Crossmann Communities, Inc.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 26, 1999
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
CROSSMANN COMMUNITIES, INC. ("Crossmann" or the "Company") which will be held
at the Marriott North Hotel, 3645 River Crossing Parkway, Indianapolis,
Indiana, at 9:00 a.m. on Wednesday, May 26, 1999 for the following purposes:
<TABLE>
<CAPTION>
<C> <S>
1. To elect two directors;
2. To ratify the appointment of Deloitte & Touche LLP as independent auditors of the Company
for the fiscal year ending December 31, 1999;
3. To authorize additional common shares to be available for issuance in connection with the
Employee Stock Option Plan of the Company; and
4. To act upon such other business as may properly come before the meeting or any adjournment
or postponement thereof.
------------------------------------------------------------------------------------------
</TABLE>
The Board of Directors has fixed the close of business on March 31, 1999
as the record date for determining those shareholders 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 all outstanding Common Shares of
Crossmann Communities, Inc. 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/ John B. Scheumann
John B. Scheumann
Chairman of the Board of Directors
and Chief Executive Officer
CROSSMANN COMMUNITIES, INC.
9210 North Meridian Street
Indianapolis, Indiana 46260
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of CROSSMANN COMMUNITIES, INC. ("Crossmann" or the
"Company") of proxies to be voted at the Annual Meeting of Shareholders, which
will be held at 9:00 a.m. on May 26, 1999 at the Marriott North Hotel, 3645
River Crossing, Parkway, Indianapolis, Indiana, 46240 or at any adjournments
or postponements thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. This Proxy Statement and the proxy
card were first mailed to shareholders on or about April 22, 1999.
Shareholders Should Read the Entire Proxy Statement Carefully Prior to
Returning Their Proxies
VOTING RIGHTS AND SOLICITATION
The close of business on March 31, 1999 was the record date for
shareholders entitled to notice of and to vote at the Annual Meeting. As of
that date, Crossmann had 11,543,772 common shares without par value, (the
"Common Shares"), issued and outstanding. All of the holders of the Company's
Common Shares outstanding on the record date are entitled to vote at the
Annual Meeting, and shareholders 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.
Common Shares represented by proxies in the accompanying form which are
properly executed and returned to Crossmann will be voted at the Annual
Meeting of Shareholders in accordance with the shareholders' 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
ratification of the appointment of auditors as described herein under
"Proposal 2--Ratification of Appointment of Auditors;" and FOR approval of an
increase in the number of common shares authorized for issuance under the
Company's Employee Stock Option Plan as described herein under "Proposal
3--Proposal to Increase the Number of Shares Authorized for Issuance under the
Employee Stock Option Plan." Management does not know of any matters to be
presented at this Annual Meeting other that 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 judgement. Any shareholder has
the right to revoke his or her proxy at any time before it is voted.
Abstentions and broker non-votes are not counted as negative votes for
purposes of determining whether a proposal has been approved.
The solicitation of proxies is being made by Crossmann, and the entire
cost of soliciting proxies will be borne by the Company. Proxies will be
solicited principally through the use of the mail, but, if deemed desirable,
may be solicited personally or by telephone, telegraph or special letter by
officers and regular Crossmann 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 Shares, and such persons may be reimbursed for their
expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of the Company's Common Shares as of March 23, 1999 by (i) each
person or entity who is known to the Company to own beneficially more than 5%
of the outstanding shares of Common Shares of the Company, (ii) each director,
(iii) each officer listed in the Summary Compensation Table on page 6 of this
Proxy Statement and (iv) all directors and officers as a group. All shares
are subject to the named person's sole voting and investment power except
where otherwise indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
PERCENT OF
-----------
NUMBER OF SHARES COMMON
-----------
NAME (1) BENEFICIALLY OWNED SHARES (2)
- ------------------------------------------------------- ------------------ -----------
John B. Scheumann, Chairman, CEO, Director 2,100,000 18.06
- ------------------------------------------------------- ------------------ -----------
Richard H. Crosser, President, COO, Director (3) 1,658,517 14.37
- ------------------------------------------------------- ------------------ -----------
Steve M. Dunn, Executive Vice President of Operations 136,500 1.18
- ------------------------------------------------------- ------------------ -----------
Jennifer A. Holihen, Executive Vice President and CFO,
- -------------------------------------------------------
Secretary, Treasurer 15,000 *
- ------------------------------------------------------- ------------------ -----------
James C. Shook, Director 13,500 *
- ------------------------------------------------------- ------------------ -----------
Larry S. Wechter, Director 11,250 *
- ------------------------------------------------------- ------------------ -----------
FMR Corporation 1,182,100 10.25
- ------------------------------------------------------- ------------------ -----------
All directors and executive officers
- -------------------------------------------------------
as a group (15 persons) 4,034,267 34.95
- ------------------------------------------------------- ------------------ -----------
<FN>
* Denotes less than 1%
(1) The address of each beneficial owner is 9210 North Meridian Street, Indianapolis,
Indiana, 46260, except FMR Corp. , which is 82 Devonshire Street, Boston, Massachusetts,
02109.
(2) There were 11,543,772 shares issued and outstanding at March 23, 1999.
(3) All of the 1,658,517 shares owned beneficially by Mr. Crosser are owned by the
Richard H. Crosser Living Trust, a revocable trust established by Mr. Crosser on
February 25, 1992. The beneficiaries of the trust are Mr. Crosser's children. Mr.
Crosser is the trustee of the trust.
(4) One thousand, eight hundred of the shares owned beneficially by Mr. Wechter are
owned by the Penn Meridian Foundation, a trust established by Mr. Wechter on December
11, 1995. Mr. Wechter and his wife, Janis Wechter, are co-trustees of the trust.
</TABLE>
PROPOSAL 1
ELECTION OF DIRECTORS
The members of the Board of Directors of Crossmann Communities, Inc. are
classified into three classes, one of which is elected at each Annual Meeting
of Shareholders to hold office for a three-year term and until successors of
such class have been elected and qualified. The nominees for the class of
Directors to be elected at this annual meeting is set forth below. Unless
otherwise instructed, proxy holders will vote the proxies received by them for
the election of the nominee named below. If the nominee becomes unavailable
for any reason, it is intended that the proxies will be voted for a substitute
nominee designated by the Board of Directors. As of the date of this Proxy
Statement, the Board of Directors is not aware that the nominee is unable or
will decline to serve as a director.
<TABLE>
<CAPTION>
NOMINEES TO THE BOARD OF DIRECTORS
<S> <C> <C> <C> <C>
Director Since Class and Year Term will Expire
-------------- -------------------------------
Name Principal Occupation Age
- ----------------- -------------------------------------- ---
John B. Scheumann Chairman of the Board of Directors and
Chief Executive Officer, Crossmann 1992 Class III 2002 50
Communities, Inc.
Larry S. Wechter Managing Director, Monument 1994 Class III 2002 43
Advisors
</TABLE>
John B. Scheumann has been the Company's Chairman of the Board of
Directors and its Chief Executive Officer since 1992 and has served as a
senior executive officer since joining the Company in 1977. Before joining
the Company, Mr. Scheumann was employed by National Homes Construction Corp.
for three years in a variety of capacities, last serving as Division
Controller for Multi-Family Construction.
Larry S. Wechter is Managing Director of Monument Advisors, a merchant
bank based in Indianapolis, which Mr. Wechter founded in 1997. He is also a
member of Eagle Investments I, LLC, a private investment company. Before
founding Monument Advisors, Mr. Wechter served as President and director of
ADESA Corporation, which owns and operates auto auctions throughout the United
States and Canada. ADESA Corporation was once publicly held; today it is a
wholly owned subsidiary of Minnesota Power & Light (NYSE: MPL), a diversified
utility based in Duluth, Minnesota. Mr. Wechter serves on the boards of
directors of J.D. Byrider and re:Member Data Services, Inc; he was elected to
Crossmann's Board of Directors in May, 1994.
DIRECTORS NOT STANDING FOR ELECTION
<TABLE>
<CAPTION>
The members of the Board of Directors who are not standing for election at this year's
Annual Meeting are set forth below.
<S> <C> <C> <C> <C>
Name Occupation Director Class and Year
- ------------------- ----------------------------------------
Since Term will Expire Age
-------- ---------------- ---
Jennifer A. Holihen Executive Vice President and Chief
Financial Officer, Treasurer, Secretary, 1993 Class I 2000 40
Crossmann Communities, Inc.
Richard H. Crosser President and Chief Operating Officer,
Crossmann Communities, Inc. 1992 Class III 2001 60
James C. Shook President, The Shook Agency 1994 Class III 2001 67
</TABLE>
Jennifer A. Holihen has served as a director of the Company since
September 1993. Ms. Holihen is Executive Vice President and Chief Financial
Officer, Secretary and Treasurer of Crossmann and has been employed by the
Company since 1983 as its principal financial and accounting officer. Ms.
Holihen is a Certified Public Accountant and holds an MBA in Accounting and
Management Information Systems from Indiana University. She is a member of
the Indiana Society of Certified Public Accountants and the American Institute
of Certified Public Accountants.
Richard H. Crosser has been the Company's President and Chief Operating
Officer and has served on its Board of Directors since 1992. He has been a
senior executive officer since joining the Company in 1974. Prior to 1974,
Mr. Crosser was employed by National Homes Construction Corp. for 15 years in
a variety of capacities, last serving as a regional manager of the company.
James C. Shook was elected to Crossmann's Board of Directors by the Board
of Directors in March 1994. Mr. Shook is President of The Shook Agency, Inc.,
a real estate brokerage firm in Lafayette, Indiana specializing in commercial
and industrial sales and leasing. Mr. Shook's other corporate affiliations
include directorships of NBD Indiana, Inc., Indiana Energy Inc. (Indiana Gas
Company), and Lafayette Life Insurance Company. Community service includes
past and present directorships of The Indiana Chamber of Commerce, The Greater
Lafayette Chamber of Commerce, Great Lafayette Progress, Inc., United Way,
Lafayette Home Hospital, The Purdue Foundation, Dean's Advisory Committee,
Krannert School of Management at Purdue University, Greater Lafayette Museum
of Art, YWCA Foundation, and the Greater Lafayette Community Foundation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO
ELECT JOHN B. SCHEUMANN AND LARRY WECHTER AS DIRECTORS OF THE COMPANY.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The firm of Deloitte & Touche LLP served as auditors for the Company for
the fiscal years ended December 31, 1995, 1996, 1997 and 1998. The Board of
Directors desires the firm to continue in this capacity for the current fiscal
year. Accordingly, a resolution will be presented to the meeting to ratify
the appointment of Deloitte & Touche LLP by the Board of Directors as
independent auditors to audit the accounts and records of the Company for the
fiscal year ending December 31, 1999 and to perform other appropriate
services. In the event that shareholders fail to ratify the appointment of
Deloitte & Touche LLP, the Board of Directors would reconsider such
appointment.
A representative of Deloitte & Touche LLP will be present at the Annual
Meeting to respond to appropriate questions and to make a statement if such
representatives desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS AUDITORS FOR 1999.
PROPOSAL 3
PROPOSAL TO INCREASE THE NUMBER OF COMMON SHARES AUTHORIZED
FOR ISSUANCE UNDER THE EMPLOYEE STOCK OPTION PLAN
On December 4, 1998, the Company's Board of Directors adopted, subject to
shareholder approval, an amendment to the Company's Employee Stock Option Plan
(the "Employee Option Plan") increasing the number of Common Shares (the
"Shares") authorized for issuance under the Employee Option Plan from 900,000
to 1,200,000. As of March 23, 1999, options to purchase 667,662 Common Shares
have been granted under the Employee Option Plan. The Board of Directors
believes that stock options have been, and will continue to be, an important
compensation element in attracting and retaining key employees. For that
reason, the Board of Directors recommends reserving an additional 300,000
Common Shares for issuance under the Employee Option Plan. As the grant of
awards under the Employee Option Plan is within the discretion of the
Compensation Committee, the benefits which would have been received by the
executive officers during 1998 had the Proposed Amendment then been in effect
are not determinable.
SUMMARY OF EMPLOYEE OPTION PLAN
The following summary of the Employee Option Plan is qualified in its
entirety by the full text of the Employee Option Plan, a copy of which may be
obtained by shareholders of the Company upon request directed to the Company's
Secretary at 9210 North Meridian Street, Indianapolis, Indiana 46260.
The Employee Option Plan is administered by the Compensation Committee
(the "Committee") of the Board of Directors. Any Shares subject to an option
that has been canceled or terminated without having been exercised are again
available for awards under the Employee Option Plan. Key employees of the
Company or its subsidiaries are eligible to participate in the Employee Option
Plan subject to the Committee's discretion to determine which of them will
actually receive awards. Currently, all employees of the Company and its
subsidiaries are eligible to be designated as key employees.
Stock options may be granted under the Employee Option Plan at the
discretion of the Committee. The Committee determines the price to be paid
for Shares purchased pursuant to the exercise of each option; however, the
Employee Option Plan provides that the option price may not be less that 100%
of the fair market value of the Shares on the date the option is granted.
The Committee has the discretion to determine the vesting period of
options granted to any employee. With certain limited exceptions, options may
be exercised only by participants who have been employees of the Company or
one of its subsidiaries continually since the date of grant. The Employee
Option Plan states that the term of each option may not exceed 10 years from
the date of grant.
The Employee Option Plan provides that the Board of Directors may amend,
suspend or terminate the operation of the Employee Option Plan at any time
with respect to any Shares for which Awards have not been granted; provided;
however, that without approval of the holders of a majority of the Company's
issued and outstanding Shares, the Board may not make the following changes in
the Employee Option Plan: (a) increase the maximum number of Shares for which
Awards may be granted under the Employee Option Plan (other than to reflect a
recapitalization or merger, as provided for in the Employee Option Plan); (b)
change the designation of the employees or class of employees eligible to
receive awards under the Employee Option Plan; (c) make any other change that
would disqualify the Employee Option Plan for purposes of the exemption
provided by Rule 16b-3(d)(3) of the Commission; (d) reduce to option price
below the fair market value of the Shares on the date the option is granted;
or (e) extend the termination date of the Employee Option Plan. No such
amendment, suspension or termination may alter or impair outstanding Awards
without consent of the participants affected thereby.
The Employee Option Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and is not
subject to the qualification requirements of Code Section 401(a). The closing
price of the Company's Common Shares on March 23, 1999, was $21.25. The
Employee Option Plan will terminate on August 31, 2002, or at an earlier date
determined by the Board of Directors. The termination of the Employee Option
Plan permits the Committee to grant options which qualify as Incentive Stock
Options or which constitute Nonqualified Stock Options.
The following discussion summarizes the federal income tax consequences
of the issuance and exercise of stock options under the Employee Option Plan,
based on current provisions of the Code. The Employee Option Plan permits the
Committee to grant options which qualify as Incentive Stock Options or which
constitute Nonqualified Stock Options.
Incentive Stock Options. Except for alternative minimum tax purposes,
the exercise of an incentive stock option will have no federal income tax
consequences to the Company or the optionee, provided the option is exercised
by an optionee who was an employee of the Company or any of its subsidiaries
on the date the option was granted and who remained in the employ of the
Company or its subsidiary until (a) the date of exercise; (b) a date within
one year of the date of exercise if the optionee's employment is terminated
due to permanent and total disability (within the meaning of Code Section
22(e)(3)); or (c) a date within three months of the date of exercise if the
optionee to exercise options. At the time of exercise, the option will be
treated as a non-qualified stock option for purposed of computing the
optionee's alternative minimum tax.
An optionee generally will recognize capital gain or loss upon the sale
of Shares that he or she acquired in exercising an incentive stock option,
provided the Shares are sold at least two years after the date of grant of
that option and at least one year after the optionee receives the Shares and
the optionee is not a dealer in securities. Any such capital gain may
increase the amount of capital loss, if any, deductible by the optionee in the
year of that gain under Code Section 1211.
An optionee generally will recognize ordinary income upon the sale of
Shares he or she acquires in exercising an incentive stock option if the sale
is made within two years of the date the option was granted or within one year
of the date the Shares were transferred to the optionee. The amount of
ordinary income recognized will equal the lesser of (a) the excess of the fair
market value of the Shares acquired on the date of exercise over the option
price, and (b) the gain realized upon disposition of the Shares. Officers and
directors subject to Section 16(b) of the Exchange Act may have different tax
consequences in connection with the exercise of options and the sale of Shares
acquired thereby. If appropriate withholdings are made and certain other
conditions are met, the Company will be entitled to an income tax deduction in
the amount of the ordinary income recognized by the optionee. If the excess
of the fair market value of the Shares over the option price is the basis for
determining the amount of ordinary income recognized by the optionee, any
subsequent, additional gain recognized by the optionee on the disposition of
the Shares generally will be capital gain if the optionee is not a dealer in
securities.
Nonqualified Stock Options. The grant of the nonqualified stock option
generally will have no federal income tax consequences to the Company or the
optionee. However, upon exercising a nonqualified stock option, an optionee
(with the exception, under certain circumstances, of an optionee which is an
officer, director or beneficial owner for more than 10% of the Company's
outstanding Common Shares (collectively, "Insiders")) is deemed to have
received ordinary income in an amount equal to the excess of the fair market
value of the Shares acquired on the date of exercise over the option price,
and, if appropriate withholdings are made an other conditions are met, that
amount is deductible by the Company. As indicated, under certain
circumstances, an optionee who is an Insider may be subject to the
restrictions on transfer of Shares imposed by Section 16(b) of the Exchange
Act. In that case, optionees who are Insiders will be deemed to have received
ordinary income in an amount equal to the excess of the fair market value of
the acquired Shares on the date the Section 16(b) restrictions lapse over the
option price.
The optionee's basis in the Shares acquired in exercising a nonqualified
stock option is equal to the fair market value of the Shares at the date used
to determine the amount to be included in the optionee's income as ordinary
income. Upon the disposition of Shares acquired in exercising a nonqualified
stock option, the optionee generally will recognize capital gain or capital
loss, as the case may be, to the extent of the difference between the
optionee's basis in the Shares and the sale price, provided the optionee is
not a dealer in securities.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
IN INCREASE THE NUMBER OF COMMON SHARES AUTHORIZED FOR ISSUANCE UNDER THE
EMPLOYEE STOCK OPTION PLAN.
BOARD OF DIRECTORS MEETINGS
The Board of Directors of the Company held a total of four meetings
during 1998. All meetings were attended by all of the Directors.
In March 1994 the Board designated an Audit Committee and a Compensation
Committee of the Board of Directors, the functions of which are described
below.
The Audit Committee is responsible for recommending independent auditors,
reviewing with the independent auditors the scope and results of the audit
engagement, establishing and monitoring the Company's financial policies and
control procedures, reviewing and monitoring the non-audit services performed
by the Company's auditors and reviewing all potential conflicts of interest.
This Committee, currently consisting of John B. Scheumann, Larry S. Wechter
and James C. Shook, held one meeting during 1998.
The Compensation Committee was formed and currently consists of James C.
Shook and Larry S. Wechter, non-employee members of the Board of Directors.
The Compensation Committee is responsible for reviewing, determining and
establishing the salaries, bonuses and other compensation of the executive
officers of the Company and for administering the Employee Option Plan. The
Compensation Committee held two meetings during 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Salaries, bonuses and option grants for all employees were recommended by
Messrs. Scheumann and Crosser and Ms. Holihen, and approved by the
Compensation Committee. Messrs. Scheumann and Crosser, and Ms. Holihen do not
participate in setting their personal salaries, bonuses or option grants.
DIRECTOR COMPENSATION
In 1998, non-employee members of the Board of Directors were each paid an
annual retainer fee of $12,000 and are reimbursed for all out-of-pocket costs
incurred in connection with their attendance at Board meetings. During 1998,
James C. Shook and Larry S. Wechter each received fees of $12,000. At the end
of 1998, the Board of Directors authorized a change to this compensation,
whereby non-employee directors shall receive $12,000 per year in the Company's
Common Shares. Shares shall be issued annually on the date of Crossmann's
Annual Meeting of Shareholders.
Under the Company's Outside Director Stock Option Plan, (the "Outside
Director Plan") each non-employee Director is entitled to receive the grant of
an option to purchase 1,500 Common Shares on their initial election and each
re-election to the Board of Directors, or more frequently as determined by the
employee Directors of the Company. The total number of Common Shares with
respect to which option may be granted under the Outside Director Plan may not
exceed 37,500 Common Shares. The Outside Director Plan is administered by the
Board members who are employees of the Company. Options granted under the
Outside Director Plan constitute non-qualified stock options for income tax
purposes. Messrs. Wechter and Shook each were granted options to purchase
1,000 Common Shares on March 5, 1998.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's four other highest-paid executive
officers for services rendered in all capacities to the Company and its
subsidiaries for the fiscal years ended December 31, 1998, 1997, and 1996,
respectively.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
<S> <C> <C> <C> <C> <C> <C>
Other All Other
------------- ----------------
Salary Bonus Compensation Options(2) Compensation (1)
-------- -------- ------------- ---------- ----------------
Name and Principal Position Year ($) ($) ($) ($)
- ----------------------------- ---- -------- -------- ------------- ----------------
John B. Scheumann, Chairman 1998 185,000 275,000 2,250 None 14,249
and Chief Executive Officer 1997 175,000 265,000 619 20,500
1996 166,000 249,000 508 18,715
Richard H. Crosser, President 1998 185,000 275,000 1,376 None 14,249
and Chief Operating Officer 1997 175,000 265,000 1,370 20,500
1996 166,000 249,000 1,171 18,715
Steve M. Dunn, Executive Vice 1998 120,000 100,000 1,035 -0- 12,938
President of Operations 1997 100,320 75,000 592 -0- 20,500
1996 100,320 60,000 614 -0- 18,715
Jennifer A. Holihen, Chief 1998 80,000 110,000 4,119 4,000 14,249
Financial Officer, Treasurer, 1997 75,000 100,000 3,678 7,500 20,500
Secretary 1996 70,000 87,500 2,247 7,500 18,715
<FN>
(1) Represents contributions by the Company to the named individual's profit sharing plan.
</TABLE>
OPTION PLAN BENEFITS
The following table sets forth the benefits allocated under the Outside
Director Plan and the Employee Option Plan (collectively, the "Plans") for the
fiscal year ended December 31, 1998 to each of the named executive officers;
all current executive officers as a group; all current directors who are not
executive officers as group; and all employees, including all current officers
who are not executive officers, as a group. The amount of such benefits are
not necessarily indicative of the amounts that will be granted in the future.
The closing sale price of a Common Share at the close of business on March 23,
1999 was $21.25.
<TABLE>
<CAPTION>
<S> <C> <C>
EMPLOYEE OUTSIDE DIRECTOR
OPTION PLAN OPTION PLAN
NAME NUMBER OF UNITS NUMBER OF UNITS
John B. Scheumann -0- -0-
Richard H. Crosser -0- -0-
Steve M. Dunn -0- -0-
Jennifer A. Holihen 4,000 -0-
All Other Executive Officers as a Group -0- -0-
All Directors who are not Executive Officers 2,000
All non-Executive Officers and Employees as a Group 200,250
</TABLE>
The following table contains information concerning the grant of stock options
under the Company's Employee Option Plan to the named executive officers and
groups indicated. The table also lists potential realizable values of such
options on the basis of assumed annual compounded appreciation rates of 5% and
10% over the life of the options, which are set at a maximum of 10 years.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
% OF TOTAL
OPTIONS POTENTIAL REALIZABLE VALUE
GRANTED TO EXERCISE AT ASSUMED ANNUAL RATES
OPTIONS EMPLOYEES PRICE EXPIRATION OF PRICE APPRECIATION OVER
NAME GRANTED(#) IN 1998 ($/SHARE) DATE 10 YEARS
- ------------------- ---------- ---------- --------- ----------
5%($) 10%($)
--------------------------- --------
John B. Scheumann -0- -0- -0- -0- -0- -0-
Richard H. Crosser -0- -0- -0- -0- -0- -0-
Steve M. Dunn -0- -0- -0- -0- -0- -0-
Jennifer A. Holihen 4,000 2 25.00 3/5/08 162,889 259,374
</TABLE>
The following table provides information with respect to the named
executive officers and groups indicated concerning the unexercised options
held as of the end of the last fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION VALUES AT DECEMBER 31, 1998
<S> <C> <C> <C> <C>
VALUE OF UNEXERCISED
-------------------------
VALUE OPTIONS AT YEAREND:
---------------- -------------------------
REALIZED: NUMBER OF OPTIONS MARKET PRICE OF $27.625
---------------- ----------------- -------------------------
SHARES ACQUIRED MARKET PRICE OF UNEXERCISED AT - EXERCISE PRICE RANGING
--------------- ---------------- ----------------- -------------------------
NAME ON EXERCISE $ 27.625 DECEMBER 31, 1998 FROM$5.17 TO $25.00
- ------------------- --------------- ---------------- ----------------- -------------------------
Jennifer A. Holihen 4,000 $ 110,500 63,700 $ 1,211,263
- ------------------- --------------- ---------------- ----------------- -------------------------
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General. The Company has undertaken to formulate a competitive
compensation policy for executive officers that will attract, motivate and
retain qualified and productive personnel, reward superior performance, and
provide long-term incentives based on that performance. The Company also has
attempted to develop a compensation policy that will serve to align the
interests of the Company, its executive officers, and its shareholders. The
primary components of executive compensation consist of base salaries, a
performance-based cash bonus plan, and stock options.
Base salaries. Management has traditionally held that it is in the
Company's best interest to keep base salaries of employees at all levels as
low as possible, due to uncertainties inherent in the homebuilding business
that affect the amount and timing of income: weather, interest rates and
other credit issues, the availability of developed lots, labor supply, etc.
This policy ensures a low break-even point and conserves cash. Management
also believes that its compensation system is consistent with hiring young
professionals and developing them as managers in the Company.
Bonuses. In light of relatively low base salaries, it is the
Company's policy to pay a substantial portion of the compensation an officer
has the opportunity to earn as a year-end bonus, provided that certain
predetermined corporate goals and individual performance objectives are
achieved. By weighing bonus compensation heavily, management believes it has
an effective tool for enhancing Company performance, while protecting the
Company from high fixed costs. Bonuses are computed only when actual earnings
performance for the entire year is known.
The Company's executive officers earn substantial bonuses if overall
corporate earnings objectives are achieved and if they accomplish
predetermined strategic objectives. In 1998, Crossmann achieved or exceeded
its earnings objectives in every quarter and achieved its strategic objective
of expanding into new markets. Year-end bonuses for 1998 were paid in
accordance with the guidelines set by the Compensation Committee.
Stock Options.The Compensation Committee authorized incentive
options to key employees on March 5, 1998 at a grant price of $25.00 per
share.
1999 Compensation Policy. In 1998, the Compensation Committee
expressed concern that management's traditional policy of low base salaries
and performance-based bonuses may not achieve the Company's goal of offering
competitive compensation packages to senior management and other key
employees. The Compensation Committee reviewed salary surveys provided by
Deloitte & Touche LLP and examined recent proxy statements of other
homebuilders and found Crossmann's compensation generally lower by a
substantial margin, while the Company's profitability, returns on equity and
assets, and growth are generally higher. The Compensation Committee
recommends a review of current practices during 1999.
Crossmann's management has substantial personal investment in the
Company's stock; therefore, the Committee believes that interests of senior
management are consistent with that of the Company's stockholders. The
Committee believes that long-term share value will be enhanced by continued
strong financial performance. The Committee has set the following goals for
management in 1999:
- To ensure the Company achieve its higher earnings targets;
- - To support operating managers in producing acceptable volume levels
and margins, particularly monitoring new markets where performance is
unproven; and
- To identify one or more new markets that will provide increase
earnings in 2000.
Submitted by the Compensation Committee James C. Shook
Larry S. Wechter
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 Standard & Poor's 500 Stock Index and the peer group
indicated below during the period from October 19, 1993 (the effective date of
the Company's initial public offering) through December 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Measurement Period Crossmann Communities, Inc. Homebuilding 500 S & P 500 Index
- --------------------- --------------------------- ---------------- ---------------
(Fiscal Year Covered)
- ---------------------
1993 100.00 100.00 100.00
- --------------------- --------------------------- ---------------- ---------------
1994 44.68 57.85 101.32
- --------------------- --------------------------- ---------------- ---------------
1995 159.58 82.61 139.40
- --------------------- --------------------------- ---------------- ---------------
1996 144.68 75.33 171.40
- --------------------- --------------------------- ---------------- ---------------
1997 352.67 120.53 228.59
- --------------------- --------------------------- ---------------- ---------------
1998 352.67 147.07 293.91
- --------------------- --------------------------- ---------------- ---------------
</TABLE>
CERTAIN TRANSACTIONS
The Company had business dealings with certain affiliates, including
its Chairman of the Board and CEO, John B. Scheumann and its President and
COO, Richard H. Crosser and entities with which they are affiliated. Since
its initial public offering , the policy of the Company has been to require
that such transactions be on terms not less favorable to the Company than
reasonably available from unrelated third parties and that they be approved by
a majority of the disinterested members of the Board of Directors of the
Company.
On September 30, 1998, the Company sold an 80.2% equity interest in
its multifamily subsidiary, Crossmann Properties LLC, for approximately $11.4
million, based on an independent appraisal of the assets and subject to
approval by disinterested members of the Board of Directors pursuant to
Crossmann's conflict of interest policy. The Company's gain on sale of the
equity interest was approximately $1.3 million.
The Company leases approximately 20,000 square feet of office space
for its headquarters, and an additional 4,000 square feet for its mortgage
brokerage subsidiary, and 5,000 square feet of warehouse space at 9202 North
Meridian Street in Indianapolis, Indiana from Crossmann Properties LLC, an
entity now 80.2% owned by principal shareholders John B. Scheumann and Richard
H. Crosser and 19.2% owned by the Company. The monthly rent on the leases is
$21,844.
The Company charters an aircraft for corporate use from DJAC LLC, an
entity 30% owned by principal shareholders John B. Scheumann and Richard H.
Crosser and 50% owned by the Company. In 1998, the Company expended $180,528
for the use of the aircraft.
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16(A) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 required the
Company's directors and executive officers, and persons who own more that 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
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) reports they file. To the knowledge of the Company, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten-percent beneficial owners have been made in a
timely manner.
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. Shareholders 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.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Shareholder proposals intended to be considered at the 2000 Annual
Meeting of Shareholders must be received by Crossmann Communities, Inc. no
later than December 31, 1999. The proposal must be mailed to the Company's
principal executive officer, 9210 North Meridian Street, Indianapolis,
Indiana, 46260, Attention: Jennifer A. Holihen. 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.
By the Order of the Board of Directors
/s/ Jennifer A. Holihen
Jennifer A. Holihen
Secretary
April 19, 1999
Indianapolis, Indiana
REVOCABLE PROXY
CROSSMANN COMMUNITIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders
May 20, 1997
The undersigned hereby appoints the Board of Directors of Crossmann
Communities, Inc., or the majority of such directors, with powers of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of capital stock of Crossmann Communities, Inc., which the undersigned
is entitled to vote at the Annual Meeting of Shareholders to be held at the
Marriott North Hotel, 3645 River Crossing Parkway, Indianapolis, Indiana, at
9:00 a.m. on May 26, 1999, and at any and all adjournments thereof, as
follows:
(Continued on Reverse Side)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
CROSSMANN COMMUNITIES, INC.
May 26, 1999
[X] Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
The Board of Directors recommends a vote "FOR" each of the listed propositions
<S> <C>
1. The election as FOR WITHHOLD AUTHORITY Nominees: John B. Scheumann
directors of the [ ] [ ] Larry S. Wechter
nominees listed
at right.
(Instructions: To withhold authority to vote for any
individual nominee, write that nominee's name on the
space provided below.)
2. Approval and ratification of the appointment of FOR AGAINST ABSTAIN
Deloitte & Touche LLP as auditors for the year [ ] [ ] [ ]
ending December 31, 1999.
3. To authorize additional 300,000 common shares FOR AGAINST ABSTAIN
to be available for issuance in connection with the [ ] [ ] [ ]
Employee Stock Option Plan of the Company; and
4. In their discretion, the proxies are authorized to
vote on any other business that may properly
come before the Meeting or adjournment thereof.
This proxy may be revoked at any time prior to the voting thereof.
The undersigned acknowledges receipt from Crossmann Communities, Inc., prior
to the executor of this proxy, of notice of the Meeting, a proxy statement and an
Annual Report to shareholders.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT
SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN THEIR BEST JUDGEMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
Signature(s)________________________________DATE___________
Note: Please sign as your name appears on the envelope in which this card
was mailed. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held jointly, each holder
should sign.
</TABLE>
