[LOGO OF D.R. HORTON, INC. APPEARS HERE]
December 12, 1997
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of D.R. Horton, Inc. to be held on Thursday, January 22, 1998, at 9:30 a.m.,
Central time, at the corporate offices of D.R. Horton, Inc., 1901 Ascension
Blvd., Suite 100, Arlington, Texas.
At the meeting, stockholders will be asked to elect nine directors for the
ensuing year, to approve an amendment to the D.R. Horton, Inc. 1991 Stock
Incentive Plan and to transact such other business as may properly be brought
before the meeting. A form of proxy on which to indicate your vote and an
envelope, postage prepaid, in which to return your proxy are enclosed.
While we would like to have each of you attend the meeting and vote your
shares in person, we realize this may not be possible. However, whether or not
you plan to attend the meeting, your vote is very important. WE URGE YOU TO
COMPLETE, SIGN AND RETURN THE ENCLOSED FORM OF PROXY SO THAT YOUR SHARES WILL BE
REPRESENTED. If you decide later to attend the meeting, you may revoke your
proxy at that time and vote your shares in person.
If you desire any additional information concerning the meeting or the
matters to be acted upon thereat, we would be glad to hear from you.
Sincerely,
DONALD R. HORTON
Chairman of the Board and President
<PAGE>
D.R. Horton, Inc.
1901 Ascension Blvd.
Suite 100
Arlington, Texas 76006
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 22, 1998
To Each Stockholder of D.R. Horton, Inc.:
You are invited to attend the 1998 Annual Meeting of Stockholders of D.R.
Horton, Inc. (the "Company"), which will be held at the Company's corporate
offices, 1901 Ascension Blvd., Suite 100, Arlington, Texas, on Thursday, January
22, 1998, at 9:30 a.m., Central time, for the following purposes:
1. To elect nine directors to serve until the next annual meeting of
the stockholders and until their successors have been elected and
qualified.
2. To approve an amendment to the Company's 1991 Stock Incentive Plan to
increase the total number of shares authorized for issuance thereunder
from 3,969,041 shares to 6,000,000 shares.
3. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on December 10, 1997,
are entitled to notice of and to vote at the meeting or any adjournment thereof.
A list of such stockholders will be available for examination by any stockholder
at the offices of the Company set forth above for at least ten days before the
meeting.
By Order of the Board of Directors,
CHARLES N. WARREN
Senior Vice President, General Counsel
and Assistant Secretary
Arlington, Texas
December 12, 1997
IN ORDER TO ENSURE YOUR REPRESENTATION, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY WILL NOT BE
USED.
<PAGE>
D.R. Horton, Inc.
1901 Ascension Blvd.
Suite 100
Arlington, Texas 76006
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
January 22, 1998
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of D.R. Horton, Inc., a Delaware corporation
(the "Company"), for the 1998 Annual Meeting of Stockholders of the Company to
be held on Thursday, January 22, 1998, at 9:30 a.m., Central time, at the
Company's corporate offices, 1901 Ascension Blvd., Suite 100, Arlington, Texas,
and any adjournment thereof (the "Annual Meeting"). The purposes of the Annual
Meeting are set forth in the Notice of Annual Meeting of Stockholders to which
this Proxy Statement is attached. The Company expects that this Proxy Statement
and the accompanying form of proxy will first be mailed to each stockholder of
record on or about December 12, 1997.
The cost of this solicitation will be paid by the Company. The solicitation
of proxies will be made primarily by use of the mail. In addition, directors,
officers and regular employees of the Company may make solicitations by
telephone, telegraph or personal interview, and may request banks, brokers,
fiduciaries and other persons holding stock in their names, or in the names of
their nominees, to forward proxies and proxy materials to their principals and
obtain authorization for the execution and return of such proxies to management.
The Company will reimburse such banks, brokers and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith.
A proxy for use at the Annual Meeting is enclosed. Any proxy given may be
revoked by a stockholder 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 stockholder present at the Annual
Meeting who expresses a desire to vote his or her shares in person. Subject to
such revocation and except as otherwise stated herein or in the form of proxy,
all proxies duly executed and received prior to, or at the time of, the Annual
Meeting will be voted in accordance with the specifications of the proxies. If
no specification is made, proxies will be voted for the nominees for election of
directors set forth elsewhere herein (see "ELECTION OF DIRECTORS") , for the
proposal to amend the Company's 1991 Stock Incentive Plan (the "Incentive Plan")
(see "AMENDMENT OF 1991 STOCK INCENTIVE PLAN") 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 37,352,663 shares of the Company's Common Stock, $.01 par value
(the "Common Stock"), issued and outstanding on December 10, 1997, which has
been set as the record date for the purpose of determining stockholders entitled
to notice of, and to vote at, the Annual Meeting. On any matter submitted to a
stockholder vote, each holder of Common Stock will be entitled to one vote, in
person or by proxy, for each share of Common Stock registered in his or her name
on the books of the Company as of the record date. Under Delaware law and the
Company's Bylaws, with respect to any matter other than the election of
directors, the aggregate number of votes entitled to be cast by all stockholders
present in person or represented by proxy at the Annual Meeting, whether those
stockholders vote for, against or abstain from voting on any matter, will be
counted for purposes of determining whether a quorum exists, and the total
number of votes cast for each of these matters will be counted for purposes of
determining whether sufficient affirmative votes have been cast. The Company's
Bylaws provide that the holders of a majority of the issued and outstanding
shares of Common Stock, present in person or represented by proxy, shall
constitute a quorum. The vote of a plurality of the shares held by persons
present at the meeting in person or by proxy is required for the election of
directors. Approval of the proposal to amend the Incentive Plan requires the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Common Stock present in person or represented by proxy at the Annual
Meeting. An abstention from voting on a matter other than the election of
<PAGE>
directors by a stockholder present in person or represented by proxy at the
Annual Meeting will have the same legal effect as a vote against the matter, and
broker non-votes will have no effect with respect to the matter.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 30, 1997 by (i) all
directors and nominees for director of the Company, (ii) all executive officers
named in the Summary Compensation Table under "Executive Compensation", and
(iii) all directors and executive officers of the Company as a group. Unless
stated otherwise, the shares are owned directly and the named beneficial owners
possess sole voting and investment power with respect to the shares set forth in
the table.
<TABLE>
<CAPTION>
Name of Beneficial Owner Shares Beneficially Owned
- ------------------------ -------------------------
Number Percent
--------- ---------
<S> <C> <C>
Donald R. Horton................................. 6,803,060(1) 18.2%
Richard Beckwitt................................. 113,023(2) *
Richard I. Galland............................... 915 *
Terrill J. Horton................................ 6,845,659(3) 18.3%
Richard L. Horton................................ 737,806 2.0%
David J. Keller.................................. 114,487(4) *
Francine I. Neff................................. 363 *
Scott J. Stone................................... 112,757 *
Donald J. Tomnitz................................ 111,054(5) *
All directors and named executive officers
as a group (9 persons)......................... 14,839,124(6) 39.4%
- ----------
<FN>
* Less than 1%.
(1) These shares of Common Stock include an aggregate of 478,579 shares owned
by Mr. Horton's adult children, as to which Mr. Horton disclaims any
beneficial interest. Mr. Horton's address is D.R. Horton, Inc., 1901
Ascension Blvd., Suite 100, Arlington, Texas 76006.
(2) These shares of Common Stock represent shares issuable upon the exercise of
outstanding stock options which are exercisable on November 30, 1997, or
within 60 days thereafter.
(3) These shares of Common Stock include an aggregate of 5,763,898 shares,
consisting of 413,254 shares of Common Stock owned of record by the Donald
Ray Horton Trust, 376,893 shares of Common Stock owned of record by the
Martha Elizabeth Horton Trust, 2,069,702 shares of Common Stock owned of
record by the Donald Ray Horton Trust Number Two, 953,811 shares of Common
Stock owned of record by the Martha Elizabeth Horton Trust Number Two and
975,119 shares of Common Stock owned of record by each of the Donald Ryan
Horton Trust and the Douglas Reagan Horton Trust. Terrill J. Horton serves
as the sole trustee for each of the foregoing trusts. The trusts were
established by Donald R. Horton and his spouse for the benefit of their
descendants. These shares of Common Stock also include 9,159 shares owned
by Terrill J. Horton's adult son, as to which Mr. Horton disclaims any
beneficial interest. Mr. Horton's address is 4808 Schooner Court, Flower
Mound, Texas 75028.
(4) These shares of Common Stock include 181 shares held by Mr. Keller's spouse
and 6,182 shares held by Mr. Keller for the benefit of his children, as to
all of which Mr. Keller disclaims any beneficial interest, and 108,124
shares issuable upon the exercise of outstanding stock options, which are
exercisable on November 30, 1997, or within 60 days thereafter.
(5) These shares include 5,667 shares owned by an IRA for the benefit of Mr.
Tomnitz's spouse and 98,053 shares issuable upon the exercise of
outstanding stock options, which were exercisable on November 30, 1997, or
within 60 days thereafter. Mr. Tomnitz disclaims any beneficial interest in
the shares owned by the IRA of his spouse.
(6) These shares of Common Stock include all shares referred to in the
preceding footnotes to this table.
</FN>
</TABLE>
-2-
<PAGE>
Certain Other Beneficial Owners
Based on filings made under Section 13(g) of the Securities Exchange Act of
1934, as amended, as of November 30, 1997, the only entities known to be
beneficial owners of more than 5% of the Company's Common Stock were as follows:
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Shares Beneficially Owned
- ------------------------------------ -------------------------
Number Percent
--------- -------
<S> <C> <C>
J.P. Morgan & Co., Incorporated (1)............... 3,723,648 9.97%
60 Wall Street
New York, New York 10260
FMR Corp.(2)...................................... 3,996,276 10.70%
82 Devonshire Street
Boston, Massachusetts 02109
- ----------
<FN>
(1) Based solely upon information contained in the Schedule 13G of J.P. Morgan
& Co., Incorporated, filed with the Securities Exchange Commission (the
"SEC") with respect to the Common Stock owned as of July 31, 1997 (the "JPM
13G"). According to the JPM 13G, 3,025,676 of these shares are owned with
sole voting power, and all of these shares are owned with sole dispositive
power.
(2) Based solely upon information contained in the Schedule 13G of FMR Corp.,
filed with the SEC with respect to the Common Stock owned as of March 31,
1997 (the "FMR 13G"). According to the FMR 13G, 143,621 of these shares are
owned with sole power to vote or direct the vote and all of these shares
are owned with sole dispositive power.
</FN>
</TABLE>
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has fixed the
number of directors at nine and nominated the persons set forth below for
election as directors of the Company at the Annual Meeting. All of the nominees
are currently serving as directors of the Company.
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. The nominees receiving a plurality of the votes cast
will be elected to serve until the next annual meeting of stockholders and their
successors have been elected and qualified. If any nominee is unable to serve,
the proxies will be voted by the proxyholders in their discretion for another
person. The Board of Directors has no reason to believe that any nominee named
will not be able to serve as a director for his or her prescribed term.
According to the Bylaws of the Company, any stockholder may make
nominations for the election of directors if notice of such nominations is
delivered to, or mailed and received at, the principal executive office of the
Company not less than thirty calendar days prior to the date of the originally
scheduled meeting; provided, however, that, if less than forty calendar days'
notice or prior public disclosure of the date of the meeting is given or made by
the Company, notice of such nomination must be so received not later than the
close of business on the tenth calendar day following the earlier of the day on
which notice of the meeting was mailed or the day on which such public
disclosure was made. If nominations are not so made, only the nominations of the
Board of Directors may be voted upon at the Annual Meeting.
-3-
<PAGE>
Nominees for Director
The following is a summary of certain information regarding the nominees
for election as directors.
<TABLE>
<CAPTION>
Director
Name Age Since Principal Occupation
---- --- ----- --------------------
<S> <C> <C> <C>
Donald R. Horton..... 47 1991 Mr. Horton was elected Chairman of the Board
and President of the Company in July 1991.
He has been involved in the real estate and
homebuilding industries since 1972, and was
the sole or principal shareholder, director
and president of each of the Company's
predecessor companies since their respective
organization, which date from 1978 to 1990.
Donald R. Horton is the brother of Terrill
J. Horton and the nephew of Richard L.
Horton.
Richard Beckwitt..... 38 1993 Mr. Beckwitt joined the Company as an
Executive Vice President in March 1993 and
was elected director of the Company in July
1993. Since July 1996, Mr. Beckwitt also has
been President of the Company's Investments
Division. From 1986 to 1993, he worked in
the Mergers and Acquisitions and Corporate
Finance Departments at Lehman Brothers Inc.,
specializing in the homebuilding and
building products industries.
Richard I. Galland... 81 1992 Mr. Galland was elected director of the
Company in June 1992. He was formerly the
Chief Executive Officer and Chairman of the
Board of Fina, Inc., a director of First
RepublicBank Corporation and Of Counsel to
the law firm of Jones, Day, Reavis & Pogue.
Mr. Galland is currently serving as a
director of Texas Industries, Inc. and
Associated Materials, Inc.
Richard L. Horton.... 54 1992 Mr. Horton was elected director of the
Company in March 1992. From May 1985 until
September 1997, he was Vice President in
charge of the Company's Dallas-Fort Worth
East Division. Richard L. Horton is the
uncle of Donald R. Horton and Terrill J.
Horton.
Terrill J. Horton.... 49 1992 Mr. Horton was elected director of the
Company in March 1992. From September 1981
until September 1997, he was Vice President
in charge of one of the two former sales
divisions that now form the Company's
Dallas-Fort Worth North Division. Terrill J.
Horton is the brother of Donald R. Horton
and the nephew of Richard L. Horton.
David J. Keller...... 49 1991 Mr. Keller was elected director of the
Company in September 1991 and has been
Executive Vice President, Treasurer and
Chief Financial Officer of the Company since
June 1991. Prior thereto, he was affiliated
for 21 years with Ernst & Young, independent
accountants, and its predecessors, serving
as an audit partner from 1983 to 1991.
Francine I. Neff..... 72 1992 Ms. Neff was elected director of the Company
in June 1992. Since 1979, she has been Vice
President of NETS, Inc., a privately-owned
investment company, and a self-employed
business consultant. Ms. Neff was formerly
Treasurer of the United States and National
Director of the U.S. Savings Bonds division
of the U.S. Department of Treasury.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Director
Name Age Since Principal Occupation
---- --- ----- --------------------
<S> <C> <C> <C>
Scott J. Stone....... 46 1992 Mr. Stone was elected director of the Company
in March 1992. He has been Vice President of
various of the Company's divisions since
1988, and was Vice President - Eastern
Region of the Company from August 1994 to
September 30, 1996. Since October 1996, Mr.
Stone has acted as a consultant to the
Company and has served as an interim
Division Manager for various divisions from
time to time during this period.
Donald J. Tomnitz.... 49 1995 Mr. Tomnitz was elected director of the
Company in November 1995. He has been Vice
President of various of the Company's
divisions since 1983, and was elected Vice
President - Western Region of the Company in
August 1994. Since July 1996, Mr. Tomnitz
has been President of the Company's
Homebuilding Division. Mr. Tomnitz
previously was a Captain in the U.S. Army, a
Vice President of RepublicBank of Dallas,
N.A., and a Vice President of Crow
Development Company, a Trammell Crow
Company.
</TABLE>
In July 1994, Mr. Donald R. Horton entered into a consent order that
settled an investigation by the Federal Reserve Board into whether he failed to
comply with certain regulatory disclosure or other obligations relating to the
acquisition and financings of his controlling interest in Provident Bancorp of
Texas, Inc., a single bank holding company (together with its bank,
"Provident"). Mr. Horton denied non-compliance. In the consent order, which was
entered without any findings of fact or law, Mr. Horton agreed to pay a civil
money penalty of $100,000 and contribute $500,000 deemed restitution as part of
a capital infusion of up to $7.0 million in Provident. The capital infusion was
made through an approved voting trust in order to address Provident's financial
difficulties, which predated his acquisition. In the consent order, Mr. Horton
also agreed not to participate, apart from the capital infusion, in the affairs
of insured depository institutions or their holding companies, without prior
regulatory approval, or to violate laws applicable thereto. Mr. Horton advised
the Company that his agreements in the consent order were intended to avoid the
expense and delay required for further proceedings and to protect his investment
by improving Provident's regulatory capital. He also advised the Company that in
making a personal investment in Provident, he obtained the financial review of a
national accounting firm and the advice of a national law firm as to regulatory
matters. In addition, Mr. Horton informed the Company that he filed suit against
the law firm that represented him in the Provident acquisition in connection
with such representation. Mr. Horton subsequently informed the Company that the
litigation against the law firm had been satisfactorily resolved and that he
had sold his interest in Provident.
On November 14, 1996, Mr. Beckwitt settled an investigation by the
Securities and Exchange Commission in connection with his purchase of stock of
an unaffiliated corporation in September 1994. Without admitting or denying the
allegations, Mr. Beckwitt consented to a final judgment announced that day
enjoining him from violating Sections 10(b) and 14(e) of the Securities Exchange
Act of 1934 (the "Exchange Act") and rules 10b-5 and 14e-3 thereunder, and
providing for his payment of the alleged profit and a civil penalty. Mr.
Beckwitt advised the Company that he believes it was in his best interest to
resolve the matter without litigation as it would avoid additional cost and
distraction.
5
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth, with respect to the President and the other
executive officers of the Company, all plan and non-plan compensation awarded,
earned or paid for all services rendered in all capacities to the Company and
its subsidiaries during the periods indicated.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
---------------------------------- ------------------------- -------
Other Restricted Shares
Name and Fiscal Annual Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Awards Options/SARs Payouts Compensation
- ------------------ ------ -------- -------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald R. Horton 1997 $235,000 $235,000 - - - - $32,580(5)
Chairman of Board 1996 235,000 165,283 - - - - 29,399(6)
and President 1995 235,000 138,650 - - - - 26,725(7)
Richard Beckwitt 1997 $185,000 $185,000 - - 50,000 - $27,053(5)
EVP, President of 1996 185,000 110,000 - - 10,000 - 24,015(6)
Investments 1995 185,000 109,150 - - 30,240(1) - 24,144(7)
Division and
Director
David J. Keller 1997 $185,000 $185,000 - - 50,000 - $27,135(5)
EVP, Treasurer, 1996 185,000 120,000 - - 41,200(2) - 24,085(6)
CFO and Director 1995 185,000 109,150 - - 39,841(3) - 23,714(7)
Donald J. Tomnitz 1997 $185,000 $185,000 - - 70,000 - $26,790(5)
President of 1996 150,000 130,000 - - 47,000(4) - 20,028(6)
Homebuilding
Division and
Director
- ----------
<FN>
(1) The number of shares has been adjusted pursuant to the antidilution
provisions of the D.R. Horton, Inc. 1991 Stock Incentive Plan (the
"Incentive Plan") to reflect the effects of a seven-for-five stock split
effected as a 40 percent stock dividend paid by the Company on September
16, 1995 (the "40 Percent Stock Dividend") and an eight percent stock
dividend paid by the Company on May 24, 1996 (the "8 Percent Stock
Dividend").
(2) The number of shares represents a stock option grant originally made in
respect of 15,000 shares of Common Stock, adjusted pursuant to the
antidilution provisions of the Incentive Plan to reflect the effect of the
8 Percent Stock Dividend, and a stock option grant made in respect of
25,000 shares of Common Stock.
(3) The number of shares represents a stock option grant originally made in
respect of 15,000 shares of Common Stock, adjusted pursuant to the
antidilution provisions of the Incentive Plan to reflect the effects of a
nine percent stock dividend paid by the Company on June 30, 1995 (the "9
Percent Stock Dividend"), the 40 Percent Stock Dividend and the 8 Percent
Stock Dividend (collectively, the "Dividends"), and a stock option grant
originally made in respect of 10,000 shares of Common Stock, adjusted
pursuant to the antidilution provisions of the Incentive Plan to reflect
the effects of the 40 Percent Stock Dividend and the 8 Percent Stock
Dividend.
(4) The number of shares represents a stock option grant originally made in
respect of 25,000 shares of Common Stock, adjusted pursuant to the
antidilution provisions of the Incentive Plan to reflect the effect of the
8 Percent Stock Dividend, and a stock option grant made in respect of
20,000 shares of Common Stock.
(5) These amounts represent (a) credits made by the Company of $23,500,
$18,500, $18,500 and $18,500 to the accounts of Messrs. Horton, Beckwitt,
Keller and Tomnitz , respectively, under the D.R. Horton, Inc. Supplemental
Executive Retirement Plan No. 2 ("SERP 2"), (b) the above-market portion of
earnings on credits made by the Company of $2,060, $1,533, $1,615 and
$1,270 to the accounts of Messrs. Horton, Beckwitt, Keller, and Tomnitz,
respectively, under SERP 2, (c) matching contributions by the Company of
$4,500 to the accounts of each of Messrs. Horton, Beckwitt, Keller and
Tomnitz under the D.R. Horton, Inc. Profit Sharing Plus Plan (the "401(k)
Plan"), and (d) group health plan premiums of $2,520 paid by the Company
for the benefit of each of Messrs. Horton, Beckwitt, Keller and Tomnitz.
(6) These amounts represent (a) credits made by the Company of $23,500,
$18,500, $18,500 and $15,000 to the accounts of Messrs. Horton, Beckwitt,
Keller and Tomnitz, respectively, under SERP 2, (b) the above-market
portion of earnings on credits made by the Company of $1,399, $1,015,
$1,085 and $850 to the accounts of Messrs. Horton, Beckwitt, Keller and
Tomnitz, respectively, under SERP 2, and (c) matching contributions by the
Company of $4,500 to the accounts of each of Messrs. Horton, Beckwitt and
Keller , and $4,178 to the account of Mr. Tomnitz, under the 401(k) Plan.
(7) These amounts represent (a) credits made by the Company of $23,500, $18,500
and $18,500 to the accounts of Messrs. Horton, Beckwitt and Keller,
respectively, under SERP 2, (b) the above-market portion of earnings on
credits made by the Company of $1,098, $732 and $854 to the accounts of
Messrs. Horton, Beckwitt and Keller, respectively, under SERP 2, and (c)
matching contributions by the Company of $2,127, $4,912 and $4,360 to the
accounts of Messrs. Horton, Beckwitt and Keller, respectively, under the
401(k) Plan.
</FN>
</TABLE>
6
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------ ---------------------------
% of Total
Shares Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted Fiscal Year Price Date 5% 10%
---- ------------ ------------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard Beckwitt.... 50,000(1) 5.18% $10.6875 07-28-07 $336,000 $ 851,500
David J. Keller..... 50,000(1) 5.18% $10.6875 07-28-07 $336,000 $ 851,500
Donald J. Tomnitz... 70,000(2) 7.25% $10.6875 07-28-07 $470,400 $1,192,100
- ----------
<FN>
(1) These shares are covered by a nonqualified stock option granted under the
Incentive Plan that becomes exercisable with respect to 5,000 of such
shares on each of the first nine anniversaries of July 28, 1997, and with
respect to 5,000 of such shares on April 28, 2007.
(2) These shares are covered by a nonqualified stock option granted under the
Incentive Plan that becomes exercisable with respect to 7,000 of such
shares on each of the first nine anniversaries of July 28, 1997, and with
respect to 7,000 of such shares on April 28, 2007.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Number of Shares
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
Shares Fiscal Year-End at Fiscal Year-End
Acquired
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
-------- -------- ------------------ -----------------------
<S> <C> <C> <C> <C>
Richard Beckwitt... - - 113,023/303,310(1) $1,075,477/2,598,126(1)
David J. Keller.... 31,000 $325,201 99,446/163,775(1) $1,048,596/1,115,856(1)
Donald J. Tomnitz.. - - 88,514/198,099(1) $1,008,291/1,280,695(1)
- ----------
<FN>
(1) Adjusted pursuant to the antidilution provisions of the Incentive Plan to
reflect the effects of the Dividends. Each of the options outstanding is a
nonqualified stock option which vests over a period of time (generally 9.75
years), but each option becomes fully exercisable upon a change of control
of the Company, or upon the death or disability of the Optionee.
</FN>
</TABLE>
Compensation of Directors
Mr. Richard I. Galland and Ms. Francine I. Neff, the "Non-Employee
Directors" of the Company, each received a fee of $25,000 per year for all
services performed as a director, and reimbursement for all expenses incurred to
attend Board and committee meetings. No additional fees are paid for
participation on any committee of the Board. During the 1997 fiscal year, the
two Non-Employee Directors of the Company each received a nonqualified stock
option granted by the Board of Directors under the Incentive Plan. Each option
gives the Non-Employee Director the right to purchase 5,000 shares of Common
Stock at an exercise price of $10.6875 per share, exercisable with respect to
1,000 of such shares on each of the first five anniversaries of July 28, 1997,
and expiring on July 28, 2007.
No director of the Company who is also an employee, or former employee, of
the Company receives any additional compensation for serving as a director of
the Company; however, effective January 1, 1997, the Company began to pay the
participant's portion of premiums pursuant to the Company's major medical plan,
for each director of the Company who was not otherwise receiving fees for acting
as a director of the Company. The amount of such premiums paid by the Company
during fiscal year 1997 was $2,520 for each of the seven directors receiving
this benefit.
7
<PAGE>
Compensation Committee Interlocks and Insider Participation
During the 1997 fiscal year, the Company's Compensation Committee was
composed of Messrs. Donald R. Horton, Richard Beckwitt, David J. Keller and
Richard I. Galland. Mr. Horton was the Chairman of the Board and President of
the Company, Mr. Beckwitt was Executive Vice President of the Company and
President of the Company's Investments Division, and Mr. Keller was Executive
Vice President, Treasurer and Chief Financial Officer of the Company during the
1997 fiscal year.
Compensation Committee Report on Executive Compensation
General. The Company has undertaken to formulate a fair and competitive
compensation policy for executive officers that will attract, motivate and
retain highly experienced, qualified and productive personnel, reward superior
performance and provide long-term incentives that are based on performance. The
Company also has attempted to develop an executive compensation policy that will
serve to align the interests of the Company, its executive officers and its
stockholders. The primary components of executive compensation consist of base
salaries, a cash bonus plan, participation in the D.R. Horton, Inc. Supplemental
Executive Retirement Plan No. 1 ("SERP 1") and SERP 2 (collectively, the
"SERPs") and stock options. The Company has undertaken through its current
executive compensation policy to make a substantial portion of the compensation
an executive officer has the opportunity to earn consist of bonus and stock
option incentives.
Base Salaries. Base salaries for the Company's executive officers for the
1997 fiscal year were established by the Compensation Committee and approved by
the Board of Directors. Factors considered were generally subjective and include
(i) the recommendation of the Chairman of the Board and President, (ii) the
contribution the executive officer made and is anticipated to make to the
success of the Company, (iii) the level of experience and responsibility of the
executive officer and (iv) the Company's historical levels of compensation for
executive officers. No quantitative relative weights were assigned to any of
these factors.
Bonus Plan. The 1997 Compensation Plan for Executive Officers (the "Bonus
Plan") was established by the Compensation Committee and approved by the Board
of Directors. The Bonus Plan provided each of the Company's executive officers
the opportunity to earn additions to his 1997 annual base salary, based in some
cases on performance goals and in other cases at the discretion of the Chairman
of the Board and President and as approved by the Compensation Committee.
Participants in the Bonus Plan each earned a bonus equal to 100% of his annual
base salary. See "Summary Compensation Table" above.
SERPs. The SERPs were adopted by the Company in 1994 to permit eligible
participants, which include executive officers, regional vice presidents,
division managers and other selected employees, to defer income and establish a
source of funds payable upon retirement, death or disability. Individual
agreements under the SERPs were adopted and approved by the Compensation
Committee and ratified by the Board of Directors. SERP 1 permits participants to
voluntarily defer receipt of compensation from the Company. Amounts deferred are
invested on behalf of the participant in investment vehicles selected from time
to time by the administrators of SERP 1. Pursuant to SERP 2, the Company has
established a liability to each participant equal to 10% of the participant's
1997 base salary. Earnings on this liability accrue at a rate established from
time to time by the administrators of SERP 2.
8
<PAGE>
Chairman of the Board and President's 1997 Compensation. Donald R. Horton's
compensation for the Company's 1997 fiscal year consisted of an annual base
salary of $235,000 and participation in the Bonus Plan and the SERPs. This base
salary and bonus arrangement were made on the basis of the Company's executive
compensation policy and the factors described above.
Compensation Committee
Donald R. Horton Richard Beckwitt Richard I. Galland David J. Keller
Stock Option Grants. Grants of stock options under the Incentive Plan are
administered by the Audit Committee. The Company believes that stock options
provide an important long-term incentive to executive officers and align the
interests of the Company, its executive officers and its stockholders by
creating a direct link between executive compensation and long-term Company
performance. The stock options granted to executive officers in the 1997 fiscal
year have an exercise price of not less than the fair market value of the Common
Stock on the date of grant and a vesting schedule that extends over nine years.
All other terms of stock option grants are established by the Audit Committee,
subject to the limitations of the Incentive Plan.
A total of three stock option grants were made to three executive officers
in fiscal 1997. See "Option/SAR Grants in Last Fiscal Year" table above. In
determining the number of shares of Common Stock covered by and the vesting
schedule of each stock option grant, the Audit Committee made a subjective
evaluation of (i) the recommendations of the Chairman of the Board and
President, (ii) the contribution the executive officer made and is anticipated
to make to the success of the Company, (iii) the level of experience and
responsibility of the executive officer, (iv) the number of stock options that
previously had been granted to the executive officer pursuant to the Incentive
Plan and (v) the number of stock options granted to other participants in the
Incentive Plan. No quantitative relative weights were assigned to any of these
factors.
Audit Committee
Richard I. Galland Francine I. Neff
9
<PAGE>
Stock Performance
The following graph illustrates the cumulative total stockholder return on
the Company's Common Stock for the last five fiscal years from December 31, 1992
(in 1993, the Company changed its fiscal year end to September 30) through
September 30, 1997, assuming a hypothetical investment of $100 and a
reinvestment of all dividends paid on such an investment, compared to the
Standard & Poors 500 Stock Index, the Standard & Poors Homebuilding-500 Index
(the "S&P Homebuilding Index") and a Peer Group Index described below for the
same period. The Company is changing from a comparison with the Peer Group to a
comparison with the S&P Homebuilding Index because, with the Company's recent
growth, a comparison with the members of the S&P Homebuilding Index (Centex
Corporation, Fleetwood Enterprises, Inc., Kaufman and Broad Home Corporation and
Pulte Corporation) is more appropriate.
The graph and the related disclosure contained in this section of the Proxy
Statement should not be incorporated by reference into any prior filings by the
Company under the Exchange Act that incorporated future filings or portions
thereof (including this Proxy Statement or the Executive Compensation section of
this Proxy Statement). The graph and related disclosure are presented in
accordance with SEC requirements. Stockholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance. The graph and related disclosure in no way
reflect the Company's forecast of future financial performance.
TOTAL STOCKHOLDER RETURNS
(Dividends Reinvested)
[GRAPH APPEARS HERE]
10
<PAGE>
<TABLE>
ANNUAL RETURN PERCENTAGE
Years Ending
<CAPTION>
Company/Index Sept. 93 Sept. 94 Sept. 95 Sept. 96 Sept. 97
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
D.R. Horton, Inc. 69.63 -15.04 29.95 -2.05 62.35
S&P 500 7.59 3.69 29.74 20.33 40.45
S&P Homebuilding-500 27.74 -40.37 20.14 3.36 49.39
Peer Group (1) 22.32 -32.38 14.65 -5.22 62.75
</TABLE>
<TABLE>
INDEXED RETURNS
Years Ending
<CAPTION>
Base
Period
Company/Index Dec 92 Sept. 93 Sept. 94 Sept. 95 Sept. 96 Sept. 97
------------- ------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
D.R. Horton, Inc. 100 169.63 144.12 187.28 183.44 297.82
S&P 500 100 107.59 111.55 144.73 174.16 244.60
S&P Homebuilding-500 100 127.74 76.17 91.52 94.60 141.32
Peer Group (1) 100 122.32 82.72 94.83 89.88 146.27
- ----------
<FN>
(1) The Peer Group Index includes the following homebuilders: Calton, Inc.,
Centex Corporation, Continental Homes Holding Corp., Engle Homes, Inc.,
Hovnanian Enterprises, Inc., Kaufman and Broad Home Corporation, Lennar
Corporation, The Presley Companies, Pulte Corporation, The Ryland Group,
Inc., Schuler Homes, Inc., Standard Pacific Corp., Toll Brothers, Inc. and
UDC Homes, Inc.
</FN>
</TABLE>
Transactions with Management
The Company has agreed to indemnify each of its directors to provide them
with the maximum indemnification allowed under its certificate of incorporation
and applicable law with respect to the Company and certain corporations
previously engaged in the homebuilding business as D.R. Horton Custom Homes that
were not merged into the Company at the time of its reorganization in December
1991.
MEETINGS AND COMMITTEES OF THE BOARD
During fiscal year 1997, the Board of Directors held four meetings and
acted once by written consent. No director attended fewer than 75 percent of the
number of meetings of the Board and of the committees on which he or she served
during fiscal year 1997. The Board of Directors has appointed three standing
committees: an Executive Committee, a Compensation Committee and an Audit
Committee.
The Executive Committee, between meetings of the Board and while the Board
is not in session, possesses all of the powers and may carry out all of the
duties of the Board of Directors in the management of the business of the
Company, which by law may be delegated to it by the Board of Directors. The
Executive Committee acted 46 times by written consent during fiscal year 1997.
The Executive Committee is composed of Messrs. Donald Horton, Beckwitt and
Keller.
The Compensation Committee is empowered to (i) recommend to the Board the
compensation to be paid to the executive officers of the Company and its
subsidiaries and other affiliates, (ii) investigate and recommend to the Board
employee benefit plans deemed appropriate for the employees of the Company and
its subsidiaries and other affiliates, (iii) supervise the administration of any
such employee benefit plans adopted by the Company and its subsidiaries and
other affiliates (other than the Incentive Plan) and (iv) perform such other
functions and undertake such investigations as the Board shall from time to time
direct. The Compensation Committee met once during fiscal year 1997. The
11
<PAGE>
Compensation Committee is composed of Messrs. Galland, Donald Horton, Beckwitt
and Keller.
The Audit Committee is empowered to (i) meet with the independent auditors
of the Company and review the scope of their annual audit, any open questions as
to the choice of acceptable accounting principles to be applied and all other
matters relating to the auditors' relationship with the Company, (ii) advise and
assist the Board in evaluating the auditors' performance, including the scope
and adequacy of the auditors' examination, (iii) recommend the firm of
independent auditors to be employed by the Board, (iv) review the Company's
annual financial statements and discuss such statements with the auditors, (v)
receive and consider the auditors' comments and suggestions as to the internal
control procedures, adequacy of staff and other matters, (vi) administer the
Incentive Plan, (vii) perform such other functions and undertake such
investigations relating to the operations or financial and accounting aspects of
the Company as the Board shall direct, and (viii) retain and consult with
counsel or such other experts as the Committee shall consider necessary or
desirable in connection with the performance of its duties. The Audit Committee
met twice during fiscal year 1997. The Audit Committee is composed of Mr.
Galland and Ms. Neff.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, certain
of its officers, and persons who own more than 10 percent of a registered class
of the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than 10 percent stockholders are required by SEC
regulations to furnish the Company with copies of all forms they file pursuant
to Section 16(a).
Based solely on its review of the copies of such forms received by it, the
Company believes that during the year ended September 30, 1997, all filing
requirements applicable to its officers, directors and greater than 10 percent
beneficial owners were complied with, other than with respect to Messrs.
Beckwitt and Keller who each filed one late report relating to a stock option
grant, Mr. Stone who filed one late report relating to two sales of stock, and
Mr. Tomnitz who filed three late reports, two relating to stock option grants
and one relating to a purchase of stock.
AMENDMENT OF 1991 STOCK INCENTIVE PLAN
On November 18, 1997, the Board of Directors adopted and approved, subject
to the approval of the Company's stockholders, an amendment to the Incentive
Plan (the "Amendment") that would increase the total number of shares of Common
Stock that may be issued or delivered pursuant to the Incentive Plan by
2,030,959 shares from 3,969,041 shares to 6,000,000 shares. The Board of
Directors believes that the attraction and retention of qualified officers,
directors and key employees is essential to the Company's continued growth and
success and that the grant of stock options to such individuals is necessary for
the Company to remain competitive in its compensation practices. In order to
continue to provide necessary incentives to officers, directors and key
employees, particularly in light of the Company's recent growth, the Board of
Directors has approved the Amendment, which will become effective upon the
approval of the Company's stockholders.
General. The Incentive Plan authorizes the granting of the following types
of benefits:
(a) stock options ("Option Rights"), which may be either incentive
stock options ("ISOs"), nonqualified stock options or a combination
thereof, and which permit an optionee to benefit from increases in the
value of the Common Stock above a predetermined option price;
(b) stock appreciation rights ("Appreciation Rights"), which provide
an alternative means of realizing the benefits arising from Option Rights
or from increases in the value of the Common Stock above the value at the
time of grant of the Appreciation Rights;
12
<PAGE>
(c) awards of restricted stock ("Restricted Stock"), which enable a
grantee or purchaser of Restricted Stock to earn over a specified period of
time shares of the Common Stock which he or she has acquired at a price
below the value of the Common Stock at the time of acquisition or without
payment;
(d) performance units ("Performance Units"), which enable a grantee to
earn cash awards by achievement of predetermined Management Objectives
(described below); and
(e) performance shares ("Performance Shares"), which enable a grantee
to earn awards of the Common Stock or other securities of the Company by
achievement of predetermined Management Objectives.
These benefits are referred to collectively herein as "Awards." All officers,
directors, key employees, agents and consultants of the Company are eligible to
receive Awards under the Incentive Plan. No Option Right, Appreciation Right,
Performance Unit or Performance Share Award is transferable by a participant
other than by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations order," as defined in the Internal Revenue Code of
1986, as amended (the "Code"), or the Employee Retirement Income Security Act of
1974. Option Rights and Appreciation Rights are exercisable during the
participant's lifetime only by the participant or his or her guardian or legal
representative. The Incentive Plan does not provide for any limit to the amount
of any Award or Awards to any one participant or any period during which the
Awards must be granted.
The total number of shares of Common Stock (and stock of any other class of
the Company hereafter authorized) that currently may be issued or delivered
pursuant to future Awards under the Incentive Plan is 244,005. Approval of the
Amendment by the Company's stockholders would increase this number to 2,274,964
shares. Any shares of Common Stock which are subject to Option Rights or
Appreciation Rights or are awarded or sold as Restricted Stock that are
terminated, unexercised, forfeited or surrendered or which expire for any reason
will again be available for issuance under the Incentive Plan. The Incentive
Plan also provides, however, that the Board of Directors may make adjustments in
such number of shares, and outstanding Awards under the Incentive Plan, to
prevent dilution or enlargement of rights of participants in the event of stock
dividends, stock splits, combinations of shares, recapitalizations or other
changes in the capital structure of the Company, mergers, consolidations,
spin-offs, reorganizations, issuances of rights or warrants and other similar
changes. At December 9, 1997, the closing price for the Common Stock quoted on
the New York Stock Exchange was $20.25 per share. Therefore, the market value of
the 2,274,964 shares available for Awards under the Incentive Plan on that date
was $46,068,021.
Option Rights. Option Rights may be granted under the Incentive Plan
entitling the optionee to purchase shares of Common Stock at a price equal to
not less than 50% of the market value per share on the date of grant. The option
price will be payable at the time of exercise in cash or by check, by the
transfer to the Company of shares of Common Stock having an aggregate market
value per share at the time of exercise equal to the aggregate option price or
by a combination of such methods. A grant of Option Rights may provide for
deferred payment of the option price from the proceeds of sale through a broker
on the exercise date of some or all of the shares to which such exercise
relates. Successive grants may be made to the same optionee whether or not
Option Rights previously granted remain unexercised.
No Option Right shall be exercisable more than 10 years from the date of
grant. Each grant of Option Rights must specify the required period or periods
of continuous service by the optionee with the Company and/or the Management
Objectives to be achieved before the Option Rights, or installments thereof,
will become exercisable.
Option Rights may constitute (i) options that are intended to qualify under
particular provisions of the Code (under current law, these would be ISOs), (ii)
options that are not intended to so qualify, or (iii) a combination of the
foregoing.
Management objectives ("Management Objectives") may be described either in
terms of Company-wide objectives, objectives that are related to performance of
the division, department or function within the Company in which the participant
13
<PAGE>
is employed or in other terms and shall relate to a specified period of time
(the "Performance Period") established by the committee which administers the
Incentive Plan (the "Administrative Committee"). The Administrative Committee
may adjust any Management Objective if, in its sole judgment, events or
transactions have occurred that are unrelated to the participant's performance
and result in a distortion of the Management Objectives.
Appreciation Rights. Appreciation Rights permit the holder to receive the
difference between the market value of the shares of Common Stock subject to the
Appreciation Rights on the exercise date of the Appreciation Rights and the
exercise price of the Appreciation Rights. Appreciation Rights may be granted in
tandem with Option Rights or separate and apart from a grant of Option Rights.
The holder of an Appreciation Right is entitled to receive from the Company
upon exercise of the Appreciation Right an amount equal to 100%, or such lesser
percentage as the Administrative Committee may determine, of the spread between
the grant price of the Appreciation Right (which will be the same as the option
price of any Option Right granted in tandem with the Appreciation Right and may
not be less than 50% of the market value per share of the Common Stock on the
date of grant) and the market value of the shares of the Common Stock subject to
the Appreciation Right being exercised. An Appreciation Right granted in tandem
with an Option Right may be exercised only by surrender of the related Option
Right.
Each grant of Appreciation Rights under the Incentive Plan must specify the
required period or periods of continuous service by the holder thereof with the
Company and/or the Management Objectives to be achieved before the Appreciation
Rights, or portions thereof, will become exercisable. No Appreciation Right
granted in tandem with an Option Right may be exercisable except at a time at
which that Option Right is exercisable. The Administrative Committee may
authorize the grant of Appreciation Rights under the Incentive Plan in
accordance with the following additional provisions:
(a) any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in shares of Common
Stock, in other securities of the Company or in any combination thereof, as
determined by the Administrative Committee in its sole discretion at the
time of payment; and
(b) any grant may specify that the amount payable by the Company upon
exercise of an Appreciation Right may not exceed a maximum specified by the
Administrative Committee at the date of grant.
Appreciation Rights may include such other terms and provisions, consistent with
the Incentive Plan, as the Administrative Committee may approve.
Restricted Stock. A grant of Restricted Stock involves the immediate
transfer by the Company to a participant of ownership of a specific number of
shares of Common Stock in consideration of the performance of services. The
participant is entitled immediately to voting, dividend and other ownership
rights in such shares. Such transfer may be made without additional
consideration or in consideration of a payment by the participant that is less
than the market value per share of the Common Stock at the date of grant, as the
Administrative Committee may determine.
Restricted Stock will be subject, for a period of time to be determined by
the Administrative Committee at the date of grant, to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code. An example would be a
provision that the Restricted Stock would be forfeited if the participant ceased
to serve the Company as a director, officer, key employee, agent or consultant
during a specified period. In order to enforce these forfeiture provisions, the
transferability of Restricted Stock will be prohibited or restricted in a manner
and to the extent prescribed by the Administrative Committee for the period
during which the forfeiture provisions remain in effect.
Performance Units. Performance Units represent the right of a participant
to receive a payment equal to $100 per Performance Unit upon achievement of
specified Management Objectives. A minimum acceptable level of achievement (the
14
<PAGE>
"Minimum Achievement Level") also will be established. If by the end of the
specified Performance Period the participant has achieved the specified
Management Objectives, the participant will be deemed to have fully earned the
Performance Units. If the participant has not achieved the Management Objectives
but has attained or exceeded the Minimum Achievement Level, the participant will
be deemed to have partly earned the Performance Units (such part may be
determined in accordance with a formula for determining the amount of the
payment if performance is between the Minimum Achievement Level and the
Management Objectives). To the extent earned, Performance Units will be paid to
the participant at the time and in the manner determined by the Administrative
Committee. Payment may be made in cash, in shares of Common Stock, in other
securities of the Company or in any combination thereof, as determined by the
Administrative Committee in its sole discretion.
Performance Shares. A participant may be granted any number of Performance
Shares that will be delivered to the participant upon achievement of specified
Management Objectives. A Minimum Achievement Level will also be specified. If by
the end of the Performance Period the participant has achieved the specified
Management Objectives, the participant will be deemed to have fully earned the
Performance Shares. If the participant has not achieved the Management
Objectives but has attained or exceeded the Minimum Achievement Level, the
participant will be deemed to have partly earned the Performance Shares (such
part may be determined in accordance with a formula for determining the number
of Performance Shares earned if performance is between the Minimum Achievement
Level and the Management Objectives). To the extent earned, Performance Shares
will be delivered to the participant at the time and in the manner determined by
the Administrative Committee. In lieu of shares of Common Stock, a participant
may receive cash, other securities of the Company or a combination thereof, as
determined by the Administrative Committee in its sole discretion.
Administration and Amendments. The Incentive Plan is administered by the
Administrative Committee, which at all times consists of not less than two
directors appointed by the Board of Directors, each of whom will be a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act.
The duties of the Administrative Committee are currently being performed by the
Audit Committee of the Board of Directors, which currently consists of Mr.
Galland and Ms. Neff.
The Administrative Committee is authorized to select eligible participants
and grant Awards, and to interpret the Incentive Plan and related agreements,
notifications and other documents. The Incentive Plan may be amended from time
to time by the Board of Directors, but may not be amended by the Board without
further approval by the stockholders of the Company if such amendment would
result in the Incentive Plan no longer satisfying the requirements of Rule 16b-3
under the Exchange Act.
Accounting Treatment. Appreciation Rights and Performance Units will
require a charge against income of the Company each year representing the
appreciation in the value of such benefits which it is anticipated will be
exercised or paid. In the case of Appreciation Rights, such charge is based on
the excess of the current market price of the Common Stock over the grant price
of the Appreciation Rights or the option price specified in the related Option
Rights. In the case of Performance Units, such charge is based on the dollar
amount expected to be paid at the end of the Performance Period. Restricted
Stock Awards and nonqualified stock options will require a charge against income
equal to the fair market value (as defined in the Incentive Plan) of the shares
at the time of award less the amount, if any, paid by the grantee. Such charge
is spread over the earnout period for such Restricted Stock. Performance Shares
will require a charge against income that, depending on the terms of the Award
of Performance Shares, will be similar to the charge required with respect to
either Restricted Stock or nonqualified stock options.
Federal Income Tax Consequences
Nonqualified Option Rights and Appreciation Rights. Generally, a
participant will not recognize income upon the grant of a nonqualified Option
Right or an Appreciation Right. In general, the holder of a nonqualified Option
Right or an Appreciation Right will recognize ordinary income at the time of
15
<PAGE>
exercise in an amount equal to the excess of the fair market value of the Common
Stock at the time of exercise over the option price (the "Spread"). Upon a
subsequent sale of the shares received upon exercise, the difference between the
net proceeds of sale and the fair market value of the shares on the date of
exercise will generally be taxed as capital gain or loss (long- or short-term,
depending on the holding period).
If a participant pays the option price of a nonqualified Option Right by
the surrender of shares of Common Stock the participant already owns, the
participant will not recognize gain or loss on the surrender of such shares to
the extent that their fair market value equals that of the shares received. To
that extent, the shares received will have a tax basis equal to the basis of the
shares surrendered, and the participant's holding period of the shares received
will include the holding period of the shares surrendered. To the extent that
the value of the shares received exceeds the value of the shares surrendered,
such excess will be ordinary income. Further, the shares received that represent
such excess value will have a basis equal to their fair market value. The
participant's holding period for any excess shares will commence on the day
after they are acquired.
ISOs. A participant will not recognize income upon the grant of an ISO. In
addition, a participant will not recognize income upon the exercise of an ISO if
the participant satisfies certain employment and holding period requirements. To
satisfy the employment requirement, a participant must exercise the option not
later than three months after he or she ceases to be an employee of the Company
(one year if he or she is disabled) unless he or she has died. To satisfy the
holding period requirement, a participant must hold the optioned stock more than
two years from the grant of the Option Right and more than one year after the
transfer of the stock to him or her. If these requirements are satisfied, on the
sale of such stock, the participant will be taxed on any gain, measured by the
difference between the option price and the net proceeds of sale, generally at
long-term capital gains rates.
If shares of Common Stock acquired upon the timely exercise of an ISO are
sold, exchanged, or otherwise disposed of without satisfying the holding period
requirement (a "disqualifying disposition"), the participant will, in the usual
case, recognize ordinary income at the time of disposition equal to the amount
of the Spread. Upon a disqualifying disposition that constitutes a sale or
exchange with respect to which any loss (if sustained) would be recognized, the
amount includible in ordinary income will be limited to the excess, if any, of
the net amount realized on the sale or exchange over the exercise price. In
general, such a disposition is a transaction with an unrelated third party that
is not subject to the wash-sale provisions of the Code.
If a participant pays the option price of an ISO by the surrender of shares
of Common Stock the participant already owns, the participant will not recognize
gain or loss on the surrender of such shares to the extent that their fair
market value equals that of the shares received. To that extent, the shares
received will have a basis equal to the basis of the shares surrendered, and the
participant's holding period of the shares received will include the holding
period of the shares surrendered (although for purposes of determining whether a
disqualifying disposition has occurred, the holding period of the shares
received will commence on the day after the shares are acquired). To the extent
that the value of the shares received exceeds the value of the shares
surrendered, those shares received that represent such excess value will have a
basis equal to zero and a holding period that will commence on the day after
they are acquired. If a participant surrenders shares acquired through the
previous exercise of an ISO before the end of the requisite holding period
applicable to the previous exercise, however, the participant will recognize
ordinary income on the surrender of such shares.
Individuals are subject to an alternative minimum tax ("AMT") based upon an
expanded tax base to the extent such tax exceeds the regular tax liability. The
AMT is imposed at up to a 28% rate on alternative minimum taxable income in
excess of an exemption amount. Alternative minimum taxable income generally is
the taxpayer's taxable income, increased or decreased by certain adjustments and
increased by certain preferences. ISOs are generally treated for AMT purposes in
a manner similar to the regular tax treatment of nonqualified stock options.
Thus, for example, for AMT purposes, upon the exercise of an ISO, the amount of
the Spread will be included in alternative minimum taxable income, and the basis
of the stock will equal its fair market value when the option is exercised. The
annual $45,000 AMT exemption ($33,750 for single taxpayers and $22,500 for
married taxpayers filing separately) is phased out at a rate of 25 cents on the
16
<PAGE>
dollar for AMT income in excess of $150,000 ($112,500 for single taxpayers and
$75,000 for married taxpayers filing separately). A tax credit may be available
in a subsequent taxable year for some or all of any AMT paid.
Option Rights otherwise qualifying as ISOs will be treated as nonqualified
stock options to the extent that the aggregate fair market value of stock with
respect to which ISOs are exercisable for the first time by a participant during
any calendar year (under all of the Company's plans and any of its subsidiaries'
plans) exceeds $100,000 based on the fair market value of the stock at the date
of grant.
Restricted Stock. A participant will not recognize income upon the receipt
of Restricted Stock. If the participant makes a Section 83(b) Election (defined
below), however, he or she will recognize ordinary income in the year of receipt
in an amount equal to the excess of the fair market value of such shares
(determined without regard to the restrictions imposed by the Incentive Plan) at
the time of transfer over any amount paid by the participant therefor; and on
sale of such stock, the difference between the fair market value at the time of
transfer and the net proceeds of sale will generally be taxed as capital gain or
loss. If a participant makes a Section 83(b) Election with respect to Common
Stock that is subsequently forfeited, he or she will not be entitled to deduct
any amount previously included in income by reason of such election. If a
participant does not make a Section 83(b) Election, the participant will
recognize ordinary income in the year or years in which the restrictions
terminate, in an amount equal to the excess, if any, of the fair market value of
such shares on the date the restrictions expire or are removed over any amount
paid by the participant therefor. If a Section 83(b) Election has not been made,
any dividends received with respect to Common Stock subject to restrictions will
be treated as additional compensation income and not as dividend income.
Performance Shares and Performance Units. A participant will not recognize
income upon the award of Performance Shares or Performance Units. In general,
the participant will recognize ordinary income at the time property is
transferred in payment of such Performance Shares or Performance Units in an
amount equal to the aggregate amount of cash and the fair market value of the
Common Stock and any other Company securities received therefor. Upon a
subsequent sale of Common Stock or any other Company securities received in
payment of Performance Shares or Performance Units, any excess of the net
proceeds of sale over the fair market value of the Common Stock or Company
securities on the date of receipt will generally be taxed as capital gain or
loss (long- or short-term, depending on the holding period).
Special Rules Applicable to Insiders. Section 83 of the Code applies to the
transfer of property (including stock) as compensation for personal services.
Section 83 provides for deferral of taxation so long as the person's rights in
the property are subject to a substantial risk of forfeiture and are not
transferable. In the case of participants who are directors and officers of the
Company subject to Section 16(b) of the Exchange Act ("Insiders"), the deferral
provided by Section 83 generally will apply so long as the sale of stock
received under the Incentive Plan could subject the Insider to suit under
Section 16(b) (the "Section 16(b) Deferral"). The effect of the Section 16(b)
Deferral is to postpone valuation and taxation of the stock received until
Section 16(b) becomes inapplicable, resulting probably in an increase or
decrease in the amount of ordinary income ultimately recognized by the
participant due to fluctuations in the value of the stock during the Section
16(b) Deferral period.
The Section 16(b) Deferral, if applicable, can be avoided if the Insider
makes an election (a "Section 83(b) Election"), to the extent such Section 83(b)
Election is otherwise available, within 30 days after the transfer of the stock
to him or her to have such stock taxed as ordinary income at its fair market
value on the date of transfer less the amount, if any, paid by him or her. Any
such election is irrevocable except with the consent of the IRS.
General Matters. The maximum statutory tax rate applicable to ordinary
income is generally 39.6%, while the maximum statutory tax rate applicable to
net capital gains is generally 20%.
The Company will be entitled to a tax deduction corresponding in amount and
time to the employee's recognition of ordinary income in the circumstances
described above, provided, among other things, that such deduction meets the
test of reasonableness; is an ordinary and necessary business expense; does not
17
<PAGE>
constitute "applicable employee remuneration" in excess of $1,000,000 paid to
one of the top five officers for Securities and Exchange Commission proxy
statement disclosure purposes (excluding certain performance-based compensation,
stock options, and benefits under certain plans adopted before February 17,
1993), all within the meaning of Section 162(m) of the Code; and is not an
"excess parachute payment" within the meaning of Section 280G of the Code, and,
provided further, that the Company satisfies any applicable withholding
requirements.
Plan Benefits. To date, the only Awards under the Incentive Plan have been
nonqualified stock options. The following table lists the nonqualified stock
options granted, from adoption of the Incentive Plan in 1991 through September
30, 1997, to the executive officers named in the Summary Compensation Table, all
current executive officers as a group (4 persons), all current directors who are
not executive officers as a group (5 persons), each nominee for election as a
director, each associate of any such director, executive officer or nominee,
each other person who has received more than five percent of the 6,000,000
shares authorized under the Incentive Plan, and all employees, including current
officers who are not executive officers, as a group (112 persons). The number of
shares set forth in the table has been adjusted to reflect the additional shares
received in the Dividends as to options which were outstanding and not
previously exercised at the time of the Dividends.
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
Current executive officers:
---------------------------
<S> <C>
Donald R. Horton* -
Richard Beckwitt* 450,083
David J. Keller* 386,766
Donald J. Tomnitz* 361,238
-------
Current executive officers, as a group 1,198,087
<CAPTION>
Current directors who are not executive officers:
-------------------------------------------------
<S> <C>
Richard I. Galland* 5,000
Richard L. Horton* -
Terrill J. Horton* -
Francine I. Neff* 5,000
Scott J. Stone* -
------
Current directors who are not executive
officers, as a group 10,000
<CAPTION>
Each other person who has received awards for more than
-------------------------------------------------------
five percent of the shares under the Incentive Plan:
----------------------------------------------------
<S> <C>
William K. Peck 355,661
All employees, including current officers who
are not executive officers, as a group 3,012,988
- ----------
<FN>
* Nominee for election as a director.
</FN>
</TABLE>
Copy of Plan. Stockholders entitled to vote at the Annual Meeting may
obtain a copy of the Incentive Plan upon request to the Company, Attention:
General Counsel, 1901 Ascension Boulevard, Suite 100, Arlington, Texas 76006.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSAL TO AMEND THE COMPANY'S
1991 STOCK INCENTIVE PLAN, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK ISSUABLE THEREUNDER AND RECOMMENDS VOTING "FOR" THE
ADOPTION OF THE PROPOSAL.
18
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP served as the Company's independent certified public
accountants for the fiscal year ended September 30, 1997, and has been engaged
to continue to serve through the 1999 fiscal year. A representative of Ernst &
Young LLP is expected to be present at the Annual Meeting and will have an
opportunity to make a statement and to respond to appropriate questions from
stockholders.
STOCKHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder who intends to present a proposal for action at the
Company's 1999 Annual Meeting of Stockholders and to have the Company include
such proposal in its proxy soliciting materials pursuant to Rule 14a-8 under the
Exchange Act must deliver a copy of the proposal to the Company not later than
August 13, 1998. In addition, the Bylaws of the Company provide that only
stockholder proposals submitted in a timely manner to the Secretary of the
Company may be acted upon at an annual meeting of stockholders. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than 30 calendar days prior
to the date of the originally scheduled meeting; provided, however, that, if
less than 40 calendar days' notice or prior public disclosure of the date of the
scheduled meeting is given or made by the Company, notice by the stockholder to
be timely must be so received not later than the close of business on the tenth
calendar day following the earlier of the day on which such notice of the date
of the scheduled meeting was mailed or the day on which such public disclosure
was made.
OTHER MATTERS
Management knows of no other matters to be voted upon at the Annual
Meeting. If any other matter is properly brought before the Annual Meeting, it
is the intention of the persons named in the form of proxy to vote in their
discretion upon such matters in accordance with their judgment.
You are urged to sign, date and return the enclosed proxy in the envelope
provided. No postage is required if the envelope is mailed from within the
United States. If you subsequently decide to attend the 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,
CHARLES N. WARREN
Senior Vice President, General Counsel
and Assistant Secretary
Arlington, Texas
December 12, 1997
19
<PAGE>
PROXY
D.R. HORTON, INC.
1901 Ascension Blvd., Suite 100, Arlington, Texas 76006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints Donald R.
Horton and David J. Keller, and each of them, attorneys, agents and proxies of
the undersigned, with full power of substitution to each and hereby authorizes
them to represent and to vote as designated on the reverse side of this card,
all shares of Common Stock of D.R. Horton, Inc. (the "Company"), held of record
by the undersigned at the close of business on December 10, 1997, at the Annual
Meeting of Stockholders to be held on January 22, 1998, or any adjournment
thereof.
PLEASE SIGN AND DATE ON REVERSE SIDE.
- --------------------------------------------------------------------------------
A |X|Please mark your votes as in this example.
1. ELECTION FOR all nominees WITHHOLD AUTHORITY
OF listed at right to vote for all
DIRECTORS (except as marked to nominees listed
the contrary below at right
[ ] [ ]
Nominees: Donald R. Horton, Richard Beckwitt, Richard I. Galland,
Richard L. Horton, Terrill J. Horton, David J. Keller, Francine I. Neff,
Scott J. Stone, and Donald J. Tomnitz
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
FOR AGAINST ABSTAIN
2. A proposal to amend the Company's 1991 [ ] [ ] [ ]
Stock Incentive Plan, as amended,
to increase the number of authorized shares
of Common Stock, $0.01 par value,
available for issuance thereunder from 3,969,041 shares to 6,000,000
shares.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly be brought before the meeting or any adjournment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS. THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
PROPOSALS.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes, shall lawfully do or cause to be
done by virtue hereof, and hereby revokes any and all proxies heretofore given
by the undersigned to vote at said meeting. The undersigned acknowledges receipt
of the notice of said annual meeting and the proxy statement accompanying said
notice.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
Dated: 199
--------------------------- ------
-------------------------------------------
(Signature)
-------------------------------------------
(Signature)
Note: Please sign exactly as names appear herein. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full titles as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
<PAGE>
D. R. HORTON, INC.
1991 Stock Incentive Plan
1. Purpose. The purpose of this Plan is to attract and retain directors,
officers, key employees and other agents and consultants for D. R. Horton, Inc.
(the "Company") and its Subsidiaries and to provide to such persons incentives
and rewards for superior performance.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Paragraph
5 of this Plan.
"Award" means an Appreciation Right, an Option Right, an award
of Performance Shares, a Performance Unit or an award of Restricted
Stock.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as in effect
from time to time.
"Committee" means the committee to which the Board has delegated
its authority to administer this Plan pursuant to Paragraph 13 of this
Plan.
"Common Stock" means the Common Stock, par value $.01 per share,
of the Company or any security into which such Common Stock may be
changed by reason of any transaction or event of the type described in
Paragraph 10 of this Plan.
"Company Security" means any security (as that term is defined
in Section 2(1) of the Securities Act of 1933) of the Company other than
Common Stock.
"Date of Grant" means the date specified by the Board on which a
grant of Option Rights, Appreciation Rights, Performance Units or
Performance Shares or a grant or sale of Restricted Stock shall become
effective (which date shall not be earlier than the date on which the
Board takes action with respect thereto).
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"Fair Market Value" means the value of any Company Security as
determined by the Board in its sole discretion as of the
date of any such determination.
"Grant Price" means the price per share of Common Stock at which
an Appreciation Right not granted in tandem with an Option Right is
granted.
"Management Objectives" means the objectives, if any,
established by the Board that are to be achieved with respect to an
Award granted under this Plan, which may be described in terms of
Company-wide objectives, in terms of objectives that are related to
performance of the division, Subsidiary, department or function within
the Company or a Subsidiary in which the Participant receiving the Award
is employed or in other terms, and which shall relate to the Performance
Period determined by the Board. The Board may adjust Management
Objectives and any minimum acceptable level of achievement with respect
to any Management Objectives if, in the sole judgment of the Board,
events or transactions have occurred which are unrelated to the
performance of the Participant and result in a distortion of the
Management Objectives or such minimum acceptable level of achievement.
"Market Value per Share" means, at any date, the closing sale
price of the Common Stock on that date (or, if there are no sales on
that date, the last preceding date on which there was a sale) in the
principal market in which the Common Stock is traded, or, if no market
for the Common Stock exists, the price determined by the Board in its
sole discretion at the time of any such determination.
"Option Price" means the price per share payable on
exercise of an Option Right.
"Option Right" means the right to purchase a share of Common
Stock upon exercise of an option granted pursuant to Paragraph 4 of this
Plan.
"Participant" means a person who is selected by the Board to
receive benefits under this Plan and who is at the time a director,
officer, key employee, consultant or agent of the Company or any of its
Subsidiaries, or who has agreed to commence serving in any such capacity
within 90 days of the Date of Grant. Notwithstanding the foregoing, no
non-employee director of the Company shall be eligible to receive any
benefit under this Plan if he or she would thereby cease to be a
"disinterested person" as that term is defined in Rule 16b-3.
"Performance Period" means, in respect of an Award, a period of
time established by the Board within which the Management Objectives
relating to such Award are to be achieved.
"Performance Shares" means shares of Common Stock granted
pursuant to Paragraph 8 of this Plan.
"Performance Unit" means a unit equivalent to $100
awarded pursuant to Paragraph 7 of this Plan.
"Restricted Stock" means shares of Common Stock granted or sold
pursuant to Paragraph 6 of this Plan as to which neither the substantial
risk of forfeiture nor the restrictions on transfer referred to therein
has expired.
"Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission (or any successor rule to the same effect) as in effect from
time to time.
"Spread" means the excess of the Market Value per Share on the
date when an Appreciation Right is exercised over (a) the Option Price
provided for in the related Option Right or (b) if there is no tandem
Option Right, the Grant Price provided for in the Appreciation Right,
multiplied by the number of shares of Common Stock in respect of which
the Appreciation Right is exercised.
"Subsidiary" means any corporation in which at the time the
Company owns or controls, directly or indirectly, not less than 50% of
the total combined voting power represented by all classes of stock
issued by such corporation.
3. Shares Available Under Plan. The shares of Common Stock and any other
Company Security which may be (a) sold upon the exercise of Option Rights, (b)
delivered upon the exercise of Appreciation Rights, (c) granted or sold as
Restricted Stock and released from substantial risks of forfeiture and
restrictions on transfer thereof or (d) delivered in payment of any Performance
Units or as Performance Shares (or in lieu thereof), shall not exceed in the
aggregate 35,000 shares, subject to adjustment as provided in Paragraph 10 of
this Plan. Such shares may be shares of original issuance or treasury shares or
a combination of the foregoing. Upon exercise of any Appreciation Rights, there
shall be deemed to have been delivered under this Plan for purposes of this
Paragraph 3 the number of shares of Common Stock covered by the Appreciation
Rights or the related Option Rights, regardless of whether such Appreciation
Rights were paid in cash, Company Securities or shares of Common Stock. Subject
to the provisions of the preceding sentence, any shares of Common Stock which
are subject to Option Rights or Appreciation Rights or are awarded or sold as
Restricted Stock that are terminated, unexercised, forfeited or surrendered or
which expire for any reason will again be available for issuance under this
Plan.
4. Option Rights. The Board may, from time to time and upon such terms and
conditions as it may determine, authorize the granting to Participants of
options to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations, and shall be subject to all of the limitations,
contained in the following provisions:
(a) Each grant shall specify the number of shares of Common
Stock to which it pertains.
(b) Each grant shall specify the Option Price, which shall not
be less than 50% of the Market Value per Share on the Date of Grant.
(c) Each grant shall specify that the Option Price shall be
payable (i) in cash or by check acceptable to the Company, (ii) by the
transfer to the Company of shares of Common Stock having an aggregate
Market Value per Share at the time of exercise equal to the aggregate
Option Price or (iii) by a combination of such methods of payment. Any
grant may provide for deferred payment of the Option Price from the
proceeds of sale through a broker on the exercise date of some or all of
the shares to which such exercise relates.
(d) Successive grants may be made to the same Participant
whether or not any Option Rights previously granted to such Participant
remain unexercised.
(e) Each grant shall specify the required period or periods of
continuous service by the Participant with the Company or any Subsidiary
and/or the Management Objectives to be achieved before the Option Rights
or installments thereof
will become exercisable.
(f) Each grant the exercise of which, or the timing of the
exercise of which, is dependent, in whole or in part, on the achievement
of Management Objectives may specify a minimum level of achievement in
respect of the specified Management Objectives below which no Options
Rights will be exercisable and may set forth a formula or other method
for determining the number of Option Rights that will be exercisable if
performance is at or above such minimum but short of full achievement of
the Management Objectives.
(g) Option Rights granted under this Plan may be (i) options
which are intended to qualify under particular provisions of the Code,
(ii) options which are not intended to so qualify or (iii) combinations
of the foregoing.
(h) No Option Right shall be exercisable more than ten years
from the Date of Grant.
(i) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered
to the Participant and containing such terms and provisions, consistent
with this Plan, as the Board may approve.
5. Appreciation Rights. The Board may also authorize the granting to any
Participant of Appreciation Rights. Appreciation Rights may be granted in tandem
with Option Rights or separate and apart from a grant of Option Rights. An
Appreciation Right shall be a right of the Participant who has been granted such
Award to receive from the Company upon exercise an amount which shall be
determined by the Board at the Date of Grant and shall be expressed as a
percentage of the Spread (not exceeding 100%) at the time of exercise. An
Appreciation Right granted in tandem with an Option Right may be exercised only
by surrender of the related Option Right. Each grant of an Appreciation Right
may utilize any or all of the authorizations, and shall be subject to all of the
limitations, contained in the following provisions:
(a) Each grant shall state whether it is made in tandem with
Option Rights and, if not made in tandem with any Option Rights, shall
specify the number of shares of Common Stock in respect of which it is
made.
(b) Each grant made in tandem with Option Rights shall specify
the Option Price and each grant not made in tandem with Option Rights
shall specify the Grant Price, which in either case shall not be less
than 50% of the Market Value per Share on the Date of Grant.
(c) Any grant may specify that the amount payable on exercise of
an Appreciation Right may be paid by the Company in (i) cash, (ii)
shares of Common Stock having an aggregate Market Value per Share equal
to the Spread, (iii) Company Securities having an aggregate Fair Market
Value equal to the Spread or (iv) any combination thereof, as determined
by the Board in its sole discretion at the time of payment.
(d) Any grant may specify that the amount payable on exercise of
an Appreciation Right (valuing shares of Common Stock for this purpose
at their Market Value per Share at the date of exercise and valuing
Company Securities for this purpose at their Fair Market Value at the
date of exercise) may not exceed a maximum specified by the Board at the
Date of Grant.
(e) Each grant shall specify the required period or periods of
continuous service by the Participant with the Company or any Subsidiary
and/or Management Objectives to be achieved before the Appreciation
Rights or installments thereof will become exercisable, and shall
provide that no Appreciation Right may be exercised except at a time
when the Spread is positive and, with respect to any grant made in
tandem with Option Rights, when the related Option Right is also
exercisable.
(f) Each grant the exercise of which, or the timing of the
exercise of which, is dependent, in whole or in part, on the achievement
of Management Objectives may specify a minimum level of achievement in
respect of the specified Management Objectives below which no
Appreciation Rights will be exercisable and may set forth a formula or
other method for determining the number of Appreciation Rights that will
be exercisable if performance is at or above such minimum but short of
full achievement of the Management Objectives.
(g) Each grant of an Appreciation Right shall be evidenced by a
notification executed on behalf of the Company by any officer and
delivered to and accepted by the Participant receiving the grant, which
notification shall describe such Appreciation Right, identify any Option
Right granted in tandem with such Appreciation Right, state that such
Appreciation Right is subject to all the terms and conditions of this
Plan and contain such other terms and provisions, consistent with this
Plan, as the Board may approve.
6. Restricted Stock. The Board may also authorize the granting or sale to
Participants of Restricted Stock. Each such grant or sale may utilize any or all
of the authorizations, and shall be subject to all of the limitations, contained
in the following provisions:
(a) Each such grant or sale shall constitute an immediate
transfer of the ownership of shares of Common Stock to the Participant
in consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, but subject
to the substantial risk of forfeiture and restrictions on transfer
hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that
is less than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the shares of
Restricted Stock covered by such grant or sale shall be subject, for a
period to be determined by the Board at the Date of Grant, to a
"substantial risk of forfeiture" within the meaning of Section 83 of the
Code and the regulations of the Internal Revenue Service thereunder.
(d) Each such grant or sale shall provide that during the period
for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Stock shall be prohibited or
restricted in a manner and to the extent prescribed by the Board at the
Date of Grant (which restrictions may include, without limiting the
generality of the foregoing, rights of repurchase or first refusal in
the Company or provisions subjecting the Restricted Stock to a
continuing substantial risk of forfeiture in the hands of any
transferee).
(e) Each grant or sale of Restricted Stock shall be evidenced by
an agreement executed on behalf of the Company by any officer and
delivered to and accepted by the Participant and shall contain such
terms and provisions, consistent with this Plan, as the Board may
approve.
7. Performance Units. The Board may also authorize the granting of
Performance Units which will become payable to a Participant upon achievement of
specified Management Objectives. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the limitations, contained in the
following provisions:
(a) Each grant shall specify the number of Performance Units to
which it pertains.
(b) Each grant shall specify the Management Objectives that are
to be achieved by the Participant.
(c) Each grant shall specify a minimum acceptable level of
achievement in respect of the specified Management Objectives below
which no payment will be made and may set forth a formula or other
method for determining the amount of the payment to be made if
performance is at or above such minimum but short of full achievement of
the Management Objectives.
(d) Each grant shall specify the time and manner of payment of
Performance Units which have become payable, which payment may be made
in (i) cash, (ii) shares of Common Stock having an aggregate Market
Value per Share equal to the aggregate value of the Performance Units
which have become payable, (iii) Company Securities having an aggregate
Fair Market Value equal to the aggregate value of the Performance Units
which have become payable or (iv) any combination thereof, as determined
by the Board in its sole discretion at the time of payment.
(e) Each grant of a Performance Unit shall be evidenced by a
notification executed on behalf of the Company by any officer and
delivered to and accepted by the Participant, which notification shall
describe the Performance Units, state that such Performance Units are
subject to all the terms and conditions of this Plan, and contain such
other terms and provisions, consistent with this Plan, as the Board may
approve.
8. Performance Shares. The Board may also authorize the granting to
Participants of Performance Shares. Each such grant may utilize any or all of
the authorizations, and shall be subject to all of the limitations, contained in
the following provisions:
(a) Each grant shall specify the number of Performance Shares to
which it pertains.
(b) Each grant shall specify the Management Objectives that are
to be achieved by the Participant.
(c) Each grant shall specify a minimum acceptable level of
achievement in respect of the specified Management Objectives below
which no delivery of Performance Shares will occur and may set forth a
formula or other method for determining the number of Performance Shares
to be delivered if performance is at or above such minimum but short of
full achievement of the Management Objectives.
(d) Each grant shall specify the time and manner of delivery of
Performance Shares which have been earned, provided that in lieu of the
delivery of all or any Performance Shares, the Participant may receive
(i) cash in an amount equal to the aggregate Market Value per Share of
the Performance Shares, (ii) Company Securities having an aggregate Fair
Market Value equal to the aggregate Market Value per Share of the
Performance Shares or (iii) any combination thereof, as determined by
the Board in its sole discretion at the time of payment.
(e) Each grant of Performance Shares shall be evidenced by a
notification executed on behalf of the Company by any officer and
delivered to and accepted by the Participant, which notification shall
state that such Performance Shares are subject to all the terms and
conditions of this Plan and contain such other terms and provisions,
consistent with this Plan, as the Board may approve.
9. Transferability. No Option Right, Appreciation Right, Performance Unit
that has not become payable or Performance Share that has not been delivered
shall be transferable by a Participant other than by will or the laws of descent
and distribution. Option Rights or Appreciation Rights shall be exercisable
during the Participant's lifetime only by the Participant or by the
Participant's guardian or legal representative.
10. Adjustments. The Board may make or provide for such adjustments in the
maximum number of shares specified in Paragraph 3 of this Plan, in the numbers
of shares of Common Stock covered by outstanding Option Rights, Appreciation
Rights, awards of Restricted Stock, awards of Performance Units and awards of
Performance Shares granted hereunder, and/or in the Option Price or Grant Price
applicable to such Option Rights and Appreciation Rights, as the Board in its
sole discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company,
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
11. Fractional Shares. The Company shall not be required to issue any
fractional share of Common Stock or of any Company Security pursuant to this
Plan. The Board may provide for the elimination of fractions or for the
settlement of fractions in cash.
12. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements in the discretion of the Board may include relinquishment of
a portion of such benefit.
13. Administration of the Plan.
(a) This Plan shall be administered by the Board, which may from
time to time delegate all or any part of its authority under this Plan
to a committee of not less than two non-employee directors appointed
by the Board, each of whom shall be a "disinterested person" within the
meaning of Rule 16b-3 (the "Committee). To the extent of such
delegation, references herein to the "Board" shall include the
Committee. A majority of the Committee shall constitute a quorum,
and the action of the members of the Committee present at any meeting
at which a quorum is present, or acts unanimously approved in writing,
shall be the acts of the Committee.
(b) The interpretation and construction by the Board of any
provision of this Plan or of any agreement, notification or document
evidencing the grant of an Award and any determination by the Board
pursuant to any provision of this Plan or of any such agreement,
notification or document shall be final and conclusive. No member of
the Board or the Committee shall be liable for any such action or
determination made in good faith.
14. Amendments, Etc.
(a) This Plan may be amended from time to time by the Board but
may not be amended by the Board without further approval by the
stockholders of the Company if such amendment would result in this
Plan no longer satisfying the requirements of Rule 16b-3.
(b) The Board may, with the concurrence of the affected
Participant, cancel any agreement evidencing any Award granted under
this Plan. In the event of such cancellation, the Board may authorize
the granting of new Awards (which may or may not cover the same number
of shares or units which had been the subject of the prior Award) in
such manner, at such price and subject to the same terms, conditions
and discretions as would have been applicable under this Plan had the
cancelled Awards not been granted.
(c) In case of termination of employment by reason of death,
disability or retirement under a retirement plan of the Company or a
Subsidiary of an Optionee who holds an Option Right or Appreciation
Right not immediately exercisable in full, or any Restricted Stock as to
which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, or any Performance Units which
have not become fully payable or any Performance Shares that have not
been delivered, the Board may, in its sole discretion, accelerate the
time at which such Option Right or Appreciation Right may be exercised
or the time at which such substantial risk of forfeiture or prohibition
or restriction on transfer will lapse or the time at which such
Performance Units will be deemed to have become fully payable
or Performance Shares will be delivered.
(d) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the
Company or any Subsidiary, nor shall it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate
such Participant's employment or other service at any time.
<PAGE>
D. R. HORTON, INC.
1991 STOCK INCENTIVE PLAN
Amendment No. 1
The D.R. Horton, Inc. 1991 Stock Incentive Plan (the "Plan") was amended by
the Board of Directors and stockholders of the Company in the following
respects:
Section 3. Shares Available Under Plan.
Section 3 was amended to read in its entirety as follows:
"3. Shares Available Under Plan. The shares of Common Stock and
any other Company Security which may be (a) sold upon the exercise of
Option Rights, (b) delivered upon the exercise of Appreciation Rights,
(c) granted or sold as Restricted Stock and released from substantial
risks of forfeiture and restrictions on transfer thereof or (d)
delivered in payment of any Performance Units or as Performance
Shares (or in lieu thereof), shall not exceed in the aggregate 52,500
shares, subject to adjustment as provided in Paragraph 10 of this Plan.
Such shares may be shares of original issuance or treasury shares or a
combination of the foregoing. Upon exercise of any Appreciation Rights,
there shall be deemed to have been delivered under this Plan for
purposes of this Paragraph 3 the number of shares of Common Stock
covered by the Appreciation Rights or the related Option Rights,
regardless of whether such Appreciation Rights were paid in cash,
Company Securities or shares of Common Stock. Subject to the provisions
of the preceding sentence, any shares of Common Stock which are subject
to Option Rights or Appreciation Rights or are awarded or sold as
Restricted Stock that are terminated, unexercised, forfeited or
surrendered or which expire for any reason will again be available
for issuance under this Plan."
October 1, 1991
<PAGE>
D. R. HORTON, INC.
1991 STOCK INCENTIVE PLAN
Amendment No. 2
On March 18, 1992, the Board of Directors of the Company adopted a 30-for-1
stock split of its outstanding Common Stock. To give effect to such stock split,
the Board of Directors amended the D.R. Horton, Inc. 1991 Stock Incentive Plan
(the "Plan") in the following respects:
Section 3. Shares Available Under Plan.
Section 3 was amended to read in its entirety as follows:
"3. Shares Available Under Plan. The shares of Common Stock and
any other Company Security which may be (a) sold upon the exercise of
Option Rights, (b) delivered upon the exercise of Appreciation Rights,
(c) granted or sold as Restricted Stock and released from substantial
risks of forfeiture and restrictions on transfer thereof or (d)
delivered in payment of any Performance Units or as Performance
Shares (or in lieu thereof), shall not exceed in the aggregate
1,575,000 shares, subject to adjustment as provided in Paragraph 10
of this Plan. Such shares may be shares of original issuance or
treasury shares or a combination of the foregoing. Upon exercise
of any Appreciation Rights, there shall be deemed to have been
delivered under this Plan for purposes of this Paragraph 3 the number of
shares of Common Stock covered by the Appreciation Rights or the related
Option Rights, regardless of whether such Appreciation Rights were paid
in cash, Company Securities or shares of Common Stock. Subject to the
provisions of the preceding sentence, any shares of Common Stock which
are subject to Option Rights or Appreciation Rights or are awarded or
sold as Restricted Stock that are terminated, unexercised, forfeited or
surrendered or which expire for any reason will again be available for
issuance under this Plan."
This Amendment supersedes Amendment No. 1 to the Plan, dated
October 1, 1991.
March 18, 1992
<PAGE>
D. R. HORTON, INC.
1991 STOCK INCENTIVE PLAN
Amendment No. 3
The D.R. Horton, Inc. 1991 Stock Incentive Plan (the "Plan") was amended by
the Board of Directors of the Company on July 23, 1992, in the following
respects:
Section 2. Definitions.
Section 2 was amended to read in its entirety as follows:
"Subsidiary" means any corporation, trust, joint venture,
partnership or other unincorporated entity in which, at the time, the
Company owns or controls, directly or indirectly, (i) in the case of a
corporation, not less than 50% of the total combined voting power
represented by all classes of stock issued by such corporation, or (ii)
in the case of a trust, joint venture, partnership or other unincorp-
orated entity, not less than 50% of the beneficial interest of such
entity.
July 23, 1992
<PAGE>
D.R. HORTON, INC.
1991 STOCK INCENTIVE PLAN
Amendment No. 4
The D.R. Horton, Inc. 1991 Stock Incentive Plan, as amended (the "Plan"),
was amended by the Board of Directors of the Company on November 17, 1994, in
the following respects:
1. The definition of "Market Value per Share" contained in Paragraph 2
of the Plan is hereby amended to read in its entirety as follows:
"'Market Value per Share' means, at any date, the average of the
inside bid and asked price of the Common Stock at the close of trading
on that date in the principal market in which the Common Stock is
traded, or, if no market for the Common Stock exists, the price
determined by the Board in its sole discretion at the time of any such
determination."
2. The definition of "Performance Unit" contained in Paragraph 2 of the
Plan is hereby amended to read in its entirety as follows:
"'Performance Unit' means a unit of a specified dollar amount
established by the Board and awarded pursuant to Paragraph 7 of this
Plan."
3. Paragraph 13 of the Plan is hereby amended by adding thereto a new
subparagraph (c) which shall read in its entirety as follows:
"(c) Notwithstanding any other provision of this Plan, this
Plan may be administered by the Chairman of the Board and President
of the Company with respect to matters relating solely to Participants
who are not subject to the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, as amended, and any references to
the 'Board' or the 'Committee', as the case may be, shall include the
Chairman of the Board and President; provided, however, that no such
authority shall be deemed to have been granted hereunder to the
extent that any such grant shall cause the disqualification of this
Plan from reliance on the exemption provided by Rule 16b-3."
4. In all other respects, the Plan as previously approved is hereby
ratified and confirmed.
November 17, 1994
<PAGE>
D.R. HORTON, INC.
1991 STOCK INCENTIVE PLAN
Amendment No. 5
The D.R. Horton, Inc. 1991 Stock Incentive Plan, as amended (the "Plan"),
was amended by the Board of Directors of the Company on November 16, 1995, in
the following respects:
1. The first sentence of Paragraph 3 of the Plan is hereby amended to
read in its entirety as follows:
"The shares of Common Stock and any other Company Security which
may be (a) sold upon the exercise of Option Rights, (b) delivered upon
the exercise of Appreciation Rights, (c) granted or sold as Restricted
Stock and released from substantial risks of forfeiture and restrictions
on transfer thereof or (d) delivered in payment of any Performance Units
or as Performance Shares (or in lieu thereof), shall not exceed in the
aggregate 3,675,038 shares, subject to adjustment as provided in
Paragraph 10 of this Plan."
2. In all other respects, the Plan as previously approved is hereby
ratified and confirmed.
November 16, 1995
<PAGE>
D.R. HORTON, INC.
1991 STOCK INCENTIVE PLAN
Amendment No. 6
The D.R. Horton, Inc. 1991 Stock Incentive Plan, as amended (the "Plan"),
was amended by the Board of Directors of the Company on November 18, 1997, in
the following respects:
1. The first sentence of Paragraph 3 of the Plan is hereby amended to
read in its entirety as follows:
The shares of Common Stock and any other Company Security which
may be (a) sold upon the exercise of Option Rights, (b) delivered upon
the exercise of Appreciation Rights, (c) granted or sold as Restricted
Stock and released from substantial risks of forfeiture and restrictions
on transfer thereof or (d) delivered in payment of any Performance Units
or as Performance Shares (or in lieu thereof), shall not exceed in the
aggregate 6,000,000 shares, subject to adjustment as provided in
Paragraph 10 of this Plan.
2. In all other respects, the Plan as previously approved is hereby
ratified and confirmed.
November 18, 1997
