NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On

Thursday, January 31, 2008

 

Dear Fellow Stockholder of D.R. Horton:

 

You are invited to attend the 2008 Annual Meeting of Stockholders of D.R. Horton, America’s Builder. Our 2008 Annual Meeting will be held at our corporate offices located at: D.R. Horton Tower, 301 Commerce Street, Fort Worth, Texas, on Thursday, January 31, 2008, at 10:00 a.m., central time, for the following purposes:

 

 

Only stockholders of record at the close of business on Monday, December 3, 2007, are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

 

While we would like to have each of you attend the meeting and vote your shares in person, we realize this may not be possible. However, whether or not you plan to attend the meeting, your vote is very important. For convenience of our stockholders, proxies may be given either by telephone, electronically through the Internet, or by mail. A form of proxy on which to indicate your vote by mail and an envelope, postage prepaid, in which to return your proxy are enclosed. WE URGE YOU TO COMPLETE AND RETURN YOUR PROXY BY ONE OF THESE METHODS SO THAT YOUR SHARES WILL BE REPRESENTED. If you decide later to attend the Annual Meeting, you may revoke your proxy at that time and vote your shares in person. If you desire any additional information concerning the 2008 Annual Meeting or the matters to be acted upon at the meeting, we would be glad to hear from you.

 

Very truly yours,

 

 

DONALD R. HORTON

Chairman of the Board

 

Fort Worth, Texas

December 19, 2007

TABLE OF CONTENTS

 

D.R. Horton Tower

301 Commerce Street

Fort Worth, Texas 76102

www.drhorton.com

 

PROXY STATEMENT

for the

2008 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On January 31, 2008

 

GENERAL

 

Time, Place and Purposes of Meeting

 

Our 2008 Annual Meeting of Stockholders will be held on Thursday, January 31, 2008, at 10:00 a.m., central time, at our corporate offices located at: D.R. Horton Tower, 301 Commerce Street, Fort Worth, Texas. The purposes of the 2008 Annual Meeting are set forth in the Notice of Annual Meeting of Stockholders to which this Proxy Statement is attached. D.R. Horton, Inc. is referred to as “D.R. Horton,” “Company,” “we,” and “our” in this Proxy Statement.

 

Solicitation of Proxies

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of D.R. Horton. D.R. Horton expects that this Proxy Statement and the accompanying form of proxy will first be made available to our stockholders of record on or about December 19, 2007. The cost of this solicitation will be paid by D.R. Horton. The solicitation of proxies will be made primarily by use of the mail. In addition, directors, officers and regular employees of D.R. Horton may make solicitations without special compensation by telephone, telegraph, e-mail or personal interview. They may request banks, brokers, fiduciaries and other persons holding stock in their names, or in the names of their nominees, to forward proxies and proxy materials to their principals and obtain authorization for the execution and return of such proxies to management. D.R. Horton will reimburse such banks, brokers and fiduciaries for their reasonable out-of-pocket expenses in connection therewith. We retained the Altman Group to solicit proxies on our behalf and will pay The Altman Group an estimated $6,500 for their services.

 

Revocation and Voting of Proxies

 

Stockholders may vote either by casting votes in person at the meeting, or by marking, signing and dating each proxy card received and returning it in the prepaid envelope, by telephone, or electronically through the Internet by following the instructions included on the enclosed proxy card. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number. The procedures, which are designed to comply with Delaware law, allow stockholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded. Stockholders who hold shares in “street name” through a broker or other nominee may be able to vote by telephone or electronically through the Internet in accordance with the voting instructions provided by that institution.

 

Any proxy given may be revoked by a stockholder at any time before it is exercised by filing with D.R. Horton a notice in writing revoking it, by duly executing and returning a proxy bearing a later date or by voting by telephone or Internet. Proxies also may be revoked by any stockholder present at the 2008 Annual Meeting who expresses a desire to vote his or her shares in person. Subject to such revocation and except as

otherwise stated herein or in the form of proxy, all proxies duly executed and received prior to, or at the time of, the Annual Meeting will be voted in accordance with the specifications of the proxies. If no specification is made, proxies will be voted FOR the nominees for election of directors (see Proposal One — Election of Directors), FOR the proposal to amend and restate the Amended and Restated 2000 Incentive Bonus Plan, (see Proposal Two — Amendment and Restatement of the 2000 Incentive Bonus Plan), FOR the proposal to approve the 2008 Performance Unit Plan (see Proposal Three — Approve the 2008 Performance Unit Plan), AGAINST the stockholder proposal concerning a pay-for-superior-performance standard for executive compensation (see Proposal Four — Stockholder Proposal Concerning a Pay-For-Superior-Performance Standard for Executive Compensation) and, at the discretion of the proxy holders, on all other matters properly brought before the Annual Meeting or any adjournment thereof.

 

Outstanding Shares and Voting Rights

 

December 3, 2007 has been set as the record date for the purpose of determining stockholders entitled to notice of, and to vote at, the 2008 Annual Meeting. There were 314,956,291 shares of D.R. Horton’s Common Stock, $.01 par value, issued and outstanding on the record date. On any matter submitted to a stockholder vote, each holder of Common Stock will be entitled to one vote, in person or by proxy, for each issued and outstanding share of Common Stock registered in his or her name on the books of D.R. Horton as of the record date. A list of such stockholders will be available for examination by any stockholder at the offices of D.R. Horton set forth above for at least ten days before the Annual Meeting.

 

Quorum Requirement

 

The D.R. Horton Bylaws provide that if the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote are present in person or represented by proxy, there will be a quorum. The aggregate number of votes entitled to be cast by all stockholders present in person or represented by proxy at the Annual Meeting, whether those stockholders vote for, against or abstain from voting on any matter, will be counted for purposes of determining whether a quorum exists. Broker non-votes, which are described below, will be considered present for purposes of determining whether a quorum exists.

 

Broker Non-Votes and Vote Required

 

If a broker holds your shares, this Proxy Statement and a proxy card have been sent to the broker. You may have received this Proxy Statement directly from your broker, together with instructions as to how to direct the broker to vote your shares. If you desire to have your vote counted, it is important that you return your voting instructions to your broker. Rules of the New York Stock Exchange (“NYSE”) determine whether proposals presented at stockholder meetings are “routine” or “non-routine.” If a proposal is routine, a broker or other entity holding shares for an owner in street name may vote on the proposal without voting instructions from the owner. If a proposal is non-routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. A “broker non-vote” occurs when the broker or other entity is unable to vote on a proposal because the proposal is non-routine and the owner does not provide instructions. Proposal One, the proposal to elect directors, Proposal Two, the proposal to amend and restate the Amended and Restated 2000 Incentive Bonus Plan, and Proposal Three, the proposal to approve the 2008 Performance Unit Plan, are routine proposals under the rules of the NYSE. As a result, brokers or other entities holding shares for an owner in street name may vote on Proposals One, Two and Three even if no voting instructions are provided by the owner. Proposal Four, the stockholder proposal, is a non-routine proposal under the rules of the NYSE. As a result, brokers or other entities holding shares for an owner in street name may vote on Proposal Four only if voting instructions are provided by the owner. If you do not provide your broker with voting instructions for Proposal Four, your shares will not be counted as shares present and entitled to vote with respect to the vote required for this proposal.

The following table reflects the vote required for each proposal and the effect of broker non-votes, withhold votes and abstentions on the vote, assuming a quorum is present at the meeting:

 

 

If any other proposals are properly presented to the stockholders at the meeting, the number of votes required for approval will depend on the nature of the proposal. Generally, under Delaware law and our Bylaws, the number of votes required to approve a proposal is a majority of the shares of Common Stock present and entitled to vote at the meeting. The enclosed proxy card gives discretionary authority to the proxy holders to vote on any matter not included in this Proxy Statement that is properly presented to the stockholders at the meeting. The persons named as proxies on the enclosed proxy card are Donald R. Horton, Chairman, Donald J. Tomnitz, Vice Chairman, President and Chief Executive Officer, and Bill W. Wheat, Executive Vice President and Chief Financial Officer.

 

Stockholders Sharing the Same Address

 

The broker, bank or other nominee of any stockholder who is a beneficial owner, but not the record holder, of the Company’s Common Stock may deliver only one copy of this Proxy Statement and our Annual Report to multiple stockholders sharing an address, unless the broker, bank or nominee has received contrary instructions from one or more of the stockholders.

 

In addition, with respect to record holders, in some cases, only one copy of this Proxy Statement and our Annual Report will be delivered to multiple stockholders sharing an address, unless the Company has received contrary instructions from one or more of the stockholders. Upon written or oral request, the Company will deliver free of charge a separate copy of this Proxy Statement and our Annual Report to a stockholder at a shared address to which a single copy was delivered. You can notify your broker, bank or other nominee (if you are not the record holder) or the Company (if you are the record holder) that you wish to receive a separate copy of our proxy statements and annual reports in the future, or alternatively, that you wish to receive a single copy of the materials instead of multiple copies. The Company’s contact information for these purposes is: D.R. Horton, Inc., Attention: Investor Relations, D.R Horton Tower, 301 Commerce Street, Suite 500, Fort Worth, Texas 76102, telephone number: (817) 390-8200, or e-mail: mehorton@drhorton.com.

 

Future Stockholder Communications through the Internet

 

Stockholders may elect to receive future notices of meetings, proxy materials and annual reports electronically through the Internet. The consent of stockholders who have previously consented to electronic delivery will remain in effect until withdrawn. To consent to electronic delivery:

 

 

This consent may be withdrawn at any time in order to resume receiving stockholder communications in print form.

 

PROPOSAL ONE

 

ELECTION OF DIRECTORS

 

Our Board of Directors currently consists of eight members who will serve until the 2008 Annual Meeting, and until their successors have been elected and qualified. On November 16, 2007, the Board of Directors increased the size of the board from seven to eight Directors and, upon the Nominating and Governance Committee’s recommendation, appointed Bob G. Scott to fill the newly-created vacancy. Mr. Scott’s consideration for nomination was brought to the attention of the committee by an executive officer of the Company. The Board also appointed Mr. Scott to each of the Audit, Compensation and Nominating and Governance Committees. Mr. Scott, along with all seven incumbent directors, stands for election at the 2008 Annual Meeting.

 

By unanimous resolution, the Nominating and Governance Committee recommended to the Board of Directors, as nominees to the Board of Directors, our eight current Directors of the Company, each of whom is listed below under the caption “Nominees for Director.” After review and consideration by the Board of Directors, the Board nominated the eight Directors for election as directors of D.R. Horton at the 2008 Annual Meeting.

 

Unless otherwise specified in the accompanying proxy, the shares voted by proxy will be voted for each of the persons named below as nominees for election as directors. The eight nominees receiving the most votes cast, which is a plurality of the votes, will be elected for one year terms and will serve until the next annual meeting of stockholders and their successors have been elected and qualified. We do not know of any reason why any of the nominees would be unable to serve. However, if any of the nominees should become unavailable to serve as a director, the Board may designate a substitute nominee or reduce the size of the board. If the Board designates a substitute nominee, the persons named as proxies will vote “FOR” that substitute nominee.

 

The Corporate Governance Principles of the Company address the situation in which a director does not receive a majority of affirmative votes cast. Under such principles, any nominee for director who, in an uncontested election, receives a greater number of votes “withheld” from his or her election than votes “for” his or her election at the annual meeting (“Majority Withheld Vote”) will promptly tender his or her resignation. The Nominating and Governance Committee, which is comprised exclusively of independent directors, will consider the resignation and recommend to the Board whether to accept the tendered resignation. The Board will act upon the Nominating and Governance Committee’s recommendation within a reasonable period of time. The action taken by the Board will be publicly disclosed in a report filed with the Securities and Exchange Commission (the “SEC”) and may include, without limitation, acceptance or rejection of the tendered resignation or adoption of measures designed to address the issues underlying the Majority Withheld Vote. The foregoing description is qualified in its entirety by reference to our Corporate Governance Principles, which can be found under the Investor Relations and Corporate Governance links on our website at www.drhorton.com.

 

According to our Bylaws, any stockholder may make nominations for the election of directors if notice of such nominations is delivered to, or mailed and received at, the principal executive office of D.R. Horton not less than thirty days prior to the date of the originally scheduled meeting. However, if less than forty days’ notice or prior public disclosure of the date of the originally scheduled meeting is given by D.R. Horton, notice of such nomination must be so received not later than the close of business on the tenth day following the earlier of the day on which notice of the originally scheduled meeting was mailed or the day on which such public disclosure was made. If nominations are not so made, only the nominations of the Board of Directors may be voted upon at the 2008 Annual Meeting.

 

The Board Of Directors Recommends Voting “FOR” Each Of The Following Director Nominees.

 

Nominees for Director

 

The following is a summary of certain information regarding the nominees for election as directors.

 

 

Other Executive Officers

 

Samuel R. Fuller, age 64, is a Senior Executive Vice President of the Company. Mr. Fuller has been employed by D.R. Horton since 1992. In 1995, he was promoted to Controller. In 2000, Mr. Fuller was promoted to Executive Vice President and Chief Financial Officer, and in 2000 he was also appointed a director. In October 2003, Mr. Fuller was promoted to Senior Executive Vice President. He retired from the Board of Directors in November 2003.

 

Stacey H. Dwyer, age 41, is an Executive Vice President and Treasurer of D.R. Horton and is in charge of investor relations for D.R. Horton. She has been an employee of D.R. Horton since 1991. She was promoted from Assistant Secretary to Assistant Vice President in 1998 and from Assistant Vice President to Executive Vice President in 2000. She also became Treasurer in October 2003. Prior to 1991, Ms. Dwyer was an auditor for Ernst & Young LLP.

 

CORPORATE GOVERNANCE

 

Corporate Governance Standards

 

Our Board of Directors has adopted a number of standards to comply with requirements of the Sarbanes-Oxley Act of 2002, and the final rules of the NYSE and SEC relating to Sarbanes-Oxley and other corporate governance matters. Our Board has adopted the D.R. Horton Corporate Governance Principles, which contain a number of corporate governance initiatives designed to comply with the NYSE listing standards (the “NYSE Rules”) and the rules and regulations of the SEC (the “SEC Rules”) relating to corporate governance. The significant corporate governance initiatives adopted by the Board of Directors are discussed below. The Corporate Governance Principles can be found under the Investor Relations and Corporate Governance links on our website at www.drhorton.com.

 

Director Independence

 

Our Board of Directors is comprised of a majority of independent directors in accordance with the NYSE Rules. Our Board made the independence determination of its members based on the “Independence Standards” discussed below.

 

Our Board has adopted a set of “Independence Standards,” consistent with the NYSE Rules, to aid it in determining whether a member of the Board is independent under the NYSE Rules. In accordance with these Independence Standards, a director must not have a direct or indirect material relationship with the Company or its management, other than as a director. The Independence Standards specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company, its management or its independent auditor.

 

The Independence Standards are contained in the Corporate Governance Principles set forth on our website under the Investor Relations and Corporate Governance links. These include the following:

 

 

 

For purposes of these Independence Standards, an “immediate family member” includes a director’s spouse, parents, children, siblings, mothers and fathers-in-laws, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares the director’s home.

 

Audit Committee Independence, Financial Literacy and Audit Committee Financial Expert

 

In addition to being independent based on the Independence Standards, the NYSE Rules and related SEC Rules require that each member of an audit committee satisfy additional independence and financial literacy requirements, and at least one of these members must satisfy the additional requirement of having accounting or related financial management expertise. This additional requirement can be satisfied by the Board determining that at least one Audit Committee member is an “audit committee financial expert” within the meaning of the SEC Rules. Accordingly, the Corporate Governance Principles contain a set of standards that relate to audit committee independence, financial literacy and audit committee accounting and financial management expertise. Generally, the additional independence standard provides that (i) a member of the Audit Committee, or his or her immediate family members, are prohibited from receiving any direct or indirect compensation or fee from the Company or its affiliates, and (ii) he or she may not be an affiliated person of the Company or any of its subsidiaries. Generally, the financial literacy standard provides that the Board, in its business judgment, shall determine if each member is financially literate, taking into account factors such as the member’s education, experience and ability to read and understand financial statements of public companies. Also, audit committee financial experts must have five additional attributes, which are (i) an understanding of generally accepted accounting principles and financial statements, (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves, (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities, (iv) an understanding of internal control over financial reporting and (v) an understanding of audit committee functions. All together, attributes (i) through (v) are referred to as the “Financial Expert Attributes.” The audit committee financial expert standards are set forth in the Corporate Governance Principles.

 

Board Determinations

 

Based on the independence, financial literacy and financial expert standards discussed above, the Board has determined that Bradley S. Anderson, Michael R. Buchanan, Richard I. Galland, Michael W. Hewatt and Bob G. Scott are (i) independent, for purposes of serving as independent members of the Board of Directors, the Compensation Committee and the Nominating and Governance Committees, (ii) independent, for purposes of serving as independent members on the Audit Committee, and (iii) financially literate, for purposes of serving on the Audit Committee. The Board has also determined, as set forth below, that Mr. Hewatt, Mr. Galland and Mr. Buchanan each have the Financial Expert Attributes described above. No affirmative decision has been made by the Board at this time regarding Mr. Scott’s Financial Expert Attributes as the Audit Committee currently has three independent members with such attributes. The Board will defer making such a decision until the future and as needed.

 

Mr. Hewatt.  Mr. Hewatt acquired the Financial Expert Attributes primarily through his more than 30 years of experience working as a certified public accountant for Coopers & Lybrand LLP and Hewatt & Associates, CPAs and its predecessor firms. Mr. Hewatt’s experience as an auditor provided him active experience in conducting audits and reviewing financial statements. This active accounting experience further

developed Mr. Hewatt’s understanding of generally accepted accounting principles and financial statements and his ability to assess the application of such principles in connection with accounting for estimates, accruals and reserves. Mr. Hewatt’s active status as a certified public accountant requires him to stay current on pronouncements and advisory notices issued by accounting, auditing and tax regulatory boards and organizations.

 

During his career as a certified public accountant, Mr. Hewatt has served on various management teams directly responsible for designing and conducting testing procedures on financial statements for compliance with applicable controls and procedures, such as estimates, accruals and reserves, and evaluating related internal control structures. These types of compliance reviews were documented and evaluated and used in forming audit procedures. In connection with certain audits and compliance testing, Mr. Hewatt prepared and issued reports to boards of directors, whereby he gained understanding into the functioning of boards of directors and related committees. Mr. Hewatt has additional experience in providing management advisory services and providing tax advisory and tax preparation services, which has provided Mr. Hewatt with a strong background in the Internal Revenue Code and dealing with the Internal Revenue Service. Mr. Hewatt has worked with clients which include public and private companies, governmental organizations and non-profit organizations.

 

Mr. Galland.  Mr. Galland acquired the Financial Expert Attributes primarily through years of experience as president and chief executive officer of several companies where he actively supervised principal accounting officers and actively oversaw the preparation and evaluation of financial statements. Throughout Mr. Galland’s career, he has actively participated in numerous mergers and acquisitions where he was involved in evaluating balance sheets and analyzing appropriate estimates, accruals and reserves to record on the financial records of the acquiring company. Mr. Galland also has had extensive experience as a board member of two other public companies, where he also served as chair of their audit committees.

 

Mr. Buchanan.  Mr. Buchanan acquired the Financial Expert Attributes primarily through his experience as a commercial banker in the real estate and homebuilding sectors, including serving as head of Bank of America’s national real estate group. Mr. Buchanan’s responsibilities as a banker required him to analyze and evaluate financial statements in order to make credit and lending decisions. In this regard, he developed significant expertise in understanding the integrity of the financial information used to prepare financial statements and how such information should be used to analyze and evaluate a company’s financial condition and its ability to meet the company’s debt obligations. As head of the national real estate group at Bank of America, Mr. Buchanan also actively supervised others in conducting financial statement and financial condition analysis and evaluation.

 

As provided by the safe harbor contained in the SEC Rules, our audit committee financial experts will not be deemed “experts” for any purpose as a result of being so designated, such designation does not impose on such persons any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed on such persons as members of the Audit Committee or the Board of Directors in the absence of such designation, and such designation does not affect the duties, obligations or liabilities of any other member of the Audit Committee or the Board of Directors.

 

The Board also determined that Donald R. Horton, Donald J. Tomnitz and Bill W. Wheat are not independent members of the Board, because they currently are executive officers of, and employed by, the Company.

 

Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers

 

In accordance with SEC Rules, the Audit Committee and the Board have adopted the Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers. The Board believes that these individuals must set an exemplary standard of conduct for D.R. Horton, particularly in the areas of accounting, internal accounting control, auditing and finance. The ethics code sets forth ethical standards the designated officers must adhere to and other aspects of accounting, auditing and financial compliance. The full text of the Code of Ethical Conduct for CEO, CFO and Senior Financial Officers has been posted to the Company’s website, and can be found under the Investor Relations and Corporate Governance links. Information relating to any amendment to

or waiver of a provision of the Code of Ethical Conduct for CEO, CFO and Senior Financial Officers will be disclosed on the website within four business days of such amendment or waiver.

 

Corporate Code of Business Conduct and Ethics

 

The Board of Directors has adopted a Corporate Code of Business Conduct and Ethics for employees and directors of D.R. Horton in accordance with the NYSE Rules. The Board adopted the Corporate Code of Business Conduct and Ethics to provide guidance to the Board and management in areas of ethical business conduct and risk and provide guidance to employees and directors by helping them to recognize and deal with ethical issues including, but not limited to, (i) conflicts of interest, (ii) corporate opportunities, (iii) confidentiality, (iv) fair dealing, (v) protection of corporate assets, (vi) compliance with rules and regulations, including insider trading of securities, and (vii) confidential reporting of unethical behavior and hotline telephone numbers. The Corporate Code of Business Conduct and Ethics can be found on our website under the Investor Relations and Corporate Governance links.

 

Qualifications for Directors

 

The Nominating and Governance Committee utilizes a variety of methods for identifying nominees for director, including considering potential director candidates who come to the committee’s attention through current officers, directors, professional search firms, stockholders or other persons. Once a potential nominee has been identified, the Nominating and Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board of Directors. This assessment includes an evaluation of the nominee’s judgment and skills, such as his or her depth of understanding of the Company’s industry, financial sophistication, leadership and objectivity, all in the context of the perceived needs of the Board of Directors at that point in time.

 

In addition to the foregoing, the Company’s Corporate Governance Principles provide that each member of the Board of Directors should have the following minimum characteristics:

 

 

Ordinarily, directors who serve as chief executive officers or in equivalent positions for other companies should not serve on more than one other board of a public company in addition to the D.R. Horton Board, and other directors should not serve on more than two other boards of public companies in addition to the D.R. Horton Board. Because of the value the Board places on having directors who are knowledgeable about the Company and its operations, neither the Board nor the Nominating and Governance Committee believes that arbitrary term limits on directors’ service are appropriate.

 

Retirement Age Policy

 

On January 25, 2007, our Board adopted a retirement policy for directors. Under the policy, directors may not stand for reelection after they have reached the age of 75. Each director serving on the Board on January 25, 2007 is exempt from this policy.

 

Majority Voting Policy

 

Our directors are elected under a plurality standard, meaning the eight nominees who receive the greatest amount of votes are elected as directors, regardless of whether a majority of votes are received by any

individual director. However, under our Corporate Governance Guidelines, any nominee for director who, in an uncontested election, receives a greater number of votes “withheld” from his or her election than votes “for” his or her election at the annual meeting must promptly tender his or her resignation. The Nominating and Governance Committee will consider the resignation and recommend to the Board whether to accept the tendered resignation. The Board will act upon the Nominating and Governance Committee’s recommendation within a reasonable period of time. The action taken by the Board will be publicly disclosed in a report filed with the Securities and Exchange Commission.

 

Procedures for Nominating or Recommending for Nomination Candidates for Director

 

Any stockholder may submit a nomination for director by following the procedures outlined in our Bylaws and described under Proposal One “Election of Directors” in this Proxy Statement. In addition, the Nominating and Governance Committee has adopted a policy permitting stockholders to recommend candidates for director for consideration by the committee, which will consider such candidates on the same basis as candidates identified through other means. Stockholders wishing to recommend candidates for election at the 2008 Annual Meeting must give notice to the Nominating and Governance Committee no more than 150 days and no less than 120 days prior to the anniversary date of this Proxy Statement. All director candidates shall, at a minimum, possess the qualifications for director discussed above. Each notice must set forth (1) the name and mailing address of such stockholder, (2) the number of shares beneficially owned by such stockholder, (3) the name, age, business address and residence address of each candidate, (4) the number of shares of Common Stock, if any, beneficially owned by each candidate, and (5) all other information relating to such person that is required to be disclosed in the solicitations for proxies for election of directors under the SEC Rules and NYSE Rules. The Nominating and Governance Committee may request additional information to assist in the evaluation of the candidacy of such person.

 

Complaint Procedures For Accounting, Internal Control, Auditing and Financial Matters

 

In accordance with SEC Rules, the Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal control, auditing or financial matters (collectively, “Accounting Matters”) and (ii) the confidential, anonymous submission by employees of concerns regarding questionable Accounting Matters. The Audit Committee oversees treatment of complaints and concerns in this area. The full text of the Complaint Procedures For Accounting, Internal Control, Auditing and Financial Matters has been posted to the Company’s website, and can be found under the Investor Relations and Corporate Governance links.

 

Executive Sessions of the Board of Directors

 

In accordance with the NYSE Rules, the Board of Directors has held and will continue to hold regularly scheduled executive sessions of the non-management directors, all of whom are independent. Mr. Michael R. Buchanan, Chairperson of the Nominating and Governance Committee, presides at these independent sessions.

 

Communications with the Board of Directors

 

You can communicate with any member of our Board of Directors by sending the communication to the Chairperson of the Nominating and Governance Committee, who also serves as the Presiding Director. Currently, Mr. Buchanan serves as chairperson of the Nominating and Governance Committee. Send communications to: Presiding Director c/o Chief Legal Officer, D.R. Horton, Inc., 301 Commerce Street, Suite 500, Fort Worth, Texas 76102. Our Chief Legal Officer will review the communications and determine if such communications come within the purview of a Board committee or Board member(s). After such determination, these communications will be promptly forwarded to such Board member(s) or the Presiding Director as applicable. The Presiding Director reports these communications to the Board on a quarterly basis. Further information may be obtained on our website at www.drhorton.com under the Investor Relations and Corporate Governance links.

 

Meetings and Committees of the Board

 

Board Meetings

 

During the 2007 fiscal year, the Board of Directors of D.R. Horton held six meetings and acted once by written consent. Each director, other than Bob G. Scott (who was appointed following the 2007 fiscal year), attended at least 83% of the Board meetings and at least 88% of the committee meetings for each committee on which he served during the 2007 fiscal year. Executive sessions of our non-management directors, all of whom are independent, are regularly held. The sessions are scheduled and chaired by the Chairperson of the Nominating and Governance Committee, who also acts as our Presiding Director. Directors are encouraged to attend annual meetings of our stockholders. The 2007 annual meeting was attended by all of our current directors on the Board at that time.

 

Committees of the Board

 

The Board of Directors has four committees: the Executive Committee, the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. The Board of Directors has adopted governing Charters for each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. Each of the Charters of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee is posted on the Company’s website, and can be found under the Investor Relations and Corporate Governance links.

 

Executive Committee

 

The Executive Committee, while the Board is not in session, possesses all of the powers and may carry out all of the duties of the Board of Directors in the management of the business of D.R. Horton, which by state or federal law or the NYSE Rules may be delegated to it by the Board of Directors. The Executive Committee acted 55 times by written consent during the 2007 fiscal year, of which 50 of these consents related to matters that were routine to the operations of the Company, and five of these consents related to matters that were delegated to the Executive Committee by the Board. During our 2007 fiscal year and currently, the Executive Committee was and is composed of Messrs. Horton, Tomnitz and Wheat.

 

Nominating and Governance Committee

 

The members of the Nominating and Governance Committee are Mr. Michael R. Buchanan, Mr. Bradley S. Anderson, Mr. Richard I. Galland, Mr. Michael W. Hewatt and Mr. Bob G. Scott, with Mr. Buchanan serving as Chairperson. Each committee member has been determined by the Board to be independent in accordance with the NYSE Rules. During the 2007 fiscal year, the Nominating and Governance Committee met three times and took no action by written consent, and each member, other than Mr. Scott (who was appointed following the 2007 fiscal year), attended in person or by telephone conference all of the meetings.

 

The Nominating and Governance Committee Charter has been posted to the Company’s website under the Investor Relations and Corporate Governance links. The Nominating and Governance Committee’s primary purpose is to provide assistance to the Board of Directors in fulfilling its responsibility to the stockholders by:

 

 

Compensation Committee

 

The members of the Compensation Committee are Mr. Bradley S. Anderson, Mr. Michael R. Buchanan, Mr. Richard I. Galland, Mr. Michael W. Hewatt and Mr. Bob G. Scott, with Mr. Anderson serving as

Chairperson. Each committee member has been determined by the Board to be independent. During the 2007 fiscal year, the Compensation Committee met two times and acted by written consent four times, and each member, other than Mr. Scott (who was appointed following the 2007 fiscal year), attended in person or by telephone conference all of the meetings.

 

The Compensation Committee Charter has been posted to the Company’s website under the Investor Relations and the Corporate Governance links. The Charter provides that the Compensation Committee shall assist the Board of Directors in discharging its responsibility to the stockholders with respect to the Company’s compensation programs and compensation of the Company’s executive officers.

 

The Compensation Committee Charter also sets forth the responsibilities and duties of the committee regarding reviewing the compensation for the Chief Executive Officer and other executive officers, monitoring incentive and equity-based compensation plans, preparing an annual report on executive compensation and reporting to the Board of Directors.

 

Audit Committee

 

The members of the Audit Committee of the Board of Directors are Mr. Michael W. Hewatt, Mr. Bradley S. Anderson, Mr. Michael R. Buchanan, Mr. Richard I. Galland and Mr. Bob G. Scott, with Mr. Hewatt serving as Chairperson. The Audit Committee met nine times during 2007 fiscal year and took no action by written consent, and each member, other than Mr. Scott (who was appointed following the 2007 fiscal year), attended in person or by telephone conference 88% or more of the meetings.

 

As discussed under the caption “Corporate Governance Standards” on pages 9 and 10 of this Proxy Statement, each member of the Audit Committee has been determined by the Board to be “independent” and “financially literate” in accordance with NYSE Rules, the SEC Rules, and the corporate governance and independent standards adopted by the Board. Also, Messrs. Galland, Buchanan and Hewatt each have been determined by the Board to be an “audit committee financial expert” under such rules, regulations and standards as are set forth in the Company’s Corporate Governance Principles posted on our website under the Investor Relations and Corporate Governance links. The Board’s determinations are set forth on pages 10 and 11 of this Proxy Statement.

 

The Audit Committee operates pursuant to an Audit Committee Charter, which was approved and adopted by the Board of Directors. A copy of the adopted Audit Committee Charter is posted to the Company’s website under the Investor Relations and Corporate Governance links. The duties and responsibilities of the Audit Committee are set forth in its Charter. The Audit Committee’s primary purposes are to:

 

 

 

 

Further discussion regarding the Audit Committee’s processes and procedures regarding D.R. Horton’s audited consolidated financial statements for the year ended September 30, 2007, and other matters are discussed in the Audit Committee Report set forth on page 41 of this Proxy Statement.

 

Compensation of Directors

 

Director Compensation for Fiscal Year 2007

 

 

 

 

BENEFICIAL OWNERSHIP OF COMMON STOCK

 

Management

 

The following table shows the beneficial ownership of the Common Stock of D.R. Horton as of December 3, 2007 by (i) all D.R. Horton directors, (ii) all D.R. Horton executive officers, and (iii) all D.R. Horton directors and executive officers as a group. Unless stated otherwise, the shares are owned directly and the named beneficial owners possess sole voting and investment power with respect to the shares set forth in the table.

 

 

 

 

 

Certain Other Beneficial Owners

 

Based on filings under the Securities Exchange Act of 1934, as amended, available as of December 3, 2007, the only other known beneficial owner of more than 5% of D.R. Horton Common Stock outstanding was the following:

 

 

 

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

The following table summarizes our equity compensation plans as of September 30, 2007:

 

 

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Overview

 

Our Compensation Committee has undertaken to design a fair and competitive compensation philosophy and program for executive officers that will attract, motivate and retain highly qualified and experienced executives, reward superior performance and provide incentives that are based on performance of the Company. Our executive compensation program consists of several components, including base salary, cash bonuses, equity awards and deferred compensation plans and retirement benefits. This compensation discussion and analysis discussion provides more information regarding:

 

 

 

Gordon D. Jones and George W. Seagraves were also named executive officers for our 2007 fiscal year because each one was an Executive Vice President for less than one month at the beginning of our 2007 fiscal year. This Compensation Discussion and Analysis section also provides information regarding Mr. Jones and Mr. Seagraves for the 2007 fiscal year. Mr. Jones and Mr. Seagraves are not expected to be named executive officers for our 2008 fiscal year. Mr. Jones is currently a Vice President of the Company and Region President of the Company’s Southwest Region. Mr. Seagraves is currently a Vice President of the Company and Region President of the Company’s Midwest Region, including Division President of the Company’s Denver and Minnesota divisions.

 

Executive Compensation Objectives

 

Our primary compensation objectives are to:

 

 

As a leading national homebuilding company delivering more new homes in the United States than any other homebuilder for six consecutive years, we have the privilege of employing key executives who have proven they can deliver results. Attracting, motivating and retaining experienced homebuilding executives are important objectives of our compensation program. Because of our market leading position, we find that our executives and other key officers may encounter other professional opportunities due to the extensive national industry experience gained during their employment with us. In order to attract, motivate and retain experienced and talented executives, we believe we must provide salaries and total compensation packages that are attractive and competitive in the homebuilding industry. We believe the executive’s interests are aligned with our stockholders’ interests by motivating and retaining our key officers so that they can use their national homebuilding expertise with us rather than with one of our competitors. Many of our key executives and officers have experience in both up and down cycles in the homebuilding industry. The Compensation

Committee considers this type of industry experience to be very valuable in the current volatile and challenging homebuilding market. We believe that to maintain our position as a leader in the homebuilding industry, the Company must provide executive compensation programs that continually motivate and seek to retain our experienced and talented executives.

 

We also believe it is important to have a significant portion of an executive’s overall compensation tied to his or her day-to-day value to the Company. When reviewing an executive’s value to the Company, we review factors such as the number of years with the Company, significance of job function, ability to analyze and make decisions on significant business and financial objectives, and the ability to work as an important member of senior management and serve as a leader for other employees. We believe that by placing importance on these performance measures, we are aligning individual and corporate performance with the compensation that is ultimately paid for this performance. Due to the number of years of dedicated service our executives have with us, the Board of Directors and Compensation Committee have chosen not to pursue written employment agreements with our executives. Rather than using fixed employment agreements, we believe our balanced cash and equity compensation program provides us with an effective tool in retaining and motivating our executives.

 

Process for Determining Compensation

 

Authority and Role of Compensation Committee

 

Our Compensation Committee evaluates and approves the performance and compensation for our Chairman and our Chief Executive Officer, and other named executive officers who are covered under Section 162(m). The Compensation Committee also makes compensation recommendations to the Board with respect to the other named executive officers. The Compensation Committee also administers our equity programs such as awards under our 2006 Stock Incentive Plan.

 

The members of the Compensation Committee of the Board of Directors are Mr. Bradley S. Anderson, Mr. Michael R. Buchanan, Mr. Richard I. Galland, Mr. Michael W. Hewatt and Mr. Bob G. Scott, with Mr. Anderson serving as Chairperson. Each committee member has been determined to be independent under the NYSE listing standards, an “outside director” under Section 162(m) of the Internal Revenue Code, and a “non-employee director” under Rule 16b-3 under the Securities Exchange Act. The Compensation Committee is responsible for approving all cash and equity compensation paid or awarded to Mr. Horton, Mr. Tomnitz and other executive officers who are awarded compensation under our Amended and Restated 2000 Incentive Bonus Plan or our 2006 Stock Incentive Plan, if such compensation is expected to be subject to the Section 162(m) deduction limitation. At the beginning of the 2007 fiscal year, only Messrs. Horton and Tomnitz were awarded compensation under the Amended and Restated 2000 Incentive Bonus Plan. Accordingly, the Compensation Committee recommended to the Board, for its approval, all compensation paid or awarded to the other named executive officers. The duties of the Compensation Committee are summarized under “Corporate Governance — Meetings and Committees of the Board” on page 14 and are more fully set forth in the Compensation Committee Charter, which is available on our website at www.drhorton.com under the Investor Relations and Corporate Governance links.

 

Role of Chairman and Chief Executive Officer

 

Our Chairman and our Chief Executive Officer review and discuss the compensation of our other executive officers and make compensation recommendations to the Compensation Committee regarding these executive officers. At the request of the Compensation Committee, our Chairman provides a recommendation concerning the annual base salary and incentive bonus program for our Chief Executive Officer, but not for himself, as Chairman. For other executive officers, our Chairman and our Chief Executive Officer review and discuss the annual base salary and cash bonus compensation for these other executive officers and make recommendations to the Compensation Committee. The Compensation Committee considers the recommendations and other information and then makes a recommendation to the Board for its consideration. Our Chairman and our Chief Executive Officer make recommendations to the Compensation Committee with regard to the compensation packages for new executive officers and adjustments in compensation for other executive officers.

Use of the Company’s Historical Data

 

When evaluating executive compensation decisions, the Compensation Committee evaluates and considers many of the Company’s short and long-term achievements that place us as a leader in the U.S. high-production homebuilding industry. Based on publicly available information at our 2007 fiscal year end, we believe these achievements include:

 

 

Review of Compensation

 

We review the compensation of our executive officers on a regular basis. In our 2007 fiscal year, the Compensation Committee met in November 2006 and August 2007 to review and discuss executive compensation. The Committee also met a total of five times in November and December 2007 to review and discuss 2007 and 2008 fiscal year executive compensation. The Compensation Committee Chairman and other members of the Compensation Committee also have discussions with management during the year and occasionally request that management prepare certain market summaries and survey data regarding executive compensation matters for the Committee’s review. The Compensation Committee believes it is appropriate to exercise its judgment when reviewing and setting the total mix of compensation related to short and long-term awards and cash and equity awards rather than relying on a set formula or percentage allocation. The Compensation Committee believes an important part of an executive’s value is the development of his or her industry expertise and the use of that expertise in helping us achieve our business plan. Accordingly, we exercise judgment in determining the mix of compensation we believe to be in line with our compensation objectives and that we believe to be appropriate for the executive under review.

 

Compliance with Internal Revenue Code Section 162(m).

 

When reviewing and setting compensation awards to our executives, we consider the tax deductibility of their compensation under “Section 162(m)” of the Internal Revenue Code. Section 162(m) generally does not allow a tax deduction to publicly-held companies for compensation over $1 million paid for any fiscal year to the company’s named executive officers. However, Section 162(m) exempts qualified performance-based compensation if certain requirements are met. Early in our 2004 fiscal year, the Compensation Committee adopted, and our stockholders approved, our 2000 Incentive Bonus Plan (referred to in this Proxy Statement as the “2000 Plan”), as amended and restated. Subsequently, in December 2007, the Compensation Committee amended and restated the 2000 Plan (referred to in this Proxy Statement as the “2000 Restated Plan”), to, among other items, change the maximum limit that may be awarded in a performance period. See Proposal 2 in this Proxy Statement for more information on the 2000 Restated Plan. We generally intend for awards to our executive officers under the 2000 Plan and the 2000 Restated Plan and the stock options under our equity plans to qualify for the performance-based compensation exemption under Section 162(m). However, we exercise judgment and may award compensation that does not qualify for tax deductibility under Section 162(m) in order to meet corporate objectives or to adapt to changing circumstances. Accordingly, the Board of Directors and the Compensation Committee may award non-deductible compensation to our officers as the Board and Committee deem appropriate.

 

Use of Compensation Survey Data

 

The Compensation Committee utilizes compensation data of our peer group of publicly-traded homebuilding companies to analyze compensation decisions in light of current market rates and practices, and to

help ensure that our compensation decisions are reasonable in comparison to our peer group and the value of the executive to us; however, the Compensation Committee does not attempt to position compensation at any specified level within the peer group. The peer group compensation data is annually compiled by our management from publicly available information and provided to the Compensation Committee for its consideration. Our peer group consists of the following publicly-traded homebuilding companies:

 

 

Components of Compensation

 

Base Salary

 

Base salaries paid to our executive officers serve to provide a fixed or base level of compensation to our executives in relation to the factors listed below. When reviewing and setting an executive’s base salary, we consider these factors:

 

 

After taking into consideration the above factors, 2008 base salaries for our named executive officers will remain the same as their respective 2007 base salaries. In 2007, our Chairman, Chief Executive Officer and Chief Financial Officer had base salaries of $400,000, $300,000 and $200,000, respectively, which were below the average salaries of comparable positions in our peer group. Based on publicly available data as of the end of our 2007 fiscal year, the average base salaries for the chief executive officers and chief financial officers in our peer group were approximately $982,000 and $544,000, respectively. The base salaries of Messrs. Horton and Tomnitz have remained at these same levels since 2001. On October 1, 2004, Mr. Wheat’s base salary increased from $150,000 to $200,000 and has remained at the level since that date. Base salaries for our other named executive officers also did not change for 2008 from those salaries received in 2007. Traditionally, base salaries for our executives have been at a level below the average of our peer group which is consistent with the Company’s practice of focusing on maintaining strong corporate overhead containment. Our executives were awarded base salaries at different levels primarily based on their tenure with the Company and their level of responsibility on Company-wide operating and financial matters. These salaries are set forth in the Summary Compensation Table on page 30 of this Proxy Statement. When setting base salaries, we do not use a percentage or ratio that base salary should be in relation to total compensation, but we do believe that incentive compensation should continue to be a significant portion of total compensation. Each year, the Compensation Committee and Board of Directors review setting base salaries on an annual basis.

 

Annual Bonus Incentive — 2007 Fiscal Year

 

In furtherance of our compensation philosophy to award incentive bonuses based on short-term company and individual performance, in 2007, our Chairman and our Chief Executive Officer had the opportunity to earn annual cash incentive bonuses under the 2000 Plan. The incentive bonuses were based on a pre-determined percentage of consolidated quarterly pre-tax income, provided that for the first quarter the bonus was based on the consolidated pre-tax income for the month of December rather than on the quarter. For the first quarter, we use the month of December, rather than the entire first quarter, in order to give the Compensation Committee time in November of each year to review final results of operations prior to awarding final 2007 fiscal year compensation and prior to determining the compensation for the 2008 fiscal year, and to meet the Section 162(m) requirements for establishing performance goals prior to or within so many days from the beginning of a performance period. Each fiscal year, the Compensation Committee sets

the performance metrics, performance periods and percentages to be awarded for the upcoming fiscal year. During the first quarter of our 2007 fiscal year, the Compensation Committee determined that the primary performance metric would be consolidated pre-tax income and that a performance period would be based on each of the Company’s 2007 fiscal quarters, provided that for the first quarter the bonus is based on the month of December rather than on the first quarter. Traditionally, the Compensation Committee has chosen quarterly performance periods in order to incentivize the executives to achieve quarterly performance results that are at or near the top of its industry. The Compensation Committee has traditionally selected pre-set percentages that, it believes, were below the percentages being paid at most of its peers and as a result, were in line with the Company maintaining its reasonable containment of corporate overhead expense. The Compensation Committee considered, among other factors, the factors listed below in determining whether to adjust downward the amount of the incentive bonus paid after the end of the fiscal year:

 

 

No quantitative relative weights were assigned to the above factors. The Compensation Committee did not take any action with respect to Messrs. Horton’s and Tomnitz’s bonus plans that would have increased or decreased the bonus payable to them beyond their respective bonus plans that were approved at the beginning of the 2007 fiscal year.

 

Based on the 2007 performance bonus plans for Messrs. Horton or Tomnitz and the level of pre-tax income achieved, $1,168,858 was paid in January 2007 based on 1.5% of the consolidated pre-tax income for the month of December, $417,229 was paid in April 2007 based on 0.5% of the second quarter consolidated pre-tax income, and no bonus was paid for either the third or fourth quarters (pre-set percentages were 0.5% for each quarter) because the Company did not have positive pre-tax income in either of those quarters. For our 2007 fiscal year, the total performance-based bonuses, under the 2000 Plan, paid to each of Messrs. Horton and Tomnitz was $1,586,087, an 86.9% (or $10,534,822) decrease over the $12,120,909 performance-based bonus paid in our 2006 fiscal year. At the beginning of our 2007 fiscal year, when we set the performance metrics related to consolidated pre-tax income, we believed that was the appropriate metric for 2007 based, in part, on a review of our peer group, market conditions in the homebuilding industry, and balancing those factors with motivating our executives in an uncertain market. The maximum payout percentage of pre-tax income under our 2000 Plan is two percent of consolidated pre-tax income with respect to a fiscal year, provided that the 2000 Plan sets forth that a performance period may be any other period during a fiscal year selected by the Committee as to which an award may be earned. In our 2007 fiscal year, performance periods were based on the month of December (in the first quarter) and each of the remaining three fiscal quarters. We believe the maximum percentage set in our 2000 Plan to be within the maximum ranges established by others in our peer group. No other bonuses or equity awards were made to these individuals in 2007.

 

Other Named Executive Officers — Corporate.  At the end of the applicable performance period, which may be a fiscal year, or any period within a fiscal year, the Compensation Committee, on recommendation of our Chairman and our Chief Executive Officer, makes a recommendation to our Board of Directors regarding discretionary bonuses for Ms. Dwyer, and Messrs. Wheat and Fuller. Factors considered by our Chairman and our Chief Executive Officer in making their bonus recommendations include evaluations of these officers’ respective individual performances in key areas in which they have direct responsibility, such as (i) the effectiveness and integrity of our financial reporting process, both at corporate and at our regions and divisions, including the effectiveness and integrity of the Company’s financial, internal and disclosure controls and procedures, (ii) the financial, capital, treasury and other corporate management functions, (iii) analysis of

and recommendations regarding financial and operating metrics related to asset and inventory acquisitions, dispositions and valuations, (iv) contributions to the implementation of the Company’s strategies, and (v) the ability to work within a team of key executives and managers and to manage, develop and effectively work with direct report employees and others throughout the Company. For the 2007 fiscal year, annual discretionary bonuses of $300,000 were awarded to each of Mr. Wheat and Ms. Dwyer, and an annual discretionary bonus of $50,000 was awarded to Mr. Fuller. No quantitative relative weights were assigned to the above factors and no other bonuses or equity awards were made to these individuals in 2007.

 

Other Named Executive Officers — Region Presidents.  Messrs. Jones and Seagraves each received bonus payments for achieving performance goals and other objectives important to the Company and related to their respective regions. Early in our 2007 fiscal year, our Chairman and our Chief Executive officer established the compensation plans for Messrs. Jones and Seagraves, rather than the Compensation Committee, because Messrs. Jones and Seagraves were executive officers for less than one month in the 2007 fiscal year (October 2006). The primary performance goal for Messrs Jones and Seagraves related to earning up to 0.5% of their respective regions pre-tax income on a quarterly basis (excluding certain corporate and region overhead allocations), provided that certain other operating and financial factors related to closings, net sales, land and lot supply, inventory turnover, impairments and land option cost write-offs and overhead expense containment would be considered in determining the final performance and discretionary bonus to be paid. Based on the quarterly and year-end evaluation for the 2007 fiscal year, Mr. Jones received a total bonus of $721,225 and Mr. Seagraves received a bonus $607,800.

 

Annual Bonus Incentives — 2008 Fiscal Year

 

In connection with setting performance-based bonuses for our top executives for 2008, we undertook a thorough review of our performance-based bonus program. In this regard, we determined that performance-based bonuses should continue to comprise a significant portion of the compensation of our Chairman and our Chief Executive Officer. In part, as a result of our review, it was determined that we should seek to structure our performance-based awards in a manner to be tax deductible under Section 162(m) to the extent reasonably feasible and to the extent that such structure is in line with our operational and financial objectives. The Compensation Committee believes that a balanced executive compensation program is best served by providing the Company with a program that has compensation plans, that allow for a mix and balance of short and long-term compensation components, including (i) a short-term (annual) cash performance plan, (ii) a long-term (more than one year) cash performance plan, and (iii) a short-term and long-term equity plan. In furtherance of this objective, the Compensation Committee has approved three incentive plans:

 

 

These three plans are described in more detail under their respective headings in this Proxy Statement. We have submitted the 2000 Restated Plan and the 2008 Performance Unit Plan (see Proposals 2 and 3 in this Proxy Statement) for approval by our stockholders at the 2008 Annual Meeting of the Stockholders. The Compensation Committee will continue to evaluate what it believes is the best use of these three plans. Below, we discuss in more detail the nature of these plans and how we may implement the features of these plans in 2008.

 

2000 Restated Plan.  Since adoption of an amendment to the 2000 Plan in 2004, the Company’s business and operating environment has changed significantly. To remain competitive and provide incentives to the Company’s management team, while at the same time seeking to maximize the tax deductibility of executive bonuses under Section 162(m), the Compensation Committee has adopted an amendment and restatement of the 2000 Plan (referred to herein as the 2000 Restated Plan), subject to stockholder approval, as set forth under Proposal 2 of this Proxy Statement. The 2000 Restated Plan changes the maximum award limits payable under the plan from a performance-based formula tied to the Company’s fiscal year, to a combination of a formula based upon the actual performance period(s) established under the plan (monthly, quarterly, annual, or multi-year) and a fixed dollar amount. The 2000 Restated Plan, by basing the maximum bonus on a combination of a formula that reflects the Company’s performance over certain performance periods and a

fixed dollar amount, will add flexibility and enable the Company to provide appropriate incentives to management under varying economic circumstances. The 2000 Restated Plan further provides the Company with an incentive bonus plan that it may use to remain competitive in attracting and retaining highly skilled executive talent, and to continue to financially motivate its senior managers to achieve results in the current environment and in the future.

 

Under the 2000 Restated Plan, the Compensation Committee approved the 2008 fiscal year performance-based goals for Mr. Horton and Mr. Tomnitz related to (i) adjusted pre-tax income, (ii) operating cash flow and (iii) selling, general and administrative expense (“SG&A”) containment. We believe these three performance goals are important to the Company’s success in 2008 in light of the current volatile housing market. We believe adjusted pre-tax income is an important 2008 fiscal year performance goal because it strongly focuses our executives on important components of pre-tax income, namely, revenue from closings and controlling ordinary operating items that go into cost of sales. We believe that operating cash flow is also an important 2008 fiscal year performance goal because it focuses our executives on reducing our land, lot and speculative home positions while also focusing them on controlling land lot purchases and development and construction spending. The generation of positive cash flow in a volatile market allows the Company to have available cash to pay usual operating expenses, including the service of short and long-term financing obligations. We further believe that the third performance goal of SG&A containment balances the other two goals by focusing our executives on controlling selling, general and administrative costs in a period of uncertain sales and revenue from closings. After deciding on these three performance goals, these goals were further grouped into two components, referred to as the “First Cash Component” and the “Second Cash and Equity Component”. For purposes of the Second Cash and Equity Component, operating cash flow means net cash provided by (used in) operating activities” from the Company’s Consolidated Statements of Cash Flows and SG&A containment means consolidated homebuilding selling, general and administrative expense as a percent of consolidated homebuilding revenue from the Company’s Consolidated Statements of Operations. Adjusted pre-tax income is defined under the 2000 Restated Plan.

 

First Cash Component.  Under the First Cash Component, Mr. Horton and Mr. Tomnitz may earn a bonus based on achieving a pre-set percentage of adjusted pre-tax income. For the 2008 fiscal year, the maximum percentage that may be earned under the First Cash Component is 2% of adjusted pre-tax income for the second, third and fourth fiscal quarters (but not below zero) and 6% of adjusted pre-tax income for the month of December in 2007 (but not below zero), provided that no other bonus may be paid under the First Cash Component for the other months in the quarterly period, or for the quarterly period, ending December 31, 2007. Under the 2000 Restated Plan, “adjusted pre-tax income” means consolidated income before income taxes, excluding inventory impairments and land option cost write-offs and goodwill impairments, as publicly reported by the Company in its consolidated financial statements prepared in accordance with generally accepted accounting principles.

 

Second Cash and Equity Component.  Under the Second Cash and Equity Component, Mr. Horton and Mr. Tomnitz may earn a performance-based bonus based on achieving certain goals or metrics related to operating cash flow and SG&A containment. A bonus related to both goals may be earned depending on the performance ranking of the Company compared to the performance ranking of its peer group on the same metrics (i.e., operating cash flow and SG&A containment). Under the Second Cash and Equity Component, the annual maximum amount that may be earned is $8 million, the annual target or middle range that may be earned is approximately $4.3 million and the annual minimum amount that may be earned is $0. The performance-based bonuses under the Second Cash and Equity Component may be paid in cash or equity or a combination of both. Actual amounts earned will depend on the ranking as determined by the Compensation Committee at the end of the performance period. If, after the value of the award is determined, the Compensation Committee determines to pay a portion of the earned award in equity, the number of shares to be awarded will be determined by dividing the closing price of our common stock (on the day of the award certification) into the dollar value of that portion of the earned award to be paid in equity, provided that the maximum award cannot exceed the limits established under the 2000 Restated Plan and the awards established in December 2007 for Mr. Horton and Mr. Tomnitz.

 

Prior to paying any award, the Compensation Committee reserves the discretion to adjust downward the amounts awarded under the First Cash Component and the Second Cash and Equity Component depending a

variety of factors, including (i) the level of the Company’s consolidated pre-tax income on both an adjusted and non-adjusted basis, (ii) the compensation earned by the participant in comparison to the aggregate compensation earned by members of the Company’s peer group, and (iii) other factors listed in the 2000 Restated Plan.

 

Other Named Executive Officers — Corporate.  Our Chairman and our Chief Executive Officer recommended to the Compensation Committee, who then recommended to the Board, that Ms. Dwyer and Messrs. Wheat and Fuller continue to be awarded bonuses for the 2008 fiscal year based on the evaluation process and criteria discussed for these officers herein under the heading Annual Bonus Incentive — 2007 Fiscal Year, Other Named Executive Officers — Corporate. At the end of each performance period, which may be a fiscal year, or any period within a fiscal year, our Chairman and Chief Executive Officer will evaluate these officers and make recommendations to the Compensation Committee and Board of Directors for their consideration and approval for discretionary bonuses to be paid in the 2008 fiscal year. No quantitative relative weights or formulas are expected to be assigned to the factors discussed previously.

 

Long-Term Bonus Incentives

 

Consistent with our compensation philosophy, we balance our annual or short-term incentive bonus program by providing a long-term incentive bonus program. Under our long-term incentive bonus program, our Chairman and our Chief Executive Officer have the opportunity to earn cash and equity incentive bonuses based on personal and Company performance over a period longer than one year. We believe that by awarding a portion of compensation that is earned over a longer time period, the interest of our executives is aligned with the interest of our long-term stockholders through the direct goal of creating value in our common stock.

 

Long-Term Equity Awards — 2006 Equity Plan.  We use our 2006 Stock Incentive Plan (referred to herein as the “2006 Equity Plan”) to issue equity based awards. The 2006 SIP replaced our 1991 Stock Incentive Plan and no further awards will be granted under the 1991 plan. Historically, the only type of equity awards we have issued to our employees have been stock options. We believe that stock options provide an important link between the performance of our employees and creation of stockholder value primarily because the stock options only have value if the stock price increases from the date of grant.

 

During our 2007 fiscal year, the Compensation Committee did not award any equity awards to any of its executive officers, directors or other employees. Since 2000, the Committee has traditionally awarded stock options to its executives on an 18 to 24 month basis, primarily because of the other incentive bonus awards being received by executives during this time frame. Equity awards were last made in May of 2006. The Compensation Committee will continue to evaluate when to award equity to its executives, which may be more frequent than in the past, based on the total mix of compensation for the executives and other factors such as the need to address the volatility of both the homebuilding industry and the stock price. Generally, when the Compensation Committee decides to grant equity awards to executive officers, in determining the number of equity awards to grant and the other material terms of the equity grants, the Compensation Committee makes a subjective evaluation of:

 

 

In light of accounting industry rule changes regarding the expensing of stock options, we will continue to evaluate the type and mix of equity awards to be awarded to our executives and other employees in the future. Restricted stock and restricted stock units are among the type of equity awards to be considered in the future and may be awarded under our 2006 Equity Plan. When considering whether to issue restricted stock

(including restricted stock units) or stock options, the Compensation Committee will review the following factors (in addition to the factors above):

 

 

The Compensation Committee believes that both restricted stock and stock options should remain important options to it when considering equity awards. Restricted stock is believed to provide a strong retention incentive in an uncertain market, providing compensation in periods where there is volatility in the stock price, and resulting in fewer shares outstanding compared to the exercise of stock options. Stock options also have unique and valuable features to our company and our employees because of the potential for strong returns if the stock price increases and the ability by the recipient to defer paying the exercise price and related taxes until the stock options are exercised. The Compensation Committee has not made any definitive decisions regarding the awarding equity awards in our 2008 fiscal year but it will continue to evaluate awarding such equity awards in the current fiscal year.

 

Long-Term Cash Awards — 2008 Performance Unit Plan.  As a result of the Compensation Committee’s thorough review of the Company’s executive compensation program, it has adopted the D.R. Horton, Inc. 2008 Performance Unit Plan (referred to herein as the “Performance Unit Plan”), subject to stockholder approval. The 2008 Performance Unit Plan is a component of the Company’s overall strategy to pay its executives for delivering measurable results. The purpose of the Performance Unit Plan is to provide the Company with another means of granting executive compensation tied to long-term performance goals and criteria, while at the same time further aligning the interests of management with those of stockholders and maximizing the tax deductibility under Section 162(m) of the Internal Revenue Code of executive compensation. The Committee has not made any awards under the 2008 Performance Unit Plan, but it will continue to evaluate the proper circumstances for making such awards to its key officers. The Performance Unit Plan has been submitted to stockholders for their approval under Proposal 3 of this Proxy Statement.

 

The Performance Unit Plan provides that the Compensation Committee may grant incentive awards denominated in Performance Units. Each Performance Unit awarded under the Performance Unit Plan has a value on any given date equal to the fair market value (closing stock price) of the Company’s common stock on that date. In general, at the time of grant the Compensation Committee will determine the target number of Performance Units subject to an award, with the maximum amount payable under the award equal to two times the target number of units. The Performance Unit Plan also establishes performance-based criteria that the Compensation Committee may select in awarding performance-based bonuses to the participants under this plan.

 

Limitation on Tax Deductibility of Compensation.  While D.R. Horton generally structures its incentive compensation plans to comply with the requirements of Section 162(m) for tax deductibility, corporate objectives, or other circumstances, may not always be consistent with the requirements for, or permit, full deductibility. Accordingly, the Board of Directors and the Compensation Committee award non-deductible compensation to D.R. Horton’s executive officers as they deem appropriate. Our 2007 fiscal year Section 162(m) officers are Mr. Horton, Mr. Tomnitz, Mr. Jones and Mr. Seagraves. We believe the compensation paid to Messrs. Horton, Tomnitz, Jones and Seagraves generally will be tax deductible; however, a portion may not qualify as performance-based compensation and will not be tax deductible to the extent the portion not qualifying as performance-based compensation exceeds $1,000,000. The stock option compensation of Messrs. Tomnitz, Jones and Seagraves arising from the exercise of stock options granted in 1997 and exercised in the 2007 fiscal year does not qualify as performance-based compensation because in 1997 our 1991 Plan did not contain an appropriate individual grant limitation. However, the 1991 Plan (the predecessor plan to the 2006 Equity Plan) was amended in November 2001 to include an appropriate individual grant limitation, and our 2006 Stock Equity Plan also includes an appropriate individual grant limitation.

 

Retirement and Post-Retirement Benefits

 

Our executive officers do not participate in any qualified pension plans or defined benefit plans but they do participate in the retirement plans below. We believe that it is important to offer these retirement plans to

our executive officers as part of a competitive long-term compensation program that encourages saving for retirement and that encourages long-term retention.

 

Profit Sharing Plus Plan (“401(k) plan”).  Our executive officers participate in our Company wide 401(k) plan. Under this plan, executive officers, and all eligible employees, are eligible to contribute from 1% to 75%, on a pre-tax basis, of their earnings into the 401(k) plan. For 2007, the maximum that may be contributed was $15,500 ($20,500 for participants 50 years or older). The Company makes a matching contribution to the participant’s account in an amount of $0.50 for each $1.00 contributed by the participant up to 6% of his or her salary. The matching contributions made by the Company on behalf of the executive officers are listed in the “All Other Compensation” column in the Summary Compensation Table on page 30 of this Proxy Statement.

 

Deferred Compensation Plan.  D.R. Horton established the D.R. Horton Deferred Compensation Plan (the “Deferred Compensation Plan”), effective as of June 15, 2002. The Deferred Compensation Plan is the successor to and superseded D.R. Horton’s and Schuler Homes’ previously established deferred compensation plans. The Deferred Compensation Plan is a nonqualified deferred compensation plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” as defined by the Employee Retirement Income Security Act of 1974, as amended. The Deferred Compensation Plan permits participants voluntarily to defer receipt of compensation from D.R. Horton. The participants earn a rate of return on their deferred amounts based on their selection from a variety of independently managed funds. D.R. Horton does not provide a guaranteed rate of return on these deferred amounts. The rate of return realized depends on the participant’s fund selections and market performance of these funds. The Deferred Compensation Plan was adopted and approved by the Compensation Committee and ratified by the Board of Directors.

 

SERP 2.  The Supplemental Executive Retirement Plan 2 (“SERP 2”), a nonqualified plan, was adopted by D.R. Horton in 1994 to permit eligible participants, which include our executive officers, the regional presidents, most division presidents and other selected employees, to defer income and establish a source of funds payable upon retirement, death or disability. Messrs. Horton’s and Tomnitz’s participation in SERP 2 is approved by the Compensation Committee annually at the beginning of the fiscal year. Pursuant to SERP 2, if the executive is employed by the Company on the last day of a fiscal year, then the Company will establish a liability to such officer equal to 10% of his or her annual base salary as of first day of such fiscal year. This liability will accrue earnings in future years at a rate established by the administrative committee for the SERP 2.

 

Post-Employment Health Insurance.  Messrs. Horton and Tomnitz are also entitled to post-employment health and dental insurance coverage that is similar to the insurance coverage that is currently provided by the Company to each of them, their spouses and their dependent children. The post-employment insurance coverage becomes effective upon Mr. Horton’s and Mr. Tomnitz’s respective retirement, disability, death or termination from the Company and coverage shall be for the life of each of Mr. Horton and Mr. Tomnitz, respectively, and for the life of Mr. Horton’s spouse and Mr. Tomnitz’s spouse, and their dependent children.

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed with management, the Compensation Discussion and Analysis on pages 19 through 28 of this Proxy Statement. Based on our review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Annual Report on Form 10-K of D.R. Horton, Inc. for the fiscal year ended September 30, 2007 filed with the Securities and Exchange Commission.

 

THE COMPENSATION COMMITTEE:

 

Bradley S. Anderson, Committee Chairman

Michael R. Buchanan

Richard I. Galland

Michael W. Hewatt

Bob G. Scott

 

The Compensation Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the company specifically incorporates the Compensation Committee Report by reference therein.

 

Executive Compensation Tables

 

The following tables show, with respect to the Chief Executive Officer, Chief Financial Officer and the other named executive officers of D.R. Horton, the compensation awarded, earned or paid for all services rendered in all capacities to D.R. Horton during the 2007 Fiscal Year.

 

Summary Compensation Table

 

 

 

 

 

In accordance with the SEC rules and regulations governing disclosure of executive compensation, the amounts reported under “All Other Compensation” do not include various perquisites provided to certain of the named executive officers, including group health plan premiums, on-site health club benefits and work related on-site parking, that are less than $10,000 in the aggregate per year.

 

Grants of Plan-Based Awards

 

The following table shows the plan-based awards granted to the Chief Executive Officer and the other named executive officers of D.R. Horton in fiscal year 2007.

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table shows information about outstanding equity awards at September 30, 2007, the Company’s fiscal year end.

 

 

 

 

Option Exercises and Stock Vested

 

The following table shows information about option exercises and stock vested during fiscal year 2007.

 

 

 

 

Nonqualified Deferred Compensation Plans

 

D.R. Horton has established the following nonqualified deferred compensation plans:

 

Deferred Compensation Plan.  The Deferred Compensation Plan permits participants, including D.R. Horton’s directors, to defer voluntarily receipt of up to 100% of bonus or director fee compensation from D.R. Horton and up to 90% of base salary from D.R. Horton. Amounts deferred are invested on behalf of the participant in investment vehicles selected from time to time by the administrators of the Deferred Compensation Plan. The participants, at their election, may choose to have the deferred amounts paid out through scheduled in-service distributions (in a lump sum or annual installments of between two and five years) or following the later of termination of employment or director service or attaining the age of 62. The Deferred Compensation Plan was adopted and approved by the Compensation Committee and ratified by the Board of Directors.

 

SERP 2.  Pursuant to the SERP 2, if the executive is employed by the Company on the last day of a fiscal year, then the Company will establish an unfunded, unsecured liability to such officer equal to 10% of his or her annual base salary as of first day of such fiscal year. This liability will accrue earnings in future years at a rate established by the administrative committee for the SERP 2. Amounts deferred under the SERP 2 are payable within 60 days following the termination of employment of the participant, the death or disability of the participant or a change in control of the company (the definition of change in control is described in Potential Payments Upon Termination or Change in Control beginning on page 34 of this Proxy Statement). The form of distribution may be in a lump sum, or in quarterly installments over a period not to exceed five years, as elected by the participant.

The following table shows, for each named executive officer, aggregate contributions, earnings and withdrawals/distributions during fiscal 2007 and outstanding balances as of September 30, 2007 under all of our nonqualified deferred compensation plans.

 

Nonqualified Deferred Compensation

 

 

 

 

Potential Payments Upon Termination or Change in Control

 

None of our named executive officers have employment or change in control agreements with us specifically providing for payments upon involuntary termination of their employment. However, certain of our benefit and incentive plans contain various provisions regarding termination of employment or change in control. Any additional severance payments would be at the discretion of the Compensation Committee and determined at the time of termination. The following is a summary of the treatment of benefits under our benefit plans for various reasons for termination, including upon a change in control.

Generally, our benefit plans define “cause” as a violation of the standard employee conduct set forth in our employee manual and “change in control” as the occurrence of any of the following events:

 

(i) Our merger, consolidation or reorganization into another entity if our stockholders immediately before such transaction do not, immediately after such transaction, own more than 50% of the combined voting power of the outstanding voting securities resulting from such transaction and in substantially the same proportion as their stock ownership prior to the transaction;

 

(ii) We sell all or substantially all of our assets to another entity or we completely liquidate or dissolve;

 

(iii) A person (as defined by Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) files a report with the SEC on Schedule 13D or Schedule 14D-1 disclosing its acquisition of beneficial ownership of at least 20% of our then outstanding voting securities (the threshold for amounts deposited under our SERP 2 plan on or after January 1, 2005 is 50% or 35% acquired in a single transaction or series of transactions in any 12 month period); and

 

(iv) We file a report or proxy statement with the SEC disclosing that a change in control has occurred or will occur in the future pursuant to any then-existing contract or transaction.

 

Generally, a “change in control” shall not be deemed to occur solely because we or any of our affiliates or any of our benefit plans becomes obligated to file a report with the SEC disclosing our acquisition of 20% of our own then outstanding voting securities. For purposes of calculating beneficial ownership pursuant to this paragraph, no voting securities held by our Chairman, Donald R. Horton, as of the date of the adoption of the plan in question or received in any merger transaction shall be included in the calculation.

 

With regard to our 2000 Incentive Bonus Plan, the definition of “change in control” differs from the generally applicable provisions described above in two ways. It includes one additional change in control event relating to board composition and it uses a different threshold for and a different exclusion from beneficial ownership for the change in control event described in paragraph (iii) above. Specifically, under the 2000 Plan, a “change in control” includes a change in the composition of the Board at any time such that a majority of the Board of Directors have been members of the Board for less than twenty-four months without the approval of at least a majority (but no less than three) of the directors still in office who were also directors at the beginning of the period. Additionally, under the 2000 Plan, the threshold for a person’s acquisition of beneficial ownership to trigger a “change in control” event is 50%, and this definition explicitly excludes from the group of persons that may trigger this change in control the Company, Donald R. Horton, Terrill J. Horton, their respective wives, children, grandchildren and other descendants, and any trust or other entity formed or controlled by any such individuals.

 

2006 Stock Incentive Plan and the 1991 Stock Incentive Plan

 

Our D.R. Horton 2006 Stock Incentive Plan and 1991 Stock Incentive Plan plans provide for accelerated vesting of all outstanding unvested options granted under the plans in the event of a change in control or in the event of a participant’s death, disability or retirement at the retirement age specified in the plan and the participant or his or her beneficiary, as applicable, will be entitled to exercise such options for a period of one year in the event of retirement or two years in the event of death or disability. In the event the participant’s employment is terminated by the Company without cause or by the participant voluntarily, the participant will be entitled to exercise any options vested as of the date of termination for a period of three months following such termination. If the participant is terminated by the Company for cause, all options will immediately terminate and the participant will forfeit all vested options.

 

Amended and Restated Supplemental Executive Retirement Plan No. 2 (SERP 2)

 

Under our Amended and Restated Supplemental Executive Retirement Plan No. 2 (SERP 2), all amounts deferred shall be paid (either in lump sum or in quarterly installments as elected by participant) within 60 days following the date of the participant’s termination of employment, disability, death or change in control of the Company; provided, however, “specified employees,” as such term is defined in Section 409A of the Internal

Revenue Code, must wait six months following termination of employment before payments accrued on or after January 1, 2005 can be made or commence. In the event the Company terminates a participant for cause, all benefits under the SERP 2 will be forfeited and no payments will be made to the participant.

 

In the event of a change in control, all amounts deferred shall be paid (in accordance with the participant’s election) within 60 days following the date of the change in control.

 

Notwithstanding the foregoing, a participant’s election as to form of payment (lump sum or installment) must have been made at least 12 months prior to distribution. If a termination event occurs and no election has been made, the distributions of pre-2005 accruals will be made or commence on the first day of the 13^th month following the date of election, and the distribution of post-2004 accruals will be made in a lump sum upon termination of employment (or six months later for specified employees).

 

Table

 

The following table reflects amounts of compensation to be paid to each of the named executive officers in the event of termination of employment or change in control. Because neither the Company nor any of its plans provide for additional benefits related to a change in control termination, if such a termination is triggered, the payments would be as set forth under the applicable column under Termination of Employment. The amounts shown assume a termination date of September 30, 2007, the last day of our fiscal year, and, if applicable, are based on the closing price of our stock on September 28, 2007, the last trading day of our fiscal year ($12.81). Because none of our named executive officers would have been at the normal retirement age on September 30, 2007 under any of our applicable plans, we do not include amounts payable upon retirement.

 

These amounts are estimates of payments to executives upon termination of employment or a change in control. Actual amounts can only be determined at the time of such executive’s actual separation from the Company or change in control. Factors that could affect these amounts include the timing during the year of any such event, the company’s stock price and the executive’s age. Amounts to be provided to an executive under arrangements that do not discriminate in scope, terms or operation in favor of our executive officers and are available to all salaried employees are not included in the tables below in accordance with SEC regulations.

 

In addition to the amounts set forth below, each of the named executive officers would be entitled to receive, upon certain termination events or a change in control, a distribution of his or her outstanding balance of compensation earned in prior years and deferred, at the executive officer’s option, under our Deferred Compensation Plan. The balances of such accounts are set forth in the Nonqualified Deferred Compensation table on page 34 of this Proxy Statement.

 

Potential Payments Upon Termination or Change in Control