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 20, 2008

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)   (Zip Code)

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 

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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
2008 Fiscal Year Compensation of Chairman and Chief Executive Officer .
On November 20, 2008, 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, 2008 (“2008 fiscal year”). Under the 2008 fiscal year performance bonus program, Mr. Horton and Mr. Tomnitz each had the opportunity to earn a performance bonus based on (i) a First Cash Component, related to a performance goal of generating adjusted pre-tax income, and (ii) a Second Cash and Equity Component, related to performance goals of generating cash flow, and achieving selling, general and administrative expense (“SG&A”) containment, both relative to the Company’s peer group. The approved performance bonuses, set forth below, were within the limits of the compensation program established by the Compensation Committee in the first quarter of the 2008 fiscal year.
First Cash Component: Under the First Cash Component, Mr. Horton and Mr. Tomnitz were each paid $848,482 related to adjusted pre-tax income achieved during the first quarter of the 2008 fiscal year (based on 6% of adjusted pre-tax income for the month of December). No bonuses were paid based on adjusted pre-tax income for the remaining three quarters in the 2008 fiscal year because no positive adjusted pre-tax income was achieved.
Second Cash and Equity Component: Under the Second Cash and Equity Component, Mr. Horton and Mr. Tomnitz were each awarded a $1 million performance bonus. Approximately 59% of the bonus was related to the cash flow performance goal and approximately 41% was related to the SG&A containment performance goal. The Compensation Committee determined that Mr. Horton and Mr. Tomnitz achieved levels of performance related to the cash flow and SG&A containment goals to earn a maximum performance bonus of $8 million under the terms of their performance bonus programs established at the beginning of the 2008 fiscal year. However, the Compensation Committee decided to exercise its discretion and reduced the $8 million potential bonus to $1 million for each of Mr. Horton and Mr. Tomnitz. In deciding to reduce the bonus, the Compensation Committee took into consideration the consolidated financial results of the Company and the continued difficulties facing the homebuilding industry.
2009 Fiscal Year Compensation Program of Chairman and Chief Executive Officer .
On November 20, 2008, the Compensation Committee of the Board of Directors established and approved the base salaries, performance-based bonus criteria, performance periods and other long-term compensation and benefits (“2009 Compensation Program”) for Donald R. Horton and Donald J. Tomnitz for our 2009 fiscal year ending September 30, 2009 (“2009 fiscal year”). Mr. Horton and Mr. Tomnitz are expected to be two of our “named executive officers” (as defined in Item 402(a)(3) of Regulation S-K) in our 2009 fiscal year. A summary of the 2009 Compensation Program for each of Mr. Horton and Mr. Tomnitz is 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.

 

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2008 Fiscal Year Compensation of Other Named Executive Officers .
For the year ended September 30, 2008 (“2008 fiscal year”), the Board of Directors on recommendation of the Compensation Committee, approved annual discretionary bonuses to the executive officers listed below consistent with past practices. All of 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 2008 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 attached as Exhibit 10.2 to this Form 8-K and Exhibit 10.2 is hereby incorporated by reference into this Item 5.02.
             
        Annual  
        Discretionary Bonus  
        for the Year Ended  
Name   Office   September 30, 2008  
 
           
Bill W. Wheat
  Executive Vice President and Chief Financial Officer   $ 350,000  
 
           
Stacey H. Dwyer
  Executive Vice President and Treasurer   $ 350,000  
2009 Fiscal Year Compensation of Other Named Executive Officers .
The Board of Directors also established and approved the 2009 fiscal year annual base salaries and 2009 fiscal year compensation programs for each of Bill W. Wheat and Stacey H. Dwyer. A summary of the 2009 compensation program for each of Mr. Wheat and Ms. Dwyer is set forth in Exhibit 10.2 to this Form 8-K and Exhibit 10.2 is hereby incorporated by reference into this Item 5.02.
Board and Committee Compensation .
On November 20, 2008, the Board of Directors of the Company approved director fees, committee member fees and committee chairperson fees to be paid to non-management directors of the Company in the current fiscal year. There was no increase or decrease in board, committee or chairperson fees from the fees paid in the prior fiscal 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 10.3 to this Form 8-K and Exhibit 10.3 is hereby incorporated by reference into this Item 5.02.

 

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Item 9.01.   Financial Statements and Exhibits.
(d)   Exhibits.
     
10.1
  Form and Summary of Executive Compensation Notification — Chairman and Chief Executive Officer
 
   
10.2
  Form and Summary of Executive Compensation Notification — Other Executive Officers
 
   
10.3
  Form and Summary of Director, Committee and Chairperson Compensation
 
   
10.4
  Form of Performance Unit Plan Award

 

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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 26, 2008  By:   /s/ Bill W. Wheat    
    Bill W. Wheat   
    Executive Vice President and
Chief Financial Officer  		 
 

 

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EXHIBIT INDEX
     
Exhibit    
Number   Description
 
   
10.1
  Form and Summary of Executive Compensation Notification — Chairman and Chief Executive Officer
 
   
10.2
  Form and Summary of Executive Compensation Notification — Other Executive Officers
 
   
10.3
  Form and Summary of Director, Committee and Chairperson Compensation
 
   
10.4
  Form of Performance Unit Plan Award

 

 

Exhibit 10.1
Form and Summary of Executive Compensation Notification
Chairman and Chief Executive Officer
2009 Fiscal Year Compensation Program of Chairman and Chief Executive Officer .
2009 Fiscal Year Base Salaries: Table I below sets for the 2009 fiscal year base salaries for Mr. Horton and Mr. Tomnitz. For the 2009 fiscal year, the Compensation Committee did not change the base salaries of either Mr. Horton or Mr. Tomnitz beyond the base salaries approved at the beginning of the prior fiscal year.
Table I
                 
        Annual Base Salary     Performance Bonus
Name   Office   (2009 Fiscal Year)     (2009 Fiscal Year)
 
               
Donald R. Horton
  Chairman of the Board   $ 400,000     See Below
 
               
Donald J. Tomnitz
  Vice Chairman, President and CEO   $ 300,000     See Below
2000 Amended and Restated Incentive Bonus Plan.
2009 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 2009 fiscal year. The 2009 performance goals were established under the Company’s 2000 Amended and Restated Incentive Bonus Plan (the “2000 Restated Plan”) . The 2009 fiscal year performance goals for Mr. Horton and Mr. Tomnitz relate to (i) adjusted pre-tax income, (ii) operating cash flow, and (iii) selling, general and administrative expense (“SG&A”) containment. These performance goals were further categorized into two components, referred to as the “ First Cash Component” and the “ Second Cash and Equity Component” as described below.
First Cash Component — Performance related to Adjusted Pre-Tax Income.
Under the First Cash Component, each of Mr. Horton and Mr. Tomnitz shall have the opportunity to earn the following cash performance-based bonus:
  (1)   6.0% of Adjusted Pre-Tax Income of the Company for the month of December 2008 (but not below $0).
 
  (2)   2.0% of Adjusted Pre-Tax Income of the Company for the quarter ending March 31, 2009 (but not below $0).
 
  (3)   2.0% of Adjusted Pre-Tax Income of the Company for the quarter ending June 30, 2009 (but not below $0).
 
  (4)   2.0% of Adjusted Pre-Tax Income of the Company for the quarter ending September 30, 2009 (but not below $0).

 

 

 

“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 prepared in accordance with generally accepted accounting principles. The financial statements shall mean the consolidated financial statements of the Company.
Second Cash and Equity Component — Performance based on “Cash Flow” and “SG&A” Containment.
Under the Second Cash and Equity Component, each of Mr. Horton and Mr. Tomnitz may earn a performance bonus for achieving goals based on relative cash flow and relative SG&A containment depending upon the ranking of the Company’s performance against the Company’s peer group performance on the same performance metrics.
For the 2009 fiscal year, the maximum amount that may be earned under a top tier ranking is $4 million, the target amount that may be earned under a middle tier ranking is $2 million and the minimum amount that may be earned under the bottom tier ranking is $0. After the end of the 2009 fiscal year and upon determination by the Compensation Committee, 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.
2008 Performance Unit Plan.
On November 20, 2008, the Compensation Committee approved an award of long-term performance units (“Performance Units”) under the 2008 Performance Unit Plan in the amount of 500,000 units to Donald R. Horton and 400,000 to Donald J. Tomnitz. The award will be made on the first NYSE trading day following January 1, 2009.
The final payout value of these Performance Units will be determined after the performance period (January 1, 2009 to September 30, 2011, the “Performance Period”) is completed, after the Compensation Committee evaluates the achievement of the performance goals and based on the closing price of the Company’s common stock on the NYSE on September 30, 2011. The performance goals established for the Performance Units are relative “return on investment” (“ROI”) and relative “net sales gains percentage” (units) (“NSG%”), as compared to the same metrics of the Company’s peer group, which consists of ten other publicly traded homebuilding companies.
The two performance goals for the Performance Units were weighted 50% on the Company’s relative ROI, and 50% on the Company’s relative NSG%. In addition, the Performance Units may be adjusted upward (up to 200%) or downward (to 0) from the initial award amount depending upon the relative ranking of the Company’s performance against the Company’s peer group performance. The adjusted number of Performance Units will then be multiplied by the closing price of the Company’s common stock on the last day of the Performance Period and the final payout amount may be paid in cash, equity or a combination of both. The performance targets, rankings (minimum, target and maximum), hurdle rates (i.e., must rank better than 9 th , 10 th or 11 th place or the payout will be $0), definitions and other terms and conditions of the award of the Performance Units are set forth in the form of award filed herewith as Exhibit 10.4, which is incorporated herein by reference.

 

 

 

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, 2009), then the Company will establish a liability to him equal to 10% of his annual base salary as of first day of the current fiscal year (for example October 1, 2008). This liability will accrue earnings in future years at a rate established by the administrative committee.

 

 

Exhibit 10.2
Form and Summary of Executive Compensation Notification
Other Executive Officers
2009 Fiscal Year Compensation of Certain Other Named Executive Officers .
The Board of Directors also established and approved the 2009 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
                 
                Discretionary
        Annual Base Salary     Bonus Plan
Name   Office   (2009 Fiscal Year)     (2009 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, 2009), 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, 2008). This liability will accrue earnings in future years at a rate established by the administrative committee.

 

Exhibit 10.3
Summary of Board and Committee Compensation
On November 20, 2008, the Board of Directors of the Company approved director fees, committee member fees and chairperson fees to be paid to non-management directors of the Company in the current fiscal year. There was no increase or decrease in board or committee fees from the fees paid in the prior 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 $10,000 per Board meeting attended in person or by tele-conference, paid quarterly and not to exceed $40,000 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 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.

 

Exhibit 10.4
D.R. Horton, Inc.
Performance Unit Award
2008 Performance Unit Plan
[_____] Year Performance Unit Award
Dear                      :
You have been granted a Performance Unit Award as of                           , 200X by D.R. Horton, Inc. (the “Company”) of                      Bonus Units under the D.R. Horton 2008 Performance Unit Plan (the “Plan”) , subject to the terms and conditions of the Plan and this Performance Unit Award (referred to herein as “Award” or “Performance Unit Award”) . Bonus Units are defined under the Plan and such Bonus Units are referred to in this Award as “Performance Units”. A copy of the Plan is attached to this Award.
This Award is subject to adjustment and other provisions as set forth on Exhibit A hereto (the “Terms and Conditions”) . Depending on the Company’s achievement of the performance goals specified in the Terms and Conditions during the period beginning [                      and ending                      ] (the “Performance Period”) , you shall be entitled to a payment (in the form of cash, equity or a combination of both) equal to the value of your adjusted number of Performance Units as of the last business day of the Performance Period determined under the Terms and Conditions, less deductions for taxes and withholdings required by law, except as otherwise provided herein.
For purposes of the Plan, (a) this Award is an award of Performance-Based Compensation Award that may be settled in cash, equity or a combination of both, and (b) amounts payable hereunder will not bear interest or be entitled to dividends payable on Common Stock. This Award is given to you as part of your compensation, but is neither voluntary nor contributory by you. This Award is subject to the Plan in all respects, and the Compensation Committee will decide on the interpretation of any provision of this Award if there is any ambiguity between the Plan and this Award. The provisions of the Plan are also provisions of this Award, and all terms, provisions and definitions set forth in the Plan are incorporated in this Award and made a part of this Award for all purposes. Capitalized terms used but not defined in this Award will have the meanings assigned to such terms in the Plan.

 

 

 

Exhibit A to Performance Unit Award — Terms and Conditions of Award
1. Award .
(a) The amount that may be paid to you with respect to the Performance Units shall be based upon the Company’s achievement of the following performance goals (“Performance Goals”) over the Performance Period as determined by the Compensation Committee of the Board of Directors of the Company (or any successor thereto) (the “Committee”) : (i) Relative Return on Investment (“ROI”) (as defined in Section 4), and (ii) Relative Net Sales Gains Percentage (“NSG%”) (as defined in Section 4), in accordance with the following matrix:
             
Relative Return on Investment ("ROI")  
Performance Level       Performance  
Compared to Peer Group   Payout   Percentage  
1 st Place
  Maximum     200 %
2 nd Place
        175 %
3 rd Place
        150 %
4 th Place
        125 %
5 th Place
  Target     100 %
6 th Place
        75 %
7 th Place
        50 %
8 th Place
        25 %
9 th Place
  Minimum     0 %
10 th Place
        0 %
11 th Place
        0 %
             
Relative Net Sales Gains Percentage ("NSG%")  
Performance Level       Performance  
Compared to Peer Group   Payout   Percentage  
1 st Place
  Maximum     200 %
2 nd Place
        175 %
3 rd Place
        150 %
4 th Place
        125 %
5 th Place
  Target     100 %
6 th Place
        75 %
7 th Place
        50 %
8 th Place
        25 %
9 th Place
  Minimum     0 %
10 th Place
        0 %
11 th Place
        0 %
(b) After adjustment for forfeitures as provided in Section 2, the number of Performance Units granted to you will be adjusted based on Relative ROI and Relative NSG% (“Performance Percentage”) as provided in this Section. The adjusted number of Performance Units to which you will be entitled shall be equal to the number of Performance Units granted hereunder multiplied by the product of (i) 0.5 and (ii) the sum of the Performance Percentages set forth in Section 1(a) for the level of achievement of each of the performance goals therein (such product the “Adjusted Performance Percentage”). Notwithstanding the foregoing, the maximum number of Performance Units you can earn will be an aggregate of 200% of the original number granted to you, and the minimum number of Performance Units that will be awarded is zero. By way of example, assuming an initial grant of 200,000 Performance Units:

 

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  (1)  
if the Company reached 1 st place in Relative ROI and 3 rd place in Relative NSG%, the sum of the Performance Percentages would be 350% (200% plus 150%) and the adjusted number of your Performance Units would be 350,000 ((350% x 0.5) x 200,000 units).
 
  (2)  
if Relative ROI reached 3 rd place and Relative NSG% reached 5 th place, the sum of the Performance Percentages would be 250% (150% plus 100%) and the adjusted number of your Performance Units would be 250,000 ((250% x 0.5) x 200,000 units).
(c) (i) Except as provided in Section 2, the adjusted number of Performance Units, determined as provided in Section 1(b), will be multiplied by the Fair Market Value of the Company’s Common Stock on the last business day of the Performance Period (if payable in cash), or using the number of shares of the Company’s Common Stock (or fully vested Restricted Stock Units for deferred payments), equal to the adjusted number of Performance Units (if payable in equity), and may be further adjusted as provided in Sections 1(c)(iii) and (iv) below. Payment of amounts due under this Award shall be made to you as soon as practicable but no later than 30 days following certification by the Committee as set forth below, unless you timely elect a deferred payment 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 payments 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 Units as a result of the achievement of the performance goals.
(ii) Any amount paid in respect of this Award may be paid in cash, equity or a combination of both. If, after the final value of the Award is determined, the 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 the Company’s common stock on the day of the certification of the Award by the Committee into the dollar value of that portion of the Award to be paid in equity, provided that the maximum award cannot exceed the limits established under the Plan or the Company’s 2006 Stock Incentive Plan (the “2006 Plan”).
(iii) The Committee shall not increase the amount payable to you to an amount that is higher than the amount payable under the formula described herein. The Committee may take into account normalization related adjustments to the above performance metrics and goals and each of the definitions in Section 4 in order to provide a relevant and consistent comparison to the performance metrics and goals of the Company’s Peer Group. For example, normalization related adjustments to take into account unconsolidated joint ventures, extraordinary items or transactions, asset write-offs, valuation allowances or impairments among the Peer Group.
(iv) Prior to paying the Award, the Committee reserves the discretion to adjust downward the Award depending a variety of factors, including (i) the level of the Company’s consolidated pre-tax income or loss on both an adjusted and non-adjusted basis, (ii) the compensation earned by the participant in comparison to the compensation earned by other Company executives and executives of the Company’s Peer Group, (iii) the participant’s overall compensation, (iv) the participant’s individual performance, and (v) other factors listed in the 2008 Plan.

 

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(d) The Company may cancel and revoke this Award and/or replace it with a revised award at any time if the Company determines, in its good faith judgment, that this Award was granted in error or that this Award contains an error. In the event of such determination by the Company, and written notice thereof to you at your business or home address, all of your rights and all of the Company’s obligations as to any unvested portion of this Award shall immediately terminate. If the Company replaces this Award with a revised award, then you will have all of the benefits conferred under the revised award, effective as of such time as the revised award goes into effect.
2. Early Termination and Change in Control .
(a) If your employment terminates before the last day of the Performance Period as a result of your voluntary (resignation) or involuntary termination or retirement, then you shall forfeit as of the date of your termination of employment a number of Performance Units determined by multiplying the number of Performance Units granted to you by a fraction, (x) the numerator of which is the number of whole months following the date of termination to the end of the Performance Period and (y) the denominator of which is                      (        ). The resulting number of Performance Units shall be adjusted upward or downward by the applicable Adjusted Performance Percentage based on the Company’s achievement of the Performance Goals as of the end of the Performance Period, and the value of the adjusted number of Performance Units, using the Fair Market Value as of the last day of the Performance Period (if payable in cash), or using the number of shares of the Company’s Common Stock (or fully vested Restricted Stock Units for deferred payments) equal to the adjusted number of Performance Units (if payable in equity), shall be payable on the Payment Date, after being certified by the Committee. If you are terminated for cause, as determined by the Committee, you shall immediately forfeit all Performance Units.
(b) If your employment terminates before the last day of the Performance Period as a result of your death or disability (as determined by the Committee in its sole discretion), or if you are disabled for more than 3 months during the Performance Period (whether or not your employment terminates), then you shall forfeit a number of Performance Units determined by multiplying the number of Performance Units granted to you by a fraction, (x) the numerator of which is the number of whole months following the date of death or Disability to the end of the Performance Period (or, if you returned to employment before the end of the Performance Period, the number of whole months you were on disability), and (y) the denominator of which is                      (        ). The resulting number of Performance Units shall be adjusted upward or downward by the applicable Adjusted Performance Percentage based on the Company’s achievement of the Performance Goals as of the end of the Performance Period, and the value of the adjusted number of Performance Units, using the Fair Market Value as of the last day of the Performance Period (if payable in cash), or using the number of shares of the Company’s Common Stock (or fully vested Restricted Stock Units for deferred payments) equal to the adjusted number of Performance Units (if payable in equity), shall be payable on the Payment Date, after being certified by the Committee.

 

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(c) The Committee or its designee shall determine the number of Performance Units forfeited pursuant to the applicable subparagraph of this Section and the amount to be paid to you or your beneficiary in accordance with this Section. Except as provided in Section 2, amounts payable hereunder will be paid on the Payout Date.
(d) If there is a Change in Control (as defined in the Plan) during the Performance Period, you shall be deemed to have achieved the level of performance as determined by the Committee for the Performance Goals for the Performance Period in accordance with the terms of the Plan, with the deemed Adjusted Performance Percentage being multiplied by the number of your Performance Units and the Fair Market Value of the Company’s common stock on the day immediately prior to the Change in Control, and then prorated for the number of months in the Performance Period up to the Change in Control over          months, as more fully set forth in the Plan. Payments of the amount due to you under this Award shall be made to you as soon as administratively practicable following the Change in Control, but in no event later than 60 days following the end of the calendar year in which such Change in Control occurs.
3. Miscellaneous .
(a) You understand and acknowledge that you are one of a limited number of employees of the Company who have been selected to receive Performance Awards and that this grant is considered confidential information. You hereby covenant and agree not to disclose the award to you of this Award to any other person except (i) your immediate family and legal or financial advisors who agree to maintain the confidentiality of this Award, (ii) as required in connection with the administration of this Award and the Plan as it relates to this Award or under applicable law, or (iii) to the extent the terms of this Award had been publicly disclosed by the Company.
(b) The Company shall be entitled to make all lawful deductions from any payment it is required to make to you under this Award in respective applicable federal, state, local or employment taxes, Social Security and Medicare.
(c) The authority to manage and control the operation and administration of this Award shall be vested in the Committee, and the Committee shall have all powers with respect to this Award as it has with respect to the Plan. Any interpretation of this Award by the Committee and any decision made by it with respect to this Award shall be final and binding on all persons.
(d) This Award and any deferral elections hereunder shall be construed and interpreted to comply with or be exempt from Section 409A of the Code. The Company reserves the right, without your prior consent, to modify or amend this Award to the extent it reasonably determines is necessary in order to (i) preserve the intended tax consequences of the Performance Units in light of Section 409A of the Code and any regulations or other guidance promulgated thereunder, or (ii) correct, with the consent of the Committee, unintentional design errors. In addition, the Committee reserves the right, without your prior consent, to reduce the amount payable under this Award to the extent it deems necessary taking into account competitive performance and other factors. Such modifications or amendments may limit or eliminate certain rights otherwise available to you under the Plan or this Award. Neither the Company nor members of the Committee shall be liable for any determination or action taken or made with respect to this Award or the Performance Units granted hereunder.

 

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(e) Neither this Award nor your rights hereunder shall be transferable during your life other than by will, pursuant to the applicable laws of descent and distribution or as provided in your beneficiary designation form, unless otherwise provided in the Plan. None of your rights or privileges in connection with this Award shall be transferred, assigned, pledged or hypothecated by you or by any other person in any way, whether by operation of law, or otherwise, and shall not be subject to execution, attachment, garnishment or similar process. In the event of any such occurrence, this Award shall automatically be terminated and shall thereafter be null and void.
(f) Nothing in this Award shall confer upon you any right to continued employment with the Company or any of its subsidiaries, or to interfere in any way with the right of the Company to terminate your employment relationship with the Company or any of its subsidiaries at any time.
(g) If any term or provision of this Award shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, you and the Company intend for any court construing this Award to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as not to affect any other term or provision hereof, and the remainder of this Award, or the application of such term or provision to persons or circumstances other than those as to which it has held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Award shall be valid and enforced to the fullest extent permitted by law.
(h) The Company’s obligation under the Plan and this Award is an unsecured and unfunded promise to pay benefits that may be earned in the future. The Company shall have no obligation to set aside, earmark or invest any fund or money with which to pay its obligations under this Award. You or any successor in interest shall be and remain a general creditor of the Company in the same manner as any other creditor having a general claim from matured and unpaid compensation.
(i) This Award shall not entitle the holder to any dividends, rights upon liquidation, voting rights or other rights of stockholders of the Company.
4. Definitions and Rules of Construction .
(a)  Definitions . The following terms have the meanings set forth below:
“Annual Net Sales” for a period of four consecutive quarters means the sum of quarterly domestic (U.S.) net sales of homes (i.e., gross number of home sales contracts less cancellations, determined in number of units) during the four quarters of the Company’s fiscal year (provided that for the fiscal year ending September 30, 200__, the three consecutive quarters ending September 30, 200__ shall be used).

 

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“Annual Pre-Tax Income” for a period of four consecutive quarters means the sum of quarterly income (loss) before income taxes during the four quarters of the Company’s fiscal year (provided that for the fiscal year ending September 30, 200__, the three consecutive quarters ending September 30, 200__ shall be used).
“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 (provided that for the fiscal year ending September 30, 200__, the three consecutive quarters ending September 30, 200__ shall be used).
“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 inventories, excluding land inventory not owned, as of the end of the quarter immediately preceding the first quarter and as of the end of each of the four quarters of the Company’s fiscal year (provided that for the fiscal year ending September 30, 200__, the balance as of December 31, 200__ shall be the average of the balances as of the end of each of the three consecutive quarters ended September 30, 200__).
“Baseline Net Sales” for a period of four consecutive quarters ending December 31, 200__ns the sum of quarterly domestic (U.S.) net sales of homes (i.e., gross number of home sales contracts less cancellations in units) during the four quarters.
“Code” means the Internal Revenue Code of 1986, as amended, and the rulings, regulations and other guidance thereunder.
“Peer Group” means, in addition to the Company, Beazer Homes USA, Centex Corporation, Hovnanian Enterprises, KB Home, Lennar Corporation, M.D.C. Holdings, Pulte Homes, Ryland Group, Standard Pacific and Toll Brothers.
“Performance Period” means the ___year period (___quarters) beginning January 1, 200__ and ending September 30, 200_. In comparing results of the Company with the performance of the other companies in the 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 Peer Group based on publicly available information of the Peer Group at September 30, 200__, 200__ and 200__, as applicable.
“Performance Period Return on Investment” or “Performance Period ROI” means the sum of (1) the Annual ROI for the three consecutive quarters ending September 30, 200__, (2) the Annual ROI for the four consecutive quarters ending September 30, 200__, and (3) the Annual ROI for the four consecutive quarters ending September 30, 201_.
“Performance Period Net Sales Percentage” or “Performance Period NS%” means the sum of the (1) the Annual Net Sales for the three consecutive quarters ending September 30, 200__, (2) the Annual Net Sales for the four consecutive quarters ending September 30, 200__, and (3) the Annual Net Sales for the four consecutive quarters ending September 30, 201_ divided by the Baseline Net Sales.

 

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“Relative Net Sales Gains Percentage” or “Relative NSG%” means the Performance Period Net Sales Percentage of the Company, compared to the other members of the Peer Group, as determined in good faith by the Committee.
“Relative Return on Investment” or “Relative ROI” means the Performance Period ROI of the Company, compared to the other members of the Peer Group, as determined in good faith by the Committee.
“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.
  (b)  
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.

 

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D.R. HORTON, INC. 2008 PERFORMANCE UNIT PLAN
LONG-TERM PERFORMANCE UNIT AWARD
BENEFICIARY DESIGNATION FORM
Participant’s Name:                                                               
Social Security Number:                                                      
This Beneficiary Designation (this “Beneficiary Designation”) is subject to all of the terms and conditions of the D.R. Horton, Inc. 2008 Performance Unit Plan (the “Plan”) and the 3-Year Performance Award — granted to me by D.R. Horton, Inc. (the “Company”) with an effective date of                           , 2008 (the “Performance Award”) .
By signing this Beneficiary Designation, I hereby declare that upon my death the following individual(s) (my “Beneficiary(ies)”) shall be entitled to receive the stated percentage of any amount that may be payable with respect to me following my death under the Performance Award:
                         
Full Name of       Social Security /    
Designated Beneficiary   Relationship   Tax ID Number   Percentage
 
                       
             
Address:
          Birth Date:       Sex:    
                     
 
                       
                     
 
                       
                     
                         
Full Name of       Social Security /    
Designated Beneficiary   Relationship   Tax ID Number   Percentage
 
                       
             
Address:
          Birth Date:       Sex:    
                     
 
                       
                     
 
                       
                     
 
                  Total:    
                         
I understand that if no Beneficiary is designated then, in the event of my death, the amount payable under the Performance Award will be made to my estate. If my sole Beneficiary dies, or if any of my other designated Beneficiaries die prior to the payment of all of the amounts payable under the Performance Award, then payment of such deceased Beneficiary’s stated percentage will be made to such deceased Beneficiary’s estate.
I further understand that all prior beneficiary designations for the Performance Award are hereby revoked and that this Beneficiary Designation may only be revoked in writing on a form provided by the Company on behalf of the Committee, signed by me (and witnessed) and received by the Committee. The foregoing Beneficiary Designation shall remain in effect until such time as I file another such designation with the Company bearing a more recent date except to the extent otherwise required by law.
         
 
       
     
Signature
      Witness
 
       
Date of Signature:
       
         

 

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