, James K. Schuler has made loans to certain vendors or
parties related to vendors which do business with the Company. In particular, as
of December 31, 1996, Mr. Schuler had notes receivable and accrued interest
thereon totaling $552,000 from a consultant to Schuler Homes, Inc.
TRANSACTIONS WITH DIRECTORS
From time to time, the Company has engaged the law firm of Kobayashi, Sugita
& Goda to perform legal work. Bert T. Kobayashi, a director of the Company since
June 1992, is a senior partner of this Honolulu law firm. During fiscal 1996,
$66,000 in legal fees to Kobayashi, Sugita & Goda were incurred by the Company.
From time to time, the Company has engaged the law firm of Brobeck, Phleger
& Harrison LLP to perform legal work. Thomas A. Bevilacqua, a director of the
Company since April 1997, is a partner of this law firm. During fiscal 1996,
$152,310 in legal fees to Brobeck, Phleger & Harrison LLP were incurred by the
Company.
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 executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten-percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
they file. Based solely upon review of the copies of such reports furnished to
the Company and written representations that no other reports were required, the
Company believes that there was compliance for the fiscal year ended December
31, 1996 with all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten-percent beneficial owners.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31, 1996
has been mailed concurrently with the mailing of the Notice of Annual Meeting
and Proxy Statement to all stockholders entitled to notice of and to vote at the
Annual Meeting. The Annual Report is not incorporated into this Proxy Statement
and is not considered proxy soliciting material, In compliance with Rule 14a-3
promulgated under the Securities Exchange Act of 1934, the Company hereby
undertakes to provide without charge to each person upon written request, a copy
of the Company's Annual Report on Form 10-K, including the financial statements
and financial schedules thereto. Requests for such copies should be directed to
Schuler Homes, Inc., 828 Fort Street Mall, Fourth Floor, Honolulu, Hawaii 96813,
Attention: Investor Relations.
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PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Ernst & Young LLP served as independent public accountants for
the Company for the fiscal year ended December 31, 1996. The Board of Directors
has appointed Ernst & Young LLP to serve in the same capacity for the current
fiscal year and is asking stockholders to ratify the selection of Ernst & Young
LLP by the Board of Directors as independent public accountants. The affirmative
vote of a majority of the shares presented and voting at the meeting is required
to ratify the selection of Ernst & Young LLP. In the event that stockholders
fail to ratify the selection of Ernst & Young LLP, the Board of Directors would
reconsider such selection.
A representative of Ernst & Young LLP is expected to attend the Annual
Meeting and has indicated that he has no statement to make, but will be
available to respond to appropriate questions and to make a statement if such
representative desires to do so.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 1998 Annual Meeting
of Stockholders must be received by Schuler Homes no later than December 19,
1997. The proposal must be mailed to the Company's principal executive offices,
828 Fort Street Mall, 4th Floor, Honolulu, Hawaii 96813, Attention: Pamela S.
Jones. Such proposals may be included in next year's proxy statement if they
comply with certain rules and regulations promulgated by the Securities and
Exchange Commission.
OTHER MATTERS
Management does not know of any matters to be presented at this Annual
Meeting other than those set forth herein and in the Notice accompanying this
Proxy Statement.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. YOU ARE, THEREFORE, URGED TO EXECUTE
PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE WHICH HAS BEEN
ENCLOSED FOR YOUR CONVENIENCE. Stockholders who are present at the meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
/S/ PAMELA S. JONES
Pamela S. Jones
SECRETARY
April 18, 1997
Honolulu, Hawaii
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<PAGE>
SCHULER HOMES, INC.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James K. Schuler and Pamela S. Jones, and
each or either of them as Proxies of the undersigned, with full power of
substitution, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all of the shares of Common Stock of SCHULER
HOMES, INC., held of record by the undersigned on April 10, 1997 at the
Annual Meeting of Stockholders of Schuler Homes, Inc. to be held May 23,
1997, or at any adjournment thereof.
(CONTINUED AND TO BE MARKED, DATED AND SIGNED ON OTHER SIDE)
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FOLD AND DETACH HERE
<PAGE>
The Board of Directors recommends a vote FOR Proposal Nos. 1 and 2. This
Proxy, when properly executed, will be voted as specified hereon. This Proxy
will be voted FOR Proposal Nos. 1 and 2 if no specification is made.
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name.
Please mark your votes as indicated in this example /X/
1. ELECTION OF DIRECTORS
FOR / /
WITHHOLD AUTHORITY / /
Nominee: Pamela S. Jones
Nominee: Martin T. Hart
2. To ratify the selection of Ernst & Young LLP as independent public
accountants of the Company.
FOR / /
AGAINST / /
ABSTAIN / /
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
Please sign exactly as your name(s) is (are) shown on the share certificate
to which the Proxy applies. When shares are held by joint tenants, both
should sign. When signing as an attorney, executor, administrator, trustee,
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature(s)__________________________ Dated _______________, 1997
PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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FOLD AND DETACH HERE
