UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

Filed by the Registrant  þx

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

Tejon Ranch Co.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Post Office Box 1000

Lebec, California 93243

March 29, 201228, 2014

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Tejon Ranch Co. on Tuesday,Wednesday, May 8, 2012,7, 2014, at 9:30 A.M., at the Hyatt Regency Irvine, 17900 Jamboree Boulevard, Irvine,Balboa Bay Club, 1221 West Coast Highway, Newport Beach, California. Your Board of Directors and management look forward to greeting those stockholders who are able to attend. If you are planning to attend the meeting in person you will need to present proof that you own shares of the Company.

The Notice of Annual Meeting and Proxy Statement, which contain information concerning the business to be transacted at the meeting, appear in the following pages.

It is important that your shares be represented and voted at the meeting, whether or not you plan to attend. Please vote the enclosed proxy at your earliest convenience.

Your interest and participation in the affairs of the Company are greatly appreciated.

Sincerely,

TEJON RANCH CO.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

on

May 8, 20127, 2014

The Annual Meeting of Stockholders of Tejon Ranch Co. (the “Company” or “Tejon” or referred to as “we”, “us”, “our” or words of similar import in this Notice and Proxy Statement) will be held at the Hyatt Regency Irvine, 17900 Jamboree Boulevard, Irvine,Balboa Bay Club, 1221 West Coast Highway, Newport Beach, California on Tuesday,Wednesday, May 8, 2012,7, 2014, at 9:30 A.M., California time, for the following purposes:

The nominees of the Board of Directors of the Company for election at the meeting are GeoffreyGregory S. Bielli, John L. StackGoolsby, Norman Metcalfe, and Michael H. Winer.Kent G. Snyder.

The Board of Directors of the Company recommends that you vote “FOR” the approval of each of the proposals outlined in the Proxy Statement accompanying this notice.

The Board of Directors has fixed the close of business on March 13, 2012,12, 2014, as the record date for the determination of stockholders entitled to notice of and to vote at the meeting.

Your attention is invited to the accompanying Proxy Statement. To ensure that your shares are represented at the meeting, please date, sign, and mail the enclosed proxy card, for which a return envelope is provided, or vote your proxy by phone or the Internet,internet, the instructions for which are provided on the enclosed proxy card.

Please note that if your shares are held by a broker, bank or other holder of record, your broker, bank or other holder of record will NOT be able to vote your shares with respect to Proposal 1 or Proposal 3 unless you provide them with directions on how to your broker.vote. We strongly encourage you to return the voting instructionsinstruction form provided by your broker, bank or other holder of record or utilize your broker’s telephone or Internetinternet voting if available and exercise your right to vote as a stockholder.

For the Board of Directors,

Lebec, California

March 29, 201228, 2014

PLEASE MARK YOUR INSTRUCTIONS ON THE ENCLOSED PROXY, SIGN AND DATE THE PROXY, AND RETURN IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. ALTERNATIVELY, PLEASE VOTE YOUR PROXY BY PHONE OR THE INTERNET. PLEASE VOTE YOUR PROXY EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU ATTEND THE MEETING AND WISH TO DO SO, YOU MAY VOTE YOUR SHARES IN PERSON YOU MAY DO SO EVEN IF YOU HAVE PREVIOUSLY VOTEDSUBMITTED YOUR PROXY.

TEJON RANCH CO.

Post Office Box 1000

Lebec, California 93243

PROXY STATEMENT

Annual Meeting of Stockholders

May 8, 20127, 2014

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders To Be Held on May 7, 2014

May 8, 2012

The Proxy Statement and accompanying Annual Report to stockholdersStockholders are available at www.tejonranch.com or

at http://www.materials.proxyvote.com/879080

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Company for use at the Annual Meeting of Stockholders to be held on May 8, 20127, 2014 (the “2012“2014 Annual Meeting”).

It is anticipated that the mailing of this Proxy Statement and accompanying form of Proxy to stockholders will begin on or about March 31, 2012.2014.

SOLICITATION OF PROXIES

At the meeting, the stockholders of the Company will be asked to vote on the following matters: (1) the election of the twofour directors named in this Proxy Statement, (2) the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2012,2014, (3) an advisory vote to approve executive compensation, and (3)(4) such other business as may properly come before the meeting. The Company’s Board of Directors (the “Board”) is asking for your proxy for use at the 20122014 Annual Meeting. Although management does not know of any other matter to be acted upon at the meeting, shares represented by valid proxies will be voted by the persons named on the proxy in accordance with their best judgment with respect to any other matters which may properly come before the meeting.

The cost of preparing, assembling, and mailing the Notice of Meeting,costs for this Proxy Statement, and the enclosed proxy ballotsolicitation will be paid by the Company. Following the mailing of this Proxy Statement, directors, officers, and regular employees of the Company may solicit proxies by mail, telephone,e-mail, or in person; such persons will receive no additional compensation for such services. Brokerage houses and other nominees, fiduciaries and custodians nominally holding shares of record will be requested to forward proxy soliciting material to the beneficial owners of such shares and will be reimbursed by the Company for their charges and expenses in connection therewith at the rates approved by the New York Stock Exchange.

RECORD DATE AND VOTING

General Information

Holders of shares of the Company’s Common Stock, par value $0.50 (the “Common Stock”) of record at the close of business on March 13, 201212, 2014 (the “Record Date”) are entitled to notice of, and to vote at, the meeting. There were 19,993,47020,568,058 shares of Common Stock outstanding on the Record Date. A stockholder of record giving a proxy may revoke it at any time before it is voted by filing with the Company’s Secretary a written notice of revocation or by submitting a later-dated proxy via the Internet, by telephone, or by mail. Unless a proxy is

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revoked, and except as indicated below with respect to Proposal 1, shares represented by a proxy will be voted in accordance with the voting instructions on the proxy and, on matters for which no voting instructions are given, shares will be voted for“for” the proposals as shown onnominees of the proxy.Board and “for” Proposals 2 and 3. If you hold shares in a stock brokerage account or by a bank or other holder of record, you must follow the instructions of your broker, bank or other holder of record to change or revoke your voting instructions.

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Broker Non-Votes

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered to be the “beneficial owner” of those shares. As the beneficial owner, you have the right to instruct your broker, bank or other holder of record how to vote your shares. If you do not provide instructions, your broker, bank or other holder of record will not have the discretion to vote with respect to certain matters and your shares will constitute “broker non-votes” with respect to those matters. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Specifically, your broker, bank or other holder of record will not have the discretion to vote with respect to Proposal 1 and Proposal 3 but will have discretion to vote on Proposal 2.Therefore, we strongly encourage you to follow the voting instructions on the materials you receive.

Quorum

AThe holders of record of a majority of the Common Stock issued and outstanding and entitled to vote at the 2014 Annual Meeting must be present at the 20122014 Annual Meeting, either in person or by proxy, in order for there to be a quorum at the 20122014 Annual Meeting. Shares of Common Stock with respect to which the holders are present in person at the 20122014 Annual Meeting but not voting, and shares of Common Stock for which we have received proxies but with respect to which the holders of the shares have abstained, will be counted as present at the 20122014 Annual Meeting for the purpose of determining whether or not a quorum exists. Broker non-votes will also be counted as present for the purpose of determining whether a quorum exists. Stockholders cannot abstain in the election of directors, but they can withhold authority. Stockholders who withhold authority will be considered present for purposes of determining a quorum.

Voting Requirements

For Proposal 1 (election of directors), the two (2)four (4) candidates receiving the highest number of affirmative votes at the 20122014 Annual Meeting (also referred to as a plurality) will be elected as directors. Stockholders will be able to cumulate their vote in the election of directors. Cumulative voting means that each stockholder is entitled to a number of votes equal to the number of directors to be elected multiplied by the number of shares he or she holds. These votes may be cast for one nominee or distributed among two or more nominees. To exercise the right to cumulate votes, a stockholder must provide written instructions on the proxy card how the stockholder wishes to have his or her votes distributed. Abstentions and broker non-votes will not be counted as participating in the voting, and will therefore have no effect for purposes of Proposal 1.

Approval of Proposal 2 (the ratification of Ernst & Young LLP as our independent registered public accounting firm) will require the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the 20122014 Annual Meeting. Abstentions will be counted as present and will thus have the effect of a vote against Proposal 2.

Approval of Proposal 3 (advisory approval vote on executive compensation) will require the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the 2014 Annual Meeting. Abstentions will be counted as present and will thus have the effect of a vote against Proposal 3. Broker non-votes will not be counted as participating in the voting and will therefore have no effect on the outcome of the vote.

Pursuant to Delaware corporate law, the actions contemplated to be taken at the 20122014 Annual Meeting do not create appraisal or dissenters rights.

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PROPOSAL 1

THE ELECTION OF DIRECTORS

The Board currently consists of eightten directors divided into three classes based upon when their terms expire. The terms of twofour directors (Class III) will expire at the 2014 Annual Meeting, the terms of three directors (Class I) will expire at the 20122015 Annual Meeting, and the terms of three directors (Class II) will expire at the 2013 Annual Meeting, and the terms of three directors (Class III) will expire at the 20142016 Annual Meeting. The regular term of each director expires at the third Annual Meeting following the Annual Meeting at which that director was elected, so that each director serves a three yearthree-year term, although directors continue to serve until their successors are elected and qualified, unless the authorized number of directors has been decreased.

The nominees of the Board for election at the 20122014 Annual Meeting to serve as Class IIII directors are GeoffreyGregory S. Bielli, John L. StackGoolsby, Norman Metcalfe, and Michael H. Winer, bothKent G. Snyder, all of whom are presently directors.

Nominations of persons for election to the Board by stockholders must be made pursuant to timely notice in writing to the Secretary of the Company pursuant to the Company’s Certificate of Incorporation. See “Stockholder Proposals for 20132015 Annual Meeting” for additional information on the procedure for stockholder nominations.

Except as noted below, each proxy solicited by and on behalf of the Board will be voted “FOR” the election of the nominees named above (unless such authority is withheld as provided in the proxy), and one-halfunless otherwise instructed, one-quarter of the votes to which the stockholder is entitled will be cast for each of the nominees. BothAll of the nominees of the Board have consented to being named in this proxy statement and to serve if elected. In the event any one or more of the nominees shall become unable to serve or for good cause refuse to serve as director (an event which is not anticipated), the proxy holders will vote for substitute nominees in their discretion. If one or more persons other than those named below as nominees for the 20122014 Annual Meeting are nominated as candidates for director by persons other than the Board, the enclosed proxy may be voted in favor of any one or more of said nominees of the Board or substitute nominees and in such order of preference as the proxy holders may determine in their discretion.

Brokers do not have discretion to vote on this proposal without your instruction. Therefore, if you are a beneficial owner and you do not instruct your broker how to vote on this proposal, your brokershares will deliver a non-votenot be voted on this proposal.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES NAMED ABOVE FOR ELECTION AS A DIRECTOR.

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PROPOSAL 2

THE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.2014. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal years 20112013 and 20102012 are described under “Audit Fees” below. Additional information regarding the Audit Committee is provided in the Report of the Audit Committee below.

Representatives of Ernst & Young LLP are expected to be present at the 20122014 Annual Meeting and will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from stockholders.

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Stockholder Ratification of the Appointment of Independent Registered Public Accountant.

We are asking our stockholders to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm. Although ratification is not required by our certificate of incorporation, bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. In the event stockholders do not ratify the appointment of Ernst & Young LLP, the appointment willmay be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

Independent Registered Public Accounting Firm

Ernst & Young LLP was selected by the Audit Committee to serveserved as the Company’s independent registered public accounting firm for the fiscal year 2012,ended December 31, 2013 and servedwas selected by the Audit Committee to serve in that capacity for the fiscal year ended December 31, 2011.2014

Audit Fees. The aggregate fees billed by Ernst & Young LLP for professional services rendered for the audit of the Company’s annual financial statements for the year ended December 31, 20112013 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 20112013 were $400,666.$517,334. The aggregate fees billed by Ernst & Young LLP for professional services rendered for the audit of the Company’s annual financial statements for the year ended December 31, 20102012 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 20102012 were $388,260.$394,233.

Audit-Related Fees. The aggregate audit-related fees billed for assurance and related services by Ernst & Young LLP that were reasonably related to the performance of the audit or review of the Company’s financial statements, including fees for the performance of audits and attest services not required by statute or regulations; audits of the Company’s employee benefit plans; due diligence activities related to investments; and accounting consultations about the application of generally accepted accounting principles to proposed transactions (collectively, the “Audit-Related Fees”), for the year ended December 31, 20112013 were $36,291.$12,360. The Audit-Related Fees billed by Ernst & Young LLP for the year ended December 31, 20102012 were $34,580.$34,995.

Tax Fees. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice and planning services for the year ended December 31, 20112013 were $141,601.$85,544. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice and planning services for the year ended December 31, 20102012 were $99,146. In each case, the$81,601. All fees billed for both 2013 and 2012 were solely related to compliance and planning services consisted offor tax return preparation.

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All Other Fees.Ernst & Young LLP did not bill for any services other than those listed above for the years ended December 31, 20112013 or December 31, 2010.2012.

The Audit Committee Charter requires that the Audit Committee pre-approve all services performed by the Company’s outside auditor. To fulfill this requirement, the Company’s outside auditor, Ernst & Young LLP provides a proposal to the Audit Committee for all services it proposes to provide, and the Audit Committee then takes such action on the proposal, as it deems advisable. During the years ending December 31, 20112013 and 2010,2012, 100% of the services provided by Ernst & Young LLP were pre-approved by the Audit Committee.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2012.2014.

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PROPOSAL 3

ADVISORY APPROVAL VOTE ON EXECUTIVE COMPENSATION

In accordance with Section 14A of the Securities Exchange Act of 1934, or the Exchange Act, we are asking stockholders to approve on an advisory basis the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement on pages 16 to 43.

The Board recommends a vote FOR this proposal because it believes that our compensation policies and practices are effective in achieving the Company’s goals of rewarding financial and operating performance, aligning the executives’ long-term interests with those of our stockholders and motivating the executives to remain with the Company.

Our executive compensation programs have a number of features designed to promote these objectives. In determining 2013 compensation for our named executive officers, or NEOs, the Compensation Committee evaluated the success in meeting defined cash and segment profit goals as well as the achievement of short-term goals that set the stage for the achievement of performance milestone goals.

The advisory proposal, commonly referred to as a “say-on-pay” proposal, is not binding on the Board of Directors. Although the voting results are not binding, the Board will review and consider them when evaluating our executive compensation program.

The Board’s policy going forward is to hold an advisory vote on executive compensation every year, and accordingly, we expect that, after the 2014 Annual Meeting, the next advisory vote on the compensation of our named executive officers will take place at our 2015 Annual Meeting.

Brokers do not have discretion to vote on this proposal without your instruction. Therefore, if you are a beneficial owner and you do not instruct your broker how to vote on this proposal, your shares will not be voted on this proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AS DISCLOSED ON PAGES 16 TO 43 IN THE PROXY STATEMENT.

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THE BOARD OF DIRECTORS

Consideration of Director Nominees

The Board believes the Board, as a whole, should possess the requisite combination of skills, professional experience, and diversity of backgrounds to oversee the Company’s business. The Board also believes that there are certain attributes each individual director should possess, as reflected in the Board’s membership criteria.discussed below. Accordingly, the Board and the Nominating and Corporate Governance Committee (the “Nominating Committee”) consider the qualifications of directors and director candidates individually as well as in the broader context of the Board’s overall composition and the Company’s current and future needs.

The Nominating Committee is responsible for selecting nominees for election to the Board. In considering candidates for the Board, the Nominating Committee evaluates the entirety of each candidate’s credentials, attributes, and other factors (as described in greater detail in the Company’s Corporate Governance Guidelines), but does not have any specific minimum qualifications that must be met by a nominee. However, the Nominating Committee seeks as directors individuals with substantial management experience who possess the highest personal values, judgment and integrity, an understanding of the environment in which the Company does business and diverse experience with the key business, financial and other challenges that the Company faces. In addition, in considering the nomination of existing directors, the Nominating Committee takes into consideration (i) each director’s contribution to the Board; (ii) any material change in the director’s employment or responsibilities with any other organization; (iii) the director’s ability to attend meetings and fully participate in the activities of the Board and the committees of the Board on which the director serves; (iv) whether the director has developed any relationships with the Company or another organization, or other circumstances that may have arisen, that might make it inappropriate for the director to continue serving on the Board; and (v) the director’s age and length of service on the Board.

Because the Nominating Committee recognizes that a diversity of viewpoints and practical experiences can enhance the effectiveness of the Board, as part of its evaluation of each candidate, the Nominating Committee takes into account how each candidate’s background, experience, qualifications, attributes and skills may complement, supplement or duplicate those of other prospective candidates. The Nominating Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board, which as discussed below is one of the committee’s responsibilities.

Based on the parameters described above, the Board has determined that the directors standing for reelection and the remaining members of the Board have the qualifications, experience, and attributes appropriate for a director of the Company. As reflected below, each director has a varied background in the real estate industry, finance, and/or agriculture. These are all areas that are integral to the strategy, operations and successful oversight of the Company.

Board Composition and Leadership Structure

The Board is grouped into three classes: (1) Class I Directors, whose terms will expire at the 20122015 Annual Meeting, (2) Class II Directors, whose terms will expire at the 20132016 Annual Meeting, and (3) Class III Directors, whose terms will expire at the 2014 Annual Meeting. The Board currently consists of eightten directors. The Board’s leadership is structured so that there is a separate Chairman of the Board and Chief Executive Officer. The Chairman of the Board is also an independent director. The Board believes that this structure is appropriate for our Company and our shareholders at this time because it provides an additional layer of oversight to management and management’s activities and allows the Board to act independent of management.

Director Qualifications and Biographical Information

The Nominating Committee considered the character, experience, qualifications and skills of each director, including the current director nominees, when determining whether each should serve as a director of the

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Company. In keeping with its stated criteria for director nominees described in the section entitled

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“Consideration “Consideration of Director Nominees” above, the Nominating Committee determined that each director, including the current director nominees, has substantial management experience, exhibits the highest personal values, judgment and integrity, and possesses an understanding of the environment in which the Company does business and diverse experience with the key business, financial and other challenges that the Company faces. Each director is or has been a leader in theirhis respective field and brings diverse talents and perspectives to the Board. The Nominating Committee also considered the experience and qualifications outlined below in the biographical information for each director, including each director nominee, as well as other public company board service.

The Nominating Committee noted the following particular attributes and qualities it considers when evaluating director nominees. The Nominating Committee believes that nominees with business and strategic management experience gained from service as a chief executive officer or similar position is a critical leadership component to Board service. The Nominating Committee also seeks nominees with backgrounds in finance, banking, economics, and the securities and financial markets, in order to have directors who can assess and evaluate the Company’s financial and competitive position. The Nominating Committee emphasizes familiarity with the real estate and agricultural industries, and considers customer perspectives to be important when evaluating director nominees. Although each of the directors listed below possesseseach possess a number of these attributes, the Nominating Committee considered the specific areas noted below for each director when determining which of the director’s qualifications best suited the needs of the Company and qualifiedqualify them to serve as a director of the Company.

During the March 13, 2012 Board of Directors meeting, Ms. Grimm-Marshall resigned as a Director due to an increasing amount of time spent in managing her personal business interests. At this meeting, the Nominating and Corporate Governance Committee recommended that Daniel Tisch be elected as a Director to replace Ms. Grimm-Marshall, and the Board of Directors approved the recommendation. Mr. Tisch will become a Class II Director, and his principal occupation and current directorships are outlined below.

The following table sets forth information regarding the nominees for Class IIII Directors and also regarding the Class III Directors and the Class IIIII Directors.

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None of the corporations or organizations described above is a subsidiaryare subsidiaries, or affiliateother affiliates, of the Company. There are no family relationships among any directors of the Company or any executive officers of the Company.Company

Corporate Governance Matters

The Board has determined that all directors, except Mr. Bielli and Mr. Stine, are “independent,” as that term is defined in“independent” under the listing standards of the New York Stock Exchange (the “NYSE”). In addition to and the definition of “independent” as set forth in the listing standards of the NYSE, the Board has adoptedCompany’s categorical criteria used to determine whether a director is independent (the Company’s “Independence Standards”), and the Board has determined that all directors, except Mr. Stine, are “independent” under the Independence Standards. These. The Independence Standards are set forth in Attachment A to the Company’s Corporate Governance Guidelines (the “Corporate Governance Guidelines”), and a copy of the Independence Standards is attached as Appendix A to this Proxy Statement. Thus, the Board determined that the following directors are independent: George G.C. Parker, Daniel Tisch, John L. Goolsby, Norman Metcalfe, Kent G. Snyder, Geoffrey L. Stack, Michael H. Winer and Anthony L. Leggio.

Also, in making its independence determinations, the Board reviewed additional information provided by the directors and the Company with regard to any business or personal activities or associations as they may relate to the Company and the Company’s management. The Board considered the transactionsthis information in the context of the NYSE’s objective listing standards, the categorical standards noted aboveIndependence Standards and, for directors serving on committees, the additional standards established for members of audit committees and the Securities and Exchange Commission (the “SEC”) and U.S. Internal Revenue Service standards for compensation committee members. Basedcommittees. In reaching a determination on all of the foregoing,these directors’ independence, the Board made a subjective determination as required by NYSE rulesconsidered that because ofneither the nature ofdirectors nor their immediate family members have within the transaction, the director’s relationshippast three years had any direct or indirect business or professional relationships with the entity and/or the amount involved, no relationships exist that,Company other than in the opinion of the Board, would impair the director’s independence.their capacity as directors.

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The Board’s independence determinations included a review of business dealings at companies where the directors serve as directors or outside consultants, all of which were ordinary course business transactions. The Board also performs a review of the Company’s charitable contributions to any organization where a director serves as an executive officer and found no contributions in excess of the Independence Standards.

The independent directors of the Board meet regularly in executive sessions outside the presence of management. As Chairman of the Board, Mr. Snyder presides over these executive sessions.

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During 2011,2013, there were fourfive meetings of the Board. During 2011,2013 all directors attended 75% or more of the aggregate total of such meetings of the Board and committees of the Board on which they served.

The Company’s policy is that all directors are expected to attend every annual stockholders meeting of stockholders in person. All directors attended the 20112013 Annual Meeting of Stockholders of the Company.

Committees of the Board

Standing committees of the Board include the Executive, Audit, Compensation, Investment Policy, Real Estate, and Nominating and Corporate Governance Committees. The current members of the standing committees are set forth below:

During 2011,2013, there were no meetings of the Executive Committee, sevensix of the Audit Committee, four of the Compensation Committee, twothree of the Real Estate Committee, twoone of the Nominating Committee, and no meetings of the Investment Policy Committee. The major functions of each of these committees, including their role in oversight of risks that could affect the Company, are described briefly below.

The Executive Committee

Except for certain powers that, under Delaware law, may be exercised only by the full Board, or which, under the rules of the SECSecurities and Exchange Commission (the “SEC”) or the NYSE, may only be exercised by committees composed solely of independent directors, the Executive Committee may exercise all powers and authority of the Board in the management of the business and affairs of the Company. Messrs. Metcalfe, Snyder, Stine, and Winer are members of the Executive Committee. Mr. Snyder is the Chairman of the Executive Committee.

The Audit Committee

The Audit Committee acts on behalf ofrepresents and assists the Board in fulfilling the Board’s oversight responsibility relating to (i) the Company’s financial statements and the financialaccounting, reporting, process, the systems of internal accounting and financial controls, risk oversightpractices of financial activities, the annual independent auditCompany and its subsidiaries, including the integrity of the Company’s financial statements,statements; (ii) the surveillance of administration and financial controls and the Company’s compliance with legal compliance and ethics programs as established by managementregulatory requirements; (iii) the independent auditor’s qualifications and independence; and (iv) the performance of the company’s internal audit function and the Board.Company’s independent auditor. In

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addition, the Audit Committee is directly responsible for the retention of the independent auditor and approves all audit and non-audit services the independent auditor performs. It also reviews and discusses the Company’s policies with respect to risk assessment and risk management. The Audit Committee reports regularly to the full Board with respect to its activities. The Audit Committee is governed by a written charter adopted and approved by the Board. Mr. ParkerThe Audit Committee’s charter is available on the ChairmanCompany’s web site,www.tejonranch.com, in the Corporate Governance section of the Audit Committee,Investor Relations webpage, and Messrs. Goolsby and Stack are members ofis available in print form upon request to the Audit Committee. Corporate Secretary, P.O. Box 1000, Lebec, California 93243.

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The Board has determined that each member of the Audit Committee is independent under the listing standards of the NYSE and under the Company’s Independence Standards, and that each member of the Audit Committee is financially literate and meets the requirements for Audit Committee Membership set forth in Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. The Board has further found that Mr. Parker qualifies as an “audit committee financial expert” for the purposes of Item 407(d)(5) of Regulation S-K, and has “accounting or related financial management expertise” as described in the listing standards of the NYSE. The Audit Committee’s charter is available on the Company’s web site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Lebec, California 93243.

The Compensation Committee

The Compensation Committee reviews and either adjusts or recommends to the Board appropriate adjustments tooversees the Company’s overall compensation structure, policies and programs, and it assesses whether the Company’s compensation structure establishes appropriate incentives for management and employees. It also reviews and approves corporate goals and objectives relevant to the compensation of top managerial and executive officers, evaluates their performance in light of those goals and objectives, and makes recommendations regarding their compensation. It administers and makes recommendations to the Board with respect to the Company’s incentive compensation and equity-based compensation plans and grants of awards thereunder. It also reviews and recommends to the Board the design of other benefit plans, employment agreements, and severance arrangements for top managerial and executive officers. The Compensation Committee oversees the assessment of the risks related to the Company’s compensation policies and programs applicable to officers and directoremployees, reviews the results of this assessment, and also assesses the results of the Company’s most recent advisory vote on executive compensation. It approves, amends or modifies the terms of any compensation or benefit plan that does not require shareholder approval, if delegated to the Committee by the Board. It reviews and evaluatesrecommends changes for the performancecompensation of directors, and it reviews succession plans relating to positions held by senior executive officers. It reports regularly to the Board with respect to its activities.

The Compensation Committee is governed by a written charter adopted and approved by the Board. The Compensation Committee’s charter is available on the Company’s web site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Lebec, California 93243. Mr. StackThe Compensation Committee is the Chairmanauthorized to delegate to a subcommittee consisting of not less than two members of the Compensation Committee and Messrs. Goolsby, Metcalfe, and Parker are membersthe responsibility to review specific issues, meet with management on behalf of the Compensation Committee.committee regarding such issues, and prepare recommendations or reports or review by the committee. The Board has determined that each member of the Compensation Committee is independent under the listing standards of the NYSE for directors and compensation committee members and under the Company’s Independence Standards.

During 2011,The CEO does not participate in the Compensation Committee’s deliberations with regard to his own compensation. At the Compensation Committee’s request, the CEO reviews with the Compensation Committee did not engagethe performance of the other executive officers, but no other executive officer has any external consulting firms. In 2009input in executive compensation decisions. The Compensation Committee gives substantial weight to the CEO’s evaluations and 2010,recommendations because he is particularly able to assess the other executive officers’ performance and contributions to the Company.

During 2013, the Compensation Committee engaged MezrahPoe Consulting as an outside compensation consultant to assist in the Compensation Committeereview of executive officer compensation and in evaluating near-term stock grant2012 engaged Poe Consulting in a review of director compensation. MezrahPoe Consulting did not provide any other services to the Company in 2011.2013 or 2012. The decision to engage thean outside compensation consultant was not recommended by management. MezrahPoe Consulting completed its 2013 engagement during March of 2014, and its fees were $55,000. Its fees in 2012 were $15,500. The Compensation Committee has reviewed an assessment of any potential conflicts of interest raised by Poe Consulting’s work for the Compensation Committee, during 2010. Thewhich assessment considered the following six factors: (i) the provision of other services to the Company by Poe Consulting; (ii) the amount of fees received from the Company by Poe Consulting, as a percentage of Poe Consulting’s total revenue; (iii) the policies and procedures of Poe Consulting that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Poe Consulting consultant with a member of the Compensation Committee approvedCommittee; (v) any Company stock owned by the services;Poe Consulting consultants; and (vi) any business

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or personal relationship of the outside compensation consultant’s fees in 2010 were $45,000.Poe Consulting consultant or Poe Consulting with any of the Company’s executive officers, and concluded that there are no such conflicts of interest.

The Real Estate Committee

The Real Estate Committee reviews all significant activities and issues related to the Company’s real estate assets and opportunities. It receives and considers the analyses of the Company’s real estate staff and provides management with oversight, guidance and strategic input oninto management action plans for development and entitlement of Company land, and it provides a review function to management regarding major decision points.points within the Company’s development projects. It reviews and either approves or recommends to the Board appropriate action on significant proposed real estate transactions and developmentpro formas and budgets, and action plans.budgets. The Real Estate Committee also evaluates risk as it relatesprovides oversight and guidance to the Company’s Chief Executive Officer with regard to recruitment and employment of senior real estate plans, activities, and transactions.executives. It reports regularly to the full Board with respect to its meetings. Mr. Metcalfe is the Chairman of the Real Estate Committee, and Messrs. Goolsby, Snyder, Stack, and Stine are members of the Real Estate Committee. The Real Estate Committee’s charter is available on the Company’s web site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Lebec, California 93243.

Investment Policy Committee

The Investment Policy Committee reviews policies and activities related to the investment of the Company’s cash assets and works in coordination with the Real Estate Committee. It receives and reviews policy

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and data regarding marketable security investments and recommends to the Board whether to approveapproval of the Company’s investment security policy. Currently, this committee consists of Mr. Winer. Committee memberships are reviewed each year after the annual meeting, and it is expected that members will be addedpolicy to the committee after the 2012 Annual Meeting.Board.

The Nominating and Corporate Governance Committee

The Nominating Committee is charged with assessing existing directors to determine whether to recommend them for reelection to the Board, identifying and recruiting potential new directors, establishing a procedure for consideration of candidates for director positions recommended by stockholders, and recommending candidates to be nominated by the Board or elected by the Board as necessary to fill vacancies and newly created directorships. It also reviews and makes recommendations to the Board respecting the structure, composition and functioning of the Board and its committees, and it evaluates the Corporate Governance Guidelines and the Board’s performance. Mr. Parker is the Chairman of the Nominating Committee, and Messrs. Goolsby and Stack are members of the Nominating Committee.

The Board has determined that each member of the Nominating Committee is independent under the listing standards of the NYSE and under the Company’s Independence Standards. The Nominating Committee is governed by a written charter adopted and approved by the Board. The Nominating Committee’s charter is available on the Company’s web site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and is available in print form upon request to the Corporate Secretary, P.O. Box 1000, Lebec, California 93243.

The Nominating Committee is pleased to consider any properly submitted recommendations of director candidates from stockholders. Stockholders may recommend a candidate for consideration by the Nominating Committee by sending written notice addressed to the Nominating and Corporate Governance Committee Chair, c/o Corporate Secretary, P.O. Box 1000, Lebec, California 93243. The Nominating Committee does not evaluate candidates differently based on who has made the recommendation. Stockholders may also nominate persons for election to the Board by providing to timely notice in writing to the Secretary of the Company pursuant to the procedures set forth in the Company’s Certificate of Incorporation. See “Stockholder Proposals for 20132015 Annual Meeting” for additional information on the procedure for stockholder nominations.

The Nominating Committee has the authority under its charter to hire and pay a fee to outside counsel, experts or other advisors to assist in the process of identifying and evaluating candidates. No such outside advisors have been used to date and, accordingly, no fees have been paid to such advisors.

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Code of Business Conduct and Ethics and Corporate Governance Guidelines

The Board has adopted a Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees. It also has adopted Corporate Governance Guidelines to guide its own operations. Both documents (including Attachment A to the Corporate Governance Guidelines, which constitutes the Company’s Independence Standards) are available on the Company web site,www.tejonranch.com, in the Corporate Governance section of the Investor Relations webpage, and are available in print form upon request to the Corporate Secretary, P.O. Box 1000, Lebec, California 93243.

Succession Planning

The Board, with the assistance of the Compensation Committee, oversees succession plans for the Chief Executive Officer and other senior executive officers. These plans relate both to succession in emergency situations and longer-term succession. As set forth in the Corporate Governance Guidelines and Compensation Committee Charter, the Compensation Committee reviews the Company’s succession planning for senior executive officers at least annually. The Chief Executive Officer also provides the Board with input regarding these matters.

Board’s Role in Risk Oversight

The full Board oversees the Company’s risk management process. The Board oversees a Company-wide approach to risk management, designed to enhance stockholder value, support the achievement of strategic objectives and improve long-term organizational performance. The full Board determines the appropriate level of risk for the Company generally, assesses the specific risks faced by the Company and reviews the steps taken by management to manage those risks. The full Board’s involvement in setting the Company’s business strategy facilitates these assessments and reviews, culminating in the development of a strategic plan that reflects both the

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Board’s and management’s consensus as to appropriate levels of risk and the appropriate measures to manage those risks. The full Board assesses risk throughout the enterprise, focusing on risks arising out of various aspects of the Company’s strategic plan and the implementation of that plan, including financial, legal/compliance, operational/strategic and compensation risks. In addition to discussing risk with the full Board, the independent directors discuss risk management during executive sessions without management present.

While the full Board maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, the Audit Committee focuses on financial risk, including internal controls, and discusses the Company’s risk profile with the Company’s internal auditors. The Audit Committee also reviews potential violations of the Company’s Code of Ethics and related corporate policies. The Compensation Committee periodically reviews compensation practices and policies to determine whether they encourage excessive risk taking. Finally, the Nominating Committee manages risks associated with the independence of directors and Board nominees. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the full Board, as appropriate, with additional review or reporting on risks being conducted as needed or as requested by the Board and its committees.

The Compensation Committee has also reviewed the design and operation of the Company’s compensation structures and policies as they pertain to risk and has determined that the Company’s compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on the Company.

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COMPENSATION DISCUSSION & ANALYSIS

Executive Summary.

The Compensation Discussion and Analysis discusses and analyzes Tejon’s executive compensation program and the amounts shown in the executive compensation tables for our named executive officers.officers, or NEOs. Our named executive officers for fiscal 20112013 were:

Our Compensation Committee has developed and maintained a compensation program that is intended to reward performance, retain talent, and encourage actions that drive achievement of our business strategies.

Our executive compensation program features the beginningfollowing:

2011

2013 – Year in Review

The Company’s financial performance exceeded expectations during 2011. For 2011,2013, we had net income attributable to common stockholders of $15,894,000, which was an increase of $11,719,000 when$4,165,000, compared to 2010. The improvementnet income attributable to common stockholders of $4,441,000 for 2012. This slight decline in net income is driven by a reduction in revenue, primarily due to an increasemineral resource revenue, which is partially offset by improved equity in revenuesearnings of $27,585,000. The increase in revenue was driven by the saleunconsolidated joint ventures of conservation easements for $15,750,000, a land sale for $4,340,000, an increase in our oil royalties over the prior year of $5,541,000,$1,471,000 and a $2,436,000 increasereduction in farm revenues. Oil royaltiesincome tax expense. During 2013, farming had another excellent revenue year and revenues improved in the commercial/industrial segment due to higher prices and production and farming revenueshunting permit revenues. Equity in earnings of unconsolidated joint ventures improved due to higher almond and grape revenues. These improvements were partially offset by an increase in operating expenses of $11,950,000 primarily due to an increasethe earnings growth within the TA/Petro joint venture. Operating expense declined in 2013, because of the reversal of stock compensation expense when comparedtied to 2010. stock units that will not vest due to the departure of two executives during the year.

During 2010,2013, two significant objectives were accomplished. First, the Company executed a stock compensation expense includedwarrant dividend program granting 3,000,000 warrants to our stockholders with an exercise price of $40 and an expiration date of August 31, 2016. The warrant dividend program provided our stockholders with the ability to participate in our future growth while at the same time providing a $6,327,000 reversalsecurity with current value in the market. It is anticipated that in 2016 we can raise approximately $120,000,000 in new equity for land development purposes. Second, during the fourth quarter of cost and in 20112013 the Tejon Mountain Village, or TMV, project received the final federal permit necessary for development of the project. As real estate markets dictate, we recognized stock compensation expense of $5,352,000.can begin infrastructure development without any additional permits.

The improvement in revenuesOperations during 20112013 led to EBITDA, the annual incentive bonus quantitative metric, EBITDA being met at just below the maximum goal level for the year. This metric is discussed below under “—“– Annual Performance-Based Incentive Bonuses” as well as revenueBonuses.” Revenue and operating profit goals for commercial/industrial real estate were slightly above

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target and resort/residential. Based onrevenue and operating goals for farming were above target for revenue and at the last three-years cash flow metric results themaximum level for operating profits. The named executive officers met the 20092011 rolling three-year cash flow objectives at the maximum award level. The rolling three-year cash flow metric is described in the equity compensation section. The grants associated with the 20092011 three-year cash flow metric were paid out during March 2012.2014. The number of grantsstock units that vested in 2014 are identified in footnote 2the footnotes to the Outstanding Equity Awards at 20112013 Fiscal Year-End table that begins on page 28.37.

Over the last two years our stock has increased from a December 31, 2011 price of $24.48 to a December 31, 2013 ending price of $36.76, or a 150% increase from the end of 2011. Over the last two years our stock has outperformed the Dow Jones Real Estate Index. We believe that our continued emphasis on pay-for-performance compensation has been a contributing factor in aligning our executives’ interests with those of our stockholders, and leading to a growth in our stock price. Please refer to our stock performance chart in our 2013 Annual Report for additional information.

For 20112013 the Compensation Committee made the following decisions:

Consideration of Say-on-Pay Results

At our 2011 Annual Meeting, our stockholders expressed support for our executive compensation program, with over 60% of votes cast voting in favor of the advisory vote proposal. When designing our 2012 and 2013 executive compensation program,programs, the Compensation Committee considered, among other things, the 2011 vote results and feedback we received from stockholders. In addition, the Compensation Committee also considered the results of the 2010 Compensation Report, as discussed in the 2011 Proxy Statement. After careful consideration of these

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factors, the Compensation Committee determined to make certain changes to the design of our executive compensation program for 2012 asbeginning in 2012. The changes implemented centered around the design of performance milestone objectives of the Company and the establishment of executive officer stock ownership guidelines. These changes remained in effect through 2013 and have contributed to our executive compensation program discussed in this Compensation Discussion and Analysis. Stockholders also expressed support for our determination to hold an advisory vote on our executive compensation program once every three years. Therefore, we expect the next advisory vote on executive compensation to occur at our 2014 annual meeting.

20122014 – The Year Ahead

The Company believes 20122014 will not be a challenging but successful year in the accomplishment of corporate objectives. The challenges of 2014 relate to farming and water management as strong an income year as 2011 duewe allocate our water resources to our permanent crops of almonds, pistachios and wine grapes while at the same time selling any excess water we have. California is in a severe drought and state water allocations have been reduced to zero. With respect to the one time saleaccomplishment of conservation easementsour performance objectives, we anticipate the successful opening of the Outlets at Tejon in 2011 for $15,750,000. We expect activitylate summer and continued success at Tejon Ranch Commerce Center, or TRCC, to continue to improve through 2012 building on the closing of two industrial transactions at the end of 2011.TRCC. In order to conserve cash going forward, the Compensation Committee’s compensation decisions will continue to be impacted by our anticipation of the need to continue to fund our joint ventures as they pursue development opportunities, future capital investment requirements for infrastructure at TRCC and residential projects, and possible continued investment in water assets.

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2014 Executive Compensation Plan Developments

During 2013, the Compensation Committee undertook a holistic review of the executive compensation program with the assistance of the POE Group. The program was analyzed with respect to the following strategic principles:

Based on the results of the analysis, we have adopted modifications to our executive compensation program, including changes to both our annual and long-term incentive compensation plans.

Beginning in 2014, our annual incentive compensation plan, or AICP, will have four primary performance measures:

The specific weight attached to each performance measure is dependent on each position’s responsibilities. Generally, corporate goals have a greater weight than divisional goals for all positions. This encourages mutual accountability among the executive team.

Beginning in 2014, our long-term incentive plan, or LTICP, will consist of three equity delivery vehicles:

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The Compensation Committee believes that the changes to our executive compensation program beginning in 2014 will encourage mutual accountability among our executive team while focusing the team on important goals in the short- and long-term. Furthermore, our new long-term design reflects the value creation process inherent in large-scale land development by first identifying and implementing projects, and then maximizing their respective financial returns.

General Objectives of the Compensation Plan.

The compensation program for our named executive officersNEOs is designed to align management’s incentives with the long-term interests of our stockholders and to be competitive with comparable employers. Our compensation philosophy recognizes the value of rewarding our named executive officers for their past performance and motivating them to continue to excel in the future. The Compensation Committee has developed and maintains a compensation program that rewards superior performance and seeks to encourage actions that drive our business strategy. Our compensation strategy is to provide a competitive opportunity for senior executives taking into account their total compensation packages, which include a combination of base salary, an annual cash- and stock-based incentive bonus (with the stock-based component taking the form of restricted stock subject to time-based vesting), and long-term performance-based equity awards. At the named executive officerNEO level, our incentive compensation arrangements are designed to reward the achievement of long-term milestone objectives related to real estate development, which drive the creation of value, as well as the achievement of year-to-year operating performance goals.

The Role of Executives in Setting Compensation. The Compensation Committee of the Board approves all compensation and awards to senior management, including the Chief Executive Officer and the other named executive officers. The Compensation Committee independently reviews and establishes the compensation levels of the Chief Executive Officer and reviews the performance of the Chief Executive Officer and discusses his performance with him. At the beginning of the year, the Chief Executive Officer works with the Compensation Committee to establish his goals and objectives to be evaluated throughout the year. For the remaining executive officers, the Chief Executive Officer makes recommendations as to compensation levels, including grants of equity awards and the establishment of performance objectives for annual performance-based incentive bonuses, for final approval by the Compensation Committee, which then makes its recommendation to the full Board of Directors for its approval.

The Role of the Compensation Consultant.During 2010, Mezrah Consulting, an outside consultant group hired by the Compensation Committee performed an analysis of the Company’s named executive officer compensation that is reflected in the 2010 Compensation Report. The analysis reviewed total compensation and the various components of total compensation including base salary, annual incentive bonus, and long-term compensation. The consulting assignment focused on the following:

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The 2010 Compensation Report concluded the Company’s short-term cash compensation (salary and annual bonus) was below competitive market levels and the consultant recommended that beginning in 2011 increases in both components of short-term cash compensation should be considered. The consulting group also concluded that the successful entitlement of Company projects is extremely important to stockholder value and continuing to attach milestone performance goals to long-term incentive compensation is appropriate. See “Compensation Discussion and Analysis—The Role of Executives in Setting Compensation” in our 2011 Proxy Statement for addition details regarding the 2010 Compensation Report.

Overall Compensation Plan Design.

The compensation policies developed by the Compensation Committee are based on the philosophy that compensation should reflect both financial and operational performance of the Company and the individual performance of the executive. The Compensation Committee also believes that long-term incentives should be a significant factor in the determination of compensation, particularly because the business of real estate development, including obtaining entitlement approvals and completing development, and many of the other actions and decisions of our named executive officers, require a long time horizon before the Company realizes a tangible financial benefit.

The Compensation Committee’s objectives when setting compensation for our named executive officers are:

Pay Mix Analysis.

The mix of total compensation elements for our NEOs in 2013, as a percentage of total compensation, is set forth in the table below. Note that the 2013 CEO values represent the first year employment agreement of our new CEO.

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The pay component percentages illustrate that variable compensation consists of a significant percentage of total compensation. The emphasis on variable compensation supports the Compensation Committee’s goal of a pay for performance orientation with a significant percentage of total compensation at risk. Also evident in the table and charts below is the importance placed by the Compensation Committee on long-term compensation elements. The nature of the Company’s business is long-term in nature. Therefore, the compensation program places strong emphasis on long-term pay opportunity to link the executive pay programs to the business strategy.

The chart below compares the six-year change in CEO compensation and the change in value of $100 invested in the Company (indexed total stock return, or TSR). CEO compensation has decreased over the period, while the change in value of the $100 investment has increased over the period. 2010 CEO compensation is significantly higher than other years due to performance milestone grants awarded that year. The milestone grants, which comprised a significant portion of long-term compensation, represented long-term pay opportunity for 2004 – 2015.

The Role of Compensation Committee in Setting Compensation.

The Compensation Committee attemptsof the Board approves all compensation and awards to provide bothsenior management, including the Chief Executive Officer and the other named executive officers. The Compensation Committee independently reviews and establishes the compensation levels of the Chief Executive Officer and reviews the

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performance of the Chief Executive Officer and discusses his performance with him. At the beginning of the year, the Chief Executive Officer works with the Compensation Committee to establish his goals and objectives to be evaluated throughout the year. For the remaining executive officers, the Chief Executive Officer makes recommendations as to compensation levels, including grants of equity awards, for final approval by the Compensation Committee, which then makes its recommendation to the full Board of Directors for its approval.

The Role of the Compensation Consultant.

During the second half of 2013, the Compensation Committee hired an outside consultant, the Poe Group, to prepare a new analysis of executive officer compensation. The Compensation Committee requested the Poe Group’s advice on a variety of matters, including the form of executive compensation, compensation strategy, market comparisons, pay and performance alignment versus peers, pay trends, and potential compensation plan designs and modifications. The Poe Group met with the Compensation Committee with and without management on several occasions during late 2013 and early 2014 with respect to 2014 compensation plans.

Market Comparison Review.

Although the Compensation Committee does not believe that it is appropriate to establish compensation levels based solely on market comparisons or industry practices, the Compensation Committee believes that information regarding pay practices at other companies is useful in three respects. First, marketplace information is one of the many factors that the Compensation Committee considers in assessing the reasonableness of compensation. Second, it recognizes that our compensation practices must be generally competitive for executive talent in the real estate, land development and agriculture industries and the market overall. Third, it recognizes that marketplace information reflects emerging and changing components and forms of compensation. While the Compensation Committee considers peer compensation levels and practices when making its compensation decisions, it does not target compensation at any particular point within a range established by a comparison of the financial performance or compensation levels of our peer companies.

In 2013, the Compensation Committee, with guidance from our independent compensation consultant, the Poe Group, reviewed our NEOs total compensation against a peer group of publicly traded real estate land companies. The peer group data is based on 2013 and 2012 results and consisted of the following companies:

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Elements of Compensation.

The Compensation Committee seeks to create a compensation plan that is balanced in its use of short-term and long-term compensation elements in order to reward current performance, as well as to provide financial incentive to achievealign management’s incentives with the long-term goals. Short-term compensation is typically in the form of annual cash or stock incentive bonuses, long-term compensation is typically in the form of equity-based awards. Because of the natureinterests of our business andstockholders. In developing the way we operate our business and implement our strategies, we may not witness the positive results of many decisions made or actions taken by our named executive officers in the current fiscal year or for several years. Accordingly,compensation plan the Compensation Committee by providing both short-term and long-term compensation, seeks to motivatebe aware of changing economic and reward named executive officers for decisions made today that will likely have positive long-term effects.industry conditions, and changing compensation trends. In achieving these objectives a variety of compensation elements are used as described below.

Elements of Compensation.The material elements of the compensation program for our named executive officers include: (i) base salary; (ii) annual cash- and stock-based incentive bonuses (with the stock-based component taking the form of restricted stock subject to time-based vesting); (iii) long-term equity-based

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majority of an executive’s compensation (i.e.is composed of performance units); (iv) change in control arrangements;based bonuses and (v) other compensation consisting of participation in broad-based pension and benefit plans, participation in supplemental executive retirement and nonqualified deferred compensation plans and executive perquisites.

Base Salaries. Tejon provides its named executive officers with a level of assured cash compensation in the form of base salaries, which the Compensation Committee believes are appropriate given the named executive officers’ professional status, accomplishments, responsibilities and importance to the business. The Compensation Committee believed, based on the 2010 Compensation Report and the individual business experiences and general industry knowledge of its members, that 2010 base salaries for each of the named executive officers other than the CEO were below market for comparable positions. We are generally able to pay our named executive officers lower base salaries than comparable companies, and still attract and retain highly qualified executives, because of the performance-basedlong-term incentive compensation, opportunities that we offer.rather than fixed compensation such as base salaries. We believe that having the overall compensation emphasis on long-term equity incentives instead of short-term cashfixed compensation better aligns management with stockholders.

For 2011, based on the data provided in the 2010 Compensation Report,In 2012, the Compensation Committee determined thatapproved the base salary for the CEO, taking into account the restoration in 2011 of a $50,000 voluntary reduction in salary in April 2009, was competitive at $500,000 per year and that thefollowing 2013 base salaries for the other named executive officers should be increased.our NEOs.

As noted above, our Chief Executive Officer’s salary was held at the 2010 level in 2011, except that a voluntary $50,000 reduction in salary that was taken in April 2009 was restored for 2011.

In determining to keep our Chief Executive Officer’s 20112013 base salary at $500,000, the Compensation Committee took into account that the total compensation package for the Chief Executive Officer, including base salary, which is competitive with the market, based on the 2010 Compensation Report anda review of peer group information, the general experience of the Compensation Committee’s members in our industry, the Company’s current stage within the land development process, the current economic environment, the status of the current real estate industry and market and how these factors can impact current compensation levels. For 2012

The base salaries for the Chief Executive Officer’s annualMessrs. Drew, Atkinson and Tobias were increased by 3%, while Mr. Lyda’s base salary will remain at $500,000 aswas increased by 10%. When granting these salary increases, the Compensation Committee has determined, based on the 2010 Compensation Report that base salary for the Chief Executive Officer is appropriate at that level.

The Compensation Committee, along with the Chief Executive Officer, performed an annual review of each of the other named executive officers’ salaries based upon information provided in the 2010 Compensation Report and evaluated possible changes to base salary for each of the other named executive officers for 2011. Based on this 2010 annual review2013. The Compensation Committee also took into account peer group information, and the compensation consultant’s recommendation in the 2010 Compensation Report, 2011 salariesfact that there have been no salary increases for the following named executive officers werelast two years. Mr. Lyda’s 10% increase also reflects increased byoperational responsibilities within water management and mineral operations.

Mr. Bielli joined the following amounts: Chief Financial Officer – $34,750; Senior Vice President, Real Estate – $17,950; andCompany in September 2013. The amount shown for Mr. Bielli is his annual salary, which remains the Senior Vice President, Natural Resources and Stewardship – $20,000. For 2012,same for 2014.

In December 2013, the Compensation Committee determined that salaries for all2014, the base salary of the named executive officers were atother NEOs would be increased by 3% based on performance in 2013 and information from the appropriate level and held salaries consistent with 2011 levels.Poe Group, a compensation consultant.

Annual Performance-Based Incentive Bonuses.

Tejon’s practice is to award annual incentive bonuses based upon the achievement of performance objectives established at the beginning of each year that will best move the Company forward to achieve its cash flow, land entitlement, land development, and land conservation goals. Beginning in 2011, eachyear. Each named executive officer at a minimum has 50% of the annual incentive bonus based upon EBITDA or divisional revenues and earnings. The remaining 50% of the annual incentive bonus is tied to the achievement of qualitative measures based upon areas of emphasis that the Compensation Committee believes are important for the particular named executive officer to focus on in the context of achieving the Company’s long-term strategic goals and creating stockholder value. During fiscal 2010, the Compensation Committee determined that all named executive officers’ annualAnnual incentive bonuses for fiscal 2010 performance, and going forward for an unspecified period of time, will beare paid in restricted stock (which restricted stock is subject to time-based vesting conditions following the award of the annual bonus) and cash, with restricted stock equaling at least one-half of the annual incentive payment. Vesting of restricted stock issued in settlement of 20112013 annual bonuses will occur in three installments, one-third each year, beginning in March 20122014 and ending

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in March 2014.2016. To account for the delay in receiving the full incentive (the restricted stock grants are not fully vested until March 2014,2016, whereas cash bonuses would have been paid in full in March 2012)2013) and the fact that each named executive officer must stay with the Company

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through March 20142016 to receive a full incentive payout, the Compensation Committee decided to increase the value of the stock grant portion of the annual incentive payment by a multiple of 1.19 as compared to the cash award portion of the payment. The 1.19 multiple is based upon a net present value calculation that determined the multiple necessary for the stock portion of the award to have the same value as the immediate cash portion of the award.

The attainment of each year’s quantitative financial goals for each of the named executive officers is uncertain and is dependent upon factors such as real estate sales and leasing programs, the timing of entitlement activities for our developments, and the uncertainty inherent in our farming operations due to the commodity nature of the products we produce and the fact that we do not know the prices we will receive for our products until harvest begins for a particular year. The achievement of qualitative goals tied to land entitlement, development, and conservation efforts are very dependent on working with groups outside of the Company such as government agencies, local county planning departments, and environmental resource groups, all of which make the timing of achieving specific steps in the process very complicated. Accordingly, goal achievement under the annual bonus plan is not guaranteed.

The following chart provides the performance level weightings for the Chief Executive Officer and the other named executive officers whothat were employed for the entire fiscal year and were eligible to receive an annual performance-based incentive bonus. Each of the performance level weighting categories shown in the chart must total 100% within the category and then each category is given a percentage weighting for each named executive officer so that the four categories total 100%. Mr. Bielli was not a part of the 2013 annual incentive plan but will be included in the 2014 plan.

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Generally the Chief Executive Officer’s qualitative goals are tied to land entitlement, public outreach in support of entitlement, development and conservation goals as well as operational and staffing objectives. The qualitative performance goals for the other named executive officersNEOs are related to land entitlement, development, and operational goals that support the achievement of corporate entitlement and development goals. The Compensation Committee, after taking into account the Chief Executive Officer’s recommendations, sets the specific weightings for each named executive officerNEO based on the relative importance of a specific objective in moving the Company forward in achieving its long-term goals and objectives and also his or her direct role in achieving such objective.

The plan is structured and bonus levels are determined, based upon the level of achievement of threshold, target and maximum performance of quantitative and qualitative objectives. If achievement of a performance objective is below threshold, no incentive bonus is earned for that objective and if achievement is greater than maximum, the maximum bonus level is earned. The Chief Executive Officer and the other named executive officersNEOs have different cash incentive pay levels (expressed as a percentage of base salary) for achievement at the threshold, target and maximum levels. These percentage levels are based on an analysis performed by Mezrah Consulting in theira 2010 Compensation Report that compared prior target

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bonus levels with market levels and determined that the Company was below competitive levels. The target percentage levels below are based on a range of 80% to 90% of the competitive ranges for comparable positions for each named executive officer determined in the 2010 Compensation Report.

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The following chart provides a breakdown of 20112013 annual incentive award measurement by performance measurement categories and the total 20112013 incentive award as a percentage of salary. However, finalFinal award measurement for the named executive officers will reflect actual results. Therefore, the award measurement percentage most likely will be a number between threshold and target or target and maximum. As an example, if the actual resultEBITDA goal achievement for a particular measurementyear was 25% in excess of the target level then the award measurement actually paid out tofor the named executive officerCEO would be 100% for that component of hisyear, or her annual performance-based incentive bonus would be 1.25 times thehis target percentage referenced in the table above.level of 80%:

Quantitative Financial Goal -Corporate– Corporate

Because a very important long-term goal is the achievement of entitlementsentitlement and beginning of development for our real estate development projects, and sincebecause Tejon does not generate significant revenue at this time, its short-term objectives, both quantitative and qualitative, are tied to metrics that are critical for the accomplishment of long-term goals. Beginning in 2011,For our annual incentive a single corporate financial goal will beis considered: EBITDA. Our definition of EBITDA is earnings before interest, taxes, depreciation, amortization, and non-cash stock compensation. We believe this is a more accurate measurement of the cash used in the operations of the Company. Each named executive officer’s weighting is different based on whether or not they have division revenue and operating income responsibility and the emphasis placed each year on division performance. This corporate measurement is being used, rather than total revenue or net income, because at this stage in the Company’s business EBITDA provides a better indicator of managementsmanagement’s creation of operating cash and overall financial performance since the Company has significant non-cash expenses each year. For 2011,2013, achievement of target performance with

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respect to this quantitative financial goal required that EBITDA equal $10,526,000$7,505,000 with threshold performance at $7,895,000,$5,629,000, and maximum performance at $15,789,000.$11,258,000. In comparison to the 2012 EBITDA target of $4,716,000 the 2013 EBITDA goal increased $2,789,000. These performance measurement numbers are based on calculations within the Company’s 20112013 business plan and operating budget. For 2011, the Company2013, EBITDA measurement was based on an estimate of 2013 year-end EBITDA of $10,153,000, which put success at just below maximum achievement. Actual 2013 EBITDA using audited financial statements was $12,285,000, which exceeded the maximum targetgoal for the year. Incentive bonuses determined in December 2013 will not be adjusted based on the actual EBITDA with EBITDA equaling $32,303,000.number. The actual results for the year were above the maximum target budget amount due to the saleimproved commercial/industrial revenues, including higher equity in earnings of land in December 2011 for $4.9 million that was not included in the 2011 operating budget, a $6.7 millionunconsolidated joint ventures and an increase in oil royalty revenue when compared to budget due to a 44% increase in production and in prices, and a $7.0 million improvement in farming revenues whenprofits compared to the 2011 Budget.

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Quantitative Financial Goal—Goal – Division

The quantitative goalsfollowing are established each year in connection with our annual budgeting process. The threshold level reflects what we believe to be the minimum acceptable level of performancedivision financial results for the Senior Vice President, Real Estate and therefore more attainable, while the target level reflects current year budget goals that we believe to be realistically attainable goals. The maximum achievement is set at what we believe will be a very difficult level to achieve without both significant effort by the executive and overall success by the Company with respect to the particular category or measurement.Senior Vice President, Agriculture.

The Senior Vice President, Real Estate, Joe Drew, has quantitative goals related to revenue and income that complement the overall corporate objective. The Senior Vice President Real Estate for 2011 had a target revenue goal of $12,330,000 with a threshold goal of $9,248,000 and a maximum goal of $18,495,000 for commercial/Commercial/industrial real estate revenues only including gains or losses from the Rockefeller joint venture activities, butand net income targets do not includinginclude grazing leases, land management ancillary revenues, and revenue from our power plant lease. For 2011, the Company achieved $17,561,000 in actual revenues, which was in excess of the target goal, but less than the maximum goal. The Senior Vice President, Real Estate also had a target net income goal of $6,661,000 with a threshold goal of $4,996,000 and a maximum goal of $9,992,000, based on commercial/industrial activities only. For 2011, actual achievement was net income of $9,735,000, which was in excess of the target goal for the year but slightly less than the maximum goal. Both goals were achieved at above target levels during the year when compared to 2011 budgeted numbers due largely to the improvement in oil revenues compared to the 2011 business plan and operating budget and the unbudgeted sale of industrial land within the TRCC development.off site lease revenues. Mr. Drew’s blended performance percentage is shown in the table above. The Senior Vice President, Natural Resources and StewardshipAgriculture, Dennis J. Atkinson, had a quantitative goal related to budgeted revenues within our resort/residential operating segment only, with the target goal being $16,030,000, threshold goal of $12,023,000, and the maximum goal of $24,045,000. The Senior Vice President, Natural Resources and Stewardship also had a net operating income target goal of $12,073,000, threshold goal of $9,055,000, and maximum net operating income goal of $18,110,000. This operating segment, for our budget purposes and compensation evaluation purposes, includes the net income or loss of our Tejon Mountain Village and Centennial joint ventures. During 2011, actual revenues totaled $16,134,000, which was slightly higher than target achievement and net operating income for the year was $12,166,000, also slightly higher than target goal achievement. The Senior Vice President, Farming had a 20112013 quantitative goal related to farming revenues with the target goal being $14,005,000, threshold goal of $10,504,000, and a maximum goal of $21,008,000.net income. For 2011,2013, the Company recognized $21,012,000 in farming revenue which is in excess ofthat was greater than target but less than the maximum goal. The Senior Vice President of Farminglevel. Mr. Atkinson also had a target net income goal for the year of $269,000, a threshold goal of $202,000, and a maximum net income goal of $404,000. For 2011, actual achievementthat was net farming income of $8,437,000, which isachieved at greater than the maximum goal level. Both goals were achieved at maximum goala greater than target level due to significant increases in pistachio and almond and grape revenue largely drivenrevenues that were partially offset by higher productioncost of sales when compared to the 2013 operating budget. In the setting of quantitative goals each year our target goals are developed through our annual budgeting process and we believe these are realistically attainable goals and that maximum achievement levels for both cropswill be difficult to attain without significant effort and higher prices for grapes.development of new business opportunities.

Qualitative Performance Objectives

In addition to the quantitative goals described above, the Chief Executive Officer’s annual incentive bonus in 20112013 was based upon the achievement of qualitative performance objectives proposed by the Chief Executive Officer and agreed upon and approved by the Compensation Committee. These objectives are tied to business development and organizational goals that move the Company forward in achieving its long-term objectives (including the achievement of strategic milestones related to land development and conservationentitlement efforts that the Compensation Committee and the Board believe to be critical to the achievement of the Company’s long-term business plan). Qualitative goals for 20112013 specifically related to leading and directing a ranch-wide strategy to facilitate future successful entitlement of our development projects, overseeing a public outreach strategy to build support for our entitlement programs, and overseeing the continued implementation of conservation strategies to build support for our entitlement programs.water strategy. Based on meaningfulachieving final permits for the Tejon Mountain Village project, progress in moving forward our Centennial project, beginning of construction for the successful closing ofnew outlet center at the conservation easement sale,Tejon Ranch Commerce Center, and the

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continued strengthening of the Company’s water investment, and water infrastructure program, the Compensation Committee determined that the Chief Executive Officer achieved a target level of performance.

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The other named executive officers have more diverse qualitative performance goals than the CEO, generally tied to individual areas of responsibility, which focus both on short-term and long-term goals (including improving operational efficiencies and achieving milestones and other goals with respect to the Company’s long-term business strategy related to land entitlement, development, and conservation). Generally the qualitative goals covered: (1) coordinating with joint venture partners regarding entitlement and permitting activity milestones for our Tejon Mountain Village community and the Centennial community; (2) beginning the entitlement process for the Grapevine Development Area; (3) guiding the Company in working with various government agencies as a part of the entitlement process; (3)(4) implementation of a ranch wideranch-wide management plan in connection with the Conservation and Land Use Agreement; (4)(5) acquiring and managing new water resources; (5)(6) expansion of oil exploration on ranch lands; (6) successful leasing(7) meaningful progress toward the construction of the 606,000 square foot building innew outlet center; (8) implementation of the Five West Parcel joint venture; (7) successful completion of newapproved ten-year farm management program; (9) implementing new capital funding activities and (8)financing of outlet center construction; and (10) coordination with key Resource Organizations and the Tejon Ranch Conservancy to allow for successful entitlement of our development projects.

The Chief Executive Officer and the Compensation Committee evaluate the success of the named executive officers (other than the CEO) in meeting their individual qualitative goals and objectives, with final approval provided by the Compensation Committee. In evaluating the success of meeting specific qualitative objectives, the Chief Executive Officer and the Compensation Committee review the objective and identify whether or not the objective was accomplished or if the proper amount of progress has been made in achieving the objective. The Chief Executive Officer and the Compensation Committee note for each objective if the objective was accomplished in the time frame designated and if the outcome achieved was as specified in the original objective. Based on each named executive officer’s achievement of his and her goals and objectives and the qualitative goals listed above the Compensation Committee approved achievement of the qualitative goals for 20112013 for the named executive officers at the levels shown in the above table.

DiscretionaryIndividual Performance

On a subjective basis the Compensation Committee evaluates the overall performance of the Chief Executive Officer and the other named executive officers outside of the attainment of specified qualitative goals taking into account concepts such as teamwork, management of staff and departments, and management of process between departments. No specific weighting is given to any of these concepts or other factors the Compensation Committee may include in their performance evaluation. The Chief Executive Officer and the other named executive officersofficers’ subjective weighting is identified above under DiscretionaryIndividual Performance Level Weighting. As shown in the above table this subjective weighting is included in the calculation of the final annual incentive award percentage.

Equity Compensation.

The Compensation Committee believes that the long-term value of the Company will be driven by the execution of its long-term strategies. Accordingly, Tejon uses long-term incentives to align senior managements’management’s interests with stockholders’ interests. The Compensation Committee believes that management should own stock and that teamwork among the management group is important in meeting business goals. Therefore, long-term milestone incentives are goal-based, with common performance measures for all participants that encourage teamwork.

The vesting of equity grants issued since 2004 has been tied to the achievement of specific goals and objectives. The Company grants long-term milestone performance units that are tied to the achievement of several objectives related to our land entitlement and real estate development activities, including our success in achieving entitlements for our planned communities. The performance milestone units currently outstanding are

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related to our Centennial project. Due to their strategic significance, we believe that disclosing specific objectives and timeframestime frames might result in competitive harm or delay achievement of long-term strategic objectives. We believe that the achievement of the target level of performance will require significant effort and substantial progress over the next few years in light of the current entitlement environment in California. NoDuring 2013, milestone performance grants related to full permitting of the Tejon Mountain Village community vested. The number of shares vested during 2011.is shown in the Option Exercises and Stock Vested table on page 38.

With respect to the grant of the annual performance units, the Company’s practice is to determine annually a dollar amount of equity compensation that it wishes to provide and to grant a number of performance units that have a fair market value equal to that amount on the date of grant. Vesting of these annual grants is tied to the

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achievement of a rolling three-year cash metric. The rolling three-year cash metric is budgeted cash provided from operations less cash used for capital investment, excluding activities within marketable securities. For 2011,2013, the dollar amount for the Chief Executive Officer was $300,000 and for the other named executive officers it was a range from $90,000$80,000 to $118,000 depending on the importance of the input from each of the other named executive officers to the successful achievement of the goal. The level of the target dollar amount for each named executive officer is based on the 2010 Compensation Report that recommended long-term compensation goals for each position. The number of shares of stock is based on a ninety-day average stock price divided into each named executive officers dollar amount of value. The shares granted are expensed based on the closing price of the stock on grant date.

The annual performance units are tied to the achievement of the rolling three-year cash flow metric, described above. This performance metric was selected by the Compensation Committee as a measurement of management’s ability to manage cash assets over an extended period at a time when cash demands will be high and net income will not be significant. For 2011,2013, this cash flow measure covers the years 20112013 through 20132015 and has a cumulative cash usage target of $39,762,000.$107,207,000. The Company believes that achievement of this target level of performance will require significant effort and is dependent on the continued absorption of land at Tejon Ranch Commerce Center, continued improvement in oil and mineral revenues, and progress with respect to entitlementpre-development activities at Tejon Mountain Village and entitlement activities at Centennial. Please refer to our Annual Report on Form 10-K for the year ended December 31, 20112013 for additional information regarding entitlement and development activities. This target assumes we are moving forward in a positive manner with respect to our development projects. These grants vest after three years and the number of shares to be received is determined by the extent of performance achievement and can range from zero shares to the maximum award amount, which is 150% of the target award.

The goal for the 20082011 – 20102013 period was cumulative cash usage of $54,407,000,$39,762,000, and the goal for the 20092012 – 20112014 period is cumulative cash usage of $144,261,000, and the target goal for the 2010 – 2012 period is a cumulative cash usage of $46,365,000.$53,038,000. For the 20082011 – 20102013 period, the named executive officers goal achievement fell eight percent short of the target objective. This outcome falls between the threshold goal and the target goal and based on this outcome the named executive officers earned a grant that vested in 2011. For the 2009 – 2011 period, the named executive officers goal achievement was atabove the maximum performance level.objective, with cash usage at $13,734,000. These grants, which are referenced in footnote 2 to the Outstanding Equity Awards at 20112013 Fiscal Year-End table that begins on page 28,37, vested and were delivered after the March 20122014 Board of Directors meeting. See the 20112013 Grants of Plan Based Awards Table on page 27,35, for number of shares granted each named executive officer for the 2011 – 20132013–2015 rolling three-year period. The table below summarizes the outstanding (as of the end of 2011)2013) performance grant measurement goals.

The Company does not have any program, plan or practice to time equity awards in coordination with the release of material non-public information, nor does the Company time the release of material nonpublic information for the purpose of affecting the value of executive compensation.

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Discretionary One-Time Equity Grants

During 2013, Mr. Lyda was granted 20,000 shares of restricted stock units related to his new employment agreement as additional equity incentive to stay in the employment of the Company, especially during the transition to a new Chief Executive Officer. These shares will vest over three years beginning on January 31, 2016, subject to his continued employment with the Company. Mr. Bielli was granted 40,000 shares of stock as part of his initial compensation package (determined based upon arms-length negotiation) for joining the Company as its new Chief Executive Officer. The shares will vest over three years beginning on September 16, 2014, subject to his continued employment with the Company.

Retirement Plans.

The Compensation Committee believes that retirement programs are important to the Company as they contribute to the Company’s ability to be competitive with its peers and are consistent with Tejon’s philosophy of preferring long-term pay overto short-term pay. For most of our employees, including the Chief Executive Officer, the Chief Financial Officer, and the Senior Vice President Real Estate, and the Senior Vice President Agriculture, Tejon provides a pension plan and a 401(k) plan. For the Chief Executive Officer and two other named executive officers, the Company also provides a supplemental executive retirement plan, or SERP. The SeniorBased on their hiring dates, the new Chief Executive Office and the Vice President Natural Resources and Stewardship isGeneral Counsel are not included in the pension plan or SERP, which were frozen as of February 1, 2007, based on their hiring date but are included in the 401(k) plan. The Compensation Committee believes that retirement benefits are an important piece of the overall compensation package for the named executive officers.

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Benefits to be received from the pension plan upon retirement are determined by an employee’s highest five-year final average annual compensation out of the last ten years, length of service with the company, and age at retirement. Average annual compensation consists only of base salary and annual incentive bonuses paid in either cash or stock. Benefits from the pension plan can be limited for the named executive officers whothat participate in the pension plan due to Internal Revenue Service compensation ceilings that are used in the calculation of pension benefits. Because of the Internal Revenue Service limits within the pension plan, the Company established a SERP to replace any pension benefit these officers might lose based on the benefit calculations within the pension plan. Without the SERP, our named executive officers who participate in the pension plan would not otherwise be eligible to receive pension benefits that are comparable in percentage based on compensation to the benefits received by other employees generally. The benefit in the SERP is calculated using the same criteria as the pension plan, except that total average compensation is used and the difference between the SERP calculation and the pension calculation is the value of the SERP benefit.

In order to manage the costs of and the liabilities from the pension and SERP plans, the Company restructured the pension plan in early 2007 to lower the benefit accrual rate, change the retirement age to match social security retirement age, and freeze new employee participation effective February 1, 2007. These changes were made not only to manage costs but also to allow the Company to continue to reward long-term service with the Company. The Company also offers a 401(k) program to its employees, which offers a matching contribution equal to one percent of salary, for employees in the pension plan, if the employee contributes at least four percent of salary to the plan. Tied to the changes in the pension plan described above, we increased the match for employees who will not be eligible for the pension plan to two percent of salary if they contribute at least four percent of salary to the plan.

The named executive officers may elect to defer cashcash- and equity-based compensation payable to them pursuant to the Company’s deferred compensation plan. This plan is designed to allow for retirement savings above the limits imposed by the IRS for 401(k) plans on an income tax-deferred basis. Cash amounts deferred into the plan are held in accounts with values indexed to the performance of selected mutual funds. Stock awards deferred into the plan can be converted to cash or kept in the Company’s stock. All participants to date have only deferred stock awards and have maintained stock in the plan. The Company does not provide a match on executive deferrals under the deferred compensation plan.

Clawback

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Claw back Policy.

The Company does not currently havehas a policy requiring a fixed course of action with respect to compensation adjustments following later restatements of performance targets. Under those circumstances,In the Compensation Committeeevent that our Board of Directors, or Board, determines there has been a restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Board will review all incentive payments that were made to executive officers and all performance-based equity awards granted to executive officers that were vested in each case, on the basis of having met or exceeded such performance targets in grants or awards made after during the three full fiscal years prior to the filing of the Current Report on Form 8-K announcing the restatement.

If such payments and/or vesting would evaluate whetherhave been lower had they been calculated based on such restated results, the Board will, to the extent permitted by governing law, seek to recoup for the benefit of the Company stockholders such payments to and/or equity awards held by executive officers who are found personally responsible for the material restatement, as determined by the Board, by requiring executive officers to pay such amounts to the Company by set-off, by reducing future compensation, adjustments were appropriate based uponor by such other means or combination of means as the facts and circumstances surrounding the restatement.Board determines to be appropriate.

Stock Ownership Guidelines.

The Company has stock retention guidelines which encourage the Chief Executive Officer to own by December 2014 shares and performance units and deferred shares, which have an aggregate value equal to or greater than five times his annual salary. The stock retention guidelines for the other named executive officers are calculated similarly except that the target retention value is two times their respective salaries, except for the Chief Financial Officer whose target retention value is three times his annual salary. as follows:

All named executive officers are expected to make reasonably steady progress toward these ownership guidelines between now and December 2014, andwith the exception of the Vice President, General Counsel, who has until 2016 to meet guideline based on date of hiring. The Compensation Committee reviews such progress annually. Since these guidelines are not a contractual basis for remaining in the employment of the Company, the success or lack of success in meeting the guidelines by 2014 will be evaluated by the Compensation Committee in 2014 and reflected in each named executive officer’s annual review for that year. During 2012, the Compensation Committee approved stock retention guidelines for non-employee directors as indicated above.

Change in Control Benefits.

The Compensation Committee believes that stockholders’ interests will be best served if the interests of executive management are aligned with them, and that providing management with change in control benefits supports that objective by focusing executives on stockholder interests when considering strategic alternatives. Except for accelerated vesting of equity awards pursuant to our equity compensation plan, change in control benefits, as provided in a severance agreement with each of our named executive officers, are only provided upon a termination of employment without cause or a resignation for good

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reason in connection with a change in control. Please refer to the Potential Payments upon Termination or Change in Control table on page 3142 of this proxy statement for a more detailed description and an estimate of value of these benefits. None of the

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agreements with our named executive officers or other compensation plans or arrangements provide for a gross-up payment or re-imbursement for excise taxes that could be imposed on the executives under Section 4999 of the Code.

In addition to the foregoing change in control severance benefits, the named executive officers whothat participate in the pension plan and SERP will also continue to be entitled to benefits under any existing pension plan and SERP as determined in accordance with the terms of those plans. If a named executive officer has been credited with more than 15 years of service, as of the effective date of termination, he or she shall also be credited with additional years of service under the plans for the period of salary continuation referred to above.

Separation or Severance Benefits. The

During 2013, the Company does not have any contractual obligation to provideentered into an Employment Agreement with the Chief Financial Officer, which provides for severance benefits though underoutside of a change in control context. For detailed information regarding the Employment Agreement please refer to the Narrative Disclosure to the Summary Compensation Table and Grants of Plan Based Awards Table on page 36.

In some circumstances the Compensation Committee believes it is in the Company’s best interest to provide a severance benefit in order to provide a smooth transition period for the Company when an executive leaves.leaves even if the Company does not have a contractual obligation to provide a separation package. Separation benefits in the form of salary continuation and health benefits may be provided to departing executives on a case-by-case basis. These benefits have historically averagedendured for approximately one year. In these cases, the Company did not have a contractual obligation to provide a separation package.

Unless the Compensation Committee determines otherwise, if prior to vesting of all or any part of a restricted stock award or performance unit award a named executive officer’sNEO’s employment with the Company is terminated for any reason, including death or disability, the named executive officerNEO will forfeit to the Company the portion of the award which has not vested.

Perquisites and Other Personal Benefits.

The Compensation Committee reviews annually the perquisites that named executive officers receive. The primary benefits for the named executive officers are Company vehicles and related maintenance. In addition, the Chief Executive Officer receives additional life insurance in excess of the insurance that is part of the Company’s broad-based life insurance policy. This additional insurance supplement is necessary to provide the same three timesthree-times salary benefit that other employees receive. These benefits are provided to attract and retain highly qualified executives, and because executives often place a higher value on these benefits relative to cost to the Company as compared to increases in cash compensation. In addition, the automobile benefit is provided to executives as well as other company employees because the Company’s location and the size of the Company’s property necessitate extensive car travel.

Senior management also participates in the Company’s other benefit plans on the same terms as other employees. These plans include medical, dental and life insurance.

Tax Considerations.

Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the deductibility of compensation paid to certain executive officers of public companies, unless the compensation meets certain requirements for “performance-based” compensation. In determining executive compensation, the Compensation Committee considers, among other factors, the possible tax consequences to the company and to the executives. However, tax consequences, including but not limited to tax deductibility by the company, are subject to many factors (such as changes in the tax laws and regulations or interpretations thereof and the timing and nature of various decisions by executives regarding options and other rights) that are beyond our control. In addition, the

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Compensation Committee believes that it is important for us to retain maximum flexibility in designing compensation programs that meet our stated objectives. For these reasons, although the Compensation Committee will consider tax deductibility as one of the factors in determining executive compensation, it will not necessarily limit compensation to those levels or types of compensation that will be deductible. We will, of course, consider alternative forms of compensation consistent with our compensation goals that preserve deductibility as much as possible.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Directors Goolsby, Metcalfe, Parker,Winer, and Stack comprise the Compensation Committee. All of the members of the Compensation Committee are independent directors under the listing standards of the NYSE and under the Company’s Independence Standards. No member of the Compensation Committee is or has been an officer or employee of the Company, or has had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed that Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in the Company’s 20122014 Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.2013. This report is provided by the following independent directors, who comprise the Compensation Committee.

Geoffrey L. Stack (Chairman), John L. Goolsby,

Norman Metcalfe, George G.C. ParkerMichael Winer

Members of the Compensation Committee

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Fiscal Year 20112013 Summary Compensation Table

The following table summarizes the total compensation awarded to, earned by, or paid to each of the named executive officers for the fiscal years ended December 31, 2011, 2010,2013, 2012, and 2009.2011.

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At maximum achievement the value received under the three-year rolling performance shares awards granted in 2013 would be $171,934 for Mr. Lyda and Mr. Tobias, $180,511 for Mr. Drew, and $118,732 for Mr. Atkinson. The value in this column for Mr. Lyda also includes a grant of 20,000 shares of restricted stock units, granted in connection with his new employment agreement. For 2013, Mr. Stine’s annual incentive was paid all in cash and he received no 2013 three-year rolling performance shares due to his retirement in December 2013. Mr. Bielli was not included in the 2013 compensation plan due to the timing of his employment with the Company; he will however participate in the compensation plan in 2014. The value of stock awards is the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The grant date fair value for grants with performance conditions includes the estimated probable outcome of the performance condition. Further information regarding stock awards can be found in Note 8, Stock Compensation Plan, to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. During 2012, the stock awards granted did not vest and will only vest in future years based on the achievement of cash flow targets, milestone performance objectives tied to development activities, and to continued employment with the Company.

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Grants of Plan-Based Awards in Fiscal Year 20112013

The following table provides information about awards granted to the named executive officers in the fiscal year ended December 31, 20112013 pursuant to our 2004 Stock Incentive Program.