UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2011
D.R. Horton, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 1-14122 | 75-2386963 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
301 Commerce Street, Suite 500,
Fort Worth, Texas 76102
(Address of principal executive offices)
Registrant’s telephone number, including area code: (817) 390-8200
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
(e) Compensatory Arrangements of Certain Officers
2011 Fiscal Year Compensation of Chairman and Chief Executive Officer .
On November 9, 2011, the Compensation Committee of the Board of Directors determined and approved the performance compensation to be paid to Donald R. Horton, Chairman, and to Donald J. Tomnitz, President and Chief Executive Officer, for the fiscal year ended September 30, 2011 (“2011 fiscal year”). Under the 2011 fiscal year performance bonus program, Mr. Horton and Mr. Tomnitz each had the opportunity to earn a performance bonus up to a maximum of two percent of the consolidated pre-tax income of the Company for each quarter in the 2011 fiscal year. For the 2011 fiscal year, Mr. Horton and Mr. Tomnitz each received $240,798, which equals two percent of the Company’s consolidated pre-tax income for fiscal 2011.
Performance Determination of Fiscal 2009 Grant of Performance Units .
On November 20, 2008, the Compensation Committee made an award of long-term performance units (“Performance Units”) under the 2008 Performance Unit Plan (“2008 Plan”) to Mr. Horton and Mr. Tomnitz. The performance period for the Performance Units was January 1, 2009 to September 30, 2011 (the “Performance Period”). The performance goals established for the Performance Units were relative return on investment (“ROI”) and relative net sales gains percentage (units) (“NSG%”). Final performance on these metrics would be determined by comparing and ranking the Company’s performance to the Company’s peer group performance, on the same performance goals of ROI and NSG%. The Company’s peer group consisted of nine publicly traded homebuilding companies.
After completion of the 33-month Performance Period (which included periods in our 2009, 2010 and 2011 fiscal years) the Compensation Committee evaluated the relative peer group rankings for both performance goals and the terms of the Performance Units and determined that Mr. Horton vested in a maximum of 875,000 shares of common stock and Mr. Tomnitz vested in a maximum of 700,000 shares of common stock. Prior to awarding a final payout of the Performance Units, the Compensation Committee used its discretion and reduced the maximum payouts by 65% and awarded 306,250 Performance Units to Mr. Horton and 245,000 Performance Units to Mr. Tomnitz. The Compensation Committee approved payout of the Performance Units to Mr. Horton and Mr. Tomnitz in the form of 50% common stock and 50% cash. The payout resulted in Mr. Horton receiving 153,125 shares of common stock and $1,384,250 and Mr. Tomnitz receiving 122,500 shares of common stock and $1,107,400. Pursuant to the terms of the Performance Units, the number of shares was determined using the closing price of our common stock of $9.04 on September 30, 2011, the last day of the Performance Period.
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2012 Fiscal Year Compensation Program of Chairman and Chief Executive Officer .
The base salaries, annual performance-based bonus plans, and other benefits for Mr. Horton and Mr. Tomnitz for the fiscal year ending September 30, 2012 (“2012 fiscal year”) were also approved by the Compensation Committee. Mr. Horton’s base annual salary remains unchanged at $1,000,000 and Mr. Tomnitz’s base annual salary remains unchanged at $900,000. Mr. Horton and Mr. Tomnitz also have the opportunity to earn bonuses based on 2% of consolidated pre-tax income determined in accordance with generally accepted accounting principles and based on two semi-annual performance periods during the 2012 fiscal year. The primary components of the 2012 fiscal year compensation program for each of Mr. Horton and Mr. Tomnitz are set forth in Exhibit 10.1 to this Form 8-K and Exhibit 10.1 is hereby incorporated by reference into this Item 5.02.
Three-Year Performance Restricted Stock Units Award — Vesting September 30, 2014.
On November 9, 2011, the Compensation Committee approved an award of performance restricted stock units (“Performance RSUs”) pursuant to the Company’s 2006 Stock Incentive Plan, as amended and restated (“2006 Plan”) to the following executive officers and in the following amounts:
|
Name |
Office |
Target # of Performance
Restricted Stock Units |
||
|
Donald R. Horton |
Chairman of the Board | 200,000 | ||
|
Donald J. Tomnitz |
President and CEO | 150,000 |
The Performance RSUs relate to a three-year performance period beginning on October 1, 2011 and ending on September 30, 2014. The Performance RSU will vest if four performance goals are satisfied. The four performance goals relate to relative total shareholder return (“TSR”), relative return on investment (“ROI”), relative selling, general and administrative expense containment (“SG&A”) and relative gross profit (“GP”) (collectively, the “Performance Goals”) . Each Performance Goal is weighted twenty-five percent (25%) of the target number of Performance RSUs. The target number of Performance RSUs may be increased to a maximum number of 400,000 for Mr. Horton and 300,000 for Mr. Tomnitz upon maximum achievement of each of the four Performance Goals and decreased to a minimum number of zero upon minimum achievement of each of the four Performance Goals. Performance and percentages that fall between the maximum RSUs, the Target RSUs and the minimum (zero) RSUs shall be ranked using linear interpolation. The Company’s peer group includes ten publicly traded homebuilding companies, and with the Company included, includes eleven homebuilding companies in the final rankings.
Each Performance RSU represents the contingent right to receive one share of the Company’s common stock if vesting is satisfied. The Compensation Committee reserves the sole discretion to pay the final earned and vested Performance RSUs in equity, cash or a combination of both. The Performance RSUs have no rights to dividends or voting.
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Vesting of the TSR Performance Goal component will be determined after the Performance Period based on a comparison of the Company’s TSR to the S&P 500 Index’s TSR as computed by Standard and Poor’s using their TSR methodology. Vesting of the ROI, SG&A and GP Performance Goal components will be determined after the Performance Period based on the relative ranking of the Company’s performance on each Performance Goal to each peer group company’s performance on each Performance Goal. Any portion of the Performance RSUs that do not vest due to inadequate relative performance will be forfeited. The Compensation Committee may use its sole discretion to adjust downward, in part or in whole the vested Performance RSUs or the value of the Performance RSUs based on performance of the Company, including based on total annual pre-tax income or stock price of the Company, the performance of the participant or other factors in the Compensation Committee’s sole discretion.
The above summary is qualified by reference to the text of the form of Restricted Stock Unit Agreement and Stock Award Agreement, which are incorporated herein by reference as set forth in Exhibits 10.2 and 10.3 respectively.
2011 Fiscal Year Compensation of Other Named Executive Officers .
The Board of Directors on recommendation of the Compensation Committee approved discretionary bonuses to the executive officers listed below consistent with past practices. The executive officers set forth below were “named executive officers” (as defined in Item 402(a)(3) of Regulation S-K) of the Company as of the end of the Company’s 2011 fiscal year. There have been no changes to the discretionary bonus plans of the below listed named executive officers as previously approved by the Board of Directors. A summary of the bonuses is as follows:
|
Name |
Office |
Annual
Discretionary Bonus for the Year Ended September 30, 2011 |
||||
|
Bill W. Wheat |
Executive Vice President and Chief Financial Officer | $ | 350,000 | |||
|
Stacey H. Dwyer |
Executive Vice President and Treasurer | $ | 350,000 | |||
For each of Mr. Wheat and Ms. Dwyer, $150,000 of the annual bonus related to the six months ended March 31, 2011 and $200,000 related to the six months ended September 30, 2011.
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2012 Fiscal Year Compensation of Other Named Executive Officers .
The Board of Directors established and approved the 2012 fiscal year annual base salaries and 2012 fiscal year compensation programs for each of Bill W. Wheat and Stacey H. Dwyer. A summary of the 2012 compensation program for each of Mr. Wheat and Ms. Dwyer is set forth in Exhibit 10.4 to this Form 8-K and Exhibit 10.4 is hereby incorporated by reference into this Item 5.02.
Board and Committee Compensation.
On November 10, 2011, the Board of Directors of the Company approved cash director fees, committee member fees and committee chairperson fees to be paid to non-management directors of the Company in the 2012 fiscal year. All director fees remained at the same levels from the prior fiscal year. Board of Directors fees are $15,000 per meeting but not to exceed $60,000 per year. Director fees, committee fees and chairperson fees are only paid to non-management directors. A summary of the non-management director, committee and chairperson fees is set forth in Exhibit 10.5 to this Form 8-K and Exhibit 10.5 is hereby incorporated by reference into this Item 5.02.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
| 10.1 | Summary of Executive Compensation Notification – Chairman and Chief Executive Officer | |
| 10.2 | Form of Restricted Stock Unit Agreement | |
| 10.3 | Form of Stock Award Agreement (incorporated herein by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, dated September 30, 2010 and filed with the SEC October 6, 2010) | |
| 10.4 | Summary of Executive Compensation Notification – Other Executive Officers | |
| 10.5 | Summary of Director, Committee and Chairperson Compensation | |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| D. R. Horton, Inc. | ||||||
| Date: November 16, 2011 | By: |
/ S / B ILL W. W HEAT |
||||
| Bill W. Wheat | ||||||
| Executive Vice President and Chief Financial Officer | ||||||
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EXHIBIT INDEX
|
Exhibit Number |
Description |
|
| 10.1 | Summary of Executive Compensation Notification – Chairman and Chief Executive Officer | |
| 10.2 | Form of Restricted Stock Unit Agreement | |
| 10.3 | Form of Stock Award Agreement (incorporated herein by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, dated September 30, 2010 and filed with the SEC October 6, 2010) | |
| 10.4 | Summary of Executive Compensation Notification – Other Executive Officers | |
| 10.5 | Summary of Director, Committee and Chairperson Compensation | |
Exhibit 10.1
Executive Compensation Notification
Chairman and Chief Executive Officer
2012 Fiscal Year Compensation Program of Chairman and Chief Executive Officer.
2012 Fiscal Year Base Salaries:
Table I below sets forth the 2012 fiscal year
Table I
|
Name |
Office |
Annual Base Salary (2012 Fiscal Year) |
Performance Bonus (2012 Fiscal Year) |
|||
|
Donald R. Horton |
Chairman of the Board | $1,000,000 | See Below | |||
|
Donald J. Tomnitz |
Vice Chairman, President and CEO | $900,000 | See Below |
2012 Fiscal Year Annual Performance Bonus: The Compensation Committee approved performance-based goals for measuring short-term performance bonuses that may be earned by Mr. Horton and Mr. Tomnitz during the 2012 fiscal year. The 2012 performance goals were established under the Company’s 2000 Amended and Restated Incentive Bonus Plan. The 2012 fiscal year performance goal for Mr. Horton and Mr. Tomnitz relates to consolidated pre-tax income as set forth below.
Annual Performance Bonus – Performance Related to Pre-Tax Income:
Under the 2012 fiscal year performance bonus program, each of Mr. Horton and Mr. Tomnitz has the opportunity to earn the following performance-based bonus:
| (1) | 2.0% of Pre-Tax Income of the Company for the six-month period ending March 31, 2012 (but not below $0), and |
| (2) | 2.0% of Pre-Tax Income of the Company for the six-month period ending September 30, 2012 (but not below $0). |
“Pre-Tax Income” shall mean income before income taxes, as publicly reported by the Company in its quarterly or annual financial statements, as applicable, prepared in accordance with generally accepted accounting principles. The financial statements shall mean the consolidated financial statements of the Company.
At the end of the 2012 fiscal year, the Committee may use its sole discretion to adjust downward, in part or in whole, the Annual Performance Bonus based on performance of the Company, including based on total annual Pre-Tax Income, and performance of the participant.
Other Long-Term Benefits.
Consistent with prior years, Mr. Horton and Mr. Tomnitz may participate in two separate deferred compensation plans. The first plan allows the executive to make voluntary income deferrals. The second plan is a promise by the Company to pay retirement benefits to the executive. Furthermore, if the executive is employed by the Company on the last day of the current fiscal year (for example September 30, 2012), then the Company will establish a liability to him equal to 10% of his annual base salary as of the first day of the current fiscal year (for example October 1, 2011). This liability will accrue earnings in future years at a rate established by the administrative committee.
Exhibit 10.2
D.R. HORTON, INC.
GRANT NOTICE FOR 2006 STOCK INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNITS
FOR GOOD AND VALUABLE CONSIDERATION, D. R. Horton, Inc. (the “Company”) , hereby grants to Grantee named below the number of performance restricted stock units specified below (the “Award” or the “Performance RSUs”) , upon the terms and subject to the conditions set forth in this Grant Notice, the Company’s 2006 Stock Incentive Plan, as amended and restated (the “Plan”) and the Standard Terms and Conditions (the “Standard Terms and Conditions”) adopted pursuant to such Plan and provided to Grantee, each as amended from time to time. Each performance restricted stock unit subject to this Award represents the right to receive one share of the Company’s Common Shares, subject to the conditions set forth in this Grant Notice, the Plan and the Standard Terms and Conditions. This Award is granted pursuant to the Plan and is subject to and qualified in its entirety by the Standard Terms and Conditions.
|
Name of Grantee: |
||
|
Approval Date: Grant Date: Vesting Period: |
||
|
Number of performance restricted stock units subject to the Award at target and maximum performance: |
(Target) (“Target Award”)
(Maximum) |
|
By accepting this Grant Notice, Grantee acknowledges that he or she has received and read, and agrees that this Award shall be subject to, the terms of this Grant Notice, the Plan and the Standard Terms and Conditions.
|
Grantee: |
|
D.R. HORTON, INC., | ||||||||
| a Delaware Corporation | ||||||||||
|
Printed Name: |
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| By: | The Compensation Committee of the | |||||||||
| Board of Directors | ||||||||||
| By: |
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|||||||||
| Name: | ||||||||||
| Title: | ||||||||||
D.R. HORTON, INC.
STANDARD TERMS AND CONDITIONS FOR
PERFORMANCE RESTRICTED STOCK UNITS
These Standard Terms and Conditions apply to any Award of performance restricted stock units granted to an employee of the Company under the Company’s 2006 Stock Incentive Plan, as amended and restated (the “Plan”) , as approved by the Compensation Committee on , 20 , which are evidenced by a Grant Notice or an action of the Committee that specifically refers to these Standard Terms and Conditions.
| 1. | TERMS OF PERFORMANCE RESTRICTED STOCK UNITS |
D.R. Horton, Inc., a Delaware corporation (the “Company”) , has granted to the Grantee named in the Grant Notice provided to said Grantee herewith (the “Grant Notice”) an award of a number of performance restricted stock units (the “Award” or the “Performance RSUs”) specified in the Grant Notice. Each Performance RSU represents the right to receive one share of the Company’s Common Shares, $0.01 par value per share (the “Common Shares”) upon the terms and subject to the conditions set forth in the Grant Notice, these Standard Terms and Conditions, and the Plan, each as amended from time to time.
The Compensation Committee reserves the right to pay the final earned and vested Performance RSUs in equity, cash or a combination of both.
The Compensation Committee may use its sole discretion to adjust downward, in part or in whole the vested Performance RSUs or the value of the Performance RSUs based on performance of the Company, including based on total annual pre-tax income or stock price of the Company, the performance of the participant or other factors in the Compensation Committee’s sole discretion.
| 2. | VESTING OF PERFORMANCE RESTRICTED STOCK UNITS |
The Award shall not be vested as of the Grant Date set forth in the Grant Notice and shall be forfeitable unless and until otherwise vested pursuant to the terms of these Standard Terms and Conditions. After the Grant Date, subject to termination or acceleration as provided in these Standard Terms and Conditions and the Plan, the Award shall become vested as described in this Section 2 with respect to that number of Performance RSUs as described in this Section 2.
| A. | The number of Performance RSUs that may be paid to you shall be based upon the Company’s achievement of the following four performance goals (“Performance Goals”) over the Performance Period: (i) Relative Total Shareholder Return (“TSR”) (as defined in Section 17), (ii) Relative Return on Investment (“ROI”) (as defined in Section 17), (iii) Relative SG&A Containment (“SG&A Containment” or “SG&A”) (as defined in Section 17), and (iv) Relative Gross Profit (“GP”) (as defined in Section 17). Each of TSR, ROI, SG&A and GP shall be given twenty-five percent (25%) weight when ranking relative performance and when calculating the final vesting of the Award. See Exhibit C for examples of this calculation. Ranking of the relative performance of the Company and its peers shall be in accordance with the following ranking tables: |
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Total Shareholder Return (weighted 25% of Target Award)
The Grantee shall vest in the TSR portion of the Award based on the Company’s performance of Total Shareholder Return as compared to the Total Shareholder Return of the S&P 500 Index over the three year Performance Period. Total Shareholder Return is to be determined by Standard and Poor’s after the Performance Period using the same or materially similar criteria used by them in preparing the stock performance graph included each year in the Company’s public filings (Form 10-K for proxy statement, as applicable). The Grantee shall receive the number of Performance RSUs in relation to the Company’s TSR performance as compared to the S&P 500 Index’s TSR performance as set forth in the table below (See Exhibit A for examples of hypothetical TSR rankings):
The final number of Performance RSUs under this TSR Performance Goal shall be determined using the above percentages and rankings. Performance and percentages that fall between those listed in the table above shall be ranked using linear interpolation. Under the TSR component of the Performance Goals and after giving effect to the 25% weighting to the total Target Award, the number of Performance RSUs that can be earned is as follows: Maximum, Target and Threshold.
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ROI and SG&A and GP (each weighted 25% of Target Award)
|
Performance Level Compared to Peer Group |
Payout |
Performance
RSUs |
||
|
1 st Place |
Maximum | — | ||
|
2 nd Place |
— | |||
|
3 rd Place |
— | |||
|
4 th Place |
— | |||
|
5 th Place |
Target | — | ||
|
6 th Place |
— | |||
|
7 th Place |
— | |||
|
8 th Place |
— | |||
|
9 th Place |
— | |||
|
10 th Place |
Threshold | — | ||
|
11 th Place |
zero | |||
Note: See Exhibit B for the complete listing of Homebuilder Peer Group.
The final number of Performance Units under the ROI, SG&A and GP Performance Goals shall be determined using the above table. Under these three components of the Performance Goals, the collective number of Performance RSUs that can be earned is: Maximum , Target , and Threshold .
| B. | After adjustment for forfeitures as provided in Section 2, the number of Performance RSUs paid to you will be determined based on the Company’s ranking on each of the four Performance Goals. Notwithstanding the foregoing, the maximum number of Performance RSUs you can earn will be an aggregate of 200% (two times) the original Target Award granted to you, and the minimum number of Performance RSUs that you can earn is zero. |
| C. | Issuance of shares earned under this Award shall be made to you as soon as practicable but no later than 45 days following certification by the Compensation Committee of the Board of Directors of the Company (the “Committee”) as set forth below, unless you timely elect a deferred payment/receipt in the manner and within the time frames specified by the Committee and in compliance with Code Section 409A (the “Payout Date”) . In the event of your death prior to the Payout Date, any amount payable to you under the Award will be paid to your designated beneficiary or, if none, to your estate. Prior to any issuance under this Award, the Committee shall certify in writing, by resolution or otherwise, that the Performance Goals and any other material terms of the Award were in fact satisfied and the amount to be paid in respect of the Performance RSUs as a result of the achievement of the Performance Goals. |
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| D. | The Award shall vest as follows: |
The number of Performance RSUs that vest will be determined after the completion of the performance period, which shall begin on , 20 and end on , 20 (the “Performance Period”), and will be based on the final peer rankings on each of the four Performance Goals as set forth in this Section 2.
Notwithstanding anything contained in these Standard Terms and Conditions to the contrary:
| (i) | if the Grantee’s separation from service is due to death or disability before , 20 , then after the Performance Period is completed and vesting determined, if any, the Grantee or his beneficiaries will be paid a number of Performance RSUs determined on a pro-rata basis based on the number of full months completed from the Grant Date before the death or disability. |
| (ii) | if after 13 months has passed since the Grant Date, the Grantee’s separation from service is due to voluntary (without cause) or involuntary (without cause) termination, retirement or resignation before , 20 , then after the Performance Period is completed and vesting determined, if any, the Grantee will be paid a number of Performance RSUs determined on a pro-rata basis based on the number of full months completed from the Grant Date to the date of separation of service. |
| (iii) | if the Grantee’s separation from service is for any reason other than those listed in (i) and (ii) above, any unvested portion of the Award held by the Grantee shall be forfeited and canceled as of the date of such separation of service. |
For purposes of this Section 2, “pro-rata portion” means a percentage, where the numerator is the number of full months completed between , 20 and the date of the Grantee’s separation of service, and the denominator is months.
| 3. | SETTLEMENT OF PERFORMANCE RESTRICTED STOCK UNITS |
Vested Performance RSUs shall be settled by the delivery to the Grantee or a designated brokerage firm of one Share per vested Performance RSU on or before , 20 or as soon as reasonably practicable thereafter.
| 4. | RIGHTS AS STOCKHOLDER |
The Grantee shall have no voting rights and no right to receive any dividends with respect to Common Shares underlying Performance RSUs unless and until such Common Shares are reflected as issued and outstanding shares on the Company’s stock ledger.
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| 5. | CHANGE IN CONTROL |
Unless otherwise provided in an employment, severance or other agreement between the Company and the Grantee, the Committee shall determine the effect of a Change in Control on all unvested Performance RSUs. Without limitation, the Committee may provide for the acceleration of vesting of all or a portion of the unvested Performance RSUs at such performance level as determined by the Committee, for a payment based on the Change in Control Price in settlement of the Performance RSUs at such performance level as determined by the Committee, or for the assumption or substitution of Performance RSUs by the Grantee’s employer (or the parent or an Affiliate of such employer) or other service recipient that engages the Grantee immediately following the Change in Control. In all events, any action under this Section 5 shall comply with the applicable requirements of Section 409A of the Code.
| 6. | RESTRICTIONS ON RESALES OF SHARES |
The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Grantee or other subsequent transfers by the Grantee of any Common Shares issued in respect of vested Performance RSUs, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Grantee and other holders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers.
| 7. | INCOME TAXES |
The Company shall not deliver shares in respect of any Performance RSUs unless and until the Grantee has made arrangements satisfactory to the Committee to satisfy applicable withholding tax obligations. Unless otherwise permitted by the Committee, withholding shall be effected by withholding Common Shares issuable in connection with the delivery of the Performance RSUs (net withholding provision) in an amount to satisfy the Grantee’s withholding tax obligations. The Grantee acknowledges that the Company shall have the right to deduct any taxes required to be withheld by law in connection with the delivery of the Performance RSUs from any amounts payable by it to the Grantee (including, without limitation, future cash wages).
| 8. | NON-TRANSFERABILITY OF AWARD |
The Grantee represents and warrants that the Performance RSUs are being acquired by the Grantee solely for the Grantee’s own account for investment and not with a view to or for sale in connection with any distribution thereof. The Grantee further understands, acknowledges and agrees that, except as otherwise provided in the Plan, the Performance RSUs may not be sold, assigned, transferred, pledged or otherwise directly or indirectly encumbered or disposed of except to the extent expressly permitted hereby and at all times in compliance with the U.S. Securities Act of 1933, as amended, and the rules and regulations of the Securities Exchange Commission thereunder, and in compliance with applicable state securities or “blue sky” laws and non-U.S. securities laws. Unless permitted by the Committee, the Performance RSUs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by the Grantee other than by will or the laws of descent and distribution.
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| 9. | THE PLAN AND OTHER AGREEMENTS |
In addition to these Terms and Conditions, the Award shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. Certain capitalized terms not otherwise defined herein are defined in the Plan. In the event of a conflict between the terms and conditions of these Standard Terms and Condition and the Plan, the Plan controls.
Subject to the next paragraph, the Grant Notice, these Standard Terms and Conditions and the Plan constitute the entire understanding between the Grantee and the Company regarding the Award, and any prior agreements, commitments or negotiations concerning the Award are superseded.
The Award (including the terms described herein) are subject to the provisions of the Plan and, if the Grantee is outside the U.S., there may be an addendum containing special terms and conditions applicable to grants in the Grantee’s country. The grant of the Performance RSUs to any such Grantee is contingent upon the Grantee executing and returning any such addendum in the manner directed by the Company.
| 10. | NOT A CONTRACT FOR EMPLOYMENT |
Nothing in the Plan, in the Grant Notice, these Standard Terms and Conditions or any other instrument executed pursuant to the Plan shall confer upon the Grantee any right to continue in the Company’s employ or service nor limit in any way the Company’s right to terminate the Grantee’s employment or other service at any time for any reason.
| 11. | SEVERABILITY |
In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision.
| 12. | HEADINGS |
The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they affect its meaning, construction or effect.
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| 13. | FURTHER ASSURANCES |
Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of these Standard Terms and Conditions.
| 14. | BINDING EFFECT |
These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns.
| 15. | ELECTRONIC DELIVERY |
By executing the Grant Notice, the Grantee hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Grantee pursuant to applicable securities laws) regarding the Company and its subsidiaries, the Plan, and the Performance RSUs via Company web site or other electronic delivery.
| 16. | SECTION 409A |
The Award shall be administered pursuant to the requirements of Section 409A of the Code. For purposes hereof, “separation from service” shall have the meaning specified in Section 409A of the Code and the regulations thereunder. To the extent required by Section 409A of the Code, any payment hereunder to a Grantee is a “specified employee” shall be delayed until six months following such Grantee’s separation from service.
| 17. | DEFINITIONS |
Total Shareholder Return: For purposes of Total Shareholder Return, the following terms shall have the following meanings:
“Relative Total Shareholder Return” for the Performance Period means the Company’s Total Shareholder Return, as compared to the S&P 500 Index Total Shareholder Return. See Exhibit A for examples of this calculation. For this purpose the Total Shareholder Return shall be computed by Standard and Poor’s.
“Total Shareholder Return” shall mean the total shareholder return of the Company over the Performance Period as determined by Standard and Poor’s after the Performance Period using the same or materially similar criteria used by Standard and Poor’s in preparing the stock performance graph included each year in the Company’s public filings (Form 10-K or proxy statement, as applicable).
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Return on Investment: For purposes of Return on Investment, the following terms shall have the following meanings:
“Annual Pre-Tax Income” for a period of four consecutive quarters means the sum of quarterly income (loss) before income taxes (including corporate general and administrative expenses) during the four quarters of the Company’s fiscal year.
“Annual Return on Investment” or “Annual ROI” for a period of four consecutive quarters means the Annual Pre-Tax Income for the four quarters of the Company’s fiscal year divided by the Annual Total Assets for the four quarters of the Company’s fiscal year.
“Annual Total Assets” for a period of four consecutive quarters of the Company’s fiscal year means the average of the beginning balance of total assets as of the end of the quarter immediately preceding the first quarter (i.e., , 20 ) and as of the end of each of the four quarters of the Company’s fiscal year (i.e., December 31 st , March 31 st , June 30 th and September 30 th ).
“Performance Period Return on Investment” or “Performance Period ROI” means the sum of (1) the Annual ROI for the four consecutive quarters ending , 20 , and (2) the Annual ROI for the four consecutive quarters ending , 20 , and (3) the Annual ROI for the four consecutive quarters ending , 20 .
“Relative Return on Investment” or “Relative ROI” means the Performance Period ROI of the Company, compared to the other members of the Homebuilding Peer Group.
SG&A Containment: For purposes of SG&A Containment or SG&A, the following terms shall have the following meanings:
“SG&A Containment” or “SG&A” means consolidated selling, general and administrative expense (including corporate general and administrative expenses) as a percent of consolidated revenue determined from the Company’s or from a Homebuilding Peer Group member’s, as applicable, Consolidated Statements of Operations (or equivalent statement or disclosure in a publicly filed Form 10-K or Form 10-Q), for the Performance Period.
“Relative SG&A Containment” means the SG&A Containment (of the Company and each member of the Homebuilding Peer Group, determined on an individual basis as applicable), as compared to and ranked with the other members of the Homebuilding Peer Group.
9
Gross Profit: For purposes of Gross Profit, the following terms shall have the following meanings:
“Gross Profit” means gross profit (total revenue minus total cost of sales, including impairments and related write-off costs) divided by total revenue (expressed as a percentage) as reported in the Consolidated Statements of Operations (or equivalent statement or disclosure in a publicly filed Form 10-K or Form 10-Q), for the Performance Period, expressed in percentage terms.
“Relative Gross Profit” means the Gross Profit (of the Company and each member of the Homebuilding Peer Group, determined on an individual basis as applicable), as compared to and ranked with the other members of the Homebuilding Peer Group.
Other Definitions:
“Code” means the Internal Revenue Code of 1986, as amended, and the rulings, regulations and other guidance thereunder.
“Homebuilding Peer Group” means the companies listed on Exhibit B . If a member of the Peer Group is acquired or is otherwise a party to a corporate transaction and no longer exists as a separate entity, or if its common stock is delisted, the ranking of the ROI, SG&A and GP Performance Goals of the Homebuilding Peer Group will be determined for the performance period retroactively to , 20 , without such former peer group member.
“Performance Period” means the 3-year period (12 quarters or 36 months) beginning , 20 and ending , 20 . In comparing results of the Company with the performance of the other companies in the Homebuilding Peer Group, there shall be used the fiscal quarter that corresponds to the same fiscal quarter of the Company, or if there is not a comparable period, then the fiscal quarter ending most closely before a fiscal quarter of the Company and, in the case of fiscal year computations, there shall be used the four fiscal quarters ending at or most closely preceding the fiscal year of the Company; provided that the performance metrics will be compared to those of the Company’s Homebuilding Peer Group based on publicly available information of the Homebuilding Peer Group at , 20 , 20 and 20 , as applicable.
“Retirement” has the meaning set forth in the Plan or in a manner consistent with the Company’s other incentive plans or such date as the Committee shall approve.
“Disability” has the meaning set forth in the Plan or in a manner consistent with the Company’s other incentive plans or such date as the Committee shall approve.
| (a) | Rules of Construction . All references to Sections refer to sections in this Award. The titles to sections of this Award are for convenience of reference only and, in the case of conflict, the text of this Award, rather than the titles, shall control. |
10
EXHIBIT A
Examples of Total Shareholder Return Rankings
Company compared to S&P 500 Index
Example 1: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of 10% and DHI had a Total Shareholder Return of 10% then the ranking payout on this TSR Performance Goal would be equal to the Target RSUs of .
Example 2: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of 10% and DHI had a Total Shareholder Return of 5% then the ranking payout on this TSR Performance Goal would equal to RSUs.
Example 3: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of 10% and DHI had a Total Shareholder Return of 14% then the ranking payout on this TSR Performance Goal would equal to RSUs.
Example 4: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of 10% and DHI had a Total Shareholder Return of 20% then the ranking payout on this TSR Performance Goal would equal to RSUs.
Example 5: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of -5% and DHI had a Total Shareholder Return of -5% then the ranking payout on this TSR Performance Goal would equal to RSUs (equal to Target).
Example 6: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of -4% and DHI had a Total Shareholder Return of -6% then the ranking payout on this TSR Performance Goal would equal to RSUs.
Example 7: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of -1% and DHI had a Total Shareholder Return of 0% (flat) then the ranking payout on this TSR Performance Goal would equal to RSUs.
Example 8: If after the Performance Period the S&P 500 Index had a Total Shareholder Return of -1% and DHI had a Total Shareholder Return of 1% then the ranking payout on this TSR Performance Goal would equal to RSUs.
A-1
EXHIBIT B
MEMBERS OF HOMEBUILDING PEER GROUP
Peer Group for Operating Performance Metrics (ROI, SG&A and GP):
| Beazer Homes USA | Meritage Homes Corp | |
| Hovnanian Enterprises | NVR, Inc. | |
| KB Home | Pulte Homes | |
| Lennar Corporation | Ryland Group | |
| M.D.C. Holdings | Toll Brothers |
Total of ten companies in Homebuilder Peer Group related to ROI, SG&A and GP (eleven including the Company (DHI)).
B-1
EXHIBIT C
EXAMPLES OF FINAL RANKING CALCULATIONS
(to follow)
C-1
Exhibit 10.4
Summary of Executive Compensation Notification
Other Executive Officers
2012 Fiscal Year Compensation of Certain Other Named Executive Officers .
The Board of Directors also established and approved the 2012 fiscal year annual base salaries of our other named executive officers. The salaries and other compensation approved are as set forth below in Table II.
| Table II | ||||||
| Name |
Office |
Annual Base Salary (2012 Fiscal Year) |
Discretionary Bonus Plan (2012 Fiscal Year) |
|||
| Bill W. Wheat |
Executive Vice President and CFO |
$250,000 | See Note II | |||
| Stacey H. Dwyer |
Executive Vice President and Treasurer |
$250,000 | See Note II |
Note II :
The Board of Directors may award discretionary bonuses to the executives listed in Table II above based on the performance of these executives. In addition, Mr. Wheat and Ms. Dwyer may participate in two separate deferred compensation plans. The first plan allows the executive to make voluntary income deferrals. The second plan is a promise by the Company to pay retirement benefits to the executive. Furthermore, if the executive is employed by the Company on the last day of the current fiscal year (for example September 30, 2012), then the Company will establish a liability to him or her equal to 10% of his or her annual base salary as of first day of the current fiscal year (for example October 1, 2011). This liability will accrue earnings in future years at a rate established by the administrative committee.
Exhibit 10.5
Summary of Board and Committee Compensation
The Board of Directors of the Company approved cash director fees, committee member fees and chairperson fees to be paid to non-management directors of the Company in the 2012 fiscal year. Director fees, committee fees and chairperson fees are only paid to non-management directors as summarized below:
Each non-management director will receive a director fee of $15,000 per Board meeting attended in person or by tele-conference, paid quarterly and not to exceed $60,000 per year.
Each non-management director who serves on a committee of the Board of Directors will receive a fee of $1,250 per committee meeting attended in person or by tele-conference, paid quarterly and not to exceed $5,000 per year.
Each non-management director who serves as the chairperson of a committee of the Board of Directors shall receive a fee of $625 per committee meeting attended in person or by tele-conference, paid quarterly and not to exceed $2,500 per year.