UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): January 28, 2009
Consolidated-Tomoka
Land Co.
(Exact
name of registrant as specified in its charter)
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Florida
(State
or other jurisdiction of incorporation)
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0-5556
(Commission
File Number)
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59-0483700
(IRS
Employer Identification No.)
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1530
Cornerstone Boulevard, Suite 100
Daytona
Beach, Florida
(Address
of principal executive offices)
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32117
(Zip
Code)
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Registrant’s
telephone number, including area code: (386)
274-2202
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Not
Applicable
(Former
name or former address, if changed since last report.)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item
5.02. Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On January 28, 2009, the Board of
Directors of Consolidated-Tomoka Land Co. (the “Company”), following the
recommendation of the Compensation and Stock Option Committee (the “Committee”)
of the Board of Directors, adopted and approved the Annual Executive Cash Bonus
Criteria for the fiscal year ending December 31, 2008 (the “Cash Bonus
Plan”). The Cash Bonus Plan applies to the Company’s Chief Executive
Officer (“CEO”), its Executive Officers and Senior Vice Presidents, its Vice
Presidents, and its managers designated in the Cash Bonus Plan.
Prior to fiscal 2008 no formal policy
on cash bonuses had been adopted by the Company, and all cash bonuses for annual
performance were discretionary following the recommendation of the
Committee. In determining whether to award a cash bonus, the
Committee considered earnings per share (“EPS”), earnings before depreciation,
amortization and deferred taxes, and individual accomplishments that contributed
to such earnings during the year.
The Cash Bonus Plan was instituted to
reward short-term performance and is a discretionary cash bonus
plan. The bonus pool will be established based on the Company’s EPS
for the fiscal year and will be adjusted for the number of employees in the Cash
Bonus Plan at each level of participation. Actual awards to
participants are based on two factors, the Company’s EPS for the fiscal year and
the individual participant’s performance (based on the recommendation of the CEO
to the Committee for participants other than the CEO and based on the
determination of the Committee in the case of the CEO). An award may
be reduced or eliminated if performance or other issues warrant such
action.
The maximum bonus payable to a
participant is 200% of base annual salary for the CEO, 100% of base annual
salary for Executive Officers and Senior Vice Presidents, 75% of base annual
salary for Vice Presidents, and 50% of base annual salary for designated
managers. The Cash Bonus Plan includes guidelines for estimated
bonuses based on the Company’s EPS for the fiscal year, ranging from $1.50 (in
which case the estimated cash bonus would be 43% of base annual salary for the
CEO, 22% of base annual salary for Executive Officers and Senior Vice
Presidents, 16% to 20% of base annual salary for Vice Presidents, and 6% to 20%
of base annual salary for designated managers) to $6.00 (in which case the
estimated bonuses would be the maximum bonuses discussed above); in general, no
cash bonuses will be awarded if the Company’s EPS is less than $1.50 unless the
Board of Directors determines that overall economic conditions in the real
estate industry are such that the Company’s performance was outstanding in
comparison to its industry peers.
In addition, the Cash Bonus Plan
includes an adjustment to the EPS calculation in order to incentivize plan
participants to engage in land leases, self-development and build-to-suit
development of Company property. Because these types of transactions
would not be part of the annual EPS calculation, for the purposes of determining
eligibility and potential bonus pool amounts under the Cash Bonus Plan, the
Company will include a one-time per project equivalency calculation representing
the hypothetical after-tax net income that would have been recognized on the
land portion of any land lease, self-development project or build-to-suite lease
during the fiscal year had the property been sold to a third party; the fair
market value of the property used to calculate the lease payment for land
leases, or the value approved by the Board in the pro-forma calculations for
self-development projects or build-to-suite leases, will then be used to adjust
the EPS calculation for the Cash Bonus Plan.
The Committee and the Board of
Directors retain the discretion to adjust the bonus pool and cash bonuses
pursuant to the Cash Bonus Plan.
The
description of the Cash Bonus Plan contained herein is a summary of the material
terms of the Cash Bonus Plan, does not purport to be complete, and is qualified
in its entirety by reference to the Cash Bonus Plan. A copy of the Cash Bonus
Plan is attached to this Current Report on Form 8-K as Exhibit
10.1.
Item
9.01. Financial Statements and Exhibits.
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(d)
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Exhibits
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10.1 Annual
Executive Cash Bonus Criteria
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: February
3, 2009
Consolidated-Tomoka
Land Co.
| By: /s/William H. McMunn |
| William H. McMunn |
| President and Chief Executive Officer |
Exhibit
CONSOLIDATED-TOMOKA
LAND CO.
Criteria
for Cash Bonus System
March
2008
Prior to
2008, the Company’s annual cash bonuses have been based on the Company’s
after-tax earnings per share (“EPS”) in general conformity with the current cash
incentive policy attached as Exhibit A. Annual Company revenues were primarily
generated from third-party land sales.
Net
income from operations, including the sale of property to third parties in any
calendar year, were calculated in conformity with U.S. generally accepted
accounting principles, as reported in the Company’s Annual Report and
accompanying Form 10-K, filed with the SEC. Land leases, build-to-suit lease
backs, and self-development were not part of the calculation.
Beginning
in 2008, the Compensation and Stock Option Committee and Board of Directors
believe that it is equally important to motivate and reward management for
achievements in these additional areas, which are also a part of the Company’s
adopted business plan. This revision to the current cash bonus plan is intended
to incentivize management to also engage in land leases, self-development, and
build-to-suit by providing equivalent cash incentives, which would be realized
from third-party land sales and conversion into 1031 income
properties.
In order
to provide an annual plan that balances executive performance, the Company, for
purposes of determining eligibility and potential bonus pool amounts, will now
include in the annual executive bonus criteria a one-time per project
equivalency calculation that represents the hypothetical after-tax net income,
which would have been recognized on the land portion of any land lease,
build-to-suit lease, or self-development project in that year had the property
been sold to a third party. The fair market value of the unimproved land value
used to calculate the lease payment or in the cases of self-development or
build-to-suit lease backs, per the value stated in the Board-approved
proforma.
Example
1: If land was
leased to a third party and the lease payments were based on a value of
$2,000,000, then the calculation would be as follows:
$2,000,000, less the
land’s cost basis, less the applicable federal and state tax rate, divided by
the average outstanding number of shares during the year.
Example
2: If a
build-to-suit lease was based on a value of $8,000,000 and the land component
was $2,250,000, then the calculation would be as follows:
$2,250,000 less the
land’s cost basis, less the applicable federal and state tax rate, divided by
the average outstanding number of shares during the year.
Example
3: If the land
value used in the Board-approved self-development proforma was $1,950,000 then
the calculation would be as follows:
$1,950,000 less the
land’s cost basis, less the applicable federal and state tax rate, divided by
the average outstanding number of shares during the year.
Example
The following example illustrates how equivalent earnings per share would be added to basic earnings to determine adjusted EPS for executive bonus calculations:
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Basic
Earnings per Share (in conformity with U.S. Generally
accepted
accounting principles)
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$ | 2.37 | |||||
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Add
(Land sales equivalency earnings per share)
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| Project "A" a third party land lease | $ | .19 | ||||||
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Project “B” a build to suit lease back
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$ | .21 | ||||||
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Project “C” a self development project
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$ | .17 | ||||||
| $ | .57 | $ | .57 | |||||
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Equivalent earnings per share
for eligibility determination
and calculation of executive bonus
(per exhibit “A”) would be:
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$ | 2.94 | ||||||
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The
Company=s
annual cash bonus plan was instituted to reward short-term
performance
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Awards
are currently tied to the Company=s EPS
achievement for the plan year.
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Bonus payouts are limited as follows:
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CEO
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up
to 200% of base annual salary
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Senior VP
& Executive Officers
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up
to 100% of base annual salary
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Vice
Presidents
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up
to 75% of base annual salary
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Managers
designated in the plan
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up
to 50% of base annual
salary
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Annually,
the bonus pool is established based on the target EPS, and is adjusted for
the number of
employees in the plan at each
level.
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Estimated
pay out guidelines as a percentage of employees base salary are as
follows:
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EPS
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CEO
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SR
VP
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VP
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Managers
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| $ | 1.50 | 43 | % | 22 | % | 16-20 | % | 6-20 | % | |||||||||
| $ | 2.00 | 52 | % | 27 | % | 20-24 | % | 8-25 | % | |||||||||
| $ | 2.50 | 65 | % | 33 | % | 25-30 | % | 10-32 | % | |||||||||
| $ | 3.00 | 78 | % | 40 | % | 30.36 | % | 12-38 | % | |||||||||
| $ | 3.50 | 94 | % | 48 | % | 36-43 | % | 15-50 | % | |||||||||
| $ | 4.00 | 112 | % | 58 | % | 43-52 | % | 18-50 | % | |||||||||
| $ | 4.50 | 135 | % | 70 | % | 52-62 | % | 22-50 | % | |||||||||
| $ | 5.00 | 162 | % | 84 | % | 62-75 | % | 27-50 | % | |||||||||
| $ | 5.50 | 194 | % | 100 | % | 75 | % | 33-50 | % | |||||||||
| $ | 6.00 | 200 | % | 100 | % | 75 | % | 40-50 | % | |||||||||
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Bonuses
are not usually awarded at earnings levels of less than $1.50 per share
unless the Board
determines that the overall economic conditions of the real estate
industry are such that
Company performance below $1.50 was outstanding when compared to industry
peers. Actual
awards are based on two factors, the Company=s EPS
achieved for the plan year and the individual
participant=s
performance. The CEO makes recommendations to the Compensation Committee
based on each participant=s
performance. A participant=s
actual award may be reduced or
eliminated if, in the judgment of the CEO, his/her performance or other
issues warrant this action Awards
may be pooled and reallocated between two are more participants, and in
certain instances awards
to an individual participant may be increased above these
guidelines.
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