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Item 5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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Appointment of Ryan R. Marshall as President and Chief Executive Officer
On September 8, 2016, the Company issued a press release announcing that the Board has appointed Ryan R. Marshall as the Company’s President and Chief Executive Officer of the Company, effective immediately. Mr. Marshall has also been appointed to serve as a director of the Company, as discussed below.
Mr. Marshall, who is 41 years of age, was appointed President of the Company in February 2016. Previously he held the positions of Executive Vice President, Homebuilding Operations from May 2014 to February 2016, Area President, Southeast from November 2012 to May 2014, Area President, Florida from May 2012 to November 2012, and Division President in one of the Company’s Florida divisions since 2007.
In connection with Mr. Marshall’s appointment to the position of President and Chief Executive Officer, Mr. Marshall’s annual base salary was increased to $900,000, effective September 1, 2016, and his 2017 annual incentive bonus target will equal $1,350,000. For the 2017-2019 performance cycle scheduled to be granted in 2017 pursuant to the Company’s Long-Term Incentive Program (“LTI Program”) under the Company’s 2013 Senior Management Incentive Plan, Mr. Marshall’s target award opportunity will equal $3,250,000. The Compensation and Management Development Committee (the “Compensation Committee”) of the Board also approved a promotional equity award to Mr. Marshall under the Company’s 2013 Stock Incentive Plan of restricted stock units valued at $500,000 on the grant date. The restricted stock units will vest in their entirety on the third anniversary of the grant date.
There are no family relationships, as defined in Item 401 of Regulation S-K, between Mr. Marshall and any of the Company’s executive officers or any of the Company’s directors. There is no arrangement or understanding between Mr. Marshall and any other person pursuant to which Mr. Marshall was appointed to his position. There are no transactions in which Mr. Marshall has an interest requiring disclosure under Item 404(a) of Regulation S-K.
Upon the appointment of Mr. Marshall as President and Chief Executive Officer, Mr. Dugas began a transition period during which Mr. Dugas will serve as Executive Chairman of the Company, all subject to and as contemplated by the terms of a Transition Agreement, described below. Mr. Dugas continues to serve as a director of the Company.
The press release announcing Mr. Marshall’s appointment to the position of President and Chief Executive Officer is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Transition Agreement with Richard J. Dugas, Jr.
On September 8, 2016, the Company entered into a Transition Agreement (the “Transition Agreement”), as approved by the Compensation Committee, with Richard J. Dugas, Jr., Chairman and Chief Executive Officer of the Company, in connection with Mr. Dugas’ retirement from the Company. Pursuant to the terms of the Transition Agreement, Mr. Dugas will retire from his position of Chief Executive Officer of the Company, effective September 8, 2016, and from his position of Executive Chairman of the Company, effective at the 2017 Annual Meeting of Shareholders. While serving as Executive Chairman of the Company, Mr. Dugas will continue to receive his current base salary, will be eligible to receive the amount earned, if any, for the 2014-2016 performance cycle granted pursuant to the LTI Program under the Company’s 2013 Senior Management Incentive Plan, with such amount determined based on the Company’s actual performance during the 2014-2016 performance cycle and, if the Compensation Committee grants restricted shares or restricted share units to the Company’s other named executive officers in 2017, Mr. Dugas will also be entitled to a grant of restricted shares or restricted share units, having terms and conditions and in an amount consistent with past practices, but cliff-vesting in February 2020. Under the terms of Mr. Dugas’ separation, Mr. Dugas will not be eligible to receive a 2017-2019 performance cycle grant under the LTI Program and he is not eligible to receive benefits under the PulteGroup, Inc. Executive Severance Policy or the PulteGroup, Inc. Retirement Policy.
In addition, in exchange for Mr. Dugas signing a general release of claims in favor of the Company, Mr. Dugas will receive (i) his 2016 annual bonus, if any, dependent on the Company’s attainment of the 2016 performance goals established by the Compensation Committee, (ii) his 2017 annual bonus, if any, with a target opportunity consistent with the 2016 bonus opportunity and dependent on the Company’s attainment of the 2017 performance goals established by the Compensation Committee and prorated through his date of retirement as Executive Chairman, (iii) the amounts earned, if any, for the 2015-2017 and 2016-2018 performance cycles under the LTI Program, based on the actual performance of the Company during the applicable performance cycles and prorated for his period of service with the Company during the applicable performance cycle and (iv) continued vesting of Mr. Dugas’ restricted share and restricted share unit awards that remain outstanding on the date of his retirement as Executive Chairman.
The Transition Agreement also contains various covenants, including restrictive covenants relating to non-competition, non-solicitation, non-disparagement, confidentiality and cooperation.
The foregoing summary of the Transition Agreement does not purport to be complete and is qualified in its entirety by reference to the Transition Agreement, which is filed as Exhibit 10.2 and is incorporated herein by reference.
Director Resignation and Director Appointments
On September 7, 2016, Debra J. Kelly-Ennis provided notice to the Board that she is resigning from the Board, effective September 8, 2016. Ms. Kelly-Ennis expressed no disagreement with the Company over any of its operations, policies or practices.
As noted above, on September 8, 2016, Mr. Marshall was appointed to the Board, effective immediately, to fill the vacancy created by Ms. Kelly-Ennis’ resignation. Mr. Marshall will serve on the Board’s Finance and Investment Committee.
As noted above, on September 8, 2016 and in connection with the Settlement Agreement, Mr. Pulte was appointed to the Board, effective immediately, to fill the newly-created directorship. Mr. Pulte will serve on the Compensation Committee and the Board’s Nominating and Governance Committee.
Mr. Pulte will be compensated for his service on the Board in the same manner as the Company’s other non-employee directors described under the heading “2015 Director Compensation” in the Company’s proxy statement for the 2016 Annual Meeting of Shareholders, filed with the Securities and Exchange Commission on April 4, 2016. Mr. Marshall will receive no additional compensation for his services as a director of the Company.
There are no transactions involving Messrs. Marshall or Pulte requiring disclosure under Item 404(a) of Regulation S-K.
The press release announcing Ms. Kelly-Ennis’ resignation as a director of the Company and Mr. Pulte’s appointment as a director of the Company is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The press release announcing Mr. Marshall’s appointment as a director of the Company is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.