SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a.12
Dominion Homes, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
<PAGE>
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DOMINION HOMES, INC.
5501 Frantz Road
P. O. Box 7166
Dublin, Ohio 43017-0766
(614) 761-6000
April 17, 1998
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying Proxy and Notice of Annual
Meeting of Shareholders are furnished to holders of common shares, without par
value (the "Common Shares"), of Dominion Homes, Inc. (the "Company") in
connection with the solicitation by its Board of Directors (the "Board") of
proxies to be used at the 1998 Annual Meeting of Shareholders of the Company
(the "Annual Meeting") to be held on Wednesday, May 20, 1998, at 10:00 a.m., and
at any postponements or adjournments thereof. The Annual Meeting will be held at
the Company's Galloway Ridge housing development, 128 Galloway Ridge Drive,
Columbus, Ohio. A map providing directions to the Annual Meeting is set forth on
the outside back cover of this Proxy Statement. Only those shareholders of the
Company of record at the close of business on March 27, 1998, will be entitled
to receive notice of, and to vote at, the Annual Meeting. Copies of this Proxy
Statement and the accompanying Proxy and Notice of Annual Meeting of
Shareholders are first being mailed to shareholders on or about April 17, 1998.
All Common Shares represented by each properly executed Proxy received
by the Board pursuant to this solicitation will be voted in accordance with the
shareholder's directions specified on the Proxy. Except as described below with
respect to broker non-votes, if no directions have been specified on a Proxy,
the Common Shares represented by the Proxy will be voted in accordance with the
Board's recommendations, which are as follows:
"FOR" the election as Directors of the nominees named on the
accompanying Proxy;
"FOR" the ratification and adoption of the Amended and Restated
Dominion Homes, Inc. Executive Deferred Compensation Plan (the "Executive
Deferred Compensation Plan"); and
"FOR" the ratification of the selection of Coopers & Lybrand L.L.P. as
independent public accountants for the Company in 1998.
Management knows of no other matters that may properly be brought, or
which are likely to be brought, before the Annual Meeting. However, if any other
matters are properly brought before the Annual Meeting, the persons named as
proxies in the accompanying Proxy or their substitutes will vote in accordance
with their best judgment on such matters.
<PAGE>
Without affecting any vote previously taken, a shareholder signing and
returning a Proxy has the power to revoke it at any time prior to its exercise
by giving notice to the Company in a writing mailed to Robert A. Meyer, Jr.,
Secretary of the Company, at the Company's executive offices at 5501 Frantz
Road, P. O. Box 7166, Dublin, Ohio 43017-0766, by executing a subsequent Proxy,
or by attending the Annual Meeting and giving notice of such revocation in
person to the inspector of elections at the Annual Meeting. Attendance at the
Annual Meeting will not, in and of itself, constitute revocation of a Proxy.
The presence, in person or by proxy, of the holders of a majority of
the Common Shares issued and outstanding on March 27, 1998, is necessary to
constitute a quorum at the Annual Meeting. As of March 27, 1998, the Company had
6,271,053 Common Shares issued and outstanding.
Under Ohio law and the Company's Amended and Restated Code of
Regulations (the "Regulations"), each shareholder is entitled to one vote for
each Common Share held. Common Shares represented by signed proxies that are
returned to the Company will be counted toward the quorum in all matters even
though they are marked as "Abstain," "Against" or "Withhold Authority" on one or
more or all matters or they are not marked at all. Broker/dealers who hold their
customers' Common Shares in street name may, under the applicable rules of the
self-regulatory organizations of which the broker/dealers are members, sign and
submit proxies for such Common Shares and may vote such Common Shares on routine
matters which, under such rules, typically include the election of directors and
the ratification of the selection of independent public accountants, but
broker/dealers may not vote such Common Shares on other matters without specific
instructions from the customers who own such Common Shares. Proxies signed and
submitted by broker/dealers which have not been voted on certain matters as
described in the previous sentence are referred to as broker non-votes. Such
proxies also count toward the establishment of a quorum. The effect of an
abstention or broker non-vote on each of the matters to be voted upon at the
meeting is the same as a "no" vote.
All costs of solicitation of the Proxies will be borne by the Company.
Solicitation will be made by mail. Proxies may be further solicited at no
additional compensation by officers, directors, or employees of the Company by
telephone, written communication or in person. Upon request, the Company will
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for expenses reasonably incurred by them in sending proxy materials
to the beneficial owners of Common Shares of the Company. No solicitation will
be made by specially engaged employees or other paid solicitors.
-2-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners
The following table sets forth, as of April 3, 1998, certain
information with respect to persons known to the Company to be the beneficial
owners of more than five percent (5%) of the outstanding Common Shares.
<TABLE>
<CAPTION>
Number of Common Shares Beneficially Owned
Name and Address of Sole Voting and Shared Voting and Shared Investment Percent
Beneficial Owner Investment Power Investment Power Power Only Total of Class(1)
---------------- ---------------- ---------------- ---------- ----- -----------
<S> <C> <C> <C> <C> <C>
Donald A. Borror(2) 30,000 4,082,000(3) 47,500(4) 4,159,500 66.3%
Douglas G. Borror(2) 40,000 4,082,000(3) 47,500(4) 4,169,500 66.5%
David S. Borror(2) 15,000 4,082,000(3) 7,148(4) 4,104,148 65.5%
Terry E. George(2) 19,000(5) 4,082,000(3) -- 4,101,000 65.4%
Borror Realty Company 4,082,000(3) -- -- 4,082,000 65.1%
3970 Brelsford Lane
Dublin, OH 43017
Borror Realty Company, -- 4,082,000(3)(6) -- 4,082,000 65.1%
Donald A. Borror,
Douglas G. Borror,
David S. Borror and
Terry E. George, as
a group
FMR Corp. 400,000 -- -- 400,000 6.4%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ----------
(1) Percent of Class is based upon the sum of 6,271,053 Common Shares
outstanding as of April 3, 1998, and the number of Common Shares as to
which the person has the right to acquire beneficial ownership upon the
exercise of options exercisable within sixty (60) days of April 3, 1998.
(2) These individuals may be contacted at the address of the Company, 5501
Frantz Road, P. O. Box 7166, Dublin, Ohio 43017-0766.
(3) Information is based on a Schedule 13D filed with the Securities and
Exchange Commission on August 14, 1997. By virtue of their ownership and
control of Borror Realty Company ("BRC"), each of Donald A. Borror, Douglas
G. Borror, David S. Borror and Terry E. George may be deemed to
beneficially own the Common Shares owned by BRC, but each has disclaimed
beneficial ownership of the Common Shares owned by BRC. See "Certain
Relationships and Certain Transactions-Description and Ownership of BRC."
(4) Consists of Common Shares held by The Huntington National Bank, as trustee
of the Dominion Homes, Inc. Retirement Plan and Trust (the "Retirement Plan
and Trust"), which Common Shares are voted by the trustee.
(5) Includes 12,000 Common Shares which can be acquired upon the exercise of
options which are exercisable within sixty (60) days of April 3, 1998.
(6) In computing the aggregate number of Common Shares held by the group, the
same Common Shares were not counted more than once.
-3-
<PAGE>
Management
The following table sets forth, as of April 3, 1998, certain
information with respect to the number of Common Shares beneficially owned by
each director and executive officer of the Company and by all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
Number of Common Shares Beneficially Owned
Name and Address of Sole Voting and Shared Voting and Shared Investment Percent
Beneficial Owner Investment Power Investment Power Power Only Total of Class(1)
---------------- ---------------- ---------------- ---------- ----- -----------
<S> <C> <C> <C> <C> <C>
Donald A. Borror(2) 30,000 4,082,000(3) 47,500(4) 4,159,500 66.3%
Douglas G. Borror(2) 40,000 4,082,000(3) 47,500(4) 4,169,500 66.5%
David S. Borror(2) 15,000 4,082,000(3) 7,148(4) 4,104,148 65.5%
Terry E. George(2) 19,000(5) 4,082,000(3) -- 4,101,000 65.4%
C. Ronald Tilley 6,000(5) -- -- 6,000 *
900 Gatehouse Lane
Worthington, OH 43235
Gerald E. Mayo 14,500(5) -- -- 14,500 *
10 Harleston Green
Hilton Head, SC 29928
Pete A. Klisares 8,000(5) -- -- 8,000 *
919 Old Henderson Road
Columbus, OH 43220
Richard K. Buechler(2) 34,000(5) -- 13,131(4) 47,131 *
Jon M. Donnell(2) 108,333(5)(6) -- -- 108,333 1.7%
Robert A. Meyer, Jr.(2) 24,000(5) -- 5,005(4) 29,005 *
All directors and 298,833 4,082,000(3) 120,284(4) 4,501,117 70.6%
executive officers as
a group (10 persons)(7)
</TABLE>
- ----------------
* Represents less than 1% of class.
(1) Percent of class is based upon the sum of 6,271,053 Common Shares
outstanding as of April 3, 1998, and the number of Common Shares as to
which the person (or members of the group) has the right to acquire
beneficial ownership upon the exercise of options exercisable within sixty
(60) days of April 3, 1998.
(2) These individuals may be contacted at the address of the Company, 5501
Frantz Road, P. O. Box 7166, Dublin, Ohio 43017-0766.
(3) Information is based on a Schedule 13D filed with the Securities and
Exchange Commission on August 14, 1997. By virtue of their ownership and
control of BRC, each of Donald A. Borror, Douglas G. Borror, David S.
Borror and Terry E. George may be deemed to beneficially own the Common
Shares owned by BRC, but each has disclaimed beneficial ownership of the
Common Shares owned by BRC. See "Certain Relationships and Certain
Transactions-Description and Ownership of BRC."
(4) Consists of Common Shares held by The Huntington National Bank, as trustee
of the Retirement Plan and Trust, which Common Shares are voted by the
trustee.
[Footnotes continued on next page]
-4-
<PAGE>
BOARD OF DIRECTORS AND MANAGEMENT
Number and Term of Directors
The Company's Regulations provide for seven (7) directors and divide
the Board into two classes, with regular two-year staggered terms. Class II
consists of four (4) directors with terms expiring at the Annual Meeting. Class
I consists of three (3) directors with terms expiring in 1999.
Nomination of Directors
In accordance with Section 2.03 of the Company's Regulations, a
nominee for election as a director at an annual meeting may be proposed only by
the directors or by a shareholder entitled to vote for the election of directors
if such shareholder shall have proposed such nominee in a written notice. Each
written notice of a proposed nominee must set forth (1) the name, age, business
or residence address of each nominee proposed in such notice; (2) the principal
occupation or employment of each such nominee for the past five years; and (3)
the number of shares of each series and class of the Company owned beneficially
and/or of record by each such nominee and the length of time any such shares
have been owned. The written notice of a proposed nominee must be delivered or
mailed by first class United States mail, postage prepaid, to the Secretary of
the Company at its principal office and received by the Secretary of the Company
on or before the later of (i) February 1, immediately preceding such annual
meeting or (ii) the sixtieth (60th) day prior to the first anniversary of the
most recent annual meeting of shareholders of the Company held for the election
of directors, provided, however, that if the annual meeting for the election of
directors in any year is not held on or before the thirty-first (31st) day next
following such anniversary, then the written notice must be received by the
Secretary within a reasonable time prior to the date of such annual meeting.
The Company has not received any proposals for director nominations
from any shareholder with respect to the Annual Meeting.
[Footnotes continued from page 4]
- ---------------
(5) Includes, in the case of Messrs. Donnell, George, Mayo, Klisares,
Tilley, Buechler and Meyer, 24,000, 12,000, 7,500, 7,500, 5,000,
28,000, and 19,000 Common Shares, respectively, which can be acquired
upon the exercise of options which are exercisable within sixty (60)
days of April 3, 1998.
(6) Includes 44,000 restricted Common Shares which are subject to
forfeiture if Mr. Donnell's employment with the Company is terminated
prior to August 1, 2001. The restrictions will lapse as to 11,000
Common Shares on August 1, 1998, August 1, 1999, August 1, 2000, and
August 1, 2001, respectively.
(7) In computing the aggregate number of Common Shares held by the group,
the same Common Shares were not counted more than once.
-5-
<PAGE>
Proposal to Elect Class II Directors
The Board proposes the election of the following persons as Class II
Directors to terms which will expire at the 2000 Annual Meeting of
Shareholders:
Director
Name Age Since
---- --- -----
Donald A. Borror 68 1978
David S. Borror 40 1985
Pete A. Klisares 62 1994
Gerald E. Mayo 65 1994
All of the nominees are presently members of the Board. All of the
nominees have stated their willingness to serve and no reason is presently known
why any of the nominees would be unable to serve as a director. It is the
intention of the persons named as proxies in the accompanying Proxy to vote for
the election of the four (4) nominees named above unless the shareholders
otherwise direct on the Proxy. If any nominee is unable to stand for election,
each Proxy will be voted for such substitute as the Board recommends.
Recommendation and Vote
Class II Directors will be elected by a plurality of the votes entitled
to be cast and present at the Annual Meeting, in person or by properly executed
proxy.
The Board of Directors recommends that the shareholders vote "FOR" the
election of its nominees for Class II Directors.
Continuing Class I Directors
The following Class I Directors will continue after the Annual Meeting
to serve as directors for a term that will expire at the 1999 Annual Meeting of
Shareholders:
Director
Name Age Since
---- --- -----
Douglas G. Borror 42 1984
C. Ronald Tilley 62 1996
Jon M. Donnell 38 1997
-6-
<PAGE>
Executive Officers and Certain Other Key Employees
The Company's executive officers and certain other key employees of the
Company are listed below.
<TABLE>
<CAPTION>
Name Age Position(s) Held
- ---- --- ----------------
<S> <C> <C>
Executive Officers
Donald A. Borror 68 Chairman of the Board
Douglas G. Borror 42 President and Chief Executive Officer
Jon M. Donnell 38 Chief Operating Officer and Chief Financial Officer
David S. Borror 40 Executive Vice President
Richard R. Buechler 44 Executive Vice President and General Manager--Homes
Division
Terry E. George 54 Senior Vice President and Treasurer
Robert A. Meyer, Jr. 44 Senior Vice President, General Counsel and Secretary
Certain Other Key Employees
Denis G. Connor 43 Senior Vice President-Administration
James B. Bianchi 61 Vice President and General Manager--Lumber Division
Jack L. Mautino 34 Vice President--Sales
Randolph B. Robert, Jr. 46 Vice President--Land Development
Lori M. Steiner 38 Vice President--Marketing
</TABLE>
Background and Experience of Directors, Officers and Certain Key Employees
The references to the Company in the following biographies for periods
of time prior to March 9, 1994, refer to the homebuilding divisions of BRC which
were transferred to the Company in connection with the Company's initial public
offering of its Common Shares. See "Certain Relationships and Certain
Transactions--Description and Ownership of BRC."
-7-
<PAGE>
Donald A. Borror has served on the Company's Board of Directors and as
the Chairman of the Board of Directors since 1978. He served as President of the
Company from 1977 to March 1987. Mr. Borror has been involved in the
homebuilding business since 1952 and founded the Company's homebuilding business
in 1976. He has a Bachelor of Arts Degree from The Ohio State University and a
Juris Doctor Degree from The Ohio State University College of Law.
Douglas G. Borror has served on the Company's Board of Directors since
January 1984, as its President since March 1987, and as its Chief Executive
Officer since September 1992. He also served as Chief Operating Officer of the
Company from September 1992 through September 1996. Mr. Borror served as
Executive Vice President of the Company from July 1985 to March 1987 and as
General Manager of BRC's multifamily housing division from July 1979 to March
1987. Mr. Borror also serves on the Boards of Directors of Columbia Gas of Ohio,
Inc. and The Huntington National Bank. Mr. Borror has a Bachelor of Arts Degree
from The Ohio State University.
David S. Borror has served on the Company's Board of Directors since
1985 and as its Executive Vice President since January 1988. He served as Vice
President of the Company from July 1985 until January 1988 and as its General
Counsel from January 1988 to December 1993. From 1982 to 1987, Mr. Borror also
was engaged in the private practice of law in the Columbus, Ohio office of
Porter, Wright, Morris & Arthur. He has a Bachelor of Arts Degree from The Ohio
State University and a Juris Doctor Degree from The Ohio State University
College of Law.
Pete A. Klisares has served on the Company's Board of Directors since
1994. He is President and Chief Executive Officer of Karrington Communities,
Inc., a Columbus, Ohio-based company which constructs and operates assisted
living facilities. Mr. Klisares is a member of the Board of Directors of
Worthington Industries, Inc., and The Huntington National Bank. He has a
Bachelor of Science Degree in Economics and a Masters Degree in Labor and
Management from the University of Iowa.
Gerald E. Mayo has served on the Company's Board of Directors since
1994. Until his retirement in October 1997, he was a member of the Boards of
Directors and the Chairman of the Midland Life Insurance Company, a Columbus,
Ohio-based life insurance company, and Midland Financial Services, Inc. Mr. Mayo
also serves on the Boards of Directors of HBO & Company and Columbia Energy
Systems, Inc. He has a Bachelor of Arts Degree from Boston University.
C. Ronald Tilley has served on the Company's Board of Directors since
January 1996. In March 1996, he retired as Chief Executive Officer and Chairman
of the Board of Directors of Columbia Gas Distribution Companies, an Ohio-based
natural gas company. Mr. Tilley has a Bachelor of Science Degree from Concord
College.
Jon M. Donnell has served on the Company's Board of Directors since May
1997, as Chief Operating Officer of the Company since September 1996 and as
Chief Financial Officer of the Company since August 1995. Mr. Donnell served as
Treasurer of the Company from August 1995 through December 1995, and as
Executive Vice President from January 1996 through August 1996. From August 1995
through December 1995, he also served as Senior Vice President of the Company.
Prior to joining the Company, Mr. Donnell spent 11 years with the Del Webb
Corporation, a national real estate development and homebuilding company, most
recently as Vice President and Associate General Manager of Webb's Sun City
Hilton Head community. He is a Certified Public Accountant, and holds a Bachelor
of Science degree from the University of Arizona.
-8-
<PAGE>
Richard R. Buechler has served as Executive Vice President of the
Company since January 1996, and as General Manager of the Company's Homes
Division since October 1995. He served as Senior Vice President of the Company
from January 1995 through December 1995 and General Manager of the Company's
Dominion Homes Division from January 1995 until October 1995. Mr. Buechler
served as General Manager of the Company's Special Projects Division from July
1994 until December 1994, as Sales Manager of the Company's Dominion Homes
Division from January 1992 until June 1994, as Sales Manager of the Company's
Tradition Homes Division from April 1990 until December 1991, and as a Sales
Representative for the Company from May 1985 until April 1990.
Terry E. George has served as Senior Vice President of the Company
since November 1993 and as Treasurer of the Company since January 1996. He
served on the Board of Directors of the Company from 1985 through May 1997, as
Controller of the Company from August 1995 to January 1996, and as Operations
Manager of the Company from October 1991 through August 1995. Mr. George has
also served as Vice President of BRC since December 1996. He served as the
General Manager of BRC's multifamily housing division from August 1985 to
October 1987 and as a Vice President of BRC from October 1987 to November 1993.
Mr. George also serves on the Board of Directors of First Community Bank. He has
a Bachelor of Science Degree from The Ohio State University and is a Certified
Public Accountant in the State of Ohio.
Robert A. Meyer, Jr. has served as Senior Vice President of the Company
since January 1996 and as General Counsel and Secretary of the Company since
December 1993. He served as Vice President of the Company from December 1993
through December 1995. Prior to joining the Company, Mr. Meyer was engaged in
the private practice of law in the Columbus, Ohio office of Porter, Wright,
Morris & Arthur from November 1978 to December 1993. He has a Bachelor of
Science Degree from Indiana University and a Juris Doctor Degree from The Ohio
State University College of Law.
Denis G. Connor has served as Senior Vice President, Administration,
since joining the Company in January, 1998. Prior to joining the Company, Mr.
Connor managed Alliance Title Agency, Ltd., from its formation in April 1997, to
December 1997, and was employed by Chicago Title Agency of Central Ohio, Inc.,
from February 1989 to April 1997. He has a Bachelor of Arts degree from Miami
University.
James B. Bianchi has served as General Manager of the Company's
lumberyard since March 1989 and as a Vice President of the Company since January
1995. He owned and operated Biancola Builders, a Columbus, Ohio custom
homebuilding company, from January 1987 to February 1989, and served as a
division manager for BRC from July 1980 to January 1987. Mr. Bianchi has a
Bachelor of Science Degree and is a graduate of the School of General Studies of
Business from the University of Pittsburgh.
Jack L. Mautino has served as Vice President of Sales since October
1995. He served as Sales Manager for the Company's Dominion Homes Division from
January 1995 through December 1995, Sales Manager of the Company's Tradition
Homes Division from December 1991 to December 1994, and as Sales Representative
for the Company from July 1990 to December 1991. Prior to joining the Company,
Mr. Mautino was employed by Ryland Homes. He holds a Bachelor of Science Degree
from Duquesne University.
Randolph B. Robert, Jr. has served as the Company's General Manager of
Land Development since January 1987 and as a Vice President since November 1993.
He was the Construction Manager for BRC's multifamily housing
-9-
<PAGE>
division from December 1979 to December 1986. Mr. Robert has a Bachelor of
Science Degree from The University of Arizona.
Lori M. Steiner has served as the Company's Vice President - Marketing
since January 1995. She served as the Company's Marketing Director from
September 1990 through January 1995. Ms. Steiner served as an account manager
for Brooks Young Communications, a Columbus-based regional advertising company,
from March 1989 to September 1990, and as an account supervisor for Shelly
Berman Communicators, a Columbus-based marketing, advertising and public
relations firm, from June 1982 to March 1989. She has a Bachelor of Arts Degree
from Wittenberg University.
Family Relationships
Douglas G. Borror, a director and the President and Chief Executive
Officer of the Company, and David S. Borror, a director and Executive Vice
President of the Company, are brothers. Donald A. Borror, a director and
Chairman of the Board of the Company, is the father of Douglas G. Borror and
David S. Borror. There are no other family relationships among the executive
officers and/or directors of the Company.
Agreement with Respect to the Election of Directors
BRC, the holder of approximately 65.1% of the issued and outstanding
Common Shares, has agreed in a Close Corporation Agreement with its shareholders
to use its best efforts to elect David S. Borror as a director of the Company
for so long as certain contingencies are satisfied and for so long as BRC has
the ability to elect at least two (2) directors of the Company. See "Certain
Relationships and Certain Transactions--Description and Ownership of BRC."
Meetings and Committees of the Board
The Board of Directors meets immediately following the adjournment of
each annual meeting of shareholders at which directors are elected, and holds
such other meetings as may be called from time to time by the Chairman of the
Board, the President or any two directors. The Board of Directors of the Company
held four meetings during the fiscal year ended December 31, 1997. Each director
attended at least 75% of the aggregate of the number of Board of Directors
meetings and meetings of all committees on which he served during the year.
The Company has a Compensation Committee, an Executive Committee, an
Audit Committee and an Affiliated Transactions Review Committee. The members of
the Compensation Committee during 1997 were Pete A. Klisares, Gerald E. Mayo,
and C. Ronald Tilley. The Compensation Committee, which determines the
compensation of the Company's executive officers, held three meetings during
1997. The members of the Executive Committee during 1997 were Donald A. Borror,
Pete A. Klisares and Douglas G. Borror. The Executive Committee, which is
authorized to act for the Board between regularly scheduled meetings of the
Board, held four meetings during 1997. The members of the Audit Committee during
1997 were Pete A. Klisares, Gerald E. Mayo, and C. Ronald Tilley. The Audit
Committee, which reviews accounting and auditing matters, held two meetings
during 1997. The members of the Affiliated Transactions Review Committee during
1997 were Pete A. Klisares, Gerald E. Mayo, and C. Ronald Tilley. The Affiliated
Transactions Review Committee, which was formed as a standing committee by the
Board of Directors on October 29, 1997 to review and authorize material
transactions between the Company and its affiliates or related parties, held one
meeting during 1997. The Company does not have a standing nominating committee
or other committee performing a similar function.
-10-
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth, for the three fiscal years ended
December 31, 1997, cash and non-cash compensation paid by the Company to the
Chief Executive Officer and to each of the other four most highly compensated
executive officers of the Company who served as such during 1997 (collectively,
the "Named Executive Officers") for services rendered to the Company in all
capacities by such persons:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation ---------------------------
------------------------------------------ Restricted Common Shares
Other Annual Stock Underlying All Other
Name and Salary(1) Bonus(1) Compensation(2) Awards Options/ Compensation(3)
Principal Position Year ($) ($) ($) ($) SARs (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald A. Borror 1997 $240,000 $260,000 -- -- $ 3,200
Chairman of the Board 1996 240,000 200,000 -- -- 3,000
1995 240,000 -0- -- -- 3,000
Douglas G. Borror 1997 $360,000 $500,000 -- -- $ 8,075
President and CEO 1996 360,000 300,000 -- -- 7,750
1995 360,000 -0- -- 25,000(4) 7,186
Jon M. Donnell 1997 $189,231(5) $300,000 -- $126,500(8) 20,000 $54,375(6)
COO and CFO 1996 159,230(7) 175,000 -- 93,332(8) 40,000 60,450(9)
1995 60,000(10) 65,000 $15,031(11) 82,500(8) 20,000 --
David S. Borror 1997 $175,000 $150,000 -- -- $ 5,575
Exec. V.P. 1996 175,000 100,000 -- -- 7,750
1995 175,000 -0- -- 25,000(4) 7,750
Richard R. Buechler 1997 $165,000 $150,000 -- 10,000 $ 8,075
Exec. V.P. 1996 150,000 150,000 -- 40,000 7,750
1995 120,000 90,000 -- 20,000 7,750
</TABLE>
- ------------
(1) Includes amounts deferred by the Named Executive Officer pursuant to the
Executive Deferred Compensation Plan.
(2) Other than as specifically reported, perquisites and other personal
benefits did not exceed applicable thresholds.
(3) All Other Compensation consists of amounts contributed by the Company to
the accounts of the Named Executive Officers in the Retirement Plan and
Trust and in the Executive Deferred Compensation Plan. Amounts contributed
by the Company to accounts in the Executive Deferred Compensation Plan are
not vested when made and are subject to vesting in 20% increments over the
five-year period following the contribution, provided the Named Executive
Officer remains with the Company, and subject to acceleration of vesting in
the event of a "change in control."
[Footnotes continued on next page]
-11-
<PAGE>
Employment Agreements
The Company has Employment Agreements with Jon M. Donnell, Chief
Operating and Chief Financial Officer, with Richard R. Buechler, Executive Vice
President and General Manager of the Company's Homes Division, and with Robert
A. Meyer, Jr., Senior Vice President, General Counsel and Secretary. The
Employment Agreements are each dated May 17, 1996, and effective as of January
1, 1996. The Employment Agreement with Mr. Donnell was amended on November 6,
1996, to reflect an expansion of Mr. Donnell's responsibilities. The Agreements
are for terms of three years, and provide for renewal annually for three-year
terms unless the Company provides notice of its intention not to
[Footnotes continued from page 11]
- -----------------
(4) Such options were canceled by the holder prior to the end of 1995, and
prior to the vesting of any such options.
(5) Mr. Donnell was paid base salary at an annual rate of $180,000 from
January 1 through June 30, 1997. His base salary was increased to an
annual rate of $200,000 effective July 1, 1997. The reported base
salary is the amount actually paid to Mr. Donnell in 1997.
(6) Includes reimbursement of payments by Mr. Donnell for initiation fee
for membership in a country club pursuant to an understanding between
Mr. Donnell and the Company at the time Mr. Donnell was employed by the
Company.
(7) Mr. Donnell was paid base salary at an annual rate of $150,000 from
January 1 through August 31, 1996. With his promotion to Chief
Operating Officer as of September 1, 1996, his base salary was
increased to an annual rate of $180,000. The reported base salary is
the amount actually paid to Mr. Donnell in 1996.
(8) The reported amount is the dollar value (net of consideration paid) of
restricted Common Shares awarded (calculated by the number of Common
Shares multiplied by the closing price of the Common Shares on the date
of grant). At December 31, 1997, Mr. Donnell held 44,000 restricted
Common Shares with an aggregate value of $528,000 as of such date. With
respect to the 20,000 restricted Common Shares granted to Mr. Donnell
on August 1, 1995, 10,000 restricted Common Shares vested on August 2,
1995, 3,333 restricted Common Shares vested on August 1, 1996, 3,333
restricted Common Shares vested on August 1, 1997, and 3,334 restricted
Common Shares will vest on August 1, 1998. With respect to 21,333
restricted Common Shares granted to Mr. Donnell on November 6, 1996,
3,667 restricted Common Shares vested on August 1, 1997, 3,666
restricted Common Shares will vest on August 1, 1998, 7,000 restricted
Common Shares will vest on August 1, 1999, and 7,000 restricted Common
Shares will vest on August 1, 2000. With respect to 23,000 restricted
Common Shares granted to Mr. Donnell on August 1, 1997, 4,000
restricted Common Shares will vest on August 1, 1998, 4,000 restricted
Common Shares will vest on August 1, 1999, 4,000 restricted Common
Shares will vest on August 1, 2,000, and 11,000 restricted Common
Shares will vest on August 1, 2001. It is a prerequisite to the vesting
of any restricted Common Shares that Mr. Donnell be employed with the
Company as of the vesting date. The Company does not presently pay
dividends. However, if dividends are paid in the future, Mr. Donnell
would be entitled to receive dividends as to both his vested and
unvested restricted Common Shares.
(9) All Other Compensation for Mr. Donnell in 1996 includes a payment
related to Mr. Donnell's housing, which was committed to by the Company
as part of its offer of employment to him.
(10) Mr. Donnell was paid base salary at an annual rate of $130,000 for that
part of 1995 during which he was employed by the Company.
(11) Includes a payment of $11,708 to Mr. Donnell to cover health insurance
expenses prior to his qualification for participation in the Company's
health insurance plan.
-12-
<PAGE>
renew the Agreement. No such notice by the Company has been provided to Mr.
Donnell, Mr. Buechler or Mr. Meyer. Each Agreement provides for lump sum
payments if employment is terminated by the Company without cause or by Mr.
Donnell, Mr. Buechler or Mr. Meyer with good reason, and includes
non-competition covenants effective for one year after termination. The
Agreements also include provisions that become effective upon a "change in
control" of the Company. Under the Agreements, a change in control is defined as
an event which results in either BRC failing to own at least 30% of the combined
voting power of the outstanding voting securities of the Company, or both Donald
Borror and Douglas Borror ceasing to be directors and officers of the Company.
Upon a change in control, all employee benefit rights, including stock options,
vest. In addition, if within two years of a change in control of the employment
of Mr. Donnell, Mr. Buechler or Mr. Meyer is terminated without cause, or if Mr.
Donnell, Mr. Buechler or Mr. Meyer terminates his employment with good reason,
he would be entitled to certain benefits, including a lump sum payment
equivalent to two year's salary, the payments he would have been entitled to had
the Company terminated his employment without cause and without a change in
control, and certain outplacement services.
-13-
<PAGE>
Incentive Stock Plan
The following table sets forth information concerning individual grants
of stock options during 1997 to those Named Executive Officers who received
grants of stock options under the Dominion Homes, Inc. Incentive Stock Plan (the
"Incentive Stock Plan") during 1997. No SARs were granted during 1997.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants
-----------------------------------------------------------
Number of % of Total Potential Realizable Value at
Common Shares Options/ Assumed Annual Rates of
Underlying SARs Granted Common Share Price Appreciation
Options/ to Employees Exercise for Option Term(1)
SARs in Fiscal Price Expiration ---------------------------------
Name Granted (#) Year (%) ($/Share) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jon M. Donnell 20,000(2) 25.8% $4.75 7/1/07 $59,800 $ 151,400
Richard R. Buechler 10,000(2) 12.9% $4.75 7/1/07 $29,900 $ 75,700
</TABLE>
- -----------------
(1) The Potential Realizable Value of the grants equals the product of: (a) the
difference between (i) the product of the per-share market price at the
time of the grant and the sum of 1 plus the adjusted Common Share price
appreciation rate (the assumed rate of appreciation compounded annually
over the term of the option); and (ii) the per-share exercise price of the
option; and (b) the number of Common Shares underlying the grant at fiscal
year end. These Potential Realizable Values represent only certain assumed
rates of appreciation that may not be achieved. Actual realized values, if
any, on option exercises will be dependent on the actual appreciation of
the Common Shares over the term of the options.
(2) The exercise price of these options was the fair market value of the Common
Shares on the date of grant. These options become exercisable in five equal
installments of 4,000 Common Shares with respect to the grant to Mr.
Donnell, and 2,000 Common Shares with respect to the grant to Mr. Buechler,
beginning July 1, 1998, and on July 1 of each of the four succeeding years,
subject to the acceleration of the exercisability of such options in the
event of a "change of control."
-14-
<PAGE>
The following table sets forth information, as of December 31, 1997,
concerning the number of Common Shares underlying unexercised options and the
value of the unexercised options held by those Named Executive Officers who held
options on such date. No Named Executive Officer exercised any options during
1997.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Common Shares Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at Options/SARs at
Fiscal-Year-End (#) Fiscal-Year-End ($)(1)
------------------------------ --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Jon M. Donnell 24,000 56,000 $204,960 $452,440
Richard R. Buechler 24,000 46,000 $200,000 $372,500
</TABLE>
- --------------
(1) The Value of Unexercised In-The-Money Options equals the difference between
the aggregate fair market value at December 31, 1997, of the Common Shares
underlying the options and the aggregate exercise price of the options.
Director Compensation
Directors who are not employees of the Company receive fees of $2,500
per quarter and $1,000 per Board meeting and $500 per committee meeting
attended. Directors may defer the receipt of those fees and receive
Company-matching contributions with respect to those deferred fees through
participation in the Executive Deferred Compensation Plan. Additionally, under
the Incentive Stock Plan, each director who is not, and has never been, an
employee of, or paid advisor or consultant to, the Company will receive, on the
first business day after each annual meeting of shareholders, provided that the
director continues to serve on the Board on such date, a grant of a
non-qualified stock option to purchase 2,500 Common Shares at an exercise price
equal to the fair market value of the Common Shares on the date of grant. A
director option is exercisable from the date of grant until the earlier of (i)
the tenth anniversary of the date of grant or (ii) generally three months (one
year in the case of a director who becomes disabled or dies) after the date the
director ceases to be a director. The Company does not pay any separate
remuneration to employees of the Company who serve as directors. Messrs.
Klisares, Mayo and Tilley were the directors who were not employees of the
Company in 1997.
-15-
<PAGE>
Report of Compensation Committee
on Executive Compensation
and Share Price Performance Graph
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
"Report of Compensation Committee on Executive Compensation" and the information
under "Share Price Performance Graph" shall not be incorporated by reference
into any such filings.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company has vested in the Compensation Committee ("Committee") of
the Board of Directors the authority to determine and administer the
compensation program for the Company's executive officers and other key
employees. The Committee is composed of the Company's three outside, independent
directors: Pete A. Klisares, Gerald E. Mayo and C. Ronald Tilley. Mr. Klisares
chairs the Compensation Committee.
Compensation Philosophy
The Company's executive compensation philosophy seeks to promote the
following key objectives:
! Align the interests of executive officers and other key
employees with the interests of shareholders by linking a
significant percentage of their total compensation to Company
financial performance.
! Reward individual contribution and achievement.
! Allow the Company to continue to attract and retain
outstanding executive officers and other key employees and to
compete with industry competitors and other businesses for
executive talent.
Implementation of this philosophy is an ongoing process, and the Committee
expects to continue to refine the Company's executive compensation program
during 1998.
There are two primary components to the Company's executive
compensation program: annual cash compensation and long-term incentive
compensation. Annual cash compensation consists of a base salary and an
incentive bonus. Long-term incentive compensation consists of stock options and
other awards under the Incentive Stock Plan. The Company's executive
compensation program also allows executives to defer a portion of their
compensation, and to augment the deferred amounts by Company matches, through
their optional participation in the Executive Deferred Compensation Plan.
Annual Cash Compensation
General. It is the Company's objective to achieve continuous revenue
and earnings growth with a long-term objective of outperforming the homebuilding
industry in revenue growth and profitability. The Committee believes that,
-16-
<PAGE>
in order to achieve this objective, the Company must be able to attract and
retain exceptional executive talent. Accordingly, the Committee's intent is that
the total cash compensation received by the Company's executive officers would
place them in the upper range of the total cash compensation received by the
executive officers of homebuilding companies in general. In determining
compensation for the Company's executive officers, the Committee annually
reviews a nationally-compiled database of compensation by other homebuilding
companies for various executive positions, including data specific to public
homebuilding companies, homebuilding companies of a size comparable to the
Company, and homebuilding companies operating in the Midwest.
Base Salary. The Committee recognizes that the homebuilding business is
cyclical and that the Company's financial performance depends, in large part, on
whether the homebuilding business is in a favorable or unfavorable cycle. The
Committee's intent is to set the base salaries of the Company's executive
officers at levels sufficient to attract and retain executive talent in all
business cycles.
In setting the base salary of an executive officer, the Committee
subjectively analyzes the executive's responsibilities, performance and value to
the Company, but gives no fixed weighting to any of such factors. The Committee
also considers market salary ranges for comparable positions. The Committee
reviews annually the base salary of each executive officer and makes adjustments
as warranted.
Incentive Bonus. The Committee believes that a significant portion of
the total compensation of the Company's executive officers should consist of
variable, performance-based components, such as awards of incentive bonuses and
grants of stock options, which the Committee can adjust to reflect changes in
Company and individual performance. These compensation components are intended
to reinforce the Company's commitment to increasing Company profitability and
shareholder value.
The Committee takes into account various quantitative measures and
qualitative indicators of Company and individual performance in determining the
level of incentive bonuses to be awarded to the Company's executive officers.
Although the Committee tends to give more weight to quantitative measures of
Company financial performance, it does not apply any specific formula. In making
such compensation decisions, the Committee recognizes and takes into account
that the homebuilding business is cyclical and that Company financial
performance can be greatly affected by factors, such as interest rates and
weather, that are beyond the control of the Company's executive officers. The
Committee considers such quantitative Company financial performance measures as
revenue growth, profitability, earnings per share and return on shareholders'
equity in determining the level of incentive bonuses.
The Committee also understands the importance of individual
contributions and achievements that may be difficult to quantify, and,
accordingly, recognizes qualitative indicators such as successful supervision of
major corporate projects, demonstrated leadership and the ability to respond to
difficult business cycles. With respect to those executive officers having
divisional responsibilities, the most important qualitative indicator was the
division's customer satisfaction ratings.
Long-Term Incentive Compensation
Stock Options. On July 1, 1997, the Committee granted incentive stock
options covering an aggregate of 77,500 Common Shares to 15 employees of the
Company, including three executive officers: Richard R. Buechler, Jon M. Donnell
and Robert A. Meyer, Jr. The options were granted at an exercise price of $4.75
per share, which was the
-17-
<PAGE>
fair market value of the Common Shares on the date of grant. The options vest in
20% increments on each of the first five anniversaries of the date of grant,
subject to acceleration of vesting in the event of a "change in control." The
Committee determined that the options would be useful in providing a meaningful
incentive to the Company's employees to increase shareholder value. The
Committee also believes that a vesting schedule using mid-year vesting dates,
when combined with the Company's award of incentive bonuses which usually occurs
at year-end, provides a combination of incentives that better motivate and
retain employees on a year-round basis.
The Committee intends on a periodic basis to make grants under the
Incentive Stock Plan to the Company's executive officers and other key
employees. In making such grants, the Committee will consider the subjective
factors identified above, as well as the number of options granted in prior
years.
Restricted Stock Grants. On August 1, 1997, the Committee awarded to
Jon M. Donnell 23,000 restricted Common Shares. Mr. Donnell had also been
granted, on August 1, 1995, and November 6, 1996, 20,000 and 21,333 restricted
Common Shares, respectively. The restrictions provide for forfeiture if Mr.
Donnell's employment with the Company is terminated prior to August 1, 2001. The
restrictions lapsed as to 10,000 Common Shares on August 2, 1995, 3,333 Common
Shares on August 1, 1996, and 7,000 Common Shares on August 1, 1997, and will
lapse as to 11,000 Common Shares each at August 1, 1998, August 1, 1999, August
1, 2000, and August 1, 2001, respectively, provided that Mr. Donnell is then
employed by the Company, and subject to acceleration of the lapse of
restrictions in the event of a "change in control." The Committee believes this
grant provides a further incentive to Mr. Donnell to continue to effect
improvement in the Company's performance.
Executive Deferred Compensation Plan
In December 1994, the Committee adopted the Executive Deferred
Compensation Plan to permit executive officers and directors to elect to defer a
portion of their annual compensation (20% of total base and bonus for employees
and 100% of directors' fees). The Executive Deferred Compensation Plan also
provides for a matching contribution by the Company for each participant of 25%
of the amount deferred, but not to exceed $2,500 in any year. On October 29,
1997, the Board of Directors approved an Amended and Restated Executive Deferred
Compensation Plan under which contributions and matching amounts are to be used
by a trustee to acquire Common Shares in the open market, which Common Shares
are held and voted by the trustee pursuant to a rabbi trust agreement.
Shareholders are being asked at the Annual Meeting to ratify and adopt the
Executive Deferred Compensation Plan, as so amended. See "Ratification and
Adoption of Executive Deferred Compensation Plan."
Chief Executive Officer Compensation
In accordance with the executive compensation philosophy and program
described above, and primarily in recognition of the Company's improved
financial performance during 1997, the Committee awarded Douglas G. Borror a
cash incentive bonus of $500,000 in 1997. Mr. Borror received an annual base
salary of $360,000 in 1997, which was the same annual base salary he received in
1996 and 1995. Mr. Borror did not receive an award of stock options in 1997.
Tax Aspects
Section 162(m) of the Internal Revenue Code of 1986, as amended,
prohibits the deduction by a publicly-held corporation of compensation paid to a
"covered employee" in excess of $1.0 million per year, subject to certain
-18-
<PAGE>
exceptions. Generally, the Company's covered employees are those executive
officers listed under the Summary Compensation Table set forth above. None of
the Company's executive officers received more than $1.0 million of compensation
from the Company in 1997, and, accordingly, Section 162(m) did not restrict the
Company in deducting compensation expenses in 1997. The Committee does not
believe that Section 162(m) will limit the deductibility of the executive
compensation that the Company will pay in 1998 because the Committee does not
anticipate that any of the Company's executive officers will receive more than
$1.0 million of compensation from the Company in 1998. As indicated above,
Section 162(m) provides exceptions to the $1.0 million limitation on the
deductibility of executive compensation. The Committee has not attempted to
revise the Company's executive compensation program to satisfy the conditions to
these exceptions but may in the future consider doing so if compensation paid by
the Company would not otherwise be deductible under Section 162(m).
Members of the Compensation Committee
Pete A. Klisares Gerald E. Mayo
C. Ronald Tilley
-19-
<PAGE>
SHARE PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Common Shares from March 9, 1994 (the date the Company became a public
company), until December 31, 1997, with the cumulative total return of (a) the
NASDAQ-OTC Index Composite and (b) the Standard and Poor's Homebuilding Index.
Data for the referenced indices are reported on a month-end basis, and the graph
below sets forth values for both indices reported as of March 31, 1994. The
graph assumes the investment of $100 in the Common Shares, the NASDAQ-OTC Index
Composite and the Standard and Poor's Homebuilding Index. The initial public
offering price of the Common Shares was $11.50 per share.
[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]
Performance Graph
March 1994 - December 1997
Mar-94 Dec-94 Dec-95 Dec-96 Dec-97
DHOM 100 43.48 28.26 38.04 104.35
S&P Homebuilding 100 73.3 103.54 93.08 147.14
NASDAQ Composite Index 100 101.14 141.52 173.65 212.62
-20-
<PAGE>
CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
Description and Ownership of BRC
BRC, which owns approximately 65.1% of the Company's outstanding Common
Shares, is actively engaged in the business of owning and managing multifamily
housing and commercial real estate. Donald Borror, Douglas Borror, and David
Borror, who are directors and executive officers of the Company, and Terry
George, who is an executive officer of the Company, also are directors of BRC.
As of December 1997, Mr. George was elected a Vice President of BRC.
BRC has issued and outstanding 105,065 voting common shares and 315,195
non-voting common shares, all of which are beneficially owned by members of the
Borror family, or trusts for their benefit, and by Terry George. Through their
ownership and control of BRC, such persons are in a position to control the
Company. See "Security Ownership of Certain Beneficial Owners and Management."
The Amended and Restated Borror Corporation Stock Trust, a revocable
trust established by Donald Borror pursuant to a trust agreement dated January
4, 1994 (the "Stock Trust"), owns 52,000 voting common shares of BRC,
representing 49.5% of the issued and outstanding voting common shares of BRC,
and 75,180 non-voting common shares of BRC, representing 23.9% of the issued and
outstanding non-voting common shares of BRC. The Stock Trust will expire upon
the ten year anniversary of Donald Borror's death or upon the death of Joanne
Borror (Donald Borror's wife), whichever is later. Joanne Borror is the
beneficiary of the Stock Trust until her death (unless she predeceases Donald
Borror) and each of Donald and Joanne Borror's children (Douglas and David
Borror and Donna Myers) are one-third remainder beneficiaries of the Stock
Trust. Donald Borror and Douglas Borror are the joint trustees of the Stock
Trust until the death or incapacity of either of them, whereupon the other of
them will become sole trustee.
Douglas Borror owns 32,865 voting common shares of BRC, representing
31.3% of the issued and outstanding voting common shares of BRC, and 108,355
non-voting common shares of BRC, representing 34.4% of the issued and
outstanding non-voting common shares of BRC.
David Borror owns 15,200 voting common shares of BRC, representing
14.5% of the issued and outstanding voting common shares of BRC, and 65,600
non-voting common shares of BRC, representing 20.8% of the issued and
outstanding non-voting common shares of BRC.
The 1987 Irrevocable Subchapter S Trust, an irrevocable trust
established by Donald Borror pursuant to a trust agreement dated June 26, 1987
(the "Irrevocable Trust"), owns 50,000 non-voting common shares of BRC,
representing 15.9% of the issued and outstanding non-voting common shares of
BRC. David Borror is the trustee of the Irrevocable Trust and Donna Myers
(Donald and Joanne Borror's daughter and Douglas and David Borror's sister) is
the sole beneficiary of the Irrevocable Trust. The Irrevocable Trust expires
upon the death of Donald Borror.
Terry George owns 5,000 voting common shares of BRC, representing 4.8%
of the issued and outstanding voting common shares of BRC, and 16,060 non-voting
common shares of BRC, representing 5.1% of the issued and outstanding non-voting
common shares of BRC.
-21-
<PAGE>
BRC and the shareholders of BRC are parties to a Close Corporation
Agreement dated January 4, 1994 ("BRC Agreement"). The BRC Agreement contains
certain provisions related to BRC's status as an S Corporation (including
mandatory distributions to BRC shareholders equal to the product of the maximum
marginal individual income tax rate and the shareholder's pro rata share of the
taxable income attributable to BRC). The BRC Agreement provides that all of the
voting power of the BRC shares is to be exercised by a majority of the directors
of BRC, all of whom will be elected by Donald Borror and Douglas Borror jointly
until the death or incapacity of either of them and, thereafter, by the other of
them solely. Under the provisions of the BRC Agreement, David Borror is required
to be elected as a director of BRC as long as he continues to hold at least 10%
of the shares of BRC, absent his removal for "cause" (as defined therein). In
such circumstances and as long as BRC has the ability to elect at least two
directors of the Company, BRC also is required to use its best efforts to elect
David Borror as a director of the Company. The BRC Agreement generally restricts
the transfer of shares of BRC to persons other than members of the Borror family
unless certain procedures are followed. BRC is required to repurchase all of
Terry George's shares in the event of his death or incapacity and has the right
to purchase Terry George's shares at any time. BRC also is required to purchase
a certain number of shares from the estates of Borror family members. Subject to
certain conditions, Borror family members have the right to require BRC to
repurchase shares from them, beginning in March 1998. In certain instances, the
obligation of BRC to repurchase shares may be assumed by Borror family
shareholders.
Transactions with BRC
The Company and BRC entered into a Corporate Exchange and Subscription
Agreement, dated January 20, 1994, pursuant to which the Company acquired
substantially all of the assets and assumed substantially all of the liabilities
of the homebuilding divisions of BRC in exchange for the issuance of 3,882,000
of the Company's Common Shares to BRC. On August 5, 1997, BRC purchased an
additional 200,000 Common Shares of Dominion Homes, Inc., bringing the total
number of Common Shares owned by BRC to 4,082,000 or 65.1% of the issued and
outstanding shares of the Company.
On October 29, 1997, the Board of Directors of the Company established
the Affiliated Transactions Review Committee for the purpose of reviewing any
material transactions with affiliates or related parties of the Company for
consistency with the Company's policies concerning affiliated transactions. The
Affiliated Transactions Review Committee consists of the Company's three
outside, independent directors: Pete A. Klisares, Gerald E. Mayo and C. Ronald
Tilley. The Committee is chaired by Mr. Klisares. Prior to the establishment of
the Affiliated Transactions Review Committee, the functions of the Affiliated
Transactions Review Committee were performed by the Audit Committee of the Board
of Directors.
During 1997, the Affiliated Transactions Review Committee reviewed and
approved the sale by the Company to BRC of the Company's corporate office
building and the contemporaneous execution by the Company of a long-term lease
with BRC for the corporate office building. The sale was closed and the lease
was executed on December 29, 1997. The purpose of the transaction from the
Company's perspective was to create additional liquidity with which to invest in
assets associated with the homebuilding process and to allow the Company to
reduce its financial cost. The office building was sold at a price of
$3,950,000, less a credit of up to $200,000 for roof repairs and sidewalk
improvements, together with parking expansion. The lease is for a term of twelve
years at a rental rate of $12.00 per square foot on a total net basis with two
options to renew for periods of five years each at then-current market rates.
Both the sale price and rental rates were established by an MAI appraisal
commissioned by the Committee, and confirmed in a review for the Committee by a
second MAI appraiser.
-22-
<PAGE>
The Company and BRC are parties to a Land Option Agreement dated
January 20, 1994 ("Land Option Agreement"). Pursuant to the provisions of the
Land Option Agreement, the Company acquired from BRC irrevocable options to
purchase from BRC finished single family lots in certain communities which BRC
and other homebuilders have developed under various joint venture agreements.
The purchase price to be paid by the Company to BRC for such lots under the Land
Option Agreement is the lesser of (i) BRC's adjusted tax basis in such lots plus
$500 per lot or (ii) their fair market value, as determined by an independent
MAI appraiser jointly selected by BRC and the Company, at the time of their
purchase from BRC. The cost of all such appraisals is borne by the Company.
Pursuant to the Land Option Agreement, during 1997 the Company purchased 188
lots from BRC for an aggregate purchase price of $4,789,000.
The Company and BRC are parties to a Model Homes Lease Agreement dated
January 20, 1994 ("Model Homes Agreement"). Pursuant to the provisions of the
Model Homes Agreement, the Company leases from BRC model homes owned by BRC. The
leases are on a triple net basis at $8.00 per square foot for a term of three
years, unless the Company earlier terminates the lease with respect to a
particular model home upon 30 days' prior written notice given to BRC. The
Company uses each such model home as the Company's on-site sales office in the
community in which the model home is located until the Company has completed its
sale of homes in that community. It is anticipated that BRC will sell each model
home upon the termination of its lease. The Company will not receive any of the
proceeds from the sales of such model homes owned by BRC, except that the
Company will receive, at the time of sale, 50% of its unamortized costs of
improvements to the model homes. During 1997, the Company paid to BRC an
aggregate of $39,000 for the lease of model homes. At December 31, 1997, the
Model Homes Agreement had been terminated as to all but 1 of the 31 model homes
that were originally the subject of the Model Homes Agreement.
The Company and BRC are parties to various lease agreements pursuant to
which the Company leases space in a shopping center owned by BRC. As of December
31, 1997, the Company leased 5,550 square feet in the shopping center for its
decorating center and architectural department. The Company leases such space
from BRC at $9.50 per square foot plus a proportionate share of common area
maintenance charges, taxes and insurance, and on substantially the same terms as
the leases that BRC has with its other tenants in the shopping center. The
Company paid to BRC an aggregate of $70,000 under the leases for space in the
shopping center during 1997. The Company believes that the terms of these leases
are no less favorable to the Company than those reasonably available from
unrelated third parties for comparable space.
Occasionally, employees of the Company provide limited administrative
services to BRC, for which the Company receives fees. The Company received
aggregate fees of $21,400 for such administrative services in 1997.
The Company provides accounting and management services to certain
joint ventures in which one of the partners in the joint ventures is BRC. The
fees received by the Company for such services are the amounts provided for such
services under the relevant joint venture agreements. The Company received
aggregate fees of $174,000 from such joint ventures in 1997.
The Company and BRC are parties to a Shareholder Agreement (the
"Shareholder Agreement"), dated January 20, 1994, pursuant to which BRC has the
right, from time to time, to demand that the Company register for sale Common
Shares owned by BRC. Each request by BRC for a demand registration must cover at
least 10% of the Common Shares owned by BRC and at least 5% of the Company's
then outstanding Common Shares. Without the Company's consent (exercised by a
majority of its independent directors), the Company is not obligated to cause a
demand registration to
-23-
<PAGE>
be effected within 18 months after the consummation of a prior demand
registration. BRC and the Company will each pay one-half of the expenses of each
demand registration. BRC also will have incidental, or piggy-back, registration
rights if the Company proposes to register any of its equity securities (other
than registrations involving employee benefit plans) for its own account or for
the account of any other shareholder. BRC will pay all of its own legal expenses
and the first $25,000 of the other expenses of a piggy-back registration and the
Company will pay the remaining expenses of a piggy-back registration. Both the
demand and piggy-back registration rights will be subject to customary
underwriting and holdback provisions and will expire on March 9, 2004.
Transactions with Printing Plus, Inc.
Donald A. Borror, Chairman of the Board of the Company, together with
Richard Myers, owns Printing Plus, Inc., a printing company which has provided
printing services to the Company. Mr. Myers, who also operates Printing Plus,
Inc., is the husband of Donna Borror Myers, who is Donald A. Borror's daughter
and Douglas G. and David S. Borror's sister. In 1997, the Company paid
approximately $189,000 to Printing Plus, Inc. for printing services, which
amount represented approximately 61% of the total amount paid by the Company for
printing services in 1997. The printing jobs awarded by the Company to Printing
Plus, Inc. tend to be small jobs with tight delivery schedules. In 1997, the
single largest printing job awarded by the Company to Printing Plus, Inc. was
approximately $9,583, and the average printing job awarded was approximately
$350. The Company believes that the prices charged by Printing Plus, Inc. were
based on the standard rates of Printing Plus, Inc. A key factor in the Company's
decision to award many of the printing jobs to Printing Plus, Inc. was its
reliability in meeting the Company's delivery schedule. The transactions between
the Company and Printing Plus, Inc. were not reviewed or approved by the
Affiliated Transactions Review Committee or the Audit Committee of the Board of
Directors.
RATIFICATION AND ADOPTION OF
EXECUTIVE DEFERRED COMPENSATION PLAN
Shareholders are being asked to ratify and adopt the Amended and
Restated Dominion Homes, Inc. Executive Deferred Compensation Plan ("the Plan").
The following summary of certain provisions of the Plan is qualified in its
entirety by reference to the Plan, a copy of which is attached hereto as an
Appendix.
Background
The Compensation Committee of the Board of Directors adopted the Plan
in December 1994. The Plan was established to permit officers and other
employees of the Company having significant managerial responsibility
("Executive Employees"), and non-employee members of the Board of Directors of
the Company ("Eligible Directors") who were selected by the committee
administering the Plan (the "Committee") (collectively, "Eligible Participants")
to defer the receipt of a portion of their compensation from the Company.
Pursuant to the terms of the Plan as originally adopted, any distribution made
from the Plan to an Eligible Participant would be paid in cash. On October 29,
1997, the Board of Directors amended and restated the Plan, effective November
15, 1997, to permit distributions from the Plan to be made in Common Shares as
well as cash, and caused the Company to establish and fund a rabbi trust (the
"Trust"). The assets of the Trust are required to be used by the trustee (the
"Trustee") to make open market purchases of Common Shares and to provide a
source of assets to be used for the satisfaction of the Company's obligations
pursuant to the Plan. There are 15 Eligible Participants currently participating
in the Plan.
-24-
<PAGE>
Description
The Plan permits an Eligible Participant electing to participate in the
Plan to elect to defer in any calendar year up to 20% of the sum of the salary
and bonus payable by the Company (in the case of an Executive Employee), or 100%
of the director's fees payable by the Company (in the case of an Eligible
Director). The Plan requires the Company to make a matching contribution on
December 31 of the calendar year equal to 25% of the lesser of (i) the amount
deferred by the Eligible Participant for such calendar year and (ii) $10,000.00.
Amounts deferred by an Eligible Participant and Company matching contributions
are credited to a deferred compensation account established for and maintained
on behalf of the Eligible Participant by the Company (the "Account"). Amounts
credited to an Eligible Participant's Account are divided by the fair market
value of Common Shares (determined as of the later of the dates such amounts are
credited to the Account or the dates Common Shares are acquired by the Trustee
in respect of the amounts credited) and the resulting number of Common Shares
are credited to the Eligible Participant's Account. Amounts previously credited
to the Accounts of Eligible Participants participating in the Plan prior to
November 15, 1997, were divided by the fair market value of the Common Shares on
such date, and the resulting number of Common Shares were credited to such
Accounts.
Any cash dividends paid by the Company in respect of Common Shares
credited to an Eligible Participant's Account also are credited to the Account.
The amount of the dividend is divided by the fair market value of the Common
Shares (determined as of the later of the date such dividend was credited to the
Account or the dates Common Shares are acquired by the Trustee in respect of the
dividend) and the resulting number of Common Shares is credited to the Eligible
Participant's Account. The number of Common Shares held in an Eligible
Participant's account also is adjusted from time to time to reflect stock
splits, stock dividends or other changes in Common Shares resulting from a
change in the Company's capital structure.
Common Shares held in respect of compensation deferrals made by an
Eligible Participant are fully vested. Common Shares held in respect of Company
matching contributions vest at a rate of 20% as of the end of each full calendar
year after the later of the year such contribution is credited to the Eligible
Participant's Account or the year the Common Shares held in respect of such
contribution is acquired. Unvested Common Shares credited to an Eligible
Participant's Account vest on the earlier to occur of (i) the date on which the
sum of the Eligible Participant's age and years of service with the Company
equals 65 and (ii) a Change in Control (as defined in the Plan).
Amounts deferred by an Eligible Participant and Company matching
contributions are payable to the Eligible Participant on the earlier to occur of
(i) the date selected by the Eligible Participant in the written election made
by the Eligible Participant at the time of deferral and (ii) the Eligible
Participant's death (the "Deferral Date"). In addition, the Committee, in its
sole discretion, may elect to accelerate the Deferral Date of an Eligible
Participant if he ceases to be an Executive Employee or an Eligible Director, or
upon the application of an Executive Employee in the event of financial hardship
resulting from the Executive Employee's need to make extraordinary or emergency
expenditures (a "Hardship Withdrawal"). In the event of the Eligible
Participant's death, amounts otherwise distributable to the Eligible Participant
are paid to the person or persons designated as the Eligible Participant's
beneficiary in the manner provided in the Plan. Amounts payable to an Eligible
Participant on the Deferral Date are paid in Common Shares. Payments made upon
the death of an Eligible Participant or as a Hardship Withdrawal may be made in
cash upon the request of the beneficiary or the Eligible Participant, as the
case may be, and with the consent of the Committee.
-25-
<PAGE>
Assets held by the Trust are subject to the claims of the Company's
creditors in the event of the Company's insolvency. The Trustee is responsible
for the administration of the assets held in the Trust and for making payments
to Eligible Participants (or their beneficiaries) in accordance with the terms
of the Plan. All rights associated with assets of the Trust are exercised by the
Trustee (or the person designated by the Trustee) including, but not limited to,
the voting rights with respect to the Common Shares held in the Trust. The
Trustee is required to invest the assets of the Trust in Common Shares or other
obligations issued by the Company, to the extent possible. The Trustee may
purchase and sell Common Shares of the Company for the Plan wherever the Common
Shares are traded, in the over-the-counter market or in negotiated transactions.
The Trustee has sole discretion in determining the terms of any such purchase or
sale.
Awards
The following table sets forth information concerning the dollar value
of Company-matching contributions and the number of Common shares acquired in
respect thereof in 1997 for each Named Executive Officer, the executive officers
as a group, non-executive directors as a group and non-executive officer
employees as a group who participate in the Plan.
<TABLE>
<CAPTION>
Name and Position Dollar Value Number of
- ----------------- ------------ ---------
Common Shares
-------------
<S> <C> <C>
Douglas G. Borror $ 2,500 244
President and CEO
Donald A. Borror -0- -0-
Chairman
David S. Borror -0- -0-
Executive Vice President
Jon M. Donnell $ 2,500 244
Chief Operating Officer and
Chief Financial Officer
Richard R. Buechler $ 2,500 244
Executive Vice President
Executive Officers as a Group $ 12,500 1,220
Non-Executive Directors as a Group $ 5,000 488
Non-Executive Officer Employees
as a Group $ 32,000 1,001
</TABLE>
-26-
<PAGE>
The following table sets forth information concerning the deferral
contributions by participating directors and executive officers and
corresponding Company-matching contributions as of December 31, 1997, expressed
as the number of Common Shares acquired by the trustee under the Plan, with
respect to each director and executive officer participating in the Plan.
<TABLE>
<CAPTION>
Deferral Vested Company- Unvested Company-
Contributions Matching Matching
Payable as Common Contributions Payable Contributions Payable
Shares as Common Shares as Common Shares Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Douglas G. Borror 8,446 722 1,362 10,530
David S. Borror 7,471 722 1,118 9,311
Pete A. Klisares 12,177 422 1,162 13,761
C. Ronald Tilley 5,757 114 701 6,572
Terry E. George 3,261 114 701 4,076
Jon M. Donnell 3,261 114 701 4,076
Richard R. Buechler 8,560 722 1,362 10,644
Robert A. Meyer, Jr. 8,560 722 1,362 10,644
</TABLE>
Reason for the Proposal
The Plan is being submitted to the Company's shareholders for
ratification and adoption to comply with the requirements for continued
inclusion of the Common Shares for trading on the Nasdaq National Market.
Proposal
Shareholders are requested to approve the following resolution:
RESOLVED, that the Amended and Restated Dominion Homes, Inc.
Executive Deferred Compensation Plan be, and it hereby is, ratified and
adopted.
Recommendation and Vote
Ratification and adoption of the Plan will require the affirmative vote
of a majority of the Common Shares issued and outstanding as of the record date.
The Board of Directors recommends that shareholders vote "FOR"
ratification and adoption of the Executive Deferred Compensation Plan.
-27-
<PAGE>
SELECTION OF AUDITORS
The Board of Directors of the Company has selected Coopers & Lybrand
L.L.P., certified public accountants, as independent auditors for the Company
for the year ending December 31, 1998. Coopers & Lybrand have audited the books
of the Company and its predecessors since 1964. Management expects that a
representative of Coopers & Lybrand will be present at the Annual Meeting, will
have the opportunity to make a statement if he or she so desires and will be
available to respond to appropriate questions.
Recommendation and Vote
Ratification of the selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for 1998 will require the affirmative vote of a
majority of the Common Shares issued and outstanding as of the record date.
The Board of Directors recommends that shareholders vote "FOR"
ratification of the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, the Company is required to report in
this Proxy Statement any known failures during the 1997 fiscal year by executive
officers, directors or 10% shareholders to file on a timely basis a Form 3, 4 or
5, relating to the beneficial ownership of the Common Shares. To the best of the
Company's knowledge after a review of such filings, all such required forms were
filed on a timely basis, with the exception of Forms 5 covering nonqualified
options issued to the Company's outside directors (Messrs. Klisares, Mayo and
Tilley) on May 18, 1996, which Forms were filed on June 6, 1997, and Forms 5
covering theoretical Common Shares credited to the accounts of participants in
the Executive Deferred Compensation Plan (Messrs. Douglas Borror, David Borror,
Klisares, Tilley, George, Donnell, Buechler and Meyer) in December 1996, which
Forms were filed on February 10, 1998.
PROPOSALS BY SHAREHOLDERS FOR 1999 MEETING
If any shareholder of the Company wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting of
the shareholders of the Company to be held in 1999, the proposal must be
received by the Company prior to the close of business on December 4, 1998. Each
proposal submitted should be accompanied by the name and address of the
shareholder submitting the proposal, the number of Common Shares of the Company
owned, and the date those Common Shares were acquired, by the shareholder. If
the proponent is not a shareholder of record, proof of beneficial ownership also
should be submitted. The proponent should also state his or her intention to
personally appear at the 1999 Annual Meeting to present the proposal. The proxy
rules of the Securities and Exchange Commission govern the content and form of
shareholder proposals. All proposals must be a proper subject for action at the
1999 Annual Meeting.
The procedures for shareholders to make nominations for Class I
Directors to be elected at the Annual Meeting of Shareholders of the Company to
be held in 1999 are set forth above under "Board of Directors and Management --
Nomination of Directors."
-28-
<PAGE>
APPENDIX
AMENDED AND RESTATED
DOMINION HOMES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Section 1. Purpose
Effective December 9, 1994, Dominion Homes, Inc. (previously,
and at the time, Borror Corporation) established a deferred
compensation plan to provide selected Executive Employees and
Directors of the Company and its subsidiaries with the option
to defer the payment of a portion of their compensation
thereby enabling the Company and its subsidiaries to attract
and retain persons of ability as Executive Employees and
Directors. Initially, the Plan was effective as to
compensation paid during the period beginning on the original
effective date and ending on December 31, 1994 and,
thereafter, with respect to compensation paid each Quarter
beginning on or after January 1, 1995. Effective December 5,
1995, the Company amended and restated the Plan to incorporate
certain amendments to the election procedures under the Plan.
Effective November 15, 1997, the Company again desires to
amend the Plan in certain respects. This amended and restated
Plan incorporates all such amendments and supersedes the
provisions of the original Plan and the prior restatement as
of the Effective Date.
Section 2. Definitions
2.1 "Beneficiary" shall mean the person or persons
designated by a Participant in accordance with the Plan
to receive payment of any remaining balance in his
Deferred Compensation Account in the event of his
death.
2.2 "Bonus" shall mean any incentive bonus payable by the
Company to an Eligible Employee.
2.3 "Change in Control" shall mean the occurrence of either
(a) Borror Realty Company's failing to own at least
thirty percent (30%) of the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of directors
or (b) both Donald Borror and Douglas Borror ceasing to
be directors and officers of the Company.
2.4 "Committee" shall mean the committee appointed by the
Board of Directors of the Company to administer the
Plan. If no committee is specifically named by the
Board of Directors to administer the Plan, the
"Committee" shall mean the Compensation Committee of
the Board of Directors of the Company.
2.5 "Common Shares" shall mean the Common Shares, without
par value, of the Company.
A-1
<PAGE>
2.6 "Company" shall mean Dominion Homes, Inc., an Ohio
corporation, its corporate successors and the surviving
corporation resulting from any merger or acquisition of
Dominion Homes, Inc. with or by any corporation or
corporations.
2.7 "Date of Deferral" shall mean the date to which payment
of the Participant's Bonus, Salary and/or Matching
Contributions attributable to such deferred Bonus or
Salary is deferred in accordance with this Plan.
Subject to the terms of the following sentence, the
Date of Deferral shall be the earlier of (a) the date
selected by the Participant in the Election Agreement,
which date must be at least one year after the end of
the Quarter with respect to which the payment would
otherwise be made; or (b) the date of the Participant's
death. To the extent provided in Section 6.1(b), the
Committee shall have the right, in its sole discretion,
to accelerate a Participant's Date of Deferral to the
date the Participant ceases to be an Executive Employee
or Director. In no event shall a Participant's Date of
Deferral extend beyond the later of his 70th birthday
or the date he ceases to be an Executive Employee or
Director.
2.8 "Deferred Compensation Account" shall mean the
bookkeeping account to which is credited (a) the amount
of Bonus or Salary that is deferred by a Participant;
(b) dividends and interest in accordance with the
applicable provisions of the Plan; and (c) Matching
Contributions.
2.9 "Director" shall mean a member of the Board of
Directors of the Company who is not also an employee of
either the Company or any of its subsidiaries.
2.10 "Effective Date" for this amended and restated Plan
shall mean November 15, 1997.
2.11 "Eligible Employee" shall mean an Executive Employee or
Director who is selected by the Committee for
eligibility in this Plan in accordance with Section 4.1
hereof.
2.12 "Executive Employee" shall mean any person who is
employed by the Company or a subsidiary and who is
either an officer or has significant managerial
responsibility.
2.13 "Fair Market Value" of the Common Shares shall mean the
most recent closing price quotation or, if none, the
average of the bid and asked prices, as reported as of
the most recent available date with respect to the sale
of Common Shares on any quotation system approved by
the National Association of Securities Dealers then
reporting sales of Common Shares or on any national
securities exchange on which the Common Shares are then
listed. Notwithstanding the foregoing, if the Trustee
of any Trust acquires or sells any Common Shares, other
than acquisitions from or sales to the Company, the
"Fair Market Value" of such Common Shares shall mean
the actual price at which such Common Shares were
acquired or sold by the Trustee.
2.14 "Matching Contribution" shall mean the credit made to a
Participant's Deferred Compensation Account pursuant to
the provisions of Section 5.2.
A-2
<PAGE>
2.15 "Participant" shall mean any Eligible Employee who has
elected to defer payment of all or any portion of his
Bonus or Salary, in accordance with, and subject to the
limitations of, the Plan.
2.16 "Plan" shall mean the "Amended and Restated Dominion
Homes, Inc. Executive Deferred Compensation Plan" as
set forth herein, as the same may be amended from time
to time.
2.17 "Plan Year" shall mean the fiscal year of the Plan
which shall coincide with the calendar year.
2.18 "Quarter" shall mean any fiscal quarter of the Company
[currently the three-month periods ending each March
31, June 30, September 30 and December 31].
2.19 "Salary" shall mean, with respect to an Executive
Employee, his regular remuneration payable to him by
the Company during each Quarter pursuant to the
Company's regular payroll practices. With respect to a
Director, the term "Salary" shall mean the director's
fee paid to him by the Company during each Quarter as
compensation for his serving on the Board of Directors
of the Company or any committee thereof.
2.20 "Theoretical Shares" shall mean those hypothetical
Common Shares (and fractions thereof) computed and
credited to the Deferred Compensation Account under the
terms of the Plan prior to this amendment and
restatement.
2.21 "Trust" shall mean any trust established by the Company
in substantially the form described in Rev. Proc. 92-64
to satisfy all or a portion of its obligations under
the Plan.
2.22 "Trustee" shall mean the trustee of the Trust, as
designated by the Company, or any successor trustee of
the Trust.
Section 3. Administration
3.1 Power of the Committee
The Plan shall be administered by the Committee. The
Committee shall have full power to construe and
interpret the Plan, to grant or deny any claim made by
any Participant or Beneficiary under the Plan, to
establish and amend rules and regulations for
administration of the Plan and to take any and all
actions necessary or desirable to effectuate or carry
out the Plan.
A-3
<PAGE>
3.2 Actions Final
All actions taken by the Committee under or with
respect to the Plan shall be final and binding on all
persons. No member of the Committee shall be liable for
any action taken or determination made in good faith.
3.3 Books and Records
The books and records to be maintained for the purpose
of the Plan shall be maintained by the officers and
employees of the Company at the Company's expense and
subject to the supervision and control of the
Committee.
3.4 Action by the Committee
The Committee shall act by a majority of its members at
the time in office, and such action may be taken either
by vote at a meeting or in writing. If a Participant is
serving as a member of the Committee, he shall not be
entitled to vote on matters specifically relating to
his rights under the Plan; provided, however, that this
provision shall not prevent such person from voting on
matters which, although they may affect his rights,
relate to Participants in general.
Section 4. Eligibility and Participation
4.1 Eligibility
The Committee shall from time to time select the
persons eligible to participate in the Plan from the
Company's Executive Employees and Directors. Any
Executive Employee or Director selected by the
Committee shall be eligible to become a Participant in
the Plan. An Executive Employee's or Director's
eligibility shall cease when he dies or otherwise
ceases to be an Executive Employee or Director, or if
the Committee determines that he is otherwise no longer
eligible to participate.
4.2 Election to Defer
Any Eligible Employee who desires to defer the payment
of any portion of his Salary for any Quarter (or any
portion of a Quarter) must complete and deliver to the
Committee an Election Agreement (in substantially the
form of Exhibit A attached hereto) prior to the
beginning of the payment period during which such
Salary is to be earned by the Eligible Employee. An
Eligible Employee who desires to defer the payment of
any portion of his Bonus for any Quarter must complete
and deliver to the Committee an Election Agreement
prior to the date on which such Bonus is actually paid
to the Eligible Employee. An Eligible Employee who
timely delivers the Election Agreement to the Committee
shall be a Participant. Each Election Agreement is
irrevocable on and after the date to which it relates
but may be revoked or changed prior to the date on
which it is to become effective.
A-4
<PAGE>
4.3 The Election Agreement
A Participant must designate on the Election Agreement
(a) the portion of his Bonus and/or Salary he desires
to defer; (b) the Date of Deferral for any deferred
Bonus and/or Salary and any Matching Contributions
attributable to such deferred amounts; and (c) the
method of payment of his deferred Bonus and/or Salary
and Matching Contributions attributable to such
deferred amounts. Payment of the amount deferred shall
be made in accordance with Section 6.
4.4 Limitations on Deferrals
Notwithstanding any provision contained in this Plan,
the amount of Bonus and/or Salary that a Participant
may defer in any Plan Year shall be limited to the
amount described in this Section 4.4. For this purpose,
the annual limitation applicable to an Executive
Employee shall be equal to 20% of the sum of the
Executive Employee's Bonus and Salary paid to him by
the Company during the Plan Year. With respect to a
Director, the annual limitation shall be equal to 100%
of the Salary paid to him by the Company during the
Plan Year.
4.5 Sub-Accounts
In the event a Participant makes different elections as
to the method of payment or as to the time for
commencement of payments with respect to Bonuses or
Salary deferred or Matching Contributions attributable
thereto for different time periods, for purposes of
determining the amounts to be paid under each election,
the Participant shall be treated as if he had a
separate Deferred Compensation Sub-Account for Bonuses
and Salary deferred and Matching Contributions pursuant
to the differing elections.
Section 5. Deferred Compensation Account
5.1 Crediting Bonuses, Salary and Dividends
The Bonus and/or Salary which a Participant elects to
defer shall be treated as if it were set aside in a
Deferred Compensation Account on the date the Bonuses
and Salary would otherwise have been paid to the
Participant. As of such date or, if later, as of the
date on which Common Shares are actually acquired by
the Trust, the amount of the Bonus and/or Salary
credited to the Deferred Compensation Account shall be
divided by the then Fair Market Value of the Common
Shares; and the Deferred Compensation Account shall be
credited with the resulting number of Common Shares.
The Deferred Compensation Account shall be credited
with cash dividends on the Common Shares at the times
and equal in amount to the cash dividends actually paid
with respect to Common Shares on and after the date
credited to the Deferred Compensation Account. At such
times or, if later, at such times that Common Shares
are actually acquired by the Trust, the amount of cash
dividends credited to the Deferred Compensation Account
shall be divided by the then Fair Market Value of the
A-5
<PAGE>
Common Shares; and the Deferred Compensation Account
shall be credited with the resulting number of Common
Shares. Notwithstanding any provision contained herein,
as of the Effective Date, the number of Theoretical
Shares credited to the Deferred Compensation Accounts
of Participants under the terms of the Plan prior to
this amendment and restatement shall be converted to
the identical number of Common Shares.
5.2 Company Matching Contribution
As of the last day of each Plan Year, each
Participant's Deferred Compensation Account shall be
credited with a Matching Contribution, as described in
this Section 5.2. For each Plan Year, the Matching
Contribution shall be equal to 25% of the Bonus and/or
Salary deferred by the Participant during such Plan
Year up to a maximum deferral of $10,000. Therefore,
the maximum Matching Contribution credited to the
Deferred Compensation Account of any Participant for
any Plan Year shall be equal to $2,500 (25% x $10,000).
As of the last day of each Plan Year or, if later, as
of the date on which Common Shares are actually
acquired by the Trust, the amount of Matching
Contribution credited to the Deferred Compensation
Account for that year shall be divided by the then Fair
Market Value of the Common Shares; and the Deferred
Compensation Account shall be credited with the
resulting number of Common Shares.
5.3 Stock Adjustments
The number of Common Shares in the Deferred
Compensation Account shall be adjusted from time to
time by the Company to reflect stock splits, stock
dividends or other changes in the Common Shares
resulting from a change in the Company's capital
structure.
5.4 Extraordinary Events
In addition to the events described in Section 5.3, if
some other event shall occur with respect to which the
Committee determines equitable adjustments should be
made in the Deferred Compensation Accounts or in the
calculation of Fair Market Value, the Committee may
make such equitable adjustments in the Deferred
Compensation Accounts and the calculation of Fair
Market Value as it deems necessary or appropriate to
reflect such event.
5.5 Vesting of Deferred Compensation Account
A Participant shall earn a vested interest in the
Common Shares credited to his Deferred Compensation
Account in accordance with the provisions of this
Section 5.5. Common Shares credited to a Participant's
Deferred Compensation Account pursuant to Section 5.1
on account of Bonuses and Salary shall be fully vested
in the Participant and nonforfeitable as of the date
such Common Shares are credited to the Deferred
Compensation Account. Common Shares credited to a
Participant's Deferred Compensation Account pursuant to
Section 5.2 on account of Matching Contributions shall
become vested in the Participant and nonforfeitable in
accordance with the following table:
A-6
<PAGE>
Full Plan Years Following
Crediting of Matching
Contribution to Deferred
Compensation Account Vested Percentage
-------------------- -----------------
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
Common Shares credited to a Participant's Deferred
Compensation Account pursuant to Section 5.1 on account
of cash dividends shall become vested in the
Participant and nonforfeitable as of the date on which
the Common Shares on which such cash dividends were
paid shall become vested in the Participant and
nonforfeitable.
Notwithstanding any provision contained herein, a
Participant shall be fully vested, and have a
nonforfeitable interest in, all Common Shares credited
to his Deferred Compensation Account as of either (a)
the date on which the sum of his age and his years of
service with the Company equals 65; or (b) the
occurrence of a Change in Control. Further,
notwithstanding any provision contained herein, if a
Participant elects a Date of Deferral for the payment
of any Matching Contributions allocated to his Deferred
Compensation Account which precedes the date on which
he is fully vested in such Matching Contributions, the
non-vested portion of the Matching Contributions shall
be forfeited by the Participant and he shall have no
right to receive payment of such non-vested amounts
under this Plan.
5.6 Amount to be Paid
If the payment of the Participant's Deferred
Compensation Account is to be made in Common Shares,
the payment to be made pursuant to Section 6 shall be
the number of vested Common Shares credited to the
Participant's Deferred Compensation Account as of the
Date of Deferral. If the payment of the Participant's
Deferred Compensation Account is to be made in cash,
the payment to be made pursuant to Section 6 shall be
equal to the number of vested Common Shares credited to
the Participant's Deferred Compensation Account as of
the Date of Deferral multiplied by the Fair Market
Value of such Common Shares as of the Date of Deferral
or, if the Trust sells such Common Shares to a person
other than the Company to fund such cash payment, the
date of such sale. No dividends or other earnings shall
be credited to the Deferred Compensation Account after
the Date of Deferral.
A-7
<PAGE>
Section 6. Payment of Deferred Compensation
6.1 General
(a) Subject to the provisions of paragraph (b) of
this Section 6.1, the vested amount of the
Participant's Deferred Compensation Account
shall be paid to the Participant, within a
reasonable time after the Participant's Date of
Deferral, in a lump sum or in a number of
approximately equal annual installments (not
more than 12), as designated by the Participant
on his Election Agreement. Each Participant's
Deferred Compensation Account shall be paid in
the form of the actual Common Shares credited
to his account, with any fractional shares paid
in a single lump sum payment in cash.
(b) In the event a Participant ceases to be an
Executive Employee or Director for reasons
other than death, the Committee may, in its
sole discretion, elect to accelerate the
Participant's Date of Deferral to the date he
ceases to be an Executive Employee or Director,
regardless of when the Participant's Date of
Deferral would otherwise occur. If the
Committee accelerates a Participant's Date of
Deferral, the vested amount in his Deferred
Compensation Account shall be paid in a lump
sum within a reasonable time after his
accelerated Date of Deferral (but no later than
such Date of Deferral) in a manner similar to
the manner described in paragraph (a) of this
Section 6.1.
6.2 Death
(a) In the event of the death of a Participant, the
vested amount of the Participant's Deferred
Compensation Account (determined in the manner
described in paragraph (a) of Section 6.1)
shall be paid in a lump sum to his Beneficiary
within a reasonable time after the
Participant's death, but no later than one (1)
year after such date. If requested by the
Beneficiary and consented to by the Committee,
payments pursuant to this Section 6.2 may be
made in cash.
(b) Each Participant may name one or more
Beneficiaries and may also name one or more
contingent Beneficiaries by making a written
designation in a form acceptable to the
Committee. A Participant's Beneficiary
designation may be changed at any time prior to
his death by execution and delivery of a new
Beneficiary designation form. The Beneficiary
designation on file with the Company at the
time of the Participant's death which bears the
latest date shall govern.
(c) If no Beneficiary has been designated or if no
Beneficiary survives the Participant, the
vested amount in the Deferred Compensation
Account shall be paid in a lump sum to the
Participant's estate.
A-8
<PAGE>
(d) If the Beneficiary dies after the death of the
Participant, any vested amount otherwise
payable to the Beneficiary shall be paid in a
lump sum to the Beneficiary's estate.
6.3 Hardship
Upon the application of a Participant who is an Executive
Employee in the event of financial hardship resulting from a
need to make extraordinary or emergency expenditures, the
Committee may, in its sole discretion, cause the distribution
from the vested Deferred Compensation Account to such
Participant of an amount not exceeding the requirements of
such Participant for such extraordinary or emergency
expenditures. If requested by the Participant and consented to
by the Committee, payments pursuant to this Section 6.3 may be
made in cash. The Committee shall require such proper proof of
financial hardship and such evidence of the requirements of a
Participant for extraordinary or emergency expenditures as it
may deem appropriate, and the Committee's determination of
financial hardship and of the requirements of a Participant
for extraordinary or emergency expenditures shall be
conclusive. Notwithstanding any provisions contained herein,
the provisions of this Section 6.3 shall not be applicable to
any Participant who is a Director.
Section 7. Amendments
The Board of Directors of the Company may from time to time
amend, suspend or terminate any or all of the provisions of
tis Plan; provided that no such amendment, suspension or
termination shall adversely affect in any material respect any
right of any Participant to receive any amount payable
pursuant to the Plan.
Section 8. Miscellaneous Provisions
8.1 No Assignment
No right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge or
encumbrance. No right or benefit hereunder shall in any
manner be liable for or subject to the debts,
contracts, liabilities or torts of the person entitled
to such benefits.
A-9
<PAGE>
8.2 Status as General Creditor
The obligations of the Company under the Plan to make
payment of amounts in the Deferred Compensation Account
merely constitute the unsecured promise of the Company
to make payments from its general assets as provided
herein. To the extent that the Company establishes the
Trust to satisfy any of its obligations hereunder, the
assets of the Trust shall, at all times, remain assets
of the Company subject to its creditors. No Participant
or Beneficiary shall have any interest in, or a lien or
prior claim upon, any property of the Company,
including, but not limited to, any assets of the Trust.
To the extent that anyone acquires a right to receive
payment from the Company of any amount payable pursuant
to the Plan, such right shall be no greater than the
right of any unsecured general creditor of the Company.
8.3 No Right to Employment
Nothing contained in this Plan shall be construed to:
(a) give any Participant any right to receive a
salary or additional bonus;
(b) limit in any way the right of the Company or a
subsidiary to terminate a Participant's
employment at any time; or
(c) be evidence of any agreement or understanding,
express or implied, that the Company or a
subsidiary will employ a Participant in any
particular position or at any particular rate
of remuneration.
Section 9. Claims Procedure
9.1 Filing Claims. At the time that any Participant or
Beneficiary may be entitled to benefits under the
Plan, such Participant or Beneficiary may file a
claim request with the Committee. In the alternative,
the Committee may act, without receipt of a formal
request from the Participant or Beneficiary, with
respect to such claim.
9.2 Notification to Claimant. If a claim is wholly or
partially denied, the Committee will furnish to the
claimant a notice of the decision within ninety (90)
days in writing and in a manner calculated to be
understood by the claimant, which notice will contain
the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions
upon which the denial is based;
A-10
<PAGE>
(c) a description of any additional material or
information necessary for the claimant to
perfect the claim and an explanation of why
such material or information is necessary; and
(d) an explanation of the Plan's claims review
procedure describing the steps to be taken by a
claimant who wishes to submit his claims for
review.
9.3 Review Procedure. A claimant or his authorized
representative may, with respect to any denied claim:
(a) request a review upon a written application
filed within sixty (60) days after receipt
by the claimant of written notice of the
denial of his claim;
(b) review pertinent documents; and
(c) submit issues and comments in writing.
Any request or submission will be in writing and will
be directed to the Committee (or its designee). The
Committee (or its designee) will have the sole
responsibility for the review of any denied claim and
will take all steps appropriate in the light of its
findings.
9.4 Decision on Review. The Committee (or its designee)
will render a decision upon review. If special
circumstances (such as the need to hold a hearing on
any matter pertaining to the denied claim) warrant
additional time, the decision will be rendered as
soon as possible, but not later than one hundred
twenty (120) days after receipt of the request for
review. Written notice of any such extension will be
furnished to the claimant prior to the commencement
of the extension. The decision on review will be in
writing and will include specific reasons for the
decision, written in a manner calculated to be
understood by the claimant, as well as specific
references to the pertinent provisions of the Plan on
which the decision is based. If the decision on
review is not furnished to the claimant within the
time limits prescribed above, the claim will be
deemed denied on review.
A-11
<PAGE>
REVOCABLE PROXY
DOMINION HOMES, INC.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1998
This Proxy is solicited on behalf of the Board of Directors
The undersigned holder(s) of common shares, no par value ("Common Shares") of
Dominion Homes, Inc. ("Company") hereby constitute(s) and appoint(s) Jon M.
Donnell and Terry E. George, or either of them, the Proxy or Proxies of the
undersigned, with full power of substitution, to attend the Annual Meeting of
Shareholders ("Annual Meeting") of the Company to be held on May 20, 1998, at
the Company's Galloway Ridge housing development, 128 Galloway Ridge Drive,
Columbus, Ohio 43119, at 10:00 a. m., local time, and any adjournment or
adjournments thereof, and to vote all of the Common Shares which the undersigned
is entitled to vote at such Annual Meeting or at any adjournments thereof:
1. The election as directors of the Company the nominees listed below (except as
marked to the contrary below):
Donald A. Borror, David S. Borror,
Pete A. Klisares and Gerald E. Mayo
[ ] FOR [ ] WITHHOLD [ ] EXCEPT
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. The ratification and adoption of the Amended and Restated Dominion Homes,
Inc. Executive Deferred Compensation Plan (the "Executive Deferred
Compensation Plan"); and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The ratification of the selection of Coopers & Lybrand L.L.P. as independent
public accountants for the Company in 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any postponements
or adjournments thereof.
<PAGE>
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED OR NOT VOTED AS SPECIFIED. WHERE NO CHOICE IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES
LISTED IN ITEM NO. 1 AS DIRECTORS OF THE COMPANY, "FOR" RATIFICATION AND
ADOPTION OF THE AMENDED AND RESTATED DOMINION HOMES, INC. EXECUTIVE DEFERRED
COMPENSATION PLAN, "FOR" RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND AS
THE INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY IN 1998, AND, IN THE
DISCRETION OF THE PROXY OR PROXIES, ON ANY OTHER BUSINESS PROPERLY BROUGHT
BEFORE THE MEETING OR ANY POSTPONEMENT(S) OR ADJOURNMENT(S) THEREOF.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
DOMINION HOMES, INC.
All proxies previously given by the undersigned are hereby revoked. The
undersigned acknowledges receipt of the accompanying Notice of Annual Meeting of
Shareholders and Proxy Statement for the May 20, 1998, Annual Meeting.
Please sign exactly as your name appears hereon. Executors, administrators,
trustees, guardians, attorneys and agents should give their full titles. If
shareholder is a corporation, sign in full corporate name by authorized officer.
If shares are registered in two names, both shareholders should sign. (Please
note any change of address on this proxy.)
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
