<PAGE>
SCHULER HOMES, INC.
828 FORT STREET MALL
FOURTH FLOOR
HONOLULU, HI 96813
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2000
---------------------
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 Monday, May 22, 2000, for the following purposes:
1. To elect two members of the Board of Directors to serve for three-year
terms ending in the year 2003 or until their successors have been duly
elected and qualified;
2. To approve the adoption of the Company's 2000 Incentive Bonus Plan;
3. To ratify the appointment of Ernst & Young LLP as independent public
accountants of the Company for the fiscal year ending December 31, 2000;
and
4. To transact 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.
Only stockholders of record at the close of business on April 5, 2000 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will remain open between the record date and the date of the Annual
Meeting. A list of stockholders entitled to vote at the Annual Meeting will be
available for inspection at the time and place of the meeting and, during the
ten days prior to the meeting, at the executive offices of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
<PAGE>
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 20, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<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 22, 2000
------------------------
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of SCHULER HOMES, INC., a Delaware corporation (Schuler
Homes" or the Company") of proxies to be voted at the Annual Meeting of
Stockholders (Annual Meeting") which will be held at 10:00 a.m. on Monday,
May 22, 2000, 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 20, 2000.
VOTING RIGHTS AND SOLICITATION
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. The close of business on April 5, 2000 was the record date
for stockholders entitled to notice of and to vote at the Annual Meeting. As of
that date, Schuler Homes had 21,400,646 shares of common stock, $.01 par value
per share (the Common Stock"), issued, 20,100,946 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 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," FOR approval of the 2000
Incentive Bonus Plan as described herein under the Proposal 2--Approval of 2000
Incentive Bonus Plan," and FOR ratification of the selection of accountants as
described herein under "Proposal 3--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. The other matters submitted for
stockholder approval at the Annual Meeting will be decided by the affirmative
vote of the holders of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote at the meeting. 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
1
<PAGE>
presented to stockholders and will have the same effect as negative votes,
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 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.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than December 22, 2000, in order that they may be included in the proxy
statement and form of proxy relating to that meeting. In addition, the proxy
solicited by the Board of Directors for the 2001 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless the Company receives notice of such proposal not later than
March 6, 2001.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
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 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 2003 39
Chief Financial Officer of Schuler
Homes, Inc.
Martin T. Hart................. Independent businessman 1992 Class II 2003 65
</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 for the Seattle,
Washington office of Touche Ross & Co., a national accounting firm. Ms. Jones is
a member of the Washington Society of Certified Public Accountants and the
American Institute of Certified Public Accountants.
2
<PAGE>
Martin T. Hart has served as a director of the Company since April 1992.
Mr. Hart is a private investor and has owned and managed a number of companies
over the years. Mr. Hart serves as a director of P.J. America, Inc., a food
service company, MassMutual Corporate Investors, an investment company,
MassMutual Participation Investors, Inc., an investment company, T-Netix, Inc.,
a communications company, and Vail Banks, Inc., a bank holding company.
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 2001 61
Chief Executive Officer of Schuler
Homes, Inc.
Michael T. Jones............... Executive Vice President of Operations 1992 Class I 2001 40
of Schuler Homes, Inc./Hawaii Division
President
Bert T. Kobayashi, Jr.......... Attorney, Kobayashi, Sugita & Goda (law 1992 Class III 2002 59
firm)
Thomas A. Bevilacqua........... Chief Corporate Development and 1997 Class III 2002 43
Strategic Investment Officer, E*Trade
Group, Inc.
</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
fincorporation 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. Since 1973 he has been President of James K.
Schuler & Associates, Inc., a private single- and multi-family development
company that constructed homes in Hawaii, California, Washington and Texas
("JKS").
Michael T. Jones has been the Company's Executive Vice President of
Operations of the Hawaii division since January 1992 and in early 1999 was named
Hawaii Division President. 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, Jr. 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
1974 and has served as a director of BancWest Corp., the parent company of First
Hawaiian Bank, since 1991.
Thomas A. Bevilacqua has been a director of the Company since April 1997.
Mr. Bevilacqua is Chief Corporate Development & Strategic Investment Officer of
E*Trade Group, Inc. From 1991 to April 1999 Mr. Bevilacqua was a partner of
Brobeck, Phleger & Harrison LLP and served on that firm's Executive Committee.
Mr. Bevilacqua is a director of E*Trade Online Ventures.
Pamela S. Jones is the daughter of James K. Schuler. Michael T. Jones and
Pamela S. Jones are husband and wife.
3
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
fiscal 1999. Each director attended at least 75% of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees of the Board of Directors 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, Jr., held
one meeting during fiscal 1999.
The Compensation Committee reviews and approves the Company's compensation
arrangements, including incentive bonuses, for key employees and administers the
1992 Stock Option Plan and the 1998 Employee Stock Purchase Plan. This
Committee, currently consisting of Martin T. Hart and Bert T. Kobayashi, Jr.
held one meeting during fiscal 1999.
DIRECTOR REMUNERATION
Non-employee members of the Board of Directors are each paid an annual
retainer fee of $20,000 plus a fee of $500 per meeting and are reimbursed for
all out-of-pocket costs incurred in connection with their attendance at such
meetings. Upon joining the Board of Directors, each non-employee member also
receives an option grant for 20,000 shares of Common Stock under the Company's
1992 Stock Option Plan. 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 of Directors member on the date of each subsequent Annual Meeting.
Accordingly, in May 1999, Martin T. Hart, Bert T. Kobayashi, Jr. and Thomas A.
Bevilacqua each received an option grant for 5,000 shares of Common Stock with
an exercise price per share of $7.38.
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>
PROPOSAL 2
APPROVAL OF 2000 INCENTIVE BONUS PLAN
The Compensation Committee has adopted, subject to stockholder approval, the
Schuler Homes, Inc. 2000 Incentive Bonus Plan (the "Plan"). The Compensation
Committee, which consists of two outside directors, believes that the Plan will
enhance the ability of the Company to attract and retain individuals of
exceptional managerial talent and enable the Company to pay competitive
compensation without necessarily losing any tax deductions available to the
Company for the compensation. In order for compensation in excess of $1 million
paid in any given year to the Company's chief executive officer or any of the
Company's four other most highly compensated executive officers named in the
proxy statement (the "covered executives") to be deductible by the Company for
income tax purposes, such compensation must qualify as "performance-based" under
Section 162(m) of the Internal Revenue Code. The Company intends for awards to
covered executives to qualify for the performance-based compensation exemption
under Section 162(m). However, there can be no assurance that these awards will
satisfy the requirements for deductibility under Section 162(m).
ELIGIBLE PARTICIPANTS
Although there may be minor variation from one division to another,
generally, substantially all of the Company's employees, except those who
receive commissions, are eligible to participate in the Plan. Membership on the
Board of Directors of the Company does not make an employee ineligible for an
award under the Plan. The Compensation Committee may determine which employees
will participate in the Plan. Approximately 364 employees are currently eligible
to participate in the Plan.
AWARDS UNDER THE PLAN
The Compensation Committee will establish target award levels and
performance criteria for each performance period in which awards are made under
the Plan, generally a fiscal year or quarter. The Compensation Committee must
base the performance criteria for a performance period on any one or more of the
following measures: return on investment; revenues; backlog; gross margin;
sales; general and administrative expenses; pre-tax income; net income; cash
flow; earnings per share; return on operating assets; return on equity;
operating profit; shareholder return; market share improvement; or economic
value added. Such criteria may be particular to a line of business, region,
division, or other unit or may be based on the Company generally or any
affiliate. The Compensation Committee may set multiple target award levels based
on varying levels of attainment of the performance criteria.
The Company will pay awards as soon as practicable after a fiscal year or
quarter, except to the extent awards are deferred by participants under
arrangements with the Company.
The Compensation Committee can adjust awards made under the Plan, upward or
downward, for participants based on individual performance, change in status,
and on the basis of such quantitative and qualitative performance measures and
evaluations as it deems appropriate. The Compensation Committee, however, may
not adjust performance-based compensation for any covered employee in a manner
that would increase the value of the award to the covered employee.
AWARD LIMITATIONS
Notwithstanding any other provision of the Plan, the maximum award payable
to any employee with respect to any fiscal year of the Company will be
$3 million. Prior to the payment of any compensation intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code, the Compensation Committee must certify in writing the attainment of the
performance criteria for the performance period.
5
<PAGE>
OTHER PROVISIONS
The Compensation Committee has the full power to administer and interpret
the Plan and to establish rules for the administration of the Plan. Each of the
members of the Compensation Committee must qualify as an outside director under
Section 162(m) of the Internal Revenue Code. Except with respect to covered
employees, the Compensation Committee can delegate all or any of its
responsibilities and powers to any one or more of its members, or to any person
or committee selected by it.
The Board of Directors may modify or terminate the Plan at any time. This
Plan will not prevent the Company from adopting, continuing, amending or
terminating such additional compensation arrangements, as it deems desirable for
participants under this Plan or other employees of the Company. Additional
compensation arrangements could include generally any additional bonus, equity
incentive or retirement plans. Awards to covered executives under any additional
compensation arrangements may or may not qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code.
Since awards under the performance criteria adopted by the Compensation
Committee will be based on the Company's future performance, no incentive
compensation under the Plan has yet been earned by any employee. Consequently,
the amount of annual incentive compensation to be paid in the future to the
Company's current or future employees cannot be determined at this time, because
actual amounts depend on actual performance and on the Compensation Committee's
discretion to adjust those amounts. The following table shows the benefits that
would have been received by the individuals listed below if the Plan had been in
effect in 1999.
ANNUAL INCENTIVE BONUS PLAN AWARDS
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION BONUS(1)
- --------------------------- ----------
<S> <C>
James K. Schuler ........................................... $ 428,720
Chairman of the Board, President and Chief Executive Officer
Harvey L. Goth ............................................. $ 107,181
Senior Vice President of Acquisition and Development
Pamela S. Jones ............................................ $ 264,360
Senior Vice President of Finance and Chief Financial
Officer, Director
David L. Oyler ............................................. $ 661,818
Vice President/Division President--Melody Homes, Inc.
Douglas M. Tonokawa ........................................ $ 107,181
Vice President of Finance
All executive officers as a group........................... $1,584,030
All non-executive officer directors as a group(2)........... $ --
All employees as a group, except executive officers......... $5,221,469
</TABLE>
- ------------------------
(1) The amounts shown under the Plan are the same as the amounts the individual
listed above actually received.
(2) Non-employees are not eligible to participate in the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF
THE PLAN. THE BOARD BELIEVES THAT IT IS IN THE BEST INTERESTS OF THE COMPANY TO
HAVE AN INCENTIVE BONUS PLAN THAT IS BASED ON THE PREMISE THAT THE ACHIEVEMENTS
OF THE COMPANY RESULT FROM THE COORDINATED EFFORTS OF ALL INDIVIDUALS WORKING
TOWARD THE COMMON OBJECTIVE OF INCREASING STOCKHOLDER VALUE.
6
<PAGE>
PROPOSAL 3
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, 1999. 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 THE STOCKHOLDERS VOTE FOR
THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
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. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed form of proxy to vote
the shares they represent as the Board of Directors may recommend. Discretionary
authority with respect to such other matters is granted by the execution of the
enclosed proxy.
7
<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, 2000 (except as
indicated in the footnotes below) 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>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
- ------------------- ------------------ ------------
<S> <C> <C>
James K. Schuler(1)(2)
828 Fort Street Mall, 4th Floor
Honolulu, Hawaii 96813...................................... 10,433,828 51.9%
Franklin Resources, Inc.(3)
777 Mariners Island Boulevard
San Mateo, California 94404................................. 1,655,800 8.2%
State of Wisconsin Investment Board(4)
P.O. Box 7842
Madison, Wisconsin 53707.................................... 1,540,000 7.7%
Loomis, Sayles & Company, L.P.(5)
One Financial Center
Boston, MA 02111............................................ 1,505,742 7.5%
Dimensional Fund Advisors Inc.(6)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401...................................... 1,420,600 7.1%
Goldman Sachs Assset Management(7)
1 New York Plaza
New York, NY 10004.......................................... 1,200,000 6.0%
Harvey L. Goth(8)........................................... 31,716 (9)
Pamela S. Jones(2)(10)...................................... 168,920 (9)
David L. Oyler(11).......................................... 45,493 (9)
Douglas M. Tonokawa(12)..................................... 32,583 (9)
Michael T. Jones(13)........................................ 168,920 (9)
Martin T. Hart(14).......................................... 38,558 (9)
Bert T. Kobayashi, Jr.(15).................................. 39,875 (9)
Thomas A. Bevilacqua(16).................................... 19,167 (9)
All directors and executive officers as a group
(9 persons)(2)(17).......................................... 10,810,140 53.0%
</TABLE>
- ------------------------
(1) Excludes 2,001 shares, of which Mr. Schuler has no voting or investment
power, owned by Mrs. Schuler. Mr. Schuler had sole voting power with
respect to 9,933,828 shares.
(2) Includes 500,000 shares held by a nonprofit corporation for which
Mr. Schuler and Ms. Jones serve as directors. The other four directors
consisted of Mr. Schuler's wife and three of their respective children not
sharing the same household. Ms. Jones disclaims beneficial ownership of
such shares.
(3) According to an amendment to a Schedule13G dated January 31, 2000, these
shares are beneficially owned by one or more open or closed-end investment
companies or other managed accounts which are advised by subsidiaries of
Franklin Resources, Inc. ("FRI"), which subsidiaries have sole voting
8
<PAGE>
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 advisor to FRI), 500
East Broward Blvd., Suite 2100, Ft. Lauderdale, FL33394.
(4) According to an amendment to a Schedule 13G dated February 10, 2000, the
State of Wisconsin Investment Board has sole voting and dispositive power
for all shares.
(5) According to an amendment to a Schedule 13G dated February 2, 2000, Loomis,
Sayles & Company, L.P. has sole voting power with respect to 1,259,854
shares, shared voting power with respect to 188,504 shares and shares
dispositive power with respect to all 1,505,742 shares.
(6) According to a Schedule 13G dated February 4, 2000, Dimensional Fund
Advisors, Inc. ("Dimensional"), an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, furnishes investment
advice to four investment companies registered under the Investment Company
Act of 1940, and serves as investment manager to certain other commingled
group trusts and separate accounts. These investment companies, trusts and
accounts own all 1,420,600 shares. In its role as investment advisor or
manager, Dimensional possesses both voting and investment power over all of
these shares, and Dimensional disclaims beneficial ownership of these
shares.
(7) According to a Schedule 13G dated September 13, 1999, Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., and
Goldman Sachs Management Partners, L.P. shared voting and dispositive power
for all shares. These shares were transferred by James K. Schuler to
certain investment funds administered by Goldman Sachs Asset Management and
Goldman Sachs Management Partners, L.P.
(8) Includes 13,997 shares which Mr. Goth has the option to purchase within
60 days of March 31, 2000.
(9) Less than 1%.
(10) Includes (i) 1 share, over which Ms. Jones has no voting or investment
power, owned by Mr. Jones, (ii) 12,400 shares, over 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) 68,088 shares which
Ms. Jones has the option to purchase within 60 days of March 31, 2000, and
(iv) 67,838 shares which Mr. Jones has the option to purchase within
60 days of March 31, 2000.
(11) Includes 33,585 shares which Mr. Oyler has the option to purchase within
60 days of March 31, 2000.
(12) Includes 25,083 shares which Mr. Tonokawa has the option to purchase
within 60 days of March 31, 2000.
(13) Includes (i) 1 share over which Mr. Jones has no voting or investment
power, owned by Ms. Jones, (ii) 12,400 shares over 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) 67,838 shares which
Mr. Jones has the option to purchase within 60 days of March 21, 2000, and
(iv) 68,088 shares which Ms. Jones has the option to purchase within
60 days of March 31, 2000.
(14) Represents 38,558 shares which Mr. Hart has the option to purchase within
60 days of March 31, 2000.
(15) Includes 39,375 shares which Mr. Kobayashi has the option to purchase
within 60 days of March 31, 2000.
(16) Represents 19,167 shares which Mr. Bevilacqua has the option to purchase
within 60 days of March 31, 2000.
(17) Includes shares which the directors and executive officers have the option
to purchase within 60 days of March 31, 2000. Does not include an
aggregate of 125,144 shares issuable upon exercise of stock options which
are not currently exercisable and will not be exercisable within 60 days
of March 31, 2000. See also footnotes 10 and 13 above.
9
<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, 1999, 1998 and 1997,
respectively. No other executive officer who would otherwise have been included
in such table on the basis of salary and bonus for fiscal year 1999 has been
excluded by reason of his or her termination of employment or change in
executive status during that year. The listed individuals shall be hereinafter
referred to as the "Named Executive Officers."
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 ..................... 1999 $650,000 $428,720 -- --
Chairman of the Board, President and 1998 $650,000 $210,930 -- --
Chief Executive Officer 1997 $650,000 -- -- --
Harvey L. Goth ....................... 1999 $149,000 $107,181 3,000 $2,500
Senior Vice President of Acquisition 1998 $149,000 $ 52,733 3,500 $2,377
and Development 1997 $149,000 $ 15,000 19,700(3) $2,235
Pamela S. Jones ...................... 1999 $165,000 $264,360 15,000 $2,496
Senior Vice President of Finance and 1998 $157,500 $105,465 35,000 $1,975
Chief Financial Officer, Director 1997 $150,000 $ 50,000 40,900(3) $1,200
David L. Oyler ....................... 1999 $139,256 $661,818 6,000 $8,500(4)
Vice President/Colorado Division 1998 $139,256 $459,027 15,000 $8,500(4)
President--Melody Homes, Inc. 1997 $139,256 $397,932 30,000 $2,375
Douglas M. Tonokawa .................. 1999 $120,000 $107,181 5,000 $2,500
Vice President of Finance 1998 $113,000 $ 52,733 10,000 $2,378
1997 $106,000 $ 25,000 17,500(3) $1,590
</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 options granted in 1997 at a new exercise price in cancellation of
pre-existing options originally granted from 1992 to 1995 but with a higher
exercise price as follows:
<TABLE>
<S> <C>
Harvey L. Goth.............................................. 14,700
Pamela S. Jones............................................. 35,900
Douglas M. Tonokawa......................................... 12,500
</TABLE>
(4) Includes automobile allowance of $6,000.
10
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock
options under the Company's 1992 Stock Option Plan for the 1999 fiscal year to
the Named Executive Officers. Except for the limited stock appreciation rights
described in footnote 7 below, 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.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
- -------------------------------------------------------------------------------------- ASSUMED ANNUAL RATE
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE OR APPRECIATION FOR
UNDERLYING GRANTED BASE PRICE OPTION TERM
OPTIONS TO EMPLOYEES IN PER SHARE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR(1) (2) DATE 5%(3) 10%(3)
- ---- ------------ ---------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
James K. Schuler (4)...... -- -- $ -- -- $ -- $ --
Harvey L. Goth............ 1,000(5)(7) 0.4% $6.000 3/30/09 $ 3,773 $ 9,562
2,000(6)(7) 0.8% $6.375 9/19/09 $ 8,018 $ 20,320
Pamela S. Jones........... 5,000(5)(7) 1.9% $6.000 3/30/09 $18,867 $ 47,812
10,000(6)(7) 3.8% $6.375 9/19/09 $40,092 $101,601
David L. Oyler............ 1,700(5)(7) 0.6% $6.000 3/30/09 $ 6,415 $ 16,256
4,300(6)(7) 1.6% $6.375 9/19/09 $17,240 $ 43,688
Douglas M. Tonokawa....... 2,000(5)(7) 0.8% $6.000 3/30/09 $ 7,547 $ 19,125
3,000(6)(7) 1.1% $6.375 9/19/09 $12,028 $ 30,480
</TABLE>
- ------------------------
(1) Based on options for a total of 262,200 shares granted to employees during
fiscal year 1999.
(2) 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.
(3) 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.
(4) James K. Schuler has not been granted options under the 1992 Stock Option
Plan.
(5) Each option will become exercisable for 25% of the option shares upon
completion of one (1) year of service measured from the date of grant and
for the balance of the option shares in a series of 36 successive equal
monthly installments upon the optionee's completion of each additional month
of service thereafter. The option was granted on March 31, 1999.
11
<PAGE>
(6) Each option will become exercisable for 25% of the option shares upon
completion of one (1) year of service measured from the date of grant and
for the balance of the option shares in a series of 36 successive equal
monthly installments upon the optionee's completion of each additional month
of service thereafter. The option was granted on September 20, 1999.
(7) 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 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.
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 fiscal year 1999, and except for the
limited stock appreciation rights described in footnote 7 to the Option Grant
Table above, no stock appreciation rights were held by such named executive
officers as of the end of fiscal 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
VALUE NUMBER OF SECURITIES FISCAL YEAR-END (MARKET
REALIZED UNDERLYING UNEXERCISED PRICE OF SHARES AT FISCAL
(MARKET PRICE OPTIONS AT YEAR-END ($6.50) LESS
SHARES AT EXERCISE, FISCAL YEAR-END EXERCISE PRICE)
ACQUIRED ON LESS EXERCISE --------------------------- ---------------------------
NAME EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James K. Schuler............... -- $ -- -- -- $ -- $ --
Harvey L. Goth................. -- $ -- 12,060 8,458 $ 8,548 $3,374
Pamela S. Jones................ -- $ -- 61,108 39,792 $37,181 $7,357
David L. Oyler................. -- $ -- 28,438 22,563 $ 5,469 $3,419
Douglas M. Tonokawa............ -- $ -- 22,146 14,354 $14,393 $4,294
</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. 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.
CEO COMPENSATION
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. The employment agreement had an initial term of three years, and
requires Mr. Schuler to
12
<PAGE>
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 any year from
1995 to 2000. The Committee played no role in the negotiation of this agreement.
However, Mr. Schuler's base and incentive bonus compensation is influenced by
the following policies. In 1999, Mr. Schuler received a bonus allocation equal
to approximately 1% of the overall Company's pretax income before bonus expense
related to corporate personnel.
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 markets in which it operates and
sets its pay 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 the overall Company performance or the performance
of particular divisions, as appropriate. Performance is evaluated by
reviewing the extent to which strategic and business plan goals are met,
including such factors as returns on invested capital, profit margins,
pretax income, and results of operations.
- 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.
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 salaries 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 markets in which the Company operates, and internal comparability
considerations. There have been no meaningful increases in the base salaries of
executive officers since 1994.
In addition to base salaries, executive officers receive cash bonuses
pursuant to the Company's incentive bonus plan. The executive officers, along
with substantially all of the Company's non-commissioned employees, share in the
overall Company's or a particular division's bonus pool. The bonus pool is
13
<PAGE>
currently based upon a percentage applied to the overall Company's or the
particular division's quarterly pretax income, as appropriate. This amount is
allocated to employees, including executive officers, taking into consideration
the employee's position within the Company, salary level and individual
performance. In the calculation of a particular division's bonus pool, a higher
percentage is applied to pretax income attained in excess of two-thirds of the
pretax income goals established per the applicable calendar year business plan.
In addition, the calculation is progressively tiered such that the percentages
to be applied to pretax income increase when certain higher benchmarks for
pretax profit margins and returns on investment are achieved. The Company
believes that all employees share the responsibility of achieving profits.
The Company also has a 401(k) retirement savings plan to which it can make a
matching contribution to eligible participants. The Company's 1999 matching
contribution equaled 25% of the eligible participants' contributions.
LONG-TERM EQUITY-BASED COMPENSATION. The Committee intends to make stock
option grants on a periodic 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 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.
The Company has an Employee Stock Purchase Plan ("ESPP"), which is intended
to provide employees, including the executive officers, with the opportunity to
acquire a proprietary interest in the Company. The purchase price per share is
generally equal to 85% of the fair market value per share of the Company's
common stock at the date of purchase. Similar to the stock option grants, the
ESPP is designed to closely align the interests of the executive officers with
those of the stockholders.
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 compensation. Compensation which qualifies as
performance-based compensation is not taken into account for purposes of this
limitation.
Historically, the Company has not sought to limit its compensation plans to
comply with the performance-based compensation requirements of Section 162(m).
The Compensation Committee for fiscal year 2000 has now determined that, in view
of the Company's growth and industry position, it would be advisable for its
proposed incentive bonus plan to meet the requirements of Section 162(m) so that
the Company may pay competitive compensation to its senior executives without
losing tax deductions available to the Company. Accordingly, the Compensation
Committee for fiscal year 2000 has adopted, subject to stockholder approval, the
Schuler Homes, Inc. 2000 Incentive Bonus Plan. The Company
14
<PAGE>
intends for awards to its executive officers under the bonus plan to qualify for
the performance-based compensation exemption under Section 162(m).
While the Company is structuring its new compensation plan to comply with
the exemption requirements of Section 162(m), corporate objectives may not
always be consistent with the requirements for full deductibility. Accordingly,
the Board of Directors and the Compensation Committee reserve the authority to
award non-deductible compensation to the company's executive officers in the
future as they deem appropriate.
It is the opinion of the Committee that the executive compensation policies
and plans provide the necessary total remuneration program to properly align the
Company's performance and the interests of the Company's stockholders through
the use of competitive and equitable executive compensation in a balanced and
reasonable manner, for both the short and long-term.
Submitted by the Compensation Committee of the Company's Board of Directors:
Martin T. Hart
Bert T. Kobayashi, Jr.
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 five year period ended December 31, 1999.
TOTAL SHAREHOLDER RETURNS*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHULER HOMES INC. S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
Dec 94 100 100 100
Dec 95 54.82 137.58 148.53
Dec 96 43.86 169.17 144.67
Dec 97 45.17 225.60 235.74
Dec 98 50.00 290.08 287.36
Dec 99 45.61 351.12 201.50
</TABLE>
* $100 invested on December 31, 1994 in stock, group or index.
15
<PAGE>
INDEXED RETURNS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------------------
BASE
PERIOD
COMPANY NAME/INDEX DEC94 DEC95 DEC96 DEC97 DEC98 DEC99
- ------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SCHULER HOMES INC............................... $100 $ 54.82 $ 43.86 $ 45.17 $ 50.00 $ 45.61
S&P 500 INDEX................................... $100 $137.58 $169.17 $225.60 $290.08 $351.12
PEER GROUP...................................... $100 $148.53 $144.67 $235.74 $287.36 $201.50
</TABLE>
PEER GROUP COMPANIES
<TABLE>
<S> <C>
CENTEX CORP PULTE CORP
D R HORTON INC RYLAND GROUP INC
ENGLE HOMES INC STANDARD PACIFIC CP
HOVNANIAN ENTRPRS INC--CL A TOLL BROTHERS INC
KAUFMAN & BROAD HOME CORP WEBB (DEL E) CORP
LENNAR CORP
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during 1999 was comprised of two independent,
non-employee directors of the Company, Bert T. Kobayashi, Jr. and Martin T.
Hart. Neither of these individuals was an officer or employee of the Company at
any time during the 1999 fiscal year or at any other time.
No current executive officer of the Company has ever served as a member of
the board of directors or compensation committee of any other entity that has or
has had one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
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, Jr., a director of the
Company since June 1992, is a senior partner of this Honolulu law firm. During
fiscal 1999, $36,000 in legal fees to Kobayashi, Sugita & Goda were incurred by
the Company.
All future transactions between the Company and its officers, directors,
principal stockholders and affiliates will be approved by a majority of the
independent and disinterested members of the Board of Directors, and will be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
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.
16
<PAGE>
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, 1999 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, 1999
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.
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 20, 2000
Honolulu, Hawaii
17
<PAGE>
EXHIBIT A
SCHULER HOMES, INC. 2000 INCENTIVE BONUS PLAN
1. PURPOSE. The Purpose of the Schuler Homes, Inc. 2000 Incentive Bonus
Plan (the "Plan") is to provide employees of Schuler Homes, Inc., a Delaware
corporation (the "Company"), and its Affiliates with incentive compensation
based upon the level of achievement of financial and other performance criteria.
The Plan will enhance the ability of the Company and its Affiliates to attract
and retain individuals of exceptional talent upon whom, in large measure, the
sustained progress, growth and profitability of the Company depends.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" means (i) any Person that directly, or through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company or (ii) any entity in which the Company has a significant equity
interest, as determined by the Committee.
(b) "Award" means cash payment.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Compensation Committee of the Board, which
shall consist of two or more Outside Directors.
(f) "Covered Employee" shall mean a Participant who is a "covered employee"
within the meaning of Code Section 162(m) and the Treasury regulations
promulgated thereunder with respect to any Performance Period.
(g) "Outside Directors" shall mean "outside directors" with the meaning of
Code Section 162(m) and the Treasury regulations promulgated thereunder.
(h) "Participant" shall mean any employee who is selected by the Committee
(or in the case of employees who are not Covered Employees, who are selected by
any Person or committee empowered by the Committee to make such selection) to
participate in the Plan for a Performance Period.
(i) "Performance-Based Compensation" shall mean amounts satisfying the
applicable requirements imposed by Code Section 162(m) and the Treasury
regulations promulgated thereunder with respect to that term.
(j) "Performance Period" shall mean the fiscal year of the Company, or any
other period during a fiscal year selected by the Committee, as to which an
Award may be earned.
(k) "Person" shall mean any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.
(l) "Target Award" shall mean one or more Award levels for a Performance
Period that will be paid in accordance herewith if certain performance criteria
are achieved in such Performance Period.
3. AWARDS.
(a) The Committee may determine and designate employees who shall be
Participants for any Performance Period. The Committee shall establish: (i) a
Target Award for the Performance Period; (ii) the performance criteria for the
Performance Period with respect to the Target Award; (iii) whether the Award is
intended to satisfy the requirements for Performance-Based Compensation. For any
Performance Period, determinations required for Awards intended to qualify as
Performance-Based Compensation shall
A-1
<PAGE>
be made within the time necessary to comply with such requirements. Designation
as a Participant for any Performance Period shall not entitle any employee to
the right to be designated as a Participant for any other Performance Period.
(b) The performance criteria to be established with respect to any Target
Awards shall be based upon any one or more of the following measures: return on
investment; revenues; backlog; gross margin; sales; general and administrative
expenses; pre-tax income; net income; cash flow; earnings per share; return on
operating assets; return on equity; operating profit; shareholder return; market
share improvement; or economic value added. Such goals may be particular to a
line of business, region, division, or other unit or may be based on the Company
generally or any Affiliate.
(c) Notwithstanding the establishment of any target Award and related
performance criteria pursuant to Section 3(a), in the sole discretion of the
Committee, the Award payable to a Participant in respect of such Target Award
may be adjusted, at any time prior to payment of the related Award, either to
increase or decrease the value of such Award, as follows:
(i) the Committee may adjust an Award for an individual performance on
the basis of such quantitative and qualitative measures and evaluations as
it deems appropriate;
(ii) the Committee may make such adjustments as it deems appropriate in
the case of any Participant whose position with the Company has changed
during the applicable Performance Period;
(iii) the Committee shall have the discretion to adjust performance
criteria and the methodology used to measure the determination of the degree
of attainment of such criteria;
provided, that to the extent required to qualify as Performance-Based
Compensation, any Award designated as Performance-Based Compensation may not be
adjusted under this Section 3(c) or otherwise in a manner that increases the
value of such Award for Covered Employees. The Committee shall retain the
discretion to adjust such Awards for Covered Employees in a manner that does not
increase the value of such Awards, at any time prior to the payment thereof.
(d) Awards shall be paid as soon as practicable after the Performance
Period, except to the extent that a Participant has made an election to defer
the receipt of such Award pursuant to a deferral arrangement with the Company or
any of its Affiliates. For Awards that do not constitute Performance-Based
Compensation, the Compensation Committee may establish rules and procedures for
advance payment of all or a portion of such Awards, or such other payment
arrangements as it deems desirable or appropriate.
4. AWARD LIMITATIONS TO PARTICIPANTS. Notwithstanding any other provision
of the Plan to the contrary, the maximum Award payable to any one Participant
with respect to any fiscal year of the Company shall not exceed $3 million.
Prior to the payment with respect to any Award designated as intended to satisfy
the requirements for Performance-Based Compensation for Covered Employees, the
Committee shall certify in writing the attainment of the performance criteria
and any other material terms.
5. ELIGIBILITY. Persons employed by the Company or any of its Affiliates
in a Performance Period prior and subsequent to the establishment by the
Committee of the Target Award for such Performance Period may be eligible to be
participants under the Plan for such Performance Period. An employee is not
rendered ineligible to be a Participant by reason of being a member of the
Board.
6. OTHER CONDITIONS.
(a) No Person shall have any right to be selected as a Participant for any
Performance Period or to receive an Award under the Plan. There is no obligation
for uniformity of treatment of Participants under the Plan. Awards under the
Plan may not be assigned or alienated.
(b) Neither the Plan nor any action taken thereunder shall be construed as
giving to any Participant the right to be retained in the employ of the Company
or any Affiliate.
A-2
<PAGE>
(c) The Company or any Affiliate shall have the right to deduct from any
Award to be paid under the Plan any federal, state or local taxes required by
law to be withheld with respect to such payment.
(d) No segregation of any moneys or the creation of any trust or the making
of any special deposit shall be required in connection with any Awards made or
to be made under the Plan.
(e) This Plan is not intended and shall not preclude the Board from
adopting, continuing, amending or terminating such additional compensation
arrangements as it deems desirable from Participants under this Plan, including
any thrift, savings, investments, stock purchase, stock option, profit-sharing,
pension, retirement, insurance, bonus or other incentive plan.
7. DESIGNATION OF BENEFICIARIES. If the Committee decides to implement
this Section 7, a Participant may designate one or more beneficiaries to receive
all or part of the Award which may be made to the Participant, or may be
payable, after such Participant's death. A designation of beneficiary may be
replaced by a new designation or may be revoked by the Participant at any time.
A designation or revocation shall be on a form to be provided for this purpose
and shall be signed by the Participant and delivered to the Company or Affiliate
employing the Participant prior to the Participant's death. In case of the
Participant's death, an Award with respect to which a designation of beneficiary
has been made (to the extent it is valid and enforceable under applicable law)
shall be paid to the designated beneficiaries at the time such Award would have
been paid to Participant, if Participant were still alive. Any Award granted or
payable to a Participant who is deceased and not subject to such a designation
shall be distributed to the Participant's estate at the time such Award would
have been paid to Participant, if Participant were still alive. If there shall
be any question as to the legal right of any beneficiary to receive an Award
under the Plan, the amount in question may be paid to the estate of the
Participant, in which event the Company or its employing Affiliate shall have no
further liability to anyone with respect to such amount.
8. PLAN ADMINISTRATION.
(a) The Committee shall have the full power to administer and interpret the
Plan and to establish rules for its administration. In making any determinations
under or referred to in the Plan, the Committee shall be entitled to rely on
opinions, reports or statements of officers or employees of the Company and its
Affiliates, and of counsel, public accountants and other professional or expert
Persons.
(b) Except to the extent prohibited by applicable law, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any Person or committee selected by it; provided, however, that the
Committee may not allocate or delegate any portion of its responsibilities in
connection with or relating to Covered Employees or Performance-Based
Compensation. Any such allocation or delegation may be revoked by the Committee
at any time.
(c) The Plan shall be governed by the laws of the State of Delaware and
applicable Federal law.
9. MODIFICATION OR TERMINATION OF PLAN. The Board may modify or terminate
the Plan at any time, effective at such date as the Board may determine.
A-3
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<S><C>
The Board of Directors recommends a vote FOR the nominees for Please mark
director and FOR Proposal Nos. 2 and 3. This Proxy, when properly your votes as /X/
executed, will be voted as specified hereon. This Proxy will be indicated in
voted FOR the nominees for director and FOR Proposal Nos. 2 and 3 this example
if no specification is made.
1. ELECTION OF DIRECTORS Nominee: Pamela S. Jones 2. To approve the adoption of the
Nominee: Martin T. Hart Company's 2000 Incentive Bonus Plan.
FOR WITHHOLD
AUTHORITY
INSTRUCTIONS: To withhold authority FOR AGAINST ABSTAIN
/ / / / to vote for any individual nominee, / / / / / /
strike a line through the nominee's
name above.
3. To ratify the selection of Ernst & Young 4. In their discretion, the Proxies are authorized
LLP as independent public accountants of the to vote upon such other matters as may properly
Company. come before the meeting.
FOR AGAINST ABSTAIN
/ / / / / /
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.
</TABLE>
SIGNATURE SIGNATURE DATE
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PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
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<PAGE>
SCHULER HOMES, INC.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 2000
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 5, 2000 at
the Annual Meeting of Stockholders of Schuler Homes, Inc. to be held May
22, 2000, or at any adjournment thereof.
(Continued and to be marked, dated and signed on other side)
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- FOLD AND DETACH HERE -
