def14a
|
|
|
|
|
|
|
OMB APPROVAL |
|
|
|
|
|
OMB Number:
|
|
3235-0059 |
|
|
Expires:
|
|
January 31, 2008 |
|
|
Estimated average burden hours per
response |
14. |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the Registrant þ |
|
Filed by a Party other than the Registrant
o |
|
|
Check the appropriate box: |
|
|
|
o Preliminary Proxy Statement |
|
o
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
|
þ Definitive Proxy Statement |
|
o Definitive Additional Materials |
|
o
Soliciting Material Pursuant to §240.14a-12 |
D.R. Horton, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
|
þ No fee required. |
|
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
|
|
|
1) Title of each class of securities to which transaction applies: |
|
|
|
2) Aggregate number of securities to which transaction applies: |
|
|
|
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
|
|
|
4) Proposed maximum aggregate value of transaction: |
|
|
|
o Fee paid previously with preliminary materials. |
|
|
|
o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
|
|
|
1) Amount Previously Paid: |
|
|
|
2) Form, Schedule or Registration Statement No.: |
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On
Thursday, January 31,
2008
Dear Fellow Stockholder of D.R. Horton:
You are invited to attend the 2008 Annual Meeting of
Stockholders of D.R. Horton, Americas Builder. Our
2008 Annual Meeting will be held at our corporate offices
located at: D.R. Horton Tower, 301 Commerce Street,
Fort Worth, Texas, on Thursday, January 31, 2008, at
10:00 a.m., central time, for the following purposes:
|
|
|
|
|
To elect eight directors.
|
|
|
|
To approve an amendment and restatement to our Amended and
Restated 2000 Incentive Bonus Plan with respect to current and
future covered employees (determined under Section 162(m)
of the Internal Revenue Code of 1986, as amended) and other
participants.
|
|
|
|
To approve the 2008 Performance Unit Plan with respect to
current and future covered employees (determined under
Section 162(m) of the Internal Revenue Code of 1986, as
amended) and other participants.
|
|
|
|
To vote on a stockholder proposal concerning a
pay-for-superior-performance standard for executive compensation.
|
|
|
|
To conduct other business properly brought before the meeting.
|
Only stockholders of record at the close of business on Monday,
December 3, 2007, are entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof.
While we would like to have each of you attend the meeting and
vote your shares in person, we realize this may not be possible.
However, whether or not you plan to attend the meeting, your
vote is very important. For convenience of our stockholders,
proxies may be given either by telephone, electronically through
the Internet, or by mail. A form of proxy on which to indicate
your vote by mail and an envelope, postage prepaid, in which to
return your proxy are enclosed. WE URGE YOU TO COMPLETE AND
RETURN YOUR PROXY BY ONE OF THESE METHODS SO THAT YOUR SHARES
WILL BE REPRESENTED. If you decide later to attend the Annual
Meeting, you may revoke your proxy at that time and vote your
shares in person. If you desire any additional information
concerning the 2008 Annual Meeting or the matters to be acted
upon at the meeting, we would be glad to hear from you.
Very truly yours,
DONALD R. HORTON
Chairman of the Board
Fort Worth, Texas
December 19, 2007
TABLE OF
CONTENTS
|
|
|
|
|
Page
|
|
|
|
Cover Page
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
8
|
|
|
9
|
|
|
9
|
|
|
14
|
|
|
16
|
|
|
17
|
|
|
17
|
|
|
18
|
|
|
18
|
|
|
19
|
|
|
19
|
|
|
28
|
|
|
30
|
|
|
30
|
|
|
31
|
|
|
32
|
|
|
33
|
|
|
33
|
|
|
34
|
|
|
34
|
|
|
36
|
|
|
39
|
|
|
39
|
|
|
39
|
|
|
40
|
|
|
40
|
|
|
40
|
|
|
41
|
i
|
|
|
|
|
Page
|
|
|
|
42
|
|
|
43
|
|
|
45
|
|
|
45
|
|
|
47
|
|
|
47
|
|
|
49
|
|
|
49
|
|
|
51
|
|
|
51
|
|
|
52
|
|
|
54
|
|
|
54
|
|
|
54
|
|
|
54
|
|
|
A-1
|
|
|
B-1
|
ii
D.R. Horton Tower
301 Commerce Street
Fort Worth, Texas 76102
www.drhorton.com
PROXY STATEMENT
for the
2008 ANNUAL MEETING OF
STOCKHOLDERS
To Be Held On January 31,
2008
Time,
Place and Purposes of Meeting
Our 2008 Annual Meeting of Stockholders will be held on
Thursday, January 31, 2008, at 10:00 a.m., central
time, at our corporate offices located at: D.R. Horton Tower,
301 Commerce Street, Fort Worth, Texas. The purposes of the
2008 Annual Meeting are set forth in the Notice of Annual
Meeting of Stockholders to which this Proxy Statement is
attached. D.R. Horton, Inc. is referred to as D.R.
Horton, Company, we, and
our in this Proxy Statement.
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of D.R.
Horton. D.R. Horton expects that this Proxy Statement and the
accompanying form of proxy will first be made available to our
stockholders of record on or about December 19, 2007. The
cost of this solicitation will be paid by D.R. Horton. The
solicitation of proxies will be made primarily by use of the
mail. In addition, directors, officers and regular employees of
D.R. Horton may make solicitations without special compensation
by telephone, telegraph,
e-mail or
personal interview. They may request banks, brokers, fiduciaries
and other persons holding stock in their names, or in the names
of their nominees, to forward proxies and proxy materials to
their principals and obtain authorization for the execution and
return of such proxies to management. D.R. Horton will reimburse
such banks, brokers and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith. We retained the
Altman Group to solicit proxies on our behalf and will pay The
Altman Group an estimated $6,500 for their services.
Revocation
and Voting of Proxies
Stockholders may vote either by casting votes in person at the
meeting, or by marking, signing and dating each proxy card
received and returning it in the prepaid envelope, by telephone,
or electronically through the Internet by following the
instructions included on the enclosed proxy card. The telephone
and Internet voting procedures are designed to authenticate
votes cast by use of a personal identification number. The
procedures, which are designed to comply with Delaware law,
allow stockholders to appoint a proxy to vote their shares and
to confirm that their instructions have been properly recorded.
Stockholders who hold shares in street name through
a broker or other nominee may be able to vote by telephone or
electronically through the Internet in accordance with the
voting instructions provided by that institution.
Any proxy given may be revoked by a stockholder at any time
before it is exercised by filing with D.R. Horton a notice in
writing revoking it, by duly executing and returning a proxy
bearing a later date or by voting by telephone or Internet.
Proxies also may be revoked by any stockholder present at the
2008 Annual Meeting who expresses a desire to vote his or her
shares in person. Subject to such revocation and except as
otherwise stated herein or in the form of proxy, all proxies
duly executed and received prior to, or at the time of, the
Annual Meeting will be voted in accordance with the
specifications of the proxies. If no specification is made,
proxies will be voted FOR the nominees for election of directors
(see Proposal One Election of
Directors), FOR the proposal to amend and restate the
Amended and Restated 2000 Incentive Bonus Plan, (see
Proposal Two Amendment and Restatement of
the 2000 Incentive Bonus Plan), FOR the proposal to approve
the 2008 Performance Unit Plan (see
Proposal Three Approve the 2008 Performance
Unit Plan), AGAINST the stockholder proposal concerning a
pay-for-superior-performance standard for executive compensation
(see Proposal Four Stockholder
Proposal Concerning a Pay-For-Superior-Performance Standard
for Executive Compensation) and, at the discretion of the
proxy holders, on all other matters properly brought before the
Annual Meeting or any adjournment thereof.
Outstanding
Shares and Voting Rights
December 3, 2007 has been set as the record date for the
purpose of determining stockholders entitled to notice of, and
to vote at, the 2008 Annual Meeting. There were
314,956,291 shares of D.R. Hortons Common Stock,
$.01 par value, issued and outstanding on the record date.
On any matter submitted to a stockholder vote, each holder of
Common Stock will be entitled to one vote, in person or by
proxy, for each issued and outstanding share of Common Stock
registered in his or her name on the books of D.R. Horton as of
the record date. A list of such stockholders will be available
for examination by any stockholder at the offices of D.R. Horton
set forth above for at least ten days before the Annual Meeting.
The D.R. Horton Bylaws provide that if the holders of a majority
of the issued and outstanding shares of Common Stock entitled to
vote are present in person or represented by proxy, there will
be a quorum. The aggregate number of votes entitled to be cast
by all stockholders present in person or represented by proxy at
the Annual Meeting, whether those stockholders vote for, against
or abstain from voting on any matter, will be counted for
purposes of determining whether a quorum exists. Broker
non-votes, which are described below, will be considered present
for purposes of determining whether a quorum exists.
Broker
Non-Votes and Vote Required
If a broker holds your shares, this Proxy Statement and a proxy
card have been sent to the broker. You may have received this
Proxy Statement directly from your broker, together with
instructions as to how to direct the broker to vote your shares.
If you desire to have your vote counted, it is important that
you return your voting instructions to your broker. Rules of the
New York Stock Exchange (NYSE) determine
whether proposals presented at stockholder meetings are
routine or non-routine. If a
proposal is routine, a broker or other entity holding
shares for an owner in street name may vote on the proposal
without voting instructions from the owner. If a proposal is
non-routine, the broker or other entity may vote on the
proposal only if the owner has provided voting instructions. A
broker non-vote occurs when the broker or
other entity is unable to vote on a proposal because the
proposal is non-routine and the owner does not provide
instructions. Proposal One, the proposal to elect
directors, Proposal Two, the proposal to amend and restate
the Amended and Restated 2000 Incentive Bonus Plan, and
Proposal Three, the proposal to approve the 2008
Performance Unit Plan, are routine proposals under the
rules of the NYSE. As a result, brokers or other entities
holding shares for an owner in street name may vote on
Proposals One, Two and Three even if no voting instructions
are provided by the owner. Proposal Four, the stockholder
proposal, is a non-routine proposal under the rules of
the NYSE. As a result, brokers or other entities holding shares
for an owner in street name may vote on Proposal Four only
if voting instructions are provided by the owner. If you do not
provide your broker with voting instructions for
Proposal Four, your shares will not be counted as shares
present and entitled to vote with respect to the vote required
for this proposal.
2
The following table reflects the vote required for each proposal
and the effect of broker non-votes, withhold votes and
abstentions on the vote, assuming a quorum is present at the
meeting:
|
|
|
|
|
|
|
|
|
Effect of Broker Non-Votes,
|
Proposal
|
|
Vote Required
|
|
Withhold Votes and Abstentions
|
|
(1) Election of Directors
|
|
(1) The eight nominees who receive the most votes will be
elected
|
|
(1) Broker non-votes and withhold votes have no legal
effect, subject to our Corporate Governance Principles
|
(2) Amendment and restatement of the Amended and Restated
2000 Incentive Bonus Plan
|
|
(2) An affirmative vote by holders of a majority of our
common stock which has voting power present in person or
represented by proxy and is entitled to vote
|
|
(2) Broker non-votes have no effect; abstentions have the
same effect as a vote against the proposal
|
(3) Approval of 2008 Performance Unit Plan
|
|
(3) An affirmative vote by holders of a majority of our
common stock which has voting power present in person or
represented by proxy and is entitled to vote
|
|
(3) Broker non-votes have no effect; abstentions have the
same effect as a vote against the proposal
|
(4) Consideration of stockholder proposal concerning a
pay-for-superior-performance standard for executive compensation
|
|
(4) An affirmative vote of the holders of a majority of our
common stock which has voting power present in person or
represented by proxy and is entitled to vote
|
|
(4) Broker non-votes have no effect; abstentions have the
same effect as a vote against the proposal
|
If any other proposals are properly presented to the
stockholders at the meeting, the number of votes required for
approval will depend on the nature of the proposal. Generally,
under Delaware law and our Bylaws, the number of votes required
to approve a proposal is a majority of the shares of Common
Stock present and entitled to vote at the meeting. The enclosed
proxy card gives discretionary authority to the proxy holders to
vote on any matter not included in this Proxy Statement that is
properly presented to the stockholders at the meeting. The
persons named as proxies on the enclosed proxy card are Donald
R. Horton, Chairman, Donald J. Tomnitz, Vice Chairman, President
and Chief Executive Officer, and Bill W. Wheat, Executive Vice
President and Chief Financial Officer.
Stockholders
Sharing the Same Address
The broker, bank or other nominee of any stockholder who is a
beneficial owner, but not the record holder, of the
Companys Common Stock may deliver only one copy of this
Proxy Statement and our Annual Report to multiple stockholders
sharing an address, unless the broker, bank or nominee has
received contrary instructions from one or more of the
stockholders.
In addition, with respect to record holders, in some cases, only
one copy of this Proxy Statement and our Annual Report will be
delivered to multiple stockholders sharing an address, unless
the Company has received contrary instructions from one or more
of the stockholders. Upon written or oral request, the Company
will deliver free of charge a separate copy of this Proxy
Statement and our Annual Report to a stockholder at a shared
address to which a single copy was delivered. You can notify
your broker, bank or other nominee (if you are not the record
holder) or the Company (if you are the record holder) that you
wish to receive a separate copy of our proxy statements and
annual reports in the future, or alternatively, that you wish to
receive a single copy of the materials instead of multiple
copies. The Companys contact information for these
purposes is: D.R. Horton, Inc., Attention: Investor Relations,
D.R Horton Tower, 301 Commerce Street, Suite 500,
Fort Worth, Texas 76102, telephone number:
(817) 390-8200,
or e-mail:
mehorton@drhorton.com.
3
Future
Stockholder Communications through the Internet
Stockholders may elect to receive future notices of meetings,
proxy materials and annual reports electronically through the
Internet. The consent of stockholders who have previously
consented to electronic delivery will remain in effect until
withdrawn. To consent to electronic delivery:
|
|
|
|
|
stockholders whose shares are registered in their own name, and
not in street name through a broker or other
nominee, may simply log in to www.proxyvote.com, the Internet
site maintained by Broadridge Financial Solutions, Inc. and
follow the step by step instructions; and
|
|
|
|
stockholders whose shares are registered in street
name through a broker or other nominee must first
vote their shares using the Internet, at www.proxyvote.com, the
Internet site maintained by Broadridge Financial solutions, Inc.
and, immediately after voting, fill out the consent form that
appears on-screen at the end of the Internet voting procedure.
|
This consent may be withdrawn at any time in order to resume
receiving stockholder communications in print form.
4
ELECTION
OF DIRECTORS
Our Board of Directors currently consists of eight members who
will serve until the 2008 Annual Meeting, and until their
successors have been elected and qualified. On November 16,
2007, the Board of Directors increased the size of the board
from seven to eight Directors and, upon the Nominating and
Governance Committees recommendation, appointed Bob G.
Scott to fill the newly-created vacancy. Mr. Scotts
consideration for nomination was brought to the attention of the
committee by an executive officer of the Company. The Board also
appointed Mr. Scott to each of the Audit, Compensation and
Nominating and Governance Committees. Mr. Scott, along with
all seven incumbent directors, stands for election at the 2008
Annual Meeting.
By unanimous resolution, the Nominating and Governance Committee
recommended to the Board of Directors, as nominees to the Board
of Directors, our eight current Directors of the Company, each
of whom is listed below under the caption Nominees for
Director. After review and consideration by the Board
of Directors, the Board nominated the eight Directors for
election as directors of D.R. Horton at the 2008 Annual Meeting.
Unless otherwise specified in the accompanying proxy, the shares
voted by proxy will be voted for each of the persons named below
as nominees for election as directors. The eight nominees
receiving the most votes cast, which is a plurality of the
votes, will be elected for one year terms and will serve until
the next annual meeting of stockholders and their successors
have been elected and qualified. We do not know of any reason
why any of the nominees would be unable to serve. However, if
any of the nominees should become unavailable to serve as a
director, the Board may designate a substitute nominee or reduce
the size of the board. If the Board designates a substitute
nominee, the persons named as proxies will vote FOR
that substitute nominee.
The Corporate Governance Principles of the Company address the
situation in which a director does not receive a majority of
affirmative votes cast. Under such principles, any nominee for
director who, in an uncontested election, receives a greater
number of votes withheld from his or her election
than votes for his or her election at the annual
meeting (Majority Withheld Vote) will
promptly tender his or her resignation. The Nominating and
Governance Committee, which is comprised exclusively of
independent directors, will consider the resignation and
recommend to the Board whether to accept the tendered
resignation. The Board will act upon the Nominating and
Governance Committees recommendation within a reasonable
period of time. The action taken by the Board will be publicly
disclosed in a report filed with the Securities and Exchange
Commission (the SEC) and may include, without
limitation, acceptance or rejection of the tendered resignation
or adoption of measures designed to address the issues
underlying the Majority Withheld Vote. The foregoing description
is qualified in its entirety by reference to our Corporate
Governance Principles, which can be found under the Investor
Relations and Corporate Governance links on our website at
www.drhorton.com.
According to our Bylaws, any stockholder may make nominations
for the election of directors if notice of such nominations is
delivered to, or mailed and received at, the principal executive
office of D.R. Horton not less than thirty days prior to the
date of the originally scheduled meeting. However, if less than
forty days notice or prior public disclosure of the date
of the originally scheduled meeting is given by D.R. Horton,
notice of such nomination must be so received not later than the
close of business on the tenth day following the earlier of the
day on which notice of the originally scheduled meeting was
mailed or the day on which such public disclosure was made. If
nominations are not so made, only the nominations of the Board
of Directors may be voted upon at the 2008 Annual Meeting.
The Board Of Directors Recommends Voting FOR Each
Of The Following Director Nominees.
5
The following is a summary of certain information regarding the
nominees for election as directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
Name
|
|
Age
|
|
|
Since
|
|
|
Principal Occupation and Business Experience
|
|
Donald R. Horton
|
|
|
57
|
|
|
|
1991
|
|
|
Mr. Horton has been Chairman of the Board of D.R. Horton since
it was formed in July 1991, and he was President from July 1991
until November 1998. He has been involved in the real estate
and homebuilding industries since 1972, and he was the founder,
sole or principal stockholder, director and president of each of
D.R. Hortons predecessor companies since their respective
organization, which date from 1978 to 1990.
|
Bradley S. Anderson
|
|
|
46
|
|
|
|
1998
|
|
|
Mr. Anderson is a Senior Vice President of CB Richard Ellis,
Inc., an international real estate brokerage company, and he has
held various positions in Phoenix, Arizona with its predecessor,
CB Commercial Real Estate Group, Inc., since January 1987. He
served as Interim Chairman of the Board of Continental Homes
Holding Corp. from October 1997 through April 1998, when it
merged into D.R. Horton, and he became a director of D.R. Horton
at that time. Mr. Anderson has been a member of both the
Audit and Compensation Committees since 1998 and he has also
been a member of the Nominating and Governance Committee since
November 2003.
|
Michael R. Buchanan
|
|
|
60
|
|
|
|
2003
|
|
|
Mr. Buchanan has significant commercial banking experience with
several banking institutions serving the real estate and
homebuilding sectors. He retired from commercial banking in
March 2002. From March 2002 to March 2003, Mr. Buchanan was
engaged as a senior advisor to Banc of America Securities. From
1998 to March 2002, Mr. Buchanan was a Managing Director of Bank
of America, an executive officer position in which he was head
of its national real estate banking group. From 1990 to 1998,
Mr. Buchanan was an Executive Vice President of NationsBank,
which later merged with Bank of America. Mr. Buchanan is also a
member of the board of directors and the asset committee of
Piedmont Office Realty Trust, Inc. (formerly Wells Real Estate
Investment Trust), a publicly held, non-traded real estate
investment trust. Mr. Buchanan was appointed to the Audit
Committee in July 2003 and the Compensation Committee in January
2004 and he has also been a member of the Nominating and
Governance Committee since November 2003.
|
Richard I. Galland
|
|
|
91
|
|
|
|
1992
|
|
|
Mr. Galland is an attorney. He was formerly the Chief Executive
Officer and Chairman of the Board of Fina, Inc. and Of Counsel
to the law firm of Jones, Day, Reavis & Pogue. Mr. Galland
formerly served on the boards of directors, and as a member of
the audit and compensation committees, of First RepublicBank
Corporation, Texas Industries, Inc. and Associated Materials,
Inc., each an NYSE listed company. He has been a director of
D.R. Horton and a member of both the Audit and Compensation
Committees since 1992, and he has also been a member of the
Nominating and Governance Committee since November 2003.
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
Name
|
|
Age
|
|
|
Since
|
|
|
Principal Occupation and Business Experience
|
|
Michael W. Hewatt
|
|
|
58
|
|
|
|
2005
|
|
|
Mr. Hewatt is a certified public accountant and owner of Hewatt
& Associates, CPAs, an auditing and tax services firm. He
has worked for Hewatt & Associates or its predecessor firms
since 1980. From 1971 to 1979, Mr. Hewatt worked in the tax
and audit areas at Coopers & Lybrand (currently
PricewaterhouseCoopers LLP) and was an audit manager for five
years during this period. Mr. Hewatt is a member of the
American Institute of Certified Public Accountants
(AICPA), the AICPAs peer review
program, former member of the board of directors of the Texas
Society of Certified Public Accountants and former President of
the Texas Society of Certified Public Accountants
Fort Worth Chapter. Mr. Hewatt has been a director of D.R.
Horton since 2005 and has been a member of the Audit,
Compensation and Nominating and Governance Committees since that
time.
|
Bob G. Scott
|
|
|
69
|
|
|
|
2007
|
|
|
Mr. Scott is currently retired from his most recent position as
Chief Financial Officer and Chief Operating Officer of Summit
Bancshares, Inc., a NASDAQ listed company. He was with Summit
Bancshares from 1994 to 2006. Mr. Scott was an insurance
consultant for Alexander & Alexander from 1992 to 1994.
From 1972 to 1992, he was the controller and treasurer of Texas
American Bancshares / Texas American Bank, an NYSE listed
company. Mr. Scott was an auditor at Ernst & Ernst
(currently Ernst & Young LLP) from 1969 to 1972. Mr. Scott
previously was a Captain in the U.S. Air Force. Mr. Scott
became a director of D.R. Horton in 2007 and is a member of the
Audit, Compensation and Nominating and Governance Committees.
|
Donald J. Tomnitz
|
|
|
59
|
|
|
|
1995
|
|
|
Mr. Tomnitz is Vice Chairman, President and Chief Executive
Officer of D.R. Horton. He was a Vice President in charge of
various divisions of D.R. Horton from 1983 until he was elected
Vice President Western Region of D.R. Horton in
August 1994. From July 1996 until November 1998, Mr. Tomnitz
was President of D.R. Hortons Homebuilding Division;
in January 1998 he was elected an Executive Vice President of
D.R. Horton; in November 1998 he was elected Vice Chairman and
Chief Executive Officer of D.R. Horton; and in March 2000, he
became President as well. Mr. Tomnitz previously was a Captain
in the U.S. Army, a Vice President of RepublicBank Dallas, N.A.,
and a Vice President of Crow Development Company, a Trammell
Crow company.
|
Bill W. Wheat
|
|
|
41
|
|
|
|
2003
|
|
|
Mr. Wheat is an Executive Vice President and the Chief Financial
Officer of D.R. Horton, positions he has held since October
2003. Mr. Wheat was a Senior Vice President and Controller from
2000 until 2003. From 1998 until 2000, Mr. Wheat was an
Accounting Manager with the Company. From 1991 to 1998, Mr.
Wheat held financial planning and assistant controller positions
with The Bombay Company. Prior to 1991, Mr. Wheat was an
auditor with Price Waterhouse LLP (currently
PricewaterhouseCoopers LLP).
|
7
Samuel R. Fuller, age 64, is a Senior Executive Vice
President of the Company. Mr. Fuller has been employed by
D.R. Horton since 1992. In 1995, he was promoted to Controller.
In 2000, Mr. Fuller was promoted to Executive Vice
President and Chief Financial Officer, and in 2000 he was also
appointed a director. In October 2003, Mr. Fuller was
promoted to Senior Executive Vice President. He retired from the
Board of Directors in November 2003.
Stacey H. Dwyer, age 41, is an Executive Vice President and
Treasurer of D.R. Horton and is in charge of investor relations
for D.R. Horton. She has been an employee of D.R. Horton since
1991. She was promoted from Assistant Secretary to Assistant
Vice President in 1998 and from Assistant Vice President to
Executive Vice President in 2000. She also became Treasurer in
October 2003. Prior to 1991, Ms. Dwyer was an auditor for
Ernst & Young LLP.
8
Corporate
Governance Standards
Our Board of Directors has adopted a number of standards to
comply with requirements of the Sarbanes-Oxley Act of 2002, and
the final rules of the NYSE and SEC relating to Sarbanes-Oxley
and other corporate governance matters. Our Board has adopted
the D.R. Horton Corporate Governance Principles, which contain a
number of corporate governance initiatives designed to comply
with the NYSE listing standards (the NYSE Rules)
and the rules and regulations of the SEC (the SEC
Rules) relating to corporate governance. The
significant corporate governance initiatives adopted by the
Board of Directors are discussed below. The Corporate Governance
Principles can be found under the Investor Relations and
Corporate Governance links on our website at www.drhorton.com.
Director
Independence
Our Board of Directors is comprised of a majority of independent
directors in accordance with the NYSE Rules. Our Board made the
independence determination of its members based on the
Independence Standards discussed below.
Our Board has adopted a set of Independence
Standards, consistent with the NYSE Rules, to aid it
in determining whether a member of the Board is independent
under the NYSE Rules. In accordance with these Independence
Standards, a director must not have a direct or indirect
material relationship with the Company or its management, other
than as a director. The Independence Standards specify the
criteria by which the independence of our directors will be
determined, including strict guidelines for directors and their
immediate family members with respect to past employment or
affiliation with the Company, its management or its independent
auditor.
The Independence Standards are contained in the Corporate
Governance Principles set forth on our website under the
Investor Relations and Corporate Governance links. These include
the following:
|
|
|
|
|
A director who is an employee or whose immediate family member
is an executive officer of D.R. Horton is not independent until
three years after the end of such employment relationship.
|
|
|
|
A director who receives, or whose immediate family member
receives, more than $100,000 per year in direct compensation
from D.R. Horton, other than director and committee fees and
pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any way
on continued service), is not independent until three years
after he or she ceases to receive more than $100,000 per year in
compensation. Compensation received by an immediate family
member for service as a non-executive employee or non-member of
senior management of D.R. Horton will not be considered in
determining independence under this test.
|
|
|
|
A director is not independent if (i) the director or an
immediate family member is a current partner of D.R.
Hortons internal or external auditor, (ii) the
director is a current employee of such a firm, (iii) the
directors immediate family member is a current employee of
such a firm and participates in the firms audit, assurance
or tax compliance (but not tax planning) practice, or
(iv) the director or an immediate family member was within
the last three years (but is no longer) a partner or employee of
such a firm and personally worked on D.R. Hortons audit
within that time.
|
|
|
|
A director who is employed, or whose immediate family member is
employed, as an executive officer of another company where any
of D.R. Hortons present executives serves on that
companys compensation committee is not independent until
three years after the end of such service or the employment
relationship.
|
|
|
|
A director who is an executive officer or an employee, or whose
immediate family member is an executive officer, of a company
that makes payments to, or receives payments from, D.R. Horton
for property or services in an amount which, in any single
fiscal year, exceeds the greater of $1 million, or
|
9
|
|
|
|
|
2% of such other companys consolidated gross revenues, is
not independent until three years after falling below such
threshold.
|
|
|
|
|
|
If a director serves as an executive officer, director or
trustee of a charitable or educational organization, and D.R.
Hortons contributions to the organization are less than
$500,000, then the relationship will not be considered to be a
material relationship that would impair a directors
independence.
|
For purposes of these Independence Standards, an
immediate family member includes a
directors spouse, parents, children, siblings, mothers and
fathers-in-laws,
sons and
daughters-in-law,
brothers and
sisters-in-law,
and anyone (other than domestic employees) who shares the
directors home.
Audit
Committee Independence, Financial Literacy and Audit Committee
Financial Expert
In addition to being independent based on the Independence
Standards, the NYSE Rules and related SEC Rules require that
each member of an audit committee satisfy additional
independence and financial literacy requirements, and at least
one of these members must satisfy the additional requirement of
having accounting or related financial management expertise.
This additional requirement can be satisfied by the Board
determining that at least one Audit Committee member is an
audit committee financial expert within the
meaning of the SEC Rules. Accordingly, the Corporate Governance
Principles contain a set of standards that relate to audit
committee independence, financial literacy and audit committee
accounting and financial management expertise. Generally, the
additional independence standard provides that (i) a member
of the Audit Committee, or his or her immediate family members,
are prohibited from receiving any direct or indirect
compensation or fee from the Company or its affiliates, and
(ii) he or she may not be an affiliated person of the
Company or any of its subsidiaries. Generally, the financial
literacy standard provides that the Board, in its business
judgment, shall determine if each member is financially
literate, taking into account factors such as the members
education, experience and ability to read and understand
financial statements of public companies. Also, audit committee
financial experts must have five additional attributes, which
are (i) an understanding of generally accepted accounting
principles and financial statements, (ii) the ability to
assess the general application of such principles in connection
with the accounting for estimates, accruals and reserves,
(iii) experience preparing, auditing, analyzing or
evaluating financial statements that present a breadth and level
of complexity of accounting issues that are generally comparable
to the breadth and complexity of issues that can reasonably be
expected to be raised by the Companys financial
statements, or experience actively supervising one or more
persons engaged in such activities, (iv) an understanding
of internal control over financial reporting and (v) an
understanding of audit committee functions. All together,
attributes (i) through (v) are referred to as the
Financial Expert Attributes. The audit
committee financial expert standards are set forth in the
Corporate Governance Principles.
Board
Determinations
Based on the independence, financial literacy and financial
expert standards discussed above, the Board has determined that
Bradley S. Anderson, Michael R. Buchanan, Richard I. Galland,
Michael W. Hewatt and Bob G. Scott are (i) independent, for
purposes of serving as independent members of the Board of
Directors, the Compensation Committee and the Nominating and
Governance Committees, (ii) independent, for purposes of
serving as independent members on the Audit Committee, and
(iii) financially literate, for purposes of serving on the
Audit Committee. The Board has also determined, as set forth
below, that Mr. Hewatt, Mr. Galland and
Mr. Buchanan each have the Financial Expert Attributes
described above. No affirmative decision has been made by the
Board at this time regarding Mr. Scotts Financial
Expert Attributes as the Audit Committee currently has three
independent members with such attributes. The Board will defer
making such a decision until the future and as needed.
Mr. Hewatt. Mr. Hewatt acquired the
Financial Expert Attributes primarily through his more than
30 years of experience working as a certified public
accountant for Coopers & Lybrand LLP and
Hewatt & Associates, CPAs and its predecessor firms.
Mr. Hewatts experience as an auditor provided him
active experience in conducting audits and reviewing financial
statements. This active accounting experience further
10
developed Mr. Hewatts understanding of generally
accepted accounting principles and financial statements and his
ability to assess the application of such principles in
connection with accounting for estimates, accruals and reserves.
Mr. Hewatts active status as a certified public
accountant requires him to stay current on pronouncements and
advisory notices issued by accounting, auditing and tax
regulatory boards and organizations.
During his career as a certified public accountant,
Mr. Hewatt has served on various management teams directly
responsible for designing and conducting testing procedures on
financial statements for compliance with applicable controls and
procedures, such as estimates, accruals and reserves, and
evaluating related internal control structures. These types of
compliance reviews were documented and evaluated and used in
forming audit procedures. In connection with certain audits and
compliance testing, Mr. Hewatt prepared and issued reports
to boards of directors, whereby he gained understanding into the
functioning of boards of directors and related committees.
Mr. Hewatt has additional experience in providing
management advisory services and providing tax advisory and tax
preparation services, which has provided Mr. Hewatt with a
strong background in the Internal Revenue Code and dealing with
the Internal Revenue Service. Mr. Hewatt has worked with
clients which include public and private companies, governmental
organizations and non-profit organizations.
Mr. Galland. Mr. Galland acquired
the Financial Expert Attributes primarily through years of
experience as president and chief executive officer of several
companies where he actively supervised principal accounting
officers and actively oversaw the preparation and evaluation of
financial statements. Throughout Mr. Gallands career,
he has actively participated in numerous mergers and
acquisitions where he was involved in evaluating balance sheets
and analyzing appropriate estimates, accruals and reserves to
record on the financial records of the acquiring company.
Mr. Galland also has had extensive experience as a board
member of two other public companies, where he also served as
chair of their audit committees.
Mr. Buchanan. Mr. Buchanan acquired
the Financial Expert Attributes primarily through his experience
as a commercial banker in the real estate and homebuilding
sectors, including serving as head of Bank of Americas
national real estate group. Mr. Buchanans
responsibilities as a banker required him to analyze and
evaluate financial statements in order to make credit and
lending decisions. In this regard, he developed significant
expertise in understanding the integrity of the financial
information used to prepare financial statements and how such
information should be used to analyze and evaluate a
companys financial condition and its ability to meet the
companys debt obligations. As head of the national real
estate group at Bank of America, Mr. Buchanan also actively
supervised others in conducting financial statement and
financial condition analysis and evaluation.
As provided by the safe harbor contained in the SEC Rules, our
audit committee financial experts will not be deemed
experts for any purpose as a result of being
so designated, such designation does not impose on such persons
any duties, obligations or liabilities that are greater than the
duties, obligations and liabilities imposed on such persons as
members of the Audit Committee or the Board of Directors in the
absence of such designation, and such designation does not
affect the duties, obligations or liabilities of any other
member of the Audit Committee or the Board of Directors.
The Board also determined that Donald R. Horton, Donald J.
Tomnitz and Bill W. Wheat are not independent members of the
Board, because they currently are executive officers of, and
employed by, the Company.
Code
of Ethical Conduct for the CEO, CFO and Senior Financial
Officers
In accordance with SEC Rules, the Audit Committee and the Board
have adopted the Code of Ethical Conduct for the CEO, CFO and
Senior Financial Officers. The Board believes that these
individuals must set an exemplary standard of conduct for D.R.
Horton, particularly in the areas of accounting, internal
accounting control, auditing and finance. The ethics code sets
forth ethical standards the designated officers must adhere to
and other aspects of accounting, auditing and financial
compliance. The full text of the Code of Ethical Conduct for
CEO, CFO and Senior Financial Officers has been posted to
the Companys website, and can be found under the Investor
Relations and Corporate Governance links. Information relating
to any amendment to
11
or waiver of a provision of the Code of Ethical Conduct for
CEO, CFO and Senior Financial Officers will be disclosed on
the website within four business days of such amendment or
waiver.
Corporate
Code of Business Conduct and Ethics
The Board of Directors has adopted a Corporate Code of
Business Conduct and Ethics for employees and directors of
D.R. Horton in accordance with the NYSE Rules. The Board adopted
the Corporate Code of Business Conduct and Ethics to
provide guidance to the Board and management in areas of ethical
business conduct and risk and provide guidance to employees and
directors by helping them to recognize and deal with ethical
issues including, but not limited to, (i) conflicts of
interest, (ii) corporate opportunities,
(iii) confidentiality, (iv) fair dealing,
(v) protection of corporate assets, (vi) compliance
with rules and regulations, including insider trading of
securities, and (vii) confidential reporting of unethical
behavior and hotline telephone numbers. The Corporate Code of
Business Conduct and Ethics can be found on our website
under the Investor Relations and Corporate Governance links.
Qualifications
for Directors
The Nominating and Governance Committee utilizes a variety of
methods for identifying nominees for director, including
considering potential director candidates who come to the
committees attention through current officers, directors,
professional search firms, stockholders or other persons. Once a
potential nominee has been identified, the Nominating and
Governance Committee evaluates whether the nominee has the
appropriate skills and characteristics required to become a
director in light of the then current
make-up of
the Board of Directors. This assessment includes an evaluation
of the nominees judgment and skills, such as his or her
depth of understanding of the Companys industry, financial
sophistication, leadership and objectivity, all in the context
of the perceived needs of the Board of Directors at that point
in time.
In addition to the foregoing, the Companys Corporate
Governance Principles provide that each member of the Board of
Directors should have the following minimum characteristics:
|
|
|
|
|
the highest personal and professional ethical standards,
integrity and values;
|
|
|
|
a commitment to representing the long-term interests of the
stockholders;
|
|
|
|
practical wisdom and mature judgment;
|
|
|
|
be objective and inquisitive; and
|
|
|
|
be prepared to offer his or her resignation in the event of any
significant change in personal circumstances that could affect
the discharge of his or her responsibilities as a director,
including a change in his or her principal job responsibilities.
|
Ordinarily, directors who serve as chief executive officers or
in equivalent positions for other companies should not serve on
more than one other board of a public company in addition to the
D.R. Horton Board, and other directors should not serve on more
than two other boards of public companies in addition to the
D.R. Horton Board. Because of the value the Board places on
having directors who are knowledgeable about the Company and its
operations, neither the Board nor the Nominating and Governance
Committee believes that arbitrary term limits on directors
service are appropriate.
Retirement
Age Policy
On January 25, 2007, our Board adopted a retirement policy
for directors. Under the policy, directors may not stand for
reelection after they have reached the age of 75. Each director
serving on the Board on January 25, 2007 is exempt from
this policy.
Majority
Voting Policy
Our directors are elected under a plurality standard, meaning
the eight nominees who receive the greatest amount of votes are
elected as directors, regardless of whether a majority of votes
are received by any
12
individual director. However, under our Corporate Governance
Guidelines, any nominee for director who, in an uncontested
election, receives a greater number of votes
withheld from his or her election than votes
for his or her election at the annual meeting must
promptly tender his or her resignation. The Nominating and
Governance Committee will consider the resignation and recommend
to the Board whether to accept the tendered resignation. The
Board will act upon the Nominating and Governance
Committees recommendation within a reasonable period of
time. The action taken by the Board will be publicly disclosed
in a report filed with the Securities and Exchange Commission.
Procedures
for Nominating or Recommending for Nomination Candidates for
Director
Any stockholder may submit a nomination for director by
following the procedures outlined in our Bylaws and described
under Proposal One Election of Directors
in this Proxy Statement. In addition, the Nominating and
Governance Committee has adopted a policy permitting
stockholders to recommend candidates for director for
consideration by the committee, which will consider such
candidates on the same basis as candidates identified through
other means. Stockholders wishing to recommend candidates for
election at the 2008 Annual Meeting must give notice to the
Nominating and Governance Committee no more than 150 days
and no less than 120 days prior to the anniversary date of
this Proxy Statement. All director candidates shall, at a
minimum, possess the qualifications for director discussed
above. Each notice must set forth (1) the name and mailing
address of such stockholder, (2) the number of shares
beneficially owned by such stockholder, (3) the name, age,
business address and residence address of each candidate,
(4) the number of shares of Common Stock, if any,
beneficially owned by each candidate, and (5) all other
information relating to such person that is required to be
disclosed in the solicitations for proxies for election of
directors under the SEC Rules and NYSE Rules. The Nominating and
Governance Committee may request additional information to
assist in the evaluation of the candidacy of such person.
Complaint
Procedures For Accounting, Internal Control, Auditing and
Financial Matters
In accordance with SEC Rules, the Audit Committee has
established procedures for (i) the receipt, retention and
treatment of complaints regarding accounting, internal control,
auditing or financial matters (collectively, Accounting
Matters) and (ii) the confidential, anonymous
submission by employees of concerns regarding questionable
Accounting Matters. The Audit Committee oversees treatment of
complaints and concerns in this area. The full text of the
Complaint Procedures For Accounting, Internal Control,
Auditing and Financial Matters has been posted to the
Companys website, and can be found under the Investor
Relations and Corporate Governance links.
Executive
Sessions of the Board of Directors
In accordance with the NYSE Rules, the Board of Directors has
held and will continue to hold regularly scheduled executive
sessions of the non-management directors, all of whom are
independent. Mr. Michael R. Buchanan, Chairperson of the
Nominating and Governance Committee, presides at these
independent sessions.
Communications
with the Board of Directors
You can communicate with any member of our Board of Directors by
sending the communication to the Chairperson of the Nominating
and Governance Committee, who also serves as the Presiding
Director. Currently, Mr. Buchanan serves as chairperson of
the Nominating and Governance Committee. Send communications to:
Presiding Director
c/o Chief
Legal Officer, D.R. Horton, Inc., 301 Commerce Street,
Suite 500, Fort Worth, Texas 76102. Our Chief Legal
Officer will review the communications and determine if such
communications come within the purview of a Board committee or
Board member(s). After such determination, these communications
will be promptly forwarded to such Board member(s) or the
Presiding Director as applicable. The Presiding Director reports
these communications to the Board on a quarterly basis. Further
information may be obtained on our website at www.drhorton.com
under the Investor Relations and Corporate Governance links.
13
Meetings
and Committees of the Board
Board
Meetings
During the 2007 fiscal year, the Board of Directors of D.R.
Horton held six meetings and acted once by written consent. Each
director, other than Bob G. Scott (who was appointed following
the 2007 fiscal year), attended at least 83% of the Board
meetings and at least 88% of the committee meetings for each
committee on which he served during the 2007 fiscal year.
Executive sessions of our non-management directors, all of whom
are independent, are regularly held. The sessions are scheduled
and chaired by the Chairperson of the Nominating and Governance
Committee, who also acts as our Presiding Director. Directors
are encouraged to attend annual meetings of our stockholders.
The 2007 annual meeting was attended by all of our current
directors on the Board at that time.
Committees
of the Board
The Board of Directors has four committees: the Executive
Committee, the Audit Committee, the Compensation Committee and
the Nominating and Governance Committee. The Board of Directors
has adopted governing Charters for each of the Audit Committee,
the Compensation Committee and the Nominating and Governance
Committee. Each of the Charters of the Audit Committee, the
Compensation Committee and the Nominating and Governance
Committee is posted on the Companys website, and can be
found under the Investor Relations and Corporate Governance
links.
Executive
Committee
The Executive Committee, while the Board is not in session,
possesses all of the powers and may carry out all of the duties
of the Board of Directors in the management of the business of
D.R. Horton, which by state or federal law or the NYSE Rules may
be delegated to it by the Board of Directors. The Executive
Committee acted 55 times by written consent during the 2007
fiscal year, of which 50 of these consents related to matters
that were routine to the operations of the Company, and five of
these consents related to matters that were delegated to the
Executive Committee by the Board. During our 2007 fiscal year
and currently, the Executive Committee was and is composed of
Messrs. Horton, Tomnitz and Wheat.
Nominating
and Governance Committee
The members of the Nominating and Governance Committee are
Mr. Michael R. Buchanan, Mr. Bradley S. Anderson,
Mr. Richard I. Galland, Mr. Michael W. Hewatt and
Mr. Bob G. Scott, with Mr. Buchanan serving as
Chairperson. Each committee member has been determined by the
Board to be independent in accordance with the NYSE Rules.
During the 2007 fiscal year, the Nominating and Governance
Committee met three times and took no action by written consent,
and each member, other than Mr. Scott (who was appointed
following the 2007 fiscal year), attended in person or by
telephone conference all of the meetings.
The Nominating and Governance Committee Charter has been posted
to the Companys website under the Investor Relations and
Corporate Governance links. The Nominating and Governance
Committees primary purpose is to provide assistance to the
Board of Directors in fulfilling its responsibility to the
stockholders by:
|
|
|
|
|
Identifying individuals qualified to become directors consistent
with criteria approved by the Board, and recommending to the
Board for selection the qualified candidates for directorships
to be filled by the Board or by the stockholders;
|
|
|
|
Developing and recommending to the Board a set of corporate
governance principles applicable to the Company; and
|
|
|
|
Overseeing the evaluation of the Board and management.
|
Compensation
Committee
The members of the Compensation Committee are Mr. Bradley
S. Anderson, Mr. Michael R. Buchanan, Mr. Richard I.
Galland, Mr. Michael W. Hewatt and Mr. Bob G. Scott,
with Mr. Anderson serving as
14
Chairperson. Each committee member has been determined by the
Board to be independent. During the 2007 fiscal year, the
Compensation Committee met two times and acted by written
consent four times, and each member, other than Mr. Scott
(who was appointed following the 2007 fiscal year), attended in
person or by telephone conference all of the meetings.
The Compensation Committee Charter has been posted to the
Companys website under the Investor Relations and the
Corporate Governance links. The Charter provides that the
Compensation Committee shall assist the Board of Directors in
discharging its responsibility to the stockholders with respect
to the Companys compensation programs and compensation of
the Companys executive officers.
The Compensation Committee Charter also sets forth the
responsibilities and duties of the committee regarding reviewing
the compensation for the Chief Executive Officer and other
executive officers, monitoring incentive and equity-based
compensation plans, preparing an annual report on executive
compensation and reporting to the Board of Directors.
Audit
Committee
The members of the Audit Committee of the Board of Directors are
Mr. Michael W. Hewatt, Mr. Bradley S. Anderson,
Mr. Michael R. Buchanan, Mr. Richard I. Galland and
Mr. Bob G. Scott, with Mr. Hewatt serving as
Chairperson. The Audit Committee met nine times during 2007
fiscal year and took no action by written consent, and each
member, other than Mr. Scott (who was appointed following
the 2007 fiscal year), attended in person or by telephone
conference 88% or more of the meetings.
As discussed under the caption Corporate Governance
Standards on pages 9 and 10 of this Proxy Statement,
each member of the Audit Committee has been determined by the
Board to be independent and
financially literate in accordance with NYSE
Rules, the SEC Rules, and the corporate governance and
independent standards adopted by the Board. Also,
Messrs. Galland, Buchanan and Hewatt each have been
determined by the Board to be an audit committee
financial expert under such rules, regulations and
standards as are set forth in the Companys Corporate
Governance Principles posted on our website under the Investor
Relations and Corporate Governance links. The Boards
determinations are set forth on pages 10 and 11 of this Proxy
Statement.
The Audit Committee operates pursuant to an Audit Committee
Charter, which was approved and adopted by the Board of
Directors. A copy of the adopted Audit Committee Charter is
posted to the Companys website under the Investor
Relations and Corporate Governance links. The duties and
responsibilities of the Audit Committee are set forth in its
Charter. The Audit Committees primary purposes are to:
|
|
|
|
|
assist the Board in fulfilling its oversight responsibilities
relating to the:
|
|
|
|
|
|
integrity of the Companys financial statements;
|
|
|
|
Companys compliance with legal and regulatory requirements;
|
|
|
|
independent auditors qualifications and
independence; and
|
|
|
|
performance of the Companys internal audit function and
independent auditor; and
|
|
|
|
|
|
prepare an Audit Committee report to be included in the
Companys annual proxy statement.
|
Further discussion regarding the Audit Committees
processes and procedures regarding D.R. Hortons audited
consolidated financial statements for the year ended
September 30, 2007, and other matters are discussed in the
Audit Committee Report set forth on page 41 of this
Proxy Statement.
15
Compensation
of Directors
Director
Compensation for Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
Name(1)
|
|
Paid in Cash(2)
|
|
|
Awards
|
|
|
Awards(3)
|
|
|
Compensation
|
|
|
Total
|
|
|
Bradley S. Anderson
|
|
$
|
57,500
|
|
|
|
|
|
|
$
|
52,140
|
|
|
|
|
|
|
$
|
109,640
|
|
Michael R. Buchanan
|
|
$
|
57,500
|
|
|
|
|
|
|
$
|
62,860
|
|
|
|
|
|
|
$
|
120,360
|
|
Richard I. Galland
|
|
$
|
56,250
|
|
|
|
|
|
|
$
|
52,140
|
|
|
|
|
|
|
$
|
108,390
|
|
Michael W. Hewatt
|
|
$
|
56,250
|
|
|
|
|
|
|
$
|
66,540
|
|
|
|
|
|
|
$
|
122,790
|
|
|
|
|
(1) |
|
During the 2007 fiscal year, D.R. Horton paid director fees only
to non-management directors. No director of D.R. Horton who
receives compensation from D.R. Horton for services other than
as a director received any additional compensation for serving
as a director of D.R. Horton. Mr. Bob G. Scott was
appointed to his position as director on November 16, 2007
and thus received no compensation for fiscal year 2007. |
|
(2) |
|
Each non-management director receives $10,000 per Board meeting
attended in person or by tele-conference, paid quarterly and not
to exceed $40,000 per year. In addition, each non-management
director who serves on a committee of the Board of Directors
receives an annual fee of $5,000 per committee paid quarterly,
and each non-management director who serves as the Chairperson
of a Committee of the Board of Directors receives an annual fee
of $2,500 per committee paid quarterly. |
|
(3) |
|
Our directors were not granted stock option awards in the 2007
fiscal year. The value of the option awards is the compensation
expense related to the vesting of stock option awards granted in
years prior to fiscal year 2007 which was calculated in
accordance with SFAS 123(R) and recognized in the
Companys 2007 fiscal year financial statements. The
compensation expense recognized in our 2007 fiscal year
financial statements was based upon the grant date fair value,
which was determined using a Black-Scholes option pricing model
pursuant to SFAS 123(R). Further information regarding the
valuation of stock options can be found under Note J in the
Notes to Consolidated Financial Statements in our Annual Report
on
Form 10-K
for the year ended September 30, 2007. See also
Outstanding Equity Awards at Fiscal Year-End
on page 32 of this Proxy Statement. As of
September 30, 2007, Messrs. Anderson, Buchanan,
Galland and Hewatt held 24,000, 30,000, 30,000 and 20,000
outstanding options, respectively. On December 3, 2007, we
awarded Mr. Scott, who was appointed to his position as
director following the end of our 2007 fiscal year, 10,000 stock
options with an exercise price of $12.34 which was the
Companys closing stock price on the date of grant. Such
grant is consistent with our past policy of awarding new
directors stock options awards. |
16
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The following table shows the beneficial ownership of the Common
Stock of D.R. Horton as of December 3, 2007 by (i) all
D.R. Horton directors, (ii) all D.R. Horton executive
officers, and (iii) all D.R. Horton directors and
executive officers as a group. Unless stated otherwise, the
shares are owned directly and the named beneficial owners
possess sole voting and investment power with respect to the
shares set forth in the table.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
Nature of Common Stock Beneficially Owned(1)
|
|
|
|
Number of Shares
|
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
|
Class(2)
|
|
|
Donald R. Horton
|
|
|
27,128,645
|
(3)
|
|
|
8.60
|
%
|
Bradley S. Anderson
|
|
|
26,948
|
|
|
|
*
|
|
Michael R. Buchanan
|
|
|
18,000
|
|
|
|
*
|
|
Stacey H. Dwyer
|
|
|
202,372
|
|
|
|
*
|
|
Samuel R. Fuller
|
|
|
104,630
|
(4)
|
|
|
*
|
|
Richard I. Galland
|
|
|
35,451
|
|
|
|
*
|
|
Michael W. Hewatt
|
|
|
6,000
|
|
|
|
*
|
|
Bob G. Scott
|
|
|
0
|
|
|
|
*
|
|
Gordon D. Jones
|
|
|
263,141
|
|
|
|
*
|
|
George W. Seagraves
|
|
|
156,504
|
|
|
|
*
|
|
Donald J. Tomnitz
|
|
|
1,604,440
|
(5)
|
|
|
*
|
|
Bill W. Wheat
|
|
|
104,108
|
(6)
|
|
|
*
|
|
All directors and executive officers as a group (12 persons)
|
|
|
29,650,239
|
|
|
|
9.36
|
%
|
|
|
|
* |
|
Less than 1% |
|
|
|
A named executive officer. |
|
(1) |
|
Beneficial ownership includes the following shares which the
executive officers and directors could acquire by exercising
stock options on, or within 60 days after, December 3,
2007: Mr. Horton 309,999,
Mr. Anderson 16,000,
Mr. Buchanan 18,000, Ms. Dwyer
139,288, Mr. Fuller 70,981,
Mr. Galland 22,000, Mr. Hewatt
6,000, Mr. Jones 215,514,
Mr. Seagraves 131,504,
Mr. Tomnitz 692,840 and
Mr. Wheat 99,644. These options represent an
aggregate of 1,721,770 shares. |
|
(2) |
|
The percentages are calculated based on 314,956,291 issued and
outstanding shares on December 3, 2007. For each person,
separately, his or her percentage was calculated by including
his or her options set forth in footnote (1) in both the
numerator and denominator, and for the group, the percentage was
calculated by including the 1,721,770 options set forth in
footnote (1) in both the numerator and denominator. |
|
(3) |
|
These shares do not include (i) 2,048,341 shares
directly owned by Donald Ryan Horton, an adult son of
Mr. Horton, and 2,048,338 shares directly owned by
Douglas Reagan Horton, another adult son of Mr. Horton,
(ii) 2,359,590 shares held by the Douglas Reagan
Horton Trust, (iii) 2,359,589 shares held by the
Donald Ryan Horton Trust, (iv) 1,368,005 shares held
by the Martha Elizabeth Horton Trust, and
(v) 1,499,984 shares held by the Donald Ray Horton
Trust. Mr. Horton disclaims any beneficial interest in
these shares. These trusts were established by Mr. Horton
and his wife for the benefit of their descendants. Terrill J.
Horton serves as the sole trustee of these trusts. Terrill J.
Horton is a retired director of the Company and the brother of
Donald R. Horton. Donald R. Hortons address is D.R.
Horton, Inc., D.R. Horton Tower, 301 Commerce Street,
Suite 500, Fort Worth, Texas 76102. |
|
(4) |
|
These shares do not include 4,000 shares owned by an IRA
for the benefit of Mr. Fullers spouse.
Mr. Fuller disclaims any beneficial interest in these
shares. |
|
(5) |
|
These shares do not include 20,568 shares owned by an IRA
for the benefit of Mr. Tomnitzs spouse.
Mr. Tomnitz disclaims any beneficial interest in these
shares. |
17
|
|
|
(6) |
|
These shares do not include 116 shares owned by an IRA for
the benefit of Mr. Wheats spouse and 332 shares
held in trust for the benefit of Mr. Wheats child.
Mr. Wheat disclaims any beneficial interest in these shares. |
Certain
Other Beneficial Owners
Based on filings under the Securities Exchange Act of 1934, as
amended, available as of December 3, 2007, the only other
known beneficial owner of more than 5% of D.R. Horton Common
Stock outstanding was the following:
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
Name and Address of Beneficial Owner
|
|
Number
|
|
|
Percent
|
|
|
FMR Corp(1)
|
|
|
47,037,419
|
|
|
|
15.00
|
%
|
82 Devonshire Street
Boston, Massachusetts 02109
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based solely upon information contained in the most recently
filed Schedule 13G/A of FMR Corp., filed with the SEC on
February 14, 2007, reflecting beneficial ownership as of
December 31, 2006. According to this Schedule 13G/A,
FMR Corp. had sole voting power for 5,434,890 of these shares,
no shared voting power, sole dispositive power for all
47,037,419 of these shares and no shared dispositive power.
Additionally, according to the filing, Edward C. Johnson III,
the chairman of FMR Corp., may be deemed to control the shares
held by FMR Corp. |
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table summarizes our equity compensation plans as
of September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
(a)
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Shares
|
|
|
(b)
|
|
|
Future Issuance Under
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Equity Compensation
|
|
|
|
Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Securities Reflected
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
in Column(a))
|
|
|
Equity compensation plans approved by stockholders
|
|
|
11,838,031
|
|
|
$
|
16.07
|
|
|
|
33,412,455
|
(1)
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
n/a
|
|
|
|
|
|
Total
|
|
|
11,838,031
|
|
|
$
|
16.07
|
|
|
|
33,412,455
|
(1)
|
|
|
|
(1) |
|
Includes 4,241,231 shares reserved for issuance under the
Companys Employee Stock Purchase Plan. Under this Employee
Stock Purchase Plan, employees of the Company purchased
158,444 shares of common stock in fiscal year 2006 and
156,543 shares of common stock in fiscal year 2007. |
18
Compensation
Discussion and Analysis
Overview
Our Compensation Committee has undertaken to design a fair and
competitive compensation philosophy and program for executive
officers that will attract, motivate and retain highly qualified
and experienced executives, reward superior performance and
provide incentives that are based on performance of the Company.
Our executive compensation program consists of several
components, including base salary, cash bonuses, equity awards
and deferred compensation plans and retirement benefits. This
compensation discussion and analysis discussion provides more
information regarding:
|
|
|
|
|
our compensation objectives;
|
|
|
|
the relationship between the components of our compensation
program and our objectives;
|
|
|
|
factors considered by the Compensation Committee in establishing
compensation levels for our named executive officers, who, for
our 2007 fiscal year, and for our 2008 fiscal year are expected
to, include:
|
|
|
|
|
|
Donald R. Horton, Chairman of the Board;
|
|
|
|
Donald J. Tomnitz, Vice Chairman, President and Chief Executive
Officer (Principal Executive Officer);
|
|
|
|
Bill W. Wheat, Executive Vice President and Chief Financial
Officer (Principal Financial Officer);
|
|
|
|
Stacey H. Dwyer, Executive Vice President and Treasurer; and
|
|
|
|
Samuel R. Fuller, Senior Executive Vice President.
|
Gordon D. Jones and George W. Seagraves were also named
executive officers for our 2007 fiscal year because each one was
an Executive Vice President for less than one month at the
beginning of our 2007 fiscal year. This Compensation Discussion
and Analysis section also provides information regarding
Mr. Jones and Mr. Seagraves for the 2007 fiscal year.
Mr. Jones and Mr. Seagraves are not expected to be
named executive officers for our 2008 fiscal year.
Mr. Jones is currently a Vice President of the Company and
Region President of the Companys Southwest Region.
Mr. Seagraves is currently a Vice President of the Company
and Region President of the Companys Midwest Region,
including Division President of the Companys Denver
and Minnesota divisions.
Executive
Compensation Objectives
Our primary compensation objectives are to:
|
|
|
|
|
attract, motivate and retain highly qualified and experienced
executives;
|
|
|
|
award compensation that motivates and recognizes valuable, short
and long-term individual and company performance;
|
|
|
|
provide a compensation program that provides flexibility to
ensure that awards are competitive within our peer
group; and
|
|
|
|
implement a compensation plan that aligns the executives
interests with those of our stockholders.
|
As a leading national homebuilding company delivering more new
homes in the United States than any other homebuilder for six
consecutive years, we have the privilege of employing key
executives who have proven they can deliver results. Attracting,
motivating and retaining experienced homebuilding executives are
important objectives of our compensation program. Because of our
market leading position, we find that our executives and other
key officers may encounter other professional opportunities due
to the extensive national industry experience gained during
their employment with us. In order to attract, motivate and
retain experienced and talented executives, we believe we must
provide salaries and total compensation packages that are
attractive and competitive in the homebuilding industry. We
believe the executives interests are aligned with our
stockholders interests by motivating and retaining our key
officers so that they can use their national homebuilding
expertise with us rather than with one of our competitors. Many
of our key executives and officers have experience in both up
and down cycles in the homebuilding industry. The Compensation
19
Committee considers this type of industry experience to be very
valuable in the current volatile and challenging homebuilding
market. We believe that to maintain our position as a leader in
the homebuilding industry, the Company must provide executive
compensation programs that continually motivate and seek to
retain our experienced and talented executives.
We also believe it is important to have a significant portion of
an executives overall compensation tied to his or her
day-to-day
value to the Company. When reviewing an executives value
to the Company, we review factors such as the number of years
with the Company, significance of job function, ability to
analyze and make decisions on significant business and financial
objectives, and the ability to work as an important member of
senior management and serve as a leader for other employees. We
believe that by placing importance on these performance
measures, we are aligning individual and corporate performance
with the compensation that is ultimately paid for this
performance. Due to the number of years of dedicated service our
executives have with us, the Board of Directors and Compensation
Committee have chosen not to pursue written employment
agreements with our executives. Rather than using fixed
employment agreements, we believe our balanced cash and equity
compensation program provides us with an effective tool in
retaining and motivating our executives.
Process
for Determining Compensation
Authority
and Role of Compensation Committee
Our Compensation Committee evaluates and approves the
performance and compensation for our Chairman and our Chief
Executive Officer, and other named executive officers who are
covered under Section 162(m). The Compensation Committee
also makes compensation recommendations to the Board with
respect to the other named executive officers. The Compensation
Committee also administers our equity programs such as awards
under our 2006 Stock Incentive Plan.
The members of the Compensation Committee of the Board of
Directors are Mr. Bradley S. Anderson, Mr. Michael R.
Buchanan, Mr. Richard I. Galland, Mr. Michael W.
Hewatt and Mr. Bob G. Scott, with Mr. Anderson serving
as Chairperson. Each committee member has been determined to be
independent under the NYSE listing standards, an outside
director under Section 162(m) of the Internal Revenue
Code, and a non-employee director under
Rule 16b-3
under the Securities Exchange Act. The Compensation Committee is
responsible for approving all cash and equity compensation paid
or awarded to Mr. Horton, Mr. Tomnitz and other
executive officers who are awarded compensation under our
Amended and Restated 2000 Incentive Bonus Plan or our 2006 Stock
Incentive Plan, if such compensation is expected to be subject
to the Section 162(m) deduction limitation. At the
beginning of the 2007 fiscal year, only Messrs. Horton and
Tomnitz were awarded compensation under the Amended and Restated
2000 Incentive Bonus Plan. Accordingly, the Compensation
Committee recommended to the Board, for its approval, all
compensation paid or awarded to the other named executive
officers. The duties of the Compensation Committee are
summarized under Corporate Governance
Meetings and Committees of the Board on page 14
and are more fully set forth in the Compensation Committee
Charter, which is available on our website at www.drhorton.com
under the Investor Relations and Corporate Governance links.
Role of
Chairman and Chief Executive Officer
Our Chairman and our Chief Executive Officer review and discuss
the compensation of our other executive officers and make
compensation recommendations to the Compensation Committee
regarding these executive officers. At the request of the
Compensation Committee, our Chairman provides a recommendation
concerning the annual base salary and incentive bonus program
for our Chief Executive Officer, but not for himself, as
Chairman. For other executive officers, our Chairman and our
Chief Executive Officer review and discuss the annual base
salary and cash bonus compensation for these other executive
officers and make recommendations to the Compensation Committee.
The Compensation Committee considers the recommendations and
other information and then makes a recommendation to the Board
for its consideration. Our Chairman and our Chief Executive
Officer make recommendations to the Compensation Committee with
regard to the compensation packages for new executive officers
and adjustments in compensation for other executive officers.
20
Use of
the Companys Historical Data
When evaluating executive compensation decisions, the
Compensation Committee evaluates and considers many of the
Companys short and long-term achievements that place us as
a leader in the U.S. high-production homebuilding industry.
Based on publicly available information at our 2007 fiscal
year end, we believe these achievements include:
|
|
|
|
|
market capitalization consistently at or near the top of public
homebuilders;
|
|
|
|
Fortune 500 company for eight consecutive years;
|
|
|
|
six consecutive years closing more homes in the U.S. than
any other homebuilder;
|
|
|
|
first homebuilder to close more than 51,000 homes and 53,000
homes in the United States in consecutive years;
|
|
|
|
first homebuilder to achieve $1.5 billion and
$1.2 billion in domestic earnings in consecutive years;
|
|
|
|
generation of operating cash flows of approximately
$1.4 billion; and
|
|
|
|
reduction of approximately $1.7 billion in debt in 2007.
|
Review of
Compensation
We review the compensation of our executive officers on a
regular basis. In our 2007 fiscal year, the Compensation
Committee met in November 2006 and August 2007 to review and
discuss executive compensation. The Committee also met a total
of five times in November and December 2007 to review and
discuss 2007 and 2008 fiscal year executive compensation. The
Compensation Committee Chairman and other members of the
Compensation Committee also have discussions with management
during the year and occasionally request that management prepare
certain market summaries and survey data regarding executive
compensation matters for the Committees review. The
Compensation Committee believes it is appropriate to exercise
its judgment when reviewing and setting the total mix of
compensation related to short and long-term awards and cash and
equity awards rather than relying on a set formula or percentage
allocation. The Compensation Committee believes an important
part of an executives value is the development of his or
her industry expertise and the use of that expertise in helping
us achieve our business plan. Accordingly, we exercise judgment
in determining the mix of compensation we believe to be in line
with our compensation objectives and that we believe to be
appropriate for the executive under review.
Compliance
with Internal Revenue Code Section 162(m).
When reviewing and setting compensation awards to our
executives, we consider the tax deductibility of their
compensation under Section 162(m) of the
Internal Revenue Code. Section 162(m) generally does not
allow a tax deduction to publicly-held companies for
compensation over $1 million paid for any fiscal year to
the companys named executive officers. However,
Section 162(m) exempts qualified performance-based
compensation if certain requirements are met. Early in our 2004
fiscal year, the Compensation Committee adopted, and our
stockholders approved, our 2000 Incentive Bonus Plan
(referred to in this Proxy Statement as the 2000
Plan), as amended and restated. Subsequently, in
December 2007, the Compensation Committee amended and restated
the 2000 Plan (referred to in this Proxy Statement as the
2000 Restated Plan), to, among other items,
change the maximum limit that may be awarded in a performance
period. See Proposal 2 in this Proxy Statement for more
information on the 2000 Restated Plan. We generally intend for
awards to our executive officers under the 2000 Plan and the
2000 Restated Plan and the stock options under our equity plans
to qualify for the performance-based compensation exemption
under Section 162(m). However, we exercise judgment and may
award compensation that does not qualify for tax deductibility
under Section 162(m) in order to meet corporate objectives
or to adapt to changing circumstances. Accordingly, the Board of
Directors and the Compensation Committee may award
non-deductible compensation to our officers as the Board and
Committee deem appropriate.
Use of
Compensation Survey Data
The Compensation Committee utilizes compensation data of our
peer group of publicly-traded homebuilding companies to analyze
compensation decisions in light of current market rates and
practices, and to
21
help ensure that our compensation decisions are reasonable in
comparison to our peer group and the value of the executive to
us; however, the Compensation Committee does not attempt to
position compensation at any specified level within the peer
group. The peer group compensation data is annually compiled by
our management from publicly available information and provided
to the Compensation Committee for its consideration. Our peer
group consists of the following publicly-traded homebuilding
companies:
|
|
|
Beazer Homes USA
Centex Corporation
Hovnanian Enterprises
KB Home
Lennar Corporation
|
|
M.D.C. Holdings
Pulte Homes
Ryland Group
Standard Pacific
Toll Brothers
|
Components
of Compensation
Base
Salary
Base salaries paid to our executive officers serve to provide a
fixed or base level of compensation to our executives in
relation to the factors listed below. When reviewing and setting
an executives base salary, we consider these factors:
|
|
|
|
|
level of experience and responsibility;
|
|
|
|
ability to contribute to meeting annual operating objectives;
|
|
|
|
provide a level of pay to retain the executives services
in light of market conditions;
|
|
|
|
average base salary of comparable executive in peer
group; and
|
|
|
|
recommendations of our Chairman and our Chief Executive Officer,
other than for themselves.
|
After taking into consideration the above factors, 2008 base
salaries for our named executive officers will remain the same
as their respective 2007 base salaries. In 2007, our Chairman,
Chief Executive Officer and Chief Financial Officer had base
salaries of $400,000, $300,000 and $200,000, respectively, which
were below the average salaries of comparable positions in our
peer group. Based on publicly available data as of the end of
our 2007 fiscal year, the average base salaries for the chief
executive officers and chief financial officers in our peer
group were approximately $982,000 and $544,000, respectively.
The base salaries of Messrs. Horton and Tomnitz have
remained at these same levels since 2001. On October 1,
2004, Mr. Wheats base salary increased from $150,000
to $200,000 and has remained at the level since that date. Base
salaries for our other named executive officers also did not
change for 2008 from those salaries received in 2007.
Traditionally, base salaries for our executives have been at a
level below the average of our peer group which is consistent
with the Companys practice of focusing on maintaining
strong corporate overhead containment. Our executives were
awarded base salaries at different levels primarily based on
their tenure with the Company and their level of responsibility
on Company-wide operating and financial matters. These salaries
are set forth in the Summary Compensation Table on
page 30 of this Proxy Statement. When setting base
salaries, we do not use a percentage or ratio that base salary
should be in relation to total compensation, but we do believe
that incentive compensation should continue to be a significant
portion of total compensation. Each year, the Compensation
Committee and Board of Directors review setting base salaries on
an annual basis.
Annual
Bonus Incentive 2007 Fiscal Year
In furtherance of our compensation philosophy to award incentive
bonuses based on short-term company and individual performance,
in 2007, our Chairman and our Chief Executive Officer had the
opportunity to earn annual cash incentive bonuses under the 2000
Plan. The incentive bonuses were based on a pre-determined
percentage of consolidated quarterly pre-tax income, provided
that for the first quarter the bonus was based on the
consolidated pre-tax income for the month of December rather
than on the quarter. For the first quarter, we use the month of
December, rather than the entire first quarter, in order to give
the Compensation Committee time in November of each year to
review final results of operations prior to awarding final 2007
fiscal year compensation and prior to determining the
compensation for the 2008 fiscal year, and to meet the
Section 162(m) requirements for establishing performance
goals prior to or within so many days from the beginning of a
performance period. Each fiscal year, the Compensation Committee
sets
22
the performance metrics, performance periods and percentages to
be awarded for the upcoming fiscal year. During the first
quarter of our 2007 fiscal year, the Compensation Committee
determined that the primary performance metric would be
consolidated pre-tax income and that a performance period would
be based on each of the Companys 2007 fiscal quarters,
provided that for the first quarter the bonus is based on the
month of December rather than on the first quarter.
Traditionally, the Compensation Committee has chosen quarterly
performance periods in order to incentivize the executives to
achieve quarterly performance results that are at or near the
top of its industry. The Compensation Committee has
traditionally selected pre-set percentages that, it believes,
were below the percentages being paid at most of its peers and
as a result, were in line with the Company maintaining its
reasonable containment of corporate overhead expense. The
Compensation Committee considered, among other factors, the
factors listed below in determining whether to adjust downward
the amount of the incentive bonus paid after the end of the
fiscal year:
|
|
|
|
|
Our financial and operating performance in the 2007 fiscal year
compared to the 2006 fiscal year and in relation to our
short-term and long-term business plan;
|
|
|
|
A review of our pre-tax income before inventory and goodwill
impairments compared to the pre-tax income before inventory and
goodwill impairments of those in our peer group;
|
|
|
|
The level of operating cash flow generated in our 2007 fiscal
year compared to operating cash flow in 2006;
|
|
|
|
An analysis of recent cash and equity compensation, in total and
as a percentage of total pre-tax income, of senior executive
officers in our peer group; and
|
|
|
|
Other actions and activities by each executive officer to
contribute to stockholder value.
|
No quantitative relative weights were assigned to the above
factors. The Compensation Committee did not take any action with
respect to Messrs. Hortons and Tomnitzs bonus
plans that would have increased or decreased the bonus payable
to them beyond their respective bonus plans that were approved
at the beginning of the 2007 fiscal year.
Based on the 2007 performance bonus plans for
Messrs. Horton or Tomnitz and the level of pre-tax income
achieved, $1,168,858 was paid in January 2007 based on 1.5% of
the consolidated pre-tax income for the month of December,
$417,229 was paid in April 2007 based on 0.5% of the second
quarter consolidated pre-tax income, and no bonus was paid for
either the third or fourth quarters (pre-set percentages were
0.5% for each quarter) because the Company did not have positive
pre-tax income in either of those quarters. For our 2007 fiscal
year, the total performance-based bonuses, under the 2000 Plan,
paid to each of Messrs. Horton and Tomnitz was $1,586,087,
an 86.9% (or $10,534,822) decrease over the $12,120,909
performance-based bonus paid in our 2006 fiscal year. At the
beginning of our 2007 fiscal year, when we set the performance
metrics related to consolidated pre-tax income, we believed that
was the appropriate metric for 2007 based, in part, on a review
of our peer group, market conditions in the homebuilding
industry, and balancing those factors with motivating our
executives in an uncertain market. The maximum payout percentage
of pre-tax income under our 2000 Plan is two percent of
consolidated pre-tax income with respect to a fiscal year,
provided that the 2000 Plan sets forth that a performance period
may be any other period during a fiscal year selected by the
Committee as to which an award may be earned. In our 2007 fiscal
year, performance periods were based on the month of December
(in the first quarter) and each of the remaining three fiscal
quarters. We believe the maximum percentage set in our 2000 Plan
to be within the maximum ranges established by others in our
peer group. No other bonuses or equity awards were made to these
individuals in 2007.
Other Named Executive Officers
Corporate. At the end of the applicable
performance period, which may be a fiscal year, or any period
within a fiscal year, the Compensation Committee, on
recommendation of our Chairman and our Chief Executive Officer,
makes a recommendation to our Board of Directors regarding
discretionary bonuses for Ms. Dwyer, and Messrs. Wheat
and Fuller. Factors considered by our Chairman and our Chief
Executive Officer in making their bonus recommendations include
evaluations of these officers respective individual
performances in key areas in which they have direct
responsibility, such as (i) the effectiveness and integrity
of our financial reporting process, both at corporate and at our
regions and divisions, including the effectiveness and integrity
of the Companys financial, internal and disclosure
controls and procedures, (ii) the financial, capital,
treasury and other corporate management functions,
(iii) analysis of
23
and recommendations regarding financial and operating metrics
related to asset and inventory acquisitions, dispositions and
valuations, (iv) contributions to the implementation of the
Companys strategies, and (v) the ability to work
within a team of key executives and managers and to manage,
develop and effectively work with direct report employees and
others throughout the Company. For the 2007 fiscal year, annual
discretionary bonuses of $300,000 were awarded to each of
Mr. Wheat and Ms. Dwyer, and an annual discretionary
bonus of $50,000 was awarded to Mr. Fuller. No quantitative
relative weights were assigned to the above factors and no other
bonuses or equity awards were made to these individuals in 2007.
Other Named Executive Officers Region
Presidents. Messrs. Jones and Seagraves each
received bonus payments for achieving performance goals and
other objectives important to the Company and related to their
respective regions. Early in our 2007 fiscal year, our Chairman
and our Chief Executive officer established the compensation
plans for Messrs. Jones and Seagraves, rather than the
Compensation Committee, because Messrs. Jones and Seagraves
were executive officers for less than one month in the 2007
fiscal year (October 2006). The primary performance goal
for Messrs Jones and Seagraves related to earning up to 0.5% of
their respective regions pre-tax income on a quarterly basis
(excluding certain corporate and region overhead allocations),
provided that certain other operating and financial factors
related to closings, net sales, land and lot supply, inventory
turnover, impairments and land option cost write-offs and
overhead expense containment would be considered in determining
the final performance and discretionary bonus to be paid. Based
on the quarterly and year-end evaluation for the 2007 fiscal
year, Mr. Jones received a total bonus of $721,225 and
Mr. Seagraves received a bonus $607,800.
Annual
Bonus Incentives 2008 Fiscal Year
In connection with setting performance-based bonuses for our top
executives for 2008, we undertook a thorough review of our
performance-based bonus program. In this regard, we determined
that performance-based bonuses should continue to comprise a
significant portion of the compensation of our Chairman and our
Chief Executive Officer. In part, as a result of our review, it
was determined that we should seek to structure our
performance-based awards in a manner to be tax deductible under
Section 162(m) to the extent reasonably feasible and to the
extent that such structure is in line with our operational and
financial objectives. The Compensation Committee believes that a
balanced executive compensation program is best served by
providing the Company with a program that has compensation
plans, that allow for a mix and balance of short and long-term
compensation components, including (i) a short-term
(annual) cash performance plan, (ii) a long-term (more than
one year) cash performance plan, and (iii) a short-term and
long-term equity plan. In furtherance of this objective, the
Compensation Committee has approved three incentive plans:
|
|
|
|
|
D.R Horton 2000 Restated Plan our primary
short-term (annual) cash plan.
|
|
|
|
D.R Horton 2008 Performance Unit Plan our
primary long-term (more than one year) cash plan.
|
|
|
|
D.R. Horton 2006 Equity Plan our primary
short and long-term (one year or more) equity plan.
|
These three plans are described in more detail under their
respective headings in this Proxy Statement. We have submitted
the 2000 Restated Plan and the 2008 Performance Unit Plan (see
Proposals 2 and 3 in this Proxy Statement) for approval by
our stockholders at the 2008 Annual Meeting of the Stockholders.
The Compensation Committee will continue to evaluate what it
believes is the best use of these three plans. Below, we discuss
in more detail the nature of these plans and how we may
implement the features of these plans in 2008.
2000 Restated Plan. Since adoption of an
amendment to the 2000 Plan in 2004, the Companys business
and operating environment has changed significantly. To remain
competitive and provide incentives to the Companys
management team, while at the same time seeking to maximize the
tax deductibility of executive bonuses under
Section 162(m), the Compensation Committee has adopted an
amendment and restatement of the 2000 Plan (referred to herein
as the 2000 Restated Plan), subject to stockholder
approval, as set forth under Proposal 2 of this Proxy
Statement. The 2000 Restated Plan changes the maximum award
limits payable under the plan from a performance-based formula
tied to the Companys fiscal year, to a combination of a
formula based upon the actual performance period(s) established
under the plan (monthly, quarterly, annual, or multi-year) and a
fixed dollar amount. The 2000 Restated Plan, by basing the
maximum bonus on a combination of a formula that reflects the
Companys performance over certain performance periods and
a
24
fixed dollar amount, will add flexibility and enable the Company
to provide appropriate incentives to management under varying
economic circumstances. The 2000 Restated Plan further provides
the Company with an incentive bonus plan that it may use to
remain competitive in attracting and retaining highly skilled
executive talent, and to continue to financially motivate its
senior managers to achieve results in the current environment
and in the future.
Under the 2000 Restated Plan, the Compensation Committee
approved the 2008 fiscal year performance-based goals for Mr.
Horton and Mr. Tomnitz related to (i) adjusted pre-tax
income, (ii) operating cash flow and (iii) selling,
general and administrative expense
(SG&A) containment. We believe these
three performance goals are important to the Companys
success in 2008 in light of the current volatile housing market.
We believe adjusted pre-tax income is an important 2008 fiscal
year performance goal because it strongly focuses our executives
on important components of pre-tax income, namely, revenue from
closings and controlling ordinary operating items that go into
cost of sales. We believe that operating cash flow is also an
important 2008 fiscal year performance goal because it focuses
our executives on reducing our land, lot and speculative home
positions while also focusing them on controlling land lot
purchases and development and construction spending. The
generation of positive cash flow in a volatile market allows the
Company to have available cash to pay usual operating expenses,
including the service of short and long-term financing
obligations. We further believe that the third performance goal
of SG&A containment balances the other two goals by
focusing our executives on controlling selling, general and
administrative costs in a period of uncertain sales and revenue
from closings. After deciding on these three performance goals,
these goals were further grouped into two components, referred
to as the First Cash Component and the
Second Cash and Equity Component. For
purposes of the Second Cash and Equity Component, operating cash
flow means net cash provided by (used in) operating
activities from the Companys Consolidated Statements
of Cash Flows and SG&A containment means consolidated
homebuilding selling, general and administrative expense as a
percent of consolidated homebuilding revenue from the
Companys Consolidated Statements of Operations. Adjusted
pre-tax income is defined under the 2000 Restated Plan.
First Cash Component. Under the First Cash
Component, Mr. Horton and Mr. Tomnitz may earn a bonus
based on achieving a pre-set percentage of adjusted pre-tax
income. For the 2008 fiscal year, the maximum percentage that
may be earned under the First Cash Component is 2% of adjusted
pre-tax income for the second, third and fourth fiscal quarters
(but not below zero) and 6% of adjusted pre-tax income for the
month of December in 2007 (but not below zero), provided that no
other bonus may be paid under the First Cash Component for the
other months in the quarterly period, or for the quarterly
period, ending December 31, 2007. Under the 2000 Restated
Plan, adjusted pre-tax income means consolidated
income before income taxes, excluding inventory impairments and
land option cost write-offs and goodwill impairments, as
publicly reported by the Company in its consolidated financial
statements prepared in accordance with generally accepted
accounting principles.
Second Cash and Equity Component. Under the
Second Cash and Equity Component, Mr. Horton and
Mr. Tomnitz may earn a performance-based bonus based on
achieving certain goals or metrics related to operating cash
flow and SG&A containment. A bonus related to both goals
may be earned depending on the performance ranking of the
Company compared to the performance ranking of its peer group on
the same metrics (i.e., operating cash flow and SG&A
containment). Under the Second Cash and Equity Component, the
annual maximum amount that may be earned is $8 million, the
annual target or middle range that may be earned is
approximately $4.3 million and the annual minimum amount
that may be earned is $0. The performance-based bonuses under
the Second Cash and Equity Component may be paid in cash or
equity or a combination of both. Actual amounts earned will
depend on the ranking as determined by the Compensation
Committee at the end of the performance period. If, after the
value of the award is determined, the Compensation Committee
determines to pay a portion of the earned award in equity, the
number of shares to be awarded will be determined by dividing
the closing price of our common stock (on the day of the award
certification) into the dollar value of that portion of the
earned award to be paid in equity, provided that the maximum
award cannot exceed the limits established under the 2000
Restated Plan and the awards established in December 2007 for
Mr. Horton and Mr. Tomnitz.
Prior to paying any award, the Compensation Committee reserves
the discretion to adjust downward the amounts awarded under the
First Cash Component and the Second Cash and Equity Component
depending a
25
variety of factors, including (i) the level of the
Companys consolidated pre-tax income on both an adjusted
and non-adjusted basis, (ii) the compensation earned by the
participant in comparison to the aggregate compensation earned
by members of the Companys peer group, and
(iii) other factors listed in the 2000 Restated Plan.
Other Named Executive Officers
Corporate. Our Chairman and our Chief Executive
Officer recommended to the Compensation Committee, who then
recommended to the Board, that Ms. Dwyer and
Messrs. Wheat and Fuller continue to be awarded bonuses for
the 2008 fiscal year based on the evaluation process and
criteria discussed for these officers herein under the heading
Annual Bonus Incentive 2007 Fiscal Year, Other
Named Executive Officers Corporate. At the end
of each performance period, which may be a fiscal year, or any
period within a fiscal year, our Chairman and Chief Executive
Officer will evaluate these officers and make recommendations to
the Compensation Committee and Board of Directors for their
consideration and approval for discretionary bonuses to be paid
in the 2008 fiscal year. No quantitative relative weights or
formulas are expected to be assigned to the factors discussed
previously.
Long-Term
Bonus Incentives
Consistent with our compensation philosophy, we balance our
annual or short-term incentive bonus program by providing a
long-term incentive bonus program. Under our long-term incentive
bonus program, our Chairman and our Chief Executive Officer have
the opportunity to earn cash and equity incentive bonuses based
on personal and Company performance over a period longer than
one year. We believe that by awarding a portion of compensation
that is earned over a longer time period, the interest of our
executives is aligned with the interest of our long-term
stockholders through the direct goal of creating value in our
common stock.
Long-Term Equity Awards 2006 Equity
Plan. We use our 2006 Stock Incentive Plan
(referred to herein as the 2006 Equity Plan)
to issue equity based awards. The 2006 SIP replaced our 1991
Stock Incentive Plan and no further awards will be granted under
the 1991 plan. Historically, the only type of equity awards we
have issued to our employees have been stock options. We believe
that stock options provide an important link between the
performance of our employees and creation of stockholder value
primarily because the stock options only have value if the stock
price increases from the date of grant.
During our 2007 fiscal year, the Compensation Committee did not
award any equity awards to any of its executive officers,
directors or other employees. Since 2000, the Committee has
traditionally awarded stock options to its executives on an 18
to 24 month basis, primarily because of the other incentive
bonus awards being received by executives during this time
frame. Equity awards were last made in May of 2006. The
Compensation Committee will continue to evaluate when to award
equity to its executives, which may be more frequent than in the
past, based on the total mix of compensation for the executives
and other factors such as the need to address the volatility of
both the homebuilding industry and the stock price. Generally,
when the Compensation Committee decides to grant equity awards
to executive officers, in determining the number of equity
awards to grant and the other material terms of the equity
grants, the Compensation Committee makes a subjective evaluation
of:
|
|
|
|
|
the overall performance of the Company in comparison to its peer
group;
|
|
|
|
an analysis of recent compensation of senior executive officers
in our peer group;
|
|
|
|
recommendations of the Chairman, other than for himself;
|
|
|
|
contributions the executive officer made and is anticipated to
make to our success;
|
|
|
|
level of experience and responsibility of the executive
officer; and
|
|
|
|
number of stock options previously granted to executive officers
and other employees.
|
In light of accounting industry rule changes regarding the
expensing of stock options, we will continue to evaluate the
type and mix of equity awards to be awarded to our executives
and other employees in the future. Restricted stock and
restricted stock units are among the type of equity awards to be
considered in the future and may be awarded under our 2006
Equity Plan. When considering whether to issue restricted stock
26
(including restricted stock units) or stock options, the
Compensation Committee will review the following factors (in
addition to the factors above):
|
|
|
|
|
expense of issuing restricted stock versus that of issuing stock
options;
|
|
|
|
objective achieved by issuing restricted stock versus that of
issuing stock options; and
|
|
|
|
value to employee of receiving restricted stock versus stock
options.
|
The Compensation Committee believes that both restricted stock
and stock options should remain important options to it when
considering equity awards. Restricted stock is believed to
provide a strong retention incentive in an uncertain market,
providing compensation in periods where there is volatility in
the stock price, and resulting in fewer shares outstanding
compared to the exercise of stock options. Stock options also
have unique and valuable features to our company and our
employees because of the potential for strong returns if the
stock price increases and the ability by the recipient to defer
paying the exercise price and related taxes until the stock
options are exercised. The Compensation Committee has not made
any definitive decisions regarding the awarding equity awards in
our 2008 fiscal year but it will continue to evaluate awarding
such equity awards in the current fiscal year.
Long-Term Cash Awards 2008 Performance Unit
Plan. As a result of the Compensation
Committees thorough review of the Companys executive
compensation program, it has adopted the D.R. Horton, Inc. 2008
Performance Unit Plan (referred to herein as the
Performance Unit Plan), subject to stockholder
approval. The 2008 Performance Unit Plan is a component of the
Companys overall strategy to pay its executives for
delivering measurable results. The purpose of the Performance
Unit Plan is to provide the Company with another means of
granting executive compensation tied to long-term performance
goals and criteria, while at the same time further aligning the
interests of management with those of stockholders and
maximizing the tax deductibility under Section 162(m) of
the Internal Revenue Code of executive compensation. The
Committee has not made any awards under the 2008 Performance
Unit Plan, but it will continue to evaluate the proper
circumstances for making such awards to its key officers. The
Performance Unit Plan has been submitted to stockholders for
their approval under Proposal 3 of this Proxy Statement.
The Performance Unit Plan provides that the Compensation
Committee may grant incentive awards denominated in Performance
Units. Each Performance Unit awarded under the Performance Unit
Plan has a value on any given date equal to the fair market
value (closing stock price) of the Companys common stock
on that date. In general, at the time of grant the Compensation
Committee will determine the target number of Performance Units
subject to an award, with the maximum amount payable under the
award equal to two times the target number of units. The
Performance Unit Plan also establishes performance-based
criteria that the Compensation Committee may select in awarding
performance-based bonuses to the participants under this plan.
Limitation on Tax Deductibility of
Compensation. While D.R. Horton generally
structures its incentive compensation plans to comply with the
requirements of Section 162(m) for tax deductibility,
corporate objectives, or other circumstances, may not always be
consistent with the requirements for, or permit, full
deductibility. Accordingly, the Board of Directors and the
Compensation Committee award non-deductible compensation to D.R.
Hortons executive officers as they deem appropriate. Our
2007 fiscal year Section 162(m) officers are
Mr. Horton, Mr. Tomnitz, Mr. Jones and
Mr. Seagraves. We believe the compensation paid to
Messrs. Horton, Tomnitz, Jones and Seagraves generally will
be tax deductible; however, a portion may not qualify as
performance-based compensation and will not be tax deductible to
the extent the portion not qualifying as performance-based
compensation exceeds $1,000,000. The stock option compensation
of Messrs. Tomnitz, Jones and Seagraves arising from the
exercise of stock options granted in 1997 and exercised in the
2007 fiscal year does not qualify as performance-based
compensation because in 1997 our 1991 Plan did not contain an
appropriate individual grant limitation. However, the 1991 Plan
(the predecessor plan to the 2006 Equity Plan) was amended in
November 2001 to include an appropriate individual grant
limitation, and our 2006 Stock Equity Plan also includes an
appropriate individual grant limitation.
Retirement
and Post-Retirement Benefits
Our executive officers do not participate in any qualified
pension plans or defined benefit plans but they do participate
in the retirement plans below. We believe that it is important
to offer these retirement plans to
27
our executive officers as part of a competitive long-term
compensation program that encourages saving for retirement and
that encourages long-term retention.
Profit Sharing Plus Plan (401(k)
plan). Our executive officers participate
in our Company wide 401(k) plan. Under this plan, executive
officers, and all eligible employees, are eligible to contribute
from 1% to 75%, on a pre-tax basis, of their earnings into the
401(k) plan. For 2007, the maximum that may be contributed was
$15,500 ($20,500 for participants 50 years or older). The
Company makes a matching contribution to the participants
account in an amount of $0.50 for each $1.00 contributed by the
participant up to 6% of his or her salary. The matching
contributions made by the Company on behalf of the executive
officers are listed in the All Other
Compensation column in the Summary Compensation
Table on page 30 of this Proxy Statement.
Deferred Compensation Plan. D.R. Horton
established the D.R. Horton Deferred Compensation Plan (the
Deferred Compensation Plan), effective as of
June 15, 2002. The Deferred Compensation Plan is the
successor to and superseded D.R. Hortons and Schuler
Homes previously established deferred compensation plans.
The Deferred Compensation Plan is a nonqualified deferred
compensation plan maintained primarily to provide deferred
compensation benefits for a select group of management
or highly compensated employees as defined by the
Employee Retirement Income Security Act of 1974, as amended. The
Deferred Compensation Plan permits participants voluntarily to
defer receipt of compensation from D.R. Horton. The participants
earn a rate of return on their deferred amounts based on their
selection from a variety of independently managed funds. D.R.
Horton does not provide a guaranteed rate of return on these
deferred amounts. The rate of return realized depends on the
participants fund selections and market performance of
these funds. The Deferred Compensation Plan was adopted and
approved by the Compensation Committee and ratified by the Board
of Directors.
SERP 2. The Supplemental Executive Retirement
Plan 2 (SERP 2), a nonqualified plan,
was adopted by D.R. Horton in 1994 to permit eligible
participants, which include our executive officers, the regional
presidents, most division presidents and other selected
employees, to defer income and establish a source of funds
payable upon retirement, death or disability.
Messrs. Hortons and Tomnitzs participation in
SERP 2 is approved by the Compensation Committee annually at the
beginning of the fiscal year. Pursuant to SERP 2, if the
executive is employed by the Company on the last day of a fiscal
year, then the Company will establish a liability to such
officer equal to 10% of his or her annual base salary as of
first day of such fiscal year. This liability will accrue
earnings in future years at a rate established by the
administrative committee for the SERP 2.
Post-Employment Health
Insurance. Messrs. Horton and Tomnitz are
also entitled to post-employment health and dental insurance
coverage that is similar to the insurance coverage that is
currently provided by the Company to each of them, their spouses
and their dependent children. The post-employment insurance
coverage becomes effective upon Mr. Hortons and
Mr. Tomnitzs respective retirement, disability, death
or termination from the Company and coverage shall be for the
life of each of Mr. Horton and Mr. Tomnitz,
respectively, and for the life of Mr. Hortons spouse
and Mr. Tomnitzs spouse, and their dependent children.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed with
management, the Compensation Discussion and Analysis on
pages 19 through 28 of this Proxy Statement. Based on our review
and discussions with management, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement
and incorporated by reference in the Annual Report on
Form 10-K
of D.R. Horton, Inc. for the fiscal year ended
September 30, 2007 filed with the Securities and Exchange
Commission.
THE COMPENSATION COMMITTEE:
Bradley S. Anderson, Committee Chairman
Michael R. Buchanan
Richard I. Galland
Michael W. Hewatt
Bob G. Scott
28
The Compensation Committee Report does not constitute soliciting
material, and shall not be deemed to be filed or incorporated by
reference into any other company filing under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the company specifically
incorporates the Compensation Committee Report by reference
therein.
29
Executive
Compensation Tables
The following tables show, with respect to the Chief Executive
Officer, Chief Financial Officer and the other named executive
officers of D.R. Horton, the compensation awarded, earned or
paid for all services rendered in all capacities to D.R. Horton
during the 2007 Fiscal Year.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards(2)
|
|
|
Compensation(3)
|
|
|
Earnings(4)
|
|
|
Compensation(5)
|
|
|
Total
|
|
|
Donald R. Horton
|
|
|
2007
|
|
|
$
|
400,000
|
|
|
|
|
|
|
$
|
1,031,491
|
|
|
$
|
1,586,087
|
|
|
$
|
32,611
|
|
|
$
|
46,750
|
|
|
$
|
3,096,939
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald J. Tomnitz
|
|
|
2007
|
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
837,763
|
|
|
$
|
1,586,087
|
|
|
$
|
23,582
|
|
|
$
|
36,750
|
|
|
$
|
2,784,182
|
|
Vice Chairman, Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
|
|
|
2007
|
|
|
$
|
200,000
|
|
|
$
|
300,000
|
|
|
$
|
190,299
|
|
|
|
|
|
|
$
|
4,973
|
|
|
$
|
24,275
|
|
|
$
|
719,547
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacey H. Dwyer
|
|
|
2007
|
|
|
$
|
200,000
|
|
|
$
|
300,000
|
|
|
$
|
214,075
|
|
|
|
|
|
|
$
|
5,072
|
|
|
$
|
24,050
|
|
|
$
|
743,197
|
|
Executive Vice President and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel R. Fuller
|
|
|
2007
|
|
|
$
|
200,000
|
|
|
$
|
50,000
|
|
|
$
|
152,121
|
|
|
|
|
|
|
$
|
10,181
|
|
|
$
|
24,350
|
|
|
$
|
436,652
|
|
Senior Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gordon D. Jones(1)
|
|
|
2007
|
|
|
$
|
175,000
|
|
|
|
|
|
|
$
|
233,313
|
|
|
$
|
721,225
|
|
|
$
|
9,759
|
|
|
$
|
24,250
|
|
|
$
|
1,163,547
|
|
Vice President and Region President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George W. Seagraves(1)
|
|
|
2007
|
|
|
$
|
175,000
|
|
|
$
|
500,000
|
|
|
$
|
202,370
|
|
|
$
|
107,800
|
|
|
$
|
13,679
|
|
|
$
|
22,214
|
|
|
$
|
1,021,063
|
|
Vice President and Region President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Gordon D. Jones and George W. Seagraves were executive officers
for less than one month early in our 2007 fiscal year when each
served in the position of Executive Vice President. Neither
Mr. Jones nor Mr. Seagraves was an executive officer
at the end of our 2007 fiscal year or is expected to be an
executive officer for our 2008 fiscal year. Mr. Jones is
currently a Vice President of the Company and Region President
of the Companys Southwest Region. Mr. Seagraves is
currently a Vice President of the Company and Region President
of the Companys Midwest Region, including
Division President of the Companys Denver and
Minnesota divisions. |
|
(2) |
|
Our named executive officers were not granted stock option
awards in the 2007 fiscal year. The value of the option awards
is the compensation expense related to the vesting of stock
option awards granted in years prior to fiscal 2007 which was
calculated in accordance with SFAS 123(R) and recognized in
the Companys 2007 fiscal year financial statements. The
compensation expense recognized in our 2007 fiscal year was
based upon the grant date fair value, which was determined using
a Black-Scholes option pricing model pursuant to
SFAS 123(R). Further information regarding the valuation of
stock options can be found under Note J in the Notes to
Consolidated Financial Statements in our Annual Report on
Form 10-K
for the year ended September 30, 2007. See also
Outstanding Equity Awards at Fiscal 2007 Year-End on
page 32 of this Proxy Statement. |
|
(3) |
|
For Messrs. Horton and Tomnitz, these amounts reflect the
incentive bonus payments earned and paid during the 2007 fiscal
year. More information on these bonuses is described under the
heading Annual Bonus Incentive 2007 Fiscal
Year in the Compensation Discussion and Analysis
section beginning on page 22 of this Proxy Statement.
For Messrs. Jones and Seagraves these amounts reflect the
incentive bonus |
30
|
|
|
|
|
payments earned during the 2007 fiscal year. More information on
these bonuses is described under the heading Annual
Bonus Incentive 2007 Fiscal Year Other
Named Executive Officers Region Presidents
in the Compensation Discussion and Analysis section
beginning on page 24 of this Proxy Statement. |
|
(4) |
|
Amounts represent the above-market portion of earnings on each
executive officers outstanding balance under the SERP 2. |
|
(5) |
|
For fiscal year 2007, the amounts under All Other
Compensation include the following components: |
|
|
|
|
a)
|
Credits made by D.R. Horton of $40,000, $30,000, $20,000,
$20,000, $20,000, $17,500 and $17,500 to the respective accounts
of Mr. Horton, Mr. Tomnitz, Mr. Wheat,
Ms. Dwyer, Mr. Fuller, Mr. Jones and
Mr. Seagraves under the SERP 2 plan.
|
|
|
b)
|
Matching contributions of $6,750 to the respective accounts of
Mr. Horton, Mr. Tomnitz and Mr. Jones, $4,275 to
the account of Mr. Wheat, $4,050 to the account of
Ms. Dwyer, $4,350 to the account of Mr. Fuller and
$4,714 to the account of Mr. Seagraves under the D.R.
Horton 401(k) plan.
|
In accordance with the SEC rules and regulations governing
disclosure of executive compensation, the amounts reported under
All Other Compensation do not include various
perquisites provided to certain of the named executive officers,
including group health plan premiums,
on-site
health club benefits and work related
on-site
parking, that are less than $10,000 in the aggregate per year.
Grants
of Plan-Based Awards
The following table shows the plan-based awards granted to the
Chief Executive Officer and the other named executive officers
of D.R. Horton in fiscal year 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
Grant
|
|
|
|
|
|
|
Compensation
|
|
|
Estimated Future Payouts
|
|
|
Payouts Under
|
|
|
Date
|
|
|
|
|
|
|
Committee
|
|
|
Under Non-Equity Incentive
|
|
|
Equity
|
|
|
Value of
|
|
|
|
Grant
|
|
|
Approval
|
|
|
Plan Awards(1)
|
|
|
Incentive
|
|
|
Stock
|
|
Name
|
|
Date
|
|
|
Date
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Plan Awards
|
|
|
Awards
|
|
|
Donald R. Horton
|
|
|
11/16/2007
|
|
|
|
11/16/2007
|
|
|
|
|
|
|
$
|
1,586,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald J. Tomnitz
|
|
|
11/16/2007
|
|
|
|
11/16/2007
|
|
|
|
|
|
|
$
|
1,586,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacey H. Dwyer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel R. Fuller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gordon D. Jones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
721,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George W. Seagraves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
107,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Under our 2000 Plan, each of Messrs. Horton and Tomnitz
received a bonus award equal to 1.5% of our pre-tax income for
the month of December 2006 (representing the first quarter of
fiscal 2007) and 0.5% of our pre-tax income for each of the
three subsequent quarters, calculated quarterly. In accordance
with this formula, each received $1,168,858 for the first
quarter of fiscal 2007 and $417,229 for the second fiscal
quarter of fiscal 2007. They received no bonus for the last two
quarters of fiscal 2007 as the Company earned no pre-tax income
during those periods. For Messrs. Jones and Seagraves these
amounts reflect the incentive bonus payments earned during the
2007 fiscal year. More information on these bonuses is described
under the heading Annual Bonus Incentive
2007 Fiscal Year Other Named Executive
Officers Region Presidents in the
Compensation Discussion and Analysis section beginning on
page 24 of this Proxy Statement. These awards are reflected
in the Summary Compensation Table under the column titled
Non-Equity Incentive Plan Compensation. |
31
Outstanding
Equity Awards at Fiscal Year-End
The following table shows information about outstanding equity
awards at September 30, 2007, the Companys fiscal
year end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Units of Stock
|
|
|
Units of Stock
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have
|
|
|
That Have
|
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Donald R. Horton(1)
|
|
5/2/2006
|
|
|
30,000
|
|
|
|
120,000
|
|
|
$
|
29.44
|
|
|
|
5/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
4/29/2004
|
|
|
79,999
|
|
|
|
53,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
200,000
|
|
|
|
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
Donald J. Tomnitz(2)
|
|
5/2/2006
|
|
|
20,000
|
|
|
|
80,000
|
|
|
$
|
29.44
|
|
|
|
5/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
4/29/2004
|
|
|
55,999
|
|
|
|
37,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
140,000
|
|
|
|
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2000
|
|
|
166,500
|
|
|
|
|
|
|
$
|
5.01
|
|
|
|
10/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
7/23/1998
|
|
|
310,341
|
|
|
|
34,483
|
|
|
$
|
6.08
|
|
|
|
7/23/2008
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat(3)
|
|
5/2/2006
|
|
|
4,000
|
|
|
|
36,000
|
|
|
$
|
29.44
|
|
|
|
5/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
4/29/2004
|
|
|
15,999
|
|
|
|
37,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
40,000
|
|
|
|
40,000
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2000
|
|
|
19,980
|
|
|
|
13,320
|
|
|
$
|
5.01
|
|
|
|
10/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
7/23/1998
|
|
|
16,335
|
|
|
|
1,816
|
|
|
$
|
6.08
|
|
|
|
7/23/2008
|
|
|
|
|
|
|
|
|
|
Stacey H. Dwyer(3)
|
|
5/2/2006
|
|
|
4,000
|
|
|
|
36,000
|
|
|
$
|
29.44
|
|
|
|
5/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
4/29/2004
|
|
|
15,999
|
|
|
|
37,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
40,000
|
|
|
|
40,000
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2000
|
|
|
39,960
|
|
|
|
26,640
|
|
|
$
|
5.01
|
|
|
|
10/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
7/23/1998
|
|
|
32,669
|
|
|
|
3,630
|
|
|
$
|
6.08
|
|
|
|
7/23/2008
|
|
|
|
|
|
|
|
|
|
Samuel R. Fuller(3)
|
|
4/29/2004
|
|
|
10,666
|
|
|
|
37,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
24,000
|
|
|
|
40,000
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2000
|
|
|
13,320
|
|
|
|
26,640
|
|
|
$
|
5.01
|
|
|
|
10/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
7/23/1998
|
|
|
16,335
|
|
|
|
5,445
|
|
|
$
|
6.08
|
|
|
|
7/23/2008
|
|
|
|
|
|
|
|
|
|
Gordon D. Jones(3)
|
|
5/2/2006
|
|
|
4,000
|
|
|
|
36,000
|
|
|
$
|
29.44
|
|
|
|
5/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
4/29/2004
|
|
|
15,999
|
|
|
|
37,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
40,000
|
|
|
|
40,000
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2000
|
|
|
39,960
|
|
|
|
26,640
|
|
|
$
|
5.01
|
|
|
|
10/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
11/10/1999
|
|
|
36,300
|
|
|
|
21,779
|
|
|
$
|
3.75
|
|
|
|
11/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
7/23/1998
|
|
|
65,335
|
|
|
|
7,260
|
|
|
$
|
6.08
|
|
|
|
7/23/2008
|
|
|
|
|
|
|
|
|
|
George W. Seagraves(3)
|
|
5/2/2006
|
|
|
4,000
|
|
|
|
36,000
|
|
|
$
|
29.44
|
|
|
|
5/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
4/29/2004
|
|
|
9,999
|
|
|
|
23,334
|
|
|
$
|
21.60
|
|
|
|
4/29/2014
|
|
|
|
|
|
|
|
|
|
|
|
7/18/2002
|
|
|
24,000
|
|
|
|
24,000
|
|
|
$
|
10.95
|
|
|
|
7/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2000
|
|
|
39,960
|
|
|
|
39,960
|
|
|
$
|
5.01
|
|
|
|
10/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
7/23/1998
|
|
|
43,555
|
|
|
|
10,890
|
|
|
$
|
6.08
|
|
|
|
7/23/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All stock option awards for Mr. Horton vest in five equal
annual installments on each successive anniversary of the grant
date commencing on the first anniversary date. |
|
(2) |
|
For Mr. Tomnitz, the stock option award granted on
July 23, 1998 vests in ten equal annual installments on
each successive anniversary of the grant date commencing on the
first anniversary date, with the final installment vesting on
the date that is 9.75 years following the grant date. All
other stock option awards granted to Mr. Tomnitz vest in
five equal annual installments on each successive anniversary of
the grant date commencing on the first anniversary date. |
|
(3) |
|
All stock option awards vest in ten equal annual installments on
each successive anniversary of the grant date commencing on the
first anniversary date, with the final installment vesting on
the date that is 9.75 years following the grant date. |
32
Option
Exercises and Stock Vested
The following table shows information about option exercises and
stock vested during fiscal year 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
Exercise
|
|
|
Exercise(1)
|
|
|
Vesting
|
|
|
Vesting
|
|
|
Donald R. Horton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald J. Tomnitz
|
|
|
254,080
|
|
|
$
|
4,831,468
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacey H. Dwyer
|
|
|
35,702
|
|
|
$
|
799,390
|
|
|
|
|
|
|
|
|
|
Samuel R. Fuller
|
|
|
5,446
|
|
|
$
|
105,637
|
|
|
|
|
|
|
|
|
|
Gordon D. Jones
|
|
|
21,780
|
|
|
$
|
435,463
|
|
|
|
|
|
|
|
|
|
George W. Seagraves
|
|
|
43,557
|
|
|
$
|
901,410
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts represent the difference in the aggregate exercise price
and the aggregate market value of the shares acquired at the
time of exercise. |
Nonqualified
Deferred Compensation Plans
D.R. Horton has established the following nonqualified deferred
compensation plans:
Deferred Compensation Plan. The Deferred
Compensation Plan permits participants, including
D.R. Hortons directors, to defer voluntarily receipt
of up to 100% of bonus or director fee compensation from D.R.
Horton and up to 90% of base salary from D.R. Horton. Amounts
deferred are invested on behalf of the participant in investment
vehicles selected from time to time by the administrators of the
Deferred Compensation Plan. The participants, at their election,
may choose to have the deferred amounts paid out through
scheduled in-service distributions (in a lump sum or annual
installments of between two and five years) or following the
later of termination of employment or director service or
attaining the age of 62. The Deferred Compensation Plan was
adopted and approved by the Compensation Committee and ratified
by the Board of Directors.
SERP 2. Pursuant to the SERP 2, if the
executive is employed by the Company on the last day of a fiscal
year, then the Company will establish an unfunded, unsecured
liability to such officer equal to 10% of his or her annual base
salary as of first day of such fiscal year. This liability will
accrue earnings in future years at a rate established by the
administrative committee for the SERP 2. Amounts deferred under
the SERP 2 are payable within 60 days following the
termination of employment of the participant, the death or
disability of the participant or a change in control of the
company (the definition of change in control is described in
Potential Payments Upon Termination or Change in Control
beginning on page 34 of this Proxy Statement). The form of
distribution may be in a lump sum, or in quarterly installments
over a period not to exceed five years, as elected by the
participant.
33
The following table shows, for each named executive officer,
aggregate contributions, earnings and withdrawals/distributions
during fiscal 2007 and outstanding balances as of
September 30, 2007 under all of our nonqualified deferred
compensation plans.
Nonqualified
Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Aggregate Earnings
|
|
|
Withdrawals/
|
|
|
Aggregate Balance at
|
|
|
|
Last Fiscal Year
|
|
|
Last Fiscal Year
|
|
|
in Last Fiscal Year
|
|
|
Distributions
|
|
|
Last Fiscal Year End
|
|
|
|
Deferred
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
Cash
|
|
|
|
|
|
Cash
|
|
|
|
|
|
Cash
|
|
|
|
|
|
Cash
|
|
|
|
|
Name
|
|
Compensation(1)
|
|
|
SERP
|
|
|
Compensation
|
|
|
SERP(2)
|
|
|
Compensation(3)
|
|
|
SERP(4)
|
|
|
Compensation
|
|
|
SERP
|
|
|
Compensation(5)
|
|
|
SERP(6)
|
|
|
Donald R. Horton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,000
|
|
|
$
|
813,953
|
|
|
$
|
75,716
|
|
|
|
|
|
|
|
|
|
|
$
|
7,124,013
|
|
|
$
|
845,068
|
|
Donald J. Tomnitz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,000
|
|
|
$
|
190,405
|
|
|
$
|
54,753
|
|
|
|
|
|
|
|
|
|
|
$
|
1,035,875
|
|
|
$
|
612,170
|
|
Bill W. Wheat
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
6,685
|
|
|
$
|
11,546
|
|
|
$
|
26,386
|
|
|
|
|
|
|
$
|
33,930
|
|
|
$
|
142,764
|
|
Stacey H. Dwyer
|
|
$
|
63,750
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
92,071
|
|
|
$
|
11,776
|
|
|
$
|
13,509
|
|
|
|
|
|
|
$
|
468,595
|
|
|
$
|
145,216
|
|
Samuel R. Fuller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
112,003
|
|
|
$
|
23,638
|
|
|
|
|
|
|
|
|
|
|
$
|
670,388
|
|
|
$
|
271,332
|
|
Gordon D. Jones
|
|
$
|
279,353
|
|
|
|
|
|
|
|
|
|
|
$
|
17,500
|
|
|
$
|
336,432
|
|
|
$
|
22,659
|
|
|
$
|
494,928
|
|
|
|
|
|
|
$
|
2,078,923
|
|
|
$
|
258,423
|
|
George W. Seagraves
|
|
$
|
120,951
|
|
|
|
|
|
|
|
|
|
|
$
|
17,500
|
|
|
$
|
203,008
|
|
|
$
|
31,758
|
|
|
|
|
|
|
|
|
|
|
$
|
1,164,023
|
|
|
$
|
355,178
|
|
|
|
|
(1) |
|
Represents amounts of fiscal 2007 compensation deferred, at the
executives discretion, under our Deferred Compensation
Plan. Such amounts are also included in the
Salary, Bonus or
Non-Equity Incentive Plan Compensation
columns of the Summary Compensation Table on page 30
of this Proxy Statement. |
|
(2) |
|
Represents the amounts of unfunded, unsecured liabilities
created by D.R. Horton on behalf of each participant with
respect to fiscal year 2007 under the SERP 2. Such amounts are
also included in the All Other Compensation
column of the Summary Compensation Table on page 30
of this Proxy Statement. |
|
(3) |
|
Represents the amounts of earnings on the balance of the
participants accounts that are attributable to the
performance of a variety of independently managed funds
available to and selected by each participant under the Deferred
Compensation Plan. We do not provide a guaranteed rate of return
on these funds. The rate of return on these funds depends on the
participants investment selections for their deferral
amounts and on the market performance of these funds. None of
the earnings in this column are included in the Summary
Compensation Table on page 30 of this Proxy Statement
because they were not preferential or above-market. |
|
(4) |
|
Represents the amounts of earnings on the balance of the
participants accounts at a rate determined by the SERP 2
plan administrator, typically 10% per annum. Those portions of
earnings that are considered above-market are reported in the
Change in Pension Value and Nonqualified Deferred
Compensation Earnings column of the Summary
Compensation Table on page 30 of this Proxy Statement.
The above-market portion of earnings for each of the above
individuals is: Mr. Horton $32,611;
Mr. Tomnitz $23,582; Mr. Wheat
$4,973; Ms. Dwyer $5,072;
Mr. Fuller $10,181; Mr. Jones
$9,759 and Mr. Seagraves $13,679. |
|
(5) |
|
Includes amounts of compensation from the current and prior
fiscal years that was deferred, at the executives
discretion, under our Deferred Compensation Plan. We have
included such amounts in the Summary Compensation Table
of each of the respective D.R. Horton Proxy Statements for the
applicable year. |
|
(6) |
|
Includes amounts of unfunded, unsecured liabilities created by
D.R. Horton on behalf of each participant with respect to the
current and prior fiscal years under the SERP 2. We included
such amounts in the Summary Compensation Table of each of
the respective D.R. Horton Proxy Statements for the applicable
year. |
Potential
Payments Upon Termination or Change in Control
None of our named executive officers have employment or change
in control agreements with us specifically providing for
payments upon involuntary termination of their employment.
However, certain of our benefit and incentive plans contain
various provisions regarding termination of employment or change
in control. Any additional severance payments would be at the
discretion of the Compensation Committee and determined at the
time of termination. The following is a summary of the treatment
of benefits under our benefit plans for various reasons for
termination, including upon a change in control.
34
Generally, our benefit plans define cause as a
violation of the standard employee conduct set forth in our
employee manual and change in control as the
occurrence of any of the following events:
(i) Our merger, consolidation or reorganization into
another entity if our stockholders immediately before such
transaction do not, immediately after such transaction, own more
than 50% of the combined voting power of the outstanding voting
securities resulting from such transaction and in substantially
the same proportion as their stock ownership prior to the
transaction;
(ii) We sell all or substantially all of our assets to
another entity or we completely liquidate or dissolve;
(iii) A person (as defined by Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) files a report with
the SEC on Schedule 13D or
Schedule 14D-1
disclosing its acquisition of beneficial ownership of at least
20% of our then outstanding voting securities (the threshold for
amounts deposited under our SERP 2 plan on or after
January 1, 2005 is 50% or 35% acquired in a single
transaction or series of transactions in any 12 month
period); and
(iv) We file a report or proxy statement with the SEC
disclosing that a change in control has occurred or will occur
in the future pursuant to any then-existing contract or
transaction.
Generally, a change in control shall not be deemed
to occur solely because we or any of our affiliates or any of
our benefit plans becomes obligated to file a report with the
SEC disclosing our acquisition of 20% of our own then
outstanding voting securities. For purposes of calculating
beneficial ownership pursuant to this paragraph, no voting
securities held by our Chairman, Donald R. Horton, as of the
date of the adoption of the plan in question or received in any
merger transaction shall be included in the calculation.
With regard to our 2000 Incentive Bonus Plan, the definition of
change in control differs from the generally
applicable provisions described above in two ways. It includes
one additional change in control event relating to board
composition and it uses a different threshold for and a
different exclusion from beneficial ownership for the change in
control event described in paragraph (iii) above.
Specifically, under the 2000 Plan, a change in
control includes a change in the composition of the Board
at any time such that a majority of the Board of Directors have
been members of the Board for less than twenty-four months
without the approval of at least a majority (but no less than
three) of the directors still in office who were also directors
at the beginning of the period. Additionally, under the 2000
Plan, the threshold for a persons acquisition of
beneficial ownership to trigger a change in control
event is 50%, and this definition explicitly excludes from the
group of persons that may trigger this change in control the
Company, Donald R. Horton, Terrill J. Horton, their respective
wives, children, grandchildren and other descendants, and any
trust or other entity formed or controlled by any such
individuals.
2006
Stock Incentive Plan and the 1991 Stock Incentive
Plan
Our D.R. Horton 2006 Stock Incentive Plan and 1991 Stock
Incentive Plan plans provide for accelerated vesting of all
outstanding unvested options granted under the plans in the
event of a change in control or in the event of a
participants death, disability or retirement at the
retirement age specified in the plan and the participant or his
or her beneficiary, as applicable, will be entitled to exercise
such options for a period of one year in the event of retirement
or two years in the event of death or disability. In the event
the participants employment is terminated by the Company
without cause or by the participant voluntarily, the participant
will be entitled to exercise any options vested as of the date
of termination for a period of three months following such
termination. If the participant is terminated by the Company for
cause, all options will immediately terminate and the
participant will forfeit all vested options.
Amended
and Restated Supplemental Executive Retirement Plan No. 2
(SERP 2)
Under our Amended and Restated Supplemental Executive Retirement
Plan No. 2 (SERP 2), all amounts deferred shall be paid
(either in lump sum or in quarterly installments as elected by
participant) within 60 days following the date of the
participants termination of employment, disability, death
or change in control of the Company; provided, however,
specified employees, as such term is defined in
Section 409A of the Internal
35
Revenue Code, must wait six months following termination of
employment before payments accrued on or after January 1,
2005 can be made or commence. In the event the Company
terminates a participant for cause, all benefits under the SERP
2 will be forfeited and no payments will be made to the
participant.
In the event of a change in control, all amounts deferred shall
be paid (in accordance with the participants election)
within 60 days following the date of the change in control.
Notwithstanding the foregoing, a participants election as
to form of payment (lump sum or installment) must have been made
at least 12 months prior to distribution. If a termination
event occurs and no election has been made, the distributions of
pre-2005 accruals will be made or commence on the first day of
the
13th month
following the date of election, and the distribution of
post-2004 accruals will be made in a lump sum upon termination
of employment (or six months later for specified employees).
Table
The following table reflects amounts of compensation to be paid
to each of the named executive officers in the event of
termination of employment or change in control. Because neither
the Company nor any of its plans provide for additional benefits
related to a change in control termination, if such a
termination is triggered, the payments would be as set forth
under the applicable column under Termination of
Employment. The amounts shown assume a termination date of
September 30, 2007, the last day of our fiscal year, and,
if applicable, are based on the closing price of our stock on
September 28, 2007, the last trading day of our fiscal year
($12.81). Because none of our named executive officers would
have been at the normal retirement age on September 30,
2007 under any of our applicable plans, we do not include
amounts payable upon retirement.
These amounts are estimates of payments to executives upon
termination of employment or a change in control. Actual amounts
can only be determined at the time of such executives
actual separation from the Company or change in control. Factors
that could affect these amounts include the timing during the
year of any such event, the companys stock price and the
executives age. Amounts to be provided to an executive
under arrangements that do not discriminate in scope, terms or
operation in favor of our executive officers and are available
to all salaried employees are not included in the tables below
in accordance with SEC regulations.
In addition to the amounts set forth below, each of the named
executive officers would be entitled to receive, upon certain
termination events or a change in control, a distribution of his
or her outstanding balance of compensation earned in prior years
and deferred, at the executive officers option, under our
Deferred Compensation Plan. The balances of such accounts are
set forth in the Nonqualified Deferred Compensation table
on page 34 of this Proxy Statement.
Potential
Payments Upon Termination or Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Without
|
|
|
Normal
|
|
|
For
|
|
|
Death or
|
|
|
Change
|
|
Name
|
|
Payments and Benefits
|
|
Cause
|
|
|
Retirement
|
|
|
Cause
|
|
|
Disability
|
|
|
in Control
|
|
|
Donald R. Horton(1)
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
845,068
|
|
|
|
|
|
|
|
|
|
|
$
|
845,068
|
|
|
$
|
845,068
|
|
|
|
Health Benefits(2)
|
|
|
15,664
|
|
|
|
|
|
|
|
|
|
|
|
15,664
|
|
|
|
|
|
|
|
Total
|
|
$
|
860,732
|
|
|
|
|
|
|
|
|
|
|
$
|
860,732
|
|
|
$
|
845,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Without
|
|
|
Normal
|
|
|
For
|
|
|
Death or
|
|
|
Change
|
|
Name
|
|
Payments and Benefits
|
|
Cause
|
|
|
Retirement
|
|
|
Cause
|
|
|
Disability
|
|
|
in Control
|
|
|
Donald J. Tomnitz(1)
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
232,140
|
|
|
$
|
232,140
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
612,170
|
|
|
|
|
|
|
|
|
|
|
|
612,170
|
|
|
|
612,170
|
|
|
|
Health Benefits(2)
|
|
|
25,339
|
|
|
|
|
|
|
|
|
|
|
|
25,339
|
|
|
|
|
|
|
|
Total
|
|
$
|
637,509
|
|
|
|
|
|
|
|
|
|
|
$
|
869,649
|
|
|
$
|
844,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill W. Wheat
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
190,508
|
|
|
$
|
190,508
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
142,764
|
|
|
|
|
|
|
|
|
|
|
|
142,764
|
|
|
|
142,764
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
142,764
|
|
|
|
|
|
|
|
|
|
|
$
|
333,272
|
|
|
$
|
333,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacey H. Dwyer
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
306,603
|
|
|
$
|
306,603
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
145,216
|
|
|
|
|
|
|
|
|
|
|
|
145,216
|
|
|
|
145,216
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
145,216
|
|
|
|
|
|
|
|
|
|
|
$
|
451,819
|
|
|
$
|
451,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel R. Fuller
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
318,821
|
|
|
$
|
318,821
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
271,332
|
|
|
|
|
|
|
|
|
|
|
|
271,332
|
|
|
|
271,332
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
271,332
|
|
|
|
|
|
|
|
|
|
|
$
|
590,153
|
|
|
$
|
590,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Without
|
|
|
Normal
|
|
|
For
|
|
|
Death or
|
|
|
Change
|
|
Name
|
|
Payments and Benefits
|
|
Cause
|
|
|
Retirement
|
|
|
Cause
|
|
|
Disability
|
|
|
in Control
|
|
|
Gordon D. Jones
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
528,270
|
|
|
$
|
528,270
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
258,423
|
|
|
|
|
|
|
|
|
|
|
|
258,423
|
|
|
|
258,423
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
258,423
|
|
|
|
|
|
|
|
|
|
|
$
|
786,693
|
|
|
$
|
786,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George W. Seagraves
|
|
Severance Pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
429,600
|
|
|
$
|
429,600
|
|
|
|
Payments of SERP 2 Contributions
|
|
$
|
355,178
|
|
|
|
|
|
|
|
|
|
|
|
355,178
|
|
|
|
355,178
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
355,178
|
|
|
|
|
|
|
|
|
|
|
$
|
784,778
|
|
|
$
|
784,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Under the 2000 Plan, Messrs. Horton and Tomnitz would have
been entitled to receive the performance bonus earned during the
fourth quarter of fiscal year 2007 in the event of retirement,
voluntary resignation or change in control occurring on
September 30, 2007. However, the amount of such award for
each of them for the fourth quarter of fiscal year 2007 was $0. |
|
(2) |
|
Amount represents the annual estimated expense to D.R. Horton to
provide post-retirement health benefits for employee and
dependents at the coverage levels currently being provided under
the Companys health benefit plans. Such benefits are to be
provided for the life of each of Messrs. Horton and Tomnitz
and their respective spouses and dependent children. |
38
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Our Corporate Code of Business Conduct and Ethics requires that
all directors and employees are expected to avoid relationships
that present a potential or actual conflict between his or her
personal interest and the interest of the Company. We generally
review related-party transactions regarding our directors and
executive officers in a similar manner as we review
relationships that may give rise to a conflicts of interest,
provided there may be certain related-party transactions that
may be ratified or approved. Generally, a conflict of
interest exists whenever an individuals personal
or private interests interfere or conflict in any way with the
interests of the Company. A conflict situation can arise when a
director or employee takes action or has personal interests that
may make it difficult to perform Company work or make Company
decisions objectively or effectively. Conflicts of interest may
also arise when a director or employee, or member of his or her
immediate family, receives improper personal benefits as a
result of his or her position with the Company, whether received
from the Company or a third party.
In order to avoid conflicts of interest, or an improper
related-party transaction, each director or executive officer
must disclose to the Companys Chief Legal Officer any
transaction or relationship that reasonably could be expected to
give rise to a conflict of interest or related-party
transaction. The Chief Legal Officer and Corporate Compliance
Officer then review the situation or transaction, and if
necessary, report the situation or transaction to the chairman
of the audit committee. If it is determined that ratification or
approval is necessary, the audit committee would be required to
ratify or approve the relationship or transaction.
Transaction
with a Director and the Company
On the effective date of the 1998 merger between D.R. Horton and
Continental Homes Holding Corp., Bradley S. Anderson, a former
director of Continental, was elected a director of D.R. Horton.
In connection with the merger, D.R. Horton agreed to indemnify
Mr. Anderson, along with the other former Continental
directors, in connection with their prior service as directors
or executive officers of Continental.
Compensation
Committee Interlocks and Insider Participation
During our fiscal year ended September 30, 2007, D.R.
Hortons Compensation Committee was composed of
Mr. Bradley S. Anderson, Mr. Michael R. Buchanan,
Mr. Richard I. Galland, Mr. Michael W. Hewatt, with
Mr. Anderson serving as its Chairperson. None of the
members of the Compensation Committee has served D.R. Horton in
any capacity other than as a member of the board or a member of
a Committee thereof. In 1998, Mr. Anderson was a party to
an indemnification arrangement with the Company as described
under the caption Transactions with
Management above.
39
INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
Ernst & Young LLP served as D.R. Hortons
independent auditor for the fiscal years ended
September 30, 2007 and September 30, 2006 and has been
engaged by the Audit Committee to continue to serve through the
2008 fiscal year. A representative of Ernst & Young
LLP is expected to be present at the 2008 Annual Meeting and
will have an opportunity to make a statement and to respond to
appropriate questions from stockholders.
Audit
Fees and All Other Fees
The following table shows the fees paid or accrued by D.R.
Horton for the audit and other services provided by
Ernst & Young LLP for fiscal years ended
September 30, 2006 and September 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2007
|
|
|
Audit fees
|
|
$
|
1,643,104
|
|
|
$
|
1,943,176
|
|
Audit-Related fees(1)
|
|
|
80,527
|
|
|
|
104,526
|
|
Tax fees(2)
|
|
|
45,700
|
|
|
|
46,400
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(3)
|
|
$
|
1,769,331
|
|
|
$
|
2,094,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Related primarily to audits of employee benefit plans, the
statutory audit of the Companys captive insurance company
and consultations related to Sarbanes-Oxley compliance. |
|
(2) |
|
Related primarily to tax compliance services. |
|
(3) |
|
Of the fees listed above, approved by the Audit Committee, none
were approved based on waiver of pre-approval under
Rule 2-01(c)(7)(i)(C)
of
Regulation S-X. |
Policy
on Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services
The Audit Committee has responsibility for appointing, setting
compensation and overseeing the work of the independent auditor.
In recognition of this responsibility, the Audit Committee has
established a policy to pre-approve audit and permissible
non-audit services provided by the independent auditor.
In connection with the engagement of the independent auditor for
the 2008 fiscal year, the Audit Committee pre-approved the
services listed below by category of service, including the
pre-approval of fee limits. The Audit Committees
pre-approval process by category of service also includes a
review of specific services to be performed and fees expected to
be incurred within each category of service. The term of any
pre-approval is 12 months from the date of the
pre-approval, unless the Audit Committee specifically provides
for a different period. During fiscal 2008, circumstances may
arise when it may become necessary to engage the independent
auditor for additional services not contemplated in the original
pre-approval. In those instances, the Audit Committee requires
separate pre-approval before engaging the independent auditor.
The services pre-approved by the Audit Committee to be performed
by our auditor during our fiscal year 2008, include the
following:
Audit Services include audit work performed in the
preparation of financial statements (including quarterly
reviews), as well as work that generally only the independent
auditor can reasonably be expected to provide, including comfort
letters, statutory audits, and attest services and consultation
regarding financial accounting
and/or
reporting standards.
Audit-Related Services are for assurance and related
services that are traditionally performed by the independent
auditor, including due diligence related to mergers and
acquisitions, employee benefit plan audits, and special
procedures required to meet certain regulatory requirements.
40
Tax Services include all services performed by the
independent auditors tax personnel except those services
specifically related to the audit of the financial statements,
and include fees in the areas of tax compliance, tax planning,
and tax advice.
All Other Fees are those associated with permitted
services not included in the other categories. The Company
generally does not request such services from the independent
auditor.
The Audit Committee may delegate pre-approval authority to one
or more of its members. The member or members to whom such
authority is delegated shall report any pre-approval decisions
to the Audit Committee at its next scheduled meeting. The Audit
Committee may not otherwise delegate its responsibilities to
pre-approve services performed by the independent auditor to
management.
The Audit Committee has reviewed and discussed with management
D.R. Hortons audited consolidated financial statements for
the fiscal year ended September 30, 2007. Further, the
Audit Committee has discussed with D.R. Hortons
independent auditor the matters required to be discussed by
Auditing Standards Board Statement on Auditing Standards
No. 61, as amended or supplemented, including D.R.
Hortons audited consolidated financial statements for the
fiscal year ended September 30, 2007, the auditors
responsibility under generally accepted auditing standards,
significant accounting policies, managements judgments and
accounting estimates, any audit adjustments, other information
in documents containing audited financial statements and other
matters. Finally, the Audit Committee has received and reviewed
the written disclosures and the letter from the independent
auditor required by the Independence Standards Board
Independence Standard No. 1, as amended or supplemented,
and has discussed the auditors independence with the
auditor.
Based on its review and discussion described above, the Audit
Committee has recommended to the Board of Directors that the
audited consolidated financial statements for the 2007 fiscal
year be included in D.R. Hortons Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007. Further, the
Audit Committee approved the engagement of Ernst &
Young LLP as D.R. Hortons independent auditor for the
fiscal year ending September 30, 2008.
AUDIT COMMITTEE:
Michael W. Hewatt, Committee Chairman
Bradley S. Anderson
Michael R. Buchanan
Richard I. Galland
Bob G. Scott
41
AMEND AND
RESTATE
THE D.R. HORTON, INC.
AMENDED AND RESTATED
2000 INCENTIVE BONUS PLAN
D.R. Hortons stockholders adopted the D.R. Horton, Inc.
Amended and Restated 2000 Incentive Bonus Plan (the
2000 Plan) at the Companys annual meeting
of stockholders on January 29, 2004.
Since adoption of the 2000 Plan, the Companys business and
operating environment has changed significantly. To remain
competitive and provide incentives to the Companys
management team, while at the same time maximizing the tax
deductibility of executive bonuses, the Compensation Committee
has adopted, subject to stockholder approval, an amendment and
restatement of the 2000 Plan (the 2000 Restated
Plan). This amendment and restatement changes the
maximum award limits payable under the plan from a
performance-based formula tied to the Companys fiscal
year, to a combination of a formula based upon the actual
performance period(s) established under the plan (monthly,
quarterly, annual, or multi-year) and a fixed dollar amount. The
proposed 2000 Restated Plan, by basing the maximum bonus on a
combination of a formula that reflects the Companys
performance over certain performance periods to be established
and a fixed dollar amount, will add flexibility and enable the
Company to provide appropriate incentives to management under
varying economic circumstances. The 2000 Restated Plan provides
the Company with an incentive bonus plan that allows it to
remain competitive in attracting and retaining highly skilled
executive talent, and continue to financially motivate its
senior managers to achieve the Company goals.
The Board of Directors continues to believe that it is in the
best interest of the Company and its stockholders for amounts
awarded under the 2000 Restated Plan to be fully deductible for
federal income tax purposes as a business expense. However,
Section 162(m) of the Code limits the deductibility of
bonuses paid to our Chief Executive Officer and our named
executive officers (excluding our chief financial officer)
unless the payments satisfy the criteria set forth in
Section 162(m). The Board of Directors believes that the
2000 Restated Plan has been structured to satisfy, if approved
by stockholders, Section 162(m) of the Code.
For us to be able to fully deduct the awards paid under the 2000
Restated Plan, Section 162(m) generally requires:
|
|
|
|
|
bonuses be paid pursuant to an objective
performance-based formula;
|
|
|
|
the certification of the Compensation Committee that the
performance-based goals of the formula have been
satisfied;
|
|
|
|
that the material terms of the 2000 Restated Plan have been
disclosed to and approved by stockholders; such material terms
include:
|
|
|
|
|
|
the eligible participants;
|
|
|
|
the maximum amount of compensation payable to employees under
the performance goals; and
|
|
|
|
a description of the business criteria on which the performance
goal is based.
|
Each of these aspects of the 2000 Restated Plan is discussed
below, and stockholder approval of the 2000 Restated Plan
will be deemed to constitute approval of each of these aspects
of the 2000 Restated Plan for purposes of the approval
requirements of Section 162(m) of the Code.
The following is only a summary of the 2000 Restated Plan and is
qualified in its entirety by the full text of the 2000 Restated
Plan, a copy of which is attached to this Proxy Statement as
Attachment A.
42
Description
of Proposed 2000 Restated Plan
Generally
As noted above, Section 162(m) of the Code requires that
for compensation paid in excess of $1 million to be
deductible, such compensation must qualify as
performance-based. The Company and the Compensation
Committee generally intend for awards under the 2000 Restated
Plan to covered employees to qualify for the performance-based
compensation deduction allowed by Section 162(m). However,
there can be no assurance that these awards will satisfy the
requirements for deductibility under Section 162(m), and
the Company and Compensation Committee reserve the right to pay
bonuses outside of the 2000 Restated Plan.
Eligible
Participants
Executive officers of the Company, or any other officer of the
Company or any of its affiliates serving as a region or division
president or manager or in another senior management position
(Senior Managers), are eligible to
participate in the Plan. Membership on the Board of Directors of
the Company does not make a Senior Manager ineligible for an
award under the Plan. Approximately 46 employees are currently
eligible to participate in the Plan. The Compensation Committee
may determine which Senior Managers will participate in the Plan.
Maximum
Amount Payable under the 2000 Restated Plan
Currently, the 2000 Plan provides that the maximum award payable
to a covered executive under such plan with respect to any
fiscal year of the Company will be 2% of consolidated pre-tax
income, calculated in accordance with generally accepted
accounting principles. The Compensation Committee, which
consists of five outside and independent directors, has adopted
the 2000 Restated Plan.
Under the 2000 Restated Plan, performance periods may be based
on one or more months, quarters or years, and the following
maximums apply. If an award is payable based on one or more
monthly or quarterly performance periods, the maximum Award
payable to any one Covered Employee with respect to any such
Performance Period shall not exceed the sum of (i) 2% of
Adjusted Pre-Tax income for such Performance Period (but not
below $0) and (ii) $8 million, provided that no
Covered Employee may receive both monthly Target Awards and a
quarterly Target Award with respect to the same quarter under
prong (i) and the maximum payout for all monthly,
quarterly, or annual Performance Periods in a fiscal year under
prong (ii) shall not exceed $8 million.
Notwithstanding the prior sentence, if the Performance Period is
the month of December, the maximum Award payable to any one
Covered Employee shall not exceed the sum of (i) 6% of
Adjusted Pre-Tax Income for such Performance Period (but not
below $0) and (ii) $8 million, provided that no other
award under prong (i) of the prior sentence shall be paid
for the quarter (or months therein) that includes December and
the maximum payout for all monthly, quarterly, or annual
Performance Periods in a fiscal year under prong (ii) shall
not exceed $8 million. If an Award is payable based on a
fiscal year, the maximum Award payable to any one Covered
Employee with respect to the fiscal year Performance Period
shall not exceed the sum of (i) 2% of Adjusted Pre-Tax
Income for such fiscal year (but not below $0) and
(ii) $8 million, provided that any amounts paid under
prong (i) of the above-referenced monthly or quarterly
Performance Period maximums during the same fiscal year shall
reduce, dollar for dollar, the maximum amount payable under
prong (i) of the maximum annual Performance Period Award,
and provided further that the maximum payout for all monthly,
quarterly, and annual Performance Periods in a fiscal year under
prong (ii) of the above formulas shall not exceed
$8 million.
In addition, the maximum amount payable over any performance
period under a long-term award (covering two or more fiscal
years) pursuant to the 2000 Restated Plan shall not exceed the
sum of 2% of Adjusted Pre-Tax Income for such long-term
performance period (but not less than $0) and $8 million.
Moreover, the amount payable under any short-term award
(covering a monthly, quarterly, or annual performance period)
covering the same or an overlapping time period as a long-term
award shall reduce, dollar for dollar, the maximum amount
payable to any Covered Employee for such long-term performance
period, such that the maximum Award a Covered Employee may
receive under an overlapping short-term and long-term
performance period is the sum of (i) the greater of 2% of
Adjusted Pre-Tax Income for such short-term
43
performance period (but not below $0) or 2% of Adjusted Pre-Tax
Income for such long-term performance period (but not below $0),
and (ii) $8 million.
Adjusted Pre-Tax Income under the 2000
Restated Plan shall mean consolidated income before income
taxes, excluding inventory impairments and land option cost
write-offs and goodwill impairments, as publicly reported by the
Company in its consolidated financial statements prepared in
accordance with generally accepted accounting principles.
Prior to the payment of any compensation intended to qualify as
performance-based compensation under Section 162(m) of the
Code, the Compensation Committee must certify in writing the
attainment of the performance criteria for the performance
period.
Awards
under the 2000 Restated Plan
The Compensation Committee establishes target award levels and
performance criteria for each performance period in which awards
are made under the 2000 Restated Plan, which performance periods
are generally each month of December, each quarter (other than
the quarter ending in December), or each year. For the first
quarter, we use the month of December, rather than the entire
first quarter, in order to give the Compensation Committee time
in November of each year to review final results of operations
prior to awarding final 2007 fiscal year compensation and prior
to determining the compensation for the 2008 fiscal year, and to
meet the Section 162(m) requirements for establishing
performance goals prior to or within so many days from the
beginning of a performance period. The Compensation Committee
must base the performance criteria for a performance period on
any one or more of the following measures, applied to either the
Company as a whole or to any business unit, region, division, or
subsidiary, either individually, alternatively, or in any
combination, and measured either monthly, quarterly, annually,
or cumulatively over a period of years, on an absolute basis or
relative to (including ranking to) a pre-established target, to
previous years results, or to a designated comparison
group, in each case as specified by the Committee:
|
|
|
return on investment;
|
|
|
return on capital;
|
|
|
revenues;
|
|
|
backlog;
|
|
|
margin;
|
|
|
selling, general and administrative expenses;
|
|
|
pre-tax income or adjusted pre-tax income;
|
|
|
net income;
|
|
|
sales, net sales or closings;
|
|
|
|
|
operating income or pre-tax profit;
|
|
|
cost of sales;
|
|
|
sales cancellations;
|
|
|
cash flow;
|
|
|
earnings per share;
|
|
|
return on operating assets;
|
|
|
return on equity;
|
|
|
operating profit;
|
|
|
stockholder return;
|
|
|
market share improvement;
|
|
|
|
|
dividend or dividend yield;
|
|
|
inventory, land or lot improvement or reduction;
|
|
|
stock price increases;
|
|
|
market capitalization;
|
|
|
debt leverage;
|
|
|
return on revenue;
|
|
|
operating ratio;
|
|
|
customer service;
|
|
|
economic value added;
|
|
|
asset turnover; and
|
|
|
net profit or economic profit.
|
The Compensation Committee may set multiple target award levels
based on varying levels of attainment of the performance
criteria.
The 2000 Restated Plan further provides that the Compensation
Committee may appropriately adjust any evaluation of performance
under a performance measure to exclude any of the following
events that occurs during a performance period:
(i) litigation, claims, judgments or settlements;
(ii) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported
results; (iii) non-cash charges related to impairments,
write-offs or asset valuation; (iv) corporate overhead
charges; (v) accruals for reorganization and restructuring
programs; and (vi) any extraordinary, unusual,
non-recurring or non-comparable items (A) as described in
Accounting Principles Board Opinion No. 30 (or any
successor provision), (B) as described in managements
discussion and analysis of financial condition and results of
operations appearing in the Companys Annual Report to
stockholders for the applicable year or years, or
(C) publicly announced
44
by the Company in a press release or conference call relating to
the Companys results of operations or financial condition
for a completed quarterly, annual, or multi-year fiscal period.
The Committee also may take into account normalization related
adjustments to the performance criteria if necessary to provide
a relevant and consistent comparison to the performance criteria
of the Companys peer group or other comparison.
In general, awards earned under the 2000 Restated Plan will be
paid in cash; provided, however, that the Compensation
Committee, in its sole discretion, may elect to satisfy payment
in whole or in part by the delivery of a number of shares of our
common stock with a fair market value equal to the dollar amount
of the award earned. Any shares delivered in settlement of an
award under the 2000 Restated Plan will be granted under the
Companys 2006 Stock Incentive Plan and will reduce the
number of shares available for issuance under the 2006 Stock
Incentive Plan in accordance with the terms thereof.
The Company generally pays awards as soon as practicable after a
performance period, but in any event no later than the last day
of the calendar year following the year in which the award is
earned, except to the extent awards are timely deferred by
participants under arrangements with the Company. Awards will be
prorated for persons ceasing to be Senior Managers (other than
by dismissal), and for termination of a Senior Manager due to
death, disability, retirement, leave of absence, or resignation,
during a performance period.
The Compensation Committee can adjust awards, upward or downward
(subject to the maximums discussed above), for participants
based on individual performance, change in status, and on the
basis of such quantitative and qualitative performance measures
and evaluations as it deems appropriate. The Compensation
Committee, however, may not adjust awards intended to qualify as
performance-based compensation payable to Section 162(m)
covered employees in a manner that would increase the value of
the award.
Since bonus awards payable under the 2000 Restated Plan for the
fiscal year ending September 30, 2008 are dependent on the
Companys financial performance, the bonus awards are
currently not determinable. However, more information regarding
the 2008 fiscal year performance goals and awards is described
under the heading Annual Bonus Incentive
2008 Fiscal Year, 2000 Restated Plan,
First Cash Component and Second Cash
and Equity Component beginning on page 24 and
continuing through page 26 of this Proxy Statement.
Within fifteen business days following a change in control of
the Company, as defined in the 2000 Restated Plan, each
participant who has been granted an award under the 2000
Restated Plan for the performance period in which the change in
control occurs will be paid a pro rata bonus equal to the award
the participant would have earned for that performance period,
assuming continued achievement of the performance criteria at
the rate achieved as of the latest month-end before the date of
the change in control, pro-rated for the number of days worked
in the period up to the date of the change in control.
The Compensation Committee has the full power and discretion to
administer and interpret the 2000 Restated Plan and to establish
rules for the administration of the 2000 Restated Plan. Each of
the members of the Compensation Committee must qualify as an
outside director under Section 162(m) of the Code. Except
with respect to covered employees, the Compensation Committee
can delegate all or any of its responsibilities and powers to
any one or more of its members, or to any person or committee
selected by it.
The Board of Directors may modify or terminate the 2000 Restated
Plan at any time, provided that no modification or termination
may, in the absence of written consent of the affected
participant, adversely affect the rights of the participant in
respect of any target award established prior to the date of the
modification or termination.
Nothing contained in the 2000 Restated Plan prevents the
Compensation Committee from adopting other or additional
compensation arrangements that provide for bonuses or other
forms of compensation for the Companys Senior Managers or
other employees regardless of stockholder approval of the 2000
Restated Plan.
45
Such other arrangements may or may not qualify for deductibility
under Section 162(m) of the Code and may be either
applicable only for specific executives, directors or employees
or may be generally applicable. However, for payments under the
2000 Restated Plan to qualify as performance-based compensation
under Section 162(m), any such other or additional
compensation arrangements may not be designed to provide 2000
Restated Plan participants all or part of the compensation they
would receive under the 2000 Restated Plan regardless of whether
the performance goal is attained.
The Board Of Directors Unanimously Recommends That
Stockholders Vote FOR This Proposal.
46
APPROVE
THE D.R. HORTON, INC.
2008 PERFORMANCE UNIT PLAN
On December 3, 2007, the Compensation Committee of the
Board of Directors adopted, subject to stockholder approval, the
D.R. Horton, Inc. 2008 Performance Unit Plan (the
Performance Unit Plan). The Performance Unit
Plan is a component of the Companys overall strategy to
pay its executives for delivering measurable results. The
purpose of the Performance Unit Plan is to provide the Company
with another means of granting executive compensation tied to
long-term performance goals, while at the same time further
aligning the interests of management with those of stockholders
and maximizing the tax deductibility of such compensation.
The Board of Directors believes that it is in the best interests
of the Company and its stockholders for amounts awarded under
the Performance Unit Plan to be fully deductible for federal
income tax purposes as a business expense. However,
Section 162(m) of the Code limits the deductibility of
bonuses paid to our Chief Executive Officer and our named
executive officers (excluding our chief financial officer)
unless the payments satisfy the criteria set forth in
Section 162(m). The Board of Directors believes that the
Performance Unit plan has been structured to satisfy, if
approved by stockholders, Section 162(m) of the Code.
For us to be able to fully deduct the awards paid under the
Performance Unit Plan, Section 162(m) generally requires:
|
|
|
|
|
bonuses be paid pursuant to an objective
performance-based formula;
|
|
|
|
the certification of the Compensation Committee that the
performance-based goals of the formula have been
satisfied;
|
|
|
|
that the material terms of the Performance Unit Plan have been
disclosed to and approved by stockholders; such material terms
include:
|
|
|
|
|
|
the eligible participants;
|
|
|
|
the maximum amount of compensation payable to employees under
the performance goals; and
|
|
|
|
a description of the business criteria on which the performance
goal is based.
|
Each of these aspects of the Performance Unit Plan is discussed
below, and stockholder approval of the Performance Unit Plan
will be deemed to constitute approval of each of these aspects
of the Performance Unit Plan for purposes of the approval
requirements of Section 162(m) of the Code.
The following is only a summary of the Performance Unit Plan and
is qualified in its entirety by the full text of the Performance
Unit Plan, a copy of which is attached to this Proxy Statement
as Attachment B.
Description
of Proposed 2008 Performance Unit Plan
Generally
As noted above, Section 162(m) of the Code requires that
for compensation paid in excess of $1 million to be
deductible, such compensation must qualify as
performance-based. The Company and the Compensation
Committee generally intend for awards under the Performance Unit
Plan to covered employees to qualify for the performance-based
compensation deduction allowed by Section 162(m). However,
there can be no assurance that these awards will satisfy the
requirements for deductibility under Section 162(m), and
the Company and Compensation Committee reserve the right to pay
bonuses outside of the Performance Unit Plan.
Eligible
Participants
Executive officers of the Company, or any other officer of the
Company or any of its affiliates serving as a region or division
president or manager or in another senior management position
(Senior Managers), are
47
eligible to participate in the Plan. Membership on the Board of
Directors of the Company does not make a Senior Manager
ineligible for an award under the Plan. Approximately 46
employees are currently eligible to participate in the Plan. The
Compensation Committee may determine which Senior Managers will
participate in the Plan.
Maximum
Amount Payable under the 2008 Performance Unit
Plan
The Performance Unit Plan provides that the maximum number of
Performance Units (described in more detail below) that can be
granted under an Award to any one covered executive in any one
fiscal year is 500,000 units, and the maximum number of
Performance Units that can be earned or paid out with respect
thereto, if all performance criteria under the Award are
satisfied, is two (2) times the number of such Performance
Units. Prior to the payment of any compensation intended to
qualify as performance-based compensation under
Section 162(m) of the Code, the Compensation Committee must
certify in writing the attainment of the performance criteria
for the performance period.
Awards
under the 2008 Performance Unit Plan
The Performance Unit Plan provides for the Compensation
Committee to grant awards denominated in Performance Units to
Senior Managers. Each Performance Unit awarded under the
Performance Unit Plan has a value on any given date equal to the
fair market value (closing stock price) of the Companys
common stock on that date. In general, at the time of grant the
Compensation Committee will determine the target number of
Performance Units subject to an award, with the maximum amount
payable under the award equal to two times the target number of
units.
The Compensation Committee establishes target award levels and
performance criteria for each performance period (generally a
period of two or more fiscal years) with respect to which awards
are made under the Performance Unit Plan. The Compensation
Committee must base the performance criteria for a performance
period on any one or more of the following measures, applied to
either the Company as a whole or to any business unit, region,
division, or subsidiary, either individually, alternatively, or
in any combination, and measured either monthly, quarterly,
annually, or cumulatively over a period of years, on an absolute
basis or relative (including ranking to) to a pre-established
target, to previous years results, or to a designated
comparison group, in each case as specified by the Committee:
|
|
|
return on investment;
|
|
|
return on capital;
|
|
|
revenues;
|
|
|
backlog;
|
|
|
margin;
|
|
|
selling, general and administrative expenses;
|
|
|
pre-tax income or adjusted pre-tax income;
|
|
|
net income;
|
|
|
sales, net sales or closings;
|
|
|
|
|
operating income or pre-tax profit;
|
|
|
cost of sales;
|
|
|
sales cancellations;
|
|
|
cash flow;
|
|
|
earnings per share;
|
|
|
return on operating assets;
|
|
|
return on equity;
|
|
|
operating profit;
|
|
|
stockholder return;
|
|
|
market share improvement;
|
|
|
|
|
dividend or dividend yield;
|
|
|
inventory, land or lot improvement or reduction;
|
|
|
stock price increases;
|
|
|
market capitalization;
|
|
|
debt leverage;
|
|
|
return on revenue;
|
|
|
operating ratio;
|
|
|
customer service;
|
|
|
economic value added;
|
|
|
asset turnover; and
|
|
|
net profit or economic profit.
|
The Compensation Committee may set multiple target award levels
based on varying levels of attainment of the performance
criteria.
The Performance Unit Plan further provides that the Compensation
Committee may appropriately adjust any evaluation of performance
under a performance measure to exclude any of the following
events that occurs during a performance period:
(i) litigation, claims, judgments or settlements;
(ii) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported
results; (iii) non-cash
48
charges related to impairments, write-offs or asset valuation;
(iv) corporate overhead charges; (v) accruals for
reorganization and restructuring programs; and (vi) any
extraordinary, unusual, non-recurring or non-comparable items
(A) as described in Accounting Principles Board Opinion
No. 30 (or any successor provision), (B) as described
in managements discussion and analysis of financial
condition and results of operations appearing in the
Companys Annual Report to stockholders for the applicable
year or years, or (C) publicly announced by the Company in
a press release or conference call relating to the
Companys results of operations or financial condition for
a completed quarterly, annual, or multi-year fiscal period. The
Committee may also take into account normalization related
adjustments to the performance criteria if necessary to provide
a relevant and consistent comparison to the performance criteria
of the Companys peer group or other comparison.
In general, awards earned under the Performance Unit Plan will
be paid in cash; provided, however, that the Compensation
Committee, in its sole discretion, may elect to satisfy payment
in whole or in part by the delivery of a number of shares of our
common stock equal to the number of Performance Units earned.
Any shares delivered in settlement of an award under the
Performance Unit Plan will be granted under the Companys
2006 Stock Incentive Plan and will reduce the number of shares
available for issuance under the 2006 Stock Incentive Plan in
accordance with the terms thereof.
The Company pays awards as soon as practicable after a
performance period, but in any event no later than the last day
of the calendar year following the year in which the award is
earned, except to the extent awards are timely deferred by
participants under arrangements with the Company. Awards will be
prorated for persons ceasing to be Senior Managers (other than
by dismissal), and for termination of a Senior Manager due to
death, disability, retirement, leave of absence, or resignation,
during a performance period.
The Compensation Committee can adjust awards, upward or downward
(subject to the maximums described above), for participants
based on individual performance, change in status, and on the
basis of such quantitative and qualitative performance measures
and evaluations as it deems appropriate. The Compensation
Committee, however, may not adjust awards intended to qualify as
performance-based compensation payable to Section 162(m)
covered employees in a manner that would increase the value of
the award.
As of the date of this Proxy Statement, no awards have been made
under the Performance Unit Plan. The benefits that may be
awarded or paid under the Performance Unit Plan are not
currently determinable. On the Record Date, the closing price of
our Common Stock on the New York Stock Exchange was $12.34.
Within fifteen business days following a change in control of
the Company, as defined in the Performance Unit Plan, each
participant who has been granted an award under the Performance
Unit Plan for the performance period in which the change in
control occurs will be paid a pro rata bonus equal to the award
the participant would have earned for that performance period,
assuming continued achievement of the performance criteria at
the rate achieved as of the latest month-end before the date of
the change in control, pro-rated for the number of days worked
in the period up to the date of the change in control.
The Compensation Committee has the full power and discretion to
administer and interpret the Performance Unit Plan and to
establish rules for the administration of the Performance Unit
Plan. Each of the members of the Compensation Committee must
qualify as an outside director under Section 162(m) of the
Code. Except with respect to covered employees, the Compensation
Committee can delegate all or any of its responsibilities and
powers to any one or more of its members, or to any person or
committee selected by it.
The Board of Directors may modify or terminate the Performance
Unit Plan at any time, provided that no modification or
termination may, in the absence of written consent of the
affected participant, adversely affect the rights of the
participant in respect of any target award established prior to
the date of the modification or termination.
49
Nothing contained in the Performance Unit Plan prevents the
Compensation Committee from adopting other or additional
compensation arrangements that provide for bonuses or other
forms of compensation for the Companys Senior Managers or
other employees regardless of stockholder approval of the
Performance Unit Plan. Such other arrangements may or may not
qualify for deductibility under Section 162(m) of the Code
and may be either applicable only for specific executives,
directors or employees or may be generally applicable. However,
for payments under the Performance Unit Plan to qualify as
performance-based compensation under Section 162(m), any
such other or additional compensation arrangements may not be
designed to provide Performance Unit Plan participants all or
part of the compensation they would receive under the
Performance Unit Plan regardless of whether the performance goal
is attained.
The Board Of Directors Unanimously Recommends That
Stockholders Vote FOR This Proposal.
50
STOCKHOLDER
PROPOSAL CONCERNING
A PAY-FOR-SUPERIOR-PERFORMANCE STANDARD
FOR EXECUTIVE COMPENSATION
D.R. Horton has received the following proposal from a
stockholder. Pursuant to
Rule 14a-8(l)(1)
of the Securities Exchange Act of 1934, we will provide the
name, address and number of securities held by the stockholder
proponent of this proposal promptly upon receipt of a written or
oral request. The Companys contact information is: D.R.
Horton, Inc., Attention: Corporate Counsel, D.R. Horton Tower,
301 Commerce Street, Suite 500, Fort Worth, Texas
76102;
e-mail
tbmontano@drhorton.com; and telephone
(817) 390-8200.
D.R. Horton is not responsible for the contents of the
supporting statement or the stockholder proposal, both of which
are quoted verbatim in italics below.
Supporting
Statement and Proposal of Stockholder Proponent
Resolved: That the shareholders of D.R. Horton
(Company) request that the Board of Directors
Compensation Committee establish a pay-for-superior-performance
standard in the Companys executive compensation plan
(Plan) for senior executives by incorporating the
following principles:
1. The annual incentive or bonus component of the Plan
should utilize defined financial performance criteria
benchmarked against a disclosed peer group of companies, and
provide that annual bonuses should be awarded only when the
Companys performance exceeds its peers median
performance on the selected financial criteria;
2. The long-term compensation component of the Plan
should utilize defined financial
and/or stock
price performance criteria benchmarked against a disclosed peer
group of companies. Options, restricted shares, or other equity
or non-equity compensation used in the Plan should be structured
so that compensation is received only when the Companys
performance exceeds its peers median performance on the
selected financial and stock price performance criteria; and
3. Plan disclosure should be sufficient to allow
shareholders to determine and monitor the pay and performance
correlation established in the Plan.
Supporting Statement: We feel it is imperative that
compensation plans for senior executives be designed and
implemented to promote long-term corporate value. A critical
design feature of a well-conceived executive compensation plan
is a close correlation between the level of pay and the level of
corporate performance relative to industry peers. We believe the
failure to tie executive compensation to superior corporate
performance; that is, performance exceeding peer group
performance, has fueled the escalation of executive
compensation.
The Companys most recent proxy statement disclosed the
following:
1. Donald R. Horton, Chairman, beneficially owned
27,031,979 shares of D.R Horton common stock, 8.62% of
outstanding shares.
2. Donald R. Horton received bonuses in excess of
$12,000,000 for each of the years 2005 and 2006.
3. Donald R. Horton was granted 150,000 options in 2006
with a potential realizable value of more than $7,000,000 if the
stock price appreciates at the rate of 10% of the option
term.
The proxy statement also stated:
[Mr.] Horton . . . received incentive bonus payments for
achieving performance goals with regard to quarterly
consolidated pre-tax income of D.R. Horton. The quarterly
bonuses are based on a pre-approved percentage of quarterly
consolidated pre-tax income. . . . Based on the Companys
performance of achieving the second highest pre-tax income in
the Companys history, [Mr.] Horton . . . received a
performance bonus of $12,120,909 for fiscal year 2006. . . .
51
Despite this very generous compensation, the proxy statement
also revealed that D.R. Hortons cumulative five year total
return as of September 2006 slightly lagged the S&P 500
Homebuilding Index.
We believe the Companys Plan fails to promote the
pay-for-superior-performance principle. Our Proposal offers a
straightforward solution: The Compensation Committee should
establish and disclose financial and stock price performance
criteria and set peer group-related performance benchmarks that
permit awards or payouts in its annual and long-term incentive
compensation plans only when the Companys performance
exceeds the median of its peer group.
Statement
in Opposition to Stockholder Proposal
After careful consideration of the subject matter of this
stockholder proposal, the Board of Directors unanimously
recommends a vote AGAINST this proposal for
the following reasons:
The Board of Directors and the Compensation Committee have long
viewed performance-based compensation as an integral piece of
the total compensation packages of our senior executives.
|
|
|
|
|
As discussed in our Compensation Discussion and Analysis,
the quarterly cash bonus payments paid to our senior executives
historically have been calculated based on a percentage of the
Companys quarterly consolidated pre-tax income. The
Compensation Committee believes that such a metric provides
meaningful incentives for superior performance by our senior
executives. In fact, the figures stated by the stockholder
proponent as Donald R. Hortons bonus in fiscal years 2005
and 2006 were paid based on the two highest years of
consolidated pre-tax income in the Companys history.
Furthermore, the consolidated pre-tax income achieved by the
Company in those years was the highest level ever achieved by a
company in the domestic homebuilding industry. Yet even with
such record breaking levels of pre-tax income during those
years, the Company limited the total cash salary and cash
incentive bonus paid to Mr. Horton to approximately 0.56%
in 2005 and 0.63% in 2006, as a percentage of pre-tax income.
Based on public disclosure made by companies in our peer group,
we believe that the percentages of pre-tax income paid to
Mr. Horton were below the median of cash salaries and cash
incentive bonuses paid to top senior executive officers of the
members in our peer group.
|
|
|
|
In addition, the bonuses paid to our top senior executives for
the 2007 fiscal year were significantly lower than bonuses paid
to them in prior years reflecting the consolidated pre-tax loss
of the Company during its last two quarters in the 2007 fiscal
year. The Compensation Committee believes this is reflective of
a proper performance metric that increases pay in record setting
periods and decreases pay in slower periods.
|
|
|
|
In deciding whether to grant performance awards to our senior
executives, we believe our Compensation Committee continues to
appropriately respond to market conditions and relevant trends
in executive compensation practices in a manner appropriate for
our Company. For example, in December 2007, the Compensation
Committee adopted a new 2008 Performance Unit Plan (see
Proposal 3 in this Proxy Statement). This new 2008 plan, if
approved by stockholders, will provide a way for the
Compensation Committee to award long-term performance awards to
our senior executives based on achieving a variety of
performance metrics, including, but not limited to, return on
equity and earnings per share growth. The new 2008 plan provides
that the level of bonus payout may be based on the
Companys performance with respect to one or more metrics
as compared to, or ranked against, the performance of its peer
group with respect to the same metrics. No awards have been made
under this 2008 plan. The Compensation Committee will review
whether to make such awards in the 2008 fiscal year based, in
part, on whether the plan is approved by our stockholders.
|
|
|
|
In deciding whether to grant equity awards to our senior
executives, the Compensation Committee considers our overall
compensation philosophy related to equity awards as set forth
herein under Compensation Discussion and Analysis
Long-Term Equity Awards. During our 2007 fiscal year, no
equity awards were made to any of our executive officers or
other employees. During our 2006 fiscal year, Mr. Horton
was awarded 150,000 stock options with a grant price of $29.44
per share, and during
|
52
|
|
|
|
|
our 2005 fiscal year, no options were awarded to any of our
executive officer or other employees. Accordingly, during the
last three fiscal years (i.e., 2007, 2006 and 2005),
Mr. Horton received a total of 150,000 stock options, none
of which is in-the-money as of the date hereof. We believe
awarding equity awards in the manner in which we have done so is
an appropriate method of performance-based compensation because
unless the price of our Common Stock increases from the grant
date price, the executive receives no compensation from this
type of equity award.
|
We also believe that requiring the Compensation Committee to use
specifically defined financial metrics benchmarked against peer
group companies as the sole measure for incentive compensation
is not in the best interest of the Company or our stockholders.
|
|
|
|
|
We believe that paying our senior executives solely on the basis
of performance-based metrics would not properly reward our
senior executives for their industry expertise, the value of
their experience in volatile and uncertain markets, such as the
homebuilding industry is currently experiencing, and other
services they perform on behalf of the Company that cannot be
determined by a numbers based formula.
|
|
|
|
Compensating the Companys leadership based solely on a
comparison against peer companies performances on specific
measures may have unintended and undesirable results. For
example, the proposal could reward the Companys senior
officers with performance-based compensation in years where the
Companys peers underperformed, even if the Company
underperformed its own targets. Moreover, extraordinary,
non-recurring or unusual items incurred by one company may skew
the average of the peer group, rendering meaningful comparison
difficult.
|
|
|
|
The Compensation Committee should be afforded flexibility in
determining and establishing our compensation packages to ensure
its ability to specifically tailor the most appropriate
compensation package for each executive officer, responding to
changing and significant market trends and conditions and
current Company business goals. By restricting this flexibility,
we believe this proposal unnecessarily limits the Compensation
Committee and its ability to provide appropriate compensation
based on a number of factors and criteria.
|
|
|
|
The Compensation Committee believes that our senior executives
are more effectively motivated when the performance-based
compensation is tied to a mix of measurements and not solely
tied to our ranking against our peer group.
|
Thus, we believe that limiting incentive compensation solely to
situations where the Companys performance exceeds the
median or mean performance of a peer group is unnecessarily
restrictive and may cause compensation packages to poorly
reflect the expertise, experience, dedicated service and
performance of our senior executives.
Finally, to assist in establishing the compensation packages of
our senior executive officers, our Compensation Committee
reviews the compensation packages and performance of other
public homebuilders, using both subjective and objective
comparisons. The Compensation Committee reserves the right to
adjust downward any compensation award that, because of a
particular performance metric, is exceedingly high when compared
to the compensation at our peer group companies. In practice, we
believe the compensation paid to our senior executives has
typically compared favorably with, and is not excessive to, that
paid to senior executive officers at similarly performing peer
companies.
We believe that the Company appropriately bases the
Companys senior executive compensation on
performance-based criteria while recognizing that the total
compensation packages offered to our senior executives must be
sufficient to attract and retain the most highly qualified
candidates in the homebuilding industry as well as motivate them
to perform to the best of their abilities. We believe that the
adoption of this proposal unnecessarily limits our Compensation
Committees ability to determine and award appropriate
levels of executive compensation and is not in the long-term
best interest of the Company and its stockholders.
The Board Of Directors Unanimously Recommends That
Stockholders Vote AGAINST This Proposal.
53
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires D.R. Hortons directors, certain of its
officers, and persons who own more than 10% of a registered
class of D.R. Hortons equity securities to file reports of
ownership and changes in ownership with the SEC. Such officers,
directors and greater than 10% stockholders are required by SEC
regulations to furnish D.R. Horton with copies of all forms they
file pursuant to Section 16(a). Based solely on its review
of the copies of such forms received by it and on written
representations from certain reporting persons that no
Form 5 reports were required for those persons, D.R. Horton
believes that all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were
complied with during the year ended September 30, 2007.
STOCKHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Any stockholder who intends to present a proposal for action at
D.R. Hortons 2009 Annual Meeting of Stockholders and to
have D.R. Horton include such proposal in its proxy soliciting
materials pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934, as amended, must
deliver a copy of the proposal to D.R. Horton not later than
August 21, 2008. In addition, the Bylaws of D.R. Horton
provide that only stockholder proposals submitted in a timely
manner to a Corporate Counsel of D.R. Horton may be acted upon
at an annual meeting of stockholders. To be timely, a
stockholders notice must be delivered to, or mailed and
received at, the principal executive offices of D.R. Horton not
less than 30 days prior to the date of the originally
scheduled meeting. However, if less than 40 days
notice or prior public disclosure of the date of the originally
scheduled meeting is given by D.R. Horton, notice by the
stockholder to be timely must be so received not later than the
close of business on the tenth calendar day following the
earlier of the day on which such notice of the date of the
originally scheduled meeting was mailed or the day on which such
public disclosure was made.
REQUESTING
DOCUMENTS FROM THE COMPANY
On our website, at www.drhorton.com, under the Investor
Relations and Corporate Governance links, you will find the
following: (i) Corporate Governance Principles,
(ii) Audit Committee Charter, (iii) Compensation
Committee Charter, (iv) Nominating and Governance Committee
Charter, (v) Code of Ethical Conduct for the CEO, CFO, and
Senior Financial Officers, (vi) Complaint Procedures for
Accounting, Internal Control, Auditing and Financial Matters and
Complaint Procedures for Employee Matters, and
(vii) Corporate Code of Business Conduct and Ethics for
Employees and Directors. You may obtain a copy of any of these
documents at no charge through our website or by contacting us
for a printed set. You may contact us for these purposes at:
Attention Corporate Counsel, D.R. Horton, Inc., 301 Commerce
Street, Suite 500, Fort Worth, TX 76102,
(817) 390-8200
or e-mail:
tbmontano@drhorton.com.
Management knows of no other matters to be voted upon at the
Annual Meeting. If any other matter is properly brought before
the Annual Meeting, it is the intention of the persons named as
proxies in the form of proxy to vote in their discretion upon
such matters in accordance with their judgment.
You are urged to sign, date and return the enclosed proxy in the
envelope provided. No postage is required if the envelope is
mailed from within the United States. If you subsequently decide
to attend the
54
Annual Meeting and wish to vote your shares in person, you may
do so. Your cooperation in giving this matter your prompt
attention is appreciated.
By Order of the Board of Directors,
THOMAS B. MONTANO
Vice President and Assistant Secretary
Fort Worth, Texas
December 19, 2007
55
Attachment
A
AMENDED AND RESTATED
2000 INCENTIVE BONUS PLAN
(as of December 3, 2007)
1. PURPOSE. The purpose of the D.R.
Horton, Inc. Amended and Restated 2000 Incentive Bonus Plan (the
Plan) is to provide senior management employees of
D.R. Horton, Inc., a Delaware corporation (the
Company), and its Affiliates with incentive
compensation based upon the level of achievement of financial
and other performance criteria. The Plan will enhance the
ability of the Company and its Affiliates to attract and retain
individuals of exceptional managerial talent upon whom, in large
measure, the sustained progress, growth and profitability of the
Company depends.
2. DEFINITIONS. As used in the
Plan, the following terms shall have the meanings set forth
below:
(a) Adjusted Pre-Tax Income shall mean
income before income taxes, excluding inventory impairments and
land option cost write-offs and goodwill impairments, as
publicly reported by the Company in its financial statements in
accordance with generally accepted accounting principles.
(b) Affiliate shall mean (i) any
Person that directly, or through one or more intermediaries,
controls, is controlled by, or is under common control with, the
Company or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(c) Award shall mean a right to a
payment under the terms of the Plan.
(d) Board shall mean the Board of
Directors of the Company.
(e) Change in Control shall mean the
occurrence of any of the following events:
(i) a merger, consolidation or reorganization of the
Company into or with another corporation or other legal person
if the stockholders of the Company, immediately before such
merger, consolidation or reorganization, do not, immediately
following such merger, consolidation or reorganization, then own
directly or indirectly, more than 50% of the combined voting
power of the then-outstanding voting securities of the
corporation or other legal person resulting from the such
merger, consolidation or reorganization in substantially the
same proportion as their ownership of voting securities of the
Company immediately prior to such merger, consolidation or
reorganization;
(ii) the Company sells all or substantially all of its
assets to another corporation or other Person, or there is a
complete liquidation or dissolution of the Company;
(iii) a change in the composition of the Board such that at
any time a majority of the Board shall have been members of the
Board for less than twenty-four months, unless the election of
each new director who was not a director at the beginning of the
period was approved by at least a majority of the directors then
still in office who were directors at the beginning of such
period (but in no event by fewer than three such directors);
(iv) any Person (other than (x) the Company or
(y) Donald R. Horton, Terrill J. Horton, or their
respective wives, children, grandchildren and other descendants,
or any trust or other entity formed or controlled by any of such
individuals) acquires beneficial ownership (as
defined in
Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
Exchange Act)) of 50% or more of the outstanding
voting securities of the Company; or
(v) the Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to
Form 8-K
or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has
occurred.
(f) Code shall mean the Internal Revenue
Code of 1986, as amended.
A-1
(g) Committee shall mean the
Compensation Committee of the Board, which shall consist of two
or more Outside Directors.
(h) Covered Employee shall mean a
Participant who is a covered employee within the
meaning of Code Section 162(m) and the Treasury regulations
promulgated thereunder with respect to any Performance Period.
(i) Outside Directors shall mean
outside directors within the meaning of Code
Section 162(m) and the Treasury regulations promulgated
thereunder.
(j) Participant shall mean any Senior
Executive who is selected by the Committee (or in the case of
Senior Executives who are not Covered Employees, any Person or
committee empowered by the Committee to make such selection) to
participate in the Plan for a Performance Period.
(k) Performance-Based Compensation shall
mean amounts satisfying the applicable requirements imposed by
Code Section 162(m) and the Treasury regulations
promulgated thereunder with respect to that term.
(l) Performance Period shall mean one or
more months, quarters or one or more fiscal years of the
Company, including multiple year periods, or any other period
selected by the Committee, as to which an Award may be earned.
(m) Person shall mean any individual,
corporation, partnership, limited liability company,
association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.
(n) Senior Executive shall mean any
executive officer of the Company or any other officer of the
Company or any of its Affiliates serving as a region or division
president or manager or in another senior management position.
(o) Share shall mean a share of the
Companys common stock, par value $0.01.
(p) Stock Incentive Plan shall mean the
Companys 2006 Stock Incentive Plan, as amended from time
to time.
(q) Target Award shall mean one or more
Award levels for a Performance Period that will be paid in
accordance herewith if certain performance criteria are achieved
in such Performance Period.
3. AWARDS.
(a) The Committee may determine and designate Senior
Executives who shall be Participants for any Performance Period.
With respect to each such designated Participant, if any, the
Committee shall establish: (i) a Target Award for the
Performance Period; (ii) the performance criteria for the
Performance Period with respect to the Target Award; and
(iii) whether the Award is intended to satisfy the
requirements for Performance-Based Compensation. For any
Performance Period, determinations required for Awards intended
to qualify as Performance-Based Compensation shall be made
within the time necessary to comply with such requirements.
Designation as a Participant for any Performance Period shall
not entitle any Senior Executive to the right to be designated
as a Participant for any other Performance Period.
(b) The performance criteria to be established with respect
to any Target Awards shall be based upon any one or more of the
following measures, applied to either the Company as a whole or
to any business unit, region, division, or subsidiary, either
individually, alternatively, or in any combination, and measured
either monthly, quarterly, annually, or cumulatively over a
period of years, on an absolute basis or relative to (including
ranking to) a pre-established target, to previous years
results, or to a designated comparison group, in each case as
specified by the Committee: (i) cash flow (before or after
dividends), (ii) earnings per share (including, without
limitation, earnings before interest, taxes, depreciation and
amortization), (iii) stock price, (iv) return on
equity, (v) equity improvement, (vi) stockholder
return or total stockholder return, (vii) return on capital
(including, without limitation, return on total capital or
return on invested capital), (viii) return on investment,
(ix) return on assets or net assets, (x) market
capitalization, (xi) economic value added, (xii) debt
A-2
leverage (debt to capital) or access to capital,
(xiii) gross or net revenue, (xiv) sales, net sales or
closings, (xv) backlog, (xvi) inventory, land or lot
improvement or reduction, (xvii) asset turnover,
(xviii) income, pre-tax income or net income,
(xix) operating income or pre-tax profit,
(xx) operating profit, operating profit before non-cash
charges and asset valuation, net operating profit or economic
profit, (xxi) gross margin, operating margin or profit
margin, (xxii) return on operating revenue or return on
operating assets, ( xxiii) cost of sales, (xxiv) cash
from operations, (xxv) operating ratio,
(xxvi) operating revenue or return on revenue,
(xxvii) market share improvement, (xxviii) sales
cancellations, (xxix) dividend or dividend yield,
(xxx) general, selling and administrative expenses
improvement or containment, or (xxxi) customer service. Such
goals may be particular to a line of business, region, division,
or other unit or may be based on the Company generally or any
Affiliate.
To the extent consistent with Code Section 162(m) (or,
alternatively, to the extent that Code Section 162(m) is
not intended to apply to a particular Award), the Committee may
appropriately adjust any evaluation of performance under the
above performance criteria to exclude any of the following
events that occur during a Performance Period:
(i) litigation, claims, judgments or settlements;
(ii) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported
results; (iii) non-cash charges related to impairments,
write-offs or asset valuation; (iv) corporate overhead
charges, (v) accruals for reorganization and restructuring
programs; (vi) adjustments related to deferred tax assets;
and (vii) any extraordinary, unusual, non-recurring or
non-comparable items (A) as described in Accounting
Principles Board Opinion No. 30 (or any successor
provision), (B) as described in managements
discussion and analysis of financial condition and results of
operations appearing in the Companys Annual Report to
stockholders for the applicable year or years, or
(C) publicly announced by the Company in a press release or
conference call relating to the Companys results of
operations or financial condition for a completed quarterly,
annual, or multi-year fiscal period. The Committee also may take
into account normalization related adjustments to the
performance criteria if necessary to provide a relevant and
consistent comparison to the performance criteria of the
Companys peer group or other comparison group or metric.
(c) Notwithstanding the establishment of any Target Award
and related performance criteria pursuant to Section 3(a),
but subject to Section 6, in the sole discretion of the
Committee, the Award payable to a Participant in respect of such
Target Award may be adjusted, at any time prior to payment of
the related Award, either to increase or decrease the value of
such Award, as follows:
(i) the Committee may adjust an Award for individual
performance on the basis of such quantitative and qualitative
performance measures and evaluations as it deems appropriate;
(ii) the Committee may make such adjustments as it deems
appropriate in the case of any Participant whose position with
the Company has changed during the applicable Performance
Period; and
(iii) the Committee shall have the discretion to adjust
performance criteria and the methodology used to measure the
determination of the degree of attainment of such criteria;
provided, that to the extent required to qualify as
Performance-Based Compensation, any Award designated as
Performance-Based Compensation may not be adjusted under this
Section 3(c) or otherwise in a manner that increases the
value of such Award. Subject to Section 6, the Committee
shall retain the discretion to adjust such Awards in a manner
that does not increase the value of such Awards, at any time
prior to the payment thereof.
(d) To the extent that a Target Award is intended to be
Performance-Based Compensation, prior to any payment thereof,
the Committee shall certify the extent to which the performance
criteria have been satisfied and the amount payable as a result
thereof.
(e) In general, Awards earned under the Plan shall be
payable in cash; provided, however, that the Committee, in its
sole discretion, may elect to satisfy payment of any Award
earned under the Plan in whole or in part by the delivery of a
number of Shares or Share Units with a fair market value equal
to the dollar value of the Award so earned. Any Shares or Share
Units delivered in settlement of an Award under the Plan shall
be granted as fully vested Restricted Stock or Restricted Stock
Units pursuant to Section 8 of the Stock Incentive Plan,
shall not be subject to the minimum vesting period set forth in
Section 8(c) of the Stock
A-3
Incentive Plan as permitted by the terms thereof regarding the
payment of earned compensation, shall be subject to all other
applicable terms and conditions of the Stock Incentive Plan, and
shall reduce the number of Shares available for issuance under
the Stock Incentive Plan in accordance with Section 5
thereof.
(f) Subject to the above, Awards shall be paid as soon as
practicable after the Performance Period, and if possible by the
15th day of the 3rd month following the end of the
year in which the Participant becomes entitled to such Award
payment, but in any event no later than the last day of the
calendar year following the year in which the Target Award is
earned, except to the extent that a Participant has made a
timely election to defer the receipt of such Award pursuant to a
deferral arrangement with the Company or any of its Affiliates.
Any deferral election shall comply with the requirements of Code
Section 409A so as to avoid the imposition of any taxes or
penalties thereunder. For Awards that do not constitute
Performance-Based Compensation, the Compensation Committee may
establish rules and procedures for advance payment of all or a
portion of such Awards, or such other payment arrangements as it
deems desirable or appropriate.
4. AWARD LIMITATIONS TO COVERED
EMPLOYEES. Notwithstanding any other provision of
the Plan to the contrary, if an award is payable based on one or
more monthly or quarterly periods, the maximum Award payable to
any one Covered Employee with respect to any such Performance
Period shall not exceed the sum of (i) 2% of Adjusted
Pre-Tax income for such Performance Period (but not below $0)
and (ii) $8 million, provided that no Covered Employee
may receive both monthly Target Awards and a quarterly Target
Award with respect to the same quarter under prong (i) and
the maximum payout for all monthly, quarterly, or annual
Performance Periods in a fiscal year under prong (ii) shall
not exceed $8 million. Notwithstanding the prior sentence,
if the Performance Period is the month of December, the maximum
Award payable to any one Covered Employee shall not exceed the
sum of (i) 6% of Adjusted Pre-Tax Income for such
Performance Period (but not below $0) and
(ii) $8 million, provided that no other award under
prong (i) of the prior sentence shall be paid for the
quarter (or months therein) that includes December and the
maximum payout for all monthly, quarterly, or annual Performance
Periods in a fiscal year under prong (ii) shall not exceed
$8 million. If an Award is payable based on a fiscal year,
the maximum Award payable to any one Covered Employee with
respect to the fiscal year Performance Period shall not exceed
the sum of (i) 2% of Adjusted Pre-Tax Income for such
fiscal year (but not below $0) and (ii) $8 million,
provided that any amounts paid under prong (i) of the
above-referenced monthly or quarterly Performance Period
maximums during the same fiscal year shall reduce, dollar for
dollar, the maximum amount payable under prong (i) of the
maximum annual Performance Period Award, and provided further
that the maximum payout for all monthly, quarterly, and annual
Performance Periods in a fiscal year under prong (ii) of
the above formulas shall not exceed $8 million.
If a Covered Employee is entitled to both a short-term (monthly,
quarterly or annual) and a long-term (covering two or more
fiscal years) Target Award covering the same or an overlapping
time period hereunder, then (a) the maximum long-term Award
shall not exceed the sum of (i) 2% of Adjusted Pre-Tax
Income for such long-term Performance Period (but not below $0)
and (ii) $8 million, and (b) the amount paid
under the short-term Award shall reduce, dollar for dollar, the
maximum payable under the long-term Award, such that the total
amount that a Covered Employee may receive for the combined
short-term and long-term Awards covering the same or an
overlapping time period shall not exceed the sum of (i) the
greater of 2% of Adjusted Pre-Tax Income for such short-term
Performance Period (but not below $0) and 2% of Adjusted Pre-Tax
Income for such long-term Performance Period (but not below $0),
and (ii) $8 million.
Prior to the payment with respect to any Award intended to
satisfy the requirements for Performance-Based Compensation, the
Committee shall certify in writing the attainment of the
performance criteria and any other material terms. Unless an
Award Agreement expressly provides otherwise, Awards and payouts
hereunder shall not affect any awards or payouts under other
compensation or benefit plans, and participants may receive
awards under more than one plan for a performance period.
5. ELIGIBILITY; PRORATIONS.
(a) Persons employed by the Company or any of its
Affiliates as Senior Executives in a Performance Period prior to
the establishment by the Committee of the Target Award for such
Performance Period are eligible to be Participants under the
Plan for such Performance Period (subject to (b) below,
whether or not so
A-4
employed or living at the date an Award is paid). A Senior
Executive is not rendered ineligible to be a Participant by
reason of being a member of the Board.
(b) The Award applicable to a Participant under the Plan
for a Performance Period shall be prorated over the Performance
Period or the Participant shall be ineligible for an Award, as
the case may be, in the following events:
|
|
|
(i) ceasing to be a Senior Executive, otherwise than by
dismissal, during the Performance Period, including ceasing to
be such due to death, retirement, resignation, or leave of
absence
|
|
prorate as of the date of ceasing to be such, to the
nearest half month
|
(ii) disability for more than three months in a Performance
Period
|
|
prorate as of the last day of the third month of
disability
|
(iii) disability for three months or less in a Performance
Period
|
|
no reduction in applicable Award
|
(iv) dismissal, with or without cause, during or after a
Performance Period by the Company or any Affiliate
|
|
no Award
|
If a Change in Control occurs during any Performance Period, the
foregoing provisions of this Section 5(b) shall not apply
to any such event occurring on or after the Change in Control.
6. CHANGE IN CONTROL. Within
fifteen (15) business days following a Change in Control,
each Participant under the Plan during the Performance Period in
which the Change in Control occurs who is in the employ of the
Company at the time of the Change in Control shall be paid an
amount equal to (i) the Award the Participant would have
earned for such Performance Period, assuming continued
achievement of the relevant performance goals at the rate
achieved as of the end of the calendar month immediately prior
to the calendar month in which the Change in Control occurs,
multiplied by (ii) a fraction, the numerator of which is
the number of days in the Performance Period which have elapsed
as of the Change in Control, and the denominator of which is the
number of days in the Performance Period. The Committee, or a
successor compensation committee of the surviving corporation
that meets the requirements of Code Section 162(m) and the
treasury regulations promulgated thereunder, shall make the
certification described in Section 4 prior to any payment
pursuant to this Section 6. Amounts payable pursuant to
this Section 6 shall not be subject to downward adjustment
by the Committee, notwithstanding the provisions of
Section 3(c).
7. OTHER CONDITIONS.
(a) No Person shall have any right to be selected as a
Participant for any Performance Period or, except as provided in
Section 10, to receive an Award under the Plan. There is no
obligation for uniformity of treatment of Participants under the
Plan. Awards under the Plan may not be assigned or alienated.
(b) Neither the Plan nor any action taken hereunder shall
be construed as giving to any Participant the right to be
retained in the employ of the Company or any Affiliate.
(c) The Company or any Affiliate shall have the right to
deduct from any Award to be paid under the Plan any federal,
state or local taxes required by law to be withheld with respect
to such payment.
(d) No segregation of any moneys or the creation of any
trust or the making of any special deposit shall be required in
connection with any Awards made or to be made under the Plan.
(e) This Plan is not intended to and shall not preclude the
Board from adopting, continuing, amending or terminating such
additional compensation arrangements as it deems desirable for
Participants under this Plan, including any thrift, savings,
investments, stock purchase, stock option, profit-sharing,
pension, retirement, insurance, bonus or other incentive plan.
8. DESIGNATION OF BENEFICIARIES. A
Participant may designate one or more beneficiaries to receive
all or part of the Award which may be made to the Participant,
or may be payable, after such Participants death. A
designation of beneficiary may be replaced by a new designation
or may be revoked by
A-5
the Participant at any time. A designation or revocation shall
be on a form to be provided for this purpose and shall be signed
by the Participant and delivered to the Company or Affiliate
employing the Participant prior to the Participants death.
In case of the Participants death, an Award with respect
to which a designation of beneficiary has been made (to the
extent it is valid and enforceable under applicable law) shall
be paid to the designated beneficiaries at the time such Award
would have been paid to Participant, if Participant were still
alive. Any Award granted or payable to a Participant who is
deceased and not subject to such a designation shall be
distributed to the Participants estate at the time such
Award would have been paid to Participant, if Participant were
still alive. If there shall be any question as to the legal
right of any beneficiary to receive an Award under the Plan, the
amount in question may be paid to the estate of the Participant,
in which event the Company or its employing Affiliate shall have
no further liability to anyone with respect to such amount.
9. PLAN ADMINISTRATION.
(a) The Committee shall have full power and discretion to
administer and interpret the Plan and to establish rules for its
administration. In making any determinations under or referred
to in the Plan, the Committee shall be entitled to rely on
opinions, reports or statements of officers or employees of the
Company and its Affiliates, and of counsel, public accountants
and other professional or expert Persons.
(b) Except to the extent prohibited by applicable law, the
Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members
and may delegate all or any part of its responsibilities and
powers to any Person or committee selected by it; provided,
however, that the Committee may not allocate or delegate any
portion of its responsibilities in connection with or relating
to Covered Employees or Performance-Based Compensation. Any such
allocation or delegation may be revoked by the Committee at any
time.
(c) The Plan shall be governed by the laws of the State of
Delaware and applicable Federal law.
10. MODIFICATION OR TERMINATION OF
PLAN. The Board may modify or terminate the Plan
at any time, effective at such date as the Board may determine;
provided that no modification a or termination may, in the
absence of written consent to the change by the affected
Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any
Participant or beneficiary in respect of any Target Award
established prior to the date such amendment is adopted by the
Board.
11. SHAREHOLDER APPROVAL. No Target
Award may be paid hereunder to any Covered Employee until the
material terms of the Plan are disclosed to and approved by the
shareholders of the Company. Such approval must be in a separate
vote by the holders of a majority of the shares of the Company
present, or represented by proxy, and entitled to vote, at a
duly constituted meeting of the Companys stockholders in
accordance with the laws of the State of Delaware.
A-6
Attachment
B
D.R.
HORTON, INC.
2008 PERFORMANCE UNIT PLAN
1. PURPOSE. The purpose of the D.R.
Horton, Inc. 2008 Performance Unit Plan (the Plan)
is to provide senior management employees of D.R. Horton, Inc.,
a Delaware corporation (the Company), and its
Affiliates with incentive compensation based upon the level of
achievement of financial and other performance criteria. The
Plan will enhance the ability of the Company and its Affiliates
to attract and retain individuals of exceptional managerial
talent upon whom, in large measure, the sustained progress,
growth and profitability of the Company depends.
2. DEFINITIONS. As used in the
Plan, the following terms shall have the meanings set forth
below:
(a) Affiliate shall mean (i) any
Person that directly, or through one or more intermediaries,
controls, is controlled by, or is under common control with, the
Company or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) Award shall mean a right to a
payment under the terms of the Plan.
(c) Board shall mean the Board of
Directors of the Company.
(d) Bonus Unit shall mean an Award
granted pursuant to this Plan, the value of which on any given
date shall equal the Fair Market Value of one Share as of such
date.
(e) Change in Control shall mean the
occurrence of any of the following events:
(i) a merger, consolidation or reorganization of the
Company into or with another corporation or other legal person
if the stockholders of the Company, immediately before such
merger, consolidation or reorganization, do not, immediately
following such merger, consolidation or reorganization, then own
directly or indirectly, more than 50% of the combined voting
power of the then-outstanding voting securities of the
corporation or other legal person resulting from the such
merger, consolidation or reorganization in substantially the
same proportion as their ownership of voting securities of the
Company immediately prior to such merger, consolidation or
reorganization;
(ii) the Company sells all or substantially all of its
assets to another corporation or other Person, or there is a
complete liquidation or dissolution of the Company;
(iii) a change in the composition of the Board such that at
any time a majority of the Board shall have been members of the
Board for less than twenty-four months, unless the election of
each new director who was not a director at the beginning of the
period was approved by at least a majority of the directors then
still in office who were directors at the beginning of such
period (but in no event by fewer than three such directors);
(iv) any Person (other than (x) the Company or
(y) Donald R. Horton, Terrill J. Horton, or their
respective wives, children, grandchildren and other descendants,
or any trust or other entity formed or controlled by any of such
individuals) acquires beneficial ownership (as
defined in
Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
Exchange Act)) of 50% or more of the outstanding
voting securities of the Company; or
(v) the Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to
Form 8-K
or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has
occurred.
(f) Code shall mean the Internal Revenue
Code of 1986, as amended.
(g) Committee shall mean the
Compensation Committee of the Board, which shall consist of two
or more Outside Directors.
B-1
(h) Covered Employee shall mean a
Participant who is a covered employee within the
meaning of Code Section 162(m) and the Treasury regulations
promulgated thereunder with respect to any Performance Period.
(i) Fair Market Value shall mean, with
respect to any relevant date, the closing price of the Shares on
such date (or, if such date is not a trading date, the
immediately preceding trading date), as reported on the New York
Stock Exchange or such other primary national exchange on which
the Shares are listed. In the event the Shares are not listed on
an exchange as described in the previous sentence, Fair Market
Value with respect to any relevant date shall be determined in
good faith by the Board.
(j) Outside Directors shall mean
outside directors within the meaning of Code
Section 162(m) and the Treasury regulations promulgated
thereunder.
(k) Participant shall mean any Senior
Executive who is selected by the Committee (or in the case of
Senior Executives who are not Covered Employees, any Person or
committee empowered by the Committee to make such selection) to
receive an Award under the Plan.
(l) Performance-Based Compensation shall
mean amounts satisfying the applicable requirements imposed by
Code Section 162(m) and the Treasury regulations
promulgated thereunder with respect to that term.
(m) Performance Period shall mean one or
more fiscal years of the Company, including multiple year
periods, or any other period selected by the Committee, as to
which an Award may be earned.
(n) Person shall mean any individual,
corporation, partnership, limited liability company,
association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.
(o) Senior Executive shall mean any
executive officer of the Company or any other officer of the
Company or any of its Affiliates serving as a region or division
president or manager or in another senior management position.
(p) Share shall mean a share of the
Companys common stock, par value $0.01, subject to
adjustment as provided in Section 4.
(q) Stock Incentive Plan shall mean the
Companys 2006 Stock Incentive Plan, as amended from time
to time.
(r) Target Award shall mean an Award
expressed as a target number of Bonus Units that may be earned
in accordance herewith if certain performance criteria are
achieved in such Performance Period. The maximum amount payable
pursuant to any Award granted hereunder shall be two
(2) times the number Bonus Units subject to the Target
Award.
3. AWARDS.
(a) The Committee may determine and designate Senior
Executives who shall be Participants for any Performance Period.
With respect to each such designated Participant, if any, the
Committee shall establish: (i) a Target Award (including
the target number of Bonus Units subject thereto) for the
Performance Period; (ii) the performance criteria for the
Performance Period with respect to the Target Award; and
(iii) whether the Award is intended to satisfy the
requirements for Performance-Based Compensation. For any
Performance Period, determinations required for Awards intended
to qualify as Performance-Based Compensation shall be made
within the time necessary to comply with such requirements.
Designation as a Participant for any Performance Period shall
not entitle any Senior Executive to the right to be designated
as a Participant for any other Performance Period.
(b) The performance criteria to be established with respect
to any Awards shall be based upon any one or more of the
following measures, applied to either the Company as a whole or
to any business unit, region, division, or subsidiary, either
individually, alternatively, or in any combination, and measured
either monthly, quarterly, annually, or cumulatively over a
period of years, on an absolute basis or relative to (including
B-2
ranking to) a pre-established target, to previous years
results, or to a designated comparison group, in each case as
specified by the Committee: (i) cash flow (before or after
dividends), (ii) earnings per share (including, without
limitation, earnings before interest, taxes, depreciation and
amortization), (iii) stock price, (iv) return on
equity, (v) equity improvement, (vi) stockholder
return or total stockholder return, (vii) return on capital
(including, without limitation, return on total capital or
return on invested capital), (viii) return on investment,
(ix) return on assets or net assets, (x) market
capitalization, (xi) economic value added, (xii) debt
leverage (debt to capital) or access to capital,
(xiii) gross or net revenue, (xiv) sales, net sales or
closings, (xv) backlog, (xvi) inventory, land or lot
improvement or reduction, (xvii) asset turnover,
(xviii) income, pre-tax income or net income,
(xix) operating income or pre-tax profit,
(xx) operating profit, operating profit before adjustments
or increases to cost of sales, net operating profit or economic
profit, (xxi) gross margin, operating margin or profit
margin, (xxii) return on operating revenue or return on
operating assets, (xxiii) cost of sales, (xxiv) cash
from operations, (xxv) operating ratio,
(xxvi) operating revenue or return on revenue,
(xxvii) market share improvement, (xxviii) sales
cancellations, (xxix) dividend or dividend yield,
(xxx) general, selling and administrative expense
improvement or containment, or (xxxi) customer service.
Such goals may be particular to a line of business, region,
division, or other unit or may be based on the Company generally
or any Affiliate.
To the extent consistent with Code Section 162(m) (or,
alternatively, to the extent that Code Section 162(m) is
not intended to apply to a particular Award), the Committee may
appropriately adjust any evaluation of performance under the
above performance criteria to exclude any of the following
events that occur during a Performance Period:
(i) litigation, claims, judgments or settlements;
(ii) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported
results; (iii) non-cash charges related to impairments,
write-offs or asset valuation; (iv) corporate overhead
charges; (v) accruals for reorganization and restructuring
programs; (vi) adjustments related to deferred tax assets;
and (vii) any extraordinary, unusual, non-recurring or
non-comparable items (A) as described in Accounting
Principles Board Opinion No. 30 (or any successor
provision), (B) as described in managements
discussion and analysis of financial condition and results of
operations appearing in the Companys Annual Report to
stockholders for the applicable year or years, or
(C) publicly announced by the Company in a press release or
conference call relating to the Companys results of
operations or financial condition for a completed quarterly,
annual, or multi-year fiscal period. The Committee also may take
into account normalization related adjustments to the
performance criteria if necessary to provide a relevant and
consistent comparison to the performance criteria of the
Companys peer group or other comparison group or metric.
(c) Notwithstanding the grant of any Award and related
performance criteria pursuant to Section 3(a), but subject
to Section 6, in the sole discretion of the Committee, the
amount payable to a Participant in respect of such Award may be
adjusted, at any time prior to payment of the related Award,
either to increase or decrease the value of such Award, as
follows:
(i) the Committee may adjust an Award for individual
performance on the basis of such quantitative and qualitative
performance measures and evaluations as it deems appropriate;
(ii) the Committee may make such adjustments as it deems
appropriate in the case of any Participant whose position with
the Company has changed during the applicable Performance
Period; and
(iii) the Committee shall have the discretion to adjust
performance criteria and the methodology used to measure the
determination of the degree of attainment of such criteria;
provided, that to the extent required to qualify as
Performance-Based Compensation, any Award designated as
Performance-Based Compensation may not be adjusted under this
Section 3(c) or otherwise in a manner that increases the
value of such Award. Subject to Section 6, the Committee
shall retain the discretion to adjust such Awards in a manner
that does not increase the value of such Awards, at any time
prior to the payment thereof.
(d) To the extent that an Award is intended to be
Performance-Based Compensation, prior to any payment thereof,
the Committee shall certify in writing the extent to which the
performance criteria have been satisfied and the amount payable
as a result thereof.
B-3
(e) In general, Awards earned under the Plan shall be
payable in cash; provided, however, that the Committee, in its
sole discretion, may elect to satisfy payment of any Award
earned under the Plan in whole or in part by the delivery of a
number of Shares or Share Units equal to the number of Bonus
Units earned under the Award. Any Shares or Share Units
delivered in settlement of an Award under the Plan shall be
granted as fully vested Restricted Stock or Restricted Stock
Units pursuant to Section 8 of the Stock Incentive Plan,
shall not be subject to the minimum vesting period set forth in
Section 8(c) of the Stock Incentive Plan as permitted by
the terms thereof regarding the payment of earned compensation,
shall be subject to all other applicable terms and conditions of
the Stock Incentive Plan, and shall reduce the number of Shares
available for issuance under the Stock Incentive Plan in
accordance with Section 5 thereof.
(f) Subject to the above, Awards shall be paid as soon as
practicable after the Performance Period, and if possible by the
15th day of the 3rd month following the end of the
year in which the Participant becomes entitled to such Award
payment, but in any event no later than the last day of the
calendar year following the year in which the Award is earned,
except to the extent that a Participant has made a timely
election to defer the receipt of such Award in the manner
specified by the Committee pursuant to a deferral arrangement
with the Company or any of its Affiliates. A deferral election
shall be deemed timely if received no later than the last day of
the calendar year preceding the calendar year in which the
Performance Period commences, except (i) with respect to
any Award with respect to a Performance Period of at least 12
consecutive months, in which case such election shall be made
not later than 6 months before the end of the applicable
Performance Period (so long as such election is made before the
Award becomes both substantially certain to be paid and readily
ascertainable), and (ii) with respect to a person who first
becomes a Participant, which person may make such election
within 30 days after first becoming a Participant and which
election shall apply only to amounts paid for services to be
performed after the date of such election. Any deferral election
shall comply with the requirements of Code Section 409A so
as to avoid the imposition of any taxes or penalties thereunder.
For Awards that do not constitute Performance-Based
Compensation, the Compensation Committee may establish rules and
procedures for advance payment of all or a portion of such
Awards, or such other payment arrangements as it deems desirable
or appropriate.
4. AWARD LIMITATIONS TO COVERED
EMPLOYEES. Notwithstanding any other provision of
the Plan to the contrary, the maximum number of Bonus Units that
may be granted under any Award to any Covered Employee in any
one fiscal year of the Company shall not exceed 500,000 Bonus
Units, and the maximum number of Bonus Units that can be earned
or paid out with respect thereto, if all performance criteria
under the Award are satisfied, is two (2) times the number
of such Bonus Units. The maximum number of Bonus Units that may
be granted in any one fiscal year to any one Covered Employee
and the number and kind of Shares used as the basis for
determining the value of Bonus Units shall, to the extent
consistent with Code Section 162(m) and the Treasury
regulations promulgated thereunder, be proportionately or
equitably adjusted (in a manner determined by the Committee) to
reflect any reorganization, reclassification, combination or
exchange of shares, repurchase of shares, stock split, reverse
stock split, merger, consolidation, spin-off, dividend or other
distribution of securities, property or cash (other than
regular, quarterly cash dividends), or any other event or
transaction that affects the number or kind of Shares
outstanding. Prior to the payment with respect to any Award
designated as intended to satisfy the requirements for
Performance-Based Compensation, the Committee shall certify in
writing the attainment of the performance criteria and any other
material terms.
5. ELIGIBILITY; PRORATIONS.
(a) Persons employed by the Company or any of its
Affiliates as Senior Executives in a Performance Period prior to
the establishment by the Committee of the Target Award for such
Performance Period are eligible to be Participants under the
Plan for such Performance Period (subject to (b) below,
whether or not so employed or living at the date an Award is
paid). A Senior Executive is not rendered ineligible to be a
Participant by reason of being a member of the Board.
B-4
(b) The Award applicable to a Participant under the Plan
for a Performance Period shall be prorated over the Performance
Period or the Participant shall be ineligible for an Award, as
the case may be, in the following events:
|
|
|
(i) ceasing to be a Senior Executive, otherwise than by
dismissal, during the Performance Period, including ceasing to
be such due to death, retirement, resignation, or leave of
absence
|
|
prorate as of the date of ceasing to be such, to the
nearest half month
|
(ii) disability for more than three months in a
Performance Period
|
|
prorate as of the last day of the third month of
disability
|
(iii) disability for three months or less in a Performance
Period
|
|
no reduction in applicable Award
|
(iv) dismissal, with or without cause, during or after a
Performance Period by the Company or any Affiliate
|
|
no Award
|
If a Change in Control occurs during any Performance Period, the
foregoing provisions of this Section 5(b) shall not apply
to any such event occurring on or after the Change in Control.
6. CHANGE IN CONTROL. Within
fifteen (15) business days following a Change in Control,
each Participant under the Plan during the Performance Period in
which the Change in Control occurs who is in the employ of the
Company at the time of the Change in Control shall be paid an
amount equal to (i) the Award the Participant would have
earned for such Performance Period, assuming continued
achievement of the relevant performance goals at the rate
achieved as of the end of the calendar month immediately prior
to the calendar month in which the Change in Control occurs,
multiplied by (ii) a fraction, the numerator of which is
the number of days in the Performance Period which have elapsed
as of the Change in Control, and the denominator of which is the
number of days in the Performance Period. The Committee, or a
successor compensation committee of the surviving corporation
that meets the requirements of Code Section 162(m) and the
treasury regulations promulgated thereunder, shall make the
certification described in Section 4 prior to any payment
pursuant to this Section 6. Amounts payable pursuant to
this Section 6 shall not be subject to downward adjustment
by the Committee, notwithstanding the provisions of
Section 3(c).
7. OTHER CONDITIONS.
(a) No Person shall have any right to be selected as a
Participant for any Performance Period or, except as provided in
Section 10, to receive an Award under the Plan. There is no
obligation for uniformity of treatment of Participants under the
Plan. Awards under the Plan may not be assigned or alienated.
(b) Neither the Plan nor any action taken hereunder shall
be construed as giving to any Participant the right to be
retained in the employ of the Company or any Affiliate.
(c) The Company or any Affiliate shall have the right to
deduct from any Award to be paid under the Plan any federal,
state or local taxes required by law to be withheld with respect
to such payment.
(d) No segregation of any moneys or the creation of any
trust or the making of any special deposit shall be required in
connection with any Awards made or to be made under the Plan.
(e) This Plan is not intended to and shall not preclude the
Board from adopting, continuing, amending or terminating such
additional compensation arrangements as it deems desirable for
Participants under this Plan, including any thrift, savings,
investments, stock purchase, stock option, profit-sharing,
pension, retirement, insurance, bonus or other incentive plan.
(f) No Participant shall have any rights as a stockholder
of the Company with respect to any Award hereunder unless and
until said such Award is settled by the delivery of Shares in
accordance with the terms and conditions of the Stock Incentive
Plan.
8. DESIGNATION OF BENEFICIARIES. A
Participant may designate one or more beneficiaries to receive
all or part of the Award which may be made to the Participant,
or may be payable, after such
B-5
Participants death. A designation of beneficiary may be
replaced by a new designation or may be revoked by the
Participant at any time. A designation or revocation shall be on
a form to be provided for this purpose and shall be signed by
the Participant and delivered to the Company or Affiliate
employing the Participant prior to the Participants death.
In case of the Participants death, an Award with respect
to which a designation of beneficiary has been made (to the
extent it is valid and enforceable under applicable law) shall
be paid to the designated beneficiaries at the time such Award
would have been paid to Participant, if Participant were still
alive. Any Award granted or payable to a Participant who is
deceased and not subject to such a designation shall be
distributed to the Participants estate at the time such
Award would have been paid to Participant, if Participant were
still alive. If there shall be any question as to the legal
right of any beneficiary to receive an Award under the Plan, the
amount in question may be paid to the estate of the Participant,
in which event the Company or its employing Affiliate shall have
no further liability to anyone with respect to such amount.
9. PLAN ADMINISTRATION.
(a) The Committee shall have full power and discretion to
administer and interpret the Plan and to establish rules for its
administration. In making any determinations under or referred
to in the Plan, the Committee shall be entitled to rely on
opinions, reports or statements of officers or employees of the
Company and its Affiliates, and of counsel, public accountants
and other professional or expert Persons.
(b) Except to the extent prohibited by applicable law, the
Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members
and may delegate all or any part of its responsibilities and
powers to any Person or committee selected by it; provided,
however, that the Committee may not allocate or delegate any
portion of its responsibilities in connection with or relating
to Covered Employees or Performance-Based Compensation. Any such
allocation or delegation may be revoked by the Committee at any
time.
(c) The Plan shall be governed by the laws of the State of
Delaware and applicable Federal law.
10. MODIFICATION OR TERMINATION OF
PLAN. The Board may modify or terminate the Plan
at any time, effective at such date as the Board may determine;
provided that no modification or termination may, in the absence
of written consent to the change by the affected Participant
(or, if the Participant is not then living, the affected
beneficiary), adversely affect the rights of any Participant or
beneficiary in respect of any Target Award established prior to
the date such amendment or termination is adopted by the Board.
11. SHAREHOLDER APPROVAL. No Award
may be paid hereunder to any Covered Employee until the material
terms of the Plan are disclosed to and approved by the
shareholders of the Company. Such approval must be in a separate
vote by the holders of a majority of the shares of the Company
present, or represented by proxy, and entitled to vote, at a
duly constituted meeting of the Companys stockholders in
accordance with the laws of the State of Delaware.
B-6
VOTE BY INTERNET www.proxyvote.com Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the AMERICAN
STOCK TRANSFER cut-off date or meeting date. Have your proxy card in hand when you & TRUST COMPANY
access the web site and follow the instructions to obtain your records and 6201 15TH AVENUE to
create an electronic voting instruction form. BROOKLYN, NY 11219 ELECTRONIC DELIVERY OF FUTURE
SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by D.R. Horton, Inc. in
mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and
annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when prompted, indicate that
you agree to receive or access shareholder communications electronically in future years. VOTE BY
PHONE 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in
hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return it to D.R. Horton, Inc.,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: DRHOR1 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED
AND DATED. DETACH AND RETURN THIS PORTION ONLY D.R. HORTON, INC. The Board of Directors recommends
a vote FOR each of Proposals 1, 2 and 3. The Board of Directors recommends a vote AGAINST Proposal
4. For Withhold For All To withhold authority to vote for any individual Vote On Proposals All All
Except nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line
below. 1. Election of Directors Nominees: 01) Donald R. Horton 05) Michael W. Hewatt 0 0 0 02)
Bradley S. Anderson 06) Bob G. Scott 03) Michael R. Buchanan 07) Donald J. Tomnitz 04) Richard I.
Galland 08) Bill W. Wheat For Against Abstain 2. To approve an amendment and restatement of the
Amended and Restated 2000 Incentive Bonus Plan with respect to current and future covered employees
(determined under Section 162(m) of the Internal Revenue Code of 1986, as amended) and 0 0 0 other
participants. 3. To approve the 2008 Performance Unit Plan with respect to current and future
covered employees (determined under Section 0 0 0 162(m) of the Internal Revenue Code of 1986, as
amended) and other participants. 4. To vote on a stockholder proposal concerning a
pay-for-superior-performance standard for executive compensation. 0 0 0 5. To conduct other
business properly brought before the meeting. 0 0 0 PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE. Note: Please sign exactly as names appear herein.
When shares are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full titles as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a partnership, please sign
in partnership name by an authorized person. Signature [PLEASE SIGN WITHIN BOX] Date Signature
(Joint Owners) Date |
D.R. HORTON, INC. 2008 PROXY PROXY D.R. HORTON, INC. D.R. Horton Tower, 301 Commerce Street, Suite
500, Fort Worth, Texas 76102 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The
undersigned hereby nominates, constitutes and appoints Donald R. Horton, Donald J. Tomnitz and Bill
W. Wheat, and each of them, attorneys, agents and proxies of the undersigned, with full power of
substitution to each and hereby authorizes them to represent and to vote, as designated on the
reverse side of this card, all shares of Common Stock of D.R. Horton, Inc. (the Company) held of
record by the undersigned at the close of business on December 3, 2007, at the 2008 Annual Meeting
of Stockholders to be held on January 31, 2008, or any adjournment thereof. The Board of Directors
recommends a vote FOR each of Proposals 1, 2 and 3. The Board of Directors recommends a vote
AGAINST Proposal 4. This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be voted as recommended
by the Board of Directors in this paragraph. The undersigned hereby ratifies and confirms all that
said attorneys and proxies, or any of them, or their substitutes, shall lawfully do or cause to be
done by virtue hereof and hereby revokes any and all proxies heretofore given by the undersigned to
vote at said meeting. The undersigned acknowledges receipt of the notice of said annual meeting
and the proxy statement accompanying said notice. PLEASE SIGN AND DATE ON REVERSE SIDE. |