D.R. Horton
Deferred Compensation Plan
(Effective as of June 15, 2002)
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TABLE OF CONTENTS
Page
ARTICLE 1 ESTABLISHMENT AND PURPOSE.....................................1
ARTICLE 2 DEFINITIONS...................................................2
ARTICLE 3 ADMINISTRATION................................................5
ARTICLE 4 ELIGIBILITY AND PARTICIPATION.................................7
ARTICLE 5 CONTRIBUTIONS TO DEFERRAL ACCOUNTS............................7
ARTICLE 6 DISTRIBUTIONS.................................................8
ARTICLE 7 DEFERRED COMPENSATION ACCOUNTS...............................11
ARTICLE 8 TRUST........................................................13
ARTICLE 9 CHANGE IN CONTROL............................................13
ARTICLE 10 RIGHTS OF PARTICIPANTS.......................................13
ARTICLE 11 WITHHOLDING OF TAXES.........................................14
ARTICLE 12 AMENDMENT AND TERMINATION....................................14
ARTICLE 13 MISCELLANEOUS................................................14
ARTICLE 14 ADMINISTRATIVE INFORMATION...................................15
ARTICLE 15 ERISA RIGHTS.................................................16
50153841_4.DOC
D.R. Horton
Deferred Compensation Plan
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. D.R. Horton, Inc., a Delaware
corporation (the "Company"), established the D.R. Horton, Inc.
Supplemental Executive Retirement Plan No. 1 (the "Supplemental Plan"),
an unfunded deferred compensation plan for a select group of management or
highly compensated employees, effective as of November 15, 1993. Effective as
of July 1, 2000, Schuler Homes, Inc. established the Schuler Homes, Inc.
Deferred Compensation Plan for Directors and Key Employees (the "Schuler Plan"),
which also is an unfunded deferred compensation plan maintained primarily for
the purpose of providing deferred compensation to members of the board of
directors and a select group of management or highly compensated employees.
Effective February 21, 2002, Schuler Homes, Inc. merged with and
into the Company, and the Company became the sponsor of the Schuler Plan. For
sake of efficiency, the Company wishes to consolidate and restate the Schuler
Plan and the Supplemental Plan into one uniform plan of benefits for the
participants of such plans and to provide a select group of management or highly
compensated employees and nonemployee directors who are selected to participate
the opportunity to defer compensation on a pre-tax basis.
Effective as of June 15, 2002, the Company hereby establishes this
deferred compensation plan for a select group of employees and directors as
described herein, which shall be known as the "D.R. Horton Deferred
Compensation Plan" (the "Plan"), which shall be the successor to and supersede
the Supplemental Plan and the Schuler Plan. In particular, the Schuler Plan
will be merged with and into the Supplemental Plan, with the Supplemental Plan
being the Surviving Plan, which shall change its name to the Plan, all
effective as of June 15, 2002. Except as expressly provided herein, all
amounts deferred under the Supplemental Plan or the Schuler Plan shall be
payable under the terms of the Plan as of the effective date.
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly compensated employees" within the meaning of sections 201, 301, and 401
of ERISA, and therefore exempt from the provisions of Parts 2, 3, and 4 of
Title I of ERISA. The Plan is intended to constitute a "nonqualified deferred
compensation plan" for purposes of Code section 3121(v)(2) as well as 4 U.S.C.
section 114.
1.2 Purpose. The primary purpose of the Plan is to provide a
select group of management and members of the Board of Directors with a capital
accumulation opportunity by deferring compensation on a pre-tax basis. The Plan
also provides the Company with a method of rewarding and retaining its highly
compensated executives and directors.
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ARTICLE 2
DEFINITIONS
Whenever used herein, the following terms shall have the meanings set
forth below, and, when the defined meaning is intended, the term is capitalized:
(a) "Affiliate" means any business entity 80% or more owned or controlled
by the Company.
(b) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(c) "Change in Control" means the occurrence of any of the following
events:
(i) A merger, consolidation or reorganization of the
Company into or with another corporation or other
legal person if the stockholders of the Company,
immediately before such merger, consolidation or
reorganization, do not, immediately following such
merger, consolidation or reorganization, then own
directly or indirectly, more than 50% of the
combined voting power of the then-outstanding voting
securities of the corporation or other legal person
resulting from such merger, consolidation or
reorganization in substantially the same proportion
as their ownership of Voting Securities (as
hereinafter defined) immediately prior to such
merger, consolidation or reorganization;
(ii) The Company sells all or substantially all of its
assets to another corporation or other legal person,
or there is a complete liquidation or dissolution of
the Company;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 20% or more of the combined
voting power of the then-outstanding voting
securities of the Company ("Voting Securities")
(computed in accordance with the standards for the
computation of total percentage ownership for the
purposes of Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report)); or
(iv) The Company files a report or proxy statement with
the Securities and Exchange Commission pursuant to
the Exchange Act disclosing in response to Form 8-K
or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of
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the Company has occurred or will occur in the future
pursuant to any then-existing contract or
transaction.
Notwithstanding the provisions set forth in (iii) or (iv)
above, a "Change in Control" shall not be deemed to have
occurred for purposes of this Plan solely because (i) the
Company, (ii) any Affiliate, or (iii) any employee stock
ownership plan or any other employee benefit plan of the
Company or any Affiliate either files or becomes obligated to
file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the
Exchange Act disclosing beneficial ownership by it of Voting
Securities, whether in excess of 20% or otherwise, or because
the Company reports that a change in control of the Company
has occurred or will occur in the future by reason of such
beneficial ownership. For purposes of calculating beneficial
ownership pursuant to this subsection, any Voting Securities
held by Donald R. Horton as of the date hereof or received by
Donald R. Horton in connection with any merger involving the
Company and any affiliate of the Company shall not be included
in the calculation of beneficial ownership.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Committee" means a committee of three (3) or more persons appointed by
the Board to administer the Plan pursuant to Article 3.
(f) "Company" means D.R. Horton, Inc., a Delaware corporation.
(g) "Compensation" means an Employee's Salary, Incentive Compensation,
Director's Compensation, and other compensation paid by the Employer
for the Plan Year.
(h) "Deferral Account" means the accounting entry made with respect to each
Participant for the purpose of maintaining a record of each
Participant's benefit under the Plan.
(i) "Director's Compensation" means such amounts payable to an Employee for
the Plan Year for the Employee's service on the Board for the Plan Year
including, with limitation, annual retainer and meeting fees.
(j) "Disability" means a condition which meets the definition of a
disability as contained in the Company's long-term disability plan
(as determined by the Committee in its sole discretion).
(k) "Eligible Employee" means an Employee who is eligible to participate in
the Plan pursuant to Section 4.1.
(l) "Employee" means any person either (i) employed by the Employer whose
wages are subject to withholding for purposes of the Federal Insurance
Contribution Act, or (ii) serving as a member of the Board of
Directors.
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(m) "Employee Contributions" means those contributions credited to a
Participant's Deferral Account in accordance with the Participant's
deferral election pursuant to Section 5.1.
(n) "Employer" means the Company and each Affiliate that adopts the Plan
with the Company's permission.
(o) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
(p) "Incentive Compensation" means such bonuses and other non periodic
amounts (not including equity compensation) payable to an Employee in
addition to his Salary and/or Director's Compensation for services
rendered during the Plan Year, which may be paid to the Employee in the
following Plan Year as determined by the Employer in accordance with
its general policies and procedures and its sole discretion. Whether a
payment qualifies as "Incentive Compensation" shall be determined by
the Company in its sole discretion.
(q) "Installment Eligibility Age" means the attainment of age 50 and 10
years of service with the Employer (including service with any
predecessor employers designated by the Company as such). This age and
service requirement is applicable only to eligibility to receive
installment payments hereunder and shall not apply to, or affect or be
considered in interpreting, any other compensation, benefit, or plan of
the Company.
(r) "Participant" means an Eligible Employee who is participating in the
Plan pursuant to Section 4.2 or an Employee who participated in the
Supplemental Plan or the Schuler Plan whose compensation deferrals
under those plans have been credited to a Deferral Account under the
Plan.
(s) "Plan" means the D.R. Horton Deferred Compensation Plan, as set forth
herein, and as it may be amended from time to time.
(t) "Plan Year" means January 1 to December 31 of each calendar year. The
first Plan Year shall be a short plan year that begins on June 15,
2002, and ends on December 31, 2002.
(u) "Salary" means the base annual compensation payable to an Employee by
the Employer for services rendered during a Plan Year, before reduction
for amounts deferred pursuant to the Plan or to the D.R. Horton, Inc.
Profit Sharing Plus Plan, or any other deferred compensation, 401(k),
or cafeteria plan, which is payable in cash to the Employee for
services to be rendered during the Plan Year; provided that "Salary"
shall exclude (i) Incentive Compensation, and (ii) Director's
Compensation that may be paid by the Employer to an Employee with
respect to the Plan Year.
(v) "Schuler Plan" means the Schuler Homes, Inc. Deferred Compensation Plan
for Directors and Key Employees.
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(w) "Supplemental Plan" means the D.R. Horton, Inc. Supplemental Executive
Retirement Plan No. 1.
ARTICLE 3
ADMINISTRATION
3.1 Authority of the Committee. The Board shall appoint a
Committee of three (3) or more persons to administer the Plan. The members of
the Committee shall be appointed by and shall serve at the discretion of the
Board.
Subject to the provisions herein, the Committee shall have full power
and discretion to select Employees for participation in the Plan; to determine
the terms and conditions of each Employee's participation in the Plan; to
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; to amend (subject to the provisions of Articles 9 and 12
herein) the terms and conditions of the Plan and any agreement entered into
under the Plan; and to make other determinations which may be necessary or
advisable for the administration of the Plan.
3.2 Decisions Binding. Subject to Section 3.4(b), all
determinations and decisions of the Committee as to any disputed question
arising under the Plan, including questions of construction and interpretation,
shall be final, conclusive, and binding on all parties and shall be given the
maximum possible deference allowed by law.
3.3 Claim Procedures. If a request for Plan benefits is denied in
whole or in part, the Participant or his beneficiary ("claimant") will be
notified in writing within 90 days after receipt of the claim. In some
instances, the Committee may require an additional 90 days to consider the
claim. When additional time is needed, the claimant will be notified of the
special circumstances requiring the extension. The extension may not exceed a
total of 180 days from the date the claim was originally filed.
If additional information is necessary to process the claim, the
claimant will be notified of the items needed in order to consider the claim.
If a claimant's initial request for benefits is denied, the notice of
the denial will include the specific reasons for denial and references to the
relevant Plan provisions on which the denial was based, a description of any
additional material or information necessary to perfect the claim and an
explanation of why such information is necessary, if applicable, and a
description of the Plan's review procedures and the time limits applicable
thereto, including a statement of the claimant's rights under Section 502(a)
of ERISA.
Within 60 days after receiving a denial, the claimant or his authorized
representative may appeal the decision by requesting a review by writing the
Committee. On appeal, the claimant may submit in writing any comments or issues
with respect to the claim and/or any additional documents or information not
considered during the initial review and, upon request, the claimant may review
all documents pertinent to the claim.
A decision on appeal will normally be given within 60 days of the
receipt of the appeals request. If special circumstances warrant an extension,
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then the decision will be made no later than 120 days after receipt of the
appeal. Subject to Section 3.4, the Committee's decision on appeal shall be
final and binding on all parties.
If a claimant's appeal is denied in whole or in part, the notice of the
decision on appeal shall include the specific reasons for the denial and
reference to the relevant Plan provisions on which the denial was based, a
statement that, upon request and free of charge, the claimant may review and
copy all documents relevant to the claim for benefits, a statement describing
the Plan's binding arbitration procedures (or, on or after a Change in Control,
other contest procedures) and the claimant's rights under Section 502(a) of
ERISA.
3.4 Arbitration. (a) Pre Change in Control. The following
provisions shall apply before a Change in Control. Any individual making a
claim for benefits under this Plan may contest the Committee's decision to deny
such claim or appeal therefrom only by submitting the matter to binding
arbitration before a single arbitrator. Any arbitration shall be held in
Arlington, Texas, unless otherwise agreed to by the Committee. The arbitration
shall be conducted pursuant to the Commercial Arbitration Rules of the
American Arbitration Association.
The arbitrator's authority shall be limited to the affirmation or
reversal of the Committee's denial of the claim or appeal, based solely on
whether or not the Committee's decision was arbitrary or capricious, and the
arbitrator shall have no power to alter, add to, or subtract from any provision
of this Plan. Except as otherwise required by ERISA, the arbitrator's decision
shall be final and binding on all parties, if warranted on the record and
reasonably based on applicable law and the provisions of this Plan. The
arbitrator shall have no power to award any punitive, exemplary, consequential
or special damages, and under no circumstances shall an award contain any amount
that in any way reflects any of such types of damages. Each party shall bear
its own attorney's fees and costs of arbitration. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
(b) Post Change in Control. On and after a Change in Control, the
Committee's decisions shall be given no special deference, but rather shall be
reviewed de novo, and a claimant may contest any Committee decision through
arbitration or litigation, at the forum and the venue of his or her choice.
The Company shall be liable for all Court or arbitration costs and legal fees if
the claimant is the prevailing party.
3.5 Indemnification. Each person who is or shall have been a
member of the Committee, or of the Board, shall be indemnified and held harmless
by the Employer against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he or she may be a party,
or in which he or she may be involved by reason of any action taken or failure
to act under the Plan, and against and from any and all amounts paid by him in
settlement thereof, with the Employer's approval, or paid by him in satisfaction
of any judgment in any such action, suit or proceeding against him, provided he
or she shall give the Employer an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his own
behalf.
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The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Employer's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Employer may have to indemnify them or hold
them harmless.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. The Committee shall determine, in its sole and
absolute discretion, which such Employees shall be eligible to participate from
time to time, and may modify such determinations at any time, provided that at
all times the Plan shall continue to qualify as an unfunded plan maintained
primarily to provide deferred compensation benefits to a select group of
management or highly compensated employees, within the meaning of sections 201,
301, and 401 of ERISA. To be eligible for selection by the Committee, an
Employee must either (i) be a Director serving on the Board, or (ii) have total
Compensation for the Plan Year scheduled to be at least $100,000 (or, if
greater, the highly compensated employee threshold under Code section 414(q)).
In addition, to be eligible to participate herein, a former Schuler Plan
participant must consent to the transfer of assets held in the Trust informally
funding the Schuler Plan (with First Hawaiian Bank as Trustee) being transferred
to the Grantor Trust informally funding this Plan, and must consent to the
distribution rules provided for herein with respect to amounts formerly credited
to the Schuler Plan.
4.2 Participation. Each Eligible Employee shall become a
Participant in the Plan upon his deferral of Compensation hereunder, pursuant to
Article 5.
In the event a Participant ceases to be eligible to participate in the
Plan, such Participant shall become an inactive Participant, retaining all the
rights described under the Plan, except the right to make any further deferrals,
until such time that the Participant again becomes an active Participant.
4.3 Partial Year Eligibility. In the event that an Employee first
becomes eligible to participate in the Plan after the beginning of a Plan Year,
the Employer shall notify the Employee of his eligibility to participate, and
the Employer shall provide each such Participant with a "Deferral Election
Form," and any additional enrollment forms that must be completed by the
Participant as provided in Section 5.3 herein; provided, however, that such
Participant must make his election within 30 days thereof and may elect only to
defer that portion of his Compensation for such Plan Year which is to be earned
after the filing of the deferral election.
4.4 Notice. The Company shall notify an Employee within a
reasonable time of such Employee's gaining or losing eligibility for active
participation in the Plan.
ARTICLE 5
CONTRIBUTIONS TO DEFERRAL ACCOUNTS
5.1 Compensation Deferrals. Subject to Sections 5.2 and 5.3, an
Eligible Employee may elect to defer and have credited to his Deferral Account
for any Plan Year (i) up to one hundred percent (100%) of his Incentive
Compensation and/or Director's Compensation, and (ii) up to ninety percent (90%)
of his Salary; provided, however, that the amount of deferrals selected by the
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Participant shall not reduce his non-deferred Compensation below the amount that
is required to withhold for any state or federal payroll taxes (including
FICA/Medicare tax on deferred amounts), income tax, payments to be withheld
pursuant to the D.R. Horton Profit Sharing Plus Plan or any other benefit plan
of the Employer (other than this Plan), and any other required or elected
withholding. The minimum amount of Compensation that may be deferred in any
Plan Year is five thousand dollars ($5,000) (or two thousand five hundred
dollars ($2,500) in the case of the first (short) Plan Year).
5.2 Deferral Election. Eligible Employees and Participants shall
make their elections to defer all or a portion of their Compensation for the
Plan Year no later than December 1 prior to the beginning of the Plan Year in
which the Salary, Incentive Compensation, and/or Director's Compensation is to
be earned, or not later than thirty (30) calendar days following notification of
eligibility to participate for a partial Plan Year (with respect to Compensation
not yet earned). Notwithstanding the foregoing, any deferral election a
Participant made under the Supplemental Plan or the Schuler Plan shall be null
and void effective as of June 15, 2002. If an Eligible Employee wishes to
participate in the Plan for the first (short) Plan Year, such Eligible Employee
must elect on or before June 14, 2002, to defer all or a portion of his
Compensation to be earned for the pay periods beginning on or after June 15,
2002; provided, however, that (i) Eligible Employees are not permitted to defer
any portion of their Incentive Compensation payable on June 15, 2002, and (ii)
Eligible Employees shall have a one-time irrevocable election until June 30,
2002, to revoke their prior deferral election, in which case they shall not be
eligible to participate herein until January 1, 2003. Any Salary, Incentive
Compensation, and Director's Compensation deferral elections must be made before
the Compensation is earned and before the amount thereof is substantially
certain of payment.
5.3 Length of Deferral and Modification of Elections. All deferral
elections shall be irrevocable for the Plan Year in which they are in effect,
and shall be made on a "Deferral Election Form," as described herein. Once
made, a Participant's deferral election shall remain in effect for all
subsequent Plan Years for which the Participant is an Eligible Employee unless
and until the Participant increases, decreases, or terminates such election by
submitting a new Deferral Election Form to the Employer. Deferral election
changes must be submitted to the Employer no later than December 1 prior to the
beginning of the Plan Year for which the change is to be effective.
On the "Deferral Election Form" and related enrollment forms
Participants shall elect (i) the percentage or flat dollar amount of each
eligible component of Compensation to be deferred for the Plan Year; (ii) the
deemed investment elections of the amounts to be deferred, in accordance with
Section 7.2; (iii) any scheduled in-service withdrawal that may be desired
(which election must be made prior to the beginning of the deferral period for
the Plan Year deferral at issue, and can only be elected for one Plan Year's
deferral at a time); and (iv) a Beneficiary designation.
ARTICLE 6
DISTRIBUTIONS
6.1 Scheduled In-Service Distributions. A Participant may elect
in the manner prescribed by the Committee to receive all or a portion of the
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vested portion of his Deferral Account while he is still employed by the
Employer in (i) a single lump sum payment, or (ii) annual installment payments
over a period of two (2) to five (5) years; provided, however, that a
Participant may not elect to receive an in-service distribution under this
Section 6.1 of the portion of his Deferral Account attributable to amounts
deferred under the Supplemental Plan, if any. If the amount the Participant
elects to receive is less than $25,000 (for all years combined), payment shall
be made in a single lump sum. If a Participant elects to receive installment
payments under (ii) above, the amount of each installment payment shall be equal
to the balance remaining in the portion of the Participant's Deferral Account
that is subject to such installment election (as determined immediately prior to
each such payment), multiplied by a fraction, the numerator of which is one (1),
and the denominator of which is the total number of remaining installment
payments. The installment amount shall be adjusted annually to reflect gains
and losses, if any, allocated to such Participant's Deferral Account pursuant to
Article 7.
A Participant's election under this Section 6.1 must specify the future
year in which the payment of the deferred amounts shall commence, provided that
the year in which distributions are to commence must be at least two (2) years
beyond the end of the Plan Year in which the compensation is deferred. Any
desired in-service distribution must be separately elected for each year
compensation is deferred. Thus, to elect a scheduled in-service withdrawal for
future plan years' deferrals, a new distribution election form must be submitted
during the applicable enrollment period. Once the applicable enrollment period
has passed, a scheduled in-service distribution cannot be elected for that plan
year's deferrals. Distributions under this Section 6.1 shall commence in January
of the year specified in the Participant's election. A Participant may delay
the commencement of in-service payments or amend his election as to the form of
the distribution at any time provided that such amendment must be made in the
manner specified by the Committee at least one (1) calendar year prior to the
date the distribution is to commence, and any change in the form of payment
(such as from lump sum to installment) or the timing of the payment must delay
or extend the length of the payments and may not accelerate them. If a
Participant's employment or Board service with the Employer terminates for any
reason prior to receiving full payment of an in-service distribution or while he
is receiving scheduled installment payments pursuant to this Section 6.1, the
unpaid portion of the Participant's elected distribution shall be paid in
accordance with Section 6.3 below.
Notwithstanding anything in this Section 6.1 to the contrary, if a
Participant has elected or is receiving an Interim Distribution (as such term is
defined in the Schuler Plan) under the Schuler Plan as of the effective date of
this Plan, the Participant shall receive or shall continue receiving such
distribution in accordance with his election under the Schuler Plan; provided,
however, installment payments shall not be made for a period longer than five
(5) years from the first January 1 following the effective date of this Plan.
6.2 Distributions upon Installment Eligibility Age, Death, or
Disability. Within ninety (90) days of a Participant's termination of
employment with the Employer after attaining Installment Eligibility Age,
separation from Board service, or incurring a Disability, the Participant may
elect to receive the vested balance credited to his Deferral Account in (i) a
single lump sum payment or, (ii) annual installment payments over a period of
two (2) to ten (10) years. If a Participant fails to make a distribution
election within ninety (90) days following his termination of employment or if
the vested balance credited to his Deferral Account is less than $50,000,
9
payment shall be made in a single lump sum. The amount of each installment
payment under (ii) above shall be equal to the balance remaining in the portion
of the Participant's Deferral Account that is subject to such installment
election (as determined immediately prior to each such payment), multiplied by a
fraction, the numerator of which is one (1), and the denominator of which is the
total number of remaining installment payments. The installment amount shall be
adjusted annually to reflect gains and losses, if any, allocated to such
Participant's Deferral Account pursuant to Article 7.
Distributions under this Section 6.2 shall begin as of the first day of
the thirteenth (13th) month after the Participant submits his distribution
election; provided, however, that a Participant can delay the commencement of
distributions to a date no later than the January of the year immediately
following his attainment of age 62. In the event a participant dies while
receiving installment payments or before distributions have commenced in
accordance with this Section 6.2, the unpaid portion of the Participant's
Deferral Account shall be paid in accordance with Section 6.3 below.
Any prior retirement or termination of employment elections under the
Supplemental Plan or Schuler Plan shall be null and void.
6.3 Termination of Employment. If a Participant's employment with
the Employer terminates for any reason (including the Participant's death) prior
to the date the Participant attains Installment Eligibility Age or incurs a
Disability, the unpaid vested portion of such Participant's Deferral Account
shall be paid to the Participant or (in the event of his death) the
Participant's designated beneficiary in a single lump sum payment as soon as
administratively feasible following the Participant's termination of employment
or death.
6.4 Nonscheduled In-Service Withdrawals. Notwithstanding any
provision of this Plan to the contrary, a Participant may at any time request a
lump sum distribution of all or a portion of his vested Deferral Account. In
the event a Participant requests a distribution under this Section 6.4, (i) such
Participant will receive a portion of his Deferral Account equal to 90% of the
requested distribution, and the remaining 10% of the requested distribution will
be forfeited, and (ii) such Participant will be ineligible to participate in the
Plan for the remainder of the Plan Year in which the distribution is received
and for the immediately following Plan Year.
6.5 Financial Hardship. The Committee shall have the authority to
alter the timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the satisfaction of the Committee, severe financial
hardship. In such event, the Committee may, in its sole discretion, distribute
all or a portion of such Participant's Deferral Account to the Participant
without penalty.
For purposes of this Section 6.5, "severe financial hardship" shall
mean any financial hardship resulting from extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the
control of the Participant, including, but not limited to, the illness or injury
of a Participant or dependent (as determined by the Committee), or the casualty
loss of a Participant's real or personal property. In any event, payment under
this Section 6.5 may not be made to the extent such emergency is or may be
relieved: (i) through reimbursement or compensation by insurance or otherwise;
(ii) by liquidation of the Participant's assets, to the extent the liquidation
of such assets would not itself cause severe financial hardship; and (iii) by
10
cessation of deferrals under the Plan. Withdrawals of amounts because of a
severe financial hardship may only be permitted to the extent reasonably
necessary to satisfy the hardship, plus to pay taxes on the withdrawal.
Examples of what are not considered to be severe financial hardships include
the need to send a Participant's child to college or the desire to purchase a
home. The Participant's Deferral Account will be credited with earnings in
accordance with the Plan up to the date of distribution.
The Committee shall judge the severity of the financial hardship.
The Committee's decision with respect to the severity of financial hardship and
the manner in which, if at all, the Participant's future deferral opportunities
shall be ceased, and/or the manner in which, if at all, the payment of deferred
amounts to the Participant shall be altered or modified, shall be final,
conclusive, and not subject to appeal.
In the event a Participant receives a distribution under this Section
6.5, then such Participant will be ineligible to participate in the Plan for the
remainder of the Plan Year in which the distribution was received.
6.6 Incompetence of Distributee. In the event that it shall be
found that a person entitled to receive payment under the Plan (including a
designated beneficiary) is a minor or is physically or mentally incapable of
personally receiving and giving a valid receipt for any payment due (unless
prior claim therefor shall have been made by a duly qualified committee or other
legal representative), such payment may be made to any person whom the Committee
in its sole discretion determines is entitled to receive it, and any such
payment shall fully discharge the Employer, the Company, the Committee and the
Plan from any further liability to the person otherwise entitled to payment
hereunder, to the extent of such payment.
ARTICLE 7
DEFERRED COMPENSATION ACCOUNTS
7.1 Participants' Accounts. The Company shall establish and
maintain an individual bookkeeping Deferral Account for Employee Contributions.
Each Deferral Account shall be credited with Employee Contributions generally
within five (5) business days of the applicable payroll deduction, and as
provided in Section 7.2. The Employee Contributions held in each Participant's
Deferral Account shall be one hundred percent (100%) vested at all times.
A Participant's Deferral Account shall also be credited with
(i) compensation deferrals, if any, made under the Supplemental Plan or the
Schuler Plan, (ii) Matching Contributions and Discretionary Contributions
(as those terms are defined in the Schuler Plan) made on the Participant's
behalf under the Schuler Plan, if any, and (iii) any deemed earnings credit to
such amounts prior to the effective date of this Plan. (These credits are in
lieu of the amounts formerly credited under the Supplemental Plan and Schuler
Plan, which are being merged into this Plan.) Participants shall be one hundred
percent (100%) vested at all times in the compensation deferrals made under the
Supplemental Plan or the Schuler Plan credited to their Deferral Accounts. If a
Participant's Deferral Account is credited with Matching Contributions and/or
Discretionary Contributions made under the Schuler Plan, the Participant's
vested interest in such contributions shall be determined in accordance with the
terms of the Schuler Plan.
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7.2 Earnings on Deferred Amounts. A Participant's Deferral
Account shall be credited with earnings (or losses) based on a deemed investment
of the Participant's Deferral Account, as directed by each Participant, which
deemed investment shall be in one or more funds among the investment options
selected by the Committee from time to time. Deemed earnings (and losses) on a
Participant's Deferral Account shall be based upon the daily unit valuation of
the funds selected by such Participant, and shall be credited to a Participant's
Deferral Account on a monthly basis. Deemed earnings (or losses) shall be paid
out to a Participant in accordance with the applicable Deferral Election Form.
Any portion of a Participant's Deferral Account which is subject to distribution
in installments shall continue to be credited with deemed earnings (or losses)
until fully paid out to the Participant.
The Committee reserves the right to change the options available for
deemed investments under the Plan from time to time, or to eliminate any such
option at any time. A Participant may specify a separate investment allocation
with respect to each Deferral Election Form or amended Deferral Election Form.
Participants may modify their deemed investment instructions each business day
with respect to any portion (whole percentages only) of their Deferral Account;
provided they notify the Committee or its designee within the time and in the
manner specified by the Committee. Elections and amendments thereto pursuant
to this Section 7.2 shall be made in the manner prescribed by the Committee.
The Committee reserve the right to credit earnings (or losses) on a basis
different from that elected by the Participants.
7.3 Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries who, upon the Participant's death, or physical or
mental incapacity will receive the amounts that otherwise would have been paid
to the Participant under the Plan. All designations shall be signed by the
Participant, and shall be in such form as prescribed by the Committee.
Each designation shall be effective as of the date delivered to the Committee or
its designee by the Participant.
Participants may change their beneficiary designations on such form as
prescribed by the Committee. The payment of amounts deferred under the Plan
shall be in accordance with the last unrevoked written beneficiary designation
that has been signed by the Participant and delivered to the Committee or its
designee prior to the Participant's death. Notwithstanding the foregoing, a
Participant who is married may not designate a beneficiary other than the
Participant's spouse, unless the spouse consents in writing to such alternate
beneficiary designation.
In the event that all the beneficiaries named by a Participant pursuant
to this Section 7.3 predecease the Participant, the deferred amounts that would
have been paid to the Participant or the Participant's beneficiaries shall be
paid to the Participant's estate.
In the event a Participant does not designate a beneficiary, or for any
reason such designation is ineffective, in whole or in part, the amounts that
otherwise would have been paid to the Participant or the Participant's
beneficiaries under the Plan shall be paid to the Participant's estate.
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ARTICLE 8
TRUST
Nothing contained in this Plan shall create a trust of any kind or a
fiduciary relationship between the Employer and any Participant. Nevertheless,
the Employer may establish one or more trusts, with such trustee(s) as the
Committee may approve, for the purpose of providing for the payment of deferred
amounts and earnings thereon. Such trust or trusts may be irrevocable, but the
assets thereof shall be subject to the claims of the Employer's general
creditors upon the bankruptcy or insolvency of the Employer.
ARTICLE 9
CHANGE IN CONTROL
9.1 Trust and Trustees. Upon the occurrence of a Change in
Control, the trust or trusts that may be established by the Employer pursuant to
Article 8 shall become irrevocable and the Employer shall not thereafter be
permitted to remove, terminate, or change the trustee(s) without the prior
written consent of the majority of the Participants, with weighted voting as
measured by their account balances.
9.2 Advanced Funding. No later than 30 days after a Change in
Control occurs, the Employer shall make a contribution to the trust or trust(s)
established pursuant to Article 8 to the extent required to fully fund all
benefits that are or may become payable under the Plan, assuming for purposes of
this calculation that all Participants retire with 100% vesting, and to fund in
advance all administrative, legal, and other costs of maintaining the Plan, in
an amount no less than $125,000. No later than December 31 of each Plan Year
thereafter, the Employer shall make such additional contributions to the trust
or trusts to fully fund the additional benefits that may become payable to
Participants or beneficiaries under the Plan and the additional administrative,
legal, and other Plan expenses.
9.3 Amendment and Termination. After the occurrence of a Change
in Control, the Employer may not amend the Plan without the prior approval of a
majority of the Participants. After a Change in Control, the Employer may not
terminate the Plan until either (i) all benefits have been paid in full, or (ii)
the majority of the Participants approve the same. For purposes hereof,
Participants' votes shall be weighted based on their relative Plan account
balances.
ARTICLE 10
RIGHTS OF PARTICIPANTS
10.1 Contractual Obligation. The Plan shall create an unfunded,
unsecured contractual obligation on the part of the Employer to make payments
from the Participants' Deferral Accounts when due. Payment of Deferral Account
balances shall be made out of the general assets of the Employer or from the
trust or trusts referred to in Article 8 above.
10.2 Unsecured Interest. No Participant or party claiming an
interest in deferred amounts of a Participant shall have any interest whatsoever
in any specific asset of the Employer. To the extent that any party acquires a
right to receive payments under the Plan, such right shall be equivalent to that
of an unsecured general creditor of the Employer. Each Participant, by
participating hereunder, agrees to waive any priority creditor status for wage
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payments with respect to any amounts due hereunder. The Employer shall have no
duty to set aside or invest any amounts credited to Participants' Deferral
Accounts under this Plan. Accounts established hereunder are solely for
bookkeeping purposes and the Employer shall not be required to segregate any
funds based on such Accounts.
10.3 Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Employer to terminate a Participant's employment at
any time, or confer upon any Participant any right to continue in the employ of
the Employer.
ARTICLE 11
WITHHOLDING OF TAXES
The Employer shall have the right to require Participants to remit to
the Employer an amount sufficient to satisfy federal, state, and local
withholding tax requirements, or to deduct from all payments made pursuant to
the Plan (or from a Participant's other Compensation) amounts sufficient to
satisfy withholding tax requirements. Employment taxes with respect to amounts
deferred hereunder shall be payable in accordance with Code section 3121(v)(2)
and may be withheld from a Participant's Compensation even if due prior to the
time of a distribution hereunder. The Employer makes no representations,
warranties, or assurances and assumes no responsibility as to the tax
consequences of this Plan or participation herein.
ARTICLE 12
AMENDMENT AND TERMINATION
Subject to Article 9, the Employer reserves the right to amend, modify,
or terminate the Plan (in whole or in part) at any time by action of the Board
or the Committee, with or without prior notice. Except as described below in
this Article 12, no such amendment or termination shall in any material manner
adversely affect any Participant's rights to any amounts already deferred or
credited hereunder or deemed earnings thereon, up to the point of amendment or
termination, without the consent of the Participant.
The Board may terminate the Plan and commence termination payout for
all or certain Participants, or remove certain Employees as Participants, if it
is determined by the United States Department of Labor or a court of competent
jurisdiction that the Plan constitutes an employee pension benefit plan within
the meaning of section 3(2) of ERISA that is not exempt from the provisions of
Parts 2, 3, and 4 of Title I of ERISA, or if the IRS otherwise taxes amounts
deferred prior to their scheduled payment date. If payout is commenced pursuant
to the operation of this Article 12, the payment of deferred amounts and
earnings thereon shall be made in the manner selected by each Participant under
Section 6.2 herein (other than the commencement date), as if the Participant had
attained Installment Eligibility Age.
ARTICLE 13
MISCELLANEOUS
13.1 Notice. Any notice or filing required or permitted to be
given to the Employer under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail to the D.R. Horton Deferred
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Compensation Plan Committee, and if mailed, shall be addressed to the principal
executive offices of the Employer. Notice mailed to a Participant shall be at
such address as is given in the records of the Employer. Notices to the
Employer shall be deemed given as of the date of delivery. Notice to a
Participant or beneficiary shall be deemed given as of the date of hand
delivery, or if delivery is made by mail, three (3) days following the postmark
date.
13.2 Nontransferability. Except as provided in Section 7.3 and
this Section 13.2, Participants' rights to deferred amounts and earnings
credited thereon under the Plan may not be sold, transferred, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution, or pursuant to a domestic relations order, nor shall
the Employer make any payment under the Plan to any assignee or creditor of a
Participant.
13.3 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
13.4 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.
13.5 Costs of the Plan. All costs of implementing and
administering the Plan shall be borne by the Employer.
13.6 Successors. All obligations of the Employer under the Plan
shall be binding on any successor to the Employer, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Employer.
13.7 Applicable Law. Except to the extent preempted by applicable
federal law, the Plan shall be governed by and construed in accordance with the
laws of the state of Texas.
ARTICLE 14
ADMINISTRATIVE INFORMATION
14.1 Plan Sponsor and Administrator. The Plan described herein is
sponsored by:
D.R. Horton, Inc.
1901 Ascension Blvd., Suite 100
Arlington, Texas 76006
The Company is the plan administrator and named fiduciary. Prior to a
Change in Control, the Company has been granted complete fiduciary discretion
and authority to administer, operate, and interpret the Plan and make final
decisions on such issues as eligibility, payment of benefits, claims, and claims
appeals, unless such decisions have been delegated to another party. However,
many day-to-day questions can be answered by the Benefits Department.
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The agent for the service of legal process for the Plan is
the Company.
14.2 Plan Type and Plan Year. Documents and reports for the Plan
are filed with the United States Internal Revenue Service and the Department of
Labor under Employer Identification Number: 75-2386963.
The official Plan name is the D.R. Horton Deferred Compensation Plan,
which, for government purposes, is intended to be an unfunded pension plan
maintained by an employer for a select group of management or highly compensated
employees. Plan records are maintained on an annual basis and December 31 is
the end of the plan year.
14.3 Plan Funding. The Plan is unfunded and unsecured and benefits
are paid solely from the Employer's general assets.
ARTICLE 15
ERISA RIGHTS
Certain rights and protections are provided to Plan participants under
the Employee Retirement Income Security Act of 1974 (ERISA). These ERISA rights
include the following:
(a) Any Plan participant may contact the Benefits Department to
examine all Plan documents without charge. These may include
the Plan descriptions and all other documents filed with the
United States Department of Labor.
(b) Copies of Plan documents and other information may be obtained
by writing to the Committee. A reasonable charge may be
assessed for these copies.
(c) Each Plan participant has the right to receive a written
summary of the Plan's annual financial reports, if any.
However, this type of plan is not required to have either an
annual financial report or a summary annual report.
(d) An employee may not be discharged or discriminated against
to prevent his obtaining a benefit or exercising his ERISA
rights.
(e) If a claim for a benefit is denied, in whole or in part, a
written explanation from the Committee or a delegated
representative will be provided. Each participant has the
right to have the plan administrator review and reconsider any
denied claim.
The named fiduciary for this Plan is the Company.
Under certain circumstances, outside assistance may be necessary to
resolve disputes between a Participant and Plan officials. For example:
(a) If a claim for benefits is denied or ignored, in whole or in
part, after a final review, the claim may be submitted to
binding arbitration (or, after a Change in Control, to either
arbitration or a court, at the Participant's election).
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(b) If a participant is discriminated against for pursuing a
benefit or exercising his ERISA rights, the participant may
seek help from the United States Department of Labor or file
an arbitration claim (or, after a Change in Control, either
an arbitration claim or a lawsuit, at the Participant's
election).
For further information about this statement or about ERISA rights,
contact the Benefits Department. Or, you may contact the nearest area office of
the Pension and Welfare Benefits Administration, United States Department of
Labor, listed in your telephone directory or the Division of Technical
Assistance and Inquires, Pension and Welfare Benefits Administration, U.S.
Department of Labor, 200 Constitution Avenue N.W., Washington D.C. 20210.
You may also obtain certain publications about your rights and responsibilities
under ERISA by calling the publications hotline of the Pension and Welfare
Benefits Administration.
IN WITNESS WHEREOF, D.R. Horton, Inc. has caused this document to be
executed by its duly authorized officer on June 21, 2002, effective as of the
date set forth above.
D.R. HORTON, INC.
By: Donald J. Tomnitz
-----------------------------------
Its: Vice Chairman, President and CEO
-----------------------------------
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