[Logo for D.R. Horton Custom Homes]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Friday, January 15, 1999
Fellow Stockholders of D.R. Horton, Inc.:
You are invited to attend the 1999 Annual Meeting of Stockholders of
D.R. Horton, Inc. It will be held at our corporate offices, 1901 Ascension
Blvd., Suite 100, Arlington, Texas, on Friday, January 15, 1999, at 9:30 a.m.,
central standard time, for the following purposes:
o Elect ten directors.
o Vote on an amendment to our Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 100,000,000
shares to 200,000,000 shares.
o Vote on a proposed Employee Stock Purchase Plan.
o Conduct other business properly brought before the meeting.
Only stockholders of record at the close of business on December 3,
1998, are entitled to notice of and to vote at the meeting or any adjournment
thereof.
While we would like to have each of you attend the meeting and vote
your shares in person, we realize this may not be possible. However, whether or
not you plan to attend the meeting, your vote is very important. A form of proxy
on which to indicate your vote and an envelope, postage prepaid, in which to
return your proxy are enclosed. 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 at the meeting, we would be glad to hear from you.
Sincerely,
DONALD R. HORTON
Chairman of the Board
Arlington, Texas
December 10, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
NOTICE OF MEETING........................................................... i
GENERAL..................................................................... 1
Time, Place and Purposes of Meeting................................ 1
Solicitation of Proxies............................................ 1
Revocation and Voting of Proxies................................... 1
Outstanding Shares And Voting Rights............................... 1
Quorum Requirement................................................. 2
Vote Required...................................................... 2
ELECTION OF DIRECTORS....................................................... 2
Nominees for Director.............................................. 3
BENEFICIAL OWNERSHIP OF COMMON STOCK........................................ 6
Management......................................................... 6
Certain Other Beneficial Owners.................................... 7
EXECUTIVE COMPENSATION...................................................... 8
Summary Compensation Table......................................... 8
Option/SAR Grants in Last Fiscal Year.............................. 9
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values............................. 9
Compensation of Directors.......................................... 10
Transactions with Management....................................... 10
Compensation Committee Interlocks and Insider Participation........ 11
Compensation Committee Report on Executive Compensation............ 11
Stock Performance.................................................. 13
MEETINGS AND COMMITTEES OF THE BOARD........................................ 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..................... 16
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION....................................................... 16
PROPOSED EMPLOYEE STOCK PURCHASE PLAN....................................... 17
INDEPENDENT PUBLIC ACCOUNTANTS.............................................. 18
STOCKHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING............................. 18
OTHER MATTERS............................................................... 18
EXHIBIT A-PROPOSED EMPLOYEE STOCK PURCHASE PLAN............................. A-1
<PAGE>
D.R. Horton, Inc.
1901 Ascension Blvd.
Suite 100
Arlington, Texas 76006
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
January 15, 1999
GENERAL
Time, Place and Purposes of Meeting
The 1999 Annual Meeting of Stockholders of D.R. Horton, Inc. (the
"Company") will be held on Friday, January 15, 1999, at 9:30 a.m., central
standard time, at the Company's corporate offices, 1901 Ascension Blvd., Suite
100, Arlington, Texas (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.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of the Company. 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 10, 1998. 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.
Revocation and Voting of Proxies
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 Amended and Restated Certificate of
Incorporation, as amended (see "PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION"), for the proposed Employee Stock Purchase Plan (see "PROPOSED
EMPLOYEE STOCK PURCHASE PLAN"), and at the discretion of the proxyholders on all
other matters properly brought before the Annual Meeting or any adjournment
thereof.
Outstanding Shares And Voting Rights
There were 61,410,618 shares of the Company's Common Stock, $.01 par
value (the "Common Stock"), issued and outstanding on December 3, 1998, 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. 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.
<PAGE>
Quorum Requirement
The Company's Bylaws provide that if the holders of a majority of the
issued and outstanding shares of Common Stock are present in person or
represented by proxy and entitled to vote, there will be a quorum. The aggregate
number of votes entitled to be cast by all stockholders present in person or
represented by proxy at the Annual Meeting, whether those stockholders vote for,
against or abstain from voting on any matter, will be counted for purposes of
determining whether a quorum exists.
Vote Required
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. This
means that the ten nominees who receive the highest number of votes will be
elected. Approval of the proposal to amend the Company's Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of Common Stock. Approval of the Employee Stock
Purchase Plan requires the affirmative vote of a majority of the Common Stock
which has voting power present in person or represented by proxy. An abstention
from voting on a matter, other than the election of 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 (ie. when a
broker does not have authority to vote on a specific matter) will have no effect
with respect to the matter.
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has fixed
the number of directors at ten 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. However, if less than forty calendar days' notice or prior
public disclosure of the date of the meeting is given 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.
2
<PAGE>
Nominees for Director
The following is a summary of certain information regarding the
nominees for election as directors.
Director Principal Occupation and
Name Age Since Business Experience
-------- ------ -------- --------------------------------------
Donald R. Horton.... 48 1991 Mr. Horton has been Chairman of the
Board of the Company since July 1991,
and he was its President from July
1991 until November 1998. He has been
involved in the real estate and
homebuilding industries since 1972,
and he 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.
Bradley S. Anderson. 37 1998 Mr. Anderson is a First Vice President
of CB Richard Ellis, Inc., an
international real estate brokerage
company, and he has had various
positions in Phoenix, Arizona with its
predecessor, CB Commercial Real Estate
Group, Inc., since January 1987. He
served as Interim Chairman of the
Board of Continental Homes Holding
Corp. ("Continental") from October
1997 through April 1998, when it
merged into the Company, and he became
a director of the Company.
Richard Beckwitt.... 39 1993 Mr. Beckwitt is President of the
Company. He was an Executive Vice
President of the Company from March
1993 until November 1998, when he
became President of the Company. From
July 1996 until November 1998, Mr.
Beckwitt also was President of the
Company's Investments Division; and
during 1996 he was Regional Manager of
the Company's Eastern Region. 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.. 82 1992 Mr. Galland 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... 55 1992 From May 1985 until September 1997,
Mr. Horton was Vice President in
charge of the Company's Dallas-Fort
Worth East Division. Since September
1997, he has been retired. Richard L.
Horton is the uncle of Donald R.
Horton and Terrill J. Horton.
3
<PAGE>
Director Principal Occupation and
Name Age Since Business Experience
-------- ------ -------- --------------------------------------
Terrill J. Horton... 50 1992 From September 1981 until September
1997, Mr. Horton was Vice President in
charge of one of the two former sales
divisions that now form the Company's
Dallas-Fort Worth North Division.
Since September 1997, he has been
retired. Terrill J. Horton is the
brother of Donald R. Horton and the
nephew of Richard L. Horton.
David J. Keller..... 50 1991 Mr. Keller 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.... 73 1992 Since 1979, Ms. Neff has been Vice
President of NETS, Inc., a
privately-owned investment company,
and a partner in EVEN Resources, a
privately-owned consulting service and
investment company. 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.
Scott J. Stone...... 47 1992 Mr. Stone has been Vice President of
various divisions of the Company since
1988, and was Vice President - Eastern
Region of the Company from August 1994
to September 30, 1996. Since October
1996, Mr. Stone has been active in
personal investments, 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... 50 1995 Mr. Tomnitz is Vice Chairman and Chief
Executive Officer of the Company. He
was a Vice President of various
divisions of the Company from 1983
until he was elected Vice President -
Western Region of the Company in
August 1994. From July 1996 until
November 1998, Mr. Tomnitz was
President of the Company's
Homebuilding Division; in January 1998
he was elected an Executive Vice
President of the Company; and in
November 1998 he was elected Vice
Chairman of the Company and Chief
Executive Officer. 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.
4
<PAGE>
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 financing 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>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Management
The following table shows the beneficial ownership of the Company's
Common Stock as of November 30, 1998 by (1) all directors and nominees for
director of the Company, (2) all executive officers named in the Summary
Compensation Table under "Executive Compensation" and (3) 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.
Amount and Nature of
Name of Beneficial Owner Common Stock Beneficially Owned
- ------------------------ -----------------------------------------------
Number of Shares Right to Percent of
Beneficially Owned Acquire (1) Class
------------------ ----------- ----------
Donald R. Horton........... 9,345,994(2) --- 15.2%
Bradley S. Anderson........ 1,350 1,687 *
Richard Beckwitt........... --- 158,733 *
Richard I. Galland......... 915 1,000 *
W. Thomas Hickcox.......... 30,375 53,999 *
Terrill J. Horton.......... 3,788,903(3) --- 6.2%
Richard L. Horton.......... 737,806 --- 1.2%
David J. Keller............ 8,000(4) 99,500 *
Francine I. Neff........... 363 1,000 *
Scott J. Stone............. 109,856 --- *
Donald J. Tomnitz.......... 7,334(5) 121,333 *
All directors and named
executive officers as
a group (11 persons...... 14,030,797(6) 437,252 23.4%
- ----------
* Less than 1%
(1) Beneficial ownership includes these shares which the executive officers
and directors could acquire by exercising stock options on, or within
60 days after, November 30, 1998.
(2) These shares do not include an aggregate of 478,579 shares owned by Mr.
Horton's adult children. Mr. Horton disclaims any beneficial interest
in these shares. Mr. Horton's address is D.R. Horton, Inc., 1901
Ascension Blvd., Suite 100, Arlington, Texas 76006.
(3) These shares include 1,048,518 shares owned by Terrill J. Horton and an
aggregate of 2,740,385 shares, consisting of 413,254 shares owned by
the Donald Ray Horton Trust, 376,893 shares owned by the Martha
Elizabeth Horton Trust, and 975,119 shares owned 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. Terrill J. Horton's address is 1200 Noble
Way, Flower Mound, Texas 75022.
(4) These shares do not include 181 shares owned by Mr. Keller's spouse and
4,182 shares owned by his children. Mr. Keller disclaims any beneficial
interest in all of these shares.
(5) These shares do not include 5,667 shares owned by an IRA for the
benefit of Mr. Tomnitz's spouse. Mr. Tomnitz disclaims any beneficial
interest in these shares.
(6) These shares are 22.8% of the total shares outstanding, without
including the option shares in the "Right to Acquire" column in the
calculation.
6
<PAGE>
Certain Other Beneficial Owners
Based on filings made under the Exchange Act as of November 30, 1998,
the only other known beneficial owner of more than 5% of the Company's Common
Stock was as follows:
Shares Beneficially Owned
-------------------------
Name and Address of Beneficial Owner Number Percent
- ------------------------------------ ------------ -------
FMR Corp............................ 3,996,276(1) 6.5%
82 Devonshire Street
Boston, Massachusetts 02109
- ----------
(1) Based solely upon information contained in the Schedule 13G of FMR
Corp., filed with the Securities Exchange Commission (the "SEC") with
respect to the Common Stock owned as of April 30, 1998 (the "FMR 13G").
According to the FMR 13G, 98,400 of these shares are owned with sole
power to vote or direct the vote, and all of these shares are owned
with sole power to dispose of the shares.
[Remainder of page intentionally blank.]
7
<PAGE>
EXECUTIVE COMPENSATION
The following tables show, with respect to the Chairman 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 Shares
Annual Restricted Underlying
Name and Fiscal Compen- Stock Options/ LTIP All Other
Principal Position Year Salary Bonus sation Awards SARs Payouts Compensation
- ------------------ ------ -------- -------- -------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald R. Horton 1998 $235,000 $540,000 --- --- --- --- $33,900(3)
Chairman of 1997 235,000 235,000 --- --- --- --- 32,580(4)
Board and 1996 235,000 165,283 --- --- --- --- 29,399(5)
President
Richard Beckwitt 1998 $185,000 $380,000 --- --- 75,000 --- $29,072(3)
EVP, President 1997 185,000 185,000 --- --- 50,000 --- 27,053(4)
of Investments 1996 185,000 110,000 --- --- 10,000 --- 24,015(5)
Division and
Director
David J. Keller 1998 $185,000 $425,000 --- --- --- --- $29,170(3)
EVP, Treasurer, 1997 185,000 185,000 --- --- 50,000 --- 27,135(4)
CFO and Director 1996 185,000 120,000 --- --- 41,200(1) --- 24,085(5)
Donald J. Tomnitz 1998 $185,000 $380,000 --- --- 95,000 --- $28,752(3)
EVP, President 1997 185,000 185,000 --- --- 70,000 --- 26,790(4)
of Homebuilding 1996 150,000 130,000 --- --- 47,000(2) --- 20,028(5)
Division and
Director
- ----------
<FN>
(1) The number of shares represents (a) a stock option grant originally made
as to 15,000 shares of Common Stock, adjusted pursuant to the
antidilution provisions of the D.R. Horton, Inc. 1991 Stock Incentive
Plan (the "Incentive Plan") to reflect the effect of an eight percent
stock dividend paid by the Company on May 24, 1996 (the "8 Percent Stock
Dividend"), and (b) a stock option grant made as to 25,000 shares of
Common Stock.
(2) The number of shares represents (a) a stock option grant originally made
as to 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 (b) a stock option grant made as to
20,000 shares of Common Stock.
(3) These amounts represent (a) credits made by the Company of $23,500,
$18,500, $18,500 and $18,500 to the respective accounts of Messrs.
Horton, Beckwitt, Keller and Tomnitz under the D.R. Horton, Inc.
Supplemental Executive Retirement Plan No. 2 ("SERP 2"), (b) the
above-market portion of earnings of $3,200, $2,412, $2,510 and $2,092 to
the respective accounts of Messrs. Horton, Beckwitt, Keller and Tomnitz
under SERP 2, (c) matching contributions by the Company of $4,800 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 $2,400 paid by the Company for the
benefit of Mr. Horton, and $3,360 for the benefit of each of Messrs.
Beckwitt, Keller and Tomnitz.
(4) These amounts represent (a) credits made by the Company of $23,500,
$18,500, $18,500 and $18,500 to the respective accounts of Messrs.
Horton, Beckwitt, Keller and Tomnitz under SERP 2, (b) the above-market
portion of earnings of $2,060, $1,533, $1,615 and $1,270 to the
respective accounts of Messrs. Horton, Beckwitt, Keller, and Tomnitz
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 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.
(5) These amounts represent (a) credits made by the Company of $23,500,
$18,500, $18,500 and $15,000 to the respective accounts of Messrs.
Horton, Beckwitt, Keller and Tomnitz under SERP 2, (b) the above-market
8
<PAGE>
portion of earnings of $1,399, $1,015, $1,085 and $850 to the respective
accounts of Messrs. Horton, Beckwitt, Keller and Tomnitz 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.
</FN>
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
------------------------------------------------------ ---------------------------
% of Total
Shares Options/SARs
Underlying Granted to 5% 10%
Executives Options/SARs Employees in Exercise or Expiration (Stock Price (Stock Price
Receiving Grants Granted Fiscal Year Base Price Date $35.9375) $57.2244)
- ---------------- ------------ ------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard Beckwitt 75,000(2) 4.4% $22.0625 07-23-08 $1,040,624 $2,637,146
Donald J. Tomnitz 95,000(2) 5.6% $22.0625 07-23-08 $1,318,124 $3,340,385
- ----------
<FN>
(1) These dollar amounts are not intended to forecast future appreciation of
the Common Stock price. Executives will not benefit unless the Common
Stock price increases above the stock option exercise price. Any gain to
the executives resulting from Common Stock price appreciation would
benefit all holders of Common Stock. The additional value realized by all
holders of Common Stock as a group based on these assumed appreciation
levels is as follows:
Appreciation Level Additional Value
------------------ ----------------
5% $ 852,065,800
10% $2,159,297,400
(2) These shares are covered by nonqualified stock options, granted under the
Incentive Plan. The options become exercisable with respect to 10% of
such shares on each of the first nine anniversaries of July 23, 1998, and
with respect to the last 10% of such shares on April 23, 2008.
</FN>
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<CAPTION>
Number of Shares
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
Fiscal Year-End (1) at Fiscal Year-End (1)
Shares ------------------- ----------------------
Acquired
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- -------- -------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Donald R. Horton........ --- --- --- ---
Richard Beckwitt........ --- --- 158,733/332,600 $1,522,395/2,255,553
David J. Keller......... 24,200 $470,907 95,408/143,613 $ 895,183/1,009,367
Donald J. Tomnitz....... --- --- 111,793/269,820 $1,190,860/1,169,779
- ----------
<FN>
(1) Adjusted pursuant to the antidilution provisions of the Incentive Plan to
reflect the effects of various stock 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>
9
<PAGE>
Compensation of Directors
Mr. Bradley S. Anderson, Mr. Richard I. Galland and Ms. Francine I.
Neff, the "Non-Employee Directors" of the Company, each received a fee for all
services performed as a director, and reimbursement for all expenses incurred to
attend Board and committee meetings. The fee for Mr. Galland and Ms. Neff was
$25,000 each for the full fiscal year; and the fee for Mr. Anderson was $6,250
for the partial year following his election as director on April 20, 1998. No
additional fees are paid for participation on any committee of the Board.
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, the Company pays 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 1998 was a
total of $19,680, consisting of either $2,400 or $3,360 for each of the seven
directors receiving this benefit.
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 their positions as officers or
directors of the Company and its subsidiaries.
On April 20, 1998, the effective date of the merger between the Company
and Continental, Bradley S. Anderson and W. Thomas Hickcox, former directors of
Continental, were elected directors of the Company. In connection with the
merger, the Company agreed to indemnify Messrs. Anderson and Hickcox, along with
the other former Continental directors, and continue directors' and officers'
liability insurance in connection with their prior service as directors or
executive officers of Continental.
In addition to being a director of Continental, Mr. Hickcox was also
its Chief Executive Officer from October 1997 through April 1998 and its
President and Chief Operating Officer from September 1995 and December 1994,
respectively, through April 1998. When Continental merged with the Company in
April 1998, he became a Regional Vice President of the Company, as well as a
director.
In connection with the merger, Mr. Hickcox's employment agreement with
Continental was assumed by the Company. As amended, such employment agreement
provides for, among other things, an annual salary of $300,000. In addition, the
amended agreement provides that, if his employment is terminated by the Company
without cause, or by Mr. Hickcox for good reason, the Company will pay him a
severance benefit equal to the sum of (1) his annual salary and (2) the average
of his three highest annual bonuses for the preceding five calendar years
(subject to increase in the event of certain adverse tax consequences) and
provide him other employee benefits for three years.
Mr. Hickcox also agreed, for two years or, if later, one year after his
employment ceases, not to compete with the Company in certain territories where
Continental conducted business. In consideration for the non-competition
agreement, the Company granted Mr. Hickcox options under the Incentive Plan to
purchase 100,000 shares of Common Stock at an exercise price of $22.6875 per
share. The options vest over 9.75 years. The Company also agreed to set his
annual bonus payable under the Company's executive bonus program during the
first two years following the merger at 1.5% of the annual pre-tax earnings of
the Company's Continental region. During the fiscal year ended September 30,
1998, he was paid a bonus of $143,930 for the period from January 1, 1998 to
March 31, 1998. As additional consideration for the non-competition agreement,
the Company agreed, if his employment agreement is terminated by the Company
without cause, or by Mr. Hickcox for good reason, to pay him a severance benefit
of twice the severance benefit described in the preceding paragraph.
In November 1998, the Company gave notice to Mr. Hickcox that his
employment would be terminated in January 1999, and he has not been nominated
for re-election as a director. The Company is negotiating with Mr. Hickcox as to
10
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the amount which may be payable to him because of the termination. The amount
could be as much as $3.5 million.
Compensation Committee Interlocks and Insider Participation
During the 1998 fiscal year, the Company's Compensation Committee was
composed of Messrs. Donald R. Horton, Richard Beckwitt, Richard I. Galland,
David J. Keller and Donald J. Tomnitz (added in January 1998). During the 1998
fiscal year, 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; Mr. Keller was Executive Vice President,
Treasurer and Chief Financial Officer of the Company; and Mr. Tomnitz was
Executive Vice President of the Company and President of the Homebuilding
Division of the Company.
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:
o Base salaries.
o Cash bonus plan.
o D.R. Horton, Inc. Supplemental Executive Retirement Plan No. 1
("SERP 1") and SERP 2 (collectively, the "SERPs").
o Stock options.
Through its current executive compensation policy, the Company has made
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 1998 fiscal year were established by the Compensation Committee and approved
by the Board of Directors. Factors considered were generally subjective and
include:
o Recommendation of the Chairman of the Board.
o Contribution the executive officer made and is anticipated to make
to the success of the Company.
o Level of experience and responsibility of the executive officer.
o Company's historical levels of compensation for executive officers.
No quantitative relative weights were assigned to any of these factors.
Bonus Plan. The 1998 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 1998 annual base salary, at
the discretion of the Chairman of the Board and as approved by the Compensation
Committee and ratified by the Board of Directors. Participants in the Bonus Plan
each earned a bonus equal to between 190% and 230% 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
11
<PAGE>
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
1998 base salary. Earnings on this liability accrue at a rate established from
time to time by the administrators of SERP 2.
Chairman of the Board 1998 Compensation. Donald R. Horton's
compensation for the Company's 1998 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. See "Summary Compensation
Table" above.
Compensation Committee:
Donald R. Horton, Chair
Richard Beckwitt
Richard I. Galland
David J. Keller
Donald J. Tomnitz
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 1998 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 9.75 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 two stock option grants were made to executive officers in
fiscal 1998. 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:
o Recommendations of the Chairman of the Board.
o Contribution the executive officer made and is anticipated to make
to the success of the Company.
o Level of experience and responsibility of the executive officer.
o Number of stock options that previously had been granted to the
executive officer pursuant to the Incentive Plan.
o 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, Chair
Francine I. Neff
Bradley S. Anderson
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Stock Performance
The following graph illustrates the cumulative total stockholder return
on the Company's Common Stock for the last five fiscal years from September 30,
1994, through September 30, 1998, assuming a hypothetical investment of $100 and
a reinvestment of all dividends paid on such an investment, compared to the
Standard & Poor's 500 Stock Index, and the Standard & Poor's Homebuilding-500
Index (the "S&P Homebuilding-500").
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.
13
<PAGE>
TOTAL STOCKHOLDER RETURNS
(Dividends Reinvested)
[Performance graph appears here.]
ANNUAL RETURN PERCENTAGE
Years Ending
Company/Index Sept. 94 Sept. 95 Sept. 96 Sept. 97 Sept. 98
- ------------------------- -------- -------- -------- -------- --------
D.R. Horton, Inc......... (15.04) 29.95 (2.05) 62.35 2.07
S&P 500.................. 3.69 29.74 20.33 40.45 9.05
S&P Homebuilding-500(1).. (40.37) 20.14 3.36 49.39 12.07
INDEXED RETURNS
Years Ending
Base
Period
Company/Index Sept. 93 Sept. 94 Sept. 95 Sept. 96 Sept. 97 Sept. 98
- ------------------------- -------- -------- -------- -------- -------- --------
D.R. Horton, Inc......... 100 84.96 110.40 108.14 175.57 179.20
S&P 500.................. 100 103.69 134.53 161.88 227.36 247.92
S&P Homebuilding-500..... 100 59.63 71.65 74.06 110.63 123.98
- ----------
(1) The S&P Homebuilding-500 Index includes the following: Centex
Corporation, Fleetwood Enterprises, Inc., Kaufman and Broad Home
Corporation, and Pulte Corporation.
14
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MEETINGS AND COMMITTEES OF THE BOARD
During fiscal year 1998, the Board of Directors held six 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 1998. The Board of Directors has appointed three standing
committees: an Executive Committee, a Compensation Committee and an Audit
Committee. There is no standing nominating 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 39 times by written consent during fiscal year 1998.
The Executive Committee is composed of Messrs. Donald Horton, Beckwitt, Keller
and, beginning January 1998, Tomnitz.
The Compensation Committee is empowered to:
o Recommend to the Board the compensation to be paid to the executive
officers of the Company and its subsidiaries and other affiliates.
o Investigate and recommend to the Board employee benefit plans deemed
appropriate for the employees of the Company and its subsidiaries
and other affiliates.
o Supervise the administration of employee benefit plans adopted by
the Company and its subsidiaries and other affiliates (other than
the Incentive Plan).
o 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 1998. The
Compensation Committee is composed of Messrs. Galland, Donald Horton, Beckwitt,
Keller and, beginning January 1998, Tomnitz.
The Audit Committee is empowered to:
o 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.
o Advise and assist the Board in evaluating the auditors' performance,
including the scope and adequacy of the auditors' examination.
o Recommend the firm of independent auditors to be employed by the
Board.
o Review the Company's annual financial statements and discuss such
statements with the auditors.
o Receive and consider the auditors' comments and suggestions as to
the internal control procedures, adequacy of staff and other
matters.
o Administer the Incentive Plan.
o 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.
o 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 four times during fiscal year 1998. The Audit
Committee is composed of Mr. Galland, Ms. Neff and, beginning July 1998, Mr.
Anderson.
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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 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 all filing requirements applicable to its officers,
directors and greater than 10 percent beneficial owners were complied with
during the year ended September 30, 1998. Terrill J. Horton has informed the
Company that in prior fiscal years he made gifts to his two children and a grand
child, and reports of these gifts were not filed. However, Mr. Horton also has
informed the Company that he has correctly reported his ownership in his
Schedule 13G filed with the SEC in February 1998 and his filings under Section
16(a) of the Exchange Act since that time.
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
The Amended and Restated Certificate of Incorporation, as amended, of
the Company (the "Certificate") presently authorizes the issuance of 100,000,000
shares of Common Stock and 30,000,000 shares of Preferred Stock, par value $.10
per share (the "Preferred Stock"). At November 30, 1998, 61,410,148 shares of
Common Stock were issued and outstanding and no shares of Preferred Stock were
issued and outstanding. On that date, approximately 5,380,000 shares of Common
Stock were reserved for issuance pursuant to the D.R. Horton, Inc. 1991 Stock
Incentive Plan, the D.R. Horton, Inc. Stock Tenure Plan and the Continental
Homes Holding Corp. 1986 and 1988 Stock Incentive Plans (collectively, the
"Stock Plans"). In addition, 10 million shares of Common Stock were reserved for
issuance from time to time in acquisitions pursuant to an effective SEC
registration statement.
Accordingly, out of the 100 million shares of Common Stock authorized,
the Company will have a total of approximately 76,800,000 shares of Common Stock
issued and outstanding or reserved for issuance pursuant to the Stock Plans and
acquisition registration statement. Further, five million shares of Common Stock
will be reserved for issuance under the new Employee Stock Purchase Plan if it
is adopted by the stockholders; and up to $400 million of the Company's debt
securities, Preferred Stock or Common Stock may also be offered from time to
time pursuant to another effective SEC registration statement. The proposed
amendment to the Certificate would increase the number of authorized shares of
Common Stock from 100 million to 200 million. The Common Stock to be authorized
pursuant to the proposed amendment to the Certificate will not have preemptive
rights.
The purpose of the proposed amendment to the Certificate is to ensure
that the Company has adequate authorized capital available from time to time if
needed for such corporate purposes as may be deemed appropriate by the Board of
Directors. These corporate purposes might include stock splits, stock dividends,
public or private stock offerings, acquisitions and other corporate purposes.
Although the Company has no specific plans or commitments for the issuance of
the additional shares of Common Stock proposed to be authorized, the Board of
Directors believes that it would be desirable for the stockholders of the
Company to authorize such additional shares at this time to meet possible future
requirements without delay.
If the proposed amendment to the Certificate is adopted, the authorized
but unissued shares of Common Stock and Preferred Stock could be issued at the
discretion of the Board of Directors for any corporate purpose without further
action by the Company's stockholders, except as required by applicable laws or
regulations, or the rules of any national securities exchange or market. While
in certain instances an increase in the number of authorized shares may have the
effect of rendering any hostile attempt to acquire a company more difficult, the
Board of Directors does not intend the proposed amendment to the Certificate to
have any anti-takeover effect and does not believe that any anti-takeover effect
will result from the proposed amendment.
Approval of the proposed amendment to the Certificate requires the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Common Stock.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK AND RECOMMENDS VOTING "FOR" ADOPTION OF THE PROPOSAL
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<PAGE>
PROPOSED EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted the D.R. Horton, Inc. 1999 Employee
Stock Purchase Plan (the "Plan") in November 1998, subject to stockholder
approval. The following is a summary of the Plan. Please refer to Exhibit A
attached to this Proxy Statement for the full text of the Plan.
Purpose. The Plan provides eligible employees the opportunity to
purchase Common Stock of the Company at a discounted price of 85% of the fair
market value of the stock on the date of purchase.
Tax Treatment. The Plan is designed to qualify under Section 423 of the
Internal Revenue Code. As a result, federal income taxes on the purchase
discount and any appreciation to the stock will be deferred until the employee
sells the stock.
Eligibility. To be eligible to participate in the Plan, employees must
be employees (as defined) of the Company or a participating subsidiary with at
least one year of service. Employees who satisfy the eligibility requirements
prior to January 1 will become participants on that date. Employees who first
satisfy the eligibility requirements between January 1 and July 1 will become
participants in the Plan on July 1 of that year. Notwithstanding the above, the
following are excluded from participating in the Plan: (1) employees who, after
a grant, would own or have options to buy 5% or more of the Common Stock, (2)
members of the committee appointed by the Board to administer the Plan, and (3)
members of the Company's Operating Committee. The Operating Committee consists
of the four executive officers and the Company's Regional Vice Presidents
(currently there are six Regional Vice Presidents). Therefore no directors or
executive officers are currently eligible to participate under the Plan. If,
however, in the future a director was an employee and not a member of the
Operating Committee, that director would be eligible. The Company expects
approximately 2,000 employees will be eligible to participate as of January 1,
1999.
Share Purchase. Participants are granted options to purchase the
Company's Common Stock in an amount equal to the lesser of (1) 15% of the
participant's base pay (as defined) for the previous twelve months, or (2)
$25,000 worth of stock, determined in both alternatives using 85% of the fair
market value of the stock on the close of trading on the last business day
before the grant. Such grants will occur on January 1 of each year (July 1 for
employees who first become participants on that date). Grantees of the options
generally will be allowed to purchase the Common Stock of the Company at 85% of
the fair market value of such stock on the date of purchase. Such purchases must
be for cash and can only occur on the 15th and last day of each month in the
year in which the option was granted. Unexercised options cannot be transferred,
and will lapse upon the earlier of the participant's termination of employment,
death or December 31 of the year granted.
Term. The Plan will commence on January 1, 1999, and terminate when all
shares approved for issuance have been purchased, unless the Board of Directors,
in its discretion, terminates the Plan sooner.
Maximum Number of Shares. The maximum number of shares of the Company's
Common Stock that can be issued under the Plan is five million (5,000,000)
shares.
Amendments. The Plan may be amended at any time by the Board of
Directors, except that stockholder approval is required in order to increase the
maximum number of shares that may be issued under the Plan or to change any
eligibility requirements.
Approval. Approval of the Plan requires the affirmative vote of a
majority of the shares of Common Stock which has voting power present in person
or represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSED PLAN AND RECOMMENDS VOTING
"FOR" ADOPTION OF THE PLAN
17
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP served as the Company's independent certified public
accountants for the fiscal year ended September 30, 1998, 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 2000 ANNUAL MEETING
Any stockholder who intends to present a proposal for action at the
Company's 2000 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 12, 1999. 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. However, if less than 40
calendar days' notice or prior public disclosure of the date of the scheduled
meeting is given 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 10, 1998
18
<PAGE>
EXHIBIT A
D.R. Horton, Inc.
1999 Employee Stock Purchase Plan
ARTICLE I-PURPOSE
1.01. Purpose.
The D.R. Horton, Inc. 1999 Employee Stock Purchase Plan is intended to
provide employees of the Company and its Subsidiary Corporations with an
opportunity to purchase shares of Company common stock. It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
Code Section 423. The provisions of the Plan shall be construed in a manner
consistent with the requirements of that section of the Code.
ARTICLE II-DEFINITIONS
2.01. Base Pay.
"Base Pay" shall mean compensation that is reportable on the Employees' W-2
and was paid to the Employee by the Company or a Subsidiary Corporation for the
12-month period prior to the date of the Employee's eligibility for an Offering.
2.02. Board of Directors.
"Board of Directors" shall mean the board of directors of the Company.
2.03. Code.
"Code" means the Internal Revenue Code of 1986, as amended.
2.04. Committee.
"Committee" shall mean the individuals appointed by the Board of Directors as
described in Article VIII.
2.05. Company.
"Company" means D.R. Horton, Inc. and/or its successors
2.06. Eligible Exercise Date.
"Eligible Exercise Date" means the last business day on or prior to the 15th
day and the last day of each month during an Offering.
2.07. Employee.
"Employee" means any person who has an employment relationship with the
Company or a Subsidiary Corporation as determined under Treasury Regulation
Section 1.423-2(e)(2), and who is scheduled to work more than 20 hours per week
and five months per year.
2.08. Exercise Date.
"Exercise Date" means the Eligible Exercise Date on which an Employee tenders
the exercise price for an option or options.
2.09. Offering.
"Offering" means the period during which a participant is granted and may
exercise options under the Plan.
2.10. Offering Commencement Date.
"Offering Commencement Date" means each January 1 beginning on or after
January 1, 1999.
2.11. Offering Termination Date.
"Offering Termination Date" means, with respect to an individual, the earlier
of (i) the December 31 next following the Offering Commencement Date and (ii)
the date the individual ceases to be employed by the Company or a Subsidiary
Corporation.
2.12. Officer.
"Officer" means officers of the Company.
2.13. Plan.
"Plan" means the D.R. Horton, Inc. 1999 Employee Stock Purchase Plan.
2.14. Subsidiary Corporation.
"Subsidiary Corporation" shall mean any present or future corporation that
(i) is a "subsidiary corporation" of the Company, as that term is defined in
Code Section 424, and (ii) is designated as a participating employer under the
Plan by the Committee.
<PAGE>
ARTICLE III-ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility.
Any Employee who has completed 12 months employment and who is employed by
the Company or a Subsidiary Corporation on an Offering Commencement Date is
eligible to participate in such Offering. Any Employee who first completes 12
months employment after an Offering Commencement Date but prior to the following
July 1 is eligible to participate in such Offering effective on such July 1. For
the purposes of this Section 3.01, prior service by an Employee with a
Subsidiary Corporation shall be included in calculating an Employee's 12 months
of employment. Notwithstanding the above, no individual member of the following
groups shall be eligible to participate in any Offering while a member of such
group: (i) the Committee; and (ii) Officers who are members of the "operating
committee" of the Company.
3.02. Leave of Absence.
In accordance with Treasury Regulation Section 1.421-7(h)(2), an Employee on
leave of absence shall be deemed to remain an Employee for the first ninety (90)
days of such leave of absence and such Employee's employment shall be deemed to
have terminated at the close of business on the ninetieth day of such leave of
absence unless such Employee shall have returned to eligible employment with the
Company or a Subsidiary Corporation prior to the close of business on such
ninetieth day. Termination by the Company of any Employee's leave of absence,
other than termination of such leave of absence on return to full-time or
part-time employment, shall terminate an Employee's employment for all purposes
of the Plan and shall terminate such Employee's participation in the Plan and
right to exercise any option.
3.03. Restrictions on Participation.
Notwithstanding any provisions of the Plan to the contrary, no Employee shall
be granted an option to participate in the Plan:
(a) if, immediately after the grant, such Employee would own stock, and/or hold
outstanding options to purchase stock, possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or a Subsidiary Corporation (for purposes of this paragraph, the
rules of Code Section 424(d) shall apply in determining stock ownership of
any Employee);
(b) that permits such Employee's rights to purchase stock under all employee
stock purchase plans of the Company and its parent and subsidiary
corporations as defined in Code Sections 424(e) and 424(f) to accrue at a
rate which exceeds $25,000 in fair market value of the stock (determined on
the Offering Commencement Date) for each calendar year in which such option
is outstanding.
ARTICLE IV-OFFERINGS
4.01. Annual Offerings.
The Plan shall be implemented by Offerings of the Company's common stock
beginning on each Offering Commencement Date, and ending on the following
Offering Termination Date.
ARTICLE V-GRANTING OF OPTION
5.01. Number of Option Shares.
On each Offering Commencement Date (and each July 1 with regard to Employees
first participating in an Offering on that date), each eligible Employee shall
hereby be granted an option to purchase a maximum number of shares of the common
stock of the Company equal to x divided by y, where x equals the lesser of
$25,000 or 15% of the Employee's Base Pay and y equals 85% of the closing price
of the Company's common stock on the last business day prior to the Offering
Commencement Date on which trading occurred on any national stock exchange.
5.02. Option Price.
The option price of stock shall be 85% of the closing price of the Company's
common stock on the Exercise Date or the nearest prior business day on which
trading occurred on any national stock exchange. If the common stock of the
Company is not admitted to trading on the aforesaid date for which closing price
of the stock is to be determined, then reference shall be made to the fair
market value of the stock on that date, as determined on such basis as shall be
established or specified for this purpose by the Committee.
ARTICLE VI-EXERCISE OF OPTION
6.01. Exercise.
The participant must make a lump-sum payment of the exercise price in a
manner provided by the Committee. In no case, however, shall the participant
<PAGE>
purchase more shares than were granted pursuant to Section 5.01. Such exercises
may be made only on an Eligible Exercise Date.
6.02. Fractional Shares.
Fractional shares will not be issued under the Plan and any payment which
would have been used to purchase fractional shares will be returned to the
Employee in the subsequent payroll period.
6.03. Transferability of Option.
Options held by a participant shall be exercisable only by that participant,
and shall not be transferable. Upon the death of a participant, such
participant's options shall no longer be exercisable.
6.04. Delivery of Stock.
As promptly as practicable after an Exercise Date, the Company will deliver
to each participant, as appropriate, the stock purchased upon exercise of the
option.
ARTICLE VII-STOCK
7.01. Maximum Shares.
The maximum number of shares which may be issued under the Plan for all
offerings, subject to adjustment upon changes in capitalization of the Company
as provided in Section 9.02, shall not exceed five million (5,000,000). If the
total number of shares for which options are exercised on any Exercise Date in
accordance with Article VI exceeds the number of shares available for issuance
under the Plan, the Company shall make a pro rata allocation of the shares
available for delivery and distribution in as nearly a uniform manner as shall
be practicable and as it shall be determined by the Committee to be equitable.
7.02. Participant's Interest in Option Stock.
The participant will have no interest in stock covered by an option until
such option has been exercised.
7.03. Registration of Stock.
Stock to be delivered to a participant under the Plan will be registered in
the name of the participant, or, if the participant so directs by written notice
to the Company prior to the Exercise Date applicable thereto, in the names of
the participant and one such other person as may be designated by the
participant, as joint tenants with rights of survivorship or as tenants by the
entireties, to the extent permitted by applicable law.
7.04. Restrictions on Exercise.
The Board of Directors may, in its discretion, require as conditions to the
exercise of any option that the shares of common stock reserved for issuance
upon the exercise of the option shall have been duly listed, upon official
notice of issuance, upon a stock exchange, and that either:
a Registration Statement under the Securities Act of 1933, as amended, with
respect to said shares shall be effective, or
the participant shall have represented at the time of purchase, in form and
substance satisfactory to the Company, that such participant intends to
purchase the shares for investment and not for resale or distribution.
ARTICLE VIII-ADMINISTRATION
8.01. Appointment of Committee.
The Board of Directors shall appoint the Committee to administer the Plan.
The Committee shall consist of no fewer than three members. No member of the
Committee shall be eligible to purchase stock under the Plan.
8.02. Authority of Committee.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority in its discretion to interpret and construe any and all
provisions of the Plan, to adopt rules and regulations for administering the
Plan, and to make all other determinations deemed necessary or advisable for
administering the Plan. The Committee's determination on the foregoing matters
shall be conclusive.
8.03 Rules Governing the Administration of the Committee.
The Board of Directors may from time to time appoint members of the Committee
in substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee may select one of its
members as its chairman and shall hold its meetings at such times and places as
it shall deem advisable and may hold telephonic meetings. A majority of its
members shall constitute a quorum. All determinations of the Committee shall be
made by a majority of its members. The Committee may correct any defect or
omission or reconcile any inconsistency in the Plan, in the manner and to the
<PAGE>
extent it shall deem desirable. Any decision or determination reduced to writing
and signed by a majority of the members of the Committee shall be as fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
ARTICLE IX-MISCELLANEOUS
9.01. Transferability.
No rights with regard to the exercise of an option or to receive stock under
the Plan may be assigned, transferred, pledged, or otherwise disposed of in any
way by the participant.
9.02. Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding shares of common
stock of the Company have increased, decreased, changed into, or been exchanged
for a different number or kind of shares or securities of the Company through
stock split, reverse stock split, stock dividend or similar transaction,
appropriate and proportionate adjustments may be (but are not required to be)
made by the Committee in the number and/or kind of shares which are subject to
purchase under outstanding options and on the option exercise price or prices
applicable to such outstanding options consistent with the requirements of Code
Section 423. In addition, in any such event, the number and/or kind of shares
which may be offered in the Offerings described in Article IV hereof shall also
be proportionately adjusted.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, all outstanding options will terminate.
9.03. Amendment and Termination.
The Board of Directors shall have complete power and authority to terminate
or amend the Plan; provided, however, that the Board of Directors shall not,
without the approval of the stockholders of the Corporation (i) increase the
maximum number of shares which may be issued under any Offering (except pursuant
to Section 9.02); (ii) amend the requirements as to the class of employees
eligible to purchase stock under the Plan except as provided in Section 2.14; or
(iii) permit the members of the Committee to purchase stock under the Plan. No
termination, modification, or amendment of the Plan may, without the consent of
an Employee then having an option under the Plan to purchase stock, adversely
affect the rights of such Employee under such option.
9.04. Effective Date.
The Plan shall be effective as of January 1, 1999, subject to (i) the
approval by the holders of the majority of the common stock present and
represented at a special or annual meeting of the shareholders (or by any other
method of approval adequate under Texas state law), and (ii) If the above
requirements relating to this plan are not met within 12 months of the date the
Plan is adopted by the Company's Board of Directors, the Plan shall be deemed to
have not become effective and all options previously issued shall terminate.
9.05. No Employment Rights.
The Plan does not, directly or indirectly, create any right for the benefit
of any Employee or class of Employees to purchase any shares under the Plan, or
create in any Employee or class of Employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an Employee's employment at any time.
9.06. Effect of Plan.
The provisions of the Plan shall, in accordance with its terms, be binding
upon all successors of each Employee participating in the Plan and any receiver,
trustee in bankruptcy or representative of creditors of such Employee.
9.07. Notices.
All notices or other communications by a participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
that is designated by the Company from time to time for the receipt thereof,
and, in the absence of such a designation, the Company's Human Resources
Department.
9.08. Governing Law.
The law of the State of Texas will govern all matters relating to this Plan
except to the extent it is superseded by the laws of the United States.
<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 3, 1998, at the Annual
Meeting of Stockholders to be held on January 15, 1999, 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 (except to vote for all
DIRECTORS as marked to the nominees listed
contrary below below
[ ] [ ]
Nominees: Donald R. Horton, Bradley S. Anderson, 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 Certificate [ ] [ ] [ ]
of Incorporation to increase the number of
authorized shares of Common Stock, $0.01 par
value, from 100,000,000 shares to 200,000,000
shares.
FOR AGAINST ABSTAIN
3. A proposal to adopt the D.R. Horton, Inc. [ ] [ ] [ ]
1999 Employee Stock Purchase Plan
4. In their discretion, the proxies are authorized to vote upon other business
properly 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.
