SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
TOLL BROTHERS, INC.
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(Name of Registrant as Specified in Its Charter)
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/X/ No fee required
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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[TOLL BROTHERS LOGO]
TOLL BROTHERS, INC.
3103 Philmont Avenue
Huntingdon Valley, PA 19006
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on Thursday, March 20, 2003
--------------------
The Annual Meeting of Stockholders (the "Meeting") of Toll Brothers, Inc.
(the "Company") will be held on Thursday, March 20, 2003 at 11:30 a.m., at the
offices of the Company, 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania
19006, for the following purposes:
1. To elect four directors to hold office until the 2006 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified. (The terms of office of the other directors do not expire until
2004 or 2005.)
2. To consider and approve the re-appointment of Ernst & Young LLP as the
Company's independent auditors for the 2003 fiscal year.
3. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 24, 2003 as
the record date for the Meeting. Only stockholders of record at that time are
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached proxy statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to sign, date and return the enclosed proxy promptly, although you are
cordially invited to attend the Meeting in person. The return of the enclosed
proxy will not affect your right to vote in person if you do attend the Meeting.
MICHAEL I. SNYDER
Secretary
February 11, 2003
TABLE OF CONTENTS
Page
Number
------
General ............................................................... 1
Voting Securities and Security Ownership .............................. 2
Proposal One - Election of Directors .................................. 4
Proposal Two - Selection of Independent Public Accountants ............ 7
Corporate Governance .................................................. 8
Executive Compensation ................................................ 10
Performance Graph ..................................................... 14
Report of the Executive Compensation Committee on Executive
Compensation......................................................... 15
Report of the Audit Committee ......................................... 18
Section 16(a) Beneficial Ownership Reporting Compliance ............... 19
Certain Transactions .................................................. 19
Stockholder Proposals ................................................. 20
Solicitation of Proxies ............................................... 21
Annual Report on Form 10-K ............................................ 21
Addendum A - Executive Compensation Committee Charter ................. 22
Addendum B - Nominating and Corporate Governance Committee Charter .... 24
Addendum C - Corporate Governance Guidelines .......................... 26
Addendum D - Code of Ethics for Principal Executive Officer and Senior
Financial Officers................................................... 27
TOLL BROTHERS, INC.
3103 Philmont Avenue
Huntingdon Valley, PA 19006
--------------------
PROXY STATEMENT
For
Annual Meeting of Stockholders
Thursday, March 20, 2003
--------------------
GENERAL
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Toll Brothers, Inc., a Delaware corporation
(the "Company"), for use at the Company's Annual Meeting of Stockholders (the
"Meeting"), which will be held on the date, at the time and place, and for the
purposes set forth in the foregoing notice, and any adjournment or postponement
thereof. This proxy statement, the foregoing notice and the enclosed proxy are
first being sent to stockholders of the Company (the "Stockholders") on or about
February 11, 2003.
The Board of Directors does not intend to bring any matter before the Meeting
except as specifically indicated in the notice and does not know of anyone else
who intends to do so. If any other matters properly come before the Meeting,
however, the persons named in the enclosed proxy, or their duly constituted
substitutes acting at the Meeting, will be authorized to vote or otherwise act
thereon in accordance with their judgment on such matters. If the enclosed proxy
is properly executed and returned to, and received by, the Company prior to
voting at the Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. In the absence of instructions,
the shares will be voted "FOR" the nominees of the Board of Directors in the
election of the four directors whose terms of office will extend until the 2006
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified and "FOR" the approval of the re-appointment of Ernst &
Young LLP as the Company's independent auditors for the 2003 fiscal year.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later date,
or by attending the Meeting and voting in person.
VOTING SECURITIES AND SECURITY OWNERSHIP
Shares Entitled To Vote, Required Vote and Quorum
At the close of business on January 24, 2003, there were 69,458,447 shares of
the Company's common stock outstanding. The Company has no other class of voting
securities outstanding. The record date fixed by the Board of Directors for the
determination of Stockholders entitled to notice of and to vote at the Meeting
is January 24, 2003. At the Meeting, Stockholders will be entitled to one vote
for each share of common stock owned of record at the close of business on the
record date. The presence at the Meeting, in person or by proxy, of persons
entitled to cast the votes of a majority of such outstanding shares of common
stock will constitute a quorum for consideration of the matters expected to be
voted on at the Meeting. Abstentions and broker non-votes (i.e., shares held of
record by a broker which are not voted because the broker has not received
voting instructions from the beneficial owner of the shares and lacks the
authority to vote the shares in its discretion) represented by submitted proxies
will be included in the calculation of the number of shares present at the
Meeting for the purposes of determining a quorum.
Proposal One: Directors are elected by a plurality and the four nominees who
receive the most votes will be elected. Abstentions and broker non-votes will
not be taken into account in determining the outcome of the election.
Proposal Two: To be approved, this matter must receive the affirmative vote
of the majority of the outstanding shares of common stock present in person or
by proxy at the Meeting and entitled to vote. Brokers holding shares of record
for their customers are entitled to vote on this matter. Accordingly,
abstentions and broker non-votes represented by submitted proxies will have the
effect of a negative vote.
Security Ownership of Principal Stockholders and Management
The following table sets forth certain information respecting the holdings
of: (i) each person known to the Company to be the beneficial owner of more than
5% of the common stock of the Company; (ii) each director and nominee for
director of the Company and each executive officer named in the Summary
Compensation Table under "Executive Compensation"; and (iii) all directors and
executive officers of the Company as a group. This information is as of January
24, 2003, except as otherwise indicated. Each of the persons named in the table
below as beneficially owning the shares set forth therein has sole voting power
and sole investment power with respect to such shares, unless otherwise
indicated.
Percent of
Amount and Nature of Common
Name of Beneficial Owner Beneficial Ownership (1) Stock
------------------------ ------------------------ ----------
Robert I. Toll ...................... 16,473,518(2)(3) 22.2%
Bruce E. Toll ....................... 9,264,268(2) 13.0%
Wellington Management Company, LLP .. 9,083,432(4) 13.1%
Myron M. Kaplan ..................... 6,559,300(5) 9.4%
Zvi Barzilay ........................ 1,287,798 1.8%
Robert S. Blank ..................... 264,446 *
Edward G. Boehne .................... 68,000 *
Richard J. Braemer .................. 279,000 *
Roger S. Hillas ..................... 320,850 *
Carl B. Marbach ..................... 288,800(6) *
Stephen A. Novick ................... 0 *
Joel H. Rassman ..................... 660,827 *
Paul E.Shapiro ...................... 286,920 *
All directors and executive officers
as a group (11 persons)............ 29,194,427(3)(6)(7) 36.9%
---------------
* Less than 1%
2
(1) Shares issuable pursuant to options exercisable within 60 days of January
24, 2003 are deemed to be beneficially owned; accordingly, information
includes the following numbers of shares of common stock underlying options
held by the following individuals, and all directors and executive officers
as a group: Robert I. Toll, 3,893,500 shares; Bruce E. Toll, 1,679,000
shares; Mr. Barzilay, 1,256,400 shares; Mr. Blank, 258,000 shares; Mr.
Boehne, 68,000 shares; Mr. Braemer, 257,000 shares; Mr. Hillas, 260,000
shares; Mr. Marbach, 267,000 shares; Mr. Rassman, 615,000 shares; Mr.
Shapiro, 266,500 shares; and all directors and executive officers as a
group, 8,820,400 shares.
(2) The address for Robert I. Toll and Bruce E. Toll is c/o Toll Brothers,
Inc., 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006.
(3) Includes 896,612 shares of the 996,236 shares that Mr. Toll elected to
defer receipt of under the Toll Brothers, Inc. Stock Award Deferral Plan
and the Company's Amended and Restated Stock Option Plan (1986)(the "1986
Plan"). Because Mr. Toll may elect early distribution of all or a portion
of the 896,612 shares at any time, he is deemed to beneficially own them.
Mr. Toll is entitled to receive 819,991 of these shares under the Toll
Brothers, Inc. Cash Bonus Plan, as amended, and 76,721 of these shares upon
the exercise of stock options granted under the 1986 Plan. Also includes
28,000 shares owned by the Robert and Jane Toll Foundation of which Robert
I. Toll is a trustee, with dispositive power, as to which he disclaims
beneficial ownership.
(4) Based on a Schedule 13G, filed with the SEC on February 12, 2002, which
states that the address of Wellington Management Company, LLP ("WMC") is 75
State Street, Boston, Massachusetts 02109, that WMC has shared voting power
with respect to 1,754,100 shares and shared dispositive power with respect
to 9,083,432 shares, and that the shares as to which the Schedule 13G is
filed by WMC, in its capacity as an investment advisor, are owned by
clients of WMC who have the right to receive or the power to direct the
receipt of dividends from or proceeds of such shares. The Schedule 13G
filed by WMC further states that none of such clients, except Vanguard
Windsor Funds, Inc. ("Vanguard"), is known to have such right or power with
respect to more than 5% of the common stock of the Company. In addition,
Vanguard filed a Schedule 13G on February 12, 2002, which the Company
assumes relates to shares that are included in the shares reported by WMC,
which states that Vanguard has sole voting power and shared dispositive
power with respect to 6,988,332 shares. The Company believes that
Vanguard's address is Post Office Box 2600, Valley Forge, Pennsylvania
19482. The number of shares reported above have been adjusted to reflect
the Company's two-for-one stock split that was completed in March 2002.
(5) Based on a Schedule 13G filed with the SEC on January 21, 2003 which states
that the address of Myron M. Kaplan is c/o Kaplan Nathan and Mayfair, PO
Box 385, Leonia, New Jersey 07605 and that Mr. Kaplan has sole voting power
with respect to 6,559,300 shares, shared voting power with respect to
300,000 shares, sole dispositive power with respect to 6,559,300 shares and
shared dispositive power with respect to 300,000 shares.
(6) Includes 4,700 shares beneficially owned by individual retirement accounts
("IRAs") for the benefit of Mr. Marbach and his wife. Mr. Marbach disclaims
beneficial ownership of the 2,350 shares held by his wife's IRA.
(7) The Board of Directors, after reviewing the functions of all of the
Company's officers, both in terms of designated function and functions
actually performed, has determined that, for purposes of Section 16 of the
Securities Exchange Act of 1934 (and the rules thereunder) and Regulation
S-K, only the Chief Executive Officer, Chief Operating Officer, and
Executive Vice President/Chief Financial Officer (and the Chief Accounting
Officer for purposes of Section 16) are deemed to be officers or executive
officers of the Company for reporting purposes under such provisions,
respectively.
3
PROPOSAL ONE
ELECTION OF DIRECTORS FOR TERMS ENDING 2006
At the Meeting, the Stockholders will elect four directors to hold office
until the 2006 Annual Meeting of Stockholders and until their respective
successors have been duly elected and qualified. The Company's Board of
Directors is divided into three classes serving staggered three-year terms, with
the term of one class of directors expiring each year. The directors whose
three-year terms of office expire at the Meeting are Messrs. Robert S. Blank,
Roger S. Hillas and Paul E. Shapiro. In addition, Mr. Stephen A. Novick was
elected to the Board of Directors on January 6, 2003 to serve until the 2003
Annual Meeting and until his successor is duly elected and qualified.
The Board of Directors has nominated Messrs. Robert S. Blank, Roger S.
Hillas, Stephen A. Novick and Paul E. Shapiro to serve again as directors until
the 2006 Annual Meeting of Stockholders and until their respective successors
have been duly elected and qualified. Each nominee has indicated a willingness
to continue to serve as a director. Should a nominee become unavailable to
accept election as a director, the persons named in the enclosed proxy will vote
the shares which such proxy represents for the election of such other person as
the Board of Directors may recommend.
Set forth below is certain information concerning each nominee for election
as a director at the Meeting and each director whose current term of office will
continue after the Meeting.
Director Term Position(s) with
Name Age Since Expires the Company
---- --- -------- ------- --------------------------
Robert I. Toll ............................. 62 1986 2005 Chairman of the Board and
Chief Executive Officer
Bruce E. Toll .............................. 59 1986 2005 Vice Chairman of the Board
Zvi Barzilay ............................... 56 1994 2004 President, Chief Operating
Officer and Director
Robert S. Blank ............................ 62 1986 2003 Director
Edward G. Boehne ........................... 62 2000 2004 Director
Richard J. Braemer ......................... 61 1986 2004 Director
Roger S. Hillas ............................ 75 1988 2003 Director
Stephen A. Novick .......................... 62 2003 2003 Director
Carl B. Marbach ............................ 61 1991 2004 Director
Joel H. Rassman ............................ 57 1996 2005 Executive Vice President,
Chief Financial Officer,
Treasurer and Director
Paul E. Shapiro ............................ 61 1993 2003 Director
Robert I. Toll co-founded the Company's predecessors' operations with his
brother, Bruce E. Toll, in 1967. He has been a member of the Board of Directors
since the Company's inception in May 1986. Mr. Toll is a member of the Shelf
Terms Committee, the Special Transactions Committee and the Employee Stock
Purchase Plan Committee. His principal occupation since the Company's inception
has been as Chief Executive Officer of the Company.
Bruce E. Toll, the brother of Robert I. Toll, has been a member of the Board
of Directors since the Company's inception in May 1986 and served as its
President until April 1998 and Chief Operating Officer until November 1998. He
is the founder and president of BET Investments, an office and commercial real
estate company. He is a member of the Employee Stock Purchase Plan Committee,
the Shelf Terms Committee and the Special Transactions Committee. He is a member
of the Board of Directors of UbiquiTel, Inc. He was also a member of the Board
of Directors until December 2001 of Assisted Living Concepts, Inc., which in
October 2001 filed a Chapter 11 bankruptcy petition.
4
Zvi Barzilay has been a member of the Board of Directors since June 1994. Mr.
Barzilay joined the Company's predecessor in 1980 as a project manager, was
appointed a Vice President of the Company in 1983 and held the position of
Executive Vice President-Operations from September 1989 until October 1992 when
he was appointed to the position of Executive Vice President of the Company. In
April 1998, Mr. Barzilay was appointed to the position of President and in
November 1998 he was appointed to the position of Chief Operating Officer. Mr.
Barzilay is a member of the Special Transactions Committee.
Robert S. Blank has been a member of the Board of Directors since September
1986. For more than five years, Mr. Blank has been a partner in Whitcom
Partners, a partnership which owns and operates newspapers and cable television
systems and formerly owned and operated broadcast television stations and radio
stations, in some cases in partnership with others. Mr. Blank is a member of the
Nominating and Corporate Governance Committee, the Toll Brothers Realty Trust
Committee, the Subordinated Debt Repurchase Authorization Committee, the Special
Transactions Committee and the Real Estate Utilization Committee.
Edward G. Boehne has been a member of the Board of Directors since July 2000.
From 1981 until his retirement in May 2000, Mr. Boehne was the President of the
Federal Reserve Bank of Philadelphia. Mr. Boehne is the chairman of the
Nominating and Corporate Governance Committee and a member of the Audit
Committee and the Special Transactions Committee. Mr. Boehne is a member of the
Board of Directors of Beneficial Savings Bank, Penn Mutual Life Insurance Co.
and AAA Mid-Atlantic, Inc. Mr. Boehne is also a member of the Board of Directors
and a Senior Economic Advisor to the Rittenhouse Trust Company.
Richard J. Braemer has been a member of the Board of Directors since
September 1986. Since January 1994, Mr. Braemer has been a partner in the
Philadelphia law firm of Ballard, Spahr, Andrews & Ingersoll, LLP. Mr. Braemer
is a member of the Subordinated Debt Repurchase Authorization Committee and the
Real Estate Utilization Committee.
Roger S. Hillas has been a member of the Board of Directors since April 1988.
From July 1988 until his retirement in December 1992, Mr. Hillas was Chairman
and Chief Executive Officer of Meritor Savings Bank. Prior to July 1988, Mr.
Hillas was Chairman of PNC Financial Corp. and of Provident National Bank. Mr.
Hillas is a member of the Audit Committee, the Toll Brothers Realty Trust
Committee, the Subordinated Debt Repurchase Authorization Committee and the
Special Transactions Committee. Mr. Hillas is a member of the Board of Directors
of Millennium Bank.
Carl B. Marbach has been a member of the Board of Directors since December
1991. Since January 1995, Mr. Marbach has been President of Internetwork
Publishing Corp., an electronic publisher, which he founded. Mr. Marbach is a
member of the Audit Committee, the Executive Compensation Committee and the
Shelf Terms Committee.
Stephen A. Novick became a member of the Board of Directors on January 6,
2003. For more than the past five years, Mr. Novick has been Chief Creative
Officer-Worldwide and (since April 2000) Vice Chairman, of Grey Global Group, a
marketing communications company.
Joel H. Rassman has been a member of the Board of Directors since September
1996. Mr. Rassman joined the Company's predecessor in 1984 as Senior Vice
President, Treasurer and Chief Financial Officer of the Company. Mr. Rassman was
appointed Executive Vice President in June 2002. Mr. Rassman is a member of the
Special Transactions Committee and the Employee Stock Purchase Plan Committee.
Paul E. Shapiro has been a member of the Board of Directors since December
1993. Since June 2001, Mr. Shapiro has been Executive Vice President and Chief
Administrative Officer of Revlon Inc. From June 1998 to June 2001, Mr. Shapiro
was Executive Vice President and Chief Administrative Officer of Sunbeam Corp.
which, in February 2001, filed a Chapter 11 bankruptcy petition. From July 1997
to June 1998, Mr. Shapiro was Executive Vice President and General Counsel of
The Coleman Company, Inc. and from January 1994 to June 1997, Mr. Shapiro was
Executive Vice President/Chief Administrative Officer/General Counsel of Marvel
Entertainment
5
Group, Inc. Mr. Shapiro is the chairman of the Audit Committee, and a member of
the Executive Compensation Committee, the Toll Brothers Realty Trust Committee,
and the Special Transactions Committee.
Meetings and Committees of the Board of Directors
The Board of Directors held four formal meetings during the Company's last
fiscal year and also met telephonically.
The Board of Directors currently has an Audit Committee, an Executive
Compensation Committee, a Nominating and Corporate Governance Committee, a Toll
Brothers Realty Trust Committee, a Subordinated Debt Repurchase Authorization
Committee, a Shelf Terms Committee, an Employee Stock Purchase Plan Committee, a
Special Transactions Committee and a Real Estate Utilization Committee.
The Audit Committee is composed of Edward G. Boehne, Roger S. Hillas, Carl B.
Marbach and Paul E. Shapiro (Chairman), each of whom is independent as the term
independence is defined in Section 303.01(B)(2)(a) and (3) of the current
listing standards of the New York Stock Exchange. The Audit Committee held five
formal meetings during the last fiscal year, of which four were attended by the
Company's independent auditors, to discuss the scope of the annual audit and
issues of accounting policy and internal controls. The Audit Committee also met
telephonically during the past fiscal year.
During the Company's last fiscal year, the Executive Compensation Committee,
which administers the Toll Brothers, Inc. Cash Bonus Plan (the "Cash Bonus
Plan"), the Toll Brothers, Inc. Executive Officer Cash Bonus Plan (the
"Executive Officer Cash Bonus Plan"), the Toll Brothers, Inc. Stock Award
Deferral Plan (the "Stock Deferral Plan"), the Amended and Restated Stock Option
Plan (1986) (the "1986 Plan"), the Key Executives and Non-Employee Directors
Stock Option Plan (1993) (the "1993 Plan"), the Stock Option and Incentive Plan
(1995) (the "1995 Plan"), the Stock Incentive Plan (1998) (the "1998 Plan") and
the Toll Brothers, Inc. Stock Award Deferral Plan, held two formal meetings and
also met telephonically during the past fiscal year. The Executive Compensation
Committee is composed of Carl B. Marbach and Paul E. Shapiro, each of whom is a
"Non-Employee Director" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934 and an "outside director" as defined for purposes of 162(m) of the
Internal Revenue Code of 1986, as amended.
The Shelf Terms Committee and the Real Estate Utilization Committee each held
one telephonic meeting during the last fiscal year. The Special Transactions
Committee, the Subordinated Debt Repurchase Authorization Committee and the
Employee Stock Purchase Plan Committee did not meet during the last fiscal year.
The Toll Brothers Realty Trust Committee was formed in August 2002 and held one
telephonic meeting during the last fiscal year.
The Nominating and Corporate Governance Committee was formed in January 2003.
This committee, which is composed of Edward J. Boehne (Chairman) and Robert S.
Blank, is responsible for: the recommendation to the Board of Directors for the
selection of director nominees for election to the Board of Directors, the
evaluation of the size of the Board of Directors, and the establishment and
updating of corporate governance guidelines.
Each director attended at least 75% of the meetings of the Board of Directors
and its committees of which he was a member during the last fiscal year.
Compensation of Directors
Each non-employee director receives $4,000 for each full-day Board meeting
attended, $2,000 for each half-day meeting attended and $1,500 for each
telephonic meeting or committee meeting in which he participates. Subsequent to
the Company's stock split in March 2002, the Board of Directors elected to
effectively reduce the number of options each non-employee director was
entitled to receive under the 1998 Plan to the number of options that each
non-employee director was
6
entitled to receive prior to the stock split. Accordingly, each non-employee
director continues to receive an annual grant of options for 15,000 shares of
the Company's common stock under the 1998 Plan. Each member of the Audit
Committee who participates in at least one meeting during the year also receives
an annual grant of options for 1,000 shares of common stock. Each non-employee
director who is a member of an eligible committee (as determined by the Board of
Directors from time to time), other than the Audit Committee, and participates
in at least one meeting of such committee during the year receives an annual
grant of options for 500 shares of common stock. No non-employee director may
receive grants for service on more than three committees, plus the Audit
Committee, in any fiscal year. In addition, the Executive Compensation Committee
determined that Mr. Bruce E. Toll should be granted options to receive shares
for his services on the Board of Directors equivalent to those granted to
non-employee directors. In fiscal 2002, Mr. Toll was granted 31,000 options
(adjusted for the Company's two-for-one stock split in March 2002).
On March 5, 1998, the Company and Mr. Bruce E. Toll entered into two
agreements relating to Mr. Toll's withdrawal from day to day operations of the
business (collectively the "Agreements"). The Agreements provided, among other
things, that, during the three-year term which commenced on November 1, 1998 and
ended on October 31, 2001 (the "Consulting Term"), Mr. Toll would (a) make
himself available to the Company on a reasonable basis to consult with the
Company concerning matters within his knowledge and expertise, (b) not compete
with the Company as described in the Agreements, and (c) agree to vote the
shares of the Company's common stock owned by him as recommended by the
Company's management or Board of Directors until the later of March 15, 2002 or
until Mr. Toll no longer serves on the Board of Directors of the Company. The
Company agreed to pay Mr. Toll the sum of $500,000 during each year of the
Consulting Term as well as provide group health insurance of a type and amount
consistent with insurance provided to Company executives for himself, and his
beneficiaries who were covered on March 5, 1998, without charge, and for all
other children provided that the premium costs that the Company is permitted to
charge under COBRA for such coverage are paid by Mr. Toll for those children.
The Company paid $9,027 in fiscal 2002 for Mr. Toll's health insurance. In June
2000, the Company and Mr. Toll amended the Agreements to terminate Mr. Toll's
obligation to vote the shares of the Company's common stock owned by him
referred to above and to extend the Consulting Term until October 31, 2004. In
December 2002, the Executive Compensation Committee increased Mr. Toll's
compensation to $675,000 effective January 1, 2003.
During fiscal 2002, the Company provided Bruce E. Toll additional perquisites
with an estimated value of approximately $73,700. Such perquisites included
income tax preparation, country club dues, telephone and Internet service, auto
allowance and drivers, and contributions to the Company's 401(k) plan. It is
expected that, of these perquisites, payment of country club dues and
contributions to the Company's 401(k) plan will continue in fiscal 2003.
In December 2000, the Board of Directors approved the purchase of a split-
dollar life insurance policy for the benefit of Bruce E. Toll. In fiscal 2002,
the Company paid $7,490 in premiums for the term life portion of a split-dollar
life insurance policy for Mr. Toll, and paid $283,087 in premiums for the
non-term portion of the split dollar life insurance policy. Until it is
determined whether this type of transaction is permitted under the Sarbanes-
Oxley Act of 2002, the Company has suspended the payment of premiums for this
split dollar life insurance policy.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION
OF ROBERT S. BLANK, ROGER S. HILLAS, STEPHEN A. NOVICK AND PAUL E. SHAPIRO
PROPOSAL TWO
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company, upon recommendation of the Audit
Committee, has re-appointed, subject to stockholder approval, Ernst & Young LLP,
independent auditors, Philadel-
7
phia, Pennsylvania, to audit the consolidated financial statements of the
Company for the fiscal year ending October 31, 2003.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will be afforded the opportunity to make a statement if they desire
to do so, and such representatives are expected to be available to respond to
appropriate questions.
The Company has been advised by Ernst & Young LLP that neither the firm, nor
any member of the firm, has any financial interest, direct or indirect, in any
capacity in the Company or its subsidiaries.
Audit Fees
Audit fees billed by Ernst & Young LLP for professional services rendered for
the audit of the Company's fiscal 2002 annual financial statements and the
review of the financial statements included in the Company's quarterly reports
on Form 10-Q for the fiscal year ended October 31, 2002 were $299,850.
Financial Information Systems Design and Implementation Fees
There were no services rendered to the Company for information technology
services related to financial information systems or implementation during the
fiscal year ended October 31, 2002.
All Other Fees
Aggregate fees billed by Ernst & Young LLP for other services rendered to the
Company for the fiscal year ended October 31, 2002 were $171,210, including
$151,491 for audit related services.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
PROPOSAL TWO
CORPORATE GOVERNANCE
The Company operates within a comprehensive plan of corporate governance for
the purpose of defining responsibilities, setting high standards of professional
and personal conduct and assuring compliance with such responsibilities and
standards. The Company regularly monitors developments in the area of corporate
governance. In July 2002, Congress passed the Sarbanes-Oxley Act of 2002 which,
among other things, establishes, or provides the basis for, a number of new
corporate governance standards and disclosure requirements. In addition, the New
York Stock Exchange ("NYSE") has recently proposed changes to its corporate
governance and listing requirements. Many of the requirements of the
Sarbanes-Oxley Act and the proposed NYSE rules are subject to final Securities
and Exchange Commission ("SEC") action and, therefore, had not yet become
effective (or, in some cases, their transitional provisions had not yet expired)
as of the date of this proxy statement. Nevertheless, the Board of Directors has
initiated actions consistent with certain of the proposed rules.
Independent Directors
o A majority of the members of the Company's Board of Directors are
independent.
o The Company's non-management directors have commenced holding formal
meetings, separate from management, which they intend to hold at least
four times a year.
Audit Committee
o All Audit Committee members possess the required level of financial
literacy and at least one member of the Committee meets the current
standard of requisite financial management
8
expertise as required by the New York Stock Exchange. The SEC recently
adopted a rule requiring disclosure concerning the presence of at least
one "audit committee financial expert" (a newly defined term) on audit
committees; upon effectiveness of the rule, this disclosure will be
required to be included in the Company's Annual Report on Form 10-K for
its fiscal year ending October 31, 2003 or in the proxy statement for the
Company's 2004 Annual Meeting of Stockholders.
o The Audit Committee operates under a formal charter that governs its
duties and conduct. The Charter was reproduced as Appendix A to the
Company's proxy statement for the Annual Meeting of Stockholders held on
March 22, 2001.
o Ernst & Young LLP, the Company's independent auditors, report directly to
the Audit Committee.
o The Audit Committee, consistent with the Sarbanes-Oxley Act of 2002 and
the rules adopted thereunder, meets with management and the auditors prior
to the filing of officers' certifications with the SEC to receive
information concerning, among other things, significant deficiencies in
the design or operation of internal controls.
o The Audit Committee has adopted a Complaint Monitoring Procedure Policy to
enable confidential and anonymous reporting to the Audit Committee.
o The Company's internal audit group reports periodically throughout the
year directly to the Audit Committee.
Executive Compensation Committee
o All members of the Executive Compensation Committee meet the appropriate
tests for independence.
o The Executive Compensation Committee will operate under a formal charter
that governs its duties and standards of performance. The charter appears
as Addendum A.
Nominating and Corporate Governance Committee
o All members of the Nominating and Corporate Governance Committee meet the
appropriate tests for independence.
o The Nominating and Corporate Governance Committee will operate under a
formal charter that governs its duties and standards of performance. The
charter appears as Addendum B.
Corporate Governance Guidelines
o The Company has adopted a set of Corporate Governance Guidelines,
including specifications for director qualification and responsibility.
The guidelines appear as Addendum C.
Code of Business Conduct and Ethics
o Management has adopted a Code of Ethics for Principal Executive Officer
and Senior Financial Officers, violations of which may be reported to the
Audit Committee. The code appears as Addendum D.
o The Company has operated under an omnibus Code of Ethics and Business
Conduct that includes provisions ranging from restrictions on gifts to
conflicts of interest. All employees are required to affirm in writing
their acceptance of the code.
9
Personal Loans to Executive Officers and Directors
o The Company complies with and will operate in a manner consistent with
recently-enacted legislation outlawing extensions of credit in the form of
a personal loan to or for its Directors and executive officers.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash and non-cash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the other executive officers of the Company.
Long Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Other Annual Securities All Other
Fiscal Compensation Underlying Compensation
Name and Principal Positions Year Salary($) Bonus($) ($) Options (#) ($)(5)
---------------------------- ------ --------- --------- ------------ ------------ ------------
Robert I. Toll 2002 1,000,000 9,648,104 88,400(4) 500,000 417,228
Chairman of the Board and 2001 1,000,000 6,620,359 87,400(4) 500,000 423,909
Chief Executive Officer(1) 2000 1,000,000 4,413,228 73,400(4) 1,500,000 8,348
Zvi Barzilay 2002 995,392 300,000 240,000 185,270
Chief Operating Officer 2001 956,322 230,000 120,000 208,811
and President(2) 2000 872,322 120,000 321,400 8,348
Joel H. Rassman 2002 849,240 170,000 100,000 138,008
Executive Vice President 2001 748,848 150,000 30,000 153,787
Chief Financial Officer 2000 637,969 140,000 170,000 9,598
and Treasurer(2)(3)
---------------
(1) The bonuses listed for Robert I. Toll for fiscal 2002, 2001 and 2000 were
earned in the fiscal year reported and were paid in common stock of the
Company pursuant to the terms of the Cash Bonus Plan and the 1998 Plan. The
amounts listed were: (a) the fair market value of the bonus award shares as
of October 31, 2002 in the case of the fiscal 2002 bonus (b) the fair
market value of the bonus award shares as of October 31, 2001 in the case
of the fiscal 2001 bonus; and (c) the fair market value of the bonus award
shares as of October 31, 2000 in the case of the fiscal 2000 bonus. Had the
bonuses been paid in cash, Robert I. Toll would have received $9,098,104
for the 2002 cash bonus, $5,152,237 for the 2001 cash bonus, and $3,292,947
for the 2000 cash bonus. Under the terms of the Stock Deferral Plan, Mr.
Toll elected to defer receipt of his 2002 and 2001 bonus award shares.
(2) The bonuses listed for Mr. Barzilay and Mr. Rassman for fiscal 2002, 2001
and 2000 represent amounts earned in the fiscal year in which it is
reported. Mr. Barzilay elected to defer receipt of $200,000 of his 2002
bonus and all of his 2001 bonus under the terms of the Company's Non-
Qualified Deferred Compensation Plan. Mr. Rassman elected to defer all of
his 2002 and 2001 bonus under the terms of the Company's Non-Qualified
Deferred Compensation Plan. The amount of interest earned on deferred
compensation in excess of 120% of the Long-Term Applicable Federal Rate is
included in compensation in note (4) below.
10
(3) Under the terms of an agreement dated June 30, 1988 between the Company and
Mr. Rassman, in the event of Mr. Rassman's termination by the Company
without cause, any material reduction or material adverse change in Mr.
Rassman's duties, the removal of certain fringe benefits or any failure by
the Company to provide Mr. Rassman with compensation, including salary and
bonus, in an amount not less than $350,000 and the exercise of an election
by Mr. Rassman to terminate his employment, Mr. Rassman will receive
$250,000, and, in certain instances, an additional amount equal to the
difference between $350,000 and his actual compensation during a specified
period prior to his termination.
(4) Of these amounts, $40,300, $44,800 and $36,500 represent the estimated cost
of income tax and financial statement preparation services provided during
fiscal 2002, 2001 and 2000, respectively. The remaining amounts represent
the estimated value of perquisites provided by the Company including health
and life insurance, auto and gas allowances, auto insurance, country club
dues, telephone and Internet service and other miscellaneous items.
(5) The following table provides a breakdown of the amounts paid to each
individual listed during the fiscal year indicated:
Fiscal 2002:
Robert I. Zvi Joel H.
Toll Barzilay Rassman
--------- -------- --------
Split-dollar life insurance policy(6)
Term................................................... $ 11,040 $ 3,894 $ 3,250
Non-term............................................... 369,996 169,433 122,672
Contribution to 401(k)Plan(7)........................... 9,192 9,192 9,192
Excess interest on deferred compensation(2)............. 2,551 1,644
Other(8)................................................ 1,250
-------- -------- --------
$417,228 $185,070 $138,008
======== ======== ========
Fiscal 2001:
Robert I. Zvi Joel H.
Toll Barzilay Rassman
--------- -------- --------
Split-dollar life insurance policy(6)
Term................................................... $ 9,702 $ 3,133 $ 2,328
Non-term............................................... 405,615 197,086 141,617
Contribution to 401(k)Plan(7)........................... 8,592 8,592 8,592
Other(8)................................................ 1,250
-------- -------- --------
$423,909 $208,811 $153,787
======== ======== ========
Fiscal 2000:
Robert I. Zvi Joel H.
Toll Barzilay Rassman
--------- -------- --------
Contribution to 401(k)Plan(7)........................... 8,348 8,348 8,348
Other(8)................................................ 1,250
-------- -------- --------
$ 8,348 $ 8,348 $ 9,598
======== ======== ========
(6) Until it is determined whether this type of transaction is permitted under
the Sarbanes-Oxley Act of 2002, the Company has suspended premium payments
for these split-dollar life insurance policies.
(7) This amount represents the Company's contribution and matching payment
under its 401(k) salary deferred savings plan.
(8) This amount represents directors fees paid by a subsidiary of the Company.
11
Option Grants in the Last Fiscal Year(1)
Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees Exercise Option Term(3)
Options in Fiscal Price Expiration --------------------
Name Granted(#) Year ($/sh) Date 5%($) 10%($)
---- ---------- ---------- -------- ---------- --------- ----------
Robert I. Toll(2) ............ 500,000 19.3% 21.76 12/20/11 6,842,374 17,339,918
Zvi Barzilay(2) .............. 240,000 9.3% 21.76 12/20/11 3,284,339 8,323,161
Joel H. Rassman(2) ........... 100,000 3.9% 21.76 12/20/11 1,368,475 3,467,984
---------------
(1) No stock appreciation rights ("SARs") were granted.
(2) These options become exercisable starting on the first anniversary of the
grant, with 25% becoming exercisable at that time and 25% becoming
exercisable on each of the second, third and fourth anniversary dates.
(3) These amounts represent assumed rates of appreciation and are not intended
to forecast future appreciation in the price of the Company's common stock.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Company's stock. There can be no assurance that the
amounts reflected in these columns will be achieved or, if achieved, that
they will exist at the time of any option exercise. The aggregate
appreciation in value of all shares of the Company's common stock
outstanding on October 31, 2002, based on the assumed 5% and 10% rates of
appreciation on the closing price of the common stock on October 31, 2002
that produced the realizable value of the options shown in this table
(based upon the weighted average life of the grants), would be
approximately $904.4 million at the assumed 5% rate of appreciation and
$2,291.8 million at the assumed 10% rate of appreciation.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values(1)
The following table sets forth certain information with regard to the
aggregated option exercises in the fiscal year ended October 31, 2002 and the
option values as of the end of that year for the Chief Executive Officer and the
other executive officers of the Company.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal Year- Fiscal Year-
End(#) End($)(2)
Shares Exercisable (E) Exercisable (E)
Acquired on Value Unexercisable Unexercisable
Name Exercise (#) Realized($) (U) (U)
---- ------------ ----------- --------------- ----------------
Robert I. Toll ............................................... 134,000 1,821,950 3,393,500 (E) 34,393,623 (E)
1,250,000 (U) 4,501,250 (U)
Zvi Barzilay ................................................. 115,000 2,374,343 1,066,400 (E) 10,882,295 (E)
480,000 (U) 1,730,300 (U)
Joel H. Rassman .............................................. 64,000 1,411,567 532,500 (E) 5,489,812 (E)
197,000 (U) 838,425 (U)
---------------
(1) The Company has never issued SARs.
(2) Represents, with respect to each share, the closing price of $20.48 per
share of the Company's common stock as reported on the New York Stock
Exchange on October 31, 2002 less the exercise price payable for the share.
12
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of October 31, 2002 with respect
to compensation plans (including individual compensation arrangements) under
which the Company's equity securities are authorized for issuance.
Equity Compensation Plan Information
-------------------------------------------------------------------
Number of
securities Number of securities
to be Weighted- remaining available
issued upon average for future issuance
exercise of exercise price under equity
outstanding of outstanding compensation plans
options, warrants options, (excluding securities
and rights warrants reflected in column(a))(1)(2)
Plan Category (in thousands) and rights (in thousands)
------------- ----------------- -------------- -----------------------------
(a) (b) (c)
Equity compensation plans approved by
security holders.......................................... 15,321 13.24 3,498
Equity compensation plans not approved by security holders.. - - -
------ ----- -----
Total....................................................... 15,321 13.24 3,498
====== ===== =====
---------------
(1) In December 2002, the Executive Compensation Committee, which administers
the stock option plans, voted to eliminate any options currently available
for grant and future increases in options available for grant under the
Company's Stock Option and Incentive Stock Plan (1995) (the "1995 Plan").
Options available for grant at October 31, 2002 under the 1995 Plan were
2,269,000. The above table does not include options then available for
grant at October 31, 2002 under the 1995 Plan.
(2) The Company's Stock Incentive Plan (1998) provides for automatic increases
each November 1 in the number of shares available for grant by 2.5% of the
number of shares issued (including treasury shares). This plan restricts
the number of shares available for grant in a year to a maximum of
5,000,000 shares.
Compensation Committee Interlocks and Insider Participation
The Executive Compensation Committee administers the Cash Bonus Plan, the
Executive Officer Cash Bonus Plan, the Company's stock option plans and the
Stock Award Deferral Plan and determines the salaries of the Chief Executive
Officer, the Chief Operating Officer and Chief Financial Officer. The Executive
Compensation Committee also recommends to the Board of Directors the Vice
Chairman's compensation. The only individuals who served as a member of the
Executive Compensation Committee during the fiscal year ended October 31, 2002
are the current members of the committee. The current members of the Executive
Compensation Committee are Carl B. Marbach and Paul E. Shapiro, neither of whom
is an officer or employee, or former officer, of the Company or any subsidiary
of the Company, nor does either have any relationship which currently affects
his independence.
13
PERFORMANCE GRAPH
The following graph and chart compares the five-year cumulative total return
(assuming an investment of $100 was made on November 1, 1997 and that dividends,
if any, were reinvested) from October 31, 1997 to October 31, 2002 for (i) the
Company's common stock, (ii) the Standard & Poor's 500 Composite Stock Index
(the "S&P 500") and (iii) the S & P Homebuilding Index:
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG TOLL BROTHERS, INC.,
S&P 500 INDEX AND S&P HOMEBUILDING INDEX
[GRAPHIC OMITTED]
October 31, 1997 1998 1999 2000 2001 2002
Toll Brothers, Inc. 100.00 104.80 79.10 146.89 140.84 185.13
S&P 500 100.00 121.99 153.31 162.64 122.14 103.69
S&P Homebuilding 100.00 121.68 92.47 134.00 134.90 185.81
14
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Basic Policy Considerations
The Company's compensation policies with respect to its executive officers,
established by the Board's Executive Compensation Committee, are based on the
principles that compensation should, to a significant extent, reflect the
financial performance of the Company and the executive, and that a significant
portion of executive officers' compensation should provide long-term incentives.
It is the policy of the committee to set executive compensation at levels that
are sufficiently competitive so that the Company will attract, retain and
motivate the highest quality individuals to contribute to the Company's goals,
objectives and overall financial success. Methods of compensation are designed
to provide incentives for executive performance that results in continuing
improvements in the Company's financial results or condition, over both the
short-term and the long-term, and to encourage continued service to the Company.
A significant portion of executives' incentive compensation is paid in stock
options and stock awards in order to align executive and shareholder interests.
The compensation of each executive officer is based largely upon both individual
and Company performance.
The compensation program is comprised of two elements: (a) annual salary and
eligibility for short-term incentive awards in the form of cash bonuses, and (b)
a long-term incentive program (principally stock options and a stock-based
feature of the Cash Bonus Plan) where the level of compensation is dependent on
the performance of the Company's common stock. The details of this compensation
program, with specific discussion of the programs applicable to the Chief
Executive Officer, are set forth below.
Annual Compensation -- Executive Officers Other Than Chief Executive Officer
The Executive Compensation Committee sets compensation by subjective
evaluation of the individual performance of each executive and by marketplace
valuations of comparable executives, although salary determinations are not
based upon any specific or constant criteria.
Executives are eligible for annual incentive cash bonuses. The awards for the
Chief Operating Officer and Chief Financial Officer are made under the Company's
Executive Officer Cash Bonus Plan. These awards are not intended to be in
addition to market level compensation but instead are designed to cause a
significant part of an executive's annual compensation to be dependent on the
committee's assessment of the executive's performance based upon a set of goals
established for each executive. Goals are established by the committee with
respect to the executive's contributions to the Company's economic and strategic
objectives, the efforts required of the executive and the executive's ability to
develop, execute and implement short-term and long-term corporate goals.
Long-Term Compensation Stock Options
The stock option component of the executive officers' compensation has been
designed to provide executives with incentives for the enhancement of
stockholder value by growing the earnings and book value of the Company. Options
are granted at fair market value on the date of grant and generally vest over a
number of years, usually not less than four years. The options have significant
restrictions, typically for a period of three years from the date of grant, on
the executive officer's ability to exercise the options and sell the shares
acquired upon exercise without the consent of the appropriate stock option
subcommittee. No constant criteria are used year to year in the granting of
stock options. The Executive Compensation Committee makes a subjective
determination of the effectiveness of the executive and the extent of the
executive's contributions to the Company's success and, based on that
determination, awards stock options to deserving executive officers. Because the
options are granted with exercise prices equal to the fair market value of the
underlying common stock on the date of grant, any value that ultimately accrues
to the
15
executive is based entirely upon the Company's performance, as perceived by
investors who establish the market price for the common stock.
2002 Compensation for Chief Executive Officer
In 1990, the Board of Directors decided that salary, bonus and option grants
for the Company's Chief Executive Officer, Robert I. Toll, should be determined
pursuant to objective measurements, including appropriate performance criteria
in addition to compensation that reflects market rates for comparable
executives. Since 1995, the base salary for Robert I. Toll has been determined
by a formula intended to increase his base salary by no less than the increase
in the Consumer Price Index (using U.S. Department of Labor definitions) and by
no more than the average percentage increase in compensation of the five highest
percentage compensation increases of the Company's next ten most highly
compensated employees for the adjustment year. From 1998 through 2002, Mr. Toll
agreed to limit his base salary to $1,000,000.
Since 1990, cash bonuses for Robert I. Toll have been determined based on
formulas contained in the Company's Cash Bonus Plan, as amended from time to
time. In 1996, the Executive Compensation Committee and the Board of Directors
determined that by obtaining the agreement of Mr. Toll to accept his bonus in
shares of the Company's stock rather than in cash, the interests of the Chief
Executive Officer and the Stockholders would be further aligned. The Executive
Compensation Committee and the Board of Directors amended the Cash Bonus Plan on
May 29, 1996 with Stockholder approval given at the 1997 Annual Meeting of
Stockholders, to provide that Mr. Toll's bonuses for fiscal years ended October
31, 1996, October 31, 1997 and October 31, 1998 would be paid in shares of
common stock, which payments would be in the form of an award under the terms of
the 1995 Plan. The Executive Compensation Committee and the Board of Directors
further amended the Cash Bonus Plan on December 10, 1998, with Stockholder
approval given at the 1999 Annual Meeting of Stockholders, to provide that Mr.
Toll's bonuses for fiscal years ended October 31, 1999, October 31, 2000, and
October 31, 2001 would be paid in shares of common stock, which payments would
be in the form of an award under the terms of the 1998 Plan.
In 2000, the Executive Compensation Committee and the Board of Directors,
with the assistance of an independent compensation consultant, reviewed the
provisions of the Cash Bonus Plan to determine whether it was in the best
interest of the Company to again amend the Cash Bonus Plan to continue the
practice of paying Mr. Toll's bonuses in shares of common stock. The Executive
Compensation Committee and the Board of Directors concluded that tying the value
of the bonus of Robert I. Toll to the stock price continued to be a valuable
incentive to align the interests of Mr. Toll with those of the Stockholders.
Accordingly, the Executive Compensation Committee and the Board of Directors
amended the Cash Bonus Plan on December 14, 2000, with Stockholder approval
given at the 2001 Annual Meeting of Stockholders, to provide that: (a) all bonus
payments made under the Cash Bonus Plan with respect to the Cash Bonus Plan
years ended October 31, 2002 and ending October 31, 2003 and October 31, 2004
would and will be paid in shares of common stock, which payments will be in the
form of an award under the terms of the 1998 Plan; (b) the number of shares of
common stock awarded pursuant to the aforementioned provisions of the Cash Bonus
Plan will be determined by dividing the dollar amount of each bonus (as
determined in accordance with the Cash Bonus Plan) by $19.3125 (the fair market
value of a share of common stock, as adjusted for the Company's March 2002
two-for-one stock split, determined as of December 20, 2000 in accordance with
the provisions of the 1998 Plan for determination of fair market value); (c) the
Executive Compensation Committee will have the discretion to terminate the
application of the provisions of the Cash Bonus Plan described in subparagraphs
(a) and (b) above, at any time, effective no sooner than six months after such
decision to terminate is made by the Executive Compensation Committee, in which
event all bonuses payable on or after the effective date of such termination
will be payable in cash only; and (d) upon receipt of a request by Robert I.
Toll, based on his concerns regarding adverse tax consequences to him, the
Executive Compensation Committee may, in its sole discretion, suspend the
application of the stock award provisions described in subparagraphs (a) and (b)
above, provided
16
that such action will not cause any increase in the amount or value of a bonus
that would otherwise be payable under the Cash Bonus Plan. In the event of
suspension of the stock award provisions, all bonuses will be payable only in
cash until such time as the Executive Compensation Committee determines to
reinstate the stock award provisions.
The Cash Bonus Plan was further amended by the Executive Compensation
Committee and the Board of Directors on December 14, 2000, with Stockholder
approval given at the 2001 Annual Meeting of Stockholders, to provide that Mr.
Toll will receive cash bonus awards for fiscal years ended October 31, 2002 and
each year thereafter equal to the sum of (a) 1.5% of the Company's income before
income taxes (as defined in the Cash Bonus Plan) to the extent such income for
the fiscal year for which the bonus is being calculated was greater than 10% and
less than or equal to 20% of stockholders' equity (as defined in the Cash Bonus
Plan) of the Company as of the end of the fiscal year preceding the fiscal year
for which the bonus is being calculated, plus (b) 3.0% of the Company's income
before income taxes (as defined in the Cash Bonus Plan) to the extent such
income for the fiscal year for which the bonus is being calculated was greater
than 20% and less than or equal to 30% of stockholders' equity as of the end of
the fiscal year preceding the fiscal year for which the bonus is being
calculated, plus (c) 6% of the Company's income before income taxes (as defined
in the Cash Bonus Plan) to the extent such income for the fiscal year for which
the bonus is being calculated is greater than 30% of stockholders' equity of the
Company as of the end of fiscal year preceding the fiscal year for which the
bonus is being calculated. The amended plan generated a cash bonus, before
consideration of the stock award feature of the plan as described above, that
was 77% higher than the cash bonus generated by the prior plan for fiscal year
2001. Payment of the cash bonus to Robert I. Toll for the 2002 fiscal year was
made in the form of an award of shares of common stock, which as of the end of
the 2002 fiscal year had a market value of $20.48 per share and an aggregate
market value of $9,648,000. If this bonus had been paid in cash instead of
stock, Mr. Toll would have received $9,098,000. Under the terms of the Company's
Stock Award Deferral Plan, Mr. Toll elected to defer receipt of his 2002 stock
award shares.
The Cash Bonus Plan is intended to provide bonuses that will be treated as
"performance based compensation" exempt from the limitations on deductibility
imposed under Section 162(m) of the Code.
Respectfully submitted on December 12, 2002, by the members of the Executive
Compensation Committee of the Board of Directors.
Carl B. Marbach
Paul E. Shapiro
17
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Committee") oversees the
Company's financial reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial statements and the
reporting process including the system of internal control. In fulfilling its
oversight responsibilities, the Committee reviewed the Company's audited
financial statements for the year ended October 31, 2002 with management
including a discussion of the quality, not just the acceptability, of accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Committee reviewed with the Company's independent auditors, who are
responsible for expressing an opinion on the conformity of the Company's audited
financial statements with accounting principles generally accepted in the United
States, their judgment as to the quality, not just the acceptability, of the
Company's accounting principles and such other matters as are required to be
discussed with the Committee under generally accepted auditing standards
(including Statement on Auditing Standards No. 61). In addition, the Committee
has discussed with the independent auditors the auditors' independence from the
Company and its management, including the matters in the written disclosures
required by the Independence Standards Board (including Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees), and
reviewed and approved the compatibility of non-audit services with the auditors'
independence. The Committee reviewed the services provided by Ernst and Young
LLP and approved the fees paid to them for fiscal 2002.
The Committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
with the internal and independent auditors, with and without management present,
to discuss the results of their examinations, their evaluations of the Company's
systems of internal control, and the overall quality of the Company's financial
reporting. The Committee reviewed the Company's internal controls and,
consistent with Section 302 of the Sarbanes-Oxley Act of 2002 and the rules
adopted thereunder, met with management and the auditors prior to the filing of
officers' certifications required by that statute to receive any information
concerning (a) significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record, process,
summarize and report financial data and (b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company's internal controls.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended October 31,
2002 for filing with the Securities and Exchange Commission. The Committee's
recommendation was considered and approved by the Board of Directors. The
Committee and the Board of Directors have also recommended the re-appointment of
Ernst and Young LLP as the Company's independent auditors for the 2003 fiscal
year.
The Committee also reviews the Audit Committee charter annually
Respectfully submitted on December 12, 2002, by the members of the Audit
Committee of the Board of Directors.
Paul E. Shapiro, Chairman
Edward G. Boehne
Roger S. Hillas
Carl B. Marbach
18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the regulations
thereunder require the Company's officers and directors and persons who own more
than ten percent of a registered class of the Company's equity securities
(collectively, the "reporting persons") to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish the
Company with copies of these reports. Based on the Company's review of the
copies of these reports received by it, and written representations received
from reporting persons, the Company believes that all filings required to be
made by the reporting persons for the period November 1, 2001 through October
31, 2002 were made on a timely basis.
CERTAIN TRANSACTIONS
In order to help provide for an orderly market in the Company's common stock
in the event of the death of either Robert I. Toll or Bruce E. Toll (the
"Tolls"), or both of them, the Company and the Tolls have entered into
agreements in which the Company has agreed to purchase from the estate of each
of the Tolls $10 million of the Company's common stock (or a lesser amount under
certain circumstances), at a price equal to the greater of fair market value (as
defined) or book value (as defined). Each of the Tolls has agreed to allow the
Company to purchase $10 million of life insurance on his life. In addition, each
of the Tolls has granted to the Company, at no cost to it, an option to purchase
up to an additional $30 million (or a lesser amount under certain circumstances)
of common stock from his estate. The agreements expire in October 2005.
In addition to the performance of their duties for the Company, the Tolls,
either jointly or independently, have engaged, and continue to engage, in
certain other businesses in real estate. These businesses include the purchase,
sale and management of townhome, apartment, condominium, commercial and
industrial real estate projects for rental. The Company leases, at what it
believes to be competitive market rates, certain office space from a business
controlled by Robert I. Toll, Bruce E. Toll, Zvi Barzilay and Joel H. Rassman.
During the last fiscal year, the Company paid to such business approximately
$57,800 in rent. The Company provided services to other businesses controlled by
the Tolls during the fiscal year, which were billed at cost and paid throughout
the year. The Tolls have deposited monies with the Company to pay for future
services provided by the Company to them. The largest amount due the Company
from these businesses at any time during the year was approximately $35,700. No
amounts were due the Company from these businesses at October 31, 2002. These
transactions are reviewed and monitored by the Audit Committee. In addition to
the foregoing, Mr. Robert I. Toll has agreed, with the approval of the Executive
Compensation Committee, to pay for one-half of the cost of an employee of the
Company who provides Mr. Toll with investment advice.
In order to take advantage of commercial real estate opportunities which may
present themselves from time to time, the Company formed Toll Brothers Realty
Trust (the "Trust") in 1998. The Trust is effectively owned one-third by the
Company, one-third by a number of senior executives and/or directors, including
Robert I. Toll, Bruce E. Toll (and certain members of his family), Zvi Barzilay
(and certain members of his family) and Joel H. Rassman, and one-third by the
Pennsylvania State Employees Retirement System (collectively, the
"Trustholders"). In June 2000, the Trustholders entered into an agreement
pursuant to which the owner(s) of each one-third interest agreed to invest
additional capital in an amount not to exceed $9,259,000 if required by the
Trust. The original agreement, which was to expire in June 2002, was extended
until August 2003. As of January 31, 2003, no additional capital investment had
been required pursuant to this commitment. The Trust pledged the agreements with
the Trustholders as security for a loan. At October 31, 2002, the Company's
investment in the Trust was $7,527,000.
The Board of Directors, on December 12, 2002, upon the recommendation of the
Real Estate Utilization Committee, approved the sale by the Company to the Trust
of a 62.2-acre portion of the Company's master plan communitiy known as the
Estates at Princeton Junction, in New Jersey, that
19
is intended for development as multi-family apartment buildings (the
"property"). The Real Estate Utilization Committee's recommendation was based on
the following advantages to the Company: (a) the Company will be able to
influence the design quality and construction quality so as to enhance the
master plan; (b) there are synergies of development and marketing costs which
may be able to benefit the Company; (c) the Trust will maintain a high quality
of operations, making sure that the existence of the apartments in the master
plan will not negatively affect the image of the Company's community, and, (d)
as has been the experience in other Trust property, apartment renters are
potential customers for the Company's townhomes and single-family homes.
Moreover, the sale would allow the Company to recover cash, remove the property
from its balance sheet, and free the Company from the need to provide capital to
build the apartments from its credit lines. The $9,785,000 purchase price was
approved by the Real Estate Utilization Committee after reviewing an offer from
an independent publicly-held company, and an independent professional appraisal.
The transaction is subject to an agreement of sale, which is currently being
negotiated.
The Company provides development, finance and management services to the
Trust. During fiscal 2002, the Company earned $1,271,000 in fees for these
services. The Company also incurs certain costs on behalf of the Trust for which
the Company is reimbursed by the Trust. These fees and reimbursements were paid
to the Company throughout the year. The amount due the Company for fees and
reimbursements as of October 31, 2002, was approximately $377,200. The largest
amount due the Company from the Trust at any time during the last fiscal year
was approximately $349,300.
Two stock certificates (the "Certificates") totaling 1,177,507 shares of
common stock of the Company were lost, misplaced or destroyed in early 2002. The
Certificates, which were registered in the name of Robert I. Toll and by an
entity owned by him, contain legends restricting their transfer. The Board of
Directors determined that there is a reasonable possibility that the Company is
at fault for the loss of the Certificates. Upon discovery of the loss, notice
was promptly filed with the Securities Information Center, effectively
nullifying any subsequent purchases by or pledges to any bank, broker or other
institution. The Company's transfer agent insisted on receipt of a surety bond
before replacing the Certificates. The customary premium for a surety bond would
have been in the range of $1 million. While a lower premium might have been
negotiated, the premium would have been substantial. After considering various
approaches, the Company's Board of Directors retained a new and reputable
transfer agent which did not require a surety bond either from the Company or
Mr. Toll because of the remote likelihood of the Certificates ever finding their
way into the hands of a protected purchaser. Mr. Toll offered to provide the new
transfer agent with an indemnity agreement, which was accepted in lieu of an
indemnification agreement from the Company. Moreover, Mr. Toll provided the
Company with an indemnification agreement.
Ballard, Spahr, Andrews & Ingersoll, LLP, the law firm of which Richard J.
Braemer, a director of the Company, is a partner, acted as counsel to the
Company in various matters during fiscal 2002 and was paid aggregate fees of
$205,792 during that period.
For information regarding certain other transactions, see "Proposal One --
Election of Directors for Terms Ending 2006 -- Compensation of Directors."
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2004 Annual Meeting of
Stockholders must be submitted in writing and received by the Company at the
address appearing on the first page of this proxy statement by October 14, 2003
in order to be considered for inclusion in the Company's proxy statement and
form of proxy relating to that meeting. Any Stockholder wishing to propose a
nominee for membership on the Company's Board of Directors should submit a
recommendation in writing in accordance with the foregoing, for consideration by
the Nominating and Corporate Governance Committee, indicating the nominee's
qualifications and other biographical information and providing confirmation of
the nominee's consent to serve as a director.
20
A Stockholder of the Company may wish to have a proposal presented at the
2004 Annual Meeting of Stockholders, but not to have such proposal included in
the Company's proxy statement and form of proxy relating to that meeting. If
notice of any such proposal is not submitted in writing and received by the
Company at the address appearing on the first page of this proxy statement by
December 28, 2003, then such proposal shall be deemed "untimely" for purposes of
Rule 14a-4(c) promulgated under the Securities Exchange Act of 1934 and,
therefore, the persons appointed by the Company's Board of Directors as its
proxies will have the right to exercise discretionary voting authority with
respect to such proposal.
SOLICITATION OF PROXIES
The enclosed form of proxy is being solicited on behalf of the Company's
Board of Directors. The Company will bear the cost of the solicitation of
proxies for the Meeting, including the cost of preparing, assembling and mailing
proxy materials, the handling and tabulation of proxies received, and charges of
brokerage houses and other institutions, nominees and fiduciaries in forwarding
such materials to beneficial owners. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone, telegraph or
telecopy by directors, officers or regular employees of the Company, or by a
professional proxy solicitation organization engaged by the Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY MAKES AVAILABLE FREE OF CHARGE ON WWW.TOLLBROTHERS.COM THE COMPANY'S
ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULE
THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY WILL
PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULE THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR ITS
MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO FREDERICK
N. COOPER OR JOSEPH R. SICREE, CO-DIRECTORS OF INVESTOR RELATIONS, AT THE
ADDRESS OF THE COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
By Order of the Board of Directors
Michael I. Snyder
Secretary
Huntingdon Valley, Pennsylvania
February 11, 2003
21
ADDENDUM A
TOLL BROTHERS, INC.
Executive Compensation Committee Charter
This Charter has been adopted by the Board of Directors of Toll Brothers,
Inc. (the "Company") to govern its Executive Compensation Committee (the
"Committee"), which shall include the Company's Compensation and Stock Based
Compensation Committee for Key Executives and Non-Employee Directors and its
Administrative Subcommittee for the Company's Stock Based Compensation Plans,
which Committee shall have the authority, responsibility and specific powers
described below.
Purposes
The Committee's purposes are (i) to discharge the responsibilities of the
Board of Directors relating to the compensation of the Company's directors and
officers in accordance with the provisions of this Charter, including the
Committee's evaluation of, and approval of or recommendations to the Board of
Directors with respect to, the plans, policies and programs relating to the
compensation of the Company's directors and officers, subject to approval of the
Company's stockholders in those instances where stockholder approval is required
by applicable laws or regulations of governmental authorities or applicable
rules of the New York Stock Exchange ("NYSE") or any other stock exchange where
the Company's securities are from time to time listed (collectively, "Applicable
Requirements"), and (ii) to produce an annual report on executive compensation
for inclusion in the Company's proxy statement in accordance with Applicable
Requirements.
Committee Membership
The Committee shall consist of the number of members fixed from time to time
by the Board of Directors, but shall at all times consist of not less than two
members. The Committee shall have a chairperson(s) who shall be appointed by the
Board of Directors. Each member of the Committee shall be a member of the Board
of Directors who satisfies any Applicable Requirements, including any
"independence" requirements of the NYSE from time to time in effect and
applicable to the Company.
The members of the Committee shall be appointed by the Board of Directors.
The members of the Committee may be removed by the Board of Directors.
Committee Authority and Responsibilities
The Committee shall annually review and approve corporate goals and
objectives relevant to the compensation of the Company's Chief Executive Officer
(the "CEO"), evaluate the CEO's performance in light of those goals and
objectives, and set the CEO's compensation level based on this evaluation. In
determining the long-term incentive component of the CEO's compensation, the
Committee will consider the Company's performance and relative stockholder
return, the value of similar incentive awards to CEOs at comparable companies,
and the awards given to the CEO in past years.
The Committee shall annually review and approve, for the CEO and each of the
other executive officers, the Vice Chairman and any other officers recommended
by the Board of Directors, as applicable, the following:
o the annual base salary level;
o the annual incentive opportunity level;
o the long-term incentive opportunity level;
22
o the provisions of any employment agreement, severance arrangement or
change-in-control agreement; and,
o any special or supplemental benefits.
The Committee shall annually review and make recommendations to the Board of
Directors with respect to the compensation of all of the Company's directors.
The Committee shall make recommendations to the Board of Directors with
respect to incentive-compensation plans and equity-based plans.
The Committee shall have the sole authority to retain and terminate any
compensation consultant retained to assist in the evaluation of the compensation
of the Company's directors and officers, including the CEO, and shall have sole
authority to approve the fees and other terms applicable to the engagement of
each such consultant so retained. The Committee shall also have authority to
obtain advice and assistance from internal or external legal, accounting or
other advisors.
The Committee shall administer the Company's stock option plans, the Cash
Bonus Plan and the Executive Officer Cash Bonus Plan, in each case, in
accordance with the terms of the plan and in accordance with Applicable
Requirements.
The Committee shall be responsible for producing an annual report on
executive compensation for inclusion in the Company's proxy statement relating
to its annual meeting of stockholders in accordance with Applicable
Requirements.
The Committee shall make regular reports to the Board of Directors.
The Committee shall review and reassess the adequacy of this Charter annually
and, upon the completion of each such review, recommend any proposed changes to
the Board of Directors for approval.
The Committee shall annually evaluate its own performance and report to the
Board of Directors the conclusions of the Committee resulting from such review.
Other than the reports required to be made by the Committee, each of which
shall be made by the entire Committee, the Committee may form and delegate
authority to one or more subcommittees. Each such subcommittee shall consist of
one or more members of the Compensation Committee.
Adopted by the Board of Directors: December 12, 2002
23
ADDENDUM B
TOLL BROTHERS, INC.
Nominating and Corporate Governance Committee Charter
This Charter has been adopted by the Board of Directors of Toll Brothers,
Inc. (the "Company") to govern its Nominating and Corporate Governance Committee
(the "Committee"), which shall have the authority, responsibility and specific
powers described below.
Purposes. The Committee's purposes are (a) to identify individuals qualified to
become members of the Board of Directors and select, or recommend that the Board
of Directors select, the director nominees for the next annual meeting of
stockholders, (b) to develop and recommend to the Board of Directors a set of
corporate governance guidelines applicable to the Company, and (c) to provide an
annual report to the Board of Directors which shall include the results of the
Committee's annual evaluation of its performance, all in accordance with
applicable laws or regulation of governmental authorities, applicable rules of
the New York Stock Exchange ("NYSE"), the Pacific Exchange (the "PE") and/or any
other stock exchange where the Company's securities are from time to time listed
(collectively, "Applicable Requirements").
Goals and Responsibilities. The Committee shall perform its duties in a manner
consistent with the criteria set forth in this Charter for selecting new
directors, and shall conduct oversight of the evaluation of the Board of
Directors and management.
Criteria for Selecting New Directors. The Committee, in selecting, or in
recommending the selection of, nominees for director, shall consider all
applicable statutory, regulatory, case law and NYSE requirements with regard
thereto, including when appropriate those applicable to membership on the Audit
Committee, as well as whatever other criteria it deems appropriate.
Committee Member Qualifications. The members of the Committee shall satisfy any
Applicable Requirements, including the "independence" requirements of the NYSE
from time to time in effect and applicable to the Company. Committee members
shall be appointed and removed by the Board of Directors. A member of the
Committee shall be selected by the Board of Directors to serve as the
Committee's chairperson. The Committee may delegate any position of its
authority to a subcommittee comprised solely of its members.
Committee Meetings and Reporting. The Committee shall meet annually, or more
frequently if deemed appropriate by its chairperson or a majority of its
members. The Committee shall make regular reports to the Board of Directors.
Board Size and Members. The Committee shall evaluate from time to time the
appropriate size of the Board of Directors and recommend any increase or
decrease with respect thereto; recommend any changes in the composition of the
Board of Directors so as to best reflect the objectives of the Company and the
Board of Directors; establish processes for developing candidates for Board
membership, and for the conducting of searches for Board candidates; and propose
a slate of directors with respect to each class of Directors to be elected at
each annual meeting of the Company's stockholders.
Establish Recommended Corporate Governance Guidelines. The Committee shall adopt
corporate governance guidelines consistent with requirements of the NYSE.
Changes to Corporate Governance Instruments. Review proposed changes in, and
where appropriate, propose changes with respect to, the Company's governing
instruments, including, but not limited to, its Certificate of Incorporation and
Bylaws, as such documents relate to corporate governance and succession matters.
Advisors. The Committee shall have the sole authority to retain and terminate
any search firm to be used to identify director candidates, including the sole
authority to approve the search firm's fees
24
and other retention terms. The Committee may also retain counsel of its choice
and other advisors which the Committee deems necessary.
Annual Performance Evaluation. The Committee shall annually review its own
performance and report to the Board of Directors the conclusions of the
Committee resulting from such review.
Adopted by the Board of Directors: December 12, 2002
25
ADDENDUM C
TOLL BROTHERS, INC.
Corporate Governance Guidelines
The following constitute the corporate governance guidelines of Toll
Brothers, Inc. established by the Company's Board of Directors:
Director Qualification Standards. The qualification standards of members of the
Board of Directors shall, in the minimum, reflect the independence and other
requirements set forth in the applicable rules of the New York Stock Exchange
and any applicable federal and state laws. Any substantive qualification
requirements for membership on the Board of Directors, including a policy
limiting the number of boards on which a Director may sit, and Director tenure,
retirement and succession, shall be determined from time to time by the
Company's Nominating/Corporate Governance Committee.
Director Responsibilities. The business and affairs of the Company shall be
under the direction of the Board of Directors. The Board shall have oversight of
management's conduct of the business and shall review the Company's financial
results. Directors are expected to dedicate themselves to promoting the best
interests of the stockholders as respects corporate governance, fiduciary
responsibilities, duty of loyalty, compliance with applicable laws and review
and familiarity with the Company's accounting, operational, internal controls,
disclosure controls and policies and other major corporate functions. The Board
shall be responsible for selecting, evaluating and replacing officers of the
Company in accordance with the Bylaws of the Company. Board members are expected
to attend meetings, except for good reason, and to be prepared for meetings by
becoming familiar with materials distributed to them.
Director Access to Management; Independent Advisors. The Board, and each of its
members, shall have direct access to management of the Company and, where the
Board deems necessary and appropriate, independent advisors.
Director Compensation. The Board shall set, and from time to time review, its
compensation and may seek independent advice with respect thereto. Compensation
for Directors may be in the form of Director's fees, as well as formula-based
stock options pursuant to a plan or plans approved by stockholders; provided,
however, that separate or additional compensation may be provided for committee
membership and for Chairs of committees or subcommittees. Board members may be
compensated for their expenses in attending meetings and fulfilling functions
assigned to them by the Board or committees. The Board should be sensitive to
questions relating to Directors' independence which may be raised with regard to
excess fees and benefits, charitable contributions to organizations in which a
Director is affiliated, consulting or other agreements with a Director and,
generally, any interested party or conflict of interest transactions.
Director Orientation and Continuing Education. The Board of Directors shall
assure that there is a continuing process for orientation of Board members to
the changing aspects of the Company's business and continuing education with
regard to the Company's operations and financial status.
Management Succession. The Board should constantly be sensitive to succession
planning issues, including policies and principles for selection of a chief
executive officer, performance review and policies regarding succession in the
event of an emergency or the retirement of the CEO.
Annual Performance Evaluation of the Board. The Board should conduct a self
evaluation at least annually to determine whether it and its Committees are
functioning effectively.
Adopted by the Board of Directors: December 12, 2002
26
ADDENDUM D
TOLL BROTHERS, INC.
Code of Ethics for Principal Executive Officer and Senior Financial Officers
This Code of Ethics for the Principal Executive Officer and the Senior
Financial Officers (the "Code") of Toll Brothers, Inc. (the "Company") applies
to the Company's principal executive officer, principal financial officer,
principal accounting officer, controller and persons performing similar
functions designated by the Company's Board of Directors (collectively, the
"Senior Officers"). The Senior Officers must conduct themselves in accordance
with the principles and responsibilities set forth in this Code. Senior
Financial Officers who violate this Code may be subject to disciplinary action.
This Code has been adopted by management after review by the Audit Committee.
Each of the Senior Officers shall:
1. Act with honesty and integrity, avoiding actual or apparent conflicts of
interest in personal and professional relationships.
2. Avoid transactions that involve potential conflicts of interest, which
have not been appropriately processed in accordance with Company policy or
reviewed and approved by the Board of Directors or the appropriate Board
Committee; disclose to one of individuals designated in item 11, below, any
material transaction or relationship that reasonably could be expected to give
rise to such a conflict.
3. Provide full, fair, accurate, timely and understandable disclosure in
reports and documents filed with, or submitted to, the SEC and in other public
communications made by the Company.
4. Comply in good faith with applicable laws, rules and regulations of
federal, state, provincial and local governments, and other appropriate private
and public regulatory agencies.
5. Act in good faith, responsibly, with due care, competence and diligence,
without misrepresenting material facts or allowing his or her independent
judgment to be subordinated.
6. Respect the confidentiality of information acquired in the course of his
or her work except when authorized or otherwise legally obligated to disclose.
Confidential information acquired in the course of his or her work shall not be
used for personal advantage.
7. Maintain skills important to his or her constituents' needs.
8. Promote ethical behavior as a responsible partner among peers in his or
her work environment.
9. Achieve responsible use of and control over all assets and resources
employed or entrusted to him or her.
10. Be accountable for adherence to this Code.
11. Promptly report any violations of this Code to one of the following
persons: Chief Executive Officer, General Counsel, Chairman of the Audit
Committee.
Adopted: December 12, 2002
27
PROXY
TOLL BROTHERS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - March 20, 2003
The undersigned stockholder of Toll Brothers, Inc. (the "Company"),
revoking all previous proxies, hereby appoints ROBERT I. TOLL, BRUCE E. TOLL AND
CARL B. MARBACH, and each of them individually, as the attorney and proxy of the
undersigned, with full power of substitution, to vote all shares of common stock
of the Company which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of the Company, to be held at the
offices of the Company, 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania on
March 20, 2003, and at any adjournment or postponement thereof. Said proxies are
authorized and directed to vote as indicated with respect to the matters
specified on the reverse side.
This proxy is solicited on behalf of the Board of Directors. This proxy,
when properly executed, will be voted in the manner directed herein by the
undersigned. Unless otherwise specified, the shares will be voted "FOR" the
election of the four Director nominees named on the reverse side and "FOR" the
approval of Ernst & Young LLP as the Company's independent auditors for the 2003
fiscal year. This proxy also delegates discretionary authority to vote with
respect to any other business which may properly come before the meeting or any
adjournment or postponement thereof.
(Continued on reverse side)
FOLD AND DETACH HERE
Please mark
your votes as
indicated in
in this example |X|
1. FOR WITHHOLD
all nominees authority
listed (except as to vote for all
marked to the nominees
contrary) listed
|_| |_|
(INSTRUCTION: To withhold authority to vote for any nominee, strike a line
through the nominee's name below.)
Robert S. Blank, Roger S. Hillas, Stephen A. Novick, Paul E. Shapiro
2. The approval of Ernst & Young LLP as the Company's auditors for the 2003
fiscal year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To transact such other business as may properly come before the Meeting or
any adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND 2002 ANNUAL REPORT OF TOLL BROTHERS, INC.
Dated: _________________________________________________, 2003
Signature of Stockholder _____________________________________
Signature of Stockholder _____________________________________
NOTE: Please sign this Proxy exactly as name(s) appear(s) in address. When
signing as attorney-in-fact, executor, administrator, trustee or guardian,
please add your title as such. If the stockholder is a corporation, please sign
by full corporate name by duly authorized officer or officers and affix the
corporate seal. Where shares are held in the name of two or more persons, all
such persons should sign. PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
FOLD AND DETACH HERE
2