<PAGE> 1
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- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
M/I SCHOTTENSTEIN HOMES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
MI SCHOTTENSTEIN HOMES, INC. LOGO
3 Easton Oval
Columbus, Ohio 43219
March 15, 1999
To Our Shareholders:
The Annual Meeting of Shareholders of M/I Schottenstein Homes, Inc. (the
"Company") will be held at 9:00 a.m. Eastern Daylight Time on Thursday, April
22, 1999, at the offices of the Company, 3 Easton Oval, Columbus, Ohio.
Enclosed is a copy of our 1998 Annual Report, notice of the meeting, a
proxy statement and a proxy card. Please record your vote on the card and return
it promptly in the enclosed postage-paid envelope.
We look forward to reviewing the activities of the Company at the meeting.
We hope you can be with us.
Sincerely,
/s/ Irving E. Schottenstein
Irving E. Schottenstein,
Chief Executive Officer
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
<PAGE> 3
MI SCHOTTENSTEIN HOMES, INC. LOGO
3 EASTON OVAL
COLUMBUS, OHIO 43219
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1999
To Each Shareholder of M/I Schottenstein Homes, Inc.:
Notice is hereby given that the 1999 Annual Meeting of Shareholders of M/I
Schottenstein Homes, Inc. (the "Company") will be held at 9:00 a.m. Eastern
Daylight Time on April 22, 1999, at the offices of the Company, 3 Easton Oval,
Columbus, Ohio, for the following purposes:
1) To elect three directors to serve until the 2002 annual meeting of
shareholders or until their successors have been duly elected and
qualified;
2) To consider and vote upon a proposal to approve the 1993 Stock
Incentive Plan as Amended, in the form attached hereto as Appendix I;
3) To consider and vote upon a proposal to approve the Executive
Officers Compensation Plan, in the form attached hereto as Appendix II;
4) To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche LLP as the Company's independent accountants and auditors
for the 1999 fiscal year; and
5) To transact such other business as may properly be brought before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on February 26, 1999,
will be entitled to notice of, and to vote at, such meeting, or at any
adjournment thereof.
It is important that your shares be represented at the Annual Meeting.
Whether or not you intend to be present, please sign, date and send the enclosed
proxy in the envelope provided. Proxies are revocable at any time, and
shareholders who are present may withdraw their proxy and vote in person if they
so desire.
By Order of the Board of Directors,
/s/ Paul S. Coppel
Paul S. Coppel,
Secretary
March 15, 1999
<PAGE> 4
MI SCHOTTENSTEIN HOMES, INC. LOGO
3 Easton Oval
Columbus, Ohio 43219
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1999
March 15, 1999
GENERAL
The Annual Meeting of Shareholders of M/I Schottenstein Homes, Inc. (the
"Company") will be held on Thursday, April 22, 1999 (the "Annual Meeting"), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The Company expects that this proxy statement and the accompanying
form of proxy will be mailed on or about March 15, 1999, to each shareholder of
record as of February 26, 1999. This proxy statement is furnished in connection
with the solicitation by the Company's Board of Directors (the "Board") of
proxies to be used at such meeting and at any adjournment thereof. The Annual
Report of the Company for the year ended December 31, 1998, including financial
statements, is being mailed to all shareholders together with this proxy
statement.
A proxy for use at the Annual Meeting is enclosed. A proxy may be revoked
by a shareholder at any time before it is exercised by filing with the Company a
notice in writing revoking it or by duly executing a proxy bearing a later date.
Proxies also may be revoked by any shareholder present at the Annual Meeting who
expresses a desire to vote his 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 set
forth herein, for Proposal Nos. 2, 3 and 4, and, at the discretion of the
proxyholders, on all other matters that may properly be brought before the
Annual Meeting or any adjournment thereof.
OUTSTANDING SHARES AND VOTING RIGHTS
There were 8,813,061 shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"), issued and outstanding on February 26, 1999 (the
"Record Date"), which date has been set as the record date for the purpose of
determining the shareholders entitled to notice of, and to vote at, the Annual
Meeting. On any matter submitted to a shareholder vote, each holder of Common
Stock will be entitled to one vote, in person or by proxy, for each share of
Common Stock registered in his name on the books of the Company as of the Record
Date. Under Ohio law and the Company's Regulations, the aggregate number of
votes entitled to be cast by all shareholders present in person or represented
by proxy at the meeting, whether those shareholders vote for, against or abstain
from voting on any matter, will be counted for purposes of determining the
minimum number of affirmative votes required for approval of such matters, and
the total number of votes cast for each of these matters will be counted for
purposes of determining whether sufficient
<PAGE> 5
affirmative votes have been cast. Abstentions, withheld votes and broker
non-votes with respect to any matter will have the same legal effect as a vote
against the matter.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A class of three directors is to be elected at the Annual Meeting. The
Board has nominated the persons set forth below for election as directors of the
Company at the Annual Meeting. The three nominees receiving the greatest number
of votes cast will be elected to serve until the 2002 Annual Meeting of
Shareholders or until their successors are duly elected and qualified.
Information concerning the nominees and the remaining members of the Board is
set forth below. Steven Schottenstein and Lewis R. Smoot, Sr. will serve until
the 2000 Annual Meeting of Shareholders or until their successors are duly
elected and qualified. Friedrich K. M. Bohm, Jeffrey H. Miro and Robert H.
Schottenstein will serve until the 2001 Annual Meeting of Shareholders or until
their successors are duly elected and qualified.
In connection with the Company's repurchase of Common Stock from the Melvin
L. Schottenstein family interests, Holly S. Kastan resigned from the Board of
Directors on August 1, 1997. The resulting vacancy in the class of directors
standing for election at the 2000 Annual Meeting of Shareholders will be filled
(or the size of such class reduced) prior to such Annual Meeting.
Unless otherwise specified in the accompanying proxy, the shares voted
pursuant thereto will be voted FOR each of the persons named below as nominees
for election as directors.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE PERSONS NAMED
BELOW AS NOMINEES FOR ELECTION AS DIRECTORS.
2
<PAGE> 6
<TABLE>
<CAPTION>
YEAR FIRST
CURRENT POSITIONS SERVED AS
NAME AGE WITH COMPANY DIRECTOR
---- --- ----------------- ----------
<S> <C> <C> <C>
NOMINEES
Irving E. Schottenstein 70 Chief Executive Officer, Director (Chairman), 1976
member of Executive Committee (Chairman), member
of Compensation Committee
Kerrii B. Anderson 41 Senior Vice President, Chief Financial Officer, 1998
Director
Norman L. Traeger 59 Director, member of Audit Committee, member of 1997
Compensation Committee (Chairman), member of
Executive Officer Compensation Committee
DIRECTORS
Friedrich K. M. Bohm 57 Director, member of Audit Committee, member of 1994
Compensation Committee, member of Executive
Officer Compensation Committee (Chairman)
Jeffrey H. Miro 56 Director, member of Compensation Committee, 1998
member of Executive Officer Compensation
Committee
Robert H. Schottenstein 46 President, Director (Vice Chairman), member of 1993
Executive Committee, member of Compensation
Committee
Steven Schottenstein 42 Chief Operating Officer, Director (Vice 1993
Chairman), member of Executive Committee
Lewis R. Smoot, Sr. 65 Director, member of Executive Committee, member 1993
of Audit Committee (Chairman), member of
Compensation Committee, member of Executive
Officer Compensation Committee
</TABLE>
- ---------------
Irving E. Schottenstein is the father of Robert H. Schottenstein and Steven
Schottenstein.
BUSINESS EXPERIENCE
NOMINEES -- TERM TO EXPIRE AT 2002 ANNUAL MEETING
Irving E. Schottenstein has been Chief Executive Officer since August 1986,
and a Director of the Company or its predecessors since 1976. He was President
of the Company and its predecessors from 1976 until 1996. He was also the
Chairman of the Board and President of M/I Financial Corp., a wholly-owned
subsidiary of the Company ("M/I Financial"), from 1983 until August 1995.
Kerrii B. Anderson has been a Senior Vice President since September 1993
and Chief Financial Officer since 1987. She served as a Vice President from 1988
until September 1993. She has also been Chief Financial Officer of M/I Financial
since 1988. Ms. Anderson currently serves as a Director of Lancaster Colony
Corporation.
Norman L. Traeger founded United Skates of America, a chain of family fun
centers, in 1971 and The Discovery Group, a venture capital firm, in 1983. Mr.
Traeger currently owns and manages industrial, commercial and office real estate
and is Vice Chairman of the Board of Trustees of Prescott College.
3
<PAGE> 7
DIRECTORS -- TERM TO EXPIRE AT 2000 ANNUAL MEETING
Steven Schottenstein has been Vice Chairman and Chief Operating Officer
since January 1999 and an Assistant Secretary since April 1992. He served as a
Senior Executive Vice President from May 1996 until January 1999, an Executive
Vice President from February 1994 until May 1996, a Senior Vice President from
September 1993 until February 1994 and a Vice President from June 1990 until
September 1993. He became the Regional Manager for the Washington, D.C. Region
in December 1990, Regional Manager for the Indiana Region in April 1992 and
Regional Manager for the Carolina Region in February 1994 and served in such
positions until May 1996.
Lewis R. Smoot, Sr. has been the President and Chief Executive Officer of
The Smoot Corporation, a construction contractor and construction management
concern, since 1987. He currently serves as a Director of Huntington Bancshares
Incorporated.
DIRECTORS -- TERM TO EXPIRE AT 2001 ANNUAL MEETING
Robert H. Schottenstein has been Vice Chairman since January 1999,
President since May 1996 and an Assistant Secretary since March 1991. He served
as an Executive Vice President from February 1994 until May 1996, a Senior Vice
President from September 1993 until February 1994 and a Vice President from
March 1991 until September 1993. He became the Regional Manager for the
Cincinnati Division in April 1994 and for the Midwest Land Operations in
November 1992 and served in such positions until May 1996. He began his service
with the Company in field operations and has been responsible for the Ohio Land
Division since November 1992. He currently serves as a Director of Huntington
Bancshares Incorporated.
Friedrich K. M. Bohm has been the Managing Partner and Chief Executive
Officer of NBBJ, the second largest architectural firm in the United States,
since 1987. He is a Director, and currently serves as a member of the executive
committee of the Board of Directors, of Huntington National Bank, a subsidiary
of Huntington Bancshares Incorporated, and as a Director of The Daimler Group
and 55 Restaurants, Inc.
Jeffrey H. Miro has been the Chairman of the law firm of Miro, Weiner and
Kramer, with offices in Bloomfield Hills, Michigan and New York, New York, since
1981. In addition, Mr. Miro is an Adjunct Professor of Law at the University of
Michigan Law School. He currently serves as a Director of Sotheby's Holdings,
Inc.
NOMINATION OF DIRECTORS
Nomination for the election of directors may be made by the Board or a
committee appointed by the Board or by any shareholder entitled to vote in the
election of directors generally. To nominate one or more persons for election as
a director, the Company's Regulations require that a shareholder give written
notice of his intent to make such nomination or nominations by personal delivery
or by United States Mail, postage pre-paid, to the Secretary of the Company not
less than 60 days nor more than 90 days prior to the first anniversary of the
date of the preceding year's annual meeting (or, if the date of annual meeting
is changed by more than 30 days from the anniversary date of the preceding
year's annual meeting or in the case of a special meeting, within seven days
after the date the Company mails or otherwise gives notice of the date of the
meeting). Such notice shall set forth: 1) the name and address of the person or
persons to be nominated; 2) a representation that the shareholder is a holder of
record entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
3) a description of all arrangements or understandings between the shareholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; 4) such other information regarding each nominee proposed by the
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission (the
"Commission"), had the nominee been nominated, or intended to be nominated, by
the Board; and 5) the consent of each nominee to serve as a director of the
Company, if so elected. The Chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
4
<PAGE> 8
BOARD AND COMMITTEE MEETINGS
The Board held four meetings during 1998. Except for Steven Schottenstein
and Friedrich K. M. Bohm, all members of the Board during 1998 attended at least
75% of all meetings of the Board and of the committees on which they served. The
Board does not have a nominating committee. The full Board selects the nominees
for directors.
The Board's Audit Committee with respect to the 1998 fiscal year consisted
of Friedrich K. M. Bohm (Chairman), Lewis R. Smoot, Sr., Norman L. Traeger and
Jeffrey H. Miro. The Audit Committee's responsibilities include reviewing the
Company's audit procedures and policies, the activities of the internal
auditors, and potential conflicts of interest, monitoring internal controls and
financial reporting, selecting the Company's independent accountants and making
recommendations concerning these matters to the Board. The Audit Committee met
four times in 1998.
The Board has a Compensation Committee, whose members with respect to the
1998 fiscal year were Lewis R. Smoot, Sr. (Chairman), Friedrich K. M. Bohm,
Irving E. Schottenstein, Robert H. Schottenstein, Norman L. Traeger and Jeffrey
H. Miro. The Compensation Committee's duties include reviewing and reporting to
the Board on specific compensation matters for executive officers and
administering the Company's stock option plan. The Compensation Committee met
four times in 1998.
The Board also has an Executive Officer Compensation Committee, whose
members with respect to the 1998 fiscal year were Norman L. Traeger (Chairman),
Lewis R. Smoot, Sr. and Jeffrey H. Miro. Friedrich K. M. Bohm was appointed to
the Executive Officer Compensation Committee on February 16, 1999. The Executive
Officer Compensation Committee's duties for the 1998 fiscal year included
developing and administering the plans necessary to ensure that the compensation
paid to the Chief Executive Officer of the Company will be tax deductible. For
the 1999 fiscal year, the Executive Officer Compensation Committee will also
address these issues with respect to the other executive officers of the
Company. The Executive Officer Compensation Committee met two times in 1998.
Between meetings of the Board or when the Board is not in session, the
Executive Committee may exercise, to the extent permitted by law, all the powers
and duties of the Board. The members of the Executive Committee with respect to
the 1998 fiscal year were Irving E. Schottenstein (Chairman), Lewis R. Smoot,
Sr., Robert H. Schottenstein and Steven Schottenstein. During 1998, the
Executive Committee did not hold any meetings but did take six written actions
without a meeting.
PROPOSAL NO. 2
APPROVAL OF 1993 STOCK INCENTIVE PLAN
AS AMENDED
PROPOSAL
The Board proposes that the shareholders approve the adoption of the 1993
Stock Incentive Plan as Amended (the "Amended and Restated Stock Incentive
Plan"), in the form attached hereto as Appendix I. The proposed Amended and
Restated Stock Incentive Plan amends and restates the existing 1993 Stock
Incentive Plan and contains the following substantive amendments thereto. First,
the Amended and Restated Stock Incentive Plan increases the number of shares of
Common Stock available for issuance thereunder from 425,000 shares to, in any
given year, that number of shares equal to five percent of the total number of
issued and outstanding shares of Common Stock of the Company as of the first day
of such year. Second, the Amended and Restated Stock Incentive Plan extends the
term of the 1993 Stock Incentive Plan from November 2, 2003 to April 22, 2009.
Third, the Amended and Restated Stock Incentive Plan expands the scope of the
1993 Stock Incentive Plan to allow Irving E. Schottenstein, Chairman and Chief
Executive Officer of the Company, and certain consultants and advisors to the
Company to be granted awards thereunder. Fourth, the Amended and Restated Stock
Incentive Plan includes a definition of "Change of Control" and provides that
awards granted under the Amended and Restated Stock Incentive Plan become
immediately vested upon a Change of Control. Fifth, the Amended and Restated
Stock Incentive Plan adds
5
<PAGE> 9
certain language to comply with Section 162(m) of the Internal Revenue Code (the
"Code"). Finally, the Amended and Restated Stock Incentive Plan provides for
"cashless" exercise of awards granted thereunder. Other than these substantive
amendments, the 1993 Stock Incentive Plan remains unchanged. The Board adopted
the Amended and Restated Stock Incentive Plan on November 17, 1998.
While the amendments to the 1993 Stock Incentive Plan are relatively few,
the Commission's proxy rules require a summary of the entire plan and not just
the amendments. Therefore, set forth below is a summary of the Amended and
Restated Stock Incentive Plan, which summary is qualified in its entirety by
reference to the Amended and Restated Stock Incentive Plan, in the form attached
hereto as Appendix I. All capitalized terms which are not defined herein are
defined in the Amended and Restated Stock Incentive Plan.
PURPOSE
The Amended and Restated Stock Incentive Plan is intended to advance the
interests of the Company, its Subsidiaries and the Company's shareholders by
providing additional incentives to attract, retain and reward selected
directors, executives, key employees, consultants and advisors upon whose
judgment, initiative and effort the Company is largely dependent for the
successful conduct of its business, and to provide additional motivation for
such personnel to exert additional effort toward the Company's growth and
success. The Amended and Restated Stock Incentive Plan serves these purposes by
providing selected directors, executives, key employees, consultants and
advisors with incentive compensation consisting of equity based awards (the
"Awards") in the form of (a) incentive stock options ("ISOs"); (b) nonqualified
stock options ("NQSOs") (ISOs and NQSOs are sometimes hereinafter referred to as
"Options"); (c) shares of Common Stock that are subject to certain conditions
and restrictions ("Restricted Stock"); and (d) stock appreciation rights
("SARs").
SHARES OF COMMON STOCK SUBJECT TO THE AMENDED AND RESTATED STOCK INCENTIVE PLAN
The maximum number of shares of Common Stock in respect of which Awards may
be granted in each calendar year during any part of which the Amended and
Restated Stock Incentive Plan is in effect shall be five percent of the total
number of issued and outstanding shares of Common Stock as of the first day of
each such year. Notwithstanding the foregoing, in no event will more than
100,000 shares of Common Stock be cumulatively available for Awards of ISOs
under the Amended and Restated Stock Incentive Plan.
The shares of Common Stock to be issued with respect to the Amended and
Restated Stock Incentive Plan may be authorized but unissued shares, shares
issued and reacquired by the Company or shares bought on the market for the
purpose of the Amended and Restated Stock Incentive Plan. In the event any
shares of Restricted Stock shall for any reason be forfeited or any Option or
SAR shall, for any reason, terminate or expire or be surrendered without having
been exercised in full, such forfeited shares and the shares subject to such
Option or SAR but not issued thereunder will again be available to be issued
with respect to the Amended and Restated Stock Incentive Plan.
ADMINISTRATION
The Amended and Restated Stock Incentive Plan is administered by the
Compensation Committee of the Board, or by any other committee appointed by the
Board. The members of the Compensation Committee are appointed from time to time
by, and serve at the discretion of, the Board. The Compensation Committee keeps
a record of all of its proceedings and actions and keeps or causes an
appropriate officer of the Company to keep, all such books of account, records
and other data as may be necessary for the proper administration of the Amended
and Restated Stock Incentive Plan. The Compensation Committee reports all action
taken by it to the Board. Members of the Compensation Committee may be granted
an Award only by a majority of the disinterested members of the Board.
The Compensation Committee has full and final authority in its discretion,
subject to the provisions of the Amended and Restated Stock Incentive Plan, to
determine the type or types of Awards and the individuals to whom and the time
or times at which each Award shall be granted; to construe and interpret the
Amended and Restated Stock Incentive Plan; to specify terms and provisions of
the respective Awards and of any
6
<PAGE> 10
Restricted Stock Agreement, Option Agreement or other agreement related to such
Award, which terms and provisions need not be identical for Awards made to
different individuals or to a particular individual; and to make all other
determinations and take all other actions it deems necessary or advisable for
the proper administration of the Amended and Restated Stock Incentive Plan. All
such actions and determinations are binding for all purposes and upon all
persons.
PARTICIPANTS
Awards may be granted under the Amended and Restated Stock Incentive Plan
to any person who is an officer or employee (including officers and employees
who are also Directors) of the Company, any consultant or advisor to the Company
and any nonemployee Directors, as determined by the Compensation Committee;
provided, however, that no Director, consultant or advisor who is not an
employee of the Company may be granted an ISO under the Amended and Restated
Stock Incentive Plan. It is currently estimated that approximately 40 persons
are eligible to participate in the Amended and Restated Stock Incentive Plan.
The exact amount of the ISOs, NQSOs, shares of Restricted Stock and SARs,
if any, that will be granted under the Amended and Restated Stock Incentive Plan
is at the discretion of the Compensation Committee, and cannot be determined at
this time. However, the following table sets forth the number and average
exercise price per share of NQSOs granted under the 1993 Stock Incentive Plan
to: (a) each of the Named Executive Officers (as defined below); (b) all current
executive officers of the Company as a group; (c) all current directors who are
not executive officers as a group; and (d) all employees, including all current
officers who are not executive officers, of the Company as a group. Other than
persons identified in the following table, no NQSOs have been granted to
associates of any of the directors, executive officers or nominees for election
as a director of the Company, and no person has received five percent or more of
the NQSOs granted under the 1993 Stock Incentive Plan. No ISOs, shares of
Restricted Stock or SARs have been granted under the 1993 Stock Incentive Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AVERAGE EXERCISE
COMMON STOCK SUBJECT PRICE PER SHARE OF
NAME OF INDIVIDUAL OR GROUP TO NQSOS GRANTED NQSOS GRANTED ($)
--------------------------- -------------------- ------------------
<S> <C> <C>
Irving E. Schottenstein,
Chief Executive Officer (1)............................... -- --
Robert H. Schottenstein,
President (2)............................................. 27,000 $15.458
Steven Schottenstein,
Chief Operating Officer (2)............................... 27,000 $15.458
Kerrii B. Anderson,
Senior Vice President and Chief Financial Officer (2)..... 17,000 $12.232
All current executive officers as a group................... 71,000 $14.686
All current directors who are not executive officers as a
group (3)................................................. -- --
All employees, including current officers who are not
executive officers, as a group............................ 226,800 $13.004
</TABLE>
- ---------------
(1) Under the existing 1993 Stock Incentive Plan, Irving E. Schottenstein is not
eligible to receive stock options. Pursuant to the terms and conditions of
the proposed Amended and Restated Stock Incentive Plan, Mr. Schottenstein
will be eligible to receive stock options.
(2) Robert H. Schottenstein, Steven Schottenstein and Kerrii B. Anderson each
have received greater than five percent of the total NQSOs granted under the
1993 Stock Incentive Plan.
(3) As of the Record Date, no director or nominee for re-election as a director,
who is not an employee of the Company, has been granted any NQSOs under the
1993 Stock Incentive Plan.
7
<PAGE> 11
OPTIONS
Exercise Price. Any Option granted under the Amended and Restated Stock
Incentive Plan will be evidenced by an Option Agreement, containing such terms
and in such form as the Compensation Committee may from time to time determine.
The exercise price for the shares of Common Stock subject to each Option will be
determined by the Compensation Committee, but:
(i) With respect to any NQSO granted to an employee of the Company,
the exercise price will be no less than 15% of Fair Market Value on the
Date of Grant;
(ii) With respect to any NQSO granted to a Director, consultant or
advisor who is not an employee of the Company and any ISO granted to an
employee who is not a Ten Percent Shareholder (in each case, determined as
of the Date of Grant), the exercise price will be no less than 100% of Fair
Market Value on the Date of Grant; and
(iii) With respect to any ISO granted to a Ten Percent Shareholder,
the exercise price will be no less than 110% of Fair Market Value on the
Date of Grant.
The Fair Market Value of the Common Stock as of the Record Date was $17.313.
Exercise of Options. The expiration date of each Option will be fixed by
the Compensation Committee. Notwithstanding the foregoing or any other provision
of the Amended and Restated Stock Incentive Plan, (i) such expiration date will
not be more than ten years from the Date of Grant, and (ii) if the Option is an
ISO which is granted to a Ten Percent Shareholder, such expiration date will not
be more than five years from the Date of Grant.
Each Option will be exercisable from time to time over a period commencing
no earlier than nine months after the Date of Grant and ending upon the
expiration or termination of the Option; provided, however, that if the Option
is granted to a Director, consultant or advisor who is not an employee of the
Company on the Date of Grant, such Option will be exercisable commencing no
earlier than one year after the Date of Grant. The Compensation Committee will,
by the provisions of individual Option Agreements, specify the period or periods
of time during which each Option is exercisable and the number of shares
purchasable thereunder in any such period or periods. The Option price upon
exercise of any Option will be payable to the Company in full either, in the
discretion of the Compensation Committee or the Board: (a) in cash or its
equivalent, or (b) by tendering previously acquired shares of Common Stock
having an aggregate Fair Market Value at the time of exercise equal to the total
Option price (provided that the shares which are tendered must have been held by
the Participant for at least six months prior to their tender to satisfy the
Option price), or (c) by a combination of (a) and (b).
Transferability. No Option will be transferable or assignable by an
Optionee otherwise than by will or the laws of descent and distribution, and
each Option will be exercisable, during the Optionee's lifetime, only by the
Optionee. No Option will be subject to execution, attachment or similar process
except with the express consent of the Compensation Committee.
Upon termination of an Optionee's employment with the Company for any
reason other than the Optionee's retirement, death or disability, his Option
privileges will be limited to the shares which were immediately purchasable by
him at the date of such termination, and such Option privileges will expire
unless exercised by him within 30 days after the date of such termination.
If an Optionee dies while in the employ of the Company, his Option
privileges will be limited to the shares which were immediately purchasable by
him at the date of death, and such option privileges will expire unless
exercised by his Beneficiary within one year after the date of the Optionee's
death.
If an Optionee retires or suffers a disability while in the employ of the
Company, his Option privileges will be limited to the shares which were
immediately purchasable by him at the date of his retirement or disability, and
such Option privileges will expire unless exercised by him (or his
representative, in the case of disability) within one year after his termination
of employment. Notwithstanding the previous sentence, in the
8
<PAGE> 12
case of an ISO, an Optionee's Option privileges will expire 90 days following
his termination of employment from the Company due to his retirement.
Upon the occurrence of a Change of Control, the shares of Common Stock with
respect to each Option will be immediately exercisable, notwithstanding any
restriction upon exercise of such Option which may be contained in the Amended
and Restated Stock Incentive Plan or in the applicable Option Agreement. Any
option privileges will expire unless exercised by the Participant within 15 days
after the date of a Change of Control.
RESTRICTED STOCK
Shares of Restricted Stock awarded under the Amended and Restated Stock
Incentive Plan will be duly and validly issued, fully paid and nonassessable
shares of Common Stock, and from the time of the issuance thereof will have all
voting, dividend and distribution rights of other outstanding shares of such
class, but will be subject to restrictions provided for or contemplated in the
Amended and Restated Stock Incentive Plan or in a Restricted Stock Agreement or
required under any applicable laws. Among other restrictions and conditions, the
Compensation Committee may, in its discretion at the time of an Award of
Restricted Stock, impose a substantial risk of forfeiture of such Restricted
Stock held by the Participant, and such restrictions on the transfer or
disposition of such Restricted Stock (such as, without limitation, requiring
that such shares become transferable or subject to disposition by Participant
only in installments over a period of time) as the Compensation Committee may
deem appropriate. Any restrictions imposed by the Compensation Committee will be
set forth in a Restricted Stock Agreement.
SARS
Any SAR granted under the Amended and Restated Stock Incentive Plan will be
evidenced by a SAR Agreement, containing such terms and in such form as the
Compensation Committee may in its discretion determine. The expiration date of
each SAR will be fixed by the Compensation Committee. Notwithstanding the
foregoing or any other provision of the Amended and Restated Stock Incentive
Plan, such expiration date may not be more than ten years from the Date of
Grant. Each SAR will be exercisable from time to time over a period commencing
no earlier than nine months after the Date of Grant and ending upon the
expiration or termination of the SAR; provided, however, that if the SAR is
granted to a Director, consultant or advisor who is not an employee of the
Company on the Date of Grant, such SAR will be exercisable commencing no earlier
than one year after the Date of Grant. The Compensation Committee will, by the
provisions of individual SAR Agreements, specify the period or periods of time
and the extent to which each SAR is exercisable. Upon his exercise of a SAR, the
Participant will be permitted to elect payment in cash, shares of Common Stock
or a combination of both.
No SAR will be transferable or assignable by a Participant otherwise than
by will or the laws of descent and distribution. Each SAR will be exercisable,
during the Participant's lifetime, only by the Participant. No SAR will be
subject to execution, attachment or similar process except with the express
consent of the Compensation Committee. Upon termination of a Participant's
employment with the Company for any reason other than the Participant's death,
his ability to exercise his SARs will be limited to the extent to which his SARs
were exercisable by him at the date of such termination, and his SARs will
expire unless exercised by him within 15 days after the date of such
termination.
If a Participant dies while in the employ of the Company, his Beneficiary's
ability to exercise the Participant's SARs will be limited to the extent to
which such SARs were exercisable by the Participant at the date of death, and
such SARs will expire unless exercised by the Beneficiary within one year after
the date of the Participant's death. Upon the occurrence of a Change of Control,
each outstanding SAR will be immediately exercisable, notwithstanding any
restriction or limitation on such exercise contained in the Amended and Restated
Stock Incentive Plan or in the applicable SAR Agreement. Any SAR will expire
unless exercised by a Participant within 15 days after the date of a Change of
Control.
9
<PAGE> 13
AMENDMENT, SUSPENSION AND TERMINATION
The Board may at any time suspend or terminate the Amended and Restated
Stock Incentive Plan or may amend it further from time to time in such respects
as the Board may deem advisable in order that the Awards granted thereunder may
conform to any changes in the law or in any other respect which the Board may
deem to be in the best interest of the Company; provided, however, that unless
first approved by a vote of a majority of the outstanding shares of Common Stock
of the Company, no amendment may be made to the Amended and Restated Stock
Incentive Plan which would: (a) materially increase the benefits accruing to
Participants thereunder; (b) increase the number of shares of the Company's
Common Stock available thereunder; (c) modify the requirements regarding
eligibility for participation thereunder; or (d) extend the date as of which it
will terminate.
Unless the Amended and Restated Stock Incentive Plan has theretofore been
terminated by the Board, or as otherwise provided therein, the Amended and
Restated Stock Incentive Plan will terminate on April 22, 2009, ten years after
the date it was approved by action of the shareholders of the Company.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code and the existing regulations
thereunder, the anticipated federal income tax consequences in respect of
Options, Restricted Stock and SARs granted under the Amended and Restated Stock
Incentive Plan are as described below. The following discussion is not intended
to be a complete statement of applicable law and is based upon the federal
income tax laws as in effect on the date hereof. Since tax law is subject to
change and since the application of tax law may vary depending upon the facts
applicable to the taxpayer, it is suggested that each participant in the Amended
and Restated Stock Incentive Plan consult with his own tax advisor before taking
action with respect to Awards granted to him under the Amended and Restated
Stock Incentive Plan.
ISOS
An option holder who is granted an ISO does not recognize taxable income
either on the date of grant or on the date of exercise. However, upon the
exercise of the ISO, the difference between the fair market value of the Common
Stock received and the exercise price is a tax preference item potentially
subject to the alternative minimum tax. On the later sale or other disposition
of the Common Stock, generally only the difference between the fair market value
of the Common Stock on the exercise date and the amount realized on the sale or
disposition is includable in alternative minimum taxable income.
Upon disposition of Common Stock acquired upon the exercise of an ISO,
capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. However, if the option holder disposes of the Common Stock
within two years of the date of grant or within one year of the date of the
issuance of the Common Stock to the option holder (a "Disqualifying
Disposition"), then the option holder will recognize ordinary income, as opposed
to capital gain, at the time of the disposition. In general, the amount of
ordinary income recognized will be equal to the lesser of (i) the amount of gain
realized on the disposition, or (ii) the difference between the fair market
value of the Common Stock received on the date of exercise and the exercise
price. Any remaining gain or loss is treated as a short-term or long-term
capital gain or loss, depending upon the period of time the Common Stock has
been held.
The Company is not entitled to a tax deduction upon either the exercise of
an ISO or the disposition of Common Stock acquired pursuant to such exercise,
except to the extent that the option holder recognizes ordinary income in a
Disqualifying Disposition. Ordinary income from a Disqualifying Disposition will
constitute compensation but will not be subject to tax withholding, nor will it
be considered wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or in part, with
already-owned shares of Common Stock, the exchange should not affect the ISO tax
treatment of the exercise. Upon such exchange, and except for Disqualifying
Dispositions, no gain or loss is recognized by the option holder upon delivering
10
<PAGE> 14
already-owned shares of Common Stock to the Company for payment of the exercise
price. The shares of Common Stock received by the option holder, equal in number
to the already-owned shares of Common Stock exchanged therefor, will have the
same basis and holding period for capital gain purposes as the already-owned
shares of Common Stock. The option holder, however, will not be able to use the
prior holding period for the purpose of satisfying the ISO statutory holding
period requirements. Shares of Common Stock received by the option holder in
excess of the number of already-owned shares of Common Stock will have a basis
of zero and a holding period which commences as of the date the shares of Common
Stock are issued to the option holder upon exercise of the ISO. If the exercise
of an ISO is effected using shares of Common Stock previously acquired through
the exercise of an ISO, the exchange of the already-owned shares of Common Stock
will be considered a disposition of such shares of Common Stock for the purpose
of determining whether a Disqualifying Disposition has occurred.
NQSOS
An option holder receiving an NQSO does not recognize taxable income on the
date of grant of the NQSO, provided that the NQSO does not have a readily
ascertainable fair market value at the time it is granted. In general, the
option holder must recognize ordinary income at the time of exercise of the NQSO
in the amount of the difference between the fair market value of the Common
Stock on the date of exercise and the exercise price. The ordinary income
recognized will constitute compensation for which tax withholding generally will
be required. The amount of ordinary income recognized by an option holder will
be deductible by the Company in the year that the option holder recognizes the
income if the Company complies with the applicable withholding requirements.
If the sale of the Common Stock could subject the option holder to
liability under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the option holder generally will recognize ordinary income
only on the date that the option holder is no longer subject to such liability
in an amount equal to the fair market value of the Common Stock on such date
less the exercise price. Nevertheless, the option holder may elect under Section
83(b) of the Code within 30 days of the date of exercise to recognize ordinary
income as of the date of exercise, without regard to the restriction of Section
16(b).
Common Stock acquired upon exercise of an NQSO will have a tax basis equal
to the fair market value on the exercise date or other relevant date on which
ordinary income is recognized, and the holding period for the Common Stock
generally will begin on the date of exercise or such other relevant date. Upon
subsequent disposition of the Common Stock, the option holder will recognize
long-term capital gain or loss if the option holder has held the Common Stock
for more than 12 months prior to disposition, or short-term capital gain or loss
if the option holder has held the Common Stock for one year or less.
If the holder of an NQSO pays the exercise price, in whole or in part, with
already-owned shares of Common Stock, the option holder will recognize ordinary
income in the amount by which the fair market value of the shares of Common
Stock received exceeds the exercise price. The option holder will not recognize
gain or loss upon delivering such already-owned shares of Common Stock to the
Company. Shares of Common Stock received by an option holder, equal in number to
the already-owned shares of Common Stock exchanged therefor, will have the same
basis and holding period as such already-owned shares of Common Stock. Shares of
Common Stock received by an option holder in excess of the number of such
already-owned shares of Common Stock will have a basis equal to the fair market
value of such additional shares of Common Stock as of the date ordinary income
is recognized. The holding period for such additional Common Stock will commence
as of the date of exercise or such other relevant date.
RESTRICTED STOCK
The holder of Restricted Stock will not be taxed upon the acquisition of
such Restricted Stock so long as the interest in such Restricted Stock is
subject to a substantial risk of forfeiture. Upon lapse or release of the
restrictions, the holder will be taxed at ordinary income tax rates on an amount
equal to either the current fair
11
<PAGE> 15
market value of the Common Stock (in the case of lapse or termination) or the
sale price (in the case of a sale), less any consideration paid for the
Restricted Stock. The Company will be entitled to a corresponding deduction. The
basis of Common Stock held after lapse or termination of restrictions will be
equal to the fair market value on the date of lapse or termination of
restrictions, and upon subsequent disposition, any further gain or loss will be
a long-term or short-term capital gain or loss, depending upon the length of
time the shares of Common Stock are held.
A holder of Restricted Stock may elect under Section 83(b) of the Code to
be taxed at ordinary income tax rates on the full fair market value of the
Restricted Stock at the time of issuance (less any consideration paid). The
basis of the Common Stock so acquired will be equal to the fair market value at
such time. If the election is made, no tax will be payable upon the subsequent
lapse or termination of the restrictions, and any gain or loss upon disposition
will be a capital gain or loss.
SARS
The holder of a SAR is not taxed upon the grant of a SAR. Rather, a SAR
holder will generally be taxed on the exercise date, at ordinary income tax
rates, on the amount of cash received and the fair market value of any Common
Stock received. However, if the sale of Common Stock could subject a SAR holder
to liability under Section 16(b) of the Exchange Act, such person generally will
not recognize ordinary income with respect to such Common Stock until he is no
longer subject to such liability, at which time he will recognize ordinary
income in an amount equal to the fair market value of the Common Stock on such
date. Nevertheless, the holder of a SAR may elect under Section 83(b) of the
Code within 30 days of the date of exercise to recognize ordinary income as of
the date of exercise, without regard to the restriction of Section 16(b). The
amount of ordinary income recognized by the holder of a SAR will be deductible
by the Company in the year in which such holder recognizes income.
RECOMMENDATION AND VOTE
Pursuant to the terms of the Amended and Restated Stock Incentive Plan, the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is required to approve the adoption of the Amended and Restated
Stock Incentive Plan. The Company's executive officers and directors and members
of the Irving E. Schottenstein family, who collectively own, or have voting
power with respect to, approximately 31% of the outstanding shares of Common
Stock, have indicated that they intend to vote FOR the proposal to approve the
adoption of the Amended and Restated Stock Incentive Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE ADOPTION OF THE 1993 STOCK INCENTIVE PLAN AS AMENDED.
PROPOSAL NO. 3
APPROVAL OF THE
EXECUTIVE OFFICERS COMPENSATION PLAN
PROPOSAL
The Board proposes that the shareholders approve the adoption of the
Executive Officers Compensation Plan (the "Plan"). The Board adopted the Plan on
November 17, 1998. Set forth below is a summary of the Plan, which summary is
qualified in its entirety by reference to the Plan in the form attached hereto
as Appendix II. All capitalized terms which are not defined herein are defined
in the Plan.
PURPOSE
The purpose of the Plan is to promote the success of the Company by
providing incentives to the executive officers of the Company based upon the
Company's achievement of specific performance goals. The Plan provides for the
payment of awards to Plan participants. The Plan is designed to take into
account Section 162(m) of the Code ("Section 162(m)"), which governs the
corporate tax deductibility of annual
12
<PAGE> 16
compensation exceeding $1,000,000 paid to the chief executive officer and the
four other most highly compensated executive officers of a public company.
Corporate tax deductions for certain types of compensation, including
performance-based compensation, are generally allowed. The Plan is being
submitted to the shareholders for approval at the Annual Meeting in an effort to
ensure that the compensation payable under the Plan will be deductible as
performance-based compensation. By approving the Plan, the shareholders will
also be approving, among other things, the performance measures, eligibility
requirements and limits on the awards that may be made pursuant to the Plan.
ADMINISTRATION
The Plan will be administered by the Executive Officer Compensation
Committee of the Board. Each Executive Officer Compensation Committee member
will be an "outside director" within the meaning of Section 162(m). The
Executive Officer Compensation Committee will have the authority to select the
executive officers of the Company to whom awards may be granted and to determine
the terms and conditions of any awards under the Plan. The Executive Officer
Compensation Committee will also have the authority to construe and interpret
the Plan, and establish, amend or waive rules for its administration. However,
the Executive Officer Compensation Committee will have no authority to take any
action that would cause any award to any participant to fail to qualify as
"performance-based compensation" under Section 162(m). All decisions made by the
Executive Officer Compensation Committee will be final and binding.
ELIGIBILITY
The Chairman/Chief Executive Officer, Vice Chairman/President, Vice
Chairman/Chief Operating Officer, Chief Financial Officer and any other
executive officer of the Company will be eligible to be selected by the
Executive Officer Compensation Committee to be granted awards under the Plan.
Each Plan Year, the Executive Officer Compensation Committee will designate the
individuals eligible to participate in the Plan.
DESCRIPTION OF AWARDS
For each Plan Year, the Executive Officer Compensation Committee will
establish for each participant one or more objective compensation Award Formulas
based upon the achievement of Performance Goals. The Performance Goals will be
objective and based upon certain corporate financial criteria for one or more
years, such as income before income taxes, net income, return on equity and
return on assets and other performance criteria for one or more years such as
homebuyer satisfaction ratings. The Executive Officer Compensation Committee
will have the discretion to determine whether the Award Formulas will be based
upon any one or more of such criteria and upon performance during one or more
years.
The level of achievement of the Performance Goals at the end of the Plan
Year will determine the amount of each participant's award. After the end of
each Plan Year, the Executive Officer Compensation Committee will determine the
amount of the award earned by each Participant under the Award Formulas. Payment
of the award to the Participant will be made upon certification by the Executive
Officer Compensation Committee, in writing, that the Performance Goals have been
satisfied and the award has been calculated in accordance with the Award
Formulas. The maximum amount payable under the Plan to a participant during any
Plan Year is an amount equal to five times such participant's 1999 base salary.
AMENDMENT AND TERMINATION
The Board has the absolute discretion to modify or amend the Plan, in whole
or in part, or suspend or terminate the Plan. However, prior to any such
modification, amendment, suspension or termination during a Plan Year, the Board
will consider the impact of such modification, amendment, suspension or
termination, as the case may be, under the requirements of Section 162(m).
NEW PLAN BENEFITS
The exact amount of the benefits or amounts, if any, that will be allocated
to or received by any persons or group of persons under the Plan is at the
discretion of the Executive Officer Compensation Committee and
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<PAGE> 17
dependent upon the future performance of the Company, and therefore cannot be
determined at this time. However, the annual cash and stock bonuses paid to the
executive officers of the Company for fiscal year 1998 and the two prior fiscal
years are set forth in the bonus column of the Summary Compensation Table on
page 18 of this proxy statement.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote and present, in person or by properly executed
proxy, is required to approve the adoption of the Plan for purposes of Section
162(m). The Company's executive officers and directors and members of the Irving
E. Schottenstein family, who collectively own, or have voting power with respect
to, approximately 31% of the outstanding shares of Common Stock, have indicated
that they intend to vote FOR the proposal to approve the adoption of the Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE ADOPTION OF THE EXECUTIVE OFFICERS COMPENSATION PLAN.
PROPOSAL NO. 4
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Deloitte & Touche LLP as the Company's independent
accountants and auditors for the fiscal year ending December 31, 1999. Deloitte
& Touche LLP served as the Company's independent accountants and auditors for
1998. A representative of Deloitte & Touche LLP will be present at the Annual
Meeting, will have an opportunity to make a statement, if he or she desires, and
will be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote and present, in person or by properly executed
proxy, is required to ratify the appointment of Deloitte & Touche LLP as the
Company's independent accountants and auditors for fiscal year 1999. The
Company's executive officers and directors and members of the Irving E.
Schottenstein family, who collectively own, or have voting power with respect
to, approximately 31% of the outstanding shares of Common Stock, have indicated
that they intend to vote FOR the proposal to ratify the appointment of Deloitte
& Touche LLP as the Company's independent accountants and auditors.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS AND AUDITORS FOR FISCAL YEAR 1999.
PROTECTION AGAINST NON-NEGOTIATED TAKEOVERS
The Company's Regulations provide for a board of directors consisting of
three classes of at least three directors each serving staggered three-year
terms. As a result, approximately one-third of the Board is elected each year.
In addition to providing continuity and stability, the purpose of such a
staggered Board is to provide shareholders with two years to consider whether
they want to cede control of the Board to an insurgent in a proxy contest. The
combined effect of the Company's staggered Board and certain other provisions of
its Regulations, including, without limitation, provisions making a
non-statutory version of Ohio's Control Share Acquisition Statute applicable to
the Company, reducing the minimum notice period required for a shareholder
meeting, restricting the ability of shareholders to call special meetings and to
nominate directors, limiting the ability to remove directors except for cause
and requiring supermajority votes to amend certain provisions of the Regulations
may have an anti-takeover impact and may make tender offers, proxy contests and
certain mergers more difficult. The Board believes that it is in the best
interest of the Company and its shareholders to require potential acquirors to
negotiate with the Board prior to engaging in any such transactions.
The Board is not aware of any efforts to obtain control of the Company or
to effect substantial accumulations of the shares of Common Stock of the
Company.
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<PAGE> 18
MANAGEMENT
The following table sets forth certain information with respect to certain
key employees of the Company.
<TABLE>
<CAPTION>
YEAR STARTED
NAME AGE CURRENT POSITIONS WITH COMPANY WITH COMPANY
---- --- ------------------------------ ------------
<S> <C> <C> <C>
Paul S. Coppel..................... 40 President Land Operations, General 1994
Counsel and Secretary
Phillip G. Creek................... 46 Senior Vice President and Treasurer 1993
James B. Feldman................... 48 President Charlotte Region 1997
Gary A. Haarer..................... 55 President Arizona Region 1996
Robert C. Moesle................... 47 President Washington, D.C. Region 1990
Paul S. Rosen...................... 48 Chief Executive Officer and 1993
President of M/I Financial and
Senior Vice President
Lloyd T. Simpson................... 53 President Columbus Region 1984
</TABLE>
BUSINESS EXPERIENCE
Paul S. Coppel joined the Company in January 1994 as Senior Vice
President/General Counsel. Mr. Coppel became the Secretary in February 1995 and
President Land Operations in January 1999. He became the Secretary of M/I
Financial in August 1995.
Phillip G. Creek joined the Company in January 1993 as Vice President and
Treasurer. Mr. Creek became a Senior Vice President in September 1993. He became
the Vice President of M/I Financial in August 1995. From 1978 to 1993, Mr. Creek
was employed with The Ryland Group, Inc., a national homebuilder.
James B. Feldman joined the Company in February 1997 as President of the
Charlotte Division. Mr. Feldman became President of the Charlotte Region in
January 1999. Prior to joining the Company, he was employed for more than ten
years with NVR, Inc., a national homebuilder, as the Division President for the
Maryland operations.
Gary A. Haarer joined the Company in November 1996 as President of the
Arizona Region. Prior to joining the Company, Mr. Haarer was employed for more
than 20 years with UDC Homes, Inc., a national homebuilder with operations
concentrated in Phoenix, most recently as its Executive Vice President.
Robert C. Moesle joined the Company in December 1990 as Division Manager of
the Washington, D.C. Division. Mr. Moesle became Vice President/Regional
Manager-Washington, D.C. Region in September 1991 and President of the
Washington, D.C. Region in November 1996. He became a Senior Vice President in
September 1993. Prior to joining the Company, Mr. Moesle was employed with NVR,
Inc. and The Ryland Group, Inc., both national homebuilders.
Paul S. Rosen joined the Company in August 1993 as the Vice President of
Mortgage Operations for M/I Financial. Mr. Rosen became the Chief Executive
Officer and Senior Vice President of M/I Financial in February 1994, the
President of M/I Financial in August 1995 and Senior Vice President of the
Company in February 1999.
Lloyd T. Simpson joined the Company in 1984 as Vice President/Regional
Manager-Ohio Region. Mr. Simpson became Vice President/Regional Manager of the
Columbus Region in February 1996 and President of the Columbus Region in
November 1996. He served as a Senior Vice President from September 1993 until
November 1996.
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<PAGE> 19
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the February 26, 1999 record date,
the number and percentage of the outstanding shares of Common Stock held by each
person who, to the knowledge of the Company, beneficially owns more than five
percent of the outstanding shares of Common Stock, by each of the Company's
directors, nominees and Named Executive Officers (as defined below) and by all
of the directors and Named Executive Officers of the Company as a group. Except
as set forth in the footnotes to the table, the shareholders have sole voting
and investment power over such shares. The address of each of the directors and
the Named Executive Officers is c/o M/I Schottenstein Homes, Inc., 3 Easton
Oval, Columbus, Ohio 43219.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER OF COMMON STOCK OF CLASS
------------------------ ---------------- --------
<S> <C> <C>
Kerrii B. Anderson.......................................... 18,200(2) (1)
Friedrich K. M. Bohm........................................ 5,000 (1)
Jeffrey H. Miro............................................. 2,000 (1)
Irving E. Schottenstein..................................... 533,100(3) 6.0%
Robert H. Schottenstein..................................... 584,000(4) 6.6%
Steven Schottenstein........................................ 529,200(5) 6.0%
Lewis R. Smoot, Sr.......................................... 2,000 (1)
Norman L. Traeger........................................... 9,680 (1)
All directors, nominees and executive officers as a group (8
persons).................................................. 1,683,180 19.1%
Dimensional Fund Advisors, Inc.............................. 417,600(6) 4.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
FMR Corp.................................................... 1,138,500(7) 12.9%
82 Devonshire Street
Boston, Massachusetts 02109
Linda S. Fisher............................................. 569,300(8) 6.5%
11221 Grandon Ridge Circle
Cincinnati, Ohio 45249
Gary L. Schottenstein....................................... 563,800(9) 6.4%
2077 Parkhill Drive
Columbus, Ohio 43209
</TABLE>
- ---------------
(1) Less than one percent of the outstanding shares of Common Stock.
(2) Includes 12,300 shares of Common Stock that underlie exercisable stock
options.
(3) Irving E. Schottenstein is the trustee of (i) the Irving and Frankie
Schottenstein Trust which holds 478,300 shares, and (ii) the Steven
Schottenstein Descendants Trust which holds 54,800 shares, and exercises all
rights with regard to such shares. Does not include an aggregate of
2,145,200 shares which are held in trust by Mr. Schottenstein, as trustee,
pursuant to trust agreements dated August 1986, as amended, for the benefit
of Mr. Schottenstein's four children: Robert H. Schottenstein (550,000
shares), Steven Schottenstein (495,200 shares), Gary L. Schottenstein
(550,000 shares) and Linda S. Fisher (550,000 shares). As trustee, Mr.
Schottenstein is empowered to exercise all rights with regard to such
shares, revoke each trust, and with the agreement of each beneficiary, amend
each trust.
(4) 550,000 of these shares are held in trust by Irving E. Schottenstein in
accordance with note 3 above. 2,800 of these shares are held by Robert H.
Schottenstein individually. 16,500 of these shares are held in trust by
Robert H. Schottenstein, as trustee, for the benefit of his children
pursuant to trust agreements dated December 22, 1994. As trustee, Robert H.
Schottenstein is empowered to exercise all rights with regard to such shares
and may be deemed the beneficial owner of such shares. Includes 14,700
shares of Common Stock that underlie exercisable stock options.
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<PAGE> 20
(5) 495,200 of these shares are held in trust by Irving E. Schottenstein in
accordance with note 3 above. 2,800 of these shares are held by Steven
Schottenstein individually. 16,500 of these shares are held in trust by
Steven Schottenstein, as trustee, for the benefit of his children pursuant
to trust agreements dated December 22, 1994. As trustee, Steven
Schottenstein is empowered to exercise all rights with regard to such shares
and may be deemed the beneficial owner of such shares. Includes 14,700
shares of Common Stock that underlie exercisable stock options.
(6) Based on information set forth in a Schedule 13G dated February 16, 1999,
which was filed by Dimensional Fund Advisors, Inc., a registered investment
advisor, on behalf of its advisory clients.
(7) Based on information set forth in a Schedule 13G dated February 12, 1999,
which was filed on behalf of FMR Corp. and certain other Fidelity entities.
(8) 550,000 of these shares are held in trust by Irving E. Schottenstein in
accordance with note 3 above. 2,800 of these shares are held by Linda S.
Fisher individually. 16,500 of these shares are held in trust by Mrs.
Fisher, as trustee, for the benefit of her children pursuant to trust
agreements dated December 22, 1994. As trustee, Mrs. Fisher is empowered to
exercise all rights with regard to such shares and may be deemed the
beneficial owner of such shares.
(9) 550,000 of these shares are held in trust by Irving E. Schottenstein in
accordance with note 3 above. 2,800 of these shares are held by Gary L.
Schottenstein individually. 11,000 of these shares are held in trust by Gary
L. Schottenstein, as trustee, for the benefit of his children pursuant to
trust agreements dated December 22, 1994. As trustee, Gary L. Schottenstein
is empowered to exercise all rights with regard to such shares and may be
deemed the beneficial owner of such shares.
The address of Irving E. Schottenstein, Robert H. Schottenstein and Steven
Schottenstein is c/o Irving E. Schottenstein, 3 Easton Oval, Columbus, Ohio
43219.
17
<PAGE> 21
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation and other
compensation for each of the fiscal years ended December 31, 1998, 1997 and 1996
for the Company's Chief Executive Officer and for each other executive officer
of the Company (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS
ANNUAL COMPENSATION SECURITIES PAYOUTS
-------------------- UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) (#) ($) ($)(1)(2)
------------------ ---- ------- --------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Irving E. Schottenstein 1998 575,000 2,087,433(3)(4) -- -- 62,075
Chief Executive
Officer 1997 586,406 1,095,582(3) -- -- 62,601
1996 585,406 857,987(3) -- -- 63,395
Robert H. Schottenstein 1998 300,000 1,020,000(3)(4) 10,000 -- 58,313
President 1997 310,406 654,844(3) 2,500 -- 58,899
1996 310,406 698,236(3) 4,500 -- 4,438
Steven Schottenstein 1998 300,000 1,020,000(3)(4) 10,000 -- 47,133
Chief Operating
Officer 1997 310,406 653,794(3) 2,500 -- 47,320
1996 310,406 698,236(3) 4,500 -- 4,438
Kerrii B. Anderson 1998 200,000 330,000(3)(4) 1,500 56,474(5) 13,282
Senior Vice President 1997 210,406 251,357(3) 1,500 53,553(5) 12,935
and Chief Financial 1996 210,406 250,000(3) 4,000 50,638(5) 4,438
Officer
</TABLE>
- ---------------
(1) The amounts shown represent the individual's share of the Company's
discretionary contribution for the 1996, 1997 and 1998 fiscal years,
respectively, under the Company's 401(k) plan as detailed in footnote 2
below. In addition, such amounts include $1,623 of long-term disability plan
premiums for the 1996, 1997 and 1998 fiscal years for each of the Named
Executive Officers other than Irving E. Schottenstein.
(2) "All Other Compensation" for each of the Named Executive Officers for the
1996, 1997 and 1998 fiscal years includes the individual's share of the
Company's discretionary contribution for 1996, 1997 and 1998 under the
Company's 401(k) plan in the amounts of $2,815, $2,876 and $3,250,
respectively, and, in the case of Irving E. Schottenstein only, the non-term
portion of the premium for a split dollar life insurance policy of $60,580,
$59,725 and $58,825, respectively. "All Other Compensation" for Robert H.
Schottenstein, Steven Schottenstein and Kerrii B. Anderson for the 1997 and
1998 fiscal years also includes the non-term portion of the premium for a
split-dollar life insurance policy of $54,400, $42,820 and $8,435,
respectively, for the 1997 fiscal year and, $53,520, $42,260 and $8,409,
respectively, for the 1998 fiscal year.
(3) Represents amounts accrued pursuant to bonus incentive plans approved by the
Compensation Committee of the Board, or with respect to the Chief Executive
Officer, the Executive Officer Compensation Committee.
(4) Pursuant to the terms of the Company's Executives' Deferred Compensation
Plan, which was adopted in 1998, each of the Company's executive officers,
as well as other members of management, is required to allocate a portion of
his or her bonus to shares of Common Stock until such executive officer or
member of management owns a minimum number of shares of Common Stock set
forth in the plan. Each participant also may elect to allocate additional
amounts of his or her bonus to shares of Common Stock under the plan. Each
participant will not beneficially own shares acquired under the plan until
such shares are distributed pursuant to the terms of the plan. With respect
to Irving E. Schottenstein, the amount shown includes $218,372 allocated to
Common Stock (9,926 shares). With respect to Robert H. Schottenstein, the
amount shown includes $165,000 allocated to Common Stock (7,500 shares).
With
18
<PAGE> 22
respect to Steven Schottenstein, the amount shown includes $120,000
allocated to Common Stock (5,454 shares). With respect to Kerrii B.
Anderson, the amount shown includes $105,000 allocated to Common Stock
(4,772 shares).
(5) Represents compensation pursuant to an executive deferred compensation plan.
On August 9, 1994, the Company and Irving E. Schottenstein entered into an
employment agreement under which the Company agreed to purchase and maintain a
split-dollar life insurance policy for Mr. Schottenstein in an amount not less
than $1.5 million. In the event Mr. Schottenstein becomes disabled, he will
receive disability payments from the Company for a period of up to three years,
in an annual amount equal to the average of the salary and bonus earned by Mr.
Schottenstein during the three calendar years preceding his disability. In the
event Mr. Schottenstein's employment ends, he has agreed to serve as a
consultant to the Company for a period of two years for which he will be paid
$500,000 per year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the nonqualified stock options granted by
the Board during the 1998 fiscal year to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1) POTENTIAL
------------------------------------------------------- REALIZABLE VALUE AT
NUMBER ACCRUED ANNUAL RATES
OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE --------------------
GRANTED FISCAL YEAR PRICE EXPIRATION 5% 10%
NAME (#) (%) ($/SH) DATE ($) ($)
---- ---------- --------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Irving E. Schottenstein (2) -- -- -- -- --
Robert H. Schottenstein 10,000 21.7 22.750 4/1/08 143,074 362,576
Steven Schottenstein 10,000 21.7 22.750 4/1/08 143,074 362,576
Kerrii B. Anderson 1,500 3.2 22.750 4/1/08 21,461 54,386
</TABLE>
- ---------------
(1) The nonqualified stock options granted by the Board are scheduled to vest at
a rate of 20% per year over the first five years and to lapse after ten
years unless sooner exercised or forfeited. All stock options were granted
at the closing market price on the date of grant.
(2) Under the existing 1993 Stock Incentive Plan, Irving E. Schottenstein is not
eligible to receive stock options. Pursuant to the terms and conditions of
the proposed Amended and Restated Stock Incentive Plan, Mr. Schottenstein
will be eligible to receive stock options.
FISCAL YEAR END OPTION VALUES
The following table sets forth information with respect to unexercised
nonqualified stock options held as of the end of the 1998 fiscal year by each of
the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
(#) (1) ($)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Irving E. Schottenstein (2) -- -- --
Robert H. Schottenstein 14,700 12,300 131,788 52,338
Steven Schottenstein 14,700 12,300 131,788 52,338
Kerrii B. Anderson 12,300 4,700 123,900 43,288
</TABLE>
- ---------------
(1) The nonqualified stock options granted by the Board are scheduled to vest at
a rate of 20% per year over the first five years and to lapse after ten
years unless sooner exercised or forfeited.
19
<PAGE> 23
(2) Under the existing 1993 Stock Incentive Plan, Irving E. Schottenstein is not
eligible to receive stock options. Pursuant to the terms and conditions of
the proposed Amended and Restated Stock Incentive Plan, Mr. Schottenstein
will be eligible to receive stock options.
COMPENSATION OF DIRECTORS
Lewis R. Smoot, Sr., Friedrich K. M. Bohm, Norman L. Traeger and Jeffrey H.
Miro, the outside directors on the Board, were paid a fee of $4,000 per quarter
during 1998. Pursuant to the Directors Deferred Compensation Plan, which was
instituted in 1997, each of the outside directors elected to have payment of the
foregoing fees be made in shares of Common Stock of the Company based on the
closing price of the Company's Common Stock on the New York Stock Exchange as of
the close of business at end of month in which board meeting a given Board
meeting occurred.
Effective January 1, 1999, each outside director will receive 250 shares of
Common Stock per quarter as payment for his service on the Board. In addition,
each outside director will receive 250 shares of Common Stock for participating
in a special meeting of the Board or any of its committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee with respect to the 1998 fiscal year was
comprised of six members: Lewis R. Smoot, Sr., Friedrich K. M. Bohm, Irving E.
Schottenstein, Robert H. Schottenstein, Norman L. Traeger and Jeffrey H. Miro.
Irving E. Schottenstein and Robert H. Schottenstein are executive officers of
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the Common Stock of the Company by
executive officers, directors and persons who own more than ten percent of the
Common Stock are required to be reported to the Commission pursuant to Section
16 of the Exchange Act. Based solely on a review of the copies of reports
furnished to the Company and representations of certain executive officers and
directors, the Company believes that during fiscal year 1998 its executive
officers, directors and greater than ten percent beneficial owners complied with
such requirements, except that Forms 5 with respect to Messrs. Bohm, Smoot,
Traeger and Miro were inadvertently not filed prior to their due date.
EXECUTIVE OFFICER COMPENSATION COMMITTEE AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in part,
this Report and the graph set forth below under " -- Performance Graph" shall
not be incorporated by reference into any such filings.
General. In 1998, the Executive Officer Compensation Committee reviewed and
determined the compensation for the Chief Executive Officer of the Company. At
the same time, the Compensation Committee reviewed and determined the
compensation for the other executive officers of the Company. Beginning in 1999,
the Executive Officer Compensation Committee will annually review and determine
the compensation for each of the executive officers of the Company.
The Executive Officer Compensation Committee's and the Compensation
Committee's overall compensation policy applicable to the Company's executive
officers is to provide a compensation program that is intended to attract and
retain qualified executives and to provide them with incentives to achieve the
Company's goals and increase shareholder value. The Executive Officer
Compensation Committee and the Compensation Committee implement this policy
through establishing salaries, bonuses and stock options. The Company's current
policy is not to provide pension or other retirement plans for the Company's
executive officers other than the 401(k) Plan.
20
<PAGE> 24
In 1998, the Company also adopted the Executives' Deferred Compensation
Plan. The Company believes that the Executives' Deferred Compensation Plan
serves to further align the interests of the executive officers and other
members of management with those of the Company's shareholders by deferring and
paying a portion of each participant's performance bonus in shares of Common
Stock. Under the Executives' Deferred Compensation Plan, until an executive
officer owns a minimum number of shares of Common Stock set forth in the plan,
five percent of his or her performance bonus is automatically invested in shares
of Common Stock, the payment of which is deferred until a future date. Each
executive officer also has the right to elect to have an additional portion of
his or her performance bonus invested in shares of Common Stock. With respect to
fiscal year 1998, each executive officer of the Company, other than the Chief
Operating Officer, elected to invest more than five percent of his or her
performance bonus in shares of Common Stock pursuant to the terms of the
Executives' Deferred Compensation Plan.
Chief Executive Officer Compensation. The base salary paid to the Chief
Executive Officer is commensurate with the base salary paid to chief executive
officers of other publicly traded, national and regional homebuilders.
The performance bonus for the Chief Executive Officer for 1998 was
determined pursuant to the amended Performance-Based Bonus Plan which was
approved by the Company's shareholders at the 1994 annual meeting. The amended
Performance-Based Bonus Plan uses two factors tied to the Company's performance
to determine the Chief Executive Officer's performance bonus: (i) earning a
specified level of income before income taxes and (ii) achieving a specified
homeowner satisfaction rating as measured by a homeowner survey conducted by the
Company. The total performance bonus that may be earned by the Chief Executive
Officer under the Performance-Based Bonus Plan is capped at four times his
annual base salary.
The Chief Executive Officer earned nearly the maximum performance bonus
available in 1998 under the Performance-Based Bonus Plan because of the
Company's strong financial performance. More than five percent of the Chief
Executive Officer's performance bonus was invested in shares of Common Stock
pursuant to the terms of the Executives' Deferred Compensation Plan.
Additionally, because income before income taxes exceeded the Company's
expectations, the Executive Officer Compensation Committee awarded the Chief
Executive Officer a $120,000 supplemental bonus payable in shares of Common
Stock under the Executives' Deferred Compensation Plan.
Other Executive Officers' Compensation. The average base salary paid to the
President, the Chief Operating Officer and the Senior Vice President/Chief
Financial Officer is commensurate with the base salaries paid to persons holding
comparable positions with other publicly traded, national and regional
homebuilders.
The Compensation Committee adopted a new performance bonus program for the
President and the Chief Operating Officer in 1998. The performance bonus that
can be earned by such executive officers is based upon the following two factors
tied to the Company's performance: (i) earning a specified level of income
before income taxes and (ii) achieving a specified homeowner satisfaction rating
as measured by a homeowner survey conducted by the Company. The total amount
that can be earned under the bonus program by such executive officers has been
capped at three times their annual base salary.
Pursuant to this performance bonus program, in order for the President and
the Chief Operating Officer to earn a performance bonus equivalent to the bonus
earned in the preceding year, the Company's income before income taxes is
required to increase by ten percent. If such income has not increased, the
performance bonus level is decreased.
The Compensation Committee adopted a new performance bonus program for the
Senior Vice President/Chief Financial Officer in 1998. The Senior Vice
President's/Chief Financial Officer's performance bonus is based upon the
Company's income before income taxes and is capped at 125% of her annual base
salary.
The President, the Chief Operating Officer and the Senior Vice
President/Chief Financial Officer each earned the maximum performance bonus
available in 1998 because of the Company's strong financial
21
<PAGE> 25
performance. Additionally, because income before income taxes for 1998 exceeded
the Company's expectations, the Compensation Committee awarded each of the
President, the Chief Operating Officer and the Senior Vice President/Chief
Financial Officer a supplemental performance bonus equal to 40% of his or her
base salary payable in shares of Common Stock under the Executives' Deferred
Compensation Plan.
Stock Options. It is the Company's intent to award stock options to the
Company's executive officers in amounts reflecting the executive officer's
position, his or her ability to influence the Company's overall performance and
the financial performance of the Company. Options are intended to retain and
motivate executive officers to improve the Company's financial results and stock
performance. During 1998, the Compensation Committee approved the award of
nonqualified stock options for 21,500 shares of Common Stock at $22.750 per
share to the Named Executive Officers (see " -- Option Grants in Last Fiscal
Year"). The nonqualified stock options vest at a rate of 20% per year over the
first five years and lapse after ten years unless sooner exercised or forfeited.
Section 162(m) Compliance. Section 162(m) of the Internal Revenue Code of
1986, as amended, places certain restrictions on the amount of compensation in
excess of $1,000,000 which may be deducted for each executive officer. With
respect to the Chief Executive Officer, the Company adopted the existing
Performance-Based Bonus Plan following approval by the shareholders and
constituted the Executive Officer Compensation Committee (formerly the CEO
Compensation Subcommittee) to comply with Section 162(m). With respect to the
Chief Executive Officer and the other executive officers of the Company, the
Company is proposing the adoption by the shareholders of the Executive Officers
Compensation Plan and has expanded the scope of the Executive Officer
Compensation Committee, which consists solely of outside directors for purposes
of Section 162(m), to further ensure that compensation paid to executive
officers in excess of $1,000,000 will be fully deductible. The Company believes
that all compensation paid to the Chief Executive Officer in excess of
$1,000,000 will be fully deductible with respect to the 1998 tax year of the
Company. With respect to compensation earned by the President and the Chief
Operating Officer in the 1998 fiscal year in excess of $1,000,000, given the
timing of payments, the Company believes that such compensation will be fully
deductible.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE: EXECUTIVE OFFICER COMPENSATION COMMITTEE:
<S> <C>
Friedrich K. M. Bohm Friedrich K. M. Bohm (from February 16,
1999)
Jeffrey H. Miro Jeffrey H. Miro
Lewis R. Smoot, Sr. Lewis R. Smoot, Sr.
Irving E. Schottenstein Norman L. Traeger
Robert H. Schottenstein
Norman L. Traeger
</TABLE>
22
<PAGE> 26
PERFORMANCE GRAPH
This chart graphs the Company's performance in the form of cumulative total
return to shareholders from December 31, 1993 until December 31, 1998 in
comparison to (a) Standard and Poor's 500; (b) the cumulative return on the
common stock of seven publicly traded peer issuers, including Continental Homes
Holding Corporation, D.R. Horton, Inc., Hovnanian Enterprises, Inc., Kaufman and
Broad Home Corporation, Lennar Corporation, Toll Brothers, Inc. and Washington
Homes, Inc. (the "Former Peer Group"); and (c) the cumulative return on the
common stock of seven publicly traded peer issuers, including Beazer Homes USA,
Inc., Crossmann Communities, Inc., Engle Homes, Inc., Hovnanian Enterprises,
Inc., MDC Holdings, Inc., NVR, Inc. and Washington Homes, Inc. (the "New Peer
Group"). For fiscal year 1998 and hereafter, the Company intends to include the
New Peer Group in lieu of the Former Peer Group because (a) several corporations
within the Former Peer Group have been parties to significant merger or
consolidation transactions in the last year and (b) partly as a result of such
transactions, the corporations within the New Peer Group have market
capitalizations which the Company believes are more comparable to the Company's
market capitalization. The Company believes the New Peer Group represents its
principal competitors.
COMPARISON OF CUMULATIVE TOTAL RETURN
DECEMBER 31, 1993 TO DECEMBER 31, 1998
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
M/I SCHOTTENSTEIN
HOMES, INC. S&P 500 COMP. LTD. FORMER PEER GROUP NEW PEER GROUP
----------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C>
12/31/93 100.00 100.00 100.00 100.00
12/31/94 38.36 101.32 56.40 48.50
12/31/95 64.38 139.40 95.25 81.20
12/31/96 60.27 171.40 91.13 85.80
12/31/97 102.74 228.59 145.44 133.51
12/31/98 121.71 293.91 167.64 182.37
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M/I Schottenstein Homes, Inc.(1) 100 38.36 64.38 60.27 102.74 121.71
- --------------------------------------------------------------------------------------------------------------------
S&P 500 Comp. Ltd. 100 101.32 139.40 171.40 228.59 293.91
- --------------------------------------------------------------------------------------------------------------------
Former Peer Group 100 56.40 95.25 91.13 145.44 167.64
- --------------------------------------------------------------------------------------------------------------------
New Peer Group 100 48.50 81.20 85.80 133.51 182.37
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes that the value of the Common Stock of the Company and the indices
was 100 on December 31, 1993 and that all dividends were reinvested.
23
<PAGE> 27
SHAREHOLDER PROPOSALS
Any proposals of shareholders which are intended to be presented at the
2000 Annual Meeting of Shareholders must be received by the Company at its
principal executive offices by November 16, 1999. Such proposals may be included
in next year's proxy statement if they comply with certain rules and regulations
promulgated by the Commission. If a shareholder intends to present a proposal at
the 2000 Annual Meeting of Shareholders, but has not sought the inclusion of
such a proposal in the Company's proxy statement, such proposal must be received
by the Company at its principal executive offices by January 30, 2000 or the
Company's management proxies will be entitled to use their discretionary voting
authority should such proposal then be raised, without any discussion of the
matter in the Company's proxy statement.
EXPENSES OF SOLICITATION
The entire expense of preparing, assembling, printing and mailing the proxy
form and the form of material used in the solicitation of proxies will be paid
by the Company. Proxies may be solicited personally or by telephone, mail,
telegraph or e-mail. Officers or employees of the Company may assist with
personal or telephone solicitation and will receive no additional compensation.
The Company will also reimburse brokerage houses and other nominees for their
reasonable expenses in forwarding proxy materials to beneficial owners of the
Common Stock.
OTHER MATTERS
The Board knows of no other matters to be presented at the Annual Meeting.
If any other matter is properly brought before the Annual Meeting, it is the
intention of the persons named in the 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 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,
/s/ Paul S. Coppel
Paul S. Coppel,
Secretary
24
<PAGE> 28
APPENDIX I
M/I SCHOTTENSTEIN HOMES, INC.
1993
STOCK INCENTIVE PLAN
AS AMENDED
1. Purpose. This document shall serve as an amendment and restatement of
the M/I Schottenstein Homes, Inc. 1993 Stock Incentive Plan. The Plan, as
amended, is intended to continue to advance the interest of the Company, its
Subsidiaries and the Company's shareholders by providing additional incentive to
attract, retain and reward selected directors, executives, key employees,
consultants and advisors upon whose judgment, initiative and effort the Company
is largely dependent for the successful conduct of its business, and to provide
additional motivation for such personnel to exert additional effort toward the
Company's growth and success.
2. Definitions.
(a) "Award" means any one or more shares of Restricted Stock, Options
or SARs which are granted under this Plan.
(b) "Beneficiary" means the person or persons last designated by a
Participant to receive such amounts or rights under this Plan with respect
to such Participant by reason of the death of such Participant. A
Participant may designate a Beneficiary, or change any Beneficiary
previously designated by him or her, by delivering to the Committee a
writing setting forth the name and address of the person so designated
together with a signed statement by the Participant of his or her intention
that the person so designated be the Beneficiary hereunder. In the absence
of such a designation, the Participant's estate shall be treated as his or
her designated Beneficiary under this Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means (i) the acquisition by any person or
group of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than Irving
E. Schottenstein or any of his immediate family members or lineal
descendants, any heir of the foregoing, any trust for the benefit of any of
the foregoing, any private charitable foundation or any partnership,
limited liability company or corporation owned or controlled by some or all
of the foregoing, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
voting capital stock of the Company or (ii) the failure of the directors of
the Company on the date hereof (the "Current Board"), or such directors who
are elected or recommended or endorsed for election to the board of
directors of the Company by a majority of the Current Board or their
successors so elected, recommended or endorsed, to constitute a majority of
the board of directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the Compensation Committee of the Board, as
specified in paragraph 3 herein, or such other committee appointed by the
Board to administer the Plan with respect to grants of Awards.
(g) "Common Stock" means the Company's $.01 par value common stock.
(h) "Company" means M/I Schottenstein Homes, Inc.
(i) "Date of Grant" means the date on which an Award is granted under
the Plan.
(j) "Director" means a member of the Board.
(k) "Employer" means the Company and any Parent and all Subsidiaries.
Appendix I-1
<PAGE> 29
(l) "Fair Market Value" shall mean the value of the Common Stock as of
a particular date as determined by the Committee, provided that if the
Common Stock is traded in a public market, the Fair Market Value per share
shall be the mean between the closing "bid" and "asked" prices thereof or
the mean between the highest and lowest quoted selling prices thereof, as
applicable, as reported in customary financial reporting services on the
business day coincident with or next preceding the day as to which the Fair
Market Value is determined.
(m) "ISO" means an incentive stock option as such term is defined in
Code Section 422(b).
(n) "Named Executive Officer" means a Participant who, as of the date
of vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
(o) "NQSO" means an Option that is not an ISO, including but not
limited to an Option that would qualify as an ISO as of the Date of Grant
but for the fact that such Option specifies that it will not be treated as
an ISO.
(p) "Option" means an option to purchase Common Stock that is granted
under this Plan.
(q) "Option Agreement" means a written agreement between the Company
and a Participant setting forth terms and conditions applicable to an
Option granted to the Participant.
(r) "Optionee" means a Participant to whom an Option which has not
expired has been granted under this Plan.
(s) "Parent" or "Parents" means a parent corporation or corporations
of the Company as defined in Code Section 424(e).
(t) "Participant" means a person who is eligible to participate in the
Plan pursuant to paragraph 5 and who has been selected by the Committee to
receive an Award under this Plan.
(u) "Performance-Based Exception" means the performance-based
exception from the tax deductibility limitations of Code Section 162(m).
(v) "Reorganization" means any statutory merger, statutory
consolidation, sale of all or substantially all of the assets of the
Company, or sale or exchange, pursuant to an agreement with the Company, of
securities of the Company pursuant to which the Company is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization.
(w) "Restricted Stock" means shares of Common Stock granted under the
Plan which are subject to restrictions or conditions specified by the
Committee pursuant to this Plan.
(x) "Restricted Stock Agreement" means a written agreement between the
Company and a Participant setting forth the restrictions and conditions
applicable to Restricted Stock granted to the Participant.
(y) "SAR" means a right to receive financial benefits under the terms
of this Plan equal in value to the excess of (i) the Fair Market Value of
the shares subject to the SAR as of the date of exercise of the SAR over
(ii) the Fair Market Value of such shares on the Date of Grant of the SAR.
(z) "SAR Agreement" means a written agreement between the Company and
a Participant setting forth terms and conditions applicable to a SAR
granted to the Participant.
(aa) "Subsidiary" or "Subsidiaries" means a subsidiary corporation or
corporations of the Company as defined in Code Section 424(f).
(bb) "Ten Percent Shareholder" means an employee of the Employer who
owns, or is considered as owning for purposes of Code Section 422(b)(6),
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Parent or Subsidiary.
Appendix I-2
<PAGE> 30
3. Administration of Plan. The Plan shall be administered by the
Compensation Committee of the Board, or by any other committee appointed by the
Board. The members of the Committee shall be appointed from time to time by, and
shall serve at the discretion of, the Board. Notwithstanding any provision
contained herein, to the extent that any Award is designed to comply with the
Performance-Based Exception, the Committee shall satisfy the requirements
contained in Section 1.162-27(c)(4) of the final regulations promulgated by the
Internal Revenue Service under Section 162(m) of the Code. For purposes of
granting Awards under the Plan, the Committee shall be composed of not less than
the minimum number of persons from time to time required by Rule 16b-3 under the
Exchange Act, or any successor rule or regulation, each of whom shall be a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act.
The Committee shall keep a record of all of its proceedings and actions and
shall keep, or cause an appropriate officer of the Company to keep, all such
books of account, records and other data as may be necessary for the proper
administration of this Plan, and it shall report all action taken by it to the
Board. Members of the Committee may be granted an Award only by a majority of
the disinterested members of the Board. The Committee shall have full and final
authority in its discretion, subject to the provisions of this Plan, to
determine the type or types of Awards and the individuals to whom and the time
or times at which each Award shall be granted; to construe and interpret the
Plan; to specify terms and provisions of the respective Awards and of any stock
restriction agreement, option agreement or other agreement related to such
Award, which terms and provisions need not be identical for Awards made to
different individuals or to a particular individual; and to make all other
determinations and take all other actions it deems necessary or advisable for
the proper administration of the Plan. All such actions and determinations shall
be conclusively binding for all purposes and upon all persons.
4. Common Stock Subject to the Plan.
(a) The maximum number of shares of Common Stock in respect for which
Awards may be granted under the Plan, subject to adjustment as provided in
Paragraph 10 of the Plan, in each calendar year during any part of which
the Plan is effective shall be five percent (5%) of the total issued and
outstanding shares of Common Stock as of the first day of each such year
the Plan is in effect. Notwithstanding the foregoing, in no event shall
more than one hundred thousand (100,000) shares of Common Stock be
cumulatively available for Awards of ISOs under the Plan.
(b) The shares of Common Stock to be issued with respect to this Plan
may be authorized but unissued shares, shares issued and reacquired by the
Company or shares bought on the market for the purposes of this Plan. In
the event any shares of Restricted Stock shall for any reason be forfeited
or any Option or SAR shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, such forfeited shares
and the shares subject to such Option or SAR but not issued thereunder
shall again be available to be issued with respect to this Plan.
(c) Unless and until the Committee determines that an Award to a Named
Executive Officer shall not be designed to comply with the
Performance-Based Exception, the following rules shall apply to a grant of
such Award under the Plan:
(i) The maximum aggregate number of shares of Common Stock
(relating to Options and SARs) that may be granted or that may vest, as
applicable, during any fiscal year pursuant to any such Options or SARs
held by any Named Executive Officer shall be two hundred thousand
(200,000). For this purpose, to the extent that any Option that is
granted or is vested during any fiscal year is canceled (as described in
Section 1.162-27(e)(2)(vi)(B) of the final regulations under Section
162(m) of the Code) during such fiscal year, such canceled Option shall
continue to be counted against the foregoing maximum aggregate number of
shares of Common Stock that may be granted or that may vest during such
fiscal year pursuant to any such Option or SAR held by a Named Executive
Officer under the Plan; and
(ii) The amount of compensation that a Named Executive Officer may
receive pursuant to an Option or SAR shall be based solely upon the
increase in the value of the Common Stock subject to the Option or the
SAR after the grant of the Option or the SAR.
Appendix I-3
<PAGE> 31
5. Participants. Awards may be granted under this Plan to any person who is
an officer or employee (including officers and employees who are also Directors)
of the Employer, any consultant or advisor to the Employer and any non-employee
members of the Board as determined by the Committee; provided, however, that no
Director, consultant or advisor who is not an employee of the Employer may be
granted an ISO under this Plan.
6. Terms and Conditions of Restricted Stock.
(a) Generally. Shares of Restricted Stock awarded under this Plan
shall be duly and validly issued and outstanding, fully paid and
nonassessable shares of Common Stock, and from the time of the issuance
thereof shall have all voting, dividend and distribution rights of other
outstanding shares of such class, but shall be subject to restrictions
provided for or contemplated in this Plan or in a Restricted Stock
Agreement or required under any applicable laws.
(b) Restrictions. Among other restrictions and conditions, the
Committee may, in its discretion at the time of an Award of Restricted
Stock, impose a substantial risk of forfeiture of such Restricted Stock by
the Participant, and such restrictions on the transfer or disposition of
such Restricted Stock (such as, without limitation, requiring that such
shares become transferable or subject to disposition by Participant only in
installments over a period of time) as the Committee may deem appropriate.
Any restrictions imposed by the Committee shall be set forth in a
Restricted Stock Agreement.
(c) Escrow. During the duration of any substantial risk of forfeiture
or any restrictions on transfer or disposition of Restricted Stock which
are imposed by the Committee, the Committee may, in its discretion, require
that the stock certificates evidencing such Restricted Stock be held in
escrow by the Secretary or another officer of the Company designated by the
Committee, to be delivered to the Participant (or, if required, back to the
Company for cancellation or other disposition) in such circumstances, at
such times and in such numbers of shares as shall be directed by the
Committee under the terms of this Plan or the applicable Restricted Stock
Agreement.
(d) Waiver of Restrictions. If a substantial risk of forfeiture or
restrictions on transfer or disposition of Restricted Stock are imposed,
the Committee may, in its sole discretion, accelerate, in whole or in part,
the time of termination of such risk or restrictions, (i) in the event that
any financial hardship may arise with respect to a Participant or the
successor-in-interest of a Participant, (ii) in the event of any change in
existing tax or other applicable laws, regulations or rulings which would
have a substantial adverse effect on the treatment of the compensation
provided for herein for tax purposes, or (iii) under such other
circumstances as the Committee deems appropriate.
(e) Change of Control. Any substantial risk of forfeiture or
restrictions on transfer or disposition of Restricted Stock shall
immediately lapse upon the occurrence of a Change of Control. The
provisions of this subparagraph (e) shall apply to any shares of Restricted
Stock awarded and outstanding under this Plan as of the effective date of
this amended and restated Plan, as well as, any shares of Restricted Stock
awarded under this Plan after such effective date.
7. Terms and Conditions of Options. Any Option granted under this Plan
shall be evidenced by an Option Agreement, containing such terms and in such
form as the Committee may from time to time determine, subject to the following
limitations and conditions:
(a) ISO Limitations. In the case of any ISO, the terms and conditions
of such grants shall be subject to, and comply with, such rules as may be
prescribed by Section 422 of the Code, as from time to time amended, and
any regulations implementing such statute, including, without limitation,
the requirements of Code Section 422(d) which limit the aggregate Fair
Market Value of shares of Common Stock (determined at the time that such
Option is granted) for which any ISO is exercisable for the first time to
$100,000 per calendar year. Each provision of the Plan and of each written
Option Agreement relating to an Option designated as an ISO shall be
construed so that such Option qualifies as an ISO, and any provision that
cannot be so construed shall be disregarded.
Appendix I-4
<PAGE> 32
(b) Option Price. The exercise price for the Common Stock subject to
each Option shall be determined by the Committee, but:
(i) With respect to any NQSO granted to an employee of the
Employer, the exercise price shall be no less than fifteen percent (15%)
of Fair Market Value on the Date of Grant;
(ii) With respect to any NQSO granted to a Director, consultant or
advisor who is not an employee of the Employer and any ISO granted to an
employee who is not a Ten Percent Shareholder (in each case, determined
as of the Date of Grant), the exercise price shall be no less than one
hundred percent (100%) of Fair Market Value on the Date of Grant; and
(iii) With respect to any ISO granted to a Ten Percent Shareholder,
the exercise price shall be no less than one hundred ten percent (110%)
of Fair Market Value on the Date of Grant.
(c) Period of Option. The expiration date of each Option shall be
fixed by the Committee. Notwithstanding the foregoing or any other
provision of this Plan, (i) such expiration date shall not be more than ten
(10) years from the Date of Grant, and (ii) if the Option is an ISO which
is granted to a Ten Percent Shareholder, such expiration date shall not be
more than five (5) years from the Date of Grant.
(d) Stockholder Rights. Neither an Optionee nor his Beneficiary shall
have any of the rights of a stockholder of the Company until the
certificates evidencing shares purchased upon exercise of an Option are
properly delivered to such Optionee or his Beneficiary.
(e) Exercise of Option. Each Option shall be exercisable from time to
time over a period commencing no earlier than 9 months after the Date of
Grant and ending upon the expiration or termination of the Option;
provided, however, if the Option is granted to a Director, consultant or
advisor who is not an employee of the Employer on the Date of Grant, such
Option shall be exercisable commencing no earlier than one year after the
Date of Grant. The Committee shall, by the provisions of individual Option
Agreements, specify the period or periods of time during which each Option
is exercisable and the number of shares purchasable thereunder in any such
period or periods. Options granted under this paragraph 7 shall be
exercised by the delivery of a written notice of exercise to the Company,
setting forth the number of shares of Common Stock with respect to which
the Option is to be exercised, accompanied by full payment of the Option
price for the shares to be exercised. The Option price upon exercise of any
Option shall be payable to the Company in full either, in the discretion of
the Committee or the Board: (a) in cash or its equivalent, or (b) by
tendering previously acquired shares of Common Stock having an aggregate
Fair Market Value at the time of exercise equal to the total Option price
(provided that the shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy
the Option price), or (c) by a combination of (a) and (b). The Committee
may provide, by inclusion of appropriate language in an Option Agreement,
that payment in full of the Option price need not accompany the written
notice of exercise provided the notice of exercise directs that the
certificate or certificates for the shares of Common Stock for which the
Option is exercised be delivered to a licensed broker acceptable to the
Company as the agent for the individual exercising the Option and, at the
time such certificate or certificates are delivered, the broker tenders to
the Company cash (or cash equivalents acceptable to the Company) equal to
the Option price for the shares of Common Stock purchased pursuant to the
exercise of the Option plus the amount (if any) of federal and/or other
taxes which the Company may in its judgment, be required to withhold with
respect to the exercise of the Option.
(f) Nontransferability of Option. No Option shall be transferable or
assignable by an Optionee otherwise than by will or the laws of descent and
distribution, and each Option shall be exercisable, during the Optionee's
lifetime, only by the Optionee. No Option shall be subject to execution,
attachment, or similar process except with the express consent of the
Committee.
(g) Termination of Employment. Upon termination of an Optionee's
employment with the Employer for any reason other than the Optionee's
retirement, death or disability, his option privileges shall be limited to
the shares which were immediately purchasable by him at the date of such
Appendix I-5
<PAGE> 33
termination, and such option privileges shall expire unless exercised by
him within 30 days after the date of such termination. The granting of an
Option to an eligible person does not alter in any way the Employer's
existing rights to terminate such person's employment at any time for any
reason, nor does it confer upon such person any rights or privileges except
as specifically provided for pursuant to this Plan.
(h) Death of Optionee. If an Optionee dies while in the employ of the
Employer, his option privileges shall be limited to the shares which were
immediately purchasable by him at the date of death, and such option
privileges shall expire unless exercised by his Beneficiary within one year
after the date of the Optionee's death.
(i) Retirement or Disability. If an Optionee retires or suffers a
disability while in the employ of the Employer, his option privileges shall
be limited to the shares which were immediately purchasable by him at the
date of his retirement or disability, and such option privileges shall
expire unless exercised by him (or his representative, in the case of
disability) within one year after his termination of employment.
Notwithstanding the previous sentence, in the case of an ISO, an Optionee's
option privileges shall expire 90 days following his termination of
employment from the Employer due to his retirement. For purposes of this
subparagraph (i), an Optionee shall be considered to have "retired" if he
terminates his service with the Employer at a time when he has satisfied
the relevant standards for retirement applied by the Employer to the
position then held by the Optionee; and an Optionee shall be considered to
have suffered a "disability" if he is considered to have suffered a
permanent and total disability, as defined in Section 22(e)(3) of the Code.
(j) Change of Control. Upon the occurrence of a Change in Control, the
shares of Common Stock with respect to each Option shall be immediately
exercisable, notwithstanding any restriction upon exercise of such Option
which may be contained in this Plan or in the applicable Option Agreement.
Any option privileges shall expire unless exercised by the Participant
within 15 days after the date of a Change of Control. The provisions of
this subparagraph (j) shall apply to any Option outstanding as of the
effective date of this amended and restated Plan, as well as, any Option
granted after such effective date.
(k) Restrictions on Issuing Shares. The exercise of each Option shall
be subject to, and shall not be effective until, the complete satisfaction,
as determined by the Committee in its discretion, of all (i) withholding
obligations, (ii) listing, registration, or qualification requirements
imposed by any securities exchange or under any state or federal law, and
(iii) consents or approvals of any regulatory body, the Board or the
Company's stockholders which are necessary or desirable as a condition of,
or in connection with, such exercise or the delivery or purchase of shares
pursuant thereto.
8. Terms and Conditions of SARs. Any SAR granted under this Plan shall be
evidenced by a SAR Agreement, containing such terms and in such form as the
Committee may in its discretion determine, subject to the following limitations
and conditions:
(a) Period of SAR. The expiration date of each SAR shall be fixed by
the Committee. Notwithstanding the foregoing or any other provision of the
Plan, such expiration date shall not be more than ten (10) years from the
Date of Grant.
(b) Exercise of SAR. Each SAR shall be exercisable from time to time
over a period commencing no earlier than 9 months after the Date of Grant
and ending upon the expiration or termination of the SAR; provided,
however, if the SAR is granted to a Director, consultant or advisor who is
not an employee of the Employer on the Date of Grant, such SAR shall be
exercisable commencing no earlier than one year after the Date of Grant.
The Committee shall, by the provisions of individual SAR Agreements,
specify the period or periods of time and the extent to which each SAR is
exercisable. Upon his exercise of a SAR, the Participant shall be permitted
to elect payment in cash, shares of Common Stock or a combination of both.
(c) Nontransferability of SAR. No SAR shall be transferable or
assignable by a Participant otherwise than by will or the laws of descent
and distribution, and each SAR shall be exercisable, during the
Participant's lifetime, only by the Participant. No SAR shall be subject to
execution, attachment, or similar process except with the express consent
of the Committee.
Appendix I-6
<PAGE> 34
(d) Termination of Employment. Upon termination of a Participant's
employment with the Employer for any reason other than the Participant's
death, his ability to exercise his SARs shall be limited to the extent to
which his SARs were exercisable by him at the date of such termination, and
his SARs shall expire unless exercised by him within 15 days after the date
of such termination. The granting of a SAR to an eligible person does not
alter in any way the Company's existing rights to terminate such person's
employment at any time for any reason, nor does it confer upon such person
any rights or privileges except as specifically provided for pursuant to
this Plan.
(e) Death of Participant. If a Participant dies while in the employ of
the Employer, his Beneficiary's ability to exercise the Participant's SARs
shall be limited to the extent to which such SARs were exercisable by the
Participant at the date of death, and such SARs shall expire unless
exercised by the Beneficiary within one year after the date of the
Participant's death.
(f) Change in Control. Upon the occurrence of a Change of Control,
each outstanding SAR shall be immediately exercisable, notwithstanding any
restriction or limitation on such exercise contained in this Plan or in the
applicable SAR Agreement. Any SAR shall expire unless exercised by a
Participant within 15 days after the date of a Change of Control. The
provisions of this subparagraph (f) shall apply to any SAR outstanding as
of the effective date of this amended and restated Plan, as well as, with
respect to any SAR awarded after such effective date.
(g) Restrictions on Issuing Shares. The exercise of each SAR shall be
subject to, and shall not be effective until, the complete satisfaction, as
determined by the Committee in its discretion, of all (i) withholding
obligations, (ii) listing, registration, or qualification requirements
imposed by any securities exchange or under any state or federal law, and
(iii) consents or approvals of any regulatory body, the Board or the
Company's stockholders which are necessary or desirable as a condition of,
or in connection with, such exercise or the delivery of shares pursuant
thereto.
9. Withholding Tax. At each time when applicable federal, state, and local
law requires withholding of income, state disability, social security or other
tax, with respect to Restricted Stock, Options or SARs granted to a Participant,
such Participant shall promptly pay to the Company the amount necessary to
satisfy all such withholding requirements. Such payment must be in the form of
any one or a combination of the following: cash, a certified check, bank draft,
or postal or express money order payable to the order of the Company in lawful
money of the United States. If a Participant does not pay such amount to the
Company, the Company shall be authorized on behalf of the Participant to (i)
sell any of the Participant's Restricted Stock held by the Secretary or other
officer of the Company in escrow, pursuant to subparagraph 6(c) above, in order
to satisfy such withholding requirements and/or (ii) to setoff the amount of
such withholding requirements against any amount otherwise due or to become due
by the Company to the Participant (under this Plan or otherwise). Upon receiving
payment of the Participant's withholding obligation, the Company shall inform
such Secretary or other officer that the Participant's withholding requirements
under this paragraph 9 have been satisfied.
10. Adjustments.
(a) If there shall be any change in the Common Stock as a result of
any merger, consolidation, reorganization, reclassification,
recapitalization, reincorporation, stock split, stock dividend, or other
like change in the capital stock of the Company, appropriate adjustments
shall be made by the Committee in (i) the number, class or kind of shares
of Restricted Stock and Common Stock subject to Options and SARs
theretofore granted under this Plan, in order to preserve (but not to
increase) the benefits afforded by this Plan to each Participant and (ii)
the number of shares which may be allocated to Awards made under this Plan.
(b) In the event of the dissolution or liquidation of the Company, any
Option or SAR granted under this Plan shall terminate as of a date to be
fixed by the Committee, provided that not less than 30 days' prior written
notice of the date so fixed shall be given to each affected Participant,
and each such Participant shall have the right during such period to
exercise his Option or SAR in whole or in part thereby including such
shares or rights as to which such Option or SAR would not otherwise be
exercisable solely by reason of an insufficient lapse of time.
Appendix I-7
<PAGE> 35
(c) In the event of a Reorganization in which the Company is not the
surviving or acquiring company, or in which the Company is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization,
(1) If there is no plan or agreement respecting the Reorganization
("Reorganization Agreement") or if the Reorganization Agreement does not
specifically provide for the change, conversion, or exchange of the
shares subject to outstanding and unexercised Options for securities of
another corporation, the Reorganization shall be treated as if it were a
dissolution or liquidation subject to subparagraph (b) of this paragraph
10; or
(2) If there is a Reorganization Agreement specifically providing
for the change, conversion, or exchange of the shares subject to
outstanding and unexercised Options for securities of another
corporation, the Committee shall equitably adjust the shares subject to
such outstanding and unexercised Options (and shall adjust the shares
then available to be optioned under the Plan, if the Reorganization
Agreement permits) in a manner not inconsistent with the provisions of
the Reorganization Agreement. The Committee also shall make equitable
adjustments to all outstanding and unexercised SARs.
(d) Adjustments and determinations under this paragraph 10 shall be
made by the Committee, whose decisions as to what adjustments or
determinations shall be made, and the extent thereof, shall be final,
binding, and conclusive.
11. Performance Measures.
(a) Unless and until the Committee proposes for a stockholder vote and
stockholders approve a change in the general performance measures set forth
in this paragraph 11, the attainment of which may determine the degree of
payout and/or vesting with respect to Awards (relating to Restricted Stock
or Options that do not satisfy the requirements of Paragraph 4(c)(ii)
hereof) to Named Executive Officers which are designed to qualify for the
Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among the following
alternatives as reported in the Company's Report on Form 10-K:
(i) Return on Assets.
(ii) Return on Sales.
(iii) Return on Equity.
(iv) Cash Flow Return on Investment.
(v) Operating Income.
(vi) EBIT.
(vii) Net Earnings.
(viii) Earnings Per Share.
(b) The Committee shall have the discretion to adjust the
determinations of the degree of attainment of the pre-established
performance goals; provided, however, that Awards affected by this
paragraph 11 held by Named Executive Officers which are designed to qualify
for the Performance-Based Exception may not be adjusted upward (but the
Committee shall have the discretion to adjust such Awards downward).
(c) In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing performance measures
without obtaining stockholder approval of such changes, the Committee shall
have discretion to make such changes without obtaining stockholder
approval. In addition, in the event that the Committee determines that it
is advisable to grant Awards of Restricted Stock or Options that do not
satisfy the requirements of paragraph 4(c)(ii) to Named Executive Officers
which are not designed to qualify for the Performance-Based Exception, the
Committee may make such
Appendix I-8
<PAGE> 36
grants without satisfying the requirements of Code Section 162(m) and,
thus, which use no performance measures or use performance measures other
than those specified above. To the extent that the Committee determines
that it is advisable to grant Awards of Restricted Stock or Options that do
not satisfy the requirements of paragraph 4(c)(ii) to Named Executive
Officers which are designed to comply with the Performance-Based Exception,
the Committee shall certify, in writing, prior to the payment of any
compensation under the Award, that the performance goals and any other
material terms were in fact satisfied.
12. Use of Proceeds. The proceeds received by the Company from the sale of
Restricted Stock granted under this Plan or of Common Stock sold pursuant to the
exercise of Options granted under this Plan shall be added to the Company's
general funds and used for general corporate purposes.
13. Amendment, Suspension, and Termination of Plan. The Board may at any
time suspend or terminate this Plan or may amend it from time to time in such
respects as the Board may deem advisable in order that the Awards granted
hereunder may conform to any changes in the law or in any other respect which
the Board may deem to be in the best interest of the Company; provided, however,
that unless first approved by a vote of a majority of the outstanding voting
stock of the Company, no amendment shall be made which would:
(a) materially increase the benefits accruing to Participants under
the Plan,
(b) increase the number of shares of the Company's Common Stock
subject to the Plan,
(c) modify the requirements regarding eligibility for participation in
the Plan,
(d) extend the date as of which the Plan shall terminate.
Unless the Plan shall theretofore have been terminated by the Board or as
provided in paragraph 10, this Plan shall terminate on April 22, 2009, ten years
after the date this amended and restated Plan was approved by action of the
shareholders of the Company. No Restricted Stock, Option or SAR may be granted
during any suspension or after the termination of the Plan. Except as provided
in paragraph 10, no amendment, suspension, or termination of the Plan shall,
without a Participant's consent, alter or impair any of the rights or
obligations under any Restricted Stock, Option or SAR theretofore granted to
such Participant under this Plan.
14. Miscellaneous Provisions.
(a) The selection of any person to receive an Award under this Plan
shall not give such person any right to be retained in the employ of the
Employer, and the right and power of the Employer to discharge any such
person shall not be affected by such Award. No person shall have any right
or claim whatever, directly, indirectly or by implication, to receive an
Award, nor any expectancy thereof, unless and until an Award in fact shall
have been made to such person by the Committee as provided herein. An Award
hereunder to any person at any time shall not create any right or
implication that any other or further Award may or shall be made at another
time. Each Award hereunder shall be separate and distinct from every other
Award and shall not be construed as a part of any continuing series of
Awards or compensation.
(b) This Plan is not exclusive. The Company may have other plans,
programs and arrangements for compensation or the issuance of shares. This
Plan does not require that Participants hereunder be precluded from
participation in such other plans, programs and arrangements.
(c) At all times when Code Section 162(m) is applicable, all Awards
granted under the Plan to Named Executive Officers shall comply with the
requirements of Code Section 162(m); provided, however, that in the event
the Committee determines in its discretion that such compliance is not
desired with respect to any Award or Awards available for grant under the
Plan, then compliance with Code Section 162(m) will not be required. In
addition, in the event that changes are made to Code Section 162(m) to
permit greater flexibility with respect to any Award or Awards available
under the Plan, the Committee may, subject to this subparagraph (c), make
any adjustments it deems appropriate.
Appendix I-9
<PAGE> 37
(d) The validity, interpretation, construction and performance of this
Plan shall be governed by the laws of the State of Ohio.
15. Effective Date of Plan. The effective date of this amended and restated
Plan is April 22, 1999, the date of its approval by the shareholders of the
Company.
Appendix I-10
<PAGE> 38
APPENDIX II
M/I SCHOTTENSTEIN HOMES, INC.
EXECUTIVE OFFICERS COMPENSATION PLAN
1. Purpose. The purpose of the M/I Schottenstein Homes, Inc. Executive
Officers Compensation Plan (the "Plan") is to provide annual cash and stock
awards to the executive officers of M/I Schottenstein Homes, Inc. that recognize
and reward the achievement of corporate performance goals.
2. Effective Date of Plan. The Plan shall be effective as of January 1,
1999, upon approval of the Plan by the shareholders of M/I Schottenstein Homes,
Inc. (the "Company").
3. Plan Administration. The Plan shall be administered by the Executive
Officer Compensation Committee (the "Committee"), which shall consist of members
appointed from time to time by the Board of Directors. Each member of the
Committee shall be an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). The Committee shall
have full power and authority, subject to the provisions of the Plan and
applicable law, to (a) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it deems necessary or advisable for the
proper administration of the Plan, (b) construe, interpret and administer the
Plan and any instrument or agreement relating to the Plan, and (c) make all
other determinations and take all other actions necessary or advisable for the
administration of the Plan. Unless otherwise expressly provided in the Plan,
each determination made and each action taken by the Committee pursuant to the
Plan or any instrument or agreement relating to the Plan (i) shall be within the
sole discretion of the Committee, (ii) may be made at any time, and (iii) shall
be final, binding and conclusive for all purposes on all persons, including, but
not limited to, participants in the Plan, their legal representatives and
beneficiaries and employees of the Company.
4. Eligibility. The Chairman/Chief Executive Officer, Vice
Chairman/President, Vice Chairman/ Chief Operating Officer, Chief Financial
Officer and any other executive officer of the Company shall be eligible to be
selected by the Committee to be granted awards under the Plan.
5. Awards. Each calendar year (the "Plan Year"), the Committee shall
designate the following:
5.1. The executive officers who will participate (the "Participants")
in the Plan for the Plan Year.
5.2. The Performance Goals, as defined herein, to be met by the
Company for Participants to earn awards for the Plan Year and one or more
Award Formulas, as defined herein, used to calculate awards based on the
Performance Goals.
6. Award Formulas and Performance Goals. For each Plan Year, the Committee
shall establish for each Participant, the one or more objective compensation
formulas or matrixes (the "Award Formulas") based on the achievement of
performance goals (the "Performance Goals"), the outcome of which is
substantially uncertain at the time so established against which actual
performance is to be measured to determine the amount of awards. The Performance
Goals shall include corporate financial criteria such as income before income
taxes, net income, return on equity and return on assets during one or more
years and other performance criteria such as homebuyer satisfaction ratings
during one or more years. The Committee shall have the discretion to determine
whether the Award Formulas will be based upon any one or more of the Performance
Goals. The level of achievement of the Performance Goals at the end of the Plan
Year will determine the amount of each Participant's award under the Award
Formulas.
7. Determination and Payment of Awards.
7.1. As soon as practicable after the end of the Plan Year, the
Committee will determine the amount of the award earned by each Participant
under the Award Formulas. Payments will be made promptly after
determination of the awards by the Committee unless payment of an award has
been deferred pursuant to the Plan. Such Committee determination must
include a certification in writing that the Performance Goals and any other
materials terms of the Award Formulas were in fact satisfied and
Appendix II-1
<PAGE> 39
that the award has been calculated in accordance with the Award Formulas.
The minutes of the Committee meeting (or any action by written consent)
shall satisfy the written certification requirement.
7.2 Awards under the Plan may be paid to the Participants in cash,
common stock of the Company or deferred compensation in the form of cash or
common stock of the Company.
7.3. A Participant who terminates employment, either voluntarily or
involuntarily, before the payment date for awards for the Plan year is
thereby ineligible for an award under the Plan; provided, however, the
Committee may, in its sole and complete discretion, determine to pay an
award in the event termination was the result of death, disability,
retirement, or a reduction in work force.
7.4 Notwithstanding anything herein to the contrary, the maximum
dollar amount that may be awarded under this Plan for any Plan Year to any
Participant may not exceed (whether in cash or common stock of the Company)
an amount equal to five times such Participant's 1999 base salary. The
maximum dollar amount (whether in cash or common stock of the Company) that
may be awarded under this Plan for any Plan Year to any Participant who was
not employed by the Company in 1999 shall be $1,000,000.00.
8. Termination, Suspension or Modification of the Plan. The Board of
Directors may, in its absolute discretion, at any time, with or without notice,
modify, amend, suspend or terminate the Plan in whole or in part. However, the
impact of any such modification, amendment, suspension or termination during a
Plan Year will be weighed against the requirements of Section 162(m). The
Committee is expressly permitted to make any amendments to the Plan, which is
not in violation of the law, that is required to conform the Plan to the
requirements of Section 162(m). The Committee may also correct any defect,
supply any omission, or reconcile any inconsistency in the Plan in the manner
and to the extent it shall deem desirable to carry the Plan into effect.
9. Miscellaneous.
9.1. No Assignments. No award under this Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, including any such liability which is for alimony
or other payments for the support of a spouse or former spouse, or for any
other relative of a Participant prior to actually being received by such
Participant or his/her designated beneficiary, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or
otherwise dispose of any right to such award shall be void.
9.2. No Right of Employment. Neither the adoption of the Plan nor the
determination of eligibility to participate in the Plan nor the granting of
an award under the Plan shall confer upon any Participant any right to
continue in the employ of the Company or any of its subsidiaries or
interfere in any way with the right of the Company or the subsidiary to
terminate such employment at any time.
9.3. Tax Withholding. The Company shall have the right to withhold the
amount of any tax attributable to amounts payable under the Plan.
9.4. Governing Law. The Plan and all determinations under the Plan
shall be governed by and construed in accordance with the laws of the State
of Ohio.
9.5. Other Plans. Nothing in this Plan shall be construed as limiting
the authority of the Committee, the Board of Directors, the Company or any
subsidiary of the Company to establish any other compensation plan or in
any way limiting its or their authority to pay bonuses or supplemental
compensation to any persons employed by the Company or a subsidiary of the
Company, whether such person is a Participant in this Plan and regardless
of how the amount of such compensation or bonus is determined.
9.6. Deferrals of Awards. A Participant may elect to defer payment of
his/her cash award under the Plan if deferral of any award under the Plan
is permitted pursuant to the terms of a deferred
Appendix II-2
<PAGE> 40
compensation program of the Company existing at the time the election to
defer is permitted to be made, and the Participant complies with the terms
of such program.
9.7. Section 162(m). It is the intention of the Company that all
payments made under the Plan shall fall within the "performance-based
compensation" exception contained in Section 162(m) of the Code. Thus,
unless the Board of Directors expressly determines otherwise, if any Plan
provision is found not to be in compliance with such exception, that
provision shall be deemed to be amended so that the provision does comply
to the extent permitted by law, and in every event, the Plan shall be
construed in favor of its meeting the "performance-based compensation"
exception contained in Section 162(m) of the Code.
Appendix II-3
<PAGE> 41
DETACH HERE
- -------------------------------------------------------------------------------
PROXY
M/I SCHOTTENSTEIN HOMES, INC.
3 Easton Oval, Columbus, Ohio 43219
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting of Shareholders, April 22, 1999
The undersigned hereby appoints Irving E. Schottenstein and Paul S. Coppel
and each of them, proxies of the undersigned, with full power of substitution,
to attend the Annual Meeting of Shareholders to be held on April 22, 1999, or
any adjournment thereof, and to vote all shares of Common Stock of M/I
Schottenstein Homes, Inc. which the undersigned is entitled to vote at such
Annual Meeting or at any adjournment thereof as set forth below.
This Proxy when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no directive is made, the shares
represented by the Proxy will be voted "FOR" the election of the named nominees
for directors, "FOR" the proposal to approve the 1993 Stock Incentive Plan as
Amended, "FOR" the proposal to approve the Executive Officers Compensation Plan
and "FOR" the proposal to ratify the appointment of Deloitte & Touche LLP as
the independent accountants and auditors for fiscal year 1999. If any other
matters are properly brought before the Annual Meeting or any adjournment
thereof, or if a nominee for election as a director named in the Proxy
Statement is unable to serve or for good cause will not serve, the shares
represented by this Proxy will be voted in the discretion of the Proxies in
such matters or for such substitute nominee(s) as the directors may
recommend.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders, dated March 15, 1999, the Proxy Statement furnished
therewith, and the Annual Report of the Company for the fiscal year ended
December 31, 1998. Any proxy heretofore given to vote the shares of Common
Stock which the undersigned is entitled to vote at the Annual Meeting of
Shareholders is hereby revoked.
- ----------- -----------
SEE REVERSE PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD SEE REVERSE
SIDE PROMPTLY IN THE ENCLOSED ENVELOPE SIDE
- ----------- -----------
<PAGE> 42
DETACH HERE
- --------------------------------------------------------------------------------
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
1. To elect the nominees named below as directors.
Nominees: Irving E. Schottenstein, Kerrii B. Anderson,
Norman L. Traeger
FOR WITHHELD
[ ] ALL [ ] FROM ALL
NOMINEES NOMINEES
[ ]
----------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the 1993 Stock Incentive [ ] [ ] [ ]
Plan as Amended
3. To approve the Executive Officers [ ] [ ] [ ]
Compensation Plan.
4. To ratify the appointment of Deloitte & [ ] [ ] [ ]
Touche LLP as the Independent
accountants and auditors for fiscal
year 1999.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name or names appear hereon. Joint owners should
each sign. Executors, administrators, trustees, guardians and others should
give their full title. Corporations and partnerships should sign in their full
name by president or other authorized person.
Signature: _________________ Date:_____ Signature: ________________ Date:_______
