DEF 14A

DEF 14A 1 d558586ddef14a.htm DEF 14A DEF 14A

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. )

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Tejon Ranch Co.

(Name of Registrant as Specified in Its Charter)

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

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Post Office Box 1000

Tejon Ranch, California 93243

March 28, 2018

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Tejon Ranch Co. (the “Company”) on Tuesday, May 8, 2018, at 10:30 A.M., Pacific Time, at the Balboa Bay Resort, 1221 West Coast Highway, Newport Beach, 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, such as a government-issued photo identification and a proxy card or voting instruction form with your name on it.

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

May 8, 2018

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 Resort, 1221 West Coast Highway, Newport Beach, California, 92663 on Tuesday, May 8, 2018, at 10:30 A.M., Pacific Time, for the following purposes:

To elect the two directors named in this Proxy Statement.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2018.

To approve named executive officer compensation on an advisory basis.

To transact such other business as may properly come before the meeting or any adjournment thereof.

The nominees of the Board of Directors of the Company for election at the meeting are Geoffrey L. Stack and Michael H. Winer.

The Board of Directors of the Company recommends that you vote (i) “FOR” the election of each of the nominees; (ii) “FOR” the ratification of the appointment of Ernst & Young LLP; and (iii) “FOR” the approval of named executive officer compensation.

The Board of Directors has fixed the close of business on March 9, 2018 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting.

Your attention is directed 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 telephone 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,

NORMAN J. METCALFE,

Chairman of the Board

ALLEN E. LYDA, Chief Financial

Officer, Assistant Secretary

Tejon Ranch, California

March 28, 2018

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 TELEPHONE 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.

2018

Notice of

Annual Meeting of

Stockholders

and Proxy

Statement

Table of Contents of the Proxy Statement


Solicitation of Proxies			1

Record Date			1

Proposal No. 1 The Election of Directors			6

Proposal No. 2 The Ratification of the Appointment of Independent Registered Public Accounting Firm			7

Proposal No. 3 Advisory Vote to Approve Executive Compensation			9

Board of Directors			11

Corporate Governance Matters			15

Committees of the Board			16

Code of Business Conduct and Ethics and Corporate Governance Guidelines			19

Succession Planning			19

Board’s Role in Risk Oversight			19

Compensation Discussion and Analysis			20

Stock Ownership			61

Report of the Audit Committee			63

Other Matters			64

TEJON RANCH CO.

Post Office Box 1000

Tejon Ranch, California 93243

PROXY STATEMENT

Annual Meeting of Stockholders

May 8, 2018

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders To Be Held on May 8, 2018

The Proxy Statement and accompanying Annual Report to Stockholders and Annual Report on Form 10-K are available at www.tejonranch.com or at http://materials.proxyvote.com/879080

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Company for use at the Annual Meeting of Stockholders to be held on May 8, 2018 (the “2018 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 30, 2018.

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 two 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 2017, (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 2018 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 (“NYSE”).

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 9, 2018 (the “Record Date”) are entitled to notice of, and to vote at, the meeting. There were 25,908,039 shares of Common Stock outstanding on the Record Date. Each stockholder is entitled to one vote for each share of Common Stock held as of the Record Date on all matters presented at the 2018 Annual Meeting other than the election of directors. Each stockholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. 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 election of each nominee 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.

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 or 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 2018 Annual Meeting must be present at the 2018 Annual Meeting, either in person or by proxy, in order for there to be a quorum at the 2018 Annual Meeting. Shares of Common Stock with respect to which the holders are present in person at the 2018 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 2018 Annual Meeting for the purpose of determining whether or not a quorum exists. Broker non-votes will also be counted as present for the purpose of determining whether a quorum exists. Stockholders cannot abstain in the election of directors, but they can withhold authority. Stockholders who withhold authority will be considered present for purposes of determining a quorum.

Voting Requirements

For Proposal 1 (election of directors), the two (2) candidates receiving the highest number of affirmative votes at the 2018 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 stating how the stockholder wishes to have his or her votes distributed. Withheld votes 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 2018 Annual Meeting. Abstentions will be counted as present and will thus have the effect of a vote against Proposal 2.

Approval of Proposal 3 (the advisory vote to approve 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 2018 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 for purposes of Proposal 3.

Pursuant to Delaware corporate law, the actions contemplated to be taken at the 2018 Annual Meeting do not create appraisal or dissenters’ rights.

Proxy Summary

2017 Performance Highlights

In determining 2017 compensation for our named executive officers, “NEOs”, the Compensation Committee of the Board considered the contributions of each of our executive officers to the Company’s strategy related to revenue, cash management, continued expansion of Tejon Ranch Commerce Center, and moving our residential development projects through the mapping and entitlement process. The Compensation Committee considered these items with a particular emphasis on the following areas:

2017 Company Highlights

• On October 27, 2017, the Company completed a rights offering, which raised $90 million in proceeds. The net proceeds of the offering are being used to provide additional working capital for general corporate purposes, including to fund general infrastructure costs and the development of buildings at Tejon Ranch Commerce Center, to continue forward with entitlement and permitting programs for the Centennial at Tejon Ranch and Grapevine at Tejon Ranch communities and costs related the preparation of the development of Mountain Village.

• Los Angeles County Department of Regional Planning finalized responses to comments received during the review of the Draft Environmental Impact Report for the Company’s Centennial master planned community reflecting an important milestone in the development of this community. The responses will become part of the Final Environmental Impact Report that will be considered first by the Los Angeles County Regional Planning Commission and later by the Board of Supervisors.

• The TRC-MRC 1 joint venture completed a 480,000 square foot industrial building on time, on budget, and on vision. The new building is located in the Tejon Ranch Commerce Center – East master planned project. One half of the building was leased in March 2018 by Dollar General.

• In December 2017, Kern County approved a Tentative Tract Map for the first three phases of development for the Mountain Village master planned community. During January 2018, the Company submitted for approval to Kern County the design plan for the first phase of the commercial area of Mountain Village.

2017 Company Performance

• For 2017, the net loss attributable to common stockholders was $1,555,000, representing a loss per common share of $0.07, compared with $558,000, or earnings per common share of $0.03, for fiscal 2016. The year-over-year reduction was due to a decline in farming revenues of $2,214,000, a decrease in mineral resource revenues of $8,170,000, and reduced income from unconsolidated joint ventures of $2,871,000. Helping to offset these declines in revenue was a decrease of $10,282,000 in expense, as a result of reduced water cost of sales and our staff rightsizing initiatives.

• Revenues and other income were $40,499,000 in fiscal 2017, a decrease of $13,835,000, or 25%, compared to revenue and other income of $54,334,000 in fiscal 2016. Recurring Commercial revenues were flat year over year as recurring lease


revenue from core assets offset the loss of lease revenue related to the sale of a real estate investment in 2016 and the recognition of a gain from the sale of land in 2016 within the Tejon Ranch Commerce Center. As noted above, farming revenues declined $2,214,000 in 2017 largely as a result of reduced pistachio production and the timing of the sale of 2017 crop almonds. During 2017, mineral resources saw a decline in revenues as a result of $8,347,000 reduction in water sales as opportunities for the sale of water were diminished due to the record level of rain and snow during 2017. Please refer to our 2017 Annual Report on Form 10-K for additional details regarding our 2017 operations. See the following chart for a summary of revenues.

	2017		2016
Total operating revenues		$35,657,000		$45,577,000
Total other income		615,000		1,659,000
Equity in earnings of unconsolidated joint ventures		4,227,000		7,098,000

Total Revenue and Other Income		$40,499,000		$54,334,000

Internally, our management’s performance is measured using a non-GAAP revenue number that includes total sales proceeds from real estate sales rather than the GAAP presentation of other income recognizing only the gain on sales from real estate. We believe disclosure of this non-GAAP information is useful to investors because it shows what results are taken into account in evaluating management. The adjustment is as follows:
	2017		2016
Total Revenues and Other Income		$40,499,000		$54,334,000
Gain on sale of real estate investment		—		(1,044,000)
Sales proceeds from sale of real estate		—		4,700,000

Non-GAAP Total Revenues and Other Income		$40,499,000		$57,990,000

2017 Compensation Summary

Our 2017 compensation program reflects our pay-for-performance philosophy. The short-term incentives paid to all our executives were well below target, ranging from 57%—70% of target. Adjusted EBITDA and adjusted revenue, the metrics used for purposes of our short-term incentives, declined from the previous year due to the declines in revenue as described above.

Three-year milestone grants were provided to our NEOs for the 2017-2019 plan cycle. These grants link compensation opportunities to strategic performance objectives important to the Company for the next three years. Milestone grants are awarded once every three years, which reflects the long-term nature of our business plan. Additional details on these grants are provided on page 45.

For the 2015-2017 three-year milestone grants, the goal for cumulative cash from operations was $32,292,000, and goal achievement was 118% of the target objective, with actual cash from operations of $38,197,000. These grants vested and were delivered in March after approval by the Compensation Committee.

Our CEO was granted a supplemental performance incentive in 2015, a portion of which was eligible to vest over a two-year period ending on December 31, 2017, based on our performance relative to two components. The award opportunity was based in part on an increase in revenue of Tejon Ranch Commerce Center-East. The performance incentive was paid out at maximum for this component due to a 96.6% increase in revenue from the properties. A second component of the performance incentive was our total stockholder return (‘TSR’) compared

to our peer group. Based on our TSR performance relative to our peers over the performance period, no incentive was paid for the TSR component of the supplemental performance incentive, further demonstrating alignment with stockholders.

The realized pay for our executive team in 2017 was 30% below the value realized in 2016.

•

2015-2017 realized pay for our CEO was 21% below pay as disclosed in the Summary Compensation Table because of the difference between the grant date fair value of equity awards granted during the period versus the actual value of equity that vested over the same period. This difference reflects the decrease in stock value realized over the period and the design of our compensation programs that emphasize long-term awards.

LOGO

Stockholder Engagement

•

Engaged with investors representing over 40% of our shares outstanding

•

Received feedback that investors needed a better understanding of our business model

•

Received feedback on the need to include stock return metrics into our compensation plans

•

Received feedback on the need to enhance our proxy disclosures with respect to results against budget

Our responses to investor feedback are provided on page 24.

Our Compensation Discussion and Analysis is on pages 20 to 49, and our Summary Compensation Table and other compensation tables are on pages 50 to 59.

3-year CEO Average SCT Pay vs. Realized $3,000,000 $2,000,000 $1,000,000 $0 $23,328 $1,642,740 $587,862 $584,722 -21% $23,328 [VALUE] $587,862 $584,722 $1 $1 $1 $1 $0 $0 $0 3-Year Total SCT Pay 3-Year Total Realized Pay Salary Value of Shares Vested Cash Incentives Paid All Other Compensation Value of Equity Granted

PROPOSAL 1

THE ELECTION OF DIRECTORS

The Board currently consists of nine directors divided into three classes based upon when their terms expire. The terms of three current directors (Class I) will expire at the 2018 Annual Meeting, the terms of three current directors (Class II) will expire at the 2019 Annual Meeting, and the terms of three current directors (Class III) will expire at the 2020 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 2018 Annual Meeting to serve as Class I Directors are Geoffrey L. Stack and Michael H. Winer, both are presently directors. Frederick C. Tuomi who has served as a Class I Director since 2014, informed the Board that he did not intend to stand for reelection at the 2018 Annual Meeting and as such was not nominated to stand for reelection.

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 and contained the information required by the Company’s Certificate of Incorporation and Bylaws. See “Stockholder Proposals for 2019 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-third 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 that 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 2018 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.

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, 2018. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal years 2017 and 2016 are described 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 2018 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 Accounting Firm.

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 that 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, 2017 and was selected by the Audit Committee to serve in that capacity for the fiscal year 2018.

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, 2017 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 2017 were $615,800. 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, 2016 and for the reviews of the financial statements included in the Company’s Forms 10-Q for the year ended December 31, 2016 were $548,579.

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, 2017 were $56,500. The Audit-Related Fees billed by Ernst & Young LLP for the year ended December 31, 2016 were $38,341.

Tax Fees. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice, and planning services for the year ended December 31, 2017 were $102,126. The aggregate fees billed by Ernst & Young LLP for tax compliance, advice and planning services for the year ended December 31, 2016 were $106,685. All fees billed for both 2017 and 2016 were solely related to compliance and planning services for tax return preparation.

All Other Fees. Ernst & Young LLP did not bill for any services other than those listed above for the years ended December 31, 2017 or December 31, 2016.

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 ended December 31, 2017 and 2016, 100% of the services provided by Ernst & Young LLP were pre-approved by the Audit Committee.

THE BOARD RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2018.

PROPOSAL 3

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

In accordance with Section 14A of the Securities Exchange Act of 1934, (the “Exchange Act”), we are asking stockholders to approve on an advisory basis the compensation paid to the Company’s NEOs, as disclosed in this Proxy Statement on pages 20 to 59.

The Board recommends that stockholders vote to approve, on an advisory basis, the compensation paid to the Company’s NEOs as described in this Proxy Statement, for the following reasons.

Sound Program Design

We design our executive officers’ compensation programs to attract, motivate, and retain the key executives who drive our success and industry leadership while considering individual and Company performance and alignment with the interest of long-term stockholders. We achieve our objectives through compensation that:

✓ provides a competitive total pay opportunity,

✓ consists primarily of performance-based compensation,

✓ enhances retention through multi-year vesting of stock awards, and

✓ does not encourage unnecessary and excessive risk-taking.

LOGO

Best Practices in Executive Compensation

Some of our leading practices include

✓ an executive compensation recovery policy,

✓ an executive stock ownership policy,

✓ a policy prohibiting pledging and hedging of Tejon stock,

✓ no executive-only perquisites or benefits,

✓ no guaranteed bonus programs, and

✓ utilization of an independent compensation consultant who reports to the Compensation Committee.

Variable Compensation Fixed 29.3% Variable 70.7% 23.4% 18.9% 9.5% 18.9% Annual Incentive Performance Milestone Grants Performance Grants—Operating Cash Time-Based Grants

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

The Board has adopted a policy of holding an advisory vote on executive compensation every year, and unless the Board modifies its policy, we expect that, after the 2018 Annual Meeting, the next advisory vote on the compensation of our NEOs will take place at our 2019 Annual Meeting.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE COMPENSATION OF THE COMPANY’S NEOS AS DISCLOSED ON PAGES 20 TO 59 IN THE PROXY STATEMENT.

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 each individual director should possess certain attributes, 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 a nominee must meet. 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 2018 Annual Meeting; (2) Class II Directors, whose terms will expire at the 2019 Annual Meeting; and (3) Class III Directors, whose terms will expire at the 2020 Annual Meeting. The Board currently consists of nine directors. The Board’s leadership is structured so that the Chairman of the Board and Chief Executive Officer are separate positions. The Chairman of the Board is also an independent director. The Board believes that this structure is appropriate for our Company and our stockholders at this time because it provides an additional layer of oversight to management and management’s activities and allows the Board to act independently 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 Company. In keeping with its stated criteria for director nominees described in the section entitled

“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 the current director nominees, 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 Committee considered the specific areas noted below for each director when determining which of the director’s qualifications best suit 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 I Directors as well as the Class II and Class III Directors.


Class I Directors Whose Terms Expire in 2018 and Principal Occupation, Employment, or Directorships	First Became Director		Age
Geoffrey L. Stack		1998		74
Mr. Stack has been the managing director of the Sares-Regis Group, a commercial and residential real estate development and management firm, since 1993. Mr. Stack is responsible for all residential operations of Sares-Regis, including development, acquisitions, finance, and management activities. Mr. Stack graduated from Georgetown University and received an M.B.A. in Real Estate Finance at the Wharton School, University of Pennsylvania. Mr., Stack is a past trustee of the Urban Land Institute (“ULI”) and the former Chairman of the ULI Foundation. He is also the past Chairman of the National Multifamily Housing Council. Our Board believes Mr. Stack’s real estate development experience and his experience as the managing director of a real estate company make him well qualified to serve as a director.

Michael H. Winer		2001		62
Mr. Winer has been employed by the Third Avenue Management (or its predecessor) since May 1994. The Third Avenue Real Estate Value Fund is an open-end mutual fund that invests in the securities of publicly-traded real estate and real estate-related companies in developed countries by adhering to a strict value-investing approach. Mr. Winer retired on February 28, 2018 and will thereafter have no affiliation with Third Avenue Management LLC. From 2009 through 2016, Mr. Winer served as a director of Newhall Holding Company LLC. In 2016, Newhall merged with two other California master-planned communities. Since the merger in May 2016, Mr. Winer has served as a director of the merged entity, Five Point Holdings LLC, where he is the Chair of the Compensation Committee and serves on the Audit Committee and Nominating and Corporate Governance Committee. He also has served as a director of 26900 Newport Inc. since 1998. Since 2016, Mr. Winer has been a member of the Board of Trustees of two not-for-profit organizations: The Pacific Legal Foundation and the Future Citizens Foundation (dba The First Tee of Monterey County). Mr. Winer received a B.S. degree in accounting from San Diego State University and is a certified public accountant in California, inactive. Our Board believes that Mr. Winer’s investment industry background and specifically his experience with real estate investing make him very qualified to serve as a director on our Board.


Class II Directors Whose Terms Expire in 2019 and Principal Occupation, Employment, or Directorships	First Became Director		Age
Robert A. Alter		2014		67
Mr. Alter is currently President of Seaview Investors, LLC, a real estate investment company, in Newport Beach, CA, and has held that position since 2007. He is the Chairman Emeritus and Founder of Sunstone Hotel Investors (NYSE: SHO), a real estate investment company, where he served as Chief Executive Officer of the company (or its predecessor) from 1985 to 2007, after which he became Executive Chairman and remained on the board until 2012. He is one of the premier hotel investment and management executives in the hospitality industry. During the 22-year period of Mr. Alter’s position as Chief Executive Officer, Sunstone acquired 125 hotel properties with over 20,000 guest rooms. Mr. Alter received a B.S. in Hotel Administration from the Cornell University School of Hotel Administration. Our Board believes that Mr. Alter’s hospitality background makes him very qualified to serve as a director.

Steven A. Betts		2014		60
Mr. Betts is President and Founder of Betts Real Estate Advisors, a consulting company founded by Mr. Betts in 2017. He has served as strategic advisor to the Holualoa Companies, a commercial real estate investment company with three-quarters of a billion dollars in assets held all across the U.S. and in Europe, since 2015, as a Senior Advisor to the Southwest Division of Hines, one of the largest commercial investment and development companies in the world, since 2015 and as a strategic advisor to the Helios Education Foundation, the largest education foundation in Arizona and Florida, since 2016. He is also the Director of Development for Chanen Development Company, an affiliate of Chanen Construction, headquartered in Phoenix. Mr. Betts also served as the Senior Vice President and Managing Director of Assets for the ASU Foundation from March 2012 through May 2013. Previous to these endeavors, Mr. Betts was President and CEO of SunCor Development Company from 2005 to 2010, a half-billion dollar plus asset base subsidiary of the publicly traded Pinnacle West Capital Corporation. SunCor was a developer of master planned communities throughout the Mountainwest and large-scale commercial projects in Metropolitan Phoenix. Mr. Betts holds numerous private board and committee posts, including the executive committee of the Greater Phoenix Economic Council, the Governor’s Transportation and Trade Alliance, Past Chairman of the Interstate 11 Coalition, Past Chairman and Trustee of the Arizona Chapter of The Nature Conservancy, and a past-chair and current member of the Urban Land Institute-Arizona District Council Governance Committee. Mr. Betts received his law degree with honors from DePaul University and a B.A. with honors from Augustana College. Our Board believes that Mr. Betts’ master planned community background makes him very qualified to serve as a director.

Daniel R. Tisch		2012		67
Mr. Tisch has been the managing member of TowerView LLC, an investment fund of the Tisch Family, since 2001. Since January 2012, Mr. Tisch has also served as a director of Vornado Realty Trust. Mr. Tisch graduated from Brown University and has over 40 years of investing experience. Mr. Tisch worked for major Wall Street firms from 1973 to 1989 and since then has been managing investment partnerships. Our Board believes that Mr. Tisch’s investment industry background and his experience in capital raising and risk management make him well qualified to serve as a director.


Class III Directors Whose Terms Expire in 2020 and Principal Occupation, Employment, or Directorships	First Became Director		Age
Gregory S. Bielli		2013		57
Mr. Bielli is President and Chief Executive Officer of Tejon Ranch Co., a position he’s held since December 2013. Prior to this position, Mr. Bielli served as the Chief Operating Officer for the Company from September 2013 through November 2013. Mr. Bielli has over 26 years of experience in real estate, land acquisition, development, and financing. Prior to Tejon Ranch, he was a regional president of Newland Communities, one of the country’s largest and most successful master planned community developers. Mr. Bielli served as President of Newland’s Western Region from 2006 until September 2013. Mr. Bielli earned a bachelor’s degree in Political Science from the University of Arizona in 1983. Our Board believes Mr. Bielli’s experience in real estate operations, specifically master planned communities, and his position as Chief Executive Officer of the Company, make him well qualified to serve as director.

Anthony L. Leggio		2012		65
Mr. Leggio has been President of Bolthouse Properties, LLC, a commercial and residential real estate development firm, since January 2006. Prior to serving at Bolthouse Properties, LLC, Mr. Leggio served as Vice President and General Counsel of Wm. Bolthouse Farms from July 2001 until December 2005. Previously, Mr. Leggio was Managing Partner of the law firm of Clifford and Brown for nearly 25 years. Mr. Leggio has served as a director of Valley Republic Bank since 2008, Three Way Chevrolet Company since 2000, H.F. Cox Trucking since 1993, Mark Christopher Chevrolet since 2001, and W.B. Camp Companies since 2009. Mr. Leggio received his B.S. degree from the University of the Pacific and his J.D. from the University of the Pacific, McGeorge School of Law. Our Board believes Mr. Leggio’s real estate development and agricultural experience, his tenure as Chief Executive Officer of a real estate development company and his legal experience make him well qualified to serve as a director.

Norman J. Metcalfe		1998		75
Mr. Metcalfe has served as Chairman of the Company’s Board of Directors since 2014. Mr. Metcalfe has an extensive history and background in real estate development and homebuilding. He previously was Vice Chairman and Chief Financial Officer of The Irvine Company, one of the nation’s largest real estate and community development companies. Mr. Metcalfe retired from The Irvine Company in 1997. Prior to the Irvine Company, Mr. Metcalfe spent over 20 years in various real estate, corporate finance and investment positions with the Kaufman and Broad/SunAmerica family of companies. These positions included President and Chief Investment Officer of SunAmerica Investments and Chief Financial Officer of Kaufman and Broad Home Corporation (currently known as KB Home). Mr. Metcalfe served as a director of CalAtlantic Homes, from 2000 until February 2018. Mr. Metcalfe received a B.S. and an M.B.A. from the University of Washington. Our Board believes Mr. Metcalfe’s extensive financial experience, understanding of capital structure within the real estate industry, and experience in publicly held companies make him very qualified to serve as a director


Class I Director not standing for reelection at the 2018 Annual Meeting	First Became Director	Age
Frederick C. Tumoi	2014	63

None of the corporations or organizations described in the biographical information above are subsidiaries or other affiliates of the Company. There are no family relationships among any directors or executive officers of the Company.

CORPORATE GOVERNANCE MATTERS

The Board has determined that all directors, except Mr. Bielli, are “independent” under the listing standards of 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: Robert A. Alter, Steven A. Betts, Anthony L. Leggio, Norman J. Metcalfe, Geoffrey L. Stack, Daniel R. Tisch, Frederick C. Tuomi, and Michael H. Winer. In addition, the Board also determined that John L. Goolsby, who served as a director through May 2017, was independent during the time he served as a director. 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 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. Metcalfe presides over these executive sessions.

During 2017, there were five meetings of the Board. During 2017, 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 2017 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:

Executive
Committee

Audit
Committee

Compensation
Committee

Real Estate
Committee

Nominating
and
Corporate
Governance
Committee

Investment
Policy
Committee

Robert A. Alter

LOGO

Steven A. Betts

LOGO

Gregory S. Bielli

LOGO

Anthony L. Leggio

LOGO

Norman J. Metcalfe

LOGO

Geoffrey L. Stack

LOGO

Daniel R. Tisch

LOGO

Frederick C. Tuomi

LOGO

Michael H. Winer

LOGO


Committee Chair		Committee Member

During 2017, there were no meetings of the Executive Committee, five of the Audit Committee, four of the Compensation Committee, three meetings of the Real Estate Committee, two meetings of the Nominating and Governance 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.

Each year, the Board performs a self-evaluation to assess its effectiveness and the participation of each board member, in addition, on an annual basis, the Audit Committee, Real Estate Committee, Compensation Committee, and Nominating and Corporate Governance Committee all perform self-evaluations to measure their effectiveness.

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.

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, compensation and oversight 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 current 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, Tejon Ranch, California 93243.

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. Leggio 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 stockholder 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 current 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, 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 for 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 officers have any input in executive 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 2017, the Compensation Committee retained the POE Group to advise the Committee on marketplace trends in executive compensation, analyze companies for peer company identification for the benchmarking of NEO compensation and NEO compensation decisions. POE consults with the Compensation Committee about its recommendations to the Board on Chief Executive Officer and other NEOs compensation. The decision to engage an outside compensation consultant was not recommended by management. POE Group was used throughout 2017. POE Group did not provide any other services to the Company in 2017, and its fees

were $32,450 for the year. The Compensation Committee has reviewed an assessment of any potential conflicts of interest raised by POE Group’s work for the Compensation Committee, which assessment considered the following six factors: (i) the provision of other services to the Company by POE Group; (ii) the amount of fees received from the Company by POE Group, as a percentage of POE Group’s total revenue; (iii) the policies and procedures of POE Group that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the POE Group consultant with a member of the Compensation Committee; (v) any Company stock owned by the POE Group consultants; and (vi) any business or personal relationship of the POE Group consultant or POE Group with any of the Company’s executive officers. The Committee 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 plans and operations 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 development pro formas and budgets. The Real Estate Committee also consults with 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 current 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, Tejon Ranch, California 93243.

The 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 the marketable securities investment 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 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 regarding the structure, composition, and functioning of the Board and its committees, and evaluates and recommends changes to the Corporate Governance Guidelines. The Nominating Committee also annually reviews the independence of all directors and evaluates 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 current 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, 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, c/o Corporate Secretary, P.O. Box 1000, 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 and Bylaws. See “Stockholder Proposals for 2019 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 were used during 2017, and, accordingly, no fees were paid to such advisors during 2017. Past practice has been for the Nominating Committee to seek recommendations for new directors from current directors, the Chief Executive Officer, and outside advisors.

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’s 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, 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 the independence of directors and evaluates potential new Board nominees. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the full Board, as appropriate, and additional review or reporting on risks is 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.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) provides a detailed description of the objectives and principles of our executive compensation programs. It explains how compensation decisions are linked to performance as compared to Company performance and stockholder interests. The NEOs, for the 2017 fiscal year are as follows.

Name

Title

Gregory S. Bielli

Chief Executive Officer

Allen E. Lyda

Chief Financial Officer

Joseph N. Rentfro

Executive Vice President, Real Estate

Hugh F. McMahon

Executive Vice President, Real Estate

Michael R.W. Houston

Senior Vice President, General Counsel

Executive Summary

Our executive compensation program aligns with our strong pay-for-performance philosophy and ties a substantial portion of executive compensation to the achievement of annual and long-term strategic objectives directly linked to the creation of stockholder value. The objectives of our executive compensation program are to (i) drive performance against critical strategic goals designed to create long-term stockholder value and (ii) pay our executives at a level and in a manner that ensures Tejon Ranch is capable of attracting, motivating, and retaining top executive talent. We design our compensation programs to support our commitment to performance. On average at target goal achievement, 75% or more of an NEO’s compensation will vary based on our company performance and the achievement of long-term real estate development performance milestones. Our real estate performance milestones are tied to a variety of factors such as planning and design, achievement of land entitlements, successful defense of litigation against our entitlements, development of projects, and finally sales and leasing within the projects.

LOGO

Our primary business objective is to maximize long-term stockholder value through the monetization of our land-based assets. This is accomplished by moving our assets up the value creation chain through the entitlement process, the mapping process, development, and ultimately to sales and leasing. A key element of our strategy is to provide entitled land for large scale residential and mixed-use real state communities to serve the growing population of Southern and Central California. We are currently engaged in commercial sales and leasing at our fully operational commercial/industrial center Tejon Ranch Commerce Center, or TRCC, and are in the mapping

Variable Compensation Fixed 29.3% Variable 70.7% 23.4% 18.9% 9.5% 18.9% Annual Incentive Performance Milestone Grants Performance Grants—Operating Cash Time-Based Grants

process and entitlement process for our three major residential mixed-use master planned communities Centennial, Grapevine, and Mountain Village. All of these efforts are supported by diverse revenue streams generated from other operations, including farming, mineral resources, and our various joint ventures.

Currently our revenues are derived principally from commodity based businesses such as farming, and mineral resources including water sales, as well as commercial real estate. Our long-term business plan is for our commercial and residential real estate assets to produce the vast majority of our revenues. The time involved to develop real estate assets in California through the entitlement stage to development is a many year process. Therefore, the value of our company and ultimate realization of its asset value will not occur until future years.

The skill, knowledge, and experience required of our senior management in the early period of large scale residential and mixed-use real estate communities is significant. Only with highly talented executives managing early stage development, will our assets realize their potential and our stockholders realize the desired return on their investment.

The chart below is a continuum of the real estate development process highlighting each project’s current status and key milestones to be met in moving through the real estate development process in California. The real estate development process may be subject to delays arising from California’s complex regulatory structure and litigation environment.

LOGO

Our long-term and short-term performance incentive plans are designed to reward the NEOs for success in moving projects forward along the above continuum. The progress is often measured based on milestone related goals rather than typical financial measures used by many companies. Success in achieving these performance objectives is critical to the creation of value within our land assets. Due to the long-term nature of the real estate development process in California the increase in value of land within our projects is not immediately recognized in stock market value largely due to the timing of revenue generation, which does not begin to occur until the execution phase of development operations.

Grapevine Create a Development Plan Prepare Environmental Impact Report Obtain Project Approval from County Board of Supervisors Detailed Maps / Engineering Level Designs for: Lot layouts Grading Amenities & Infrastructure, including Sewer & Water systems ENTITLEMENT STATE & FEDERAL PERMITS TRACTS / FINAL MAPS CONSTRUCTION PERMITS TRCC OPERATIONS Obtain Necessary Permits from: State Department of Fish and Wildlife Regional Water Quality Control Board US Army Corps of Engineers Obtain Permitting to Commence Construction Centennial Mountain Village

2017 Company Highlights

• Los Angeles County Department of Regional Planning has finalized responses to comments received during the review of the Draft Environmental Impact Report for the Company’s Centennial master planned community, reflecting an important milestone in the development of this community. The responses will become part of the Final Environmental Impact Report that will be considered first by the Los Angeles County Regional Planning Commission and later by the Board of Supervisors.

Company Performance 2017

Declines in total revenue and net income during 2017 led to EBITDA and total revenues, the annual corporate incentive bonus quantitative metrics, being below the target goal levels for 2017 and also below 2016 actuals. These metrics are discussed below under “Annual Performance-Based Incentives.” Revenue and operating profit goals for commercial/industrial real estate were also below the target goal level. The NEOs met the 2015 rolling three-year cash flow objectives at 118% of the target award level. The rolling three-year cash flow metric is described in the equity compensation section. The grants associated with the 2015 three-year cash flow metric were paid out during March 2018. The number of stock units that vested in 2018 is identified in the footnotes to the Outstanding Equity Awards at 2017 Fiscal Year-End table that begins on page 53.


• For 2017, the net loss attributable to common stockholders was $1,555,000, representing a loss per common share of $0.07, compared with $558,000, or earnings per common share of $0.03, for fiscal 2016. The year-over-year reduction was due to a decline in farming revenues of $2,214,000, a decrease in mineral resource revenues of $8,170,000, and reduced income from unconsolidated joint ventures of $2,871,000. Helping to offset these declines in revenue was a decrease of $10,282,000 in expense, as a result of reduced water cost of sales and our staff rightsizing initiatives.
• Revenues and other income were $40,499,000 in fiscal 2017, a decrease of $13,835,000 or 25%, compared to revenue and other income of $54,334,000 in fiscal 2016. Recurring Commercial revenues were flat year over year, as recurring lease revenue from core assets offset the loss of lease revenue related to the sale of a real estate investment in 2016 and the recognition of a gain from the sale of land in 2016 within the Tejon Ranch Commerce Center. As noted above, farming revenues declined $2,214,000 in 2017 largely as a result of reduced pistachio production and the timing of the sale of 2017 crop almonds. During 2017, mineral resources saw a decline in revenues as a result of $8,347,000 reduction in water sales as opportunities for the sale of water were diminished due to the record level of rain and snow during 2017. Please refer to our 2017 Annual Report on Form 10-K for additional details regarding our 2017 operations. See the following chart for a summary of revenues.
	2017		2016
Total operating revenues	$	35,657,000	$	45,577,000
Total other income		615,000		1,659,000
Equity in earnings of unconsolidated joint ventures		4,227,000		7,098,000

Total Revenue and Other Income	$	40,499,000	$	54,334,000
Internally, our management’s performance is measured using a non-GAAP revenue number that includes total sales proceeds from real estate sales rather than the GAAP presentation of other income recognizing only the gain on sales from real estate. We believe disclosure of this non-GAAP information is useful to investors because it shows what results are taken into account in evaluating management. The adjustment is as follows:
	2017		2016
Total Revenues and Other Income	$	40,499,000	$	54,334,000
Gain on sale of real estate investment		—		(1,044,000	)
Sales proceeds from sale of real estate		—		4,700,000

Non-GAAP Total Revenues and Other Income	$	40,499,000	$	57,990,000

Pay-for- Performance

Consistent with our pay-for-performance philosophy, Company performance in 2017, as well as over the 2015-2017 period, directly impacted payouts for 2017, as follows:

•

Annual Cash Incentives. Declines in total revenue and net income during 2017 led to adjusted EBITDA and total revenues, the annual corporate incentive bonus quantitative metrics, being below the target goal levels for 2017 and also below 2016 actuals. Performance against revenue and operating profit goals for commercial/industrial real estate were also below the target goal level. These metrics are discussed below under “Annual Performance-Based Incentives.”

•

2015-2017 Cashflow Performance Shares. The NEOs met the 2015 rolling three-year cash flow objectives at 118% of the target award level. The rolling three-year cash flow metric is described in the equity compensation section. The grants associated with the 2015 three-year cash flow metric were paid out during March 2018. The number of stock units that vested in 2018 is identified in the footnotes to the Outstanding Equity Awards at 2017 Fiscal Year-End table that begins on page 53.

•

CEO Supplemental Long-Term Performance Stock Grant. Our CEO was granted a supplemental performance incentive in 2016, a portion of which was eligible to vest over a two-year period ending on December 31, 2017, based on our performance relative to two components. The award opportunity was based in part on an increase in revenue of Tejon Ranch Commerce Center-East. The performance incentive was paid out at maximum for this component due to a 96.6% increase in revenue from the properties. A second component of the performance incentive was our total TSR compared to our peer group. Based on our TSR performance relative to our peers over the performance period, no incentive was paid for the TSR component of the supplemental performance incentive, further demonstrating alignment with shareholders. The number of stock units that vested in 2017 is identified in the Stock Vested in Fiscal Year 2017 table that begins on page 55.

Consideration of Say-on-Pay Results and Stockholder Feedback

At our 2017 Annual Meeting, our stockholders expressed support for our executive compensation program, with 60.5% of stockholders casting votes in favor of the advisory vote proposal. Stockholder engagement is an important process and our directors and management recognize the benefits that come from this dialogue. We engage with stockholders throughout the year in order to:

•

Provide visibility and transparency into our business, key real estate entitlement milestones, and our performance

•

Discuss with stockholders and prospective stockholders the issues that are important to them and hear their expectations

•

Assess emerging issues that may affect our business, inform our decision making, and help shape our practices.

We provide stockholders and prospective stockholders with many opportunities to provide feedback to our Board and management through one-on-one meetings and telephone calls. Throughout the year we have met with investors representing over 40% of shares outstanding. The feedback we received related to our business plans and compensation programs are presented below.

What We Heard

How We Responded

Stockholders would like to get a better understanding of business model

Management evaluated past disclosures and for the 2017 Annual Report on Form 10-K expanded disclosures related to our land entitlement and development programs

Stockholders favor the addition of total stock return measurements into performance based equity programs

The Compensation Committee has included a total stock return component within the CEO’s long term supplemental performance stock grants and in future years will evaluate including this as a component of other NEO’s performance based equity grants

Stockholders had concerns about annual cash incentive plan financial metrics being compared to budget rather than prior year financial metrics

Enhancement of disclosures to better illustrate the strategic alignment of the budget, which is tied to the current commodity-price environment

2018 – The Year Ahead

The Company believes 2018 will be a challenging year in terms of the accomplishment of corporate objectives. The 2017-2018 winter weather has brought warmer temperatures than normal, which could possibly impact 2018 farm crop production and contribute to the challenges of accomplishing corporate revenue objectives. There is also the potential for a decline in farm crop prices, especially almonds and pistachios. A potential positive for 2018, is that we expect water sales to increase over 2017 as a result of below normal rain and snow levels within the state and many counties in the state, including Kern County have again been designated as being in a drought condition. Our successes may also come from the approval of the specific plan for our Centennial development, formal approval of a new Foreign Trade Zone designation for TRCC, and the leasing of buildings within TRCC.

General Objectives and Compensation Philosophy

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 NEOs 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-based incentive bonus, and long-term performance-based and time-based equity awards. At the NEO level, a significate portion of our incentive compensation arrangements are designed to reward the achievement of long-term milestone objectives related to real estate development that are measurable and instrumental to our success. This will drive the creation of value, as well as the achievement of year-to-year operating performance goals.

Overall Compensation Plan Design and Core Tenets

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, the success of the

Company in achieving real estate development milestones, and the individual performance of each executive. The Compensation Committee also believes that long-term incentives should be a significant factor in determining compensation, particularly because the business of real estate development, including obtaining complex entitlement approvals, managing the litigation process, completing development, and many of the other actions and decisions of our NEOs requires an extended time horizon before the Company realizes a tangible financial benefit. The following core tenets inform the design of our compensation plan.

Competitive Pay Opportunity

✓ We pay competitively to attract, motivate, and retain the executives who drive our success and industry leadership.

Equity Incentives

✓ A significant percentage of annual target pay opportunity is in equity to incentivize a long-term focus and promote strong alignment with stockholders.

Sustainable Long-Term Performance

✓ A large majority of total pay is subject to multi-year vesting or performance requirements.

Explicit Pay and Performance Link

✓ We explicitly tie pay to performance by delivering a large majority of pay through performance-based cash and equity incentives.

Compensation Governance

✓ We discourage unnecessary and excessive risk-taking through our vesting and stockholding requirements and clawback provisions.

The principles of our pay philosophy influence the design and administration of our executive compensation programs. The Compensation Committee uses several components of pay that are linked to both our long-term and short-term performance in the executive compensation programs, including long-term incentives, annual cash incentives, base pay, and benefits. The chart below illustrates the linkage between the vehicles of pay we use and our pay principles.


Pay Principles	Long–term Incentives	Annual Cash Incentives	Base Pay	Benefits
Total compensation should reinforce business objectives and values.	●	●	●	●

A significant portion of an NEO’s total compensation should be variable and based on performance	●	●

Incentive compensation should balance long-term intermediate, and short-term performance.	●	●

Incentive compensation should align the interests of NEO’s with stockholders.	●	●

Compensation should foster a culture of collaboration which shares focus and commitment to our Company	●	●

Compensation opportunities should be competitive.	●	●	●	●

A portion of compensation should provide NEOs with a stable predictable source of income and benefits.			●	●

Our Executive Compensation Best Practices


WHAT WE DO		WHAT WE DO NOT DO
✓ Utilize multiple performance metrics in our incentive plans tied to our short- and long-term goals equity vehicles		× Provide tax gross-ups for executive officers on perquisites or change-in-control severance payments

✓ Employ common short-term goals for the majority of our NEOs’ bonus opportunities		× Allow hedging of TRC stock

✓ Provide a majority of equity compensation opportunity through performance-based goals		× Allow pledging of TRC stock

✓ Align a significant portion of long-term equity opportunity to project milestones that are linked to stockholder value creation		× Allow holding of TRC stock in margin accounts

✓ Adhere to an executive compensation recovery, or clawback, policy to ensure accountability		× Reprice or replace equity awards

✓ Require executives and directors to own Company stock to reinforce the alignment of their interests with those of our stockholders		× Provide “single trigger” cash severance based solely upon a change in control of the Company

✓ Utilize an independent compensation consultant who reports directly to the Compensation Committee		× Provide large bonus payouts without justifiable performance linkage

✓ Recognize an independent Chairman of the Board in our corporate governance structure		× Provide guaranteed bonuses

✓ Provide an annual stockholder “say on pay” vote		× Time equity awards in coordination with the release of material non-public information

The Role of the 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 NEOs. The Compensation Committee independently reviews and establishes the compensation levels of the Chief Executive Officer; it also reviews the performance of the Chief Executive Officer and discusses his performance with him. At the beginning of the year, the Chief Executive Officer works with the Compensation Committee to establish his goals and objectives to be evaluated throughout the year. For the remaining executive officers, the Chief Executive Officer makes recommendations as to compensation levels, including grants of equity awards, for final approval by the Compensation Committee.

The Role of the Compensation Consultant

In accordance with its Charter, the Compensation Committee has the sole authority to retain and terminate independent consultants on matters of executive compensation and benefits, including sole authority to approve the consultant’s fees and other retention terms. The Compensation Committee also has the authority to obtain advice and assistance for internal and external legal, accounting, or other advisors. The Compensation Committee utilizes the POE Group, Inc. as its compensation consultant. The POE Group reports directly to the Compensation Committee. The POE Group was not engaged to perform any additional services beyond its support of the Compensation Committee.

In reviewing conflicts of interest, our Compensation Committee considered the following six factors with respect to the POE Group:

• The provision of other services to the Company.

• The amount of fees received from the Company as a percentage of the POE Group’s total revenue.

• The policies and procedures of the POE Group that are designed to prevent conflicts of interest.

• Any business or personal relationship of the POE Group with a member of the Compensation Committee.

• Any Company stock owned by the POE Group.

• Any business or personal relationship of the POE Group with any of the Company’s executive officers.

Upon consideration of these factors, our Compensation Committee concluded that the engagement of the POE Group did not present any conflicts of interest.

In connection with its engagement by the Compensation Committee, the POE Group has:

• Provided information, insights, and advice regarding compensation philosophy, objectives, and strategy.

• Recommended peer group selection criteria and identified and recommended potential peer companies.

• Provided preliminary analysis of competitive compensation practices for NEOs.

• Consulted with the Compensation Committee on long-term incentive and equity plan design.

• Reviewed and commented on recommendations regarding CEO and NEO compensation.

• Advised the Compensation Committee on specific issues as they arose.

The POE Group has worked with compensation committees and senior management teams in real estate development companies for over fifteen years.

Compensation Risk Assessment

As part of its risk assessment process, the Compensation Committee reviewed material elements of executive and non-executive employee compensation. The Compensation Committee concluded these policies and practices do not create risk that is reasonably likely to have a material adverse effect on the Company.

The structure of our compensation program for NEOs does not incentivize unnecessary or excessive risk-taking. The base salary component of compensation does not encourage risk taking because it is a fixed amount. The incentive plan awards have the following risk limiting characteristics:

✓ Annual incentive awards for each NEO are limited to the fixed maximum specified in the incentive plan. Cash awards under the annual incentive plan are limited to 150% of the target cash award.

✓ Annual incentive awards are based on a review of a variety of performance factors, thus diversifying the risk associated with any single aspect of performance, while amounts received from performance stock awards are based on Company results rather than an individual executive officer’s performance.

✓ The variable compensation program places a greater weight on long-term pay opportunity as compared to short-term opportunity.

✓ The annual incentive plans allocates the highest weighting on overall corporate performance.

✓ Stock awards are not tied to formulas that could focus our NEOs on specific short-term outcomes.

✓ The Compensation Committee, which is composed of independent members of our Board, approves final incentive plan cash and stock awards in its discretion after reviewing executive and corporate performance.

✓ Awards are subject to our clawback policy.

✓ The majority of long-term value is delivered in shares of the Company with a multi-year vesting schedule, which aligns the interests of our NEOs to the long-term interests of stockholders.

✓ NEOs are subject to our executive stock ownership requirements.

2017 Executive Compensation Plan Developments

Our annual incentive compensation plan (“AICP”) has four primary performance measures:

Achievement of targeted adjusted (“EBITDA”).

Achievement of targeted corporate revenue.

Achievement of short-term milestone goals, which are defined each year.

Divisional quantitative/individual measures.

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

Our long-term incentive plan (“LTIP”) consists of three equity delivery vehicles:

Project-related milestone grants reflect the first phase of stockholder value creation. Project-related milestones are awarded once every three years and are tied to specific business objectives. The Compensation Committee believes that accomplishing these goals are paramount to achieving our long-term real estate development goals. The value of the milestones grants are three times that of an award that would normally be granted every year. The performance milestone focus is on identifying projects, securing entitlement, permit, and mapping approvals, and project implementation of our real estate holdings. These milestone performance units have specific defined goals that are measurable and not subjective. This component of our LTIP delivers 40% of the long-term compensation opportunity. New performance milestone grants were determined by the Compensation Committee for the next three-year measurement period beginning in 2017 and are described in more detail below.

Three-year performance share grants capture the second phase of value creation: the management and creation of cash flow. The Compensation Committee has selected three-year cumulative corporate operating cash flow as the performance share plan metric. These grants are made on an annual basis. This component of our LTIP delivers 40% of the long-term compensation opportunity.

Time-vested restricted stock units are the final component of our LTIP. This element in the plan design recognizes the inherent risk in large-scale land development. Time-vested restricted stock units help balance the performance orientation of our approach with the objective of retaining our executive team. The grants vest one-third each year for three years. This component of our LTIP delivers 20% of the long-term compensation opportunity.

The Compensation Committee believes that long-term performance award design reflects the value creation process inherent in large-scale land development by first identifying projects, securing complex entitlements, managing litigation, mapping projects, and then developing the projects to maximize financial returns. Please refer to earlier graphic describing the land entitlement and development process within California.

Pay Mix Analysis

The target mix of total direct compensation elements for our NEOs, as a percentage of total compensation, is set forth in the table below. The first set of exhibits illustrates the three-year direct compensation target selected by the Compensation Committee. We show a three-year period to account for the granting of project milestone equity performance grants that occurs once every three years. A project milestone grant was most recently made in March 2017. For comparison purposes, the second set of exhibits shows the 2015 – 2017 actual direct compensation granted pay mix. The actual to target direct comparison shows that we are in line with the three-year target and that the CEO’s long-term equity portion has increased as a percentage of his total direct compensation. This increase in the CEO’s long-term equity compensation is consistent with the intent of the Compensation Committee to have a greater percentage of pay tied to equity performance milestones.

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	Variable Compensation
Named Executive Officer—Target Mix	Base Salary		Annual Incentives		(2) Long-Term Equity
CEO 3-Year Target (1)		25%		25%		50%
Other NEOs 3-Year Target (1)		33%		22%		45%

CEO PAY MIX 3-YR TARGET Long-Term Equity, 50% Salary, 25% Variable Cash, 25% OTHER NEO PAY MIX 3-YR TARGET Long-Term Equity, 45% Salary, 33% Variable Cash, 22%

In comparison to the above three-year target pay mix the actual granted pay mix is shown in the chart and table below:

LOGO


Named Executive Officer – Actual Granted Pay Mix	Base Salary		Annual Incentives		(2) Long-Term Equity
CEO 3-Year Target (1)		21%		21%		58%
Other NEOs 3-Year Target (1)		31%		17%		52%

1.	The three-year measurement period covers 2015 – 2017. LTIP milestone equity grants were made in 2017.

2.	Includes LTIP milestone equity grants that are made once every three years and are tied to specific milestones that lead to the achievement of development objectives. For this three-year period, the grants were made in 2017.

Realized vs. Summary Compensation Table Pay

The Summary Compensation Table (“SCT”) summarizes executive pay but does not account for the final payout of performance shares, if any, or the impact of changes to stock price on the value of restricted stock. Since the majority of awards under the Company’s LTIP do not fully vest until after three years, it can be difficult to assess the link between pay and performance by reviewing the SCT alone. For this reason, we also consider realized pay. Realized pay demonstrates the actual impact on executive pay of changes in our share price during the performance period, as well as the payout of performance shares. Shares of restricted stock that vest during the applicable time period are valued at the date of vesting, and performance shares, if any, are valued at the date of payout.

CEO PAY MIX 3-YR ACTUAL Long-Term Equity, 58% Salary, 21% Variable Cash, 21% OTHER NEO PAY MIX 3-YR ACTUAL Long-Term Equity, 52% Salary, 31% Variable Cash, 17%

Realized vs. Summary Compensation Table Pay for the CEO: 2015 through 2017

The graph below illustrates three-year average SCT (“SCT Pay”) total compensation compared to three-year average realized total compensation for our CEO for the 2015-2017 period. The graph illustrates no differences between the comparisons for salary, cash incentives, or other annual compensation. However, the difference between long-term compensation values is significant, and the amount realized from the vesting of shares is considerably less than the value of equity grants reported in the SCT.

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3-year CEO Average SCT Pay vs. Realized $3,000,000 $2,000,000 $1,000,000 $0 $23,328 $1,642,740 $587,862 $584,722 -21% $23,328 [VALUE] $587,862 $584,722 3-Year Total SCT Pay 3-Year Total Realized Pay Salary Value of Shares Vested Cash Incentives Paid All Other Compensation Value of Equity Granted

Realized vs. Summary Compensation Table Pay for NEOs (other than the CEO): 2015 through 2017

Average NEO realized compensation over the three-year period ended December 31, 2017 was significantly lower than SCT Pay over the same period. Again, the difference between long-term compensation values is significant, and the amount realized from the vesting of shares is considerably less than the value of equity grants reported in the SCT.

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3-year Average NEO SCT Pay vs. Realized $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $129,404 $399,044 $186,470 $251,410 -20% $129,404 $205,599 $186,470 $251,410 3-Year Average SCT Pay 3-Year Average Realized Pay Salary Value of Shares Vested Cash Incentives Paid All Other Compensation Value of Equity Granted

CEO Compensation vs. TSR: 2012 through 2017

The chart below compares the five-year change in CEO SCT pay and the change in value of $100 invested in the Company (indexed total stock return, or TSR). CEO compensation has increased over the period, while the change in value of the $100 investment has decreased over the period. CEO compensation in 2014 and 2017 was higher than in other years due to three-year performance milestone grants being awarded during those years, and 2016 compensation increased as a result of supplemental performance milestone award grants that have measurement periods at the end of 2017 and 2019. The 2014 and 2017 milestone grants, which comprised a significant portion of long-term compensation, represented long-term pay opportunity for 2014 – 2016 and 2017 – 2019.

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CEO Total Compensation $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2012 2013 2014 2015 2016 2017 $200 $150 $100 $50 $0 Indexed TSR CEO Total Compensation Indexed TSR Linear (CEO Total Compensation) Linear (Indexed TSR)

CEO Realized Pay vs. TSR: 2012 through 2017

The Compensation Committee continues to emphasize our pay-for-performance philosophy, and considers the relationship between realized pay and TSR. The decline in value realized by our CEO demonstrates the strong link between pay actually delivered and stockholder returns. The chart below compares the five-year change in our CEO’s realized compensation and the change in value of $100 invested in the Company (indexed total stock return, or TSR). While the change in value of the $100 investment decreased over the period, CEO realized compensation also decreased, demonstrating strong alignment between TSR and CEO pay actually realized.

LOGO

Note: Pay values in 2012 and 2013 are for our previous CEO, Robert Stine. Pay value for 2014-2017 are for our current CEO, Gregory Bielli.

Market Comparison Review – 2017 Peer Group

Although the Compensation Committee does not believe that it is appropriate to establish compensation levels based solely on market comparisons or industry practices, the 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 2016, the Compensation Committee, with guidance from our independent compensation consultant, the POE Group, reviewed companies for inclusion in our 2017 peer group. The goal was to identify companies that are engaged in real estate development activities and are appropriate for comparison purposes based on revenues and market capitalization. The Compensation Committee compared NEOs’ total compensation against the peer group when evaluating 2017 compensation. In comparison to the peer group, TRC CEO pay is at the top of the rankings as a result of 2017 performance milestone grants as described in the Equity Compensation section beginning on page 44. The performance milestone grants at TRC differ from peers because the business model causes the need to incent executives long-term to identify projects, secure entitlements, permit, map approvals,

CEO Realized Pay $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2012 2013 2014 2015 2016 2017 $0 $50 $100 $150 $200 Indexed TSR CEO Realized Pay Indexed TSR Linear ( CEO Realized Pay) Linear (Indexed TSR)

and project implementation of real estate holdings. Long-term payouts, once achieved, sometimes lead to a perceived misalignment between pay and performance because the actual benefits are not seen until years after. This differs from other real estate companies that are able to have a much quicker turn around in profit.

Note in the table below that TRC’s revenue is below the majority of the peer group, but market capitalization is at the peer group median. The Compensation Committee believes that market capitalization is a more appropriate criterion for comparison to peer companies, considering that our primary assets are under development and are not yet producing their projected revenues. The peer companies have monetized their majority of their real estate assets and are comparatively producing greater revenues as a percentage of market capitalization.

The 2017 peer group data is shown below. The related comparison statistics are based on 2016 financial data which was relied on by the Compensation Committee in approving the 2017 peer group.


		Agree Realty		Forestar Group
		Alexander & Baldwin		Kite Realty Group
		Alico		Limoneira
		AV Homes		One Liberty Properties
		BRT Realty Trust		Retail Opportunity Investments
		Consolidated-Tomoka Land		Saul Centers
		Cousins Properties		St. Joe Co.
		First Industrial Trust		Stratus Properties

Peer Company Data Comparison


(Dollars in Millions)	Peer Median (1)		Tejon (2)		Tejon Percent Rank
Total Revenues	$	171	$	54	3%
Market Capitalization	$	879	$	529	44%
Net Income	$	28	$	.6	13%

(1)	Peer company data as of December 31, 2016; September 30, 2016; and October 31, 2016.

(2)	Tejon company data as of December 31, 2016.

(3)	Tejon 2017 Company data: Total revenues $41; Market capitalization $538; and Net loss $1.6.

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, as well as changing compensation trends. To achieve these objectives, the plan uses a variety of compensation elements as described below.


Compensation Component	Objective	Characteristics
Base Salary	Provide a fundamental level of compensation to the NEOs for performing their roles and assuming their levels of responsibility.	Fixed cash component, annually reviewed and adjusted from time to time based on performance and peer group analysis.

Annual Incentive Bonus	Drive the achievement of performance goals in a particular fiscal year.	Annual incentive bonuses are paid in cash. This performance- based bonus opportunity is based on the achievement of quantitative and qualitative goals. Performance period is one year.

Long-Term Incentive Compensation	Promote the achievement of our long-term financial goals and development milestone goals to create value by aligning NEO and stockholder interests, promoting NEO retention, and rewarding NEOs for performance over time.	Long-term incentive compensation is in the form of performance shares and time- vested awards. The payout of performance shares is based on the achievement of targets set by the Compensation Committee related to cash flow management and the achievement of measurable performance goals and development milestones. Performance period for performance shares is three years. Time-vesting awards vest ratably over three years.

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 our peer group. The Compensation Committee believes that compensation objectives are effectively met when a majority of an executive’s compensation is composed of performance-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.

The Compensation Committee approved the following 2016 and 2017 base salaries for our NEOs.


Name	2016 Salary	2017 Salary	Percent Increase	Peer Group Rank
Gregory S. Bielli	$600,000	$625,000	4.2%	58%
Allen E. Lyda	$300,245	$309,252	3%	55%
Joseph N. Rentfro	$256,250	$261,375	2%	20%
Hugh F. McMahon	$240,875	$248,101	3%	13%
Michael R.W. Houston	$250,000	$255,000	2%	17%

The Compensation Committee determined at the end of 2016 to provide Mr. Bielli with an increase in base salary for 2017. The Compensation Committee approved the increase in light of the following considerations: a comparison of CEO salaries in the peer group, recognition of Mr. Bielli’s leadership and contribution to our long-term goals related to land entitlement and master planned community development, 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.

When granting the salary increases for 2017 for the other NEOs, the Compensation Committee, along with the Chief Executive Officer, performed an annual review of each of the other NEOs’ salaries and evaluated changes to base salary. This review considered several factors, including peer group information, the market for similar job functions, the economic environment, and the general experience of the Compensation Committee members.

In December 2017, the Compensation Committee determined that for 2018, our Chief Executive Officer’s salary would remain at $625,000 and the base salaries of the other NEOs would be increased by 0% to 3% for 2018. The exception being Mr. Lyda who received at 5.1% increase due to the addition of new job responsibilities. In determining the 2018 salary levels, the Compensation Committee evaluated overall Company performance, peer group information, base salary compensation in relation to total compensation, and information from the POE Group, our compensation consultant.

Annual Performance-Based Incentive

Tejon’s practice is to award annual incentive bonuses based upon the achievement of performance objectives established at the beginning of each year. At least 50% of the annual incentive bonus for each NEO is based upon adjusted total company revenues and adjusted EBITDA. At least 20% to 30% of the annual incentive bonus for each NEO is tied to corporate short-term objectives that are defined and measurable. The remaining 20% to 30% of the annual incentive is tied to divisional revenues and earnings and identified individual objectives that the Compensation Committee believes are important for the particular NEO to focus on in the context of achieving the Company’s short-term goals and generating revenue and EBITDA. Annual incentive bonuses are paid in cash.

The attainment of each year’s quantitative financial goals for each of the NEOs is uncertain and is dependent upon factors such as real estate sales and leasing programs, the timing of entitlement activities for our developments, and the uncertainty inherent in our farming and mineral operations due to the commodity nature of the products we produce and the fact that we do not know the ultimate price we will receive for our products each year. The achievement of individual objectives tied to land entitlement, development, and conservation efforts is highly 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 NEOs.


Weighted Measures	Gregory S. Bielli - Chief Executive Officer	Allen E. Lyda - Chief Financial Officer	Joseph Rentfro - EVP Real Estate	Hugh F. McMahon - EVP Real Estate	Michael R. W. Houston SVP General Counsel
	Corporate Quantitative Measurements
Adjusted EBITDA	40%	40%	40%	40%	40%
Adjusted Total Company Revenue	10%	10%	10%	10%	10%

Corporate Quantitative Measurements	50%	50%	50%	50%	50%


	Corporate Short-Term Objectives
Grapevine Business Plan approval	6%	6%	6%	4%	6%
Completion of building for lease on time and budget	12%	12%	12%	8%	12%
Approval of tentative tract map – Mountain Village	12%	12%	12%	8%	12%

Corporate Short-Term Objectives	30%	30%	30%	20%	30%


	Divisional Quantitative / Qualitative Measurements
Division Revenue	0%	0%	0%	6%	0%
Division Net Operating Income	0%	0%	0%	9%	0%
Individual Objectives	20%	20%	20%	15%	20%

Divisional Quantitative/Qualitative Weighting	20%	20%	20%	30%	20%

Total Weighting	100%	100%	100%	100%	100%

Generally, the Chief Executive Officer’s individual objectives are tied to land entitlement, public outreach in support of entitlement, and development and conservation goals as well as operational, strategic planning, and staffing objectives. The individual objectives for the other NEOs are generally 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 weighting for the individual objectives of each NEO at 15% to 20% of the total annual bonus opportunity. 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 each 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 opportunity levels (expressed as a percentage of base salary) for achievement at the threshold, target, and maximum levels. These percentage levels are in line with information provided by the POE Group, a compensation consulting group reporting to the Compensation Committee.

The target percentage levels are outlined below.

Threshold

Target

Maximum

Gregory S. Bielli, Chief Executive Officer

50.00

100.00

150.00

Allen E. Lyda, Chief Financial Officer

35.00

70.00

105.00

Joseph N. Rentfro, EVP, Real Estate

35.00

70.00

105.00

Hugh F. McMahon, EVP, Real Estate

35.00

70.00

105.00

Michael R.W. Houston SVP, General Counsel

30.00

60.00

90.00

Quantitative Financial Goal – Corporate

Because the achievement of entitlements and the 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, two corporate budgeted financial goals are considered: adjusted EBITDA and adjusted total corporate revenue. Total adjusted corporate revenue includes revenue from operations, gross sales of investment property, other income, and equity in earnings of unconsolidated joint ventures. Our definition of adjusted 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. Adjusted EBITDA is being used with adjusted total revenue because at this stage in the Company’s business, adjusted EBITDA provides a better indicator of management’s creation of operating cash, which is critical to the funding of our entitlement and development efforts, since the Company has significant non-cash expenses each year. The following table outlines adjusted EBITDA and adjusted total revenue results for 2017. Adjusted EBITDA for compensation purposes includes only company specific operations and not the add back of our share of unconsolidated joint venture depreciation, amortization and interest expense. Therefore, this number does not agree to the numbers shown in the 2017 Annual Report and Form 10-K, Non-GAAP measures.


Corporate Quantitative Goal	2016 Actual		2017 Threshold		2017 Target		2017 Maximum		2017 Actual		% of Target
Adjusted EBITDA *	$	9,528,000	$	6,851,000	$	9,134,000	$	13,701,000	$	4,939,000		36.51	%
Adjusted Total Revenue **	$	57,990,000	$	39,715,000	$	52,953,000	$	79,430,000	$	40,499,000		76.48	%

These performance measurement numbers are determined based on calculations within the Company’s 2017 business plan and operating budget. The Compensation Committee uses data from each year’s annual budget because it is a reflection of what the Company believes will happen in the coming year based on an analysis of the commodity markets we operate in, anticipated weather patterns that impact our agricultural operations, and sales/leasing activity within TRCC. Our operating budgets we believe are a better predictor of each year’s revenue creation compared to prior year actual numbers, because our forecasting process attempts to pick up trends in the commodity markets we operate in that may not be reflected in the prior year actual numbers.

Using prior year numbers as a target level for comparison to the next year can unfairly benefit or hurt plan participants due to the nature of commodity markets. As you see above the target goal numbers and the 2017 actual numbers are not significantly different. The budgeted target goal for 2017 is less than the prior year actuals due largely to the sale in 2016 of investment real estate that resulted in the receipt of $4,700,000 in proceeds. The 2017 actual results are significantly below target goal numbers and prior year numbers due to the unfavorable variances described earlier in this section on page 23. The tables below reflect actual achievement shown in the format used by the Company internally to measure NEOs performance compared to the approved 2017 operating budget.


* Adjusted EBITDA Actual 2017 Calculation (non-GAAP):
Loss before income tax benefit	$	(2,702,000	)
Interest, net		(462,000	)
Depreciation and amortization		4,551,000
Stock compensation expense		3,552,000

Total Adjusted EBITDA	$	4,939,000


** Total Adjusted Revenue:
Real Estate Commercial /Industrial (includes equity in earnings of joint ventures)	$	13,630,000
Mineral Resources		5,983,000
Farming		16,434,000
Ranch Operations		3,837,000
Other Revenue		615,000

Total Adjusted Revenue and Other Income (1)	$	40,499,000

(1)	As shown in the 2017 Annual Report filed on Form 10-K.

Quantitative Financial Goal – Division

The following are the division financial results for the Executive Vice President, Real Estate.


Name and Principal Position	Threshold		Target		Maximum		Actual		% of Target
Mr. McMahon – EVP Real Estate
Revenue Goal – Commercial/ Industrial	$	13,624,000	$	18,165,000	$	27,248,000	$	13,630,000		75%
Net Income Goal – Commercial / Industrial	$	8,177,000	$	10,903,000	$	16,355,000	$	7,101,000		65%

In the setting of quantitative division goals each year, we develop target goals through our annual budgeting process. 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. As an example, the 2017 commercial real estate budget included a forecasted lot sale within TRCC that was not achieved, which was the primary factor in the unfavorable variance when comparing actual revenue and net income goals to target.

Short-Term Objectives – Corporate

Annual short-term milestone corporate objectives are generally those items identified each year that are critical to successfully moving forward the Company’s long-term objectives related to land entitlement and development within our four development projects.

For 2017 the short-term objectives were as follows:

•

Approval of Grapevine Business Plan third quarter of 2017. The importance of this goal is that the business plan provides an overview of future funding needs and business strategy as this development moves forward. The goal was achieved during the third quarter of 2017, which exceeded the goal target date of December 2017.

•

Completion of building for lease within the Tejon/Majestic joint venture during the third quarter of 2017 on time, on budget, and on vision. The achievement of this goal will allow TRCC to market a new building that is ready for occupancy allowing us to better compete for business within the North Los Angeles market. Goal achievement was at maximum, due to meeting completion date and being under budget.

•

Approval of tentative tract map for the Mountain Village master planned community. The importance of this goal is that it is the next to last step necessary to fulfilling all of the regulatory actions prior to the ability to pull permits for the start of construction. The tentative tract map goal was achieved in December 2017 at the target achievement level. The final step necessary prior to being able to begin development is receipt of approval for the final engineering map.

Individual Performance Objectives

In addition to the quantitative goals described above, the Chief Executive Officer’s annual incentive bonus in 2017 was based upon the achievement of individual 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. Individual goals for 2017 specifically related to leading and directing a ranch-wide strategy to facilitate future successful entitlement of our development projects, overseeing an outreach strategy to build support for our entitlement programs in Los Angeles County and Kern County, obtaining tentative tract map approval in Kern County for the Mountain Village master planned community, completion of an equity offering, overseeing succession plans for key departments, and overseeing a cost control program that included a rightsizing initiative. Based on a successful rights offering, completion of the response phase of the environmental impact report for the Centennial project, and a reduction in operating costs for the year, the Compensation Committee determined that the Chief Executive Officer individual performance was at a level above target achievement but below maximum achievement.

The other NEOs have more diverse individual performance goals than the Chief Executive Officer. These goals are generally tied to individual areas of responsibility, which focus on both short-term and long-term goals (including improving operational efficiencies and achieving short-term milestones and other goals with respect to the Company’s long-term business strategy related to land entitlement, development, and conservation). Generally, the qualitative goals covered:

• Coordination regarding entitlement and permitting activity milestones for our Mountain Village community, Centennial community, and Grapevine community.

• Guiding the Company in working with various government agencies as a part of the entitlement process.

• Acquiring and managing water resources to include the drilling of new water wells.

• Completion of development of speculative building for lease within Tejon Ranch Commerce Center.

• Completion of successful equity offering for the Company.

• Meeting implementation dates related to farm developments.

• Analysis of future staffing requirements to meet near-term and long-term needs as the Company moves forward with its land entitlement and development plans.

• 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 NEOs (other than the Chief Executive Officer) in meeting their individual performance objectives, with final approval provided by the Compensation Committee. The Chief Executive Officer and the Compensation Committee note whether each objective was accomplished in the time frame designated and if the outcome achieved was as specified in the original objective.

2017 Performance Achievement

The following chart provides a breakdown of 2017 annual incentive award measurement by performance measurement category and the total 2017 incentive award as a percentage of salary. Final award measurement for the NEOs reflect actual results. The award measurement percentage for each NEO for each category varies this year from zero to a number between threshold and maximum achievement.


Weighted Measures	Gregory S. Bielli - Chief Executive Officer			Allen E. Lyda - Chief Financial Officer			Joseph Rentfro - EVP Real Estate			Hugh F. McMahon - EVP Commercial			Michael R.W Houston SVP/ General Counsel
		Corporate Quantitative Measurements
Adjusted EBITDA		40.00	%		40.00	%		40.00	%		40.00	%		40.00	%
Results as % of Target		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%

Weighted Total (1)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%

Adjusted Total Company Revenue		10.00	%		10.00	%		10.00	%		10.00	%		10.00	%
Results as % of Target		50.40	%		50.40	%		50.40	%		50.40	%		50.40	%

Weighted Total (1)		5.04	%		5.04	%		5.04	%		5.04	%		5.04	%

		Corporate Short-Term Objectives
Blended Short-Term Objectives		30.00	%		30.00	%		30.00	%		20.00	%		30.00	%
Results as % of Target		130.00	%		130.00	%		130.00	%		130.00	%		130.00	%

Weighted Total (1)		39.00	%		39.00	%		39.00	%		26.00	%		39.00	%

		Divisional Quantitative / Qualitative Measurements:
Blended Revenue/Net Operating Income		0.00	%		0.00	%		0.00	%		15.00	%		0.00	%
Results as % of Target		0.00	%		0.00	%		0.00	%		59.10	%		0.00	%

Weighted Total (1)		0.00	%		0.00	%		0.00	%		8.87	%		0.00	%

Individual Objectives		20.00	%		20.00	%		20.00	%		15.00	%		20.00	%
Results as % of Target		130.02	%		112.50	%		91.00	%		115.49	%		112.13	%

Weighted Total (1)		26.00	%		22.50	%		18.20	%		17.32	%		22.43	%

		Total
Total Incentive Award as a Percentage of Target		70.04	%		66.54	%		62.24	%		57.23	%		66.47	%

Total Incentive Award as a Percentage of Salary		70.04	%		46.58	%		43.57	%		40.06	%		39.88	%

(1)	Weighted total is calculated as the performance objective times the performance achievement factor.

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 equity 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 to encourage teamwork.


Long-Term Equity Compensation Vehicle	Grant Frequency	Target Long- Term Vehicle Weight	Vesting	Purpose
Performance Related Milestone Grants	Every three years, new grant in 2017	40%	Cliff vesting at the end of the three-year period	To tie equity compensation to longer-term real estate development milestones
Three-Year Cash Flow Performance Grants	Annually	40%	Cliff vesting at the end of the three-year period	To measure and tie equity compensation opportunity to ongoing cash flow of our business, which is needed to fund our real estate development activities
Time-Vested Restricted Stock	Annually	20%	Three-year prorated vesting	To encourage share ownership and retention of executives

At the end of 2016, the Board of the Company, on the recommendation of the Compensation Committee, approved the 2017-2019 performance milestone measurement objectives that will be used to measure the vesting of performance milestone grants. The objectives are:

Provide assistance in obtaining approval of and/or be a part of an approved ground water sustainability agency for the White Wolf Basin and the Castac Lake Basin. Grant date value of award equals 40% of total. The achievement of this goal is important to our ability to work with local water districts in the management of groundwater on our lands.

Create a destination retail development program on land adjacent to the Outlets of Tejon and begin construction of that program. Grant Date value of award equals 35% of total. This objective is important to our ongoing development of TRCC and the expansion of retail services in order to expand our offerings and draw more consumers to our development.

Develop a program for the development of one of our residential master plans through a joint venture agreement, a letter of intent with a potential joint venture partner, or a program to develop the identified community ourselves. Grant date value of award equals 25% of total. This goal is key to the next step in the land development process as we move past entitlement and permitting and begin preparation to begin development activities.

Shares were granted in March 2017 with a target vesting date of December 2019. Maximum award achievement is 150% of target and occurs if performance objectives are achieved ten months prior to target date. Threshold award achievement is 50% of target and occurs if objectives are achieved no more than ten months after the target vesting date. The following table identifies the target value and target shares granted:

Target

Value

Target

Gregory S. Bielli

1,483,198

64,347

Allen E. Lyda

556,658

24,150

Joseph N. Rentfro

472,779

20,511

Hugh F. McMahon

444,404

19,280

Michael R.W. Houston

307,510

13,341

When granting three-year cash flow performance shares, the Company’s practice is to determine annually a dollar amount of equity compensation to be provided, and to grant a number of performance shares 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. For 2017, the dollar amount attributed to performance shares for the Chief Executive Officer was $500,000, and for the other NEOs it ranged from $100,000 to $184,000, depending on the importance of each NEO’s input to the successful achievement of the goal. The level of the target dollar amount for each NEO is based on a report from the POE Group that recommended long-term compensation goals for each position. The shares granted are expensed based on the closing price of the stock on grant date.

The annual performance shares 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 create operating cash over an extended period at a time when cash demands will be high and net income will not be significant. For 2017, this cash flow measure covers the years 2017 through 2019 and has a cumulative cash from operations target of $28,251,000. 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, improvement in oil and mineral revenues, maintenance of farm revenues at current levels, sales of water, and progress with respect to pre-development activities at Mountain Village and entitlement activities at Centennial and Grapevine. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2017 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. 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.

For the 2015 – 2017 period, the goal for cumulative cash from operations was $32,292,000. For the 2015 – 2017 period, goal achievement was 118% of the target objective, with actual cash from operations at $38,197,000. These grants, which are referenced in footnote 2 to the Outstanding Equity Awards at 2017 Fiscal Year-End table that begins on page 53, vested and were delivered in early March after approval by the Compensation Committee.

Actual shares earned in respect of 2015-2017 three-year cash flow performance shares are as follows:

Name

2015-2017

Performance Grants Cash

from Operations

Gregory S. Bielli, Chief Executive Officer

18,881

Allen E. Lyda, Chief Financial Officer

8,269

Joseph N. Rentfro, EVP, Real Estate

7,081

Hugh F. McMahon EVP, Real Estate

6,655

Michael R.W. Houston SVP, General Counsel

N/A*

*	Mr. Houston was not employed by the Company in 2015.

See the 2017 Grants of Plan Based Awards Table on page 52 for the number of shares granted to each NEO for the 2017-2019 rolling three-year period. The table below summarizes the outstanding (as of the end of 2017) cash flow performance share measurement goals.


(Dollars in thousands) Performance Grants	Threshold		Target		Maximum		Actual
2015-2017 Cash Flow Objective - Cash From Operations	$	16,146	$	32,292	$	48,438	$	38,197
2016-2018 Cash Flow Objective - Cash From Operations	$	17,462	$	34,924	$	52,386		N/A
2017-2019 Cash Flow Objective - Cash From Operations	$	14,126	$	28,251	$	42,377		N/A

During 2017, the Compensation Committee granted time-vested restricted stock to the NEOs. This element is seen as a balance to the strong performance orientation of both the LTIP 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 2017, the dollar amount for the Chief Executive Officer was $250,000, and for the other NEOs it ranged from $50,000 to $92,000.

CEO Supplemental Long-Term Performance Stock Grant

As discussed in further detail in last year’s proxy statement, the Board of Directors approved a supplemental performance stock grant in 2016. Potential awards are based on the achievement of specific performance goals with measurement periods of two years and four years. This supplemental incentive opportunity was provided outside our standard compensation plans and therefore does not recur regularly. The purpose of the supplemental grant was to increase our CEO’s stock ownership opportunity, by achieving performance results, and encourage his retention with the Company.

There are two award opportunities in the grant; the first vested in 2017 and the second potentially vests in 2019. Each opportunity has quantifiable performance metrics associated with our business plans and relative TSR compared to our peer group.

The first opportunity, which partially vested and was settled in 2017, was eligible to vest based on two components. The first component was increasing the revenue of Tejon Ranch Commerce Center East. The performance incentive was paid out at maximum due to a 96.6% increase in revenue from the properties. The second performance component was the Company’s TSR compared to the peer group during the two-year period. This part of the 2017 supplemental grant was not earned as the Company’s TSR was below the 51^st percentile of the peer group, which was the performance threshold.

Benefits and Perquisites

Retirement Plans

The Compensation Committee believes that retirement programs are important to the Company, as they contribute to the Company’s ability to be competitive with its peers. For many of our employees, including the Chief Financial Officer, and one of our Executive Vice Presidents of Real Estate Tejon provides a pension plan and a 401(k) plan. In addition, the Company provides the Chief Financial Officer a supplemental executive retirement plan, or SERP. Based on their hiring dates, the Chief Executive Officer, an Executive Vice President of Real Estate, and our Senior Vice President and General Counsel are not included in the pension plan or SERP, which were frozen for entrance as of February 1, 2007, but are included in the 401(k) plan. During 2017, both the pension plan and SERP were frozen as to the accrual of future benefits.

The NEOs 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.

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, available to all NEOs, pursuant to our equity compensation plan, change in control benefits, as provided in a severance agreement with selected NEOs, 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 57 of this Proxy Statement for a more detailed description and an estimate of value of these benefits. None of the agreements with our NEOs or other compensation plans or arrangements provide for a gross-up payment or reimbursement for excise taxes that could be imposed on the executives.

In addition to the foregoing change in control severance benefits, the NEOs who 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.

Separation or Severance Benefits

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, the NEO will forfeit to the Company the portion of the award that has not vested.

Perquisites and Other Personal Benefits

The Compensation Committee reviews annually the perquisites that NEOs receive. The primary benefits for the NEOs 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-time salary benefit that other employees receive. These benefits are provided to attract and retain highly qualified executives, and because executives often place a higher value on these benefits relative to cost to the Company as compared to increases in cash compensation. In addition, the automobile benefit is provided to executives as well as other Company employees because the Company’s location and the size of the Company’s property necessitate extensive car travel.

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

Other Compensation Practices and Policies

Clawback Policy

The Company has a policy requiring a fixed course of action with respect to compensation adjustments following restatements of our financial statements. In the event that our 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 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’s 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 such 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.

Stock Ownership Guidelines

The Company’s stock retention guidelines are as follows:


Position		Stock Multiple
Chief Executive Officer		5.0 x Base Salary
Chief Financial Officer		3.0 x Base Salary
Other NEOs		2.0 x Base Salary

All NEOs are expected to make reasonably steady progress toward these ownership guidelines each year. The Chief Executive Officer has through 2018 to meet the guidelines, the Executive Vice Presidents of Real Estate have until 2020, and the Senior Vice President General Counsel has through 2021 to reach their guidelines, based on their participation dates in 2015 and 2016. The Chief Financial Officer has met the stock ownership guidelines. 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 NEO’s annual review for that year.

Securities Trading Policy

The Company has a policy that prohibits executive officers and directors from trading in Company stock while in the possession of nonpublic information. Executive officers and directors are also prohibited from trading in options, puts, calls, or other derivative instruments related to the Company’s stock. They are also prohibited from purchasing stock on margin, borrowing against the Company’s stock held in a margin account, or pledging stock as collateral for a loan.

Tax Considerations

For 2017 and prior years, Section 162(m) of the Internal Revenue Code imposed 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. Changes to the tax laws that became effective for the Company as of January 1, 2018 are anticipated to have an impact on Section 162(m) deductibility for the Company going forward. In determining executive compensation, the Compensation Committee considers, among other factors, the possible tax consequences to the Company and to the executives. However, tax consequences, including but not limited to tax deductibility by the Company, are subject to many factors (such as changes in the tax laws and regulations or interpretations thereof and the timing and nature of various decisions by executives regarding options and other rights) that are beyond our control. In addition, the Compensation Committee continues to believe 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 continue to 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.

Compensation Committee Interlocks and Insider Participation

Directors Betts, Leggio, Metcalfe, Stack, and Tuomi served on the Compensation Committee during 2017. 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 2018 Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. This report is provided by the following independent directors, who comprised the Compensation Committee for 2017.

Steven A. Betts (Chairman),

Anthony L. Leggio,

Norman J. Metcalfe,

Geoffrey L. Stack,

Frederick C. Tuomi

Fiscal Year 2017 Summary Compensation Table

The following table summarizes the total compensation awarded to, earned by, or paid to each of the NEOs for the fiscal years ended December 31, 2017, 2016, and 2015.


Name and Principal Position	Year		Salary ($)		Bonus ($)		(1) Stock Awards ($)		(2) Non-Equity Incentive Plan Compensation ($)		(3) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)			(4) All Other Compensation ($)		Total ($)
Gregory S. Bielli		2017		625,000		—		2,233,199		437,770		—			19,364		3,315,333
Chief Executive Officer		2016		600,000		—		2,095,008		611,671		—			21,642		3,328,321
		2015		529,167		—		600,012		714,145		—			28,979		1,872,303

Allen E. Lyda		2017		309,252		—		834,986		144,043		175,874			9,857		1,474,012
Chief Financial Officer		2016		300,245		—		270,227		204,495		262,181			15,608		1,052,756
		2015		291,500		—		262,804		231,789		(22,602	)		13,988		777,479

Hugh F. McMahon		2017		248,101		—		667,689		99,388		57,075			8,867		1,081,120
Executive Vice President, Real Estate		2016		240,875		—		216,791		144,121		44,685			15,204		661,676
		2015		235,000		—		211,481		154,217		(3.273	)		24,147		621,572

Joseph N. Rentfro (5)		2017		261,375		—		708,027		113,876		—			12,200		1,095,478
Executive Vice President, Real Estate		2016		256,250		—		465,981		160,314		—			20,292		902,837
		2015		209,295		—		444,014		144,218		—			15,097		812,624

Michael R.W. Houston		2017		255,000		—		460,516		101,694		—			9,407		826,617
Senior Vice President, General Counsel		2016		166,667		—		199,500		95,446		—			9,407		471,020

The figures in this column represent equity awards for the Chief Executive Officer and for the other NEOs as follows: (i) grant date fair value of time-based grants; (ii) the grant date fair value of the three-year rolling performance shares; and (iii) grant date for value of performance milestone shares granted in 2017 The following outlines the 2017 stock grants:

Time Based
Restricted
Stock Award

Three-Year
Rolling
Performance
Shares

Performance

Milestone

Grants

Total Actual
Award

Gregory S. Bielli

250,000

500,001

1,483,198

2,233,199

Allen E. Lyda

92,776

185,552

556,658

834,986

Hugh F. McMahon

74,428

148,857

444,404

667,689

Joseph N. Rentfro

78,416

156,832

472,779

708,027

Michael R. W. Houston

51,010

101,996

307,510

460,516

At maximum achievement, the value received under the three-year rolling performance shares awards granted in 2017 would be $750,000 for Mr. Bielli, $278,328 for Mr. Lyda, , $223,285 for Mr. McMahon, $235,248 for Mr. Rentfro, and $152,994 for Mr. Houston. The maximum value of performance milestone grants for Mr. Bielli is $2,224,797, for Mr. Lyda is $834,987, for Mr. McMahon is $666,606, for Mr. Rentfro is $709,169, and Mr. Houston is $461,265.

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 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, 2017. The stock awards granted did not vest during 2017 and will only vest in future years based on the achievement of cash flow targets, milestones and/or continued employment with the Company.

2.	Non-equity incentive plan compensation is described in the Compensation Discussion and Analysis under “Annual Performance-Based Incentive Bonuses” beginning on page 38. In 2017, 2016 and 2015, all of the incentive bonus was paid in cash.

The change in pension value is based upon the same assumptions and measurements that are used for the audited financial statements for the current year. See Note 15, Retirement Plan, to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. There are no above-market or preferential earnings related to the Company’s nonqualified deferred compensation plan.

4.	Except with respect to Mr. Bielli, for whom “All Other Compensation” also includes $3,720 for life insurance premiums, each of the NEOs received the amounts set forth in this column in the form of a Company-provided vehicle and related maintenance.

5.	Mr. Rentfro joined the Company in March 2015. His compensation for 2015 includes pro-rated salary and non-equity incentive plan compensation amount based upon time of service in 2015.

6.	Mr. Houston joined the Company in May 2016. His compensation for 2016 includes pro-rated salary and non-equity incentive plan compensation amount based upon time of service in 2016.

Grants of Plan-Based Awards in Fiscal Year 2017

The following table provides information about awards granted to the NEOs in the fiscal year ended December 31, 2017.


					Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards						All Other Stock Awards: Number of Shares of Stock or Units (#)		Grant Date Fair Value of Stock Awards ($)
Name	Year		Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)				Grant Date Fair Value of Stock Awards ($)
Gregory S. Bielli
Annual Incentive Plan		2017				312,500		625,000		937,500
Time Vested Stock Grant				3/09/17														10,846		250,000
Performance Grants, Cash Flow Objective				3/09/17								10,846		21,692		32,538				500,001
Milestone Performance Grants				3/09/17								32,174		64,347		96,521				1,483,198
Allen E. Lyda
Annual Incentive Plan		2017				108,238		216,476		324,714
Time-Vested Stock Grant				3/09/17														4,025		92,776
Performance Grants, Cash Flow Objective				3/09/17								4,025		8,050		12,075				185,552
Milestone Performance Grants				3/09/17								12,075		24,150		36,225				556,658
Hugh F. McMahon
Annual Incentive Plan		2017				86,836		173,671		260,507
Time-Vested Stock Grant				3/09/17														3,229		74,428
Performance Grants, Cash Flow Objective				3/09/17								3,229		6,458		9,687				148,857
Milestone Performance Grants				3/09/17								9,640		19,280		28,920				444,404
Joseph N. Rentfro
Annual Incentive Plan		2017				91,481		182,962		274,443
Time-Vested Stock Grant				3/09/17														3,402		78,416
Performance Grants, Cash Flow Objective				3/09/17								3,402		6,804		10,206				156,832
Milestone Performance Grants				3/09/17								10,256		20,511		30,767				472,779
Michael Houston
Annual Incentive Plan		2017				76,500		153,000		229,500
Time Vested Stock Grant				3/09/17														2,213		51,010
Performance Grants, Cash Flow Objective				3/09/17								2,213		4,425		6,638				101,996
Milestone Performance Grants				3/09/17								6,671		13,341		20,102				307,510

The annual non-equity incentive award is based on the achievement of both quantitative and qualitative annual business objectives. The objectives vary based on the NEO’s responsibilities. For 2017, based upon the percentage of achievement shown in the “Annual Performance-Based Incentives” section of the Compensation Discussion and Analysis, Mr. Bielli earned an incentive of $437,770; Mr. Lyda $144,013; Mr. McMahon 99,388; Mr. Rentfro $113,876; and Mr. Houston $101,694.

The equity incentive award program provides for performance unit grants, which vest upon achievement of a cash flow objective over a three-year time frame. The objective is based upon meeting targeted cash from operations within the Company’s five-year business plan. The three-year objective for these potential stock awards is cash from operations of $28,251,000. The 2017 milestone performance grants are tied to the achievement of specific goals and objectives that are important to the success of our real estate entitlement and development efforts. For additional details, see the “Equity Compensation” section of the Compensation Discussion and Analysis beginning on page 44.

Outstanding Equity Awards at 2017 Fiscal Year-End

The following table provides information on the current holdings of restricted stock, and performance unit awards of the NEOs. This table includes unvested stock grants, as well as performance share grants with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each NEO who had outstanding equity as of December 31, 2017. The market value of the stock awards is based on the closing market price of Tejon stock as of December 31, 2017, which was $20.76 per share. The market value as of December 31, 2017 shown below assumes satisfaction of performance objectives at the target level of achievement.


	Stock Awards
Name	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Gregory S. Bielli:
Time-Based Stock Awards (1)		21,646		449,371
Performance Shares (2)						64,988		1,349,151
Milestone Performance Units (3)						64,347		1,350,978
Supplemental Milestone Performance Units (4)						49,550		1,028,658
Totals Gregory S. Bielli		21,646		449,371		179,614		3,728,787
Allen E. Lyda:
Time-Based Restricted Stock Units (5)		10,000		207,600
Time-Based Stock Awards (1)		8,246		171,187
Performance Shares (2)						25,482		529,006
Milestone Performance Units (3)						24,150		501,354
Totals Allen E. Lyda		18,246		378,787		49,632		1,030,360
Hugh McMahon:
Time-Based Stock Awards (1)		6,617		137,369
Performance Shares (2)						20,464		424,833
Milestone Performance Units (3)						19,280		402,204
Totals Hugh McMahon		6,617		137,369		39,838		827,037
Joseph N. Rentfro:
Restricted Stock Grant (1)		5,000		103,800
Time Based Stock Awards (6)		7,006		145,445
Performance Shares (2)						21,705		450,596
Milestone Performance Units (3)						20,511		423,732
Totals Joseph Rentfro		12,006		249,245		42,116		874,328
Michael R.W. Houston:
Time-Based Restricted Stock Units (7)		7,500		155,700
Time-Based Stock Awards (1)		2,213		45,942
Performance Shares (2)						4,425		91,863
Milestone Performance Units (3)						13,341		276,959
Totals Michael R.W. Houston		9,713		201,642		17,766		368,822

1.	Time-based stock award vesting occurs ratably over three years from the grant date. Unvested time-based stock awards outstanding as of December 31, 2017 were as follows:


Name	2015 Time Based Grants		2016 Time Based Grants		2017 Time Based Grants		Total Time-Based Stock Awards
Gregory S. Bielli		2,661		8,139		10,846		21,646
Allen E. Lyda		1,166		3,055		4,025		8,246
Hugh F. McMahon		937		2,451		3,229		6,617
Joseph N. Rentfro		997		2,607		3,402		7,006
Michael R. W. Houston		0		0		2,213		2,213

Performance shares consist of shares that may vest during March 2018, 2019, and 2020 based upon achievement of a rolling three-year cash flow objective that is included within our five-year business plan. The shares shown are based upon reaching target levels of performance. Included in this number are the following shares that will vest in 2017 and will be settled in 2018 due to the achievement of the specified cash flow objective over the 2015 – 2017 period:


Name	2018 Performance Share Awards Not Vested		2019 Performance Share Awards Not Vested		2020 Performance Share Awards Not Vested		Total Performance Share Awards
Gregory S. Bielli		18,881		24,415		21,692		64,988
Allen E. Lyda		8,269		9,163		8,050		25,482
Hugh F. McMahon		6,655		7,351		6,458		20,464
Joseph N. Rentfro		7,081		7,820		6,804		21,705
Michael R. W. Houston		0		0		4,425		4,425

3.	Milestone performance units consist of shares that may vest upon achievement of specific milestone objectives related to our residential development. For additional detail, see the “Equity Compensation” section of the Compensation Discussion and Analysis beginning on page 44.

4.	Supplemental milestone grants vest upon the achievement of specific goals related to the Mountain Village and Grapevine projects. Goal measurement is December 31, 2019.

5.	The RSUs granted to Mr. Lyda will vest ratably over three years beginning on January 31, 2016.

6.	The RSUs granted to Mr. Rentfro will vest ratably over a three-year period beginning in March 15, 2016.

7.	The RSUs granted to Mr. Houston will vest ratably over a three-year period beginning in May 15, 2017.

Stock Vested in Fiscal Year 2017

The following table provides information for the NEOs regarding the value realized and the number of shares acquired upon the vesting of stock awards, before payment of any applicable withholding tax and broker commissions.


Name	Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Gregory S. Bielli
Time Grant		8,635		185,566
Annual Incentive Grant		2,343		50,351
Performance Grants (1)		11,242		241,591
Supplemental Performance Grants		37,789		799,993
Total Gregory S. Bielli		60,009	$	1,277,501
Allen E. Lyda
Restricted Stock Grants		5,000	$	118,050
Time Grants		3,544		76,161
Annual Incentive Grant		976		20,974
Performance Share Grants (1)		5,028		108,052
Total Allen E. Lyda		14,548	$	323,237
Hugh F. McMahon
Time Grants		2,360		50,716
Performance Share Grants (1)		1,161		24,950
Total Hugh F. McMahon		3,521	$	75,666
Joseph N. Rentfro
Restricted Stock Grants		2,500		56,425
Time Grant		2,301		49,448
Total Joseph F. Rentfro		4,801	$	105,873
Michael R.W. Houston
Restricted Stock Grants		2,500		51,450
Time Grant
Total Michael R. W. Houston		2,500	$	51,450

The performance share grants that vested during 2017 were originally granted in 2014 as part of the annual rolling three-year performance grant that is tied to the achievement of specified cash management objectives. The supplemental performance grants were originally issued in 2016 and were tied to the achievement of project-related revenue and leasing milestones at TRCC. For additional detail regarding performance equity plans, see the “Equity Compensation” section of the Compensation Discussion and Analysis beginning on page 44.

Pension Benefits in Fiscal Year 2017

The Company’s pension plan is a tax-qualified retirement program that covers eligible employees of the Company. Effective January 31, 2007, the pension plan was frozen so that anyone hired on or after February 1, 2007, is not allowed to participate in the plan. An employee is eligible for normal retirement benefits on the first day of the month coinciding with or next following the employee’s Social Security retirement date. The amount of annual benefit, payable monthly, is based upon an employee’s average monthly compensation, which is based upon the employee’s highest five consecutive calendar years of compensation out of the employee’s final ten years of compensation. The amount of the annual benefit payable monthly is 1.45% of the average monthly compensation, offset by .65% of the final average compensation not in excess of one-twelfth of covered compensation, multiplied by total years of service (up to a maximum of 25 years). Effective April 2017, the Company froze the pension plan and SERP as it relates to the accrual of future benefits.

The NEOs’ annual earnings taken into account under this formula include base salary and any annual cash or stock incentive payments, if any, but may not exceed an IRS-prescribed limit applicable to tax-qualified plans ($270,000 for 2017). Pension benefits fully vest after the completion of five years of service. Prior to that time, the benefit is not vested.

The supplemental executive retirement plan, or SERP, was established for the NEOs to replace any pension benefit the NEOs might lose due to the IRS-prescribed limit applicable to tax-qualified plans. The SERP benefit is calculated based on the same formula as the defined benefit plan.

Name

Plan Name

Number of
Years
Credited
Service
(#)

(1) Present Value
of Accumulated
Benefit

($)

Payments
During Last
Fiscal Year

($)

Gregory S. Bielli

None

Allen E. Lyda

Defined Benefit Plan

797,226

—

Supplemental Executive Retirement Plan

898,397

—

Hugh F. McMahon

Defined Benefit Plan

326,512

—

Joseph N. Rentfro

None

Michael R. W. Houston

None

The present value of the accumulated benefit is based upon the same assumptions and measurements that are used in the preparation of the audited financial statements for the current year. See Note 15, Retirement Plans, to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for the valuation method and these assumptions.

Fiscal Year 2017 Nonqualified Deferred Compensation Table

The nonqualified deferred compensation plan allows the deferral of salary, bonuses, and vested restricted stock or performance units, and there are no limits on the extent of deferral permitted. The plan is available for the NEOs and directors of the Company. Each of the NEOs with deferred compensation has elected to defer payment until termination of employment, at which time payment will be made in a lump sum in accordance with Internal Revenue Code Section 409A. The plan provides for withdrawals in the event of unforeseeable emergencies such as financial hardship from illness or accident, loss of property due to casualty, or other similar extraordinary circumstances arising as a result of events beyond the control of the employee, as determined by the Company. A distribution based on an unforeseeable emergency is made only with the consent of the Company.

The decision by each NEO to defer future compensation and the distribution date of any deferral is determined at the end of each fiscal year for awards that may be received in the coming year. The Company does not contribute to the nonqualified deferred compensation plan for the benefit of any NEO or director. Earnings from any cash contributed or stock that is converted to cash by a NEO or director are based upon the market return of the investment in which such officer or director directed his or her contribution. All holdings in the nonqualified deferred compensation plan are in the form of Company stock. No shares have been converted to cash within the plan.


Name	Executive Contribution in Last FY ($)	Aggregate Earnings (Loss) in Last FY (2) ($)			Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last FYE (1) ($)
Gregory S. Bielli	—		—		—		—
Allen E. Lyda	—		(47,611	)	—		211,648
Hugh F. McMahon	—		—		—		—
Joseph N. Rentfro	—		—		—		—
Michael R. W. Houston	—		—		—		—

1.	All amounts reported in the aggregate balance at last fiscal year-end were reported as compensation to the NEO in the Summary Compensation Table for previous years.

2.	Aggregate earnings in the last fiscal year are based on the change in price of the Company’s stock from the prior year-end to December 31, 2017. This factor is used because all investments within the nonqualified deferred compensation plan are held in Company stock.

Fiscal Year 2017 Potential Payments Upon Termination or Change in Control

The Company has entered into an agreement with selected NEOs that provides for specified benefits upon a change in control and/or upon certain terminations outside of a change in control. A change in control is deemed to have occurred if (i) there is an acquisition by any person or group (excluding current ownership) of 20% or more of the outstanding shares of the Company; (ii) the Company sells all or substantially all of its assets; or (iii) the Company merges or consolidates with another entity.

Benefits are payable to an NEO as a result of termination of employment in connection with a change in control if the NEO is terminated without cause during the two years after the occurrence of a change in control or the NEO is terminated prior to a change in control at the request of a third party who has taken steps to effect a change in control. The NEO will also receive benefits if he or she voluntarily terminates employment after a change in control if the NEO has been assigned substantial reductions in duties and responsibilities, received a reduction in base salary, or had an annual bonus opportunity eliminated or significantly reduced (i.e., a resignation for good reason). An NEO’s employment shall be deemed to have been terminated with cause if employment is terminated as a result of failure to perform his or her duties, willful misconduct or breach of fiduciary duty, fraud, or wrongful disclosure of confidential information.

Change in control benefits include a continuation of base salary for a period of 36 months for the Chief Executive Officer and 30 months for the other NEOs, and a lump sum payment of two and one-half times the NEO’s average bonus for the previous three years. The NEOs are also entitled to receive a continuation of health and other insurance benefits over the salary continuation period. Each NEO also has the right to a three-month period to continue use of any perquisites he or she may have had prior to the change in control. For all NEOs unvested performance unit awards will vest at target achievement levels and other time-based awards will vest in full upon a change in control whether or not the NEO is terminated as outlined in the equity compensation plan. During the period of time described above during which benefits are to be received in connection with a change

in control, the NEO must agree not to solicit any employees of the Company or disclose any confidential information related to the Company.


		Before Change in Control		After Change in Control (1)
Name	Benefit	Termination w/o Cause or for Good Reason ($)		Termination w/o Cause or for Good Reason ($)		Change in Control No Termination ($)
Gregory S. Bielli	Salary Continuation				1,875,000
	Bonus – Target				1,562,500
	Health Insurance				50,400
	Other Compensation (2)				129,841
	Equity Compensation				4,178,158		4,178,158

	Total Value				7,795,899		4,178,158
Allen E. Lyda (3)	Salary Continuation		309,252		773,130
	Bonus – Target		216,476		541,191
	Health Insurance		16,800		42,000
	Other Compensation (2)		157,090		157,090
	Equity Compensation		436,500		1,409,147		1,409,147

	Total Value		1,136,118		2,922,558		1,409,147
Hugh F. McMahon (4)	Equity Compensation				964,406		964,406

	Total Value				964,406		964,406
Joseph Rentfro (4)	Equity Compensation				1,123,573		1,123,573

	Total Value				1,123,573		1,123,573
Michael R.W. Houston	Salary Continuation				637,500
	Bonus – Target				382,500
	Health Insurance				58,200
	Other Compensation (2)				22,307
	Equity Compensation				570,464		570,464

	Total Value				1,670,971		570,464

Restricted stock and performance units vest upon a change in control. For purposes of this table, it is assumed all non-vested performance units and milestone units vest immediately at the target level. The value for vesting of performance unit awards and milestone performance awards is the closing market price on the last business day of 2017 ($20.76).

2.	“Other Compensation” consists of accrued and unused vacation and personal paid leave at the time of termination and, if the NEO has the right to use a Company vehicle prior to termination, the continuation of that benefit for a three-month period.

If Mr. Lyda is involuntarily terminated by the Company without cause or voluntarily terminates employment for good reason, Mr. Lyda will receive an amount equal to one times his annual base salary; an amount equal to one times an average annual bonus over the last three years; continuation of medical benefits for a one-year period; any stock grants that vest at time of separation; and, for a twelve-month period after separation, any stock grants that would have vested if Mr. Lyda were still employed.

4.	Mr. McMahon and Mr. Rentfro at this time only have change in control benefits related to outstanding stock awards per stock grant agreements.

Director Compensation in Fiscal Year 2017

In 2017, non-employee directors received 1,000 shares of stock and an annual retainer of $60,000 payable quarterly in the form of common stock in arrears, based on the closing price of the Company’s common shares at each quarter end. In addition, the Chairman of the Board received an annual retainer of $25,000 payable in common stock, and the Chairman of each of the Audit, Compensation, Real Estate, and Nominating and Corporate Governance Committees received an annual retainer of $15,000 payable in common stock. Directors affiliated with a person or entity owning 10% or more of the Company’s total shares outstanding could elect to receive their entire annual retainer in cash. Directors are not paid any fees for board or committee meeting

attendance. The Compensation Committee has approved stock retention guidelines for non-employee directors; the target retention value is five times the value of the annual director retainer.

Name

Fees Earned or
Paid in Cash ($)

(1)

Stock Awards

($)

Total

($)

Robert A. Alter

—

81,159

Steven A. Betts

—

96,161

John L. Goolsby

—

36,451

Anthony L. Leggio

—

96,161

Norman J. Metcalfe

—

106,183

Geoffrey L. Stack

—

84,895

Daniel R. Tisch

81,159

Frederick C. Tuomi

—

81,159

Michael H. Winer

96,110

—

96,110

The amounts reported reflect the grant date fair value of stock awards granted in 2017 to each director. Please see Note 11, Stock Compensation Plan, to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for additional information regarding the valuation of stock awards. The number of stock awards granted each year is determined on a quarterly basis by dividing one-fourth of the annual retainer by the closing stock price at the end of each quarter. At the end of 2017, there were no unvested outstanding equity awards for our directors.

PAY RATIO DISCLOSURE

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our President and Chief Executive Officer (the “CEO”) and the annual total compensation of our medium compensated employees:

The 2017 annual total compensation of the median compensated of all our employees who were employed as of December 31, 2017, other than our CEO, was $51,547; our CEO’s 2017 annual total compensation was $3,315,333 as reflected in the Summary Compensation Table on page 50, and the ratio of these amounts was 64 to 1. The median compensated employee was identified as one of our professional staff working in our commercial/industrial operating segment.

The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. Pay elements that were included in the annual total compensation for each employee in determining the median compensated employee were:

•

Salary received in 2017

•

Annual incentive payment received for performance in 2017

•

Grant date fair value of stock awards granted in 2017

•

Company provided vehicle and related maintenance, or auto allowance paid in 2017

This is the same approach used to determine total annual compensation of our CEO reflected in the summary compensation table.

We determined the compensation of our median employee by calculating the annual total compensation including the compensation items just described for each of our employees. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation, and we did not annualize the compensation for any employee not employed for a full year. We excluded from the determination of our median compensated employee any employee that left the Company during 2017 and therefore was not employed on December 31, 2017. Based upon the compilation of this data we determined the median compensated employee as identified above.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table lists the stock ownership of stockholders known to the Company to be the beneficial owners of more than 5% of the shares of the Company’s Common Stock outstanding as of March 26, 2018. As of March 26, 2018, we had 25,944,891 shares of Common Stock outstanding. The table also provides the stock ownership as of the same date of all directors, each NEO named in the above Summary Compensation Table, and all directors and executive officers as a group.


Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)			Percent of Class (2)
TowerView LLC 460 Park Avenue, 20th Floor New York, NY 10022		3,672,659	(3)		14.16	%
Third Avenue Management LLC 622 Third Avenue, 32nd Floor New York, NY 10017		2,653,982	(4)		10.23	%
Royce & Associates LP 745 Fifth Avenue New York, NY 10151		1,857,815	(6)		7.16	%
The Vanguard Group 100 Vanguard Blvd. Malvern, PA. 19355		1,516,405	(7)		5.84	%
Directors
Robert A. Alter		25,968	(8)		below 1	%
Steven A. Betts		16,280	(8)		below 1	%
Gregory S. Bielli		95,190	(10)		below 1	%
Anthony L. Leggio		23,678	(8)		below 1	%
Norman J. Metcalfe		52,241	(8)		below 1	%
Geoffrey L. Stack		60,565	(9)		below 1	%
Daniel R. Tisch		4,643,336	(3)		17.90	%
Frederick C. Tuomi		17,968	(8)		below 1	%
Michael H. Winer		—	(5)		below 1	%
Executive Officers
Michael Houston		2,298	(8)		below 1	%
Allen E. Lyda		126,758	(9)		below 1	%
Hugh F. McMahon, IV		10,048	(8)		below 1	%
Joseph E. Rentfro		18,783	(9)		below 1	%
Robert Velasquez		4,398	(8)		below 1	%
All executive officers and directors as a group (14 persons)		5,097,511			19.65	%

(1)

In each case, the named stockholder in the above table has the sole voting and investment power as to the indicated shares, except as set forth in the footnotes below, and except that all options, restricted stock, and restricted stock units are held by directors and officers individually. For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any shares that such person owns or has the right to acquire within 60 days. As a result, we have included in the “Amount and Nature of

Beneficial Ownership” column shares of vested and unvested restricted stock granted to a beneficial owner and warrants granted to a beneficial owner. Such restricted stock has voting rights, irrespective of vesting. In addition, we have included restricted stock units that could possibly vest within 60 days of March 26, 2018, even though for any such restricted stock units shown to vest within that period, the beneficial owner would have to terminate his relationship with the Company.

(2)

For purposes of computing the “Percent of Class” column, any shares which such person does not currently own but has the right to acquire within 60 days of March 26, 2018 are deemed to be outstanding for the purpose of computing the percentage ownership of any person. Restricted stock is deemed outstanding, irrespective of vesting. Also included are restricted stock units that could possibly vest within 60 days of March 26, 2018, even though for any such restricted stock units shown to vest within that period, the beneficial owner would have to terminate his relationship with the Company.

(3)

TowerView LLC has sole voting power and investment power over its 3,672,659 shares of common stock shown. Mr. Tisch has dispositional and voting authority over all shares owned by TowerView LLC. Mr. Tisch also has dispositional and voting authority over 925,000 shares owned by DT Four Partners LLC and 45,677 shares owned directly. Information provided from Form 4 filed January 4, 2018.

(4)

Based on data supplied by Third Avenue Management LLC (“TAM”), TAM beneficially owns 2,653,982 shares. Third Avenue Real Estate Value Fund holds 1,129,952 common shares, and the Third Avenue Real Estate Value Fund UCITS holds 81,956 common shares. Third Avenue Value Fund holds 1,359,121 common shares, and the Third Avenue Value Fund UCITS holds 4,368 common shares. Third Avenue Value Portfolio of the Third Avenue Variable Series Trust holds 78,585 common shares.

(5)

At December 31, 2017, Mr. Winer was portfolio manager of TAM, which has dispositional authority over all these shares. Mr. Winer disclaimed beneficial ownership of these shares owned by said entities for all other purposes. Mr. Winer retired from TAM on February 28, 2018 and thereafter will have no affiliation with TAM. As a portfolio manager of TAM, Mr. Winer was not permitted to personally own shares in the Company prior to his retirement

(6)	A Schedule 13G/A filed on January 24, 2018 by Royce & Associates LP (“RA”) with the SEC pursuant to the Exchange Act indicates that RA beneficially owns 1,857,815 shares. The Schedule 13G/A and our records indicate that RA has sole power to dispose or direct the disposition of 1,857,815 shares.

(7)

A Schedule 13G/A filed on February 12, 2018 by The Vanguard Group (“VG”) with the SEC pursuant to the Exchange Act indicates that VG beneficially owns 1,516,405 shares. The Schedule 13G/A indicates that VG has sole power to dispose and shared power to dispose or direct the disposition of 1,516,405 shares.

(8)

The shares owned by Mr. Leggio include 23,678 shares of stock that are held in his personal investment accounts. The shares owned by Mr. Metcalfe include 18,620 shares in his personal investment accounts and 33,621 restricted stock units that could possibly vest within 60 days of March 26, 2018. The shares owned by Mr. Alter include 14,000 shares of stock in his personal investment accounts and 11,968 restricted stock units that could vest within 60 days of March 26, 2018. The shares owned by Mr. Betts include 14,975 shares of stock in his personal investment accounts and 1,305 restricted stock units that could vest within 60 days of March 26, 2018. The shares owed by Mr. Tuomi include 6,000 shares of stock in his personal investments accounts and 11,968 restricted stock units that could vest within 60 days of March 26, 2018. The shares owned by Mr. McMahon include 10,048 shares that are held in his personal investment account. The 4,398 shares owned by Mr. Velasquez are held in his personal investment account. The shares owned by Mr. Houston include 2,298 shares that are held in his personal investment account.

(9)

The shares owned by Mr. Stack include 30,338 shares in his personal investment accounts and 30,227 restricted stock units that could possibly vest within 60 days of March 26, 2018. The shares owned by Mr. Lyda include 116,563 shares in his personal investment accounts and 10,195 restricted stock units that could possibly vest within 60 days of March 26, 2018. The shares owned by Mr. Rentfro include 18,783 shares in his personal investment accounts. The shares owned by each of Messrs. Stack, Lyda, and Rentfro in their personal investment accounts are held as community property concerning which the named persons and their respective spouses share voting and investment power.

(10)	Mr. Bielli owns 95,190 shares in his personal investment accounts. Some of these shares are held by a family trust and the remainder are held as community property. In each case, he and his spouse share voting and investment power.

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee of the Board has furnished the following report:

The Audit Committee reviewed Tejon Ranch Co.’s (the “Company’s”) financial reporting process on behalf of the Board of Directors (the “Board”). Management has the primary responsibility for the financial statements and the reporting process. The Company’s independent auditors are responsible for expressing an opinion on the conformity of the Company’s audited financial statements to generally accepted accounting principles.

In this context, the Audit Committee has reviewed and discussed with management and Ernst & Young LLP, the Company’s independent registered public accounting firm, the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The Audit Committee has also discussed with Ernst & Young LLP the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board, or PCAOB. In addition, the Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence, and has discussed with the independent auditors their independence from the Company and its management. The Audit Committee has also considered whether Ernst & Young LLP’s provision of non-audit services to the Company is compatible with its independence.

Based on the reviews and discussions referred to in the preceding paragraphs, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the Securities and Exchange Commission.

Anthony L. Leggio (Chairman), Geoffrey L. Stack,

Frederick C. Tuomi, and Norman J. Metcalfe

Members of the Audit Committee

OTHER MATTERS

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and officers as well as and persons who beneficially own more than 10% of the Company’s outstanding Common Stock, to file reports of ownership and changes in beneficial ownership of the Company’s Common Stock on Form 3, Form 4, and Form 5, as appropriate, with the SEC and to furnish the Company with copies of all such Section 16(a) reports that they file. Based solely on the review of copies of such reports and amendments thereto and other information furnished to the Company, the Company believes that, during 2017, all officers, directors, and persons who beneficially own more than 10% of the Company’s Common Stock complied in a timely manner with all filing requirements.

Related Person Transactions

The Board follows certain written policies and procedures developed for the review and approval of all transactions with related persons, pursuant to which the Board reviews the material facts of, and either approves or disapproves of, the Company’s entry into any transaction, arrangement or relationship or any series thereof in which (i) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, or over the term of the contract; (ii) the Company is a participant; and (iii) any related person has or will have a direct or indirect material interest (other than solely as a result of being a director or less than 10% beneficial owner of another entity).

The Board reviews all relationships and transactions in which both the Company and any related person are participants to determine whether such related persons have a direct or indirect material interest in such transaction. A “related person” is any executive officer, director, or director nominee of the Company, or any beneficial owner of more than 5% of the Company’s Common Stock, or any immediate family member of any of the foregoing. The Company discloses transactions in its proxy statements with related persons in accordance with Item 404 of Regulation S-K.

In the course of the Board’s review and approval or ratification of a related party transaction, the Board considers:

•

the nature of the related person’s interest in the transaction;

•

the material terms of the transaction, including, without limitation, the amount and type of transaction;

•

the importance of the transaction to the related person;

•

the importance of the transaction to the Company;

•

whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company; and

•

any other matters the Board deems appropriate.

Any member of the Board who is a related person with respect to a transaction under review may not participate in the deliberation or vote respecting approval or ratification of the transaction, provided that such director may be counted in determining the presence of a quorum at a meeting that considers the transactions. There have been no related party transactions since the beginning of 2017.

Financial Information

Both the Company’s Annual Report to Stockholders and the Company’s Annual Report on Form 10-K (including the financial statements and financial statement schedules but without exhibits) as filed with the SEC accompany this Proxy Statement. Both reports may be obtained without charge by calling (661) 248-3000, or by written request to the Corporate Secretary, Tejon Ranch Co., P.O. Box 1000, Tejon Ranch, California 93243.

Notice of Internet Availability

You can now access the 2017 Annual Report to Stockholders, the 2017 Annual Report on Form 10-K, and the Proxy Statement for the 2018 Annual Meeting via the Internet at the following address: http://materials.proxyvote.com/879080

The enclosed information has been provided to you to enable you to cast your vote in one of three convenient ways: (1) via the Internet, (2) by telephone, or (3) by returning it in the enclosed postage-paid envelope. Whichever method you choose, you are encouraged to vote.

You can also eliminate the mailing of this information in the future by electing to receive this data through the Internet and by an email directing you to vote electronically. You can make this election as you vote your proxy via the Internet by providing your email address when prompted.

Communications with Directors

Any stockholder or other party interested in communicating with members of the Board, any of its committees, the independent directors as a group, or any of the independent directors individually may send written communications to Tejon Ranch Co., P.O. Box 1000, Tejon Ranch, California 93243, Attention: Corporate Secretary, or via the “Contact” link on the Company’s web site, www.tejonranch.com. Communications received in writing are forwarded to the Board, committee, or any individual director or directors to whom the communication is directed, unless the communication is unduly hostile, threatening, or illegal, does not reasonably relate to the Company or its business, or is similarly inappropriate. The Corporate Secretary has the authority to discard or disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications.

Stockholder Proposals for 2019 Annual Meeting

Stockholder proposals to be presented at the 2019 Annual Meeting, pursuant to Rule 14a-8 under the Exchange Act, must be received by the Company no later than November 30, 2018 in order to be considered for inclusion in the Company’s proxy materials for that meeting. Such proposals must be submitted in writing to the principal executive offices of the Company at the address set forth on the first page of this Proxy Statement.

In addition, the Company’s Certificate of Incorporation and Bylaws require that the Company be given advance written notice of stockholders nominating for election to the Company’s Board and of other matters which stockholders wish to present for action at an annual meeting of stockholders other than matters included in the Company’s proxy materials in accordance with Rule 14a-8 under the Exchange Act, as discussed above, specified information be provided in connection with such proposals. The Company’s Certificate of Incorporation requires that the Company be given advance written notice of stockholder nominations for election to the Company’s Board and of other matters which stockholders wish to present for action at an annual meeting of stockholders (other than matters included in the Company’s proxy materials in accordance with Rule 14a-8 under the Exchange Act, as discussed above). Such nomination or other proposal will be considered at the 2019 Annual Meeting only if it is delivered to or mailed and received at the principal executive offices of the Company at the address set forth on the first page of this Proxy Statement not less than 30 days nor more than 60 days prior to the meeting as originally scheduled. However, if less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to the stockholders, then the notice must be received not later than the close of business on the tenth (10th) day following the day on which the Notice of Annual Meeting of Stockholders was mailed or the public disclosure was made.

A stockholder’s notice to the Secretary must set forth (i) as to the stockholder giving the notice and the beneficial owners, if any, on whose behalf the nomination or proposal is made: (A) the name and address of the stockholder, as they appear on the Company’s books, and of such beneficial owner, (B) the class and number of

shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner, and (C) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business: and (ii) as to the stockholder giving notice, or, if the nomination or proposal is made on behalf of a beneficial owner, as to the beneficial owner, and if such stockholder or beneficial owner is an entity, as to each director, executive, managing member or control person of such entity (each a “control person”): (A) the class and the number of shares beneficially owned, (B) a description of any agreement with respect to the nomination or proposal between or among the stockholder, beneficial owner or control person and any other person, (C) a description of any agreement entered into by, or on behalf of, such stockholder, beneficial owner or control person, the effect of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Corporation’s shares, or maintain, increase or decrease the voting power of the stockholder, beneficial owner, or control person with respect to the Company’s securities: and (D) a representation whether the stockholder or beneficial owner, if any, intends or is part of a group which intends (I) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve a proposal (other than a nomination) and/or (II) otherwise to solicit proxies from stockholders in support of such proposal or nomination.

A stockholder’s notice to the Secretary regarding a nomination for election to the Company’s Board must set forth, as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required pursuant to the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (ii) a statement as to whether a nominated person is receiving compensation, reimbursement or remuneration to be a nominee or serve as a director and, if so, disclosure of all material terms and identity of persons providing such compensation, reimbursement or remuneration, (iii) a statement by such nominee indicating a current intention to serve the full term if elected and (iv) a statement by such nominee stating whether or not the nominee has any agreement, arrangement or understanding or given a commitment or assurance to any person or entity as to how such nominee will act or vote, if elected.

A stockholder’s notice to the Secretary regarding matters other than nomination for election to the Company’s Board must set forth as to each matter the stockholder proposes to bring before the Annual Meeting: (i) a brief description of the business desired to be brought before the Annual Meeting, (ii) the text of the proposal or business (including the text of any resolutions or amendments to the Bylaws proposed for consideration), (iii) the reasons for conducting such business, and (ivi) any material interest of the stockholder in such business of the stockholder and the beneficial owner, if any on whose behalf such business proposal is made.

Stockholders Sharing the Same Last Name and Address

To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding the Company’s Common Stock but who share the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, certain stockholders of record who have the same address and last name will receive only one copy of our annual report and proxy statement that are delivered until such time as one or more of these stockholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.

If you receive a single set of proxy materials as a result of householding, and you would like to have separate copies of our annual report and/or proxy statement mailed to you, please submit a request to our Corporate Secretary at Tejon Ranch Co., P.O. Box 1000, Tejon Ranch, California 93243, telephone 661-248-3000, and we will promptly send you what you have requested. You can also contact our Corporate Secretary if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future, or if you would like to opt out of householding for future mailings.

Other Business

Management does not know of any matter to be acted upon at the 2018 Annual Meeting other than those described above, but if any other matter properly comes before the meeting, the persons named on the enclosed proxy will vote thereon in accordance with their best judgment.

Stockholders are urged to sign and return their proxies without delay.

For the Board of Directors,

NORMAN J. METCALFE, Chairman of the Board

ALLEN E. LYDA, Chief Financial Officer, Assistant Secretary

APPENDIX A

ATTACHMENT A TO CORPORATE GOVERNANCE GUIDELINES

The Nominating and Corporate Governance Committee annually reviews the independence of all directors and reports its findings to the Board of Directors. Based upon the report and the directors’ consideration, the Board of Directors determines which directors shall be deemed independent.

A director will be deemed independent if it is determined that he or she has no material relationship with the corporation, either directly or through an organization that has a material relationship with the corporation. A relationship is “material” if, in the judgment of the Board of Directors, it might reasonably be considered to interfere with the exercise of independent judgment. Ownership of stock of the corporation is not, in itself, inconsistent with a finding of independence. In addition, an Audit Committee member must also be independent within the meaning of the New York Stock Exchange’s listing requirements for audit committees and the requirements set forth in Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and a Compensation Committee member must also be independent within the meaning of the New York Stock Exchange’s listing requirements for compensation committees. The following specific standards are utilized in determining whether a director shall be deemed independent:

•

the director is not, and in the past three years has not been, an employee of Tejon Ranch Co. or any of its subsidiaries (collectively, “Tejon”);

•

an immediate family member of the director is not, and in the past three years has not been, employed as an executive officer of Tejon;

•

neither the director nor a member of the director’s immediate family is, or in the past three years has been, affiliated with or employed by Tejon’s present or former (within three years) internal or external auditor;

•

neither the director nor a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of another company where any of Tejon’s present executives serve on that company’s compensation committee;

•

neither the director nor a member of the director’s immediate family receives or has received more than $120,000 per year in direct compensation from Tejon in the past three years, other than director and committee fees and pensions or other forms of deferred compensation for prior services (provided such compensation is not contingent in any way on continued service);

•

(a) the director is not a current partner or employee of a firm that is Tejon’s internal or external auditor; (b) the director does not have an immediate family member who is a current partner of such a firm; (c) the director does not have an immediate family member who is a current employee of such a firm and personally works on the listed company’s audit; or (d) the director or an immediate family member was not within the last three years a partner or employee of such a firm and personally worked on Tejon’s audit within that time;

•

the director is not, nor are any of the director’s immediate family members, currently an executive officer of a company that makes payments to, or receives payments from, Tejon for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues.

For purposes of this Attachment A, an “immediate family member” means a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than an employee) who shares such person’s home.

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. MMMMMMMMMMMM TEJON RANCH CO. MMMMMMMMMMMMMMM C123456789 IMPORTANT ANNUAL MEETING INFORMATION 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext MR A SAMPLE Electronic Voting Instructions DESIGNATION (IF ANY) Available 24 hours a day, 7 days a week! ADD 1 ADD 2 Instead of mailing your proxy, you may choose one of the voting ADD 3 methods outlined below to vote your proxy. ADD 4 VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. MMMMMMMMM ADD 5 Proxies submitted by the Internet or telephone must be received by ADD 6 11:59 p.m., Eastern Time, on May 7, 2018 Vote by Internet • Go to www.investorvote.com/trc • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in X this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345 qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals — The Board of Directors recommends a vote FOR each of the nominees listed in Proposal 1, FOR Proposal 2 and FOR Proposal 3. 1. Election of Directors: For Withhold For Withhold + 01—Geoffrey L. Stack 02—Michael H. Winer For Against Abstain For Against Abstain 2. Ratification of appointment of Ernst & Young LLP as the 3. Approval of named executive officer compensation on an Company’s independent registered public accounting firm for advisory basis. fiscal year 2018. 4. To transact such other business as may properly come before the meeting or any adjournment thereof. B Non-Voting Items Change of Address — Please print new address below. Comments — Please print your comments below. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1UPX 3682531 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + q

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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — TEJON RANCH CO. 2018 Annual Meeting of Stockholders – May 8, 2018 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY The undersigned hereby appoints Norman J. Metcalfe and Gregory S. Bielli, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Tejon Ranch Co. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the 2018 Annual Meeting of Stockholders of the Company to be held May 8, 2018 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the 2018 Annual Meeting. This proxy, when properly executed, will be voted in the manner directed by the undersigned. If no such directions are made, this proxy will be voted FOR the election of each of the nominees listed in Proposal 1 and FOR Proposals 2 and 3. If any other matters properly come before the 2018 Annual Meeting, the persons named in this proxy will vote on such matters in their discretion. (Continued and to be marked, dated and signed, on the other side)