UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

Filed by the Registrant  x                            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,Tejon Ranch, California 93243

March 28, 201430, 2015

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Tejon Ranch Co. (“Company”) on Wednesday, May 7, 2014,6, 2015, at 9:30 A.M., Pacific Time, at the Balboa Bay Club,Resort, 1221 West Coast Highway, Newport Beach, California.California, 92663. 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 on the enclosed proxy at your earliest convenience.

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

Sincerely,

Gregory S. Bielli,

President and Chief Executive Officer

TEJON RANCH CO.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

on

May 7, 20146, 2015

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 Proxy Statement) will be held at the Balboa Bay Club,Resort, 1221 West Coast Highway, Newport Beach, California, 92663 on Wednesday, May 7, 2014,6, 2015, at 9:30 A.M., California time,Pacific Time, for the following purposes:

The nominees of the Board of Directors of the Company for election at the meeting are Gregory S. Bielli, JohnAnthony L. Goolsby, Norman Metcalfe,Leggio, Geoffrey L. Stack, Frederick C. Tuomi, and Kent G. Snyder.Michael H. Winer.

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

The Board of Directors has fixed the close of business on March 12, 2014,11, 2015, 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, 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 vote. We strongly encourage you to return the voting instruction form provided by your broker, bank or other holder of record or utilize your broker’s telephone or internet voting if available and exercise your right to vote as a stockholder.

For the Board of Directors,

KENT G. SNYDER,NORMAN J. METCALFE, Chairman of the Board

ALLEN E. LYDA, Chief Financial Officer, Assistant Secretary

Lebec,Tejon Ranch, California

March 28, 201430, 2015

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 EVEN IF YOU HAVE PREVIOUSLY SUBMITTED YOUR PROXY.

TEJON RANCH CO.

Post Office Box 1000

Lebec,Tejon Ranch, California 93243

PROXY STATEMENT

Annual Meeting of Stockholders

May 7, 20146, 2015

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders To Be Held on May 7, 20146, 2015

The Proxy Statement and accompanying Annual Report to Stockholders 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 7, 20146, 2015 (the “2014“2015 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, 2014.2015.

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 four 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 2014,2015, (3) an advisory vote to approve executive compensation, and (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 20142015 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 costs for this proxy solicitation 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 12, 201411, 2015 (the “Record Date”) are entitled to notice of, and to vote at, the meeting. There were 20,568,05820,645,547 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 revoked, 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” the nominees of the 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

The holders of record of a majority of the Common Stock entitled to vote at the 20142015 Annual Meeting must be present at the 20142015 Annual Meeting, either in person or by proxy, in order for there to be a quorum at the 20142015 Annual Meeting. Shares of Common Stock with respect to which the holders are present in person at the 20142015 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 20142015 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 four (4) candidates receiving the highest number of affirmative votes at the 20142015 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 20142015 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 20142015 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 20142015 Annual Meeting do not create appraisal or dissenters rights.

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PROPOSAL 1

THE ELECTION OF DIRECTORS

The Board currently consists of teneleven directors divided into three classes based upon when their terms expire. The terms of four directors (Class III) will expire at the 2014 Annual Meeting, the terms of three directors (Class I) will expire at the 2015 Annual Meeting, and the terms of three directors (Class II) will expire at the 2016 Annual Meeting, and the terms of four directors (Class III) will expire at the 2017 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-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 20142015 Annual Meeting to serve as Class IIII directors are Gregory S. Bielli, JohnAnthony L. Goolsby, Norman Metcalfe,Leggio, Geoffrey L. Stack, Frederick C. Tuomi, and Kent G. Snyder,Michael H. Winer, 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 20152016 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 unless otherwise instructed, one-quarter of the votes to which the stockholder is entitled will be cast for each of the nominees. All 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 20142015 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 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 shares will not 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, 2014.2015. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal years 20132014 and 20122013 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 20142015 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.

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 may 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 served as the Company’s independent registered public accounting firm for the year ended December 31, 20132014 and was selected by the Audit Committee to serve in that capacity for the fiscal year 20142015

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, 2014 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 2014 were $504,429. 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, 2013 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 2013 were $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, 2012 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 2012 were $394,233.

Audit-Related Fees. The aggregate 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, 20132014 were $12,360.$2,000. The Audit-Related Fees billed by Ernst & Young LLP for the year ended December 31, 20122013 were $34,995.$12,360.

Tax Fees. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice and planning services for the year ended December 31, 20132014 were $85,544.$101,070. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice and planning services for the year ended December 31, 20122013 were $81,601.$85,544. All fees billed for both 20132014 and 20122013 were solely related to compliance and planning services for 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, 20132014 or December 31, 2012.2013.

The Audit Committee Charter requires that the Audit Committee pre-approve all services performed by the Company’s outside auditor. To fulfill this requirement, 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, 20132014 and 2012,2013, 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 2014.2015.

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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 43.42.

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 20132014 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 20142015 Annual Meeting, the next advisory vote on the compensation of our named executive officers will take place at our 20152016 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 4342 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 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 2015 Annual Meeting, (2) Class II Directors, whose terms will expire at the 2016 Annual Meeting, and (3) Class III Directors, whose terms will expire at the 20142017 Annual Meeting. The Board currently consists of teneleven 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 “Consideration

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“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 his 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 the directors listed below each possess a number of these attributes, the Nominating and Corporate Governance 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 qualify them to serve as a director of the Company.

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 are subsidiaries, or other affiliates of the Company. There are no family relationships among any directors or executive officers of the CompanyCompany.

Corporate Governance Matters

The Board has determined that all directors, except Mr. Bielli and Mr. Stine, are “independent” under the listing standards of the New York Stock Exchange (the “NYSE”) and the Company’s categorical criteria used to determine whether a director is independent (the “Independence Standards”). 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,Robert A. Alter, Steven A. Betts, John L. Goolsby, Anthony L. Leggio, Norman J. Metcalfe, Kent G. Snyder, Geoffrey L. Stack, Daniel R. Tisch, Frederick C. Tuomi, and Michael H. Winer and Anthony L. Leggio.Winer.

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 this information in the context of the NYSE’s objective listing standards, the Independence Standards and, for directors serving on committees, the

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additional standards established for members of audit committees and compensation committees. In reaching a determination on these directors’ independence, the Board considered that neither the directors nor their immediate family members have within the past three years had any direct or indirect business or professional relationships with the Company other than in their capacity as directors.

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. SnyderMetcalfe presides over these executive sessions.

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During 2013,2014, there were fivesix meetings of the Board. During 20132014 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 in person. All directors attended the 20132014 Annual Meeting 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 2013,2014, there were no meetings of the Executive Committee, sixseven of the Audit Committee, fourtwo of the Compensation Committee, threetwo of the Real Estate Committee, one 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 Securities 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.

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The Audit Committee

The Audit Committee represents and assists the Board in fulfilling the Board’s oversight responsibility relating to (i) the accounting, reporting, and financial practices of the Company and its subsidiaries, including the integrity of the Company’s financial statements; (ii) the surveillance of administration and financial controls and the Company’s compliance with legal and regulatory requirements; (iii) the independent auditor’s qualifications and independence; and (iv) the performance of the company’s internal audit function and the Company’s independent auditor. In 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. 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,Tejon Ranch, 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 Exchange Act. The Board has further found that Mr. ParkerLeggio 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 Compensation Committee

The Compensation Committee oversees 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 employees, 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 recommends changes for the compensation 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,Tejon Ranch, California 93243. The Compensation Committee is authorized to delegate to a subcommittee consisting of not less than two members of the Compensation Committee the responsibility to review specific issues, meet with management on behalf of the 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.

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 the performance of the other executive officers, but no other executive officer hasofficers have any input in executive

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compensation decisions. The Compensation Committee gives substantial weight to the CEO’s evaluations and recommendations because he is particularly able to assess the other executive officers’ performance and contributions to the Company.

During 2013, the Compensation Committee engaged Poe Consulting to assist in the review of executive officer compensation and in 2012 engaged Poe Consulting in a review of director compensation. Poe Consulting did not provide any other services to the Company in 2013 or 2012. The decision to engage an outside compensation consultant was not recommended by management. Poe Consulting completed its 2013 engagement during March of 2014, and its fees were $55,000. Its feesPoe Consulting did not provide any other services to the Company in 2012 were $15,500.2014. The Compensation Committee has reviewed an assessment of any potential conflicts of interest raised by Poe Consulting’s work for the Compensation Committee, which 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; (v) any Company stock owned by the Poe Consulting consultants; and (vi) any business

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or personal relationship of the 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 provides oversight, guidance and strategic input into management action plans for development and entitlement of Company land, and it provides a review function to management regarding major decision 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. The Real Estate Committee also provides oversight and guidance to the Company’s Chief Executive Officer with regard to recruitment and employment of senior real estate executives. It reports regularly to the full Board with respect to its meetings. 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,Tejon Ranch, 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 and data regarding marketable security investments and recommends approval of the Company’s investment security policy to the Board.

The Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee (“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.

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,Tejon Ranch, 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,

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c/o Corporate Secretary, P.O. Box 1000, Lebec,Tejon Ranch, 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 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 20152016 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,Tejon Ranch, 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 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’sOur executive compensation program aligns with our strong pay-for-performance philosophy and ties a substantial portion of executive compensation to the amounts shownachievement of annual and long-term strategic objectives directly tied to the creation of stockholder value. The following is a discussion of our executive compensation philosophy, process and components, and compensation decisions made with respect to the following NEOs as listed in the executive compensation tables for our named executive officers, or NEOs. Our named executive officers for fiscal 2013 were:2014 Summary Compensation Table:

Executive Summary

Our Compensation Committee has developed and maintainedmaintains 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 following:

20132014 – Year in Review

For 2013,2014, we had net income attributable to common stockholders of $4,165,000,$5,655,000 compared to net income attributable to common stockholders of $4,441,000$4,165,000 for 2012.2013. This slight decline in net incomeimprovement is driven by a reductionan increase in revenue, primarily due tofrom mineral resourceresources revenue, which is partially offset byas a result of 2014 water sales and improved equity in earnings of unconsolidated joint ventures of $1,471,000 and a reduction$1,288,000. These increases in income tax expense.revenue were partially offset by an increase in operating expenses of $4,964,000, which was largely driven by $4,523,000 in water cost of sales. During 2013,2014, farming had another excellent revenue yeardeclined due to lower quantities of orchard crops being sold, and revenues improved slightly in the commercial/industrial segment due primarily to the sale of a convenience store/gas station site and higher hunting permit revenues.development fees. Equity in earnings of unconsolidated joint ventures improved primarily due to the earnings growth within the TA/Petro and Rockefeller joint venture. Operating expense declined in 2013, because of the reversal of stock compensation expense tied to stock units that will not vest due to the departure of two executives during the year.ventures.

During 2013, two2014, three significant objectives were accomplished. First, the Company executedsuccessfully guided the development of the Outlets at Tejon, which opened in August 2014 on time and within the construction budget. This development is part of a stock warrant 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 stockholdersjoint venture with the ability to participate in our future growth while atRockefeller Development Group. Achievement of this goal was one of the same time providing a security with current value inshort-term annual incentives objectives for 2014. Second, we received preliminary zoning for the market. It is anticipated that in 2016 we can raise approximately $120,000,000 in new equity for land development purposes. Second,Centennial project during the fourth quarter of 20132014 when the Tejon Mountain Village,Los Angeles County Board of Supervisors approved the Antelope Valley Area Plan, or AVAP. The AVAP is designed to guide future development and conservation in

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the region. We expect the Los Angeles County Counsel, per instruction from the Board of Supervisors, to prepare final documents and ordinance for the AVAP for the Board of Supervisors final approval in the first half of 2015. To take advantage of this momentum, our next steps would be to submit a specific plan for phase one entitlement and permits. Third, the Company acquired full ownership of TMV project receivedLLC through the final federal permit necessarypurchase of DMB TMV LLC’s interest in the joint venture for development$70,000,000. The decision to obtain full ownership of TMV LLC reflects the Company’s growth as a fully integrated real estate company and demonstrates our belief in the future success of the project. As real estate markets dictate,development. In connection with the acquisition of the membership interest, we can begin infrastructure development without any additional permits.entered into a new long-term debt facility of $70,000,000. The new debt has a ten-year term and a fixed rate of interest of 4.11%. These last two accomplishments are tied to the ultimate successful completion of our long-term performance milestones.

OperationsImprovements in total revenue and net income during 20132014 led to EBITDA and total revenues, the annual corporate incentive bonus quantitative metric,metrics, being met at just belowmaximum level and above the maximumtarget goal level for the year. This metric isyear, respectively. These metrics are discussed below under “– Annual“Annual Performance-Based Incentive Bonuses.” Revenue and operating profit goals for commercial/industrial real estate were slightly above

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target and revenueat maximum goal level, respectively. Revenue and operating goals for farming were above target for revenue and at the maximum level for operating profits. The named executive officers met the 20112012 rolling three-year cash flow objectives at 103% of the maximumtarget award level. The rolling three-year cash flow metric is described in the equity compensation section. The grants associated with the 20112012 three-year cash flow metric were paid out during March 2014.2015. The number of stock units that vested in 20142015 are identified in the footnotes to the Outstanding Equity Awards at 20132014 Fiscal Year-End table that begins on page 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.36.

For 20132014, the Compensation Committee made the following decisions:

Consideration of Say-on-Pay Results

At our 20112014 Annual Meeting, our stockholders expressed support for our executive compensation program, with over 60%78% of shareholders casting votes cast in favor of the advisory vote proposal. When designing our 20122014 and 20132015 executive compensation programs, the Compensation Committee considered, among other things, the 2011 and 2014 vote results and feedback we received from stockholders. In addition, the Compensation Committee considered the results of the 2010 Compensation Report, as discussed in the 2011 Proxy Statement. After careful consideration of these results, as well as other factors described herein, the Compensation Committee determined to make certain changes to the design of our executive compensation program beginning in 2012.2013 for 2014 and approved additional changes in early 2014 for 2014 and future compensation periods. The changes implemented centered aroundon the design of performance milestone objectives offor the Company, more quantitative annual incentive objectives, the use of peer companies in our analysis, and the establishment of executive officer stock ownership guidelines. These changes remainedremain in effect through 2013for 2015 and have contributed to our executive compensation program discussed in this Compensation Discussion and Analysis.

20142015 – The Year Ahead

The Company believes 20142015 will be a challenging but successful year in the accomplishment of corporate objectives. The challenges of 20142015 relate to farming and water management as we allocate our water resources to our permanent crops of almonds, pistachios, and wine grapes and to real estate development, while at the same time selling any excess water we have. California is in a severe drought, and state water project allocations have been reduced to zero. With respect toonly a 20% allocation of state water project contracts. We will also have challenges regarding oil

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royalty revenue, as prices have declined in excess of 50% from the accomplishment ofprevious year’s levels. This will challenge us in meeting our performance objectives, we anticipate the successful opening of the Outlets at Tejon in late summer2015 revenue and continued success at Tejon Ranch Commerce Center, or TRCC.cash flow objectives. 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. During the first quarter of 2014, the updated compensation program was approved by the Compensation Committee and the Board of Directors. 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 havehas 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 consistLTIP, consists of three equity delivery vehicles:

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The Compensation Committee believes that the changes to our executive compensation program beginningapproved in 2014 will encourage mutual accountability among our executive team while focusing the team on important goals in the short-short and long-term.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 NEOs 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 NEO 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.

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, requirerequires 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:

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Pay Mix Analysis.

The mix of total compensation elements for our NEOs in 2013,2014, as a percentage of total compensation, is set forth in the table below. Note that the 20132014 CEO values represent the first full year of employment agreement offor our new CEO.

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The pay component percentages illustrate that variable compensation consists ofcomprises a significant percentage of total compensation. The emphasis on variable compensation supports the Compensation Committee’s goal of a pay for performancepay-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.

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The Role of Compensation Committee 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 andOfficer; it also 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 PoePOE Group, to prepare a new analysis of executive officer compensation. The Compensation Committee requested the PoePOE 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 PoePOE 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 2013,2014, the Compensation Committee, with guidance from our independent compensation consultant, the PoePOE Group, reviewed our NEOsNEOs’ total compensation against a peer group of publicly traded real estate land companies.companies (the 2014 Compensation Report). The peer group data is based on 20132014 and 20122013 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 align management’s incentives with the long-term interests of our stockholders. In developing the compensation plan, the Compensation Committee seeks to be aware of changing economic and industry conditions, and changing compensation trends. In achieving these objectives, a variety of compensation elements are used as described below.

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Base Salaries.

When establishing base salaries, the Compensation Committee takes into account each NEO’s performance of his role and responsibilities and, to the extent useful, the range of compensation of comparable executives in a peer group. The Compensation Committee believes that compensation objectives are effectively met when a

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majority of an executive’s compensation is composed of performance basedperformance-based bonuses and long-term incentive compensation, 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 fixed compensation better aligns management with stockholders.

In 2012,2013, the Compensation Committee approved the following 20132014 base salaries for our NEOs.

In determiningdeciding to keep our Chief Executive Officer’s 2013Mr. Bielli’s 2014 base salary at $500,000,$475,000, the Compensation Committee took into accountdetermined that the total compensation package for the Chief Executive Officer, including base salary, which is competitive with the market, based on a 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 impact current compensation levels.

The base salaries for the Messrs. Drew,Mr. Lyda, Mr. Atkinson, and Mr. Tobias were increased by 3%, while Mr. Lyda’sDrew’s base salary was increased by 10%8%. When granting these salary increases, the Compensation Committee, along with the Chief Executive Officer, performed an annual review of each of the other named executive officers’ salaries and evaluated possible changes to base salary for each of the other named executive officers for 2013.2014. The Compensation Committee also took into account peer group information and the fact that there have been noin evaluating salary increases for the last two years.increases. Mr. Lyda’s 10%Drew’s 8% increase also reflects increased operational responsibilities within water management and mineral operations.

Mr. Bielli joined the Company in September 2013. The amount shown for Mr. Bielli is his annual salary, which remains the same for 2014.responsibilities.

In December 2013,2014, the Compensation Committee determined that for 2014,2015, our Chief Executive Officer’s salary would be increased by 5% to $500,000 and the base salarysalaries of the other NEOs would be increased by 3% based on. In determining the 2015 salary levels the Compensation Committee evaluated overall company performance, peer group information, base salary compensation in 2013relation to total compensation, and information from the 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. Each named executive officer at a minimum has 50% of the annual incentive bonus based upon EBITDA or divisionaltotal revenues and earnings. The remaining 50%EBITDA. Each NEO also has at least 20% of the annual incentive bonus tied to corporate short-term objectives that are defined and measureable. The remaining 30% of the annual incentive is tied to the achievement of qualitative measures based upon areas of emphasisdivisional revenues and earnings and identified individual objectives 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. Annual incentive bonuses are 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-halfone-quarter of the annual incentive payment. Vesting of restricted stock issued in settlement of 20132014 annual bonuses will occur in threetwo installments, one-thirdone-half each year, beginning in March 20142016 and ending in March 2016. To account for the delay in receiving the full incentive (the restricted stock grants are not fully vested until March 2016, whereas cash bonuses would have been paid in full in March 2013) and the fact that each named executive officer must stay with the Company

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through March 2016 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.2017. 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

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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 goalsindividual objectives 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 thatwho 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.

Generally, the Chief Executive Officer’s qualitative goalsindividual objectives are tied to land entitlement, public outreach in support of entitlement, and development and conservation goals as well as operational and staffing objectives. The qualitative performance goalsindividual objectives for the other NEOs 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 weightingsweighting for the individual objectives of each NEO at 10% to 15% of the total annual bonus. This judgment is 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 hereach NEO’s direct role in achieving such objective.

The annual incentive 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 NEOs 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 a 20102014 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 determined in the 20102014 Compensation Report.

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The following chart provides a breakdown of 20132014 annual incentive award measurement by performance measurement categories and the total 20132014 incentive award as a percentage of salary. Final award measurement for the named executive officers will reflect actual results. Therefore, theThe award measurement percentage most likely will befor each NEO for each category is a number between threshold and target or target and maximum.maximum or maximum achievement for 2014. As an example, if the EBITDA goal achievement for a particular year was 25% in excess of target, then the award measurement for the CEO would be 100% for that year, or 1.25 times his target level of 80%:

Quantitative Financial Goal – Corporate

Because a very important long-term goal is the achievement of entitlement and beginning of development for our real estate projects is a very important long-term goal, and because 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. For our annual incentive, a singletwo corporate financial goal isgoals are considered: EBITDA.EBITDA and total corporate revenue. 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 measurementEBITDA is being used rather thanwith total revenue or net income, because at this stage in the Company’s business, EBITDA provides a better indicator of management’s creation of operating cash and overall financial performance, since the Company has significant non-cash expenses each year. For 2013, achievement of target performance with

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respect to this quantitative financial goal required that EBITDA equal $7,505,000 with threshold performance at $5,629,000, and maximum performance at $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 20132014 business plan and operating budget. For 2013, 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 goal for the year. Incentive bonuses determined in December 2013 will not be adjusted based on the actual EBITDA number. The actual results for the year were above the maximum target budget amount due to improved commercial/industrial revenues, including higher equity in earnings of unconsolidated joint ventures and an increase in farming profits compared to the 2013 operating budget.

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Quantitative Financial Goal – Division

The following are the division financial results for the Senior Vice President, Real Estate and 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. Commercial/industrial real estate revenues and net income targets do not include grazing leases, land management ancillary revenues, and off site lease revenues.joint venture revenues from the TA/Petro joint venture. Mr. Drew’s blended performance percentage is shown in the table above.

The Senior Vice President, Agriculture, Dennis J. Atkinson, had a 20132014 quantitative goalgoals related to farming revenues and net income. For 2013,2014, the Company recognized farming revenue that was greater than target but less than the maximum level. Mr. Atkinson also had a target net income goal for the year that was achieved at greater than the maximum level. Both goals were achieved at a greater than budgeted target level due to increases in pistachio, grape and almondhay revenues, that were partially offset by higherand lower cost of sales when compared to the 20132014 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 will be difficult to attain without significant effort and development of new business opportunities.

QualitativeIndividual Performance Objectives

In addition to the quantitative goals described above, the Chief Executive Officer’s annual incentive bonus in 20132014 was based upon the achievement of qualitativeindividual 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 entitlement efforts that the Compensation Committee and the Board believe to be critical to the achievement of the Company’s long-term business plan). QualitativeIndividual goals for 20132014 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 our water strategy.strategy, and completion of outlet center development. Based on achieving final permitspreliminary zoning for the Tejon Mountain Village project, progress in moving forward our Centennial project, beginninginternal integration of constructionall management functions for TMV and the Grapevine Development, completion and opening of the new outlet center at the Tejon Ranch Commerce Center, and the

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continued strengthening of the Company’s water investment, the Compensation Committee determined that the Chief Executive Officer achieved a targetmaximum level of performance. In addition, the Compensation Committee approved a discretionary bonus of $25,000 based on the successes just mentioned and the overall progress made in transitioning the Company to internal management of all development projects.

The other named executive officers have more diverse qualitativeindividual 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

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Company’s long-term business strategy related to land entitlement, development, and conservation). Generally, the qualitative goals covered: (1) coordinating with joint venture partnerscoordination regarding entitlement and permitting activity milestones for our Tejon Mountain Village community, Centennial community, and the CentennialGrapevine 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; (4) implementation of a ranch-wide management plan in connection with the Conservation and Land Use Agreement; (5)(3) acquiring and managing new water resources; (6) expansion(4) management of oil explorationleases on ranch lands; (7) meaningful progress toward(5) oversight of the construction of the new outlet center; (8)(6) implementation of the approved ten-year farm management program; (9)(7) implementing new capital funding activities and financing of outlet center construction;corporate operations; and (10)(8) 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 andperformance objectives, with final approval provided by the Compensation Committee. In evaluating the success of meeting specific qualitativeindividual 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 20132014 for the named executive officers at the levels shown in the above table.

Individual 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 officers’ subjective weighting is identified above under Individual 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 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.three development projects and are tied to successful entitlement and approval of development plans. Due to their strategic significance, we believe that disclosing specific objectivesmilestones and time 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 fewthree years in light of the current entitlement environment in California. During 2013, milestone performance grants related to full permitting of the Tejon Mountain Village community vested. The number of shares vested is shown in the Option Exercises and Stock Vested table on page 38.

With respect to the grant of the annual performance units,shares, 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 unitsshares that have a fair market value equal to that amount on the date of grant. Vesting of these annual grants is tied to the achievement of a rolling three-year cash metric. The rolling three-year cash metric is budgeted cash provided from operations lessas calculated per GAAP for cash used for capital investment, excluding activities within marketable securities.flow statements. For 2013,2014, the dollar amount attributed to performance shares for the Chief Executive Officer was $300,000$380,000, and for the other named executive officers it was a rangeranged from $80,000 to $118,000$170,000 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 20102013 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 officersofficer’s dollar amount of value. The shares granted are expensed based on the closing price of the stock on grant date.

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The annual performance unitsshares 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 managecreate operating cash assets over an extended period at a time when cash demands will be high and net income will not be significant. For 2013,2014, this cash flow measure covers the years 20132014 through 20152016 and has a cumulative cash usagefrom operations target of $107,207,000.$36,374,000. 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, maintenance of farm revenues at current levels, and progress with respect to pre-development activities at Tejon Mountain Village and entitlement activities at Centennial.Centennial and Grapevine. Please refer to our Annual Report on Form 10-K for the year ended December 31, 20132014 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 goalgoals for the 2011 – 2013 period wasyears prior to 2014 were tied to cumulative cash usage, of $39,762,000,which is defined as cash provided from operations less cash used for capital investments, excluding activities within marketable securities. For the 2012–2014 period, the goal for cumulative cash usage was $50,154,000, and the goal for the 2012 – 20142013–2015 period is cumulative cash usage of $53,038,000.$107,207,000. For the 2011 – 20132012–2014 period, goal achievement was above103% of the maximumtarget objective, with cash usage at $13,734,000.$46,800,000. These grants, which are referenced in footnote 2 to the Outstanding Equity Awards at 20132014 Fiscal Year-End table that begins on page 37,36, vested and were delivered after the March 20142015 Board of Directors meeting. See the 20132014 Grants of Plan Based Awards Table on page 35,34 for the number of shares granted to each named executive officer for the 2013–20152014–2016 rolling three-year period. The table below summarizes the outstanding (as of the end of 2013)2014) performance grantshare measurement goals.

During 2014, with the approval of the new LTIP, the Compensation Committee granted time-vested restricted stock to the NEO’s. This new element is seen as a balance to the strong performance orientation of both the LITP and the annual incentive program with the objective of retaining our executive team. The dollar value attributed to these shares is one-half the annual performance share grant. For 2014, the dollar amount for the Chief Executive Officer was $190,000, and for the other NEOs ranged from $40,000 to $85,000.

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 nonpublicnon-public 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.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 to short-term pay. For mostmany of our employees, including the Chief Executive Officer, the Chief Financial Officer, 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,In addition, for these three NEOs, the Company also provides a supplemental executive retirement plan, or SERP. Based on their hiring dates, the new Chief Executive Office and the Vice President General Counsel are not included in the pension plan or SERP, which were frozen as of February 1, 2007, 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.

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,Company, and

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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 thatwho 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 in 1992 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 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 securitySocial 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.service. The Company also offers a 401(k) program to its employees, which offers a matching contribution equal to one percent1% of salary, for employees in the pension plan, if the employee contributes at least four percent4% 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 percent2% of salary if they contribute at least four percent4% of salary to the plan.

The named executive officers may elect to defer cash- 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.

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Claw backClawback Policy.

The Company has a policy requiring a fixed course of action with respect to compensation adjustments following restatements of performance targets.our financial statements. In the event 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 have 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, or by such other means or combination of means as the Board determines to be appropriate.

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Stock Ownership Guidelines.Guidelines.

The Company has stock retention guidelines as follows:

All named executive officers arewere expected to make reasonably steady progress toward these ownership guidelines between now andby the end of December 2014, with the exception of the Chief Executive Officer, who has until 2018 to meet the guidelines, and the Vice President, General Counsel, who has until 2016 to meet the guideline based on datedates of hiring. The three NEOs who were scheduled to meet stock ownership guidelines by the end of 2014 achieved those objectives. 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 will be evaluated by the Compensation Committee and reflected in each named executive officer’s annual review for that year. During 2012,The Board of Directors strongly discourages hedging transactions or the pledging of stock as collateral for loans. For approval of these types of transactions, an NEO must request a pre-clearance from the Chief Financial Officer and General Counsel and then approval by the Compensation Committee approved stock retention guidelines for non-employee directors as indicated above.Committee.

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 reason in connection with a change in control. Please refer to the Potential Payments upon Termination or Change in Control table on page 4241 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.Internal Revenue.

In addition to the foregoing change in control severance benefits, the named executive officers thatwho 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.

During 2013, the Company entered into an Employment Agreement with the Chief Financial Officer, which provides for severance benefits outside of a change in control context. For detailed information regarding the Employment Agreement, please refer to our Quarterly Report on Form 10-Q for the Narrative Disclosure to the Summary Compensation Table and Grants of Plan Based Awards Table on page 36.period ending March 31, 2013.

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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, 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 endured for approximately one year.

Unless the Compensation Committee determines otherwise, if an NEO’s employment with the Company is terminated for any reason, including death or disability prior to vesting of all or any part of a restricted stock award or performance unit award, a NEO’s employment with the Company is terminated for any reason, including death or disability, the NEO 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-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 companyCompany 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 companyCompany and to the executives. However, tax consequences, including but not limited to tax deductibility by the company,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 Betts, Goolsby, Leggio, Metcalfe, Tuomi, Winer, and Stack comprise the Compensation Committee. 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 20142015 Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.2015. This report is provided by the following independent directors, who comprisecomprised the Compensation Committee.Committee for 2014.

Geoffrey L. Stack (Chairman), Steven A. Betts, John L. Goolsby, Anthony L. Leggio,

Norman Metcalfe, Frederick C. Tuomi, Michael Winer

Members of the Compensation Committee

Fiscal Year 20132014 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, 2014, 2013, 2012, and 2011.2012.

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At maximum achievement, the value received under the three-year rolling performance shares awards granted in 20132014 would be $171,934$570,000 for Mr. Bielli, $254,934 for Mr. Lyda, and$149,580 for Mr. Tobias, $180,511$214,846 for Mr. Drew, and $118,732$117,769 for Mr. Atkinson. The maximum achievement value for milestone performance shares granted in this column2014 would be $1,710,000 for Mr. Bielli, $764,752, 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,$644,490 for Mr. Stine’s annual incentive was paid all in cashDrew, $353,257 for Mr. Atkinson, and he received no 2013 three-year rolling performance shares due to his retirement in December 2013.$448,740 for 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.Tobias. 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 8,11, 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, the2014. The stock awards granted did not vest during 2014 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 20132014

The following table provides information about awards granted to the named executive officers in the fiscal year ended December 31, 20132014 pursuant to our 2004 Stock Incentive Program.