Doc Number9011783.4SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. _____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ _ ]
Check the appropriate box:
[ _ ] Preliminary Proxy Statement
[ _ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ _ ] Definitive Additional Materials
[ _ ] Soliciting Material Pursuant toss.240.14a-12
Dominion Homes, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ _ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ _ ] Fee paid previously with preliminary materials.
[ _ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DOMINION HOMES, INC.
5501 Frantz Road
P. O. Box 7166
Dublin, Ohio 43017-0766
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MAY 1, 2002
Notice is hereby given that the 2002 Annual Meeting of Shareholders
("Annual Meeting") of Dominion Homes, Inc. (the "Company") will be held at The
Dominion HomeStore, 5767 Karric Square Drive, Dublin, Ohio, 43016, on Wednesday,
May 1, 2002, at 10:00 a.m. local time, for the following purposes:
1. election as Class II directors of the nominees named in the
accompanying Proxy;
2. approval of the adoption of the Dominion Homes, Inc. Incentive Growth
Plan; and
3. ratification of the selection of PricewaterhouseCoopers LLP as
independent public accountants for the Company in 2002.
The Board of Directors has fixed the close of business on March 19, 2002,
as the record date for the determination of the shareholders entitled to notice
of and to vote at the Annual Meeting and at any adjournments or postponements
thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, you may ensure your representation by
completing, signing, dating and promptly returning the enclosed proxy card. A
return envelope, which requires no postage if mailed in the United States, has
been provided for your use. If you attend the Annual Meeting and inform the
Secretary of the Company in writing that you wish to vote your shares in person,
your proxy will not be used.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the Annual Meeting, you must obtain a letter from the broker,
bank or other nominee confirming your beneficial ownership of the shares and
bring it to the Annual Meeting. In order to vote your shares at the Annual
Meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By Order of the Board of Directors
/s/Robert A. Meyer, Jr.
-----------------------
Robert A. Meyer, Jr.
Secretary
Dublin, Ohio
April 1, 2002
DOMINION HOMES, INC.
5501 Frantz Road
P. O. Box 7166
Dublin, Ohio 43017-0766
(614) 761-6000
April 1, 2002
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying Proxy and Notice of Annual
Meeting of Shareholders are furnished to holders of common shares, without par
value (the "Common Shares"), of Dominion Homes, Inc. (the "Company") in
connection with the solicitation by its Board of Directors (the "Board") of
proxies to be used at the 2002 Annual Meeting of Shareholders of the Company
(the "Annual Meeting") to be held on Wednesday, May 1, 2002, at 10:00 a.m.,
local time, and at any postponements or adjournments thereof. The Annual Meeting
will be held at The Dominion HomeStore, 5767 Karric Square Drive, Dublin, Ohio
43016. Only those shareholders of the Company of record at the close of business
on March 19, 2002, will be entitled to receive notice of, and to vote at, the
Annual Meeting. Copies of this Proxy Statement and the accompanying Proxy and
Notice of Annual Meeting of Shareholders are first being mailed to shareholders
on or about April 1, 2002.
All Common Shares represented by each properly executed Proxy received by
the Board pursuant to this solicitation will be voted in accordance with the
shareholder's directions specified on the Proxy. Except as described below with
respect to broker non-votes, if no directions have been specified on a Proxy,
the Common Shares represented by the Proxy will be voted in accordance with the
Board's recommendations, which are as follows:
"FOR" election as Class II directors of the nominees named in the
accompanying Proxy;
"FOR" approval of the adoption of the Dominion Homes, Inc. Incentive Growth
Plan; and
"FOR" ratification of the selection of PricewaterhouseCoopers LLP as
independent public accountants for the Company in 2002.
Management knows of no other matters that may properly be brought, or which
are likely to be brought, before the Annual Meeting. However, if any other
matters are properly brought before the Annual Meeting, the persons named as
proxies in the accompanying Proxy or their substitutes will vote in accordance
with their best judgment on such matters.
1
Without affecting any vote previously taken, a shareholder signing and
returning a Proxy has the power to revoke it at any time prior to its exercise
by giving notice to the Company in a writing or other verifiable communication
delivered to Robert A. Meyer, Jr., Secretary of the Company, at the Company's
corporate offices at 5501 Frantz Road, P. O. Box 7166, Dublin, Ohio 43017-0766,
by executing a subsequent Proxy, or by attending the Annual Meeting and giving
notice of such revocation in person to the inspector of elections at the Annual
Meeting. Attendance at the Annual Meeting will not, in and of itself, constitute
revocation of a Proxy.
The presence, in person or by proxy, of the holders of a majority of the
Common Shares issued and outstanding on March 19, 2002, is necessary to
constitute a quorum at the Annual Meeting. As of March 19, 2002, the Company had
6,600,237 Common Shares issued and outstanding.
Under Ohio law and the Company's Amended and Restated Code of Regulations
(the "Regulations"), each shareholder is entitled to one vote for each Common
Share held. Common Shares represented by proxies that have been signed or which
constitute a verifiable communication and that are delivered to the Company will
be counted toward the quorum in all matters even though they are marked as
"Abstain," "Against" or "Withhold Authority" on one or more or all matters or
they are not marked at all. Broker non-votes, as described in the following
paragraph, also will be counted toward the establishment of a quorum.
Broker/dealers who hold their customers' Common Shares in street name may,
under the applicable rules of the self-regulatory organizations of which the
broker/dealers are members, sign and submit proxies for such Common Shares and
may vote such Common Shares on routine matters which, under such rules,
typically include the election of directors and the ratification of the
selection of independent public accountants. Broker/dealers may not vote such
Common Shares on other matters without specific instructions from the customers
who own such Common Shares. Proxies signed and submitted by broker/dealers which
have not been voted on certain matters as described in the previous sentence are
referred to as broker non-votes.
Broker non-votes and votes withheld will not be counted toward the election
of directors or toward the election of individual nominees specified in the form
of Proxy. As to all other proposals to be voted upon at the Annual Meeting, a
broker non-vote or an abstention will have the same effect as a vote against the
proposal.
All costs of solicitation of the Proxies will be borne by the Company.
Solicitation will be made by mail. Proxies may be further solicited at no
additional compensation by officers, directors, or employees of the Company by
telephone, written communication or in person. Upon request, the Company will
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for expenses reasonably incurred by them in sending proxy materials
to the beneficial owners of Common Shares of the Company. No solicitation will
be made by specially engaged employees or other paid solicitors.
2
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners
The following table sets forth, as of March 19, 2002, certain information
with respect to persons known to the Company to be the beneficial owners of more
than five percent (5%) of the outstanding Common Shares.
Number of Common Shares Beneficially Owned
Sole Voting Shared
Name and Address of and Shared Voting Sole Voting Investment Percent
Beneficial Owner Investment and Investment Power Only Power Only Total of Class
Power Power (1)
------------------------ --------------- ------------------ -------------- -------------- ---------------- ----------
Donald A. Borror (2) 30,000 4,204,324 (3) -- 39,521 4,273,845 64.8%
Douglas G. Borror (2) 47,000 4,204,324 (3) -- 11,382 4,262,706 64.6%
David S. Borror (2) 11,040 4,204,324 (3) -- -- 4,215,364 63.9%
Terry E. George (2) 23,000 4,204,324 (3) -- -- 4,227,324 64.0%
BRC Properties, Inc. 4,204,324 (3) -- -- -- 4,204,324 63.7%
5501 Frantz Rd
Dublin, Ohio 43017
BRC Properties, Inc. -- 4,204,324 (3)(5) -- -- 4,204,324 63.7%
Donald A. Borror,
Douglas G. Borror,
David S. Borror and
Terry E. George, as
a group
FMR Corp. -- -- -- 616,300(6) 616,300 9.3%
82 Devonshire Street
Boston, MA 02109
Fidelity Low Priced -- -- 616,300(6) -- 616,300 9.3%
Stock Fund
82 Devonshire Street
Boston, MA 02109
(1) Percent of class is based upon the sum of 6,600,237 Common Shares
outstanding as of March 19, 2002, and the number of Common Shares as to
which the person has the right to acquire beneficial ownership upon the
exercise of options exercisable within sixty (60) days of March 19,
2002.
(2) These individuals may be contacted at the address of the Company, 5501
Frantz Road, P.O. Box 7166, Dublin, Ohio 43017-0766.
(3) Share total is based on information provided to the Company by BRC
Properties Inc. ("BRC"). By virtue of their ownership and control of
BRC, each of Donald A. Borror, Douglas G. Borror, David S. Borror and
Terry E. George may be deemed to beneficially own the Common Shares
owned by BRC, but each has disclaimed beneficial ownership of the
Common Shares owned by BRC. See "Certain Relationships and Related
Transactions-Description and Ownership of BRC."
(4) Consists of Common Shares held by KeyTrust Company of Ohio, N.A., as
trustee of the Dominion Homes, Inc. Retirement Plan and Trust (the
"Retirement Plan and Trust"), which Common Shares are voted by the
trustee.
(5) In computing the aggregate number of Common Shares held by the group,
the same Common Shares were not counted more than once.
3
(6) Information is based on an Amended Schedule 13G filed with the
Securities and Exchange Commission on February 14, 2002. According to
the Schedule 13G, Fidelity Management & Research Company ("Fidelity")
is a wholly-owned subsidiary of FMR Corp. ("FMR") and an investment
adviser under the Investment Advisers Act of 1940. Fidelity is an
investment adviser to Fidelity Low Priced Stock Fund (the "Fund"),
which is the reported owner of the 616,300 Common Shares listed above.
Edward C. Johnson 3d (Chairman of FMR), FMR (through its control of
Fidelity) and the Fund each has the power to dispose of the 616,300
Common Shares. Neither FMR, nor Edward C. Johnson 3d, has the sole
power to vote or direct the voting of the Common Shares, which power
resides with the Fund. Fidelity carries out the voting of the Common
Shares under written guidelines established by the Fund. Members of
the Edward C. Johnson 3d family (including Edward C. Johnson 3d and
Abigail Johnson) may be deemed under the Investment Company Act of 1940
to form a controlling group with respect to FMR Corp.
Management
The following table sets forth, as of March 19, 2002, certain information
with respect to the number of Common Shares beneficially owned by each director
(including nominees) and executive officer of the Company and by all directors
(including nominees) and executive officers of the Company as a group:
Number of Common Shares Beneficially Owned
------------------------------------------
Sole Voting Shared Voting and Shared Investment Power
Name and Address of and Investment Power Investment Power Only Percent
Beneficial Owner Total of Class (1)
---------------------------- ------------------------ ------------------ ----------------------------------- ------------
Donald A. Borror (2) 30,000 4,204,324 (3) 39,521 (4) 4,273,845 64.8%
Douglas G. Borror (2) 47,000 4,204,324 (3) 11,382 (4) 4,262,706 64.6%
David S. Borror (2) 11,040 4,204,324 (3) -- 4,215,364 63.9%
Terry E. George (2) 23,000 4,204,324 (3) -- 4,227,324 64.0%
Pete A. Klisares 7,500 (5) -- -- 7,500 *
1660 Northwest
Professional Plaza
Suite C
Columbus, OH 43220
Gerald E. Mayo 14,500 -- -- 14,500 *
51 Brams Point Road
Hilton Head, SC 29926
C. Ronald Tilley 10,000 (5) -- -- 10,000 *
900 Gatehouse Lane
Worthington, OH 43235
Jon M. Donnell (2) 108,212 (6) -- -- 108,212 1.6%
Robert A. Meyer, Jr. (2) 47,951 -- -- 47,951 *
Peter J. O'Hanlon (2) 4,303 -- -- 4,303 *
All directors and 303,506 4,204,324 (3) 50,903 4,558,733 68.9%
executive officers as
a group (10 persons) (7)
*Represents less than 1% of class.
(1) Percent of class is based upon the sum of 6,600,237 Common Shares
outstanding as of March 19, 2002, and the number of Common Shares as to
which the person has the right to acquire beneficial ownership upon the
exercise of options exercisable within sixty (60) days of March 19, 2002.
(2) These individuals may be contacted at the address of the Company, 5501
Frantz Road, P.O. Box 7166, Dublin, Ohio 43017-0766.
(3) Share total is based on information provided to the Company by BRC. By
virtue of their ownership and control of BRC, each of Donald A. Borror,
Douglas G. Borror, David S. Borror and Terry E. George may
4
be deemed to beneficially own the Common Shares owned by BRC, but each has
disclaimed beneficial ownership of the Common Shares owned by BRC. See
"Certain Relationships and Related Transactions-Description and Ownership
of BRC."
(4) Consists of Common Shares held by KeyTrust Company of Ohio, N.A., as
trustee of the Retirement Plan and Trust, which Common Shares are voted by
the trustee.
(5) Includes, in the case of Messrs. Klisares and Tilley, 7,500 and 10,000
Common Shares, respectively, which can be acquired upon the exercise of
options which are exercisable within sixty (60) days of March 19, 2002.
(6) Includes 11,000 restricted Common Shares which are subject to forfeiture if
Mr. Donnell's employment with the Company is terminated prior to August 1,
2002.
(7) In computing the aggregate number of Common Shares held by the group, the
same Common Shares were not counted more than once.
BOARD OF DIRECTORS AND MANAGEMENT
Number and Term of Directors
The Company's Regulations provide for seven (7) directors and divide the
Board into two classes, with regular two-year staggered terms. Class I consists
of three (3) directors with terms expiring in 2003. Class II consists of four
(4) directors with terms expiring at the Annual Meeting.
Nomination of Directors
In accordance with Section 2.03 of the Company's Regulations, a nominee for
election as a director at an annual meeting may be proposed only by the
directors or by a shareholder entitled to vote for the election of directors if
such shareholder shall have proposed such nominee in a written notice. Each
written notice of a proposed nominee must set forth (1) the name, age, business
or residence address of each nominee proposed in such notice; (2) the principal
occupation or employment of each such nominee for the past five years; and (3)
the number of shares of each series and class of the Company owned beneficially
and/or of record by each such nominee and the length of time any such shares
have been owned. The written notice of a proposed nominee must be delivered or
mailed by first class United States mail, postage prepaid, to the Secretary of
the Company at its principal office and received by the Secretary of the Company
on or before the later of (i) February 1, immediately preceding such annual
meeting or (ii) the sixtieth (60th) day prior to the first anniversary of the
most recent annual meeting of shareholders of the Company held for the election
of directors, provided, however, that if the annual meeting for the election of
directors in any year is not held on or before the thirty-first (31st) day next
following such anniversary, then the written notice must be received by the
Secretary within a reasonable time prior to the date of such annual meeting.
The Company has not received any proposals for director nominations from
any shareholder with respect to the Annual Meeting.
5
Proposal to Elect Class II Directors
The Board proposes the election of the following persons as Class II
Directors to terms which will expire at the 2004 Annual Meeting of Shareholders:
Director
Name Age Since
---- --- -----
Donald A. Borror 72 1978
David S. Borror 44 1985
Pete A. Klisares 66 1994
Gerald E. Mayo 69 1994
All of the nominees are presently members of the Board. All of the nominees
have stated their willingness to serve and no reason is presently known why any
of the nominees would be unable to serve as a director. It is the intention of
the persons named as proxies in the accompanying Proxy to vote for the election
of the four (4) nominees named above unless the shareholders otherwise direct on
the Proxy. If any nominee is unable to stand for election, each Proxy will be
voted for such substitute as the Board recommends.
Recommendation and Vote
Class II Directors will be elected by a plurality of the votes entitled to
be cast and present at the Annual Meeting, in person or by properly executed
proxy. Shareholders do not have cumulative voting rights in the election of
directors. Proxies cannot be voted for more than four (4) directors.
The Board of Directors recommends that the shareholders vote "FOR" the
election of its nominees for Class II Directors.
Continuing Class I Directors
The following Class I Directors will continue after the Annual Meeting to
serve as directors for a term that will expire at the 2003 Annual Meeting of
Shareholders:
Director
Name Age Since
---- --- -----
Douglas G. Borror 46 1984
Jon M. Donnell 42 1997
C. Ronald Tilley 66 1996
6
Executive Officers and Certain Other Key Employees
The Company's executive officers and certain other key employees of the
Company are listed below.
Name Age Position(s) Held
- ---- --- ----------------
Executive Officers
Donald A. Borror 72 Chairman Emeritus
Douglas G. Borror 46 Chairman of the Board and Chief
Executive Officer
Jon M. Donnell 42 President and Chief Operating
Officer
David S. Borror 44 Executive Vice President
Terry E. George 58 Senior Vice President and
Treasurer
Robert A. Meyer, Jr. 48 Senior Vice President, General
Counsel and Secretary
Peter J. O'Hanlon 43 Senior Vice President-Finance
and Chief Financial Officer
Certain Other Key Employees
Karl E. Billisits 36 Executive Vice
President-Construction Operations
Stephan M. George 45 Executive Vice President and
President of the Company's
Louisville Subsidiary
Jack L. Mautino 38 Executive Vice President-Sales
Denis G. Connor 47 Senior Vice
President-Administration
Lori M. Steiner 42 Senior Vice President-Strategy
and Communications
7
Background and Experience of Directors, Officers and Certain Key Employees
The references to the Company in the following biographies for periods of
time prior to March 9, 1994, refer to the homebuilding divisions of BRC which
were transferred to the Company in connection with the Company's initial public
offering of its Common Shares. See "Certain Relationships and Related
Transactions--Description and Ownership of BRC."
Donald A. Borror has served on the Company's Board of Directors since 1978,
and has served as Chairman Emeritus since July 1999. He served as the Chairman
of the Board of Directors from 1978 through July 1999, and as President of the
Company from 1977 to March 1987. Mr. Borror has been involved in the
homebuilding business since 1952 and founded the Company's homebuilding business
in 1976. He has a Bachelor of Arts degree from The Ohio State University and a
Juris Doctor degree from The Ohio State University College of Law.
Douglas G. Borror has served on the Company's Board of Directors since
January 1984, as Chairman of the Board of Directors since July 1999, and as its
Chief Executive Officer since September 1992. He also served as the Company's
President from March 1987 through July 1999, and as Chief Operating Officer of
the Company from September 1992 through September 1996. Since December 2000, Mr.
Borror has also served as Executive Vice President of BRC. Mr. Borror serves on
the Boards of Directors of Columbia Gas of Ohio, Inc., The Huntington National
Bank and Alcon Corporation. Mr. Borror has a Bachelor of Arts degree from The
Ohio State University.
Jon M. Donnell has served on the Company's Board of Directors since May
1997, as President of the Company since July 1999, and as Chief Operating
Officer of the Company since September 1996. Mr. Donnell served as Chief
Financial Officer of the Company from August 1995 through June 1998, as
Treasurer of the Company from August 1995 through December 1995 and as Executive
Vice President from January 1996 through August 1996. From August 1995 through
December 1996, he also served as Senior Vice President of the Company. Prior to
joining the Company, Mr. Donnell spent 11 years with the Del Webb Corporation, a
national real estate development and homebuilding company, most recently as Vice
President and Associate General Manager of Webb's Sun City Hilton Head
community. He is a Certified Public Accountant, and holds a Bachelor of Science
degree from the University of Arizona.
David S. Borror has served on the Company's Board of Directors since 1985
and as its Executive Vice President since January 1988. He served as Vice
President of the Company from July 1985 until January 1988, and as its General
Counsel from January 1988 to December 1993. Since December 2000, Mr. Borror has
also served as President of BRC. He has a Bachelor of Arts degree from The Ohio
State University and a Juris Doctor degree from The Ohio State University
College of Law.
Pete A. Klisares has served on the Company's Board of Directors since 1994.
He has served as Principal, MIGG Capital, an Ohio-based capital investment
company, since October 1999. From August 1997 through June 1999, he served as
President and Chief Operating Officer of Karrington Communities, Inc., a
Columbus, Ohio-based company which constructs and operates assisted living
facilities. From August 1993 through December 1997, he served as Executive Vice
President of Worthington Industries, Inc., a Columbus-based steel company. He
8
is a member of the Board of Directors of The Huntington National Bank, Sunrise
Assisted Living, and MPW Industrial Services. Mr. Klisares has a Bachelor of
Science degree in Economics and a Masters Degree in Labor and Management from
the University of Iowa.
Gerald E. Mayo has served on the Company's Board of Directors since 1994.
Until his retirement in October 1997, he was a member of the Boards of Directors
and the Chairman of the Midland Life Insurance Company, a Columbus, Ohio-based
life insurance company, and Midland Financial Services, Inc., positions which he
held for more than five years. He also serves on the Boards of Directors of
McKesson/HBOC and Depositor Assistance Corp. Mr. Mayo has a Bachelor of Arts
degree from Boston University.
C. Ronald Tilley has served on the Company's Board of Directors since
January 1996. In March 1996, he retired as Chief Executive Officer and Chairman
of the Board of Directors of Columbia Gas Distribution Companies, an Ohio-based
natural gas company, positions which he held for more than five years. Mr.
Tilley has a Bachelor of Science degree from Concord College.
Terry E. George has served as Senior Vice President of the Company since
November 1993 and as Treasurer of the Company since January 1996. He served on
the Board of Directors of the Company from 1985 through May 1997, as Controller
of the Company from August 1995 to January 1996, and as Operations Manager of
the Company from October 1991 through August 1995. Mr. George has also served as
Vice President and Treasurer of BRC since December 1996, and previously served
as a Vice President of BRC from October 1987 to November 1993. Since December
2000, Mr. George has additionally served as Secretary of BRC. Mr. George also
serves on the Board of Directors of First Community Bank. He has a Bachelor of
Science degree from The Ohio State University and is a Certified Public
Accountant in the State of Ohio.
Robert A. Meyer, Jr. has served as Senior Vice President of the Company
since January 1996 and as General Counsel and Secretary of the Company since
December 1993. He served as Vice President of the Company from December 1993
through December 1995. Prior to joining the Company, Mr. Meyer was engaged in
the private practice of law in the Columbus, Ohio office of Porter, Wright,
Morris & Arthur from November 1978 to December 1993. He has a Bachelor of
Science degree from Indiana University and a Juris Doctor degree from The Ohio
State University College of Law.
Peter J. O'Hanlon has served as Senior Vice President of Finance of the
Company since January 2000, and as Chief Financial Officer of the Company since
June 1998. Prior to joining the Company, Mr. O'Hanlon was Controller of Gables
Residential Trust, an Atlanta-based real estate investment trust, from 1993
through May 1998, and Chief Financial Officer of Wilson Company, an
Atlanta-based privately-held holding company, from 1987 through 1992. He is a
Certified Public Accountant, and holds a Bachelor of Arts degree from Emory
University and a Masters degree in Business Administration from Northwestern
University.
Stephan M. George has served as the Company's Executive Vice President and
as President of the Company's Louisville subsidiary since December 2000. He
served as the Company's Executive Vice President of Operations from May 1999
through December 2000. Prior to joining the Company, Mr. George served as Chief
Operating Officer of Silverman
9
Building Company, a Farmington, Michigan-based homebuilding company, from March
1998 through April 1999, and Vice President of Operations of Cambridge Homes,
Inc., a Libertyville, Illinois-based homebuilding company, from December 1987 to
March 1998. Mr. George has a Bachelor of Science degree in Civil Engineering
from Cornell University and a Masters degree in Business Administration from
Loyola University.
Karl E. Billisits has served as the Company's Executive Vice President of
Construction Operations since December 2000. He served as the Company's Senior
Vice President of Land Acquisition and Development from April 1999 through
November 2000, as the Company's Vice President of Engineering and Development
from January 1999 through April 1999, as Vice President of Engineering from May
1998 through January 1999, as Director of Engineering from April 1997 through
May 1998, and as Engineer from April 1994 through April 1997. Prior to joining
the Company in 1994, Mr. Billisits was employed as a consulting engineer with
Bauer, Davidson & Merchant, a Columbus-based consulting engineering firm. Mr.
Billisits holds a Bachelor of Science degree in Civil Engineering from The Ohio
State University, and is a Registered Professional Engineer in the States of
Ohio, Kentucky and Michigan.
Jack L. Mautino has served as the Company's Executive Vice President of
Sales since December 2000. He served as the Company's Senior Vice President and
General Manager of the Company's Louisville, Kentucky Operations from August
1998 through November 2000, as Senior Vice President of Sales of the Company
from May 1998 through August 1998, and as Vice President of Sales from October
1995 through August 1998. He served as Sales Manager for the Company's Dominion
Homes Division from January 1995 through December 1995, as Sales Manager of the
Company's Tradition Homes Division from December 1991 to December 1994, and as
Sales Representative for the Company from July 1990 to December 1991. Prior to
joining the Company, Mr. Mautino was employed by Ryland Homes. He holds a
Bachelor of Science degree from Duquesne University.
Denis G. Connor has served as Senior Vice President of Administration since
joining the Company in January 1998. Prior to joining the Company, Mr. Connor
managed Alliance Title Agency, Ltd., from its formation in April 1997, to
December 1997, and was employed by Chicago Title Agency of Central Ohio, Inc.,
from February 1989 to April 1997. He has a Bachelor of Arts degree from Miami
University.
Lori M. Steiner has served as Senior Vice President of Strategy and
Communications since January 1999. She served as the Company's Senior Vice
President of Marketing from May 1998 through December 1998, and as the Company's
Vice President of Marketing from January 1995 through May 1998. She served as
the Company's Marketing Director from September 1990 through January 1995. Ms.
Steiner served as an account manager for Brooks Young Communications, a
Columbus-based regional advertising company, from March 1989 to September 1990.
She has a Bachelor of Arts degree from Wittenberg University.
10
Family Relationships
Douglas G. Borror, a director and the Chairman of the Board and Chief
Executive Officer of the Company, and David S. Borror, a director and Executive
Vice President of the Company, are brothers. Donald A. Borror, a director and
Chairman Emeritus of the Company, is the father of Douglas G. Borror and David
S. Borror. There are no other family relationships among the executive officers
and/or directors of the Company.
Agreement with Respect to the Election of Directors
BRC, the holder of approximately 63.7% of the issued and outstanding Common
Shares, has agreed in a Close Corporation Agreement with its shareholders to use
its best efforts to elect David S. Borror as a director of the Company for so
long as certain contingencies are satisfied and for so long as BRC has the
ability to elect at least two (2) directors of the Company. See "Certain
Relationships and Related Transactions--Description and Ownership of BRC."
Meetings and Committees of the Board
The Board of Directors meets immediately following the adjournment of each
annual meeting of shareholders at which directors are elected, and holds such
other meetings as may be called from time to time by the Chairman of the Board,
the President or any two directors. The Board of Directors of the Company held
four meetings during the year ended December 31, 2001. Each director attended at
least 75% of the aggregate of the number of Board of Directors meetings and
meetings of all committees on which he served during the year.
The Company has a Compensation Committee, an Executive Committee, an Audit
Committee and an Affiliated Transactions Review Committee. The members of the
Compensation Committee during 2001 were Pete A. Klisares (Chairman), Gerald E.
Mayo and C. Ronald Tilley. The Compensation Committee, which determines the
compensation of the Company's executive officers, held two meetings during 2001.
The members of the Executive Committee during 2001 were Donald A. Borror,
Douglas G. Borror (Chairman), David S. Borror, Jon M. Donnell and Pete A.
Klisares. The Executive Committee, which is authorized to act for the Board
between regularly scheduled meetings of the Board, held two meetings during
2001. The members of the Audit Committee during 2001 were Pete A. Klisares,
Gerald E. Mayo (Chairman) and C. Ronald Tilley. The Audit Committee, which
reviews accounting and auditing matters, held three meetings during 2001. The
members of the Affiliated Transactions Review Committee during 2001 were Pete A.
Klisares (Chairman), Gerald E. Mayo and C. Ronald Tilley. The Affiliated
Transactions Review Committee, which reviews and authorizes material
transactions between the Company and its affiliates or related parties, held one
meeting during 2001. The Company does not have a standing nominating committee
or other committee performing a similar function.
11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth, for the three years ended December 31,
2001, cash and non-cash compensation paid by the Company to the Chief Executive
Officer and to each of the other four most highly compensated executive officers
of the Company who served as such during 2001 (collectively, the "Named
Executive Officers") for services rendered to the Company in all capacities by
such persons:
Summary Compensation Table
Annual Compensation
----------------------------------------------------
Other Annual All Other
Name and Salary (1) Bonus (1) Compensation (2) Compensation
Principal Position Year ($) ($) ($) ($)
- -------------------------- ------- ------------ ---------------- ------------------ --------------
Donald A. Borror 2001 $250,000 $ 275,000 $ 816 (3)
Chairman Emeritus 2000 $250,000 $ 260,000 $ 2,781
1999 $250,000 $ 260,000 $ 6,083
Douglas G. Borror 2001 $480,000 $1,000,000 (4) $130,770 (5) $153,641 (8)
Chairman and CEO 2000 $440,000 $ 700,000 $105,370 (5) $153,160 (9)
1999 $440,000 $ 550,000 $ 57,585 (5) $ 72,438 (10)
Jon M. Donnell (11) 2001 $400,000 $ 725,000 (4) $ 64,572 (6) $ 91,547 (8)
President and COO 2000 $360,000 $ 500,000 $ 90,840 (9)
1999 $360,000 $ 400,000 $ 65,119 (6) $ 50,687 (10)
David S. Borror 2001 $240,000 $ 330,000 $ 56,559 (7) $ 40,649 (8)
Exec. V.P. 2000 $225,000 $ 275,000 $ 39,690 (9)
1999 $200,000 $ 225,000 $ 23,541 (10)
Robert A. Meyer, Jr. 2001 $175,000 $ 200,000 $ 34,774 (8)
Sr. V.P., General 2000 $160,000 $ 150,000 $ 33,960 (9)
Counsel and Secretary 1999 $160,000 $ 125,000 $ 23,591 (10)
(1) Includes amounts deferred by the Named Executive Officer pursuant to the
Amended and Restated Dominion Homes, Inc. Executive Deferred Compensation
Plan (the "Executive Deferred Compensation Plan").
(2) Perquisites and other personal benefits did not exceed applicable
thresholds except as specifically set forth.
(3) Includes for 2001, $816 paid by the Company for coverage under the
Company's Group Life Insurance Program for all employees.
(4) Includes $600,000 paid to Mr. Borror in 2001 and $450,000 paid to Mr.
Donnell in 2001. The Company will pay the remaining $400,000 of Mr.
Borror's $1,000,000 bonus and the remaining $275,000 of Mr. Donnell's
$725,000 bonus in 2002.
(5) Includes $49,302 for 2001, $47,002 for 2000 and $23,760 for 1999,
attributable to personal use of Company property. Also includes for 2001,
$47,138 for personal expenses of Mr. Borror on business related trips.
(6) Includes $45,045 for 2001 and $40,320 for 1999, attributable to personal
use of Company property.
(7) Includes $42,312 attributable to personal use of Company property.
(8) Includes for 2001, the value of premiums paid for split-dollar life
insurance coverage under the Company's Collateral Assignment Split Dollar
Plan (the "Split Dollar Plan") (Mr. Douglas Borror, $143,081, Mr.
12
Donnell, $80,987, Mr. David Borror, $30,089 and Mr. Meyer, $24,214). The
Split Dollar Plan is discussed in greater detail under "Report of
Compensation Committee on Executive Compensation- Long-Term Incentive
Compensation-Split Dollar Plan." Also includes for 2001, amounts paid by
the Company for coverage under the Company's Group Life Insurance Program
for all employees of $1,260 for each of the Named Executive Officers,
Company matching contributions under the Retirement Plan and Trust of
$6,800 for each of the Named Executive Officers and Company matching
contributions under the Executive Deferred Compensation Plan of $2,500 for
each of the Named Executive Officers.
(9) Includes for 2000, the value of premiums paid for split-dollar life
insurance coverage under the Split Dollar Plan (Mr. Douglas Borror,
$143,500; Mr. Donnell, $81,300; Mr. David Borror, $30,450; and Mr. Meyer
$24,300).
(10) Includes for 1999, the value of premiums paid for split-dollar life
insurance coverage under the Split Dollar Plan (Mr. Douglas Borror,
$62,488; Mr. Donnell, $40,737; Mr. David Borror, $13,591; and Mr. Meyer
$13,646).
(11) As of December 31, 2001, Mr. Donnell held 11,000 restricted Common Shares
with an aggregate fair market value as of that date of $171,600. The
restricted Common Shares are subject to forfeiture if Mr. Donnell's
employment with the Company is terminated prior to August 1, 2002. Mr.
Donnell is entitled to receive any dividends declared by the Company upon
the restricted Common Shares.
Employment Agreements
The Company has Amended Employment Agreements with Jon M. Donnell,
President and Chief Operating Officer and with Robert A. Meyer, Jr., Senior Vice
President, General Counsel and Secretary. The Amended Employment Agreements with
Messrs. Donnell and Meyer are each dated December 29, 2000, and effective as of
January 1, 2001. The Amended Employment Agreements supercede prior Employment
Agreements with Messrs. Donnell and Meyer, which had substantially similar
provisions.
The Agreements are for terms of three years, and provide for renewal
annually for three-year terms unless the Company provides notice of its
intention not to renew the Agreement. No such notice by the Company has been
provided to Mr. Donnell or Mr. Meyer.
Each Agreement provides for lump sum payments if employment is terminated
by the Company without cause or by Mr. Donnell or Mr. Meyer with good reason,
and includes non-competition covenants effective for one year after termination.
The Agreements also include provisions that become effective upon a "change in
control" of the Company. Under the Agreements, a change in control is defined as
an event which results in either BRC failing to own at least 30% of the combined
voting power of the outstanding voting securities of the Company, or both Mr.
Donald Borror and Mr. Douglas Borror ceasing to be directors and officers of the
Company. Upon a change in control, all employee benefit rights, including stock
options, vest. In addition, if within two years of a change in control, the
employment of Mr. Donnell or Mr. Meyer is terminated without cause, or if Mr.
Donnell or Mr. Meyer terminates his employment with good reason, he would be
entitled to certain benefits, including a lump sum payment equivalent to two
years' salary, the payments he otherwise would have been entitled to receive had
the Company terminated his employment without cause and without a change in
control, and certain outplacement services.
13
Split Dollar Plan
The Company maintains a Split Dollar Plan which provides death benefit
protection and retirement benefits to participating executives if specified
vesting conditions are met and further if the participating executive does not
leave employment with the Company prior to age 55. The Split Dollar Plan also
provides for designated payments upon a change of control of the Company. All
Named Executive Officers of the Company participate in the Split Dollar Plan,
other than Donald A. Borror. The specific terms of the Split Dollar Plan are
discussed below under "Report of Compensation Committee on Executive
Compensation - Long Term Incentive Compensation Split Dollar Plan."
Incentive Stock Plan
The Company does not have any compensation plans (including any individual
compensation arrangements) under which Common Shares are authorized for issuance
by the Company, other than the Dominion Homes, Inc. Incentive Stock Plan (the
"Incentive Stock Plan"). All outstanding stock options and awards of restricted
stock were made pursuant to the Incentive Stock Plan. The Incentive Stock Plan
was originally approved by the Company's sole shareholder in 1994.
No stock options, SARs, or long-term incentive plan awards were granted to
any Named Executive Officer under the Incentive Stock Plan during 2001.
The following table sets forth information concerning the number of Common
Shares underlying unexercised options and the value of the unexercised options
held by those Named Executive Officers who held options as of December 31, 2001.
All options were granted pursuant to the Incentive Stock Plan. No Named
Executive Officer exercised any options during 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
-----------------------------------------------------------------------
Option/SAR Values
-----------------
Number of Common Shares Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at Options/SARs at
Fiscal-Year-End (#) Fiscal-Year-End ($)(1)
---------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------
Jon M. Donnell 76,000(2) 4,000 $902,100(2) $43,400
Robert A. Meyer, Jr. 46,000(3) 1,500 $540,350(3) $16,275
(1) The Value of Unexercised In-The-Money Options equals the difference between
the aggregate fair market value at December 31, 2001, of the Common Shares
underlying the options and the aggregate exercise price of the options.
(2) Includes 76,000 Common Shares which Mr. Donnell acquired upon exercise of
options on January 31, 2002.
(3) Includes 46,000 Common Shares which Mr. Meyer acquired upon exercise of
options on January 31, 2002.
14
The following table sets forth information, as of December 31, 2001,
concerning the aggregate number of Common Shares that are subject to issuance
upon exercise of outstanding options, warrants or rights granted under the
Incentive Stock Plan; the weighted-average exercise price of such options,
warrants and rights; and the number of Common Shares remaining available for
issuance under the Incentive Stock Plan. For information regarding Common Shares
held by the trustee of the Executive Deferred Compensation Plan for the account
of certain participating directors and executive officers of the Company, see
"Executive Deferred Compensation Plan" below.
Equity Compensation Plan Information
Number of Common Shares to Weighted-average Number of Common Shares
be issued upon exercise of exercise price of remaining available for
outstanding options, outstanding options, future issuance under the
warrants and rights(1) warrants and rights Incentive Stock Plan (2)
- --------------------------------------------------------------------------------
402,600 $4.65 176,743
(1) Number is subject to adjustment if necessary to prevent dilution or
enlargement of the benefits intended to be made available under the
Incentive Stock Plan.
(2) Excludes Common Shares listed in the first column as Common Shares to be
issued upon exercise of outstanding options, warrants and rights.
Executive Deferred Compensation Plan
The Executive Deferred Compensation Plan permits executive officers and
directors to elect to defer receipt of a portion of their annual compensation
(20% of total base and bonus for employees and 100% of directors' fees). The
Executive Deferred Compensation Plan also provides for a matching contribution
by the Company for each participant equal to 25% of the amount deferred, but not
to exceed $2,500 in any year. The Company's matching contribution vests in 20%
increments over a five-year period. The contribution and match amounts are used
by the trustee of a rabbi trust to acquire Common Shares of the Company in the
open market. These Common Shares are held and voted by the trustee pursuant to
the rabbi trust agreement.
15
The following table sets forth information concerning the aggregate
deferral contributions by participating directors and executive officers and
corresponding aggregate Company-matching contributions through December 31,
2001, expressed as the number of Common Shares held by the trustee as of such
date, with respect to each director and executive officer participating in the
Executive Deferred Compensation Plan.
Vested Unvested
Deferral Company-MatchinCompany-Matching
Contributions Contributions Contributions
Payable as Payable as Payable as
Common Shares Common Shares Common Shares Total
- --------------------------------------------------------------------------------
Douglas G. Borror 12,766 2,396 774 15,936
David S. Borror 6,604 932 726 8,262
Pete A. Klisares 16,475 1,911 0 18,386
C. Ronald Tilley 12,797 1,903 0 14,700
Terry E. George 7,577 1,901 0 9,478
Jon M. Donnell 7,577 1,127 774 9,478
Robert A. Meyer, 7,580 1,127 775 9,482
Jr.
Peter J. O'Hanlon 4,314 360 725 5,399
- --------------------------------------------------------------------------------
Total 75,690 11,657 3,774 91,121
Director Compensation
Directors who are not employees of the Company receive fees of $2,500 per
quarter and $1,000 per Board meeting and $500 per committee meeting attended
($1,000 per committee meeting for committees of which the director serves as
chairman). Directors may defer the receipt of those fees and receive
Company-matching contributions with respect to those deferred fees through
participation in the Executive Deferred Compensation Plan.
Additionally, under the Incentive Stock Plan, each director who is not, and
has never been, an employee of, or paid advisor or consultant to, the Company
will receive, on the first business day after each annual meeting of
shareholders, provided that the director continues to serve on the Board on such
date, a grant of a non-qualified stock option to purchase 2,500 Common Shares at
an exercise price equal to the fair market value of the Common Shares on the
date of grant. A director option is exercisable from the date of grant until the
earlier of (i) the tenth anniversary of the date of grant or (ii) generally
three months (one year in the case of a director who becomes disabled or dies)
after the date the director ceases to be a director.
The Company does not pay any separate remuneration to employees of the
Company who serve as directors. Messrs. Klisares, Mayo and Tilley were the
directors who were not employees of the Company in 2001.
16
Report of Compensation Committee
on Executive Compensation, Report of Audit Committee
and Share Price Performance Graph
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate by reference future
filings, including this Proxy Statement, in whole or in part, the following
"Report of Compensation Committee on Executive Compensation," "Report of Audit
Committee" and the information under "Share Price Performance Graph" shall not
be incorporated by reference into any such filings.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company has vested in the Compensation Committee (the "Committee") of
the Board of Directors the authority to determine and administer the
compensation program for the Company's executive officers and other key
employees. The Committee is composed of the Company's three outside, independent
directors: Pete A. Klisares, Gerald E. Mayo and C. Ronald Tilley. Mr. Klisares
chairs the Compensation Committee.
Compensation Philosophy
The Company's executive compensation philosophy seeks to promote the
following key objectives:
o Align the interests of executive officers and other key employees with the
interests of shareholders by linking a significant percentage of their
total compensation to Company financial performance.
o Reward individual contribution and achievement.
o Allow the Company to continue to attract and retain outstanding executive
officers and other key employees and to compete with industry competitors
and other businesses for executive talent.
Implementation of this philosophy is an ongoing process, and the Committee
expects, as in previous years, to continue to refine the Company's executive
compensation program during 2002.
There are two primary components to the Company's executive compensation
program: annual cash compensation and long-term incentive compensation. Annual
cash compensation consists of a base salary and an incentive bonus. Long-term
incentive compensation consists of stock options, restricted stock, and other
awards under the Incentive Stock Plan. The Company's executive compensation
program also allows executives to defer a portion of their compensation, and to
augment the deferred amounts by Company matches, through their optional
participation in the Executive Deferred Compensation Plan. The Company also has
a Split Dollar Plan which
17
provides death benefit protection and retirement benefits to participating
executives if certain vesting conditions are met and further if the
participating executive does not leave employment with the Company prior to age
55. See "Split Dollar Plan," below.
Annual Cash Compensation
General. It is the Company's objective to achieve continuous revenue and
earnings growth with a long-term objective of performing in the leading group of
companies in the homebuilding industry in revenue growth and profitability. The
Committee believes that, in order to achieve this objective, the Company must be
able to attract and retain exceptional executive talent. Accordingly, the
Committee's intent is that the total cash compensation received by the Company's
executive officers would place them in the upper range of the total cash
compensation received by the executive officers of homebuilding companies in
general. In determining compensation for the Company's executive officers, the
Committee annually reviews a nationally-compiled database of compensation by
other homebuilding companies for various executive positions, including data
specific to public homebuilding companies, homebuilding companies of a size
comparable to the Company and homebuilding companies operating in the Midwest.
The Committee also considers the performance of the Company in relation to other
homebuilding companies based on several measures of economic performance.
Base Salary. The Committee recognizes that the homebuilding business is
cyclical and that the Company's financial performance depends, in large part, on
whether the homebuilding business is in a favorable or unfavorable cycle. The
Committee attempts to set the base salaries of the Company's executive officers
at levels sufficient to attract and retain executive talent in all business
cycles.
In setting the base salary of an executive officer, the Committee
subjectively analyzes the executive's responsibilities, performance and value to
the Company, but gives no fixed weighting to any of such factors. The Committee
also considers market salary ranges for comparable positions. The Committee
reviews annually the base salary of each executive officer and makes adjustments
as it believes is warranted.
Incentive Bonus. The Committee believes that a significant portion of the
total compensation of the Company's executive officers should consist of
variable, performance-based components, such as awards of incentive bonuses and
grants of stock options, which the Committee can adjust to reflect changes in
Company and individual performance. These compensation components are intended
to reinforce the Company's commitment to increasing Company profitability and
shareholder value.
The Committee takes into account various quantitative measures and
qualitative indicators of Company and individual performance in determining the
level of incentive bonuses to be awarded to the Company's executive officers,
including contributions to attaining corporate goals and objectives and
achievements with respect to individual goals and performance measures. Although
historically the Committee has tended to give more weight to quantitative
measures of Company financial performance, it does not apply any specific
formula. In making such compensation decisions, the Committee recognizes and
takes into account that the homebuilding business is cyclical and that Company
financial performance can be greatly
18
affected by factors, such as interest rates and weather, that are beyond the
control of the Company's executive officers. The Committee considers such
quantitative Company financial performance measures as revenue growth,
profitability, earnings per share and return on shareholders' equity in
determining the level of incentive bonuses. The Committee also considers the
Company's performance with respect to its customer satisfaction ratings as a
factor in determining incentive bonuses for all executive officers.
The Committee also understands the importance of individual contributions
and achievements that may be difficult to quantify and, accordingly, recognizes
qualitative indicators such as successful supervision of major corporate
projects, demonstrated leadership and the ability to respond to difficult
business cycles.
Long-Term Incentive Compensation
Stock Options. No stock options were awarded to any Named Executive Officer
in 2001.
Although no grants were made in 2001, the Committee intends to make grants
on a periodic basis under the Incentive Stock Plan to the Company's executive
officers and other key employees. In making such grants, the Committee will
consider the subjective factors identified above, as well as the number of
options granted in prior years.
Restricted Stock Grants. No restricted stock grants were awarded to any
Named Executive Officer in 2001.
Split Dollar Plan. Effective January 1, 1999, the Company adopted the Split
Dollar Plan, in which certain key employees of the Company, including all Named
Executive Officers other than Donald A. Borror, are participants. The purpose of
the Split Dollar Plan is to provide additional incentive for participating
employees to remain with the Company and contribute to its success.
Under the Split Dollar Plan, participating employees are provided with a
death benefit during employment, together with a retirement benefit upon
retirement at or after age 55 (or, if sooner, upon a "change in control" of the
Company), provided (a) the employee shall have then completed ten years of
service with the Company following implementation of the Split Dollar Plan, (b)
the Company shall have attained adjusted shareholders' equity of $100 million,
and (c) the employee shall have complied with the provisions of the
noncompetition covenant for one year following retirement. "Change in control"
is defined as an event which results in either BRC failing to own at least 30%
of the combined voting power of the outstanding voting securities of the
Company, or both Donald A. Borror and Douglas G. Borror ceasing to be directors
and officers of the Company. "Adjusted shareholders' equity" is defined to
exclude the proceeds of any sale by the Company of equity securities and to
include the fair value of any dividends or distributions made by the Company
after the effective date of the Split Dollar Plan.
Each participating employee has entered into an agreement with the Company
under which the employee's rights under each split dollar policy are assigned to
the Company. Each participating employee is required to pay a portion of the
policy premiums; the remainder of the premiums are paid by the Company. In the
event a participating employee terminates
19
employment prior to either completing ten years of service or the Company's
attaining adjusted shareholders' equity of $100 million dollars, the employee's
employment is terminated by the Company for "cause" at any time prior to payment
of the retirement benefit, or the employee violates the terms of the
noncompetition covenant, the then accumulated cash value in the policy will be
retained by the Company. In the event the employee dies prior to the vesting of
retirement benefits, all premiums paid by the Company will be repaid to the
Company prior to the payment of any death benefit to the employee's beneficiary
under the policy.
Chief Executive Officer Compensation
In accordance with the executive compensation philosophy and program
described above, and primarily in recognition of the Company's improved
financial performance during 2001, the Committee awarded Douglas G. Borror a
cash incentive bonus of $1.0 million in 2001. Mr. Borror received an annual base
salary in 2001 of $480,000. Mr. Borror did not receive an award of stock options
or restricted stock in 2001.
Tax Aspects
Section 162(m) of the Internal Revenue Code of 1986, as amended, prohibits
the deduction by a publicly-held corporation of compensation paid to a "covered
employee" in excess of $1.0 million per year, subject to certain exceptions.
Generally, the Company's covered employees are those executive officers listed
under the Summary Compensation Table set forth above.
As set forth in the Summary Compensation Table above, Douglas G. Borror and
Jon M. Donnell each earned bonuses in 2001 that caused their total compensation
for 2001 to exceed $1.0 million. The Company paid only a portion of these
bonuses ($600,000 of Mr. Borror's total $1.0 million bonus and $450,000 of Mr.
Donnell's total $725,000 bonus) in 2001. The Company will pay all remaining
amounts ($400,000 to Mr. Borror and $275,000 to Mr. Donnell) in 2002. The total
compensation subject to Section 162(m) for Mr. Borror, after the deferral of
bonus discussed above, exceeded the $1.0 million limitation of Section 162(m) by
$101,961. The total compensation subject to Section 162(m) for Mr. Donnell,
after the deferral of bonus discussed above, exceeded the $1.0 million
limitation of Section 162(m) by $26,777.
As indicated above, Section 162(m) provides exceptions to the $1.0 million
limitation on the deductibility of executive compensation. The Board of
Directors is recommending to the shareholders that they approve the adoption of
the Dominion Homes, Inc. 2002 Incentive Growth Plan at the Annual Meeting to
ensure that compensation payable under the plan will be deductible as
performance based compensation. The plan is discussed in detail below under
"Approval of Dominion Homes, Inc. 2002 Incentive Growth Plan." If the Plan is
approved, the Company anticipates that it will be able to meet the deductibility
limitations of Section 162(m) for each of Mr. Borror and Mr. Donnell for 2002.
Members of the Compensation Committee
Pete A. Klisares Gerald E. Mayo
C. Ronald Tilley
20
REPORT OF AUDIT COMMITTEE
General
The Audit Committee is composed of three directors. The members of the
Audit Committee during 2001 were Pete A. Klisares, Gerald E. Mayo and C. Ronald
Tilley. Mr. Mayo chairs the Audit Committee. The Audit Committee is governed by
a formal written charter that is reviewed and assessed annually and that was
adopted by the Board in 2001. A copy of the charter was attached as Appendix A
to the Company's Proxy Statement for the 2001 Annual Meeting and is on file with
the Securities and Exchange Commission. In accordance with the provisions of its
written charter, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. Each member of the
Audit Committee qualifies as independent for purposes of Rule 4200(a)(15) of the
National Association of Securities Dealers' listing standards.
Review and Discussion with Independent Accountants and Auditors
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from PricewaterhouseCoopers LLP a formal written
statement describing all relationships between PricewaterhouseCoopers LLP and
the Company that might bear on PricewaterhouseCoopers LLP's independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with PricewaterhouseCoopers LLP any
relationships or services that may impact the objectivity and independence of
PricewaterhouseCoopers LLP and satisfied itself as to PricewaterhouseCoopers
LLP's independence. The Audit Committee also discussed with management, the
internal auditors and PricewaterhouseCoopers LLP the adequacy and effectiveness
of the Company's internal accounting and financial controls. The Audit Committee
met with the independent auditors each quarter to discuss the results of interim
reviews including when applicable, new or changed accounting principles, unusual
transactions, and estimates, judgments and uncertainties related to the
Company's quarterly financial reports. In each case, these meetings were
conducted prior to the filing of the Form 10-Q. The Audit Committee also
received written communication, and held discussions with, the independent
auditor regarding the annual audit plan including matters relating to accounting
and financial reporting, higher risk and judgmental areas of financial reporting
and industry and business issues impacting the Company's financial reports.
Prior to filing of the Company's Annual Report on Form 10-K, the Audit Committee
discussed and reviewed the results of PricewaterhouseCoopers LLP's audit of the
financial statements for the year ended December 31, 2001. This discussion and
review conducted with and without management present, included all
communications required by Statement on Auditing Standards No. 61, Communication
with Audit Committees.
Review with Management
The Audit Committee reviewed and discussed the audited consolidated
financial statements of the Company as of and for the year ended December 31,
2001, with management. Management has the responsibility for the preparation of
the Company's consolidated financial statements and PricewaterhouseCoopers LLP
has the responsibility for the audit of those statements. The Audit Committee
also discussed the results of the Company's internal audit.
Audit Fees
The aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP for the audit of the Company's annual consolidated
financial statements for 2001 and the reviews of the consolidated financial
21
statements included in the Company's Quarterly Reports on Form 10-Q for 2001
(the "Audit Services") were $182,000.
Financial Information Systems Design and Implementation Fees
PricewaterhouseCoopers LLP did not render any of the professional services
described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X (17 CFR
210.2-01(c)(4)(ii)) (the "Financial Information Systems Design and
Implementation Services") during 2001 for the Company.
All Other Fees
The aggregate fees billed for services rendered by PricewaterhouseCoopers
LLP, other than Audit Services and Financial Information Systems Design and
Implementation Services, for 2001 included audit related services for audits to
meet regulatory requirements ($32,000), income tax compliance and related tax
services ($32,000), and other one-time advisory services ($76,000).
Conclusion
Based on the reviews and discussions with management and
PricewaterhouseCoopers LLP noted above, the Audit Committee recommended to the
Board (and the Board approved) that the Company's audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001, to be filed with the Securities and Exchange
Commission. The Audit Committee also determined that the provision of the Other
Services was compatible with maintaining PricewaterhouseCoopers LLP's
independence.
This Report of the Audit Committee was signed and adopted by each of the
members of the Audit Committee on March 19, 2002.
Members of the Audit Committee
Pete A. Klisares Gerald E. Mayo
C. Ronald Tilley
22
SHARE PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Shares from December 31, 1996, until December 31, 2001, with the
cumulative total return of (a) the NASDAQ-OTC Index Composite and (b) the
Standard and Poor's Homebuilding Index. The graph assumes the investment on
December 31, 1996, of $100 in the Common Shares, the NASDAQ-OTC Index Composite
and the Standard and Poor's Homebuilding Index.
Share Price Performance Graph
[GRAPHIC-CHART-PLOTTED POINTS BELOW]
Nasdaq S&P Homebuilding DHOM
------- ---------------- ------
December 31, 1996 100.0 100.0 100.0
December 31, 1997 122.4 158.1 274.3
December 31, 1998 169.8 191.1 251.4
December 31, 1999 312.7 127.6 142.9
December 31, 2000 191.4 198.4 192.9
December 31, 2001 151.1 252.0 356.6
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Description and Ownership of BRC
BRC, which owns approximately 63.7% of the Company's outstanding Common
Shares, is in the business of owning, managing and consulting on multifamily
housing, commercial real estate and undeveloped real estate. Donald A. Borror,
Douglas G. Borror, and David S. Borror, who are directors and executive officers
of the Company, and Terry E. George, who is an executive officer of the Company,
also are directors of BRC. David S. Borror, Douglas G. Borror and Mr. George
also serve as President, Executive Vice President and Vice President,
respectively, of BRC. Mr. George additionally serves as Secretary and Treasurer
of BRC.
BRC has issued and outstanding 94,860 voting common shares and 273,195
non-voting common shares, all of which are beneficially owned by members of the
Borror family, or trusts for their benefit, and by Terry George. BRC holds
10,205 voting and 42,000 non-voting common shares of BRC as treasury shares.
Through their ownership and control of BRC, such persons are in a position to
control the Company. See "Security Ownership of Certain Beneficial Owners and
Management."
On September 13, 2001, the Amended and Restated Borror Corporation Stock
Trust, a revocable trust established by Donald Borror pursuant to a trust
agreement dated January 4, 1994 (the "Stock Trust") exchanged 13,475 voting
common shares of BRC for 13,475 non-voting common shares held by the Irrevocable
S Trust, an irrevocable trust established by Donald Borror pursuant to a trust
agreement dated June 26, 1987 (the "Irrevocable Trust"). The exchange was
effected as part of Donald Borror's estate planning and to help ensure an
orderly succession of ownership of BRC at the time of Donald Borror's death.
The Stock Trust owns 6,500 voting common shares of BRC, representing 6.85%
of the issued and outstanding voting common shares of BRC, and 13,475 of the
non-voting common shares of BRC, representing 4.93% of the issued and
outstanding non-voting common shares of BRC.
The Stock Trust will expire upon the ten year anniversary of Donald
Borror's death or upon the death of Joanne Borror (Donald Borror's wife),
whichever is later. After Donald Borror's death, Joanne Borror is the
beneficiary of the Stock Trust until her death (unless she predeceases Donald
Borror) and each of Donald and Joanne Borror's children (Douglas and David
Borror and Donna Myers) are one-third remainder beneficiaries of the Stock
Trust. Donald Borror and Douglas Borror are the joint trustees of the Stock
Trust until the death or incapacity of either of them, whereupon the other of
them will become sole trustee.
Douglas Borror owns 43,099 voting common shares of BRC, representing 45.43%
of the issued and outstanding voting common shares of BRC, and 112,875
non-voting common shares of BRC, representing 41.32% of the issued and
outstanding non-voting common shares of BRC.
David Borror owns 23,328 voting common shares of BRC, representing 24.59% of the
issued and outstanding voting common shares of BRC, and 76,180 non-voting common
shares of BRC, representing 27.88% of the issued and outstanding non-voting
common shares of BRC.
24
The Irrevocable Trust owns 16,114 voting common shares of BRC,
representing 16.99% of the issued and outstanding voting common shares of
BRC, and 54,605 non-voting common shares of BRC, representing 19.99% of the
issued and outstanding non-voting common shares of BRC. David Borror is the
trustee of the Irrevocable Trust and Donna Myers (Donald and Joanne Borror's
daughter and Douglas and David Borror's sister) is the sole beneficiary of
the Irrevocable Trust. The Irrevocable Trust expires upon the death of
Donald Borror.
Terry George owns 5,819 voting common shares of BRC, representing 6.13% of
the issued and outstanding voting common shares of BRC, and 16,060 non-voting
common shares of BRC, representing 5.88% of the issued and outstanding
non-voting common shares of BRC.
BRC and the shareholders of BRC are parties to a Close Corporation
Agreement dated January 4, 1994 and Amended and Restated on September 13, 2001
(the "BRC Agreement"). The BRC Agreement contains certain provisions related to
BRC's status as an S Corporation (including mandatory distributions to BRC
shareholders equal to the product of the maximum marginal individual income tax
rate and the shareholder's pro rata share of the taxable income attributable to
BRC).
The BRC Agreement provides that all of the voting power of the BRC shares
is to be exercised by a majority of the directors of BRC, all of whom will be
elected by Donald Borror and Douglas Borror jointly until the death or
incapacity of either of them and, thereafter, by the other of them solely. David
Borror will appoint the directors of BRC in the event Douglas Borror and Donald
Borror are both deceased or incapacitated and, in such event, it is anticipated
that David Borror will appoint an Advisory Committee of the then existing
members of the Company's Executive Committee to assist him with material
decisions affecting BRC, including issues involving BRC's ownership of the
Company's Common Shares.
Under the provisions of the BRC Agreement, David Borror is required to be
elected as a director of BRC as long as he continues to hold at least 10% of the
shares of BRC, absent his removal for "cause" (as defined therein). In such
circumstances and as long as BRC has the ability to elect at least two directors
of the Company, BRC also is required to use its best efforts to elect David
Borror as a director of the Company. The BRC Agreement generally restricts the
transfer of shares of BRC to persons other than members of the Borror family
unless certain procedures are followed. BRC is required to repurchase all of
Terry George's shares in the event of his death or incapacity and has the right
to purchase Terry George's shares at any time. BRC also is required to purchase
a certain number of shares from the estates of Borror family members. Subject to
certain conditions, Borror family members who are not employed by BRC have the
right to require BRC to repurchase shares from them. In certain instances, the
obligation of BRC to repurchase shares may be assumed by certain Borror family
shareholders.
Transactions with BRC
The Board of Directors of the Company has established the Affiliated
Transactions Review Committee for the purpose of reviewing any material
transactions with affiliates or related parties of the Company, including BRC,
for consistency with the Company's policies concerning affiliated transactions.
The Affiliated Transactions Review Committee is comprised
25
of the Company's three outside, independent directors: Pete A. Klisares, Gerald
E. Mayo and C. Ronald Tilley, and is chaired by Mr. Klisares.
The Company leases its 40,000 square foot corporate headquarters from BRC.
The lease was effective January 1, 1998 for a term of twelve years at a rental
rate of $12.00 per square foot on a triple net basis. The lease contains two
options to renew for periods of five years each at then-current market rates.
The rental rate was established by an MAI appraiser commissioned by the
Affiliated Transactions Review Committee, and confirmed in a review for the
Affiliated Transactions Review Committee by a second MAI appraiser. The Company
paid to BRC $451,000 under this lease during 2001.
The Company also leases from BRC an aggregate of 15,750 square feet of
commercial space which the Company uses as a decorating center, centralized
sales office, mortgage services company and construction conference center. The
weighted average lease rate of this space is $11.00 a square foot. The
Affiliated Transactions Review Committee approved each of the leases after
review of a report by an independent MAI appraiser. The Company paid to BRC an
aggregate of $153,000 under leases for this space during 2001. The Company
believes that the terms of these leases were no less favorable to the Company
than those reasonably available from unrelated third parties for comparable
space.
Occasionally, employees of the Company provide limited administrative
services to BRC, for which the Company receives fees. The Company received
aggregate fees of $12,500 from BRC for such administrative services in 2001.
The Company and BRC are parties to a Shareholder Agreement (the
"Shareholder Agreement"), dated January 20, 1994, pursuant to which BRC has the
right, from time to time, to demand that the Company register for sale Common
Shares owned by BRC. Each request by BRC for a demand registration must cover at
least 10% of the Common Shares owned by BRC and at least 5% of the Company's
then outstanding Common Shares. Without the Company's consent (exercised by a
majority of its independent directors), the Company is not obligated to cause a
demand registration to be effected within 18 months after the consummation of a
prior demand registration. BRC and the Company will each pay one-half of the
expenses of each demand registration. BRC also will have incidental, or
piggy-back, registration rights if the Company proposes to register any of its
equity securities (other than registrations involving employee benefit plans)
for its own account or for the account of any other shareholder. BRC will pay
all of its own legal expenses and the first $25,000 of the other expenses of a
piggy-back registration and the Company will pay the remaining expenses of a
piggy-back registration. Both the demand and piggy-back registration rights will
be subject to customary underwriting and holdback provisions and will expire on
March 9, 2004.
Transactions with Printing Plus, Inc.
Donald A. Borror and Richard Myers own Printing Plus, Inc., a printing
company which has provided printing services to the Company. Mr. Myers operates
Printing Plus, Inc. Mr. Myers is the husband of Donna Borror Myers, who is
Donald A. Borror's daughter and Douglas G. and David S. Borror's sister. In
2001, the Company paid $137,000 to Printing Plus, Inc. for printing services.
All of the printing services provided to the Company by Printing Plus, Inc. in
26
2001 were pursuant to contracts that had been competitively bid. The
transactions between the Company and Printing Plus, Inc. were not reviewed or
approved by the Affiliated Transactions Review Committee or the Audit Committee
of the Board of Directors.
APPROVAL OF DOMINION HOMES, INC.
INCENTIVE GROWTH PLAN
The Board proposes that the shareholders approve the adoption of the
Dominion Homes, Inc. Incentive Growth Plan (the "Plan"). Set forth below is a
summary of the Plan, which summary is qualified in its entirety by reference to
the Plan in the form attached as Appendix I.
Purpose
The purpose of the Plan is to foster and promote the Company's long-term
financial success and to increase shareholder value by, (1) providing
participants in the Plan an opportunity to earn incentive compensation if
specified objectives are met; and (2) enabling the Company to attract and retain
the services of outstanding persons upon whose judgment, interest and dedication
the successful conduct of the Company's business is largely dependent.
The Plan provides for the award of target bonuses for Plan participants.
Pursuant to the Plan, a participant must satisfy specified performance criteria
over the course of a performance cycle in order to receive some or all of the
designated target bonus.
The Plan is designed to take into account Section 162(m) of the Internal
Revenue Code of 1986, as amended ("Section 162(m)"). Section 162(m) governs the
corporate tax deductibility of annual compensation exceeding $1.0 million paid
to the chief executive officer and the four other most highly compensated
executive officers of a public company. Corporate tax deductions for certain
types of compensation, including performance-based compensation, are generally
allowed. The Plan is being submitted to the shareholders for approval at the
Annual Meeting in an effort to ensure that the compensation payable under the
Plan will be deductible as performance-based compensation. By approving the
Plan, the shareholders will also be approving, among other things, the
performance measures, eligibility requirements and limits on the awards that may
be made pursuant to the Plan.
Administration
The Plan will be administered by the Compensation Committee of the Board of
Directors. Each Compensation Committee member will be an "outside director"
within the meaning of Section 162(m). The Compensation Committee will have the
authority to,
o prescribe, amend and rescind rules and regulations relating to the
Plan;
o provide for conditions deemed necessary or advisable to protect the
interests of the Company; and
o interpret the Plan and supply any missing terms needed to administer
the Plan.
The Compensation Committee also will have the authority to determine the amount
of each target bonus that may be awarded to a participant under the Plan and the
performance criteria
27
that the participant must satisfy in order to receive some or all of that bonus.
All decisions made by the Compensation Committee will be final and binding.
Eligibility
Only those persons holding the positions of Chairman of the Board, Chief
Executive Officer, President, Executive Vice President or Chief Operating
Officer of the Company are eligible to participate in the Plan. It is
anticipated that Douglas G. Borror, the Chairman of the Board and Chief
Executive Officer of the Company, and Jon M. Donnell, the President and Chief
Operating Officer of the Company, will be the only two eligible officers during
2002.
The Compensation Committee will send each of the eligible officers a
participation agreement specifying the conditions that must be met if the
participant is to receive a bonus at the end of a designated performance cycle
and the basis upon which the amount will be calculated. Each eligible officer
may become a participant in the Plan only if he or she returns to the
Compensation Committee a signed participation agreement within sixty days of
receiving it from the Compensation Committee.
Performance Criteria
The Compensation Committee is responsible for establishing for each plan
participant (1) a target bonus and (2) the performance criteria used to
determine the portion of the target bonus that the participant will receive at
the end of any given performance cycle under the Plan. In establishing each
participant's performance criteria, the Compensation Committee will consider the
relevance of each participant's assigned duties and responsibilities to factors
that preserve and increase the Company's value. These factors will include:
o Increasing sales;
o Developing new products and lines of revenue;
o reducing operating expenses;
o increasing customer satisfaction;
o developing new markets and increasing the Company's share of existing
markets;
o meeting completion schedules;
o increasing standardized pricing;
o developing and managing relationships with regulatory and other
governmental agencies;
o managing cash;
o managing claims against the Company, including litigation;
o identifying and completing strategic acquisitions; and
o increasing the Company's book value.
At the end of each performance cycle, the Compensation Committee will
certify to the Board the extent to which each participant has or has not met his
or her performance criteria and the portion, if any, of the target bonus that is
to be paid to each participant.
The Compensation Committee will make appropriate adjustments to reflect any
substantive change in a participant's job description or assigned duties and
responsibilities. The
28
Compensation Committee also will make appropriate adjustments to reflect the
effect on any performance criteria of any stock dividend or stock split,
recapitalization, merger, consolidation, combination, spin-off, distribution of
assets to shareholders, exchange of shares or similar corporate change. The
Compensation Committee will make the adjustment to the extent the performance
criteria is based on stock, as of the effective date of the event, and for the
performance cycle in which the event occurs. The Compensation Committee will
make a similar adjustment to any portion of a performance criteria that is not
based on stock but which is affected by an event having an effect similar to
those previously described.
The Compensation Committee will establish performance criteria and
communicate them in writing to each affected participant in a participation
agreement, no later than the earlier of (1) ninety (90) days after the beginning
of the applicable performance cycle; or (2) the expiration of 25% of the
applicable performance cycle.
Termination of Employment During Performance Cycle
Subject to any contrary agreement between the Company and the participant,
a participant who terminates employment before the end of a performance cycle
will forfeit all right to receive any amount under the Plan. In all cases,
however, the participant will receive any amounts earned during any performance
cycle that ended before his or her termination. A participant who retires, dies
or becomes disabled during a performance cycle will receive a prorated
distribution at the end of the performance cycle during which he or she retired,
died or became disabled, calculated in accordance with the proration formula set
forth in the Plan.
Change in Control
Within sixty days of a change in control of the Company, the Company will
distribute to each Plan participant the participant's target bonus for the year
in which the change in control occurred. The Company will make the distribution
whether or not the performance criteria for that period have been met and
whether or not the pending performance cycle has been completed.
If, however, the sum of all payments made upon a change in control as
described in the Plan, and those provided under all other plans, programs or
agreements between the participant and the Company and its subsidiaries,
constitute "excess parachute payments," then the Company will either (1)
reimburse the participant for specified amounts owed as excise taxes, as
described in the Plan, or (2) reduce the amounts paid to the participant under
the Plan so that the participant's total payments would be $1.00 less than the
amount that would be considered an "excess parachute payment." The Company will
use the procedure which provides the affected participant with the greatest
after-tax benefit.
Form and Time of Distribution
In general, the Company will distribute all amounts under the Plan in a
lump sum no later than ninety days after the end of the applicable performance
cycle. Each participant, however, may direct the Company to defer all or any
portion of a distribution by electing to have that amount credited to the
participant's account under the Executive Deferred Compensation Plan, or any
successor plan, and having that amount distributed under the terms of that plan.
The
29
participant must make this election in his or her participation agreement that
relates to the performance cycle during which the deferred amount may be earned.
Once filed, the election is irrevocable. Before distributing any amount under
the Plan, the Company will withhold an amount sufficient to satisfy federal,
state and local income and employment tax withholding requirements imposed on
the amount of any distribution under the Plan.
Amendment and Termination
The Board and the Compensation Committee each have authority to terminate,
suspend or amend the Plan at any time without shareholder approval, except to
the extent that approval is required to satisfy applicable requirements under
Rule 16b-3 of the Securities Exchange Act or under applicable requirements of
the Internal Revenue Code or any securities exchange on which the Company's
securities are listed. In addition, no Plan amendment may:
o result in the loss of a Compensation Committee member's status as a
"non-employee director" as defined in Rule 16b-3, with respect to any
employee benefit plan of the Company;
o cause the Plan to fail to meet requirements imposed by Rule 16b-3; or
o without the consent of the affected participant, adversely affect the
participant's ability to earn any target bonus for which performance
criteria were established before the amendment, modification or
termination of the Plan.
Transferability
In general, no participant may transfer, alienate, pledge, hypothecate or
otherwise assign the participant's rights to receive a distribution under the
Plan to any other person, and any attempt to do so, will be void. The Plan,
however, does permit a participant to designate one or more beneficiaries to
whom the Company will pay any amount under the Plan upon the death of the
participant. A participant must make each designation on a form acceptable to
the Compensation Committee and the designation will not be effective until it is
delivered to the Compensation Committee. In the absence of a beneficiary
designation, the Company will pay amounts remaining unpaid on the participant's
death to the deceased participant's surviving spouse, if any, or otherwise to
the participant's estate.
New Plan Benefits
Pursuant to the Plan, the Company may not pay a bonus for any performance
cycle that is larger than four times the participant's base salary for that
performance cycle.
The exact amount of the benefits or amounts, if any, that will be allocated
to or received by the Company's eligible officers is at the discretion of the
Compensation Committee and dependent upon the future performance of the Company,
and therefore cannot be determined at this time. However, the annual cash and
stock bonuses paid to the executive officers of the Company for fiscal year 2001
and for the two prior fiscal years are set forth in the bonus column of the
Summary Compensation Table of this proxy statement. In addition, information
concerning the total number of Common Shares subject to options, warrants and
rights issued by the Company pursuant to its Incentive Stock Plan, and the
number of Common Shares remaining
30
available for issuance pursuant to that plan, is set forth above in the table
titled "Equity Compensation Plan Information."
Recommendation and Vote
The affirmative vote of the holders of a majority of the Common Shares
issued and outstanding as of the record date is required to approve the adoption
of the Plan.
The Board of Directors recommends that shareholders vote "FOR" the proposal
to approve the adoption of the Plan.
SELECTION OF AUDITORS
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP, certified public accountants, as independent auditors for the Company for
the year ending December 31, 2002. PricewaterhouseCoopers LLP and its
predecessors have audited the books of the Company and its predecessors since
1964. Management expects that a representative of PricewaterhouseCoopers LLP
will be present at the Annual Meeting, will have the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.
Recommendation and Vote
Ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for 2002 will require the affirmative vote of the
holders of a majority of the Common Shares issued and outstanding as of the
record date.
The Board of Directors recommends that shareholders vote "FOR" ratification
of the selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, the Company is required to report in
this Proxy Statement any known failures during the 2001 year by executive
officers, directors or 10% shareholders to file on a timely basis a Form 3, 4 or
5, relating to the beneficial ownership of the Common Shares. To the best of the
Company's knowledge after a review of such filings and written representations
of those persons, all such required forms were filed on a timely basis.
31
PROPOSALS BY SHAREHOLDERS FOR 2002 MEETING
In order to be eligible to submit a proposal to be included in next year's
Proxy Statement and acted upon at the annual meeting of the shareholders of the
Company to be held in 2003 (the "2003 Annual Meeting"), a shareholder must have
continuously held at least $2,000 in market value, or 1% of the issued and
outstanding Common Shares, for at least one year by the date on which the
proposal is submitted. In addition, the shareholder must continue to hold the
requisite number of Common Shares through the date of the 2003 Annual Meeting.
Any such proposal must be received by the Company prior to the close of business
on December 2, 2002. Each proposal submitted should be accompanied by the name
and address of the shareholder submitting the proposal and a statement that the
shareholder intends to continue to hold the requisite number of Common Shares
through the date of the 2003 Annual Meeting. If the proponent is not a
shareholder of record, proof of beneficial ownership of the requisite number of
Common Shares also should be submitted. The proxy rules of the Securities and
Exchange Commission govern the content and form of shareholder proposals. All
proposals must be a proper subject for action at the 2003 Annual Meeting.
The Company may not be required to include in its Proxy Statement for the
2003 Annual Meeting any proposal submitted outside of the procedures set forth
in the immediately preceding paragraph. The Company also may confer on the
proxies' discretionary authority to vote on any such proposal, if it does not
receive notice of such proposal by February 17, 2003.
The procedures for shareholders to make nominations for Class I Directors
to be elected at the 2003 Annual Meeting are set forth above under "Board of
Directors and Management -- Nomination of Directors."
ADDITIONAL INFORMATION
Upon the written request of any person solicited, the Company will provide,
without charge, a copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 2001, excluding exhibits, which was filed with the Securities
Exchange Commission on March 22, 2002. Such request should be addressed to
Dominion Homes, Inc., Investor Relations Department, Attn: Terry E. George, 5501
Frantz Road, Dublin, Ohio 43017. The written request must include a statement
that, as of March 19, 2002, the person was the beneficial owner of Common
Shares.
32
Appendix I
DOMINION HOMES, INC.
INCENTIVE GROWTH PLAN
SECTION 1.00
PURPOSE
This Plan is intended to foster and promote the Company's long-term financial
success and to increase shareholder value by [1] providing Participants an
opportunity to earn incentive compensation if specified objectives are met and
[2] enabling the Company to attract and retain the services of outstanding
persons upon whose judgment, interest and dedication the successful conduct of
the Company's business is largely dependent.
SECTION 2.00
DEFINITIONS
When used in this Plan, the following terms will have the meanings given to them
in this section unless another meaning is expressly provided elsewhere in this
document. When applying these definitions, the form of any term or word will
include any of its other forms.
Act. The Securities Exchange Act of 1934, as amended.
Board. The Company's Board of Directors.
Code. The Internal Revenue Code of 1986, as amended.
Change in Control. The occurrence of any event that results in either [1] Borror
Realty Company's failing to own at least 30 percent of the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors or [2] both Don Borror and Doug Borror
ceasing to be directors and officers of the Company.
Committee. The Board's Compensation Committee.
Company. Dominion Homes, Inc., an Ohio corporation, and any successor to it.
Disability. A Participant's inability due to illness, accident or otherwise to
perform his duties for the period of time during which benefits are payable to
the Participant under the Company's Short-Term Disability Plan, as determined by
an independent physician selected by the Committee and reasonably acceptable to
the Participant (or to his or her legal representative), provided that the
participant does not return to work on a substantially full-time basis within 30
days after the Company notifies the Participant that his employment is being
terminated because of his or her Disability.
I-1
Officer. The Company's Chairman of the Board, Chief Executive Officer,
President, Executive Vice President or Chief Operating Officer.
Participation Agreement. The form that the Committee and each Participant must
complete within the period described in Section 3.02.
Participant. Any Officer who has returned a completed Participation Agreement to
the Committee within the period described in Section 3.02.
Performance Criteria. The criteria established by the Committee as of the
beginning of each Performance Cycle and applied at the end of the same
Performance Cycle to determine the portion (if any) of the Target Bonus payable
under this Plan to any Participant.
Performance Cycle. The period over which the Committee will apply the
Performance Criteria to establish the portion (if any) of the Target Bonus
payable under this Plan to each Participant.
Plan. The Dominion Homes, Inc. Incentive Growth Plan.
Retirement. Termination of a Participant's employment at or after age 55.
Stock. The common shares, without par value, of the Company.
Subsidiary. Any corporation, partnership or limited liability company in which
the Company owns, directly or indirectly, 50 percent or more of the total
combined voting power of all classes of stock of that corporation or of the
capital or profits interest of a partnership or limited liability company.
Target Bonus. The amount that a Participant will receive if he or she meets the
Performance Criteria established under Section 4.01 as of the beginning of the
Performance Cycle. However, no Participant may receive a distribution under this
Plan for any Performance Cycle that is larger than four times the Officer's base
salary for the same Performance Cycle.
SECTION 3.00
PARTICIPATION
3.01 Designation of Participants. Subject to Section 3.02, all Officers may
participate in this Plan. The Committee will send each Participant a
Participation Agreement specifying [1] the conditions that must be met if he or
she is to receive a bonus at the end of the Performance Cycle and [2] the basis
on which that amount will be calculated.
3.02 Conditions of Participation. An Officer may become a Participant only if he
or she returns to the Committee a signed Participation Agreement within 60 days
after receiving that form from the Committee.
I-2
SECTION 4.00
ADMINISTRATION
4.01 Performance Criteria.
[1] For each Performance Cycle, the Committee will [a] establish each
Participant's Target Bonus and [b] develop the Performance Criteria that
will be applied to determine the portion of the Target Bonus that will be
paid at the end of the Performance Cycle.
[2] In establishing each Participant's Performance Criteria, the Committee
will consider the relevance of each Participant's assigned duties and
responsibilities to factors that preserve and increase the Company's value.
These factors will include:
[a] Increasing sales;
[b] Developing new products and lines of revenue;
[c] Reducing operating expenses;
[d] Increasing customer satisfaction;
[e] Developing new markets and increasing the Company's share of
existing markets;
[f] Meeting completion schedules;
[g] Increasing standardized pricing;
[h] Developing and managing relationships with regulatory and other
governmental agencies;
[i] Managing cash;
[j] Managing claims against the Company, including litigation;
[k] Identifying and completing strategic acquisitions; and
[l] Increasing the Company's book value.
[3] The Committee will make appropriate adjustments to reflect:
[a] The effect on any Performance Criteria of any Stock dividend or
Stock split, recapitalization (including, without limitation, the
payment of an extraordinary dividend), merger, consolidation,
combination, spin-off, distribution of assets to shareholders,
exchange of shares or similar corporate change. This adjustment to the
Performance Criteria will be made [i] to the extent the Performance
Criteria is based on Stock, [ii] as of the effective date of the event
and [iii] for the Performance Cycle in which the event occurs. Also,
the Committee will make a similar adjustment to any portion of a
Performance
I-3
Criteria that is not based on Stock but which is affected by an event
having an effect similar to those just described.
[b] A substantive change in a Participant's job description or
assigned duties and responsibilities.
[4] Performance Criteria will be established and communicated in
writing to each affected Participant in a Participation Agreement no
later than the earlier of:
[a] 90 days after the beginning of the applicable Performance
Cycle; or
[b] The expiration of 25 percent of the applicable Performance
Cycle.
4.02 Certification. As of the end of each Performance Cycle, the Committee will
certify to the Board the extent to which each Participant has or has not met his
or her Performance Criteria and the portion (if any) of the Target Bonus that is
to be paid to each Participant.
4.03 Administration. The Committee is responsible for administering the Plan. In
addition to the duties described elsewhere in this Plan, the Committee, by
majority action, may [1] prescribe, amend and rescind rules and regulations
relating to the Plan, [2] provide for conditions deemed necessary or advisable
to protect the interests of the Company and [3] interpret the Plan and supply
any missing terms needed to administer the Plan. Determinations, interpretations
or other actions made or taken by the Committee under the provisions of this
document will be final, binding and conclusive for all purposes and upon all
persons.
SECTION 5.00
EFFECT OF TERMINATION OF EMPLOYMENT
DURING PERFORMANCE CYCLE; CHANGE IN CONTROL
5.01 Effect of Termination of Employment During Performance Cycle for Reasons
Other Than Retirement, Death or Disability. Except as provided in Section 5.02
and subject to any employment contract or other agreement between the Company
and the Participant, a Participant who terminates employment before the end of a
Performance Cycle will forfeit all right to receive any amount under this Plan.
However, in all cases a terminated Participant will receive any amounts earned
during any Performance Cycle that ended before his or her termination (e.g., if
the Committee has not then valued or distributed amounts earned during a
Performance Cycle that ended before the Participant terminated).
5.02 Effect of Retirement, Death or Disability During Performance Cycle. A
Participant who Retires, dies or becomes Disabled during a Performance Cycle
will receive a prorated distribution at the end of the Performance Cycle during
which he or she Retired, died or became Disabled. The amount of this
distribution will be calculated at the end of the Performance Cycle by applying
the following procedure:
[1] As of the end of the Performance Cycle during which the affected
Participant Retired, died or became Disabled, the Committee will apply the
Performance Criteria to measure the portion of the Target Bonus to be
distributed. This calculation will be made
I-4
in the manner described in Section 4.02 and will be made as if the Retired,
deceased or Disabled Participant had remained actively employed throughout
the Performance Cycle.
[2] The Committee then will multiply the amount produced under
Section 5.02[1] by a fraction, the numerator of which is the number of
whole calendar months during which the Retired, deceased or Disabled
Participant was actively employed during the Performance Cycle and the
denominator of which is the number of whole calendar months in the
Performance Cycle.
[3] Then, the Committee will direct the Company to distribute the
amount calculated in the form and at the time described in Section 6.00
to, as appropriate, the Retired or Disabled Participant or to the
beneficiary of the deceased Participant.
5.03 Change in Control. Within 60 days after the completion of a Change in
Control, the Company will distribute to each Participant their Target Bonus for
the year in which the Change in Control occurs. This distribution will be made
whether or not the Performance Criteria for that period have been met and
whether or not the pending Performance Cycle has been completed. However, if the
sum of the payments described in this section and those provided under all other
plans, programs or agreements between the Participant and the Company or any
Subsidiary constitute "excess parachute payments" as defined in Code
ss.2800(b)(1), the Company will either:
[1] Reimburse the Participant for the amount of any excise tax due under
Code ss.4999 (but not for any income taxes or additional excise taxes
associated with this initial payment), if this procedure provides the
affected Participant with an after-tax amount that is larger than the
after-tax amount produced under Section 5.03[2]; or
[2] Reduce the amounts paid to the Participant under this Plan so that his
or her total "parachute payment" as defined in Code ss.280G(b)(2)(A) under
this and any all other plans, programs or agreements between the
Participant and the Company or Subsidiary will be $1.00 less than the
amount that would be an "excess parachute payment," if this procedure
provides the Participant with an after-tax amount that is larger than the
after-tax amount produced under Section 5.03[1].
SECTION 6.00
FORM AND TIME OF DISTRIBUTION
6.01 Distribution. Subject to Sections 6.02 and 8.04, the amount determined by
applying the procedures described in Sections 4.00 and 5.00 will be distributed
in a lump sum no later than 90 days after the end of the applicable Performance
Cycle.
6.02 Deferral of Distribution. Each Participant may direct the Company to defer
all or any portion of his or her Plan distribution by electing to have that
amount credited to his or her account under the Dominion Homes. Inc. Executive
Deferred Compensation Plan or any successor plan and having that amount
distributed under the terms of that plan. This election must be made in the
Participation Agreement that relates to the Performance Cycle during which the
deferred amount may be earned. Once filed, this election will be irrevocable.
I-5
SECTION 7.00
AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any time
without shareholder approval except to the extent that shareholder approval is
required to satisfy applicable requirements imposed by [1] Rule 16b-3 under the
Act, or any successor rule or regulation, [2] applicable requirements of the
Code or [3] any securities exchange on which the Company's securities are
listed. Also, no Plan amendment may [4] result in the loss of a Committee
member's status as a "non-employee director as defined in Rule 16b-3 under the
Act, or any successor rule or regulation, with respect to any employee benefit
plan of the Company, [5] cause the Plan to fail to meet requirements imposed by
Rule 16b-3 or [6] without the consent of the affected Participant adversely
affect his or her ability to earn any Target Bonus for which Performance
Criteria were established before the amendment, modification or termination of
the Plan.
SECTION 8.00
MISCELLANEOUS PROVISIONS
8.01 Assignability. Except as provided in Section 8.02, no Participant may
transfer, alienate, pledge, hypothecate, transfer or otherwise assign his or her
rights to receive a distribution under the Plan to any other person and any
attempt to do so will be void.
8.02 Beneficiary Designation. Each Participant may from time to time name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any amount under the Plan will be paid as provided in Section 5.02. Each
designation must be made on a form acceptable to the Committee and will be
effective only after it is delivered to the Committee. In the absence of any
beneficiary designation, amounts remaining unpaid at the Participant's death
will be paid to the deceased Participant's surviving spouse, if any, or
otherwise to his or her estate. The Participant (and his or her beneficiary) and
not the Company or the Committee is responsible for keeping the Committee
apprised of the beneficiary's address. Also, neither the Company nor the
Committee is required to search for any beneficiary beyond sending a registered
letter to the beneficiary at the latest address given to it by the Participant
or beneficiary. Any amount otherwise payable to a beneficiary whom the Committee
cannot locate at this address will be forfeited. However, if, within one year of
the Participant's death, the beneficiary files a claim and establishes that he
or she is the deceased Participant's beneficiary, the Committee will direct the
Company to pay (and the Company will pay) any amount that was payable at the
death of the Participant. However, no amount will be paid representing the time
value of the delayed distribution. If this claim is not filed within one year of
the Participant's death, the amount will be forfeited irrevocably.
8.03 No Guarantee of Employment or Participation. Nothing in the Plan will
interfere with or limit in any way the right of the Company or any Subsidiary to
terminate any Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company or any
Subsidiary. Also, [1] receipt of a Target Bonus for any Performance Cycle is
I-6
no guarantee that a Participant will receive a similar (or any) Target Bonus for
any subsequent Performance Cycle and [2] establishment of Performance Criteria
for any Performance Cycle is no guarantee that identical or similar criteria
will be established for any subsequent Performance Cycle.
8.04 Tax Withholding. Before distributing any amount under the Plan, the Company
will withhold an amount sufficient to satisfy federal, state and local income
and employment tax withholding requirements imposed on the amount of any
distribution under the Plan.
8.05 Indemnification. Each person who is or has been a member of the Committee
or of the Board will be indemnified and held harmless by the Company against and
from any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be made 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 or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction of
any judgment in any such action, suit or proceeding against him or her, provided
he or she gives the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification is not exclusive and is
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Code of Regulations, by contract, as a matter of
law or otherwise.
8.06 No Limitation on Compensation. Nothing in the Plan is to be construed to
limit the right of the Company to establish other plans or to pay compensation
to its employees, in cash or property, in a manner not expressly authorized
under this document.
8.07 Governing Law. The Plan, and all agreements under it, will be construed in
accordance with and governed by the laws of the State of Ohio.
8.08 Resolution of Disputes.
[1] Any controversy of claim arising out of, or relating to, this Plan will
be settled by arbitration in the city of Columbus, Ohio, in accordance with
the Rules of the American Arbitration Association, and judgement on the
award rendered by the arbitrator or arbitrators may be entered in any court
of competent jurisdiction.
[2] If the Company refuses or otherwise fails to make a payment when due
and it is ultimately decided that the Participant is entitled to that
payment, the payment will be increased to reflect an interest equivalent
for the period of delay, compounded annually, equal to the prime or base
lending rate used by The Huntington National Bank and in effect as of the
date the payment was first due.
[3] The costs of arbitration will be borne solely by the person by which
they are incurred.
8.09 Term of Plan. The Plan will be effective upon its adoption by the
Committee, subject to approval by the Board and approval by the affirmative vote
of the holders of a majority of the shares of voting stock present in person or
represented by proxy at the first annual meeting of shareholders occurring after
the Board approves the Plan.
I-7
DOMINION HOMES, INC.
Proxy for the Annual Meeting of Shareholders to be held on May 1, 2002
This Proxy is solicited on behalf of the Board of Directors
The undersigned holder(s) of common shares, no par value ("Common Shares"),
of Dominion Homes, Inc. (the "Company") hereby constitute(s) and appoint(s) Jon
M. Donnell and Terry E. George, or either of them, the Proxy or Proxies of the
undersigned, with full power of substitution, to attend the Annual Meeting of
Shareholders ("Annual Meeting") of the Company to be held at The Dominion
HomeStore, 5767 Karric Square Drive, Dublin, Ohio, 43016, on May 1, 2002, at
10:00 a.m., local time, and any adjournment or adjournments thereof, and to vote
all of the Common Shares which the undersigned is entitled to vote at such
Annual Meeting or at any adjournments thereof:
1.[ _ ] FOR election as Class II 2. [ _ ] WITHHOLD AUTHORITY to vote
Directors of the Company of all for all nominees listed blow
the nominees listed below
(except as marked to the
contrary below)*
Donald A. Borror David S. Borror Pete A. Klisares Gerald E. Mayo
*(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NAME OF THE NOMINEE IN THE LIST ABOVE.)
2. [ _ ] FOR [ _ ] AGAINST [ _ ] ABSTAIN
Approval of the adoption of the Dominion Homes, Inc. 2002 Incentive
Growth Plan.
3. [ _ ] FOR [ _ ] AGAINST [ _ ] ABSTAIN
Ratification of the selection of PricewaterhouseCoopers LLP as
independent public accountants for the Company in 2002.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any postponements
or adjournments thereof.
(Continued, and to be signed, on other side)
(Continued from other side)
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED AS SPECIFIED. WHERE NO CHOICE IS INDICATED, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED IN ITEM
NO. 1 AS CLASS II DIRECTORS OF THE COMPANY, "FOR" APPROVAL OF THE ADOPTION OF
THE DOMINION HOMES, INC. 2002 INCENTIVE GROWTH PLAN, "FOR" RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE COMPANY IN 2002, AND, IN THE DISCRETION OF THE PROXY OR
PROXIES, ON ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING OR ANY
POSTPONEMENT(S) OR ADJOURNMENT(S) THEREOF.
All proxies previously given by the undersigned are hereby revoked.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Shareholders and Proxy Statement for the May 1, 2002, Annual
Meeting.
Dated: __________________, 2002 -------------------------------------
Signature of Shareholder(s)
Dated: __________________, 2002 -------------------------------------
Signature of Shareholder(s)
Please sign exactly as your name appears
hereon. Executors, administrators,
trustees, guardians, attorneys and agents
should give their full titles. If
shareholder is a corporation, sign in
full corporate name by authorized
officer. If shares are registered in two
names, both shareholders should sign.
(Please note any change of address on
this proxy.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DOMINION
HOMES, INC. PLEASE FILL IN, DATE, SIGN AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.