SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _____)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
Dominion Homes, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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|_| 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.
5000 Tuttle Crossing Boulevard
P.O. Box 5000
Dublin, Ohio 43016-5555
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
You are cordially invited to attend our 2005 annual meeting of
shareholders, which will be held at our headquarters, 5000 Tuttle Crossing
Boulevard, Dublin, Ohio, on Wednesday, May 11, 2005, at 9:00 a.m., local time.
The annual meeting is being held for the following purposes:
(1) To elect four Class I Directors, each to serve for a two-year term
expiring at the 2007 annual meeting of shareholders, or until their
respective successors have been elected or appointed.
(2) To transact any other business which may properly come before the
annual meeting or any adjournment thereof.
These items are more fully described in the following pages, which are
made part of this notice. Only shareholders of record at the close of business
on March 21, 2005, will be entitled to notice of and to vote at the annual
meeting and at any adjournments or postponements thereof.
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 from
within the United States, has been provided for your use. If you attend the
annual meeting and inform the inspector of elections of the Company that you
wish to vote your shares in person, your proxy will not be used. If you wish to
attend the annual meeting and your shares are held of record by a brokerage
firm, bank or other nominee, 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,
Dublin, Ohio Robert A. Meyer, Jr.
April 13, 2005 Secretary
DOMINION HOMES, INC.
5000 Tuttle Crossing Boulevard
P.O. Box 5000
Dublin, Ohio 43016-5555
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
May 11, 2005
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GENERAL INFORMATION
Purpose, Place, Date and Time of the Annual Meeting
This proxy statement and the accompanying proxy and Notice of Annual
Meeting of Shareholders is furnished to you in connection with the solicitation
on behalf of our Board of Directors of proxies to be at the Company's 2005
annual meeting of shareholders or any postponement or adjournment of that
meeting. The annual meeting will be held at our corporate offices at 5000 Tuttle
Crossing Boulevard, Dublin, Ohio on Wednesday, May 11, 2005 at 9:00 a.m., local
time for the purposes set forth in the accompanying Notice of Annual Meeting.
This proxy statement, the accompanying proxy, Notice of Annual Meeting and a
copy of our 2004 Annual Report to Shareholders, are first being mailed to
shareholders on or about April 13, 2005.
Record Date and Share Ownership
Holders of record of our common shares at the close of business on March
21, 2005, are entitled to notice of and to vote at the annual meeting and any
postponement or adjournment of the meeting. At that time, we had 8,237,515
common shares outstanding and entitled to vote. Each common share outstanding on
the record date entitles the holder to one vote on each matter submitted at the
annual meeting.
Submitting and Revoking Your Proxy
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 recommendation, which is "FOR" election as directors of the four
nominees named in the accompanying form of proxy.
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 either: (1) giving notice of such revocation to the Company in writing or
other verifiable communication delivered to Christine A. Murry, Assistant
Secretary of the Company, at our corporate offices at 5000 Tuttle Crossing
Boulevard, P.O. Box 5000, Dublin, Ohio 43016-5555, (2) executing a subsequent
proxy, or (3) attending the 2005 annual meeting and giving notice of such
revocation in person to the inspector of elections at the annual meeting.
Attendance at the 2005 annual meeting will not, in and of itself, constitute
revocation of a proxy.
Quorum and Required Vote
The presence, in person or by proxy, of a majority of voting shares of the
Company outstanding and entitled to vote at the annual meeting is necessary to
constitute a quorum for the transaction of business at the annual meeting.
Common shares represented by proxies that have been signed or which constitute a
verifiable communication and are delivered to us will be counted toward the
quorum in all matters, even though they are marked as "Abstain," "Against" or
"Withhold Authority" on any 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. 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.
The election of the director nominees requires the favorable vote of a
plurality of all votes cast by the holders of our common shares at a meeting at
which a quorum is present. Broker non-votes and proxies marked "Withhold
Authority" will not be counted toward the election of directors or toward the
election of individual nominees specified in the form of proxy and, thus, will
have no effect. All other proposals submitted to our shareholders for approval
at the annual meeting require the affirmative vote of holders of a majority of
our common shares issued and outstanding as of the record date at a meeting at
which a quorum is present. For purposes of determining the number of our common
shares voting on such matters, abstentions and broker non-votes will have the
same effect as a vote against the proposal.
Cost of Solicitation
We will bear all costs of the solicitation of proxies. Solicitation of
proxies will be made by mail. Proxies may be further solicited for no additional
compensation by our officers, directors, or employees by telephone, written
communication or in person. Upon request, we 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 our
common shares. No solicitation will be made by specially engaged employees or
other paid solicitors.
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VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
Ownership of Our Common Shares by Principal Shareholders
The following table sets forth information as of March 21, 2005 (except as
noted below), relating to the beneficial ownership of our common shares by each
person known by us to own beneficially more than 5% of our outstanding common
shares.
Number of Common Shares Beneficially Owned (1)
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Sole Voting Shared
and Voting and Shared Percent
Name and Address of Investment Investment Investment of
Beneficial Owner Power Power Power Only Total Class (2)
- ---------------------- ------------ ------------ ------------ ----------- ----------
Douglas G. Borror(3) 70,000(4) 3,908,424(5) 11,443(6) 3,989,867 48.4%
Donald A. Borror(3) -- 3,908,424(5) 37,547(6) 3,945,971 47.9%
David S. Borror(3) 21,794(7) 3,908,424(5) -- 3,930,218 47.7%
Terry E. George(3) 14,792 3,908,424(5) -- 3,923,216 47.6%
BRC Properties Inc.(3) 3,908,424(5) -- -- 3,908,424 47.5%
BRC Properties Inc., -- 3,908,424(5) -- 3,908,424 47.5%
Donald A. Borror,
Douglas G. Borror,
David S. Borror and
Terry E. George, as a group
FMR Corp.(8) 785,994 -- -- 785,994 9.5%
82 Devonshire Street
Boston, MA 02109
Columbia Wanger Asset -- 490,000 -- 490,000 6.0%
Management L.P.(9)
227 West Monroe Street
Suite 3000
Chicago, IL 60606
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(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those shares.
(2) Percent of Class is calculated by dividing the number of common shares
beneficially owned by a person by the sum of 8,237,515 common shares
outstanding as of March 21, 2005, and the number of common shares as to
which the person has the right to acquire beneficial ownership within
sixty (60) days of March 21, 2005.
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(3) The address of Donald A. Borror, Douglas G. Borror, David S. Borror, Terry
E. George, and BRC Properties Inc. ("BRC") is 5000 Tuttle Crossing
Boulevard, Dublin, Ohio 43016-5555.
(4) Includes 30,000 restricted common shares awarded to Mr. Douglas Borror on
October 22, 2002, which shares will vest, if at all, upon (a) the
expiration of five years from the date of the award, (b) the Company's
achievement of shareholder' equity of not less than $175,000,000 and (c)
Mr. Douglas Borror continuing to be employed with the Company as of such
date. Also includes 40,000 restricted common shares awarded to Mr. Douglas
Borror on October 22, 2003, which shares will vest, if at all, upon (a)
the expiration of three years from the date of the award, and (b) the
Company's achievement of a book value per share of $30.00 (without
adjustment for the impact of dividends and dilution).
(5) Share total is based on information provided to the Company by BRC. By
virtue of their ownership and/or 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 of the Company held by BRC. See
"Certain Relationships and Related Transactions - Description and
Ownership of BRC" for additional information.
(6) Consists of common shares held by The Principal Group, as Trustee of the
Dominion Homes, Inc. Retirement Plan and Trust, which common shares are
voted by the Trustee.
(7) Includes 20,000 restricted common shares awarded to Mr. David Borror on
October 22, 2003, which shares will vest, if at all, upon (a) the
expiration of three years from the date of the award, and (b) the
Company's achievement of a book value per share of $30.00 (without
adjustment for the impact of dividends and dilution).
(8) Information is based on a Schedule 13G filed with the Securities and
Exchange Commission on February 14, 2005. 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 785,994 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 785,994 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's
board of trustees. 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.
(9) Information is based on a Schedule 13G filed with the Securities and
Exchange Commission on February 11, 2005. According to the Schedule 13G,
Columbia Wanger Asset Management L.P. ("WAM"), an investment adviser under
the Investment Advisers Act of 1940, WAM Acquisition GP, Inc., the general
partner of WAM ("WAM GP"), and Columbia Acorn Trust ("Acorn"), an
investment company under the Investment Company Act of 1940, collectively
share the power to direct the voting of and dispose of the 490,000 common
shares listed above. The shares have been acquired on behalf of
discretionary clients of WAM, including Acorn. Persons other than WAM and
WAM GP are entitled to receive all dividends from, and proceeds from the
sale of, those shares. Acorn is the only such person known to be entitled
to all dividends from, and all proceeds from the sale of, shares reported
in the Schedule 13G to the extent of more than 5% of the class.
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Ownership of Our Common Shares by Directors and Executive Officers
The following table sets forth information regarding beneficial ownership
of our common shares by each of our directors, each of our executive officers
named in the Summary Compensation Table, and our directors and executive
officers as a group as of March 21, 2005:
Number of Common Shares Beneficially Owned(1)
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Sole Voting Shared
and Voting and Shared Percent
Name of Investment Investment Investment of
Beneficial Owner Power Power Power Only Total Class(2)
- -----------------------------------------------------------------------------------------------------
David Blom 2,500(3) -- -- 2,500 *
David S. Borror 21,794(4) 3,908,424(5) -- 3,930,218 47.7%
Donald A. Borror -- 3,908,424(5) 37,547(6) 3,945,971 47.9%
Douglas G. Borror 70,000(7) 3,908,424(5) 11,443(6) 3,989,867 48.4%
Jon M. Donnell(8) -- -- -- -- --
R. Andrew Johnson 2,500(9) -- -- 2,500 *
Gerald E. Mayo 11,000(10) -- -- 11,000 *
Carl A. Nelson, Jr 3,500(11) -- -- 2,500 *
Zuheir Sofia 5,000(12) -- -- 5,000 *
Terrence R. Thomas 16,000(13) -- -- 16,000 *
C. Ronald Tilley 6,905(14) -- -- 6,905 *
All directors (including 139,199 3,908,424(4) 48,990 4,096,613 49.6%
director nominees) and
executive officers as a
group (11 persons)(15)
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* Less than one percent (1%).
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those shares.
(2) Percent of Class is calculated by dividing the number of shares
beneficially owned by the sum of 8,237,515 shares outstanding as of March
21, 2005, and the number of common shares as to which the person has the
right to acquire beneficial ownership within sixty (60) days of March 21,
2005.
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(3) Includes an option to purchase 2,500 common shares which is exercisable by
Mr. Blom within sixty (60) days of March 21, 2005.
(4) Includes 20,000 restricted common shares awarded to Mr. David Borror on
October 22, 2003, which shares will vest, if at all, upon (a) the
expiration of three years from the date of the award, and (b) the
Company's achievement of a book value per share of $30.00 (without
adjustment for the impact of dividends and dilution).
(5) Share total is based on information provided to the Company by BRC. By
virtue of their ownership and/or control of BRC, each of Donald A. Borror,
Douglas G. Borror and David S. Borror may be deemed to beneficially own
the common shares of the Company held by BRC. See "Certain Relationships
and Related Transactions - Description and Ownership of BRC" for
additional information.
(6) Consists of common shares held by The Principal Group, as Trustee of the
Dominion Homes, Inc. Retirement Plan and Trust, which common shares are
voted by the Trustee.
(7) Includes 30,000 restricted common shares awarded to Mr. Douglas Borror on
October 22, 2002, which shares will vest, if at all, upon (a) the
expiration of five years from the date of the award, (b) the Company's
achievement of shareholders' equity of not less than $175,000,000, and (c)
Mr. Douglas Borror continuing to be employed with the Company as of such
date. Also includes 40,000 restricted common shares awarded to Mr. Douglas
Borror on October 22, 2003, which shares will vest, if at all, upon (a)
the expiration of three years from the date of the award, and (b) the
Company's achievement of a book value per share of $30.00 (without
adjustment for the impact of dividends and dilution).
(8) Mr. Donnell's employment with us ended effective October 31, 2004.
Effective as of the same date, Mr. Donnell resigned from our Board of
Directors. Information regarding his beneficial ownership of the Company's
common shares as of March 21, 2005, is not available to the Company.
(9) Includes an option to purchase 2,500 common shares which is exercisable by
Mr. Johnson within sixty (60) days of March 21, 2005.
(10) Includes options to purchase 7,500 common shares which are exercisable by
Mr. Mayo within sixty (60) days of March 21, 2005.
(11) Includes an option to purchase 2,500 common shares which is exercisable by
Mr. Nelson within sixty (60) days of March 21, 2005.
(12) Includes an option to purchase 2,500 common shares which is exercisable by
Mr. Sofia within sixty (60) days of March 21, 2005.
(13) Includes 15,000 restricted common shares awarded to Mr. Thomas on June 25,
2004, in connection with his commencement of employment with the Company.
The restrictions on these shares will lapse as to one-fifth of the total
number of shares covered by the award on each of the first, second, third,
fourth and fifth anniversaries of the award date.
(14) Includes an option to purchase 2,500 common shares which is exercisable by
Mr. Tilley within sixty (60) days of March 21, 2005.
(15) In computing the aggregate number of common shares held by the group, the
same common shares were not counted more than once.
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INFORMATION CONCERNING OUR BOARD OF DIRECTORS AND
CORPORATE GOVERNANCE MATTERS
Board of Directors Meetings
Regular meetings of our Board of Directors are generally held four times
per year, and special meetings are scheduled when required. At each regular
meeting of our Board of Directors, members who are "independent directors" meet
in executive session without the presence of management. Our Board of Directors
held five meetings in 2004. Each director is expected to attend each meeting of
the Board and the committees on which he serves. In addition to meetings, the
Board and its committees review and act upon matters through written consent
procedures. During 2004, each of our directors attended 75% or more of the total
number of (i) meetings of the Board, and (ii) meetings of committees of the
Board on which the director served.
Standing Committees of the Board
Our Board of Directors has three standing committees: an Audit Committee,
a Nominating and Corporate Governance Committee, and a Compensation Committee.
The Audit Committee oversees management's conduct of our financial
reporting process, including the financial reports and information that we
provide to our shareholders or to the Securities and Exchange Commission, our
system of internal control over financial reporting, and the annual independent
audit of our financial statements. The Audit Committee also acts on behalf of
the Board of Directors with respect to the appointment of our independent
registered public accounting firm, and all audit and other activities performed
for us by our independent registered public accounting firm. Finally, the Audit
Committee is responsible for reviewing all proposed related party transactions
between us and our affiliates. The Audit Committee's Charter is available on our
Internet website at www.dominionhomes.com under the heading "Investor Relations"
- - "Corporate Governance." The Audit Committee is comprised solely of directors
who are "independent" directors pursuant to the listing requirements of The
Nasdaq Stock Market and applicable provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Currently, Messrs. Nelson (Chairman),
Mayo and Sofia serve as members of our Audit Committee. The Audit Committee held
a total of six meetings during 2004. For additional information on the Audit
Committee, see "REPORT OF THE AUDIT COMMITTEE" beginning at page 34 of this
proxy statement.
The Compensation Committee determines the compensation of our Chief
Executive Officer, executive officers and other key senior management members,
and administers our incentive stock plans. The Compensation Committee's Charter
can be found on our Internet website at www.dominionhomes.com under the heading
"Investor Relations" - "Corporate Governance." The Compensation Committee is
comprised solely of directors who are "independent" directors pursuant to the
listing requirements of The Nasdaq Stock Market. Currently, Messrs. Sofia
(Chairman) and Tilley serve as members of our Compensation Committee. Our
Compensation Committee held a total of ten meetings during 2004. For
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additional information on the Compensation Committee, see "REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION" beginning at page 28.
The Nominating and Corporate Governance Committee ("Governance
Committee"), identifies individuals qualified to become members of our Board of
Directors and recommends to our Board the slate of directors to be nominated by
the Board at the annual shareholders' meeting and any director to fill a vacancy
on the Board. The Governance Committee also reviews and makes recommendations to
the Board regarding Board committee structure and membership, assists the Board
in evaluating the Board's overall effectiveness, and oversees the development
and implementation of our corporate governance policies. The Governance
Committee will consider recommendations for nominees for directorships submitted
by our shareholders. See "Director Nomination Process" beginning at page 10. The
Governance Committee's Charter can be found on our Internet website at
www.dominionhomes.com under the heading "Investor Relations" - "Corporate
Governance." The Governance Committee is comprised solely of directors who are
"independent" directors pursuant to the listing requirements of The Nasdaq Stock
Market. Currently, Messrs. Tilley (Chairman), Blom and Mayo serve as members of
our Governance Committee. Our Governance Committee held five meetings during
2004.
Lead Director
Our Board of Directors has a Lead Director whose purpose is to serve as a
channel of communication between the Company's independent directors and the
Chief Executive Officer/Chairman of the Board. Pursuant to our Corporate
Governance Guidelines, the Chairman of the Governance Committee also will serve
as the Lead Director and, as a result, the Lead Director will be an independent
director. Currently, C. Ronald Tilley serves as our Lead Director. The Lead
Director position will rotate every two years in conjunction with the rotation
of the Governance Committee chair position.
The Lead Director's responsibilities include: (1) providing input to the
Chief Executive Officer/Chairman in establishing the agenda for Board meetings;
(2) chairing executive sessions of the independent directors; and (3) working
with the Chief Executive Officer/Chairman to ensure that the Board has adequate
information and resources to support its decision-making requirements. The Lead
Director also meets regularly with the Chief Executive Officer/Chairman outside
of Board meetings to discuss agenda items, personnel issues, and such other
Board and Company matters as they deem appropriate.
Communications with the Board
Shareholders, employees of the Company, and other interested parties may
contact any director or committee of the Board of Directors by writing to them
at: c/o Corporate Counsel, Dominion Homes, Inc., 5000 Tuttle Crossing Boulevard,
P.O. Box 5000, Dublin, Ohio 43016-5555. Questions or concerns relating to our
financial statements, accounting practices or internal control over financial
reporting should be addressed to the Chairman of the Audit Committee.
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Questions or concerns relating to our governance practices, business ethics or
corporate conduct should be addressed to the Chairman of the Governance
Committee. Questions or concerns regarding our compensation practices should be
addressed to the Chairman of the Compensation Committee. Any person who submits
a question, concern or complaint in this manner and includes his, her or its
name and mailing address in the submission will receive a written
acknowledgement within 14 days of the Company's receipt of the submission.
Communications also may be submitted on an anonymous basis. The process for the
Corporate Counsel's forwarding of these communications to the appropriate Board
members has been approved by our independent directors.
Questions, complaints and concerns also may be submitted to our directors
by telephone through our Business Ethics Help Line at 1-800-418-6423, ext. 366,
or by electronic mail at Confide2SV@securityvoice.com.
Qualifications of Directors
When identifying and evaluating director nominees, the Governance
Committee will consider the following:
o The candidate's demonstrated character and integrity.
o The candidate's relevant expertise and experience, including
leadership qualities and experience, high-level managerial
experience in a relatively complex organization or experience
dealing with complex problems.
o The candidate's ability to provide advice and practical guidance
based on his or her experience and expertise.
o Whether the candidate meets the criteria for independence as
established by the Securities and Exchange Commission and the
listing standards of The Nasdaq Stock Market. The Board of Directors
must be comprised of at least a majority of independent directors.
o Whether the candidate would be considered a "financial expert" or
financially literate according to the criteria established by the
Securities and Exchange Commission and the listing standards of The
Nasdaq Stock Market.
o The candidate's ability to exercise sound and independent business
judgment and commitment to shareholder value.
o The candidate's ability to devote sufficient time to Board
activities and towards the fulfillment of his or her
responsibilities to the Company. A candidate's service on other
boards of public companies must not interfere with his or her
ability to effectively serve on the Board.
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o Whether the candidate assists in achieving a mix of Board members
that represents a diversity of background and professional
experience, including with respect to ethnic background, age and
gender.
For incumbent directors, the Governance Committee will also consider the
candidate's overall service to the Company during his or her term, including the
number of meetings attended, level of participation, quality of performance, and
any transactions by the candidate with the Company during his or her term.
Director Nomination Process
In accordance with Section 2.03 of our Amended and Restated Code of
Regulations (the "Regulations"), a nominee for election as a director may be
proposed only by our 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 our Secretary at our principal office and, in the case of a nominee
proposed for election as a director at an annual meeting of shareholders,
received by the Secretary 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 our shareholders 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 Governance Committee is charged with assisting the Board of Directors
in identifying and evaluating prospective candidates, and recommending to the
Board of Directors its candidate(s) for Board membership. The Governance
Committee will consider new director candidates suggested by shareholders of the
Company, members of the Board of Directors, management, a professional search
firm (if the Governance Committee has engaged one), or other interested parties.
Prior to recommending a candidate to the Board for nomination as a director, at
least one member of the Governance Committee and the Chief Executive
Officer/Chairman will interview the director candidate.
Prior to the filing of our proxy statement for the annual meeting of
shareholders, the Governance Committee will meet to consider new and incumbent
director candidates to recommend to the Board of Directors for nomination and
election at the annual meeting. During this meeting, the Governance Committee
will consider each director candidate by reviewing relevant information provided
by the candidate (including information contained in the candidate's mandatory
questionnaire), by applying the criteria listed above, and, with respect to
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incumbent director candidates, by assessing such candidate's performance during
the previous year. The Governance Committee will consider and evaluate director
candidates nominated by shareholders in the same manner after ensuring that any
such nomination has been executed in compliance with the Regulations and the
applicable rules and regulations of the Securities and Exchange Commission
governing shareholder nominations. Upon conclusion of its evaluation, the
Governance Committee will approve and recommend to the Board of Directors its
final candidate(s) for Board membership. The nomination of such candidates for
election at the annual shareholder meeting is subject to the approval of the
Board of Directors.
All nominees for election as Class I directors at the 2005 annual meeting
are current members of the Board of Directors and have been nominated by the
Board of Directors and elected by the shareholders in prior years.
To date, the Company has not employed a search firm on behalf of the
Governance Committee to identify and assist in evaluating suitable director
candidates, although the Governance Committee is authorized to retain a search
firm for this purpose if it deems necessary.
Attendance of Directors at Annual Meetings
All members of our Board of Directors are strongly encouraged, but not
required, to attend our annual shareholder meetings. At our 2004 annual meeting,
all of the directors then in office were in attendance, as well as director
nominees David P. Blom and R. Andrew Johnson.
Compensation of Directors
Directors who are not our employees receive a fee of $10,000 per quarter
for Board service. Non-employee directors who serve on the Audit Committee
(other than the Audit Committee Chairman) receive an additional fee of $1,250
per quarter, and the Audit Committee Chairman receives an additional fee of
$2,500 per quarter. The Chairman of the Compensation Committee receives an
additional fee of $1,250 per quarter. The Chairman of the Governance Committee
receives an additional fee of $6,250 per quarter, of which $1,250 relates to his
service on the Governance Committee and $5,000 relates to his service as Lead
Director.
Directors may defer the receipt of their director and committee fees
through participation in our Executive Deferred Compensation Plan and receive a
matching contribution from us of 25% with respect to such deferred fees, which
matching contribution may not exceed $2,500 in any year. No directors
participated in the Executive Deferred Compensation Plan in 2004. Directors who
are not our employees are also entitled to participate in the Company's
Financial Planning Reimbursement Plan, which provides reimbursement for expenses
incurred in personal financial planning of up to $7,500 in any calendar year for
our independent directors. Additionally, under the 2003 Stock Option and
Incentive Equity Plan, each non-employee director receives, on the first
business day after each annual meeting of shareholders, provided that the
director continues to serve on the Board of Directors on such date, a grant of a
non-qualified stock option to purchase 2,500 common shares of our Company at an
exercise price
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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.
We do not pay any separate remuneration to our employees who serve as
directors. Messrs. Blom, Johnson, Mayo, Nelson, Sofia and Tilley were our
non-employee directors in 2004.
Agreement with Respect to the Election of Directors
BRC, the holder of approximately 47.5% of our 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" beginning at page 40.
Family Relationships
Donald A. Borror, Chairman Emeritus, is the father of Douglas G. Borror,
Chairman, Chief Executive Officer and President and David S. Borror, Corporate
Executive Vice President and director. There are no other family relationships
among our executive officers and/or directors.
Code of Business Conduct and Ethics
Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, on March 10,
2004, our Board of Directors adopted a Code of Business Conduct and Ethics,
which applies to all of our officers (including our Chief Executive Officer,
Chairman and President, and senior financial officers), employees and directors.
The Code of Business Conduct and Ethics was filed as Exhibit 14 to our Annual
Report on Form 10-K for the fiscal year ended December 31, 2004. If the Company
makes any substantive amendment of, or grants any waiver for an executive
officer or director to, the Code of Business Conduct and Ethics, the Company
will disclose the nature of such amendment or waiver in a current report on Form
8-K.
Corporate Governance Guidelines
On July 21, 2004, at the recommendation of the Governance Committee, our
Board of Directors adopted Corporate Governance Guidelines to assist the Board
in fulfilling its responsibility to the Company's shareholders to oversee the
work of management and the Company's business results. The Corporate Governance
Guidelines may be found on our Internet website at www.dominionhomes.com under
the heading "Investor Relations" - "Corporate Governance." The Governance
Committee is responsible for reviewing these Guidelines at least annually, and
recommending any changes to the Board of Directors.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
AND COMPENSATION MATTERS
Executive Officers
In addition to Douglas G. Borror and David S. Borror , whose biographies
are set forth in this proxy statement under "ELECTION OF DIRECTORS" beginning at
page 44, the following individual is an executive officer of the Company:
Terrence R. Thomas, age 44, has served as Senior Vice President of Finance
and Chief Financial Officer of the Company since June 2004. Prior to joining the
Company, Mr. Thomas was employed in various capacities with Pulte Home
Corporation since 1990, including most recently as Area Vice President of
Finance/Asset Management for the Southeast Region from May 2000 to June 2004 and
as Regional Vice President of Finance for the Southwest Region from May 1997 to
May 2000. Prior to his employment with Pulte Home, Mr. Thomas served as Senior
Audit Manager with KPMG Peat Marwick from January 1983 to September 1990.
Significant Employees
Karl E. Billisits, age 39, has served as our President - Communities
Division since December 2004. He served as our Executive Vice President -
Construction Operations from December 2000 through November 2004, as Senior Vice
President of Land Acquisition and Development from April 1999 through November
2000, as 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 us in 1994, Mr. Billisits
was employed as a consulting engineer with Bauer, Davidson & Merchant, a
Columbus, Ohio-based consulting engineering firm.
Nancy J. Doran, age 51, has served as our Senior Vice President - Dominion
Homes Financial Services since March 2005. Prior to joining the Company, Ms.
Doran was employed with Pulte Mortgage Corporation, serving as Manager of
Centralized Originations from January 2001 through February 2005, and as Senior
Vice President from August 1996 through February 2005.
Stephan M. George, age 48, has served as our Executive Vice President and
as President of our Kentucky subsidiary since December 2000. He served as our
Executive Vice President of Operations from May 1999 through December 2000.
Prior to joining us in 1999, Mr. George served as Chief Operating Officer of
Silverman 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.
Terry E. George, age 61, has served as our Senior Vice President since
November 1993 and as our Treasurer since January 1996. He served on our Board of
Directors from 1985
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through May 1997, as our Controller from August 1995 to January 1996, and as our
Operations Manager 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, he has additionally served as Secretary of BRC.
Jack L. Mautino, age 41, has served as our President - Single Family
Division since December 2004. He served as our Executive Vice President of Sales
from December 2000 through November 2004, as Senior Vice President and General
Manager of our Louisville, Kentucky subsidiary from September 1998 through
November 2000, as our Senior Vice President of Sales from May 1998 through
August 1998, as our Vice President of Sales from October 1995 through August
1998, as a Sales Manager from December 1991 to September 1995, and as a Sales
Representative from July 1990 to December 1991. Prior to joining us in 1990, Mr.
Mautino was employed by Ryland Homes.
Robert A. Meyer, Jr., age 51, has served as our Senior Vice President
since January 1996 and as our General Counsel and Secretary since December 1993.
He served as our Vice President from December 1993 through December 1995. Prior
to joining us in 1993, Mr. Meyer was engaged in the private practice of law in
the Columbus, Ohio office of Porter, Wright, Morris & Arthur, LLP from November
1978 to December 1993.
Lori M. Steiner, age 45, has served as our Senior Vice President and Chief
Marketing Officer since December 2004. She served as Senior Vice President -
Brand Management from October 2003 through November 2004, as Senior Vice
President of Strategy and Communications from January 1999 through September
2003, as Senior Vice President of Marketing from May 1998 through December 1998,
as Vice President of Marketing from January 1995 through May 1998 and as
Marketing Director from September 1990 through January 1995. Ms. Steiner served
as an account manager for Brooks Young Communications, a Columbus, Ohio-based
regional advertising company, from March 1989 to September 1990.
Compensation of Executive Officers
The following table sets forth, for the three years ended December 31,
2004, cash and non-cash compensation we paid to our Chief Executive Officer,
Chairman and President, to each of our other two most highly compensated
executive officers who served as such during 2004, and to Jon M. Donnell, our
former President and Chief Operating Officer (collectively, the "Named Executive
Officers"), for services rendered in all capacities by such persons:
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SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------
Annual Compensation Awards
----------------------------------------------------------------------------
Securities
Other Annual Restricted Stock Underlying All Other
Name and Salary Bonus (1) Compensation(2) Awards Options Compensation
Principal Position Year ($) ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas G. Borror 2004 $ 650,000 $ 1,200,000(3) $ 205,735(4) -- -- $ 161,270(5)
CEO, Chairman 2003 $ 525,000 $ 2,250,000(3) $ 181,938(4) $ 1,281,200(6)(7) -- $ 161,760(8)
and President 2002 $ 525,000 $ 1,450,000(3) $ 165,966(4) $ 453,000(9)(7) -- $ 161,925(10)
Jon M. Donnell (11) 2004 $ 486,538 -- $ 150,765(12) -- -- $1,281,197(5)(13)
Former President and 2003 $ 420,000 $ 1,750,000(14) $ 142,548(12) $ 1,121,050(6) -- $ 96,760(8)
COO 2002 $ 420,000 $ 1,105,000(14) $ 128,012(12) $ 377,500(9) -- $ 96,760(10)
David S. Borror 2004 $ 250,000 $ 350,000 $ 105,975(15) -- -- $ 42,271(5)
Corporate Executive 2003 $ 250,000 $ 550,000 $ 86,321(15) $ 640,600(6)(7) -- $ 42,760(8)
VP 2002 $ 250,000 $ 417,000 $ 102,127(15) -- -- $ 42,760(10)
Terrence R. Thomas (16) 2004 $ 124,038 $ 500,000(17) $ 2,442 $ 63,150(7)(18) 20,000 $ 57,643(5)(19)
SVP of Finance and 2003 -- -- -- -- -- --
CFO 2002 -- -- -- -- -- --
- ----------
(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) Includes the aggregate incremental cost to the Company of personal use of
the Company's aircraft, calculated based on the variable operating costs
to the Company, including the hourly rate, fuel costs, mileage,
landing/ramp fees and other miscellaneous variable costs. Fixed costs
which do not change based on usage, such as pilot salaries, the
amortization of the purchase price of the Company's interest in the
aircraft, and the cost of maintenance not related to trips, are excluded.
Also includes the cost of additional miscellaneous benefits provided to
the Named Executive Officers, including financial planning reimbursement,
medical reimbursement, lease of a Company car, club dues and fees, and
long-term disability premiums, none of which exceeds 25% of the value of
all perquisites included herein.
(3) For 2004, includes Mr. Douglas Borror's 2004 bonus of $1,200,000, all but
$10,207 of which was paid in 2005. For 2003, includes Mr. Douglas Borror's
2003 bonus of $2,250,000, all of which was paid in 2004. For 2002,
includes Mr. Douglas Borror's 2002 bonus of $1,450,000, all of which was
paid in 2003.
(4) Includes $157,615 for 2004, $136,255 for 2003, and $100,466 for 2002,
attributable to personal use of the Company 's aircraft. Also includes for
2002, $32,434 attributable to payment of personal expenses of Mr. Douglas
Borror on business related trips (these amounts were $0 for 2003 and
2004). Does not include reimbursement of dues and expenses related to
membership in professional and civic organizations of $258,246 in 2004,
$41,076 in 2003, and $129,257 in 2002.
(5) Includes for 2004, the value of premiums paid by the Company to fund a
contractually obligated death benefit and contributions pursuant to the
Company's Supplemental Executive Retirement Plan (Mr. Douglas Borror:
$150,000, Mr. Donnell: $85,000, Mr. David Borror: $31,000, and Mr. Thomas:
$0). Also includes for 2004, amounts we paid for coverage under our Group
Life Insurance Program (Mr. Douglas Borror: $1,080, Mr. Donnell: $810, Mr.
David Borror: $1,080, and Mr. Thomas: $450), our matching contributions
under our Retirement Plan and Trust (the "401(k) Plan")(Mr. Douglas
Borror: $7,690, Mr. Donnell: $8,462, Mr. David
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Borror: $7,691, and Mr. Thomas: $0), and our matching contributions under
the Executive Deferred Compensation Plan of $2,500 for each of Messrs.
Douglas Borror, David Borror and Thomas.
(6) On October 22, 2003, Mr. Douglas. Borror was granted 40,000 restricted
common shares, Mr. Donnell was granted 35,000 restricted common shares,
and Mr. David Borror was granted 20,000 restricted common shares. The
restricted common shares were valued at $32.03, the closing price of the
Company's common shares on October 21, 2003. The shares will vest, if at
all, upon (a) the expiration of three years from the date of the award,
and (b) the Company's achievement of a book value per share of $30.00
(without adjustment for the impact of dividends and dilution). Mr.
Donnell's restricted shares had not vested at the time of his departure in
October 2004, and, as such, these restricted shares were forfeited.
(7) As of December 31, 2004, the aggregate value of the 70,000 restricted
common shares held by Mr. Douglas Borror, the 20,000 restricted common
shares held by Mr. David Borror, and the 15,000 restricted common shares
held by Mr. Thomas were $1,766,800, $504,800 and $378,600, respectively.
Dividends, if any, are held in escrow pending vesting of the restricted
common shares.
(8) Includes for 2003, the value of premiums paid by the Company to fund a
contractually obligated death benefit and contributions pursuant to the
Company's Supplemental Executive Retirement Plan (Mr. Douglas Borror:
$150,000, Mr. Donnell: $85,000, and Mr. David Borror: $31,000). Also
includes for 2003, amounts we paid for coverage under our Group Life
Insurance Program of $1,260 for each of Messrs. Douglas Borror, Donnell
and David Borror, our matching contributions under our 401(k) Plan of
$8,000 for each these individuals, and our matching contributions under
the Executive Deferred Compensation Plan of $2,500 for each of these
individuals.
(9) On October 22, 2002, Mr. Douglas Borror was granted 30,000 restricted
common shares and Mr. Donnell was granted 25,000 restricted common shares.
The restricted common shares were valued at $15.10, the closing price of
the Company's common shares on October 21, 2002. The shares will vest, if
at all, upon (a) the expiration of five years from the date of the award,
(b) the Company's achievement of shareholders' equity of not less than
$175,000,000, and (c) the recipient continuing to be employed with the
Company as of such date. Mr. Donnell's restricted shares had not vested at
the time of his departure in October 2004, and, as such, these restricted
shares were forfeited.
(10) Includes for 2002, the value of premiums paid for split-dollar life
insurance coverage under our Split Dollar Plan (the "Split Dollar Plan")
(Mr. Douglas Borror: $150,000, Mr. Donnell: $85,000, and Mr. David Borror:
$31,000). Does not include reimbursements made to the executive officers
pursuant to the Company's discontinuation of the split dollar plan
arrangement. 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 2002 amounts
we paid for coverage under our Group Life Insurance Program of $1,260 for
each of Messrs. Douglas Borror, Donnell and David Borror, our matching
contributions under our 401(k) Plan of $8,000 for each of these
individuals, and our matching contributions under the Executive Deferred
Compensation Plan of $2,500 for each of these individuals.
(11) Mr. Donnell's employment with us ended effective October 31, 2004.
(12) Includes $115,053 for 2004, $105,523 for 2003, and $95,823 for 2002,
attributable to personal use of the Company's aircraft.
(13) Includes separation payments of $709,184 paid in 2004, $473,915 payable to
Mr. Donnell in 2005, and $3,826 payable to Mr. Donnell in 2006 in
connection with his separation from the Company. Significant portions of
the 2005 and 2006 separation payments are subject to a dollar for dollar
reduction in the event of Mr. Donnell's employment.
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(14) For 2003, includes Mr. Donnell's bonus of $1,750,000, $1,705,047 of which
was paid in 2004. For 2002, includes Mr. Donnell's 2002 bonus of
$1,105,000, all of which was paid in 2002.
(15) Includes $69,486 for 2004, $56,701 for 2003, and $78,196 for 2002,
attributable to personal use of the Company's aircraft.
(16) Mr. Thomas's employment with us commenced on June 22, 2004.
(17) Includes a $100,000 signing bonus paid to Mr. Thomas at the commencement
of his employment with us, a $200,000 deferred signing bonus, $10,207 of
which was paid to Mr. Thomas in 2004 and the remainder of which was paid
to Mr. Thomas in early 2005, and a guaranteed incentive bonus of $200,000
for 2004, also paid in early 2005.
(18) On June 25, 2004, Mr. Thomas was granted 15,000 restricted common shares.
The restricted common shares were valued at $24.21, the closing price of
the Company's common shares on June 24, 2004. The shares will vest in
equal amounts on the first five anniversaries of the date of grant.
(19) Includes $54,693 for relocation expenses for Mr. Thomas in connection with
his commencement of employment with us.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of
stock options to the Named Executive Officers under our 2003 Stock Option and
Incentive Equity Plan during the 2004 fiscal year:
Number of % of Total
Securities Options
Underlying Granted to Potential Realized Value at
Options Employees in Exercise Assumed Annual Rates of Stock
Granted Fiscal Price Expiration Price Appreciation for
Name (#) Year(1) ($/Share) Date Option Terms (2)(3)
- -------------------------------------------------------------------------------------------------------
5% ($) 10% ($)
----------- ------------
Terrence R. Thomas 20,000 27% $24.21 2014 $ 789,000 $ 1,256,000
- ----------
(1) Percentage is based upon 73,000 options granted to employees in fiscal
2004.
(2) The dollar amounts in these columns are the product of (a) the difference
between (1) the product of the per share market price at the date of grant
and the sum of 1 plus the assumed rate of appreciation (5% and 10%)
compounded over the term of the option (ten years) and (2) the per share
exercise price and (b) the number of shares underlying the grant.
(3) The appreciation rates stated are arbitrarily assumed, and may or may not
reflect actual appreciation in the stock price over the life of the
option. Regardless of any theoretical value which may be placed on a stock
option, no increase in its value will occur without an increase in the
value of the underlying shares. Whether an increase will be realized will
depend not only on the efforts of the recipient of the option, but also
upon conditions in our industry, competition, and economic conditions,
over which the optionee may have little or no control.
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AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END
OPTION VALUE TABLE
The following table provides certain information regarding the number and
value of stock options held by our Named Executive Officers at December 31,
2004.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at Options/SARs at
Fiscal-Year-End (#) Fiscal-Year-End ($)(2)
---------------------------------------------------------
Shares
acquired on Value
exercise Realized
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
Jon M. Donnell 4,000 $ 60,760 -- -- -- --
Terrence R. Thomas -- -- -- 20,000 -- $ 20,600
- ----------
(1) Value realized represents the difference between the aggregate exercise
price of the option shares and the aggregate market price of the option
shares on the date the option was exercised. The value realized was
determined without consideration for any taxes or brokerage expenses that
may have been owed.
(2) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and the per share fair market value at year
end ($25.24 on December 31, 2004). An option is in-the-money if the fair
market value of the underlying shares exceeds the exercise price of the
option.
Employment Agreements
We have employment agreements with the following Named Executive Officers:
Douglas G. Borror, our Chief Executive Officer, Chairman and President, David S.
Borror, our Corporate Executive Vice President, and Terrence R. Thomas, our
Senior Vice President of Finance and Chief Financial Officer.
Douglas G. Borror Employment Agreement
We entered into an employment agreement with Mr. Douglas Borror effective
July 1, 2004. The agreement is for a period of five years, and renews
automatically for additional one-year terms unless the Board of Directors has
notified Mr. Douglas Borror within 90 days prior to the expiration of the
initial term (or any extension period) of its decision not to extend the
agreement. Under the agreement, Mr. Douglas Borror's base salary is $650,000,
and may be increased during the term by the Compensation Committee of our Board
of Directors. Mr. Douglas Borror is also entitled to participate in our 2002
Incentive Growth Plan (the "Incentive Growth Plan"), and to receive such other
benefits (including, but not limited to health and life insurance coverages,
sick leave and disability programs, tax-qualified retirement plans, and other
perquisites and benefits) as we may provide from time to time to actively
employed senior executives of the Company. In addition, Mr. Douglas Borror is
entitled to the following: (1) use
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of the Company's aircraft for personal travel not to exceed pre-established
annual limits set by the Compensation Committee, (2) payment of dues and
reimbursement of reasonable expenses related to his membership in professional
and civic organizations (including the Young President's Organization), (3)
payment of dues and expenses related to his membership in two (2) country clubs,
(4) a monthly automobile allowance or leased Company car, in accordance with the
Company's policies and procedures, and (5) reimbursement of reasonable expenses
related to his service on the Board of Trustees of The Ohio State University,
which are not otherwise reimbursed by the University.
In the event that we terminate Mr. Douglas Borror's employment without
cause (as defined in the agreement) or he terminates his employment with us for
good reason (as defined in the agreement), he will be entitled to the following:
o any accrued but unpaid base salary, any accrued but unused vacation,
and any unreimbursed business expenses, all as of the date of
termination;
o his target bonus award under the Incentive Growth Plan for the year
in which termination occurs;
o an amount equal to the greater of (a) two, or (b) the number of
years (and fractions of years) remaining on the term of the
agreement multiplied by the greater of (c) the amount of the award
paid to him under the Incentive Growth Plan for the last full year
preceding his termination of employment or (d) the average of the
amount of the award paid to him under the Incentive Growth Plan for
the three years prior to his termination of employment; and
o continuation of coverage under our group health plan for a period of
twenty-four (24) months after the date of termination or, if
continuation is not permitted, an amount necessary for him (and, if
applicable, his family) to obtain an individual health insurance
policy that will provide coverage for the twenty-four (24) month
period that is substantially similar to the coverage provided under
our group health plan.
Additionally, in exchange for a non-competition covenant effective for two years
after his termination without cause or for good reason, Mr. Douglas Borror will
receive an amount equal to the greater of (a) 24 months, or (b) the number of
months remaining on the term of his agreement, of base salary in effect on the
date of termination, paid in equal monthly installments.
In the event that (1) Mr. Douglas Borror's employment is terminated by the
Company without cause or by Mr. Douglas Borror for good reason within 180 days
prior to a "change in control" of the Company, or (2) Mr. Douglas Borror elects
to terminate his employment within ten days following the occurrence of a
"change in control" of the Company, he will be entitled to the following:
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o any accrued but unpaid base salary, any accrued but unused vacation,
and any unreimbursed business expenses, all as of the date of
termination;
o his target bonus award under the Incentive Growth Plan for the year
in which termination occurs;
o an amount equal to three times his average annual award under the
Incentive Growth Plan for the three full fiscal years ending before
the date of termination;
o continuation of coverage under our group health plan for a period of
thirty-six (36) months after the date of termination or, if
continuation is not permitted, an amount necessary for him (and, if
applicable, his family) to obtain an individual health insurance
policy that will provide coverage for the thirty-six (36) month
period that is substantially similar to the coverage provided under
our group health plan;
o continuation of his participation in the fringe benefit plans,
policies and programs that he participated in on the date of
termination for a period of thirty-six (36) months after the date of
termination; and
o an amount equal to any excise taxes imposed on any payments that
constitute "parachute payments" under 280G(b) of the Internal
Revenue Code.
Additionally, in exchange for a non-competition covenant effective for
three years after his termination under this scenario, Mr. Douglas Borror will
receive an amount equal to 300% of his average annual base salary over the three
fiscal years preceding the date of termination, paid in equal monthly
installments during the thirty-six (36) month period following the date of
termination. For purposes of the agreement, a "change in control" will be deemed
to have occurred upon the happening of any of the following events:
o the replacement of a majority of the members of our Board of
Directors serving as such on the date of the agreement for any
reason other than death or disability, which replacement has not
been approved by the Board of Directors of the Company;
o an acquisition by tender or exchange offer, open market purchases,
privately negotiated purchases, or exercise of stock pledge, by one
or more persons (other than the Borror family) of equity securities
of our Company representing more than 29% of the combined voting
power of our outstanding securities; or
o the failure of the Borror family at any time to have (on a fully
diluted basis) ownership of 30% of our outstanding equity
securities.
Mr. Douglas Borror's employment agreement is attached as Exhibit 10.1 to
our Quarterly Report on Form 10-Q for the period ending September 20, 2004.
-20-
David Borror Employment Agreement
We entered into an employment agreement with Mr. David Borror effective
July 1, 2004. The agreement is for an initial three-year term, and renews
automatically for additional one-year terms unless the Board of Directors has
notified Mr. David Borror within 90 days prior to the expiration of the initial
term (or any extension period) of its decision not to extend the agreement.
Under the agreement, Mr. David Borror's base salary is $250,000, and may be
increased during the term by the Compensation Committee of our Board of
Directors. Mr. David Borror is also entitled to participate in our annual
incentive compensation program and to participate in such other programs and
receive such other benefits as we may provide from time to time to actively
employed, similarly situated executives. In addition, Mr. David Borror is
entitled to the following: (i) use of the Company's aircraft for personal travel
not to exceed pre-established annual limits set by the Compensation Committee,
(2) payment of dues and expenses related to his membership in one (1) country
club, and (3) a monthly automobile allowance or leased Company car, in
accordance with the Company's policies and procedures.
In the event that we terminate Mr. David Borror's employment without cause
(as defined in the agreement) or he terminates his employment with us for good
reason (as defined in the agreement), he will be entitled to the following:
o any accrued but unpaid base salary, any accrued but unused vacation,
and any unreimbursed expenses, all as of the date of termination;
o an amount equal to the greater of (a) his bonus award in the year
preceding the date of termination, or (b) a pro rata award under our
incentive compensation program during the calendar year of his
termination, with proration based on service completed during the
calendar year for which the award is determined; and
o continuation of coverage under our group health plan for a period of
eighteen (18) months after the date of termination.
Additionally, in exchange for a non-competition covenant effective for one year
after his termination without cause or for good reason, Mr. David Borror will
receive twelve (12) months of his base salary in effect on the date of
termination, paid in equal monthly installments.
In the event that (1) Mr. David Borror's employment is terminated by the
Company without cause or by Mr. David Borror for good reason within 180 days
prior to a "change in control" of the Company, or (2) Mr. David Borror elects to
terminate his employment within ten days following the occurrence of a "change
in control" of the Company, he will be entitled to the following:
o any accrued but unpaid base salary, any accrued but unused vacation,
and any unreimbursed business expenses, all as of the date of
termination;
-21-
o a pro rata award under our incentive compensation program, with
proration based on service completed during the calendar year for
which the award is determined;
o an amount equal to one and one-half (1 1/2) times the bonus award he
received in the year preceding the date of termination;
o continuation of coverage under our group health plan for a period of
eighteen (18) months after the date of termination; and
o continuation of participation in the fringe benefit plans, policies
and programs that he participated in on the date of termination for
a period of eighteen (18) months after the date of termination.
If the sum of the foregoing payments, along with any benefits that Mr.
David Borror would be entitled to receive in the event of a change in control of
our Company under various plans and programs in which he participates,
constitute "excess parachute payments" under Section 280G(b) of the Code, then
we will either (1) reimburse him for the amounts owed as excise taxes, or (2)
reduce the amounts paid to him under the agreement so that his total payments
would be $1.00 less than the amount that would be considered an "excess
parachute payment," whichever procedure provides Mr. David Borror with the
greatest after-tax benefit.
Additionally, in exchange for a non-competition covenant effective for
eighteen (18) months after his termination under this scenario, Mr. David Borror
will receive eighteen (18) months of his base salary in effect on the date of
termination, paid in equal monthly installments. For purposes of the agreement,
"change in control" has the same meaning as described above in Mr. Douglas
Borror's employment agreement.
Mr. David Borror's employment agreement is attached as Exhibit 10.2 to our
Quarterly Report on Form 10-Q for the period ending September 20, 2004.
Terrence R. Thomas Employment Agreement
We entered into an employment agreement with Mr. Thomas effective January
1, 2005. The agreement is for a three-year term, and automatically extends on
December 31 of each year for an additional three-year period unless the Board of
Directors has notified Mr. Thomas by such date of its decision not to extend the
Agreement. Under the agreement, Mr. Thomas's initial base salary is $250,000,
and may be increased during the term by the Compensation Committee of our Board
of Directors. Mr. Thomas is also entitled to participate in our annual incentive
compensation program and to participate in such other programs and receive such
other benefits as we may provide from time to time to actively employed,
similarly situated executives.
In the event that we terminate Mr. Thomas's employment without cause (as
defined in the agreement) or he terminates his employment with us for good
reason (as defined in the agreement), he will be entitled to the following:
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o any accrued but unpaid base salary, any accrued but unused vacation,
and any unreimbursed expenses, all as of the date of termination;
o a pro rata award under our incentive compensation program, with
proration based on service completed during the calendar year for
which the award is determined;
o payments equal to twelve (12) months of his base salary in effect on
the date of termination; and
o a lump sum cash payment equal to eighteen months of the premium
applicable to Mr. Thomas on the date of termination for he and his
family under our group health plan.
In the event that Mr. Thomas's employment is terminated by the Company
without cause or by Mr. Thomas for good reason within two years following a
"change in control" of the Company, Mr. Thomas will be entitled to receive, in
addition to the payments set forth above, (1) an additional twelve months of
base salary in effect on the date of termination (for a total of 2 years of base
salary), and (2) reimbursement of expenses related to executive outplacement
services. For purposes of the agreement, a "change in control" will be deemed to
have occurred upon the happening of any of the following events:
o Douglas G. Borror and David S. Borror both cease to be members of
the Company's Board of Directors;
o any direct or indirect acquisition by a person or group, directly or
indirectly, of the Company's securities representing more than 40
percent of the combined voting power of the Company's then
outstanding securities; provided, however, that a "person" or
"group" will not include:
o the Company;
o any entity under common control with the Company;
o BRC Properties Inc. or any of its shareholders or members of
the family of Donald A. Borror; or
o any employee benefit plan of any entity described above;
o the adoption or authorization by the Company's shareholders of a
definitive agreement for the merger or other business combination of
the Company in which the Company's shareholders will own less than
50 percent of the voting power in the surviving entity or for the
sale or other disposition of all or substantially all of the
Company's assets; or
o the adoption by the Company's shareholders of a plan relating to the
liquidation or dissolution of the Company.
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The agreement also includes a non-competition covenant effective for one year
after Mr. Thomas's termination.
Mr. Thomas's employment agreement was attached as Exhibit 10.2 to our
Current Report on Form 8-K dated February 1, 2005.
Separation Agreement with Jon M. Donnell
On October 14, 2004, we entered into a Separation Agreement and General
Release (the "Separation Agreement") with Jon M. Donnell, our former President
and Chief Operating Officer, in connection with his resignation from employment
with us. Mr. Donnell's separation from our Company was effective October 31,
2004 (the "Separation Date"). Under the terms of the Separation Agreement, we
agreed to pay Mr. Donnell the following:
o his base salary in effect at the time of his separation for twelve
(12) months following the Separation Date, provided that such
payments would be reduced, dollar for dollar, upon his becoming
employed;
o an incentive bonus award under our Incentive Growth Plan, prorated
for his service through the Separation Date;
o his monthly health insurance premiums for the shorter of eighteen
(18) months or such time as he becomes eligible under a group health
plan sponsored by another employer; and
o the lease and insurance payments on his Company automobile until the
expiration of his lease in March 2005.
In exchange for this consideration, Mr. Donnell agreed not to work in the
homebuilding industry in Ohio and Kentucky (where the Company currently conducts
business) for a period of two (2) years after the Separation Date. In addition,
Mr. Donnell agreed to forfeit any unvested awards of equity compensation that he
had received from the Company, which included outstanding restricted share
awards (60,000 shares), his unvested interest in the SERP, and his rights under
a Stock Option Agreement dated November 13, 1998 with BRC for 100,000 shares of
the Company.
The Separation Agreement was attached as Exhibit 10.1 to our Current
Report on Form 8-K dated October 14, 2004.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2004,
concerning the aggregate number of our common shares that may be issued upon the
exercise of options and other rights under our existing equity compensation
plans and arrangements, divided between
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plans or arrangements approved by our shareholders and plans or arrangements not
submitted to our shareholders for approval. The information includes the number
of shares covered by, and the weighted average exercise price of, outstanding
options and other rights and the number of shares remaining available for future
grants excluding the shares to be issued upon exercise of outstanding options,
warrants, and other rights.
Number of
securities to be Number of securities
issued upon Weighted-average remaining available for
exercise of exercise price of issuance under equity
outstanding outstanding compensation plans
options, warrants options, warrants (excluding securities
and rights and rights reflected in column (a)
(a)(1) (b) (c)(2)
--------------------- --------------------- --------------------------
Equity compensation plans approved
by security holders (3) 232,100 $ 19.26 232,200
Equity compensation plans not
approved by security holders -- -- --
Total 232,100 $19.26 232,200
- ----------
(1) All outstanding options, warrants and rights were issued under the 1994
Incentive Stock Plan or the 2003 Stock Option and Incentive Equity Plan.
(2) Excludes common shares listed in the first column as common shares to be
issued upon exercise of outstanding options, warrants and rights.
(3) Does not include shares subject to the Executive Deferred Compensation
Plan. See "Executive Deferred Compensation Plan" below.
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 us to make a matching
contribution for each participant equal to 25% of the amount deferred, which
matching contribution may not exceed $2,500 in any year. Our matching
contribution vests in 20% increments over a five-year period, subject to
accelerated vesting upon a "change in control." The contribution and match
amounts are used by the trustee of a rabbi trust to acquire common shares in the
open market. These common shares are held and voted by the trustee pursuant to
the rabbi trust agreement.
The following table sets forth information concerning the aggregate
deferral contributions by participating directors and Named Executive Officers
and corresponding aggregate Company-matching contributions through December 31,
2004, expressed as the number of common shares held by the trustee as of such
date, with respect to each director and Named Executive Officer participating in
the Executive Deferred Compensation Plan.
-25-
Vested Unvested
Deferral Company-Matching Company-Matching
Contributions Contributions Contributions
Payable as Payable as Payable as
Common Shares Common Shares Common Shares Total
- --------------------------------------------------------------------------------
David S. Borror 4,700 1,189 -- 5,889
Douglas G. Borror 14,158 3,521 -- 17,679
Terrence R. Thomas 893 -- 100 993
C. Ronald Tilley 6,088 926 -- 7,014
- --------------------------------------------------------------------------------
Total 25,839 5,636 100 31,575
Incentive Growth Plan
In 2002, our shareholders adopted the Dominion Homes, Inc. Incentive
Growth Plan (the "Incentive Growth Plan") to provide tax-deductible incentive
compensation to the Company's most senior executive officers. Currently, Mr.
Douglas Borror, our Chief Executive Officer, Chairman and President, is the only
employee participating in the Incentive Growth Plan. Prior to his departure from
the Company in October 2004, Mr. Donnell, our former President and Chief
Operating Officer, also participated in the Incentive Growth Plan.
Incentive compensation is paid under the Incentive Growth Plan only if
specified performance criteria are met over the course of a performance cycle.
The Incentive Growth Plan is administered by the Compensation Committee,
which 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. Performance criteria are established (and communicated to
participants in writing) 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.
In establishing each participant's performance criteria, the Compensation
Committee considers the relevance of each participant's assigned duties and
responsibilities to factors that preserve and increase the Company's value.
Historically, the Compensation Committee has used the Company's net income and a
measure of the Company's homeowner customer satisfaction as the performance
criteria which would determine the participant's bonus. At the end of each
performance cycle, the Compensation Committee certifies to the Board of
Directors 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. If the Board of Directors approves, this amount is
distributed in a single cash payment within 90 days after the end of the
performance cycle unless the participant has made an irrevocable election to
defer all or part of his or her incentive compensation into the Executive
Deferred Compensation Plan. If this election is made, the deferred incentive
compensation will be credited to the participant's Executive Deferred
Compensation Plan account and distributed under the terms of that plan.
-26-
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 Incentive Growth Plan
(other than any amounts earned during any performance cycle that ended before
his or her termination, which amounts will be paid). 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 Incentive Growth Plan.
Within sixty days of a "change in control" of the Company, the Company
will distribute to each Incentive Growth Plan participant the participant's
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 Incentive Growth 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 Incentive Growth Plan, or (2) reduce the amounts paid to the
participant under the Incentive Growth 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. In the case of Mr.
Douglas Borror, however, pursuant to his employment agreement with the Company,
the Company will pay him an amount equal to any excise taxes imposed on the
"excess parachute payments," plus any federal, state or local income, employment
wage and other taxes due on such payments such that, after these taxes are paid,
he will retain an amount equal to what he would have retained had the payments
not been "excess parachute payments."
Compensation Committee Interlocks and Insider Participation
During 2004, no member of the Compensation Committee was a current or
former executive officer of the Company. Other than a transaction involving R.
Andrew Johnson, who served as a member of the Compensation Committee for part of
2004, no member of the Compensation Committee had a reportable business
relationship with the Company during 2004. The business relationship involving
Mr. Johnson is described in this proxy statement under "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS - Transactions with BRC and Related Persons." Mr.
Johnson resigned from the Compensation Committee in December 2004.
-27-
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee on Executive
Compensation does not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other Company filings under the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
except to the extent that the Company specifically incorporates this Report by
reference in such filing.
The following is a report of the Compensation Committee of the Board of
Directors regarding executive compensation. The Compensation Committee's duties
and membership are described on page 7.
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; and
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. In early 2005, the
Compensation Committee approved the engagement of an independent executive
compensation consultant to assist the Compensation Committee in conducting a
comprehensive review of the Company's executive compensation programs during
2005. In connection with this review, the Compensation Committee may decide to
modify the terms and conditions of the Company's executive compensation programs
based on the independent consultant's recommendations.
Components of Executive Compensation
The primary components to the Company's executive compensation program are
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 share-based equity incentive grants -
including stock options, restricted common shares, and other awards - under the
Company's 2003 Stock Option and Incentive Equity Plan (the "Stock Incentive
Plan"). The Company provides such grants to executive officers and key employees
to drive long-term performance and promote ownership in the Company.
-28-
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 Supplemental Executive Retirement
Plan, which provides deferred compensation benefits to participating executives
if certain vesting conditions are met and if the participating executive does
not leave employment with the Company prior to age 55. See "Supplemental
Executive Retirement Plan" beginning at page 31.
Annual Cash Compensation
General. In determining annual cash compensation for the Company's
executive officers and other key employees, the Compensation Committee annually
reviews several nationally-compiled databases 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. This peer group
includes those companies within the S&P Homebuilding Index in the Performance
Graph included in this proxy statement at page 39. Additionally, the
Compensation Committee believes that the Company's competitors for executive
talent also include other companies not included in this Index. Therefore, the
Committee reviews industry survey data on companies of comparable size and
geographic location as noted above.
Base Salary. The Compensation 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 Compensation Committee attempts to set the base salaries
of the Company's executive officers and other key employees at levels sufficient
to attract and retain executive talent in all business cycles. The Compensation
Committee reviews annually the base salary of the Chief Executive Officer,
Chairman and President, as well as the executive officers and other key
employees, and makes adjustments as it believes is warranted.
Incentive Bonus. The Compensation Committee believes that a significant
portion of the total compensation of the Company's executive officers and other
key employees should consist of variable, performance-based components, such as
awards of incentive bonuses and grants of stock options and restricted shares,
which the Compensation Committee can adjust to reflect changes in Company
performance and individual performance. These compensation components are
intended to reinforce the Company's commitment to increasing Company
profitability and shareholder value.
In determining 2004 incentive bonuses for the Company's executive officers
and key employees (except for Mr. Douglas Borror, whose 2004 incentive bonus was
determined under the Company's Incentive Growth Plan as explained below, and Mr.
Thomas, whose 2004 incentive bonus was established at the time of his
commencement of employment with the Company in June 2004), the Compensation
Committee reviewed and considered the following:
-29-
o the Company's financial and operational performance, primarily with
respect to net income and homeowner customer satisfaction, on an
absolute basis, year-to-year, and versus pre-established performance
goals;
o performance evaluations for each executive officer and key employee,
based on the individual's achievement of quantitative and
qualitative individual performance objectives;
o industry survey data for the Company's peer group for purposes of
monitoring executive officer and key employee compensation levels
relative to similar jobs in the marketplace; and
o the historical compensation levels (salary and incentive bonus) of
the Company's executive officers and other key employees.
The Committee determined the 2004 incentive bonuses based upon a
subjective process, considering the factors noted above. The Committee concluded
that, while the Company exceeded its pre-established target goal for customer
satisfaction, net income results, although solid, were below the pre-established
target goal and below 2003 results. The total amount of incentive bonus awards
paid to the Company's executive officers and key employees for 2004, therefore,
were significantly less than were paid to the same executive officers and key
employees of the Company in 2003.
Long-Term Incentive Compensation
Long-term incentive compensation is generally awarded in the form of stock
options and restricted common shares under the Stock Incentive Plan. By
providing executives with an ownership stake in the Company, stock option and
restricted common share grants are intended to align executive interests with
shareholder interests and to motivate executives to continually improve the
long-term performance of the Company.
Stock Options. The Compensation Committee intends to grant stock options
under the Stock Incentive Plan on a periodic basis to the Company's executive
officers and other key employees. Stock option grants to the Company's executive
officers and other key employees have an exercise price equal to 100% of the
market value of the Company's common shares on the date of grant (or 110% of the
fair market value if such person owns shares representing more than 10% of the
total voting power of our shares) and a vesting period from three to five years.
Stock options align executive incentives with shareholders because the options
only have value if the Company's share price increases over time. In addition,
stock options help retain key employees because they cannot be exercised until
vested and, if not exercised, generally must be forfeited if the employee leaves
the Company. In 2004, the Company awarded Mr. Thomas an option to purchase
20,000 common shares in connection with his acceptance and commencement of
employment with the Company. No other Named Executive Officers were awarded
stock options in 2004.
-30-
Restricted Shares. The Compensation Committee intends to grant restricted
common shares of the Company on a periodic basis under the Stock Incentive Plan
to the Company's executive officers and other key employees. Generally, these
restricted share awards are based on the Company's achievement of certain
performance goals and have a time-based component. In 2004, the Company awarded
15,000 restricted common shares to Mr. Thomas in connection with his acceptance
and commencement of employment with the Company. No other grants of restricted
shares were made to any Named Executive Officer in 2004. The vesting conditions
for these restricted shares are set forth in footnote 18 of the SUMMARY
COMPENSATION TABLE on page 17.
Split Dollar Plan. Beginning in January of 1999 until December of 2002,
the Company maintained a Split Dollar Plan, in which certain key employees of
the Company, including Mr. Douglas Borror, Mr. David Borror, and Mr. Donnell,
were participants. The purpose of the Split Dollar Plan was to provide
additional incentive for participating employees to remain with the Company and
contribute to its success.
Under the Split Dollar Plan, participating employees were 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.
Under the terms of the Split Dollar Plan, each participating employee paid
a portion of the policy premium; the remainder of the premium was paid by the
Company in cash. In December 2002, the Company discontinued the split dollar
plan arrangement and each of the participating employees assigned all of his or
her interest in the employee's life insurance policy to the Company in exchange
for the Company's agreement to provide the employee with an equivalent death
benefit should the employee die during the course of his or her employment and a
payment in cash equivalent to the portion of the premiums which the participants
had personally paid ($19,344 in the case of Mr. Douglas Borror, $11,318 in the
case of Mr. Donnell, and $3,537 in the case of Mr. David Borror).
Supplemental Executive Retirement Plan. Effective January 1, 2003, the
Company adopted a Supplemental Employee Retirement Plan (the "SERP"), in which
certain key employees of the Company, including Mr. Douglas Borror and Mr. David
Borror, are participants. The purpose of the SERP is to provide additional
incentive for participating employees to remain with the Company and contribute
to its success.
Under the SERP, participating employees will be eligible for retirement
benefits if the participant satisfies certain criteria as are set forth in each
employee's notice of participation. Each current participant's notice of
participation states that in order for the participant to receive retirement
benefits under the SERP, (1) the participant's employment with the Company must
-31-
have terminated for reasons other than death after the occurrence of either (a)
both (i) the participant's completion of 72 months of participation in the SERP
and (ii) the Company's adjusted shareholders' equity having exceeded $100
million, or (b) a "change in control" (as defined in the SERP), and (2) such
termination either (a) occurred after the participant reached age 55, (b)
occurred for "good reason" (as defined in the SERP) or (c) was a termination by
the Company without "cause" (as defined in the SERP).
The Compensation Committee may set forth qualifying criteria which differs
from those stated above for any future participant in the SERP. The Compensation
Committee will establish an account for each participant and otherwise
administer the SERP. Upon a participant satisfying the conditions outlined in
his notice of participation, the Company will make a lump sum distribution to
the participant in an amount equal to the value of his account. Initially, the
account shall have a value equal to the Company's contribution to the SERP as
set forth in the notice of participation. The Compensation Committee will
measure the value or the account annually by crediting any allocations made by
the Company, at the Compensation Committee's discretion, and by using a
hypothetical investment of the value of the account in an investment fund of the
Compensation Committee's choosing.
Benefits and Perks
Executive officers and other key employees of the Company are eligible to
participate in the following programs: the 401(k) Plan (which includes a Company
match), health and dental coverage, company-paid term life and disability
insurance, paid time off, and paid holidays.
Other benefits that are available to the Company's executive officers and
other key employees are: additional company-paid life insurance, medical
reimbursement, participation in the Company's Financial Planning Reimbursement
Plan, which provides reimbursement of expenses incurred in personal financial
planning up to a maximum amount in any calendar year for participants,
memberships to country and/or social clubs, and a monthly automobile allowance
or use of a Company leased car. In addition, the Compensation Committee has
approved the personal use of the Company's airplane by Mr. Douglas Borror and
Mr. David Borror, not to exceed pre-established annual limits, which personal
use the Company values utilizing the method described at footnote 2 of the
SUMMARY COMPENSATION TABLE at page 15.
2004 Compensation decisions regarding Douglas G. Borror
In determining the 2004 base salary for Douglas G. Borror, the Company's
Chief Executive Officer, Chairman and President, the Compensation Committee
considered, among other relevant factors, (1) the Company's record net income
results for 2003, (2) Mr. Douglas Borror's performance, responsibilities, and
value to the Company, and (3) market salary ranges for Mr. Douglas Borror's
position as reported in the various industry surveys the Compensation Committee
utilizes. See "Annual Cash Compensation - General" at page 29. The Compensation
Committee subjectively analyzed these and other factors, but gave no fixed
-32-
weighting to any one factor. The Compensation Committee approved a base salary
of $650,000 for Mr. Douglas Borror for 2004.
Mr. Douglas Borror's incentive bonus was awarded in accordance with the
Company's Incentive Growth Plan based on the achievement of Performance Criteria
(as defined in the Incentive Growth Plan) established by the Compensation
Committee early in 2004. For 2004, these Performance Criteria included the
Company's results with respect to net income and homeowner customer
satisfaction. Mr. Douglas Borror's 2004 Performance Criteria did not include any
individual performance objectives based on the Compensation Committee's belief
that his incentive bonus should be linked exclusively to the Company's
performance in these two areas. A detailed description of the Incentive Growth
Plan is included in this proxy statement beginning at page 26. In accordance
with the Company's 2004 net income and customer satisfaction results under the
Incentive Growth Plan, Mr. Douglas Borror received an incentive bonus award of
$1,200,000 for 2004. This amount was significantly less than Mr. Borror's
incentive bonus award for 2003, based primarily on the Company's decline in net
income in 2004 compared to 2003. Mr. Douglas Borror did not receive any
share-based equity compensation in 2004.
In early 2005, the Compensation Committee reviewed all components of Mr.
Douglas Borror's compensation, including the actual projected payout under his
employment agreement with the Company under several potential severance
scenarios. A tally sheet setting forth all of the components of Mr. Douglas
Borror's compensation was reviewed by the Compensation Committee affixing dollar
amounts under various payout scenarios. In early 2005, the Compensation
Committee also established Mr. Douglas Borror's base salary for fiscal 2005 at
$650,000, which is unchanged from his 2004 base salary level.
Section 162(m) of the Internal Revenue Code
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, the
Company cannot take a tax deduction for certain compensation paid in excess of
$1 million to a "covered employee," subject to certain exceptions. Generally,
the Company's covered employees are the Named Executive Officers, who are listed
under the SUMMARY COMPENSATION TABLE at page 15 of this proxy statement. With
the adoption and application of the Company's Incentive Growth Plan, the Company
believes that the portion of compensation over $1.0 million for 2004 awarded to
Mr. Douglas Borror will be deductible for Federal income tax purposes.
This report of the Compensation Committee was adopted by each of the
members of the Compensation Committee on March 31, 2005.
Compensation Committee
Zuheir Sofia, Chairman
C. Ronald Tilley
-33-
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filings under the Securities Act or the Exchange Act, except to
the extent that the Company specifically incorporates this Report by reference
in such filing.
General
The Audit Committee of our Board of Directors is comprised of three
non-employee directors (listed below). After reviewing the qualifications of the
current members of the Audit Committee, and any relationships they may have with
the Company that might affect their independence from the Company, the Board of
Directors has determined that: (1) all current Audit Committee members are
"independent" as that concept is defined in Rule 10A-3(b)(1) of the Exchange
Act, (2) all current Audit Committee members are independent and financially
literate for purposes of the listing requirements of The Nasdaq Stock Market,
and (3) Carl A. Nelson, Jr. qualifies as the Company's Audit Committee financial
expert under the applicable rules promulgated pursuant to the Exchange Act, and
satisfies the standards for financial sophistication set forth in the listing
requirements of The Nasdaq Stock Market.
The Audit Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. The Audit Committee
is governed by a formal written charter that is reviewed and assessed annually
(the "Charter"). On March 16, 2004, our Board of Directors amended the Charter
to address recent pronouncements by the Securities and Exchange Commission and
The Nasdaq Stock Market. A copy of the Charter, as amended and restated, is
available to the public by accessing the Company's Internet website at
www.dominionhomes.com, and selecting "About Dominion Homes" - "Investor
Relations" - "Corporate Governance."
Review and Discussion with Independent Auditors
In discharging its oversight responsibility as to the audit process, the
Audit Committee (1) 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, (2) discussed with PricewaterhouseCoopers LLP
any relationships or services that may impact the objectivity and independence
of PricewaterhouseCoopers LLP, and (3) satisfied itself as to
PricewaterhouseCoopers LLP's independence.
Prior to the filing of each of the Company's Quarterly Reports on Form
10-Q, the Audit Committee met with PricewaterhouseCooopers LLP to discuss the
results of their interim reviews, including, when applicable, (1) new or changed
accounting principles, (2) critical accounting policies, (3) unusual
transactions, and (4) estimates, judgments and financial reporting risks related
to such quarterly financial reports. The Audit Committee also received
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written communication and held discussions with PricewaterhouseCoopers LLP
regarding the annual audit plan, including matters relating to accounting and
financial reporting, critical accounting policies, higher risk and judgmental
areas of financial reporting, and industry and business issues impacting the
Company's financial reports.
Prior to the filing of the Company's Annual Report on Form 10-K, the Audit
Committee reviewed and discussed the results of PricewaterhouseCoopers LLP's
audit of the financial statements as of and for the year ended December 31,
2004. This review and discussion, conducted with and without management present,
included all communications required by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as well as critical accounting policies and
the overall quality of the Company's financial reporting.
In addition, prior to the filing of the Company's Annual Report on Form
10-K, the Audit Committee reviewed and discussed with PricewaterhouseCoopers LLP
and management the results of PricewaterhouseCoopers LLP's audit of the
Company's internal control over financial reporting and its determination as to
the effectiveness of such internal control over financial reporting as of
December 31, 2004. PricewaterhouseCoopers LLP is responsible for evaluating
management's assessment of the effectiveness of the Company's internal control
over financial reporting based on its audit of internal control over financial
reporting.
Review and Discussion 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,
2004, with management. Management has the responsibility for the preparation of
the Company's consolidated financial statements, and PricewaterhouseCoopers LLP
has the responsibility for the examination of those consolidated statements.
The Audit Committee also reviewed and discussed with management and
PricewaterhouseCoopers LLP management's assessment of and assertion on the
design and effectiveness of the Company's internal control over financial
reporting as of December 31, 2004. Management is responsible for maintaining
effective internal control over financial reporting and for conducting an
assessment of the design and effectiveness of the Company's internal control
over financial reporting.
The Audit Committee met quarterly with the Company's Director of Internal
Audit and discussed the work performed by the Company's internal audit
department, whose efforts in 2004 were focused primarily on the documentation
and testing of the Company's internal control over financial reporting and
matters relating to compliance with the Sarbanes-Oxley Act of 2002. The Audit
Committee also reviewed and discussed with management any complaints or concerns
regarding accounting, internal accounting controls or auditing matters submitted
to the Audit Committee, management, or one of the Company's Ethics Officers,
including through the Company's anonymous Business Ethics Help Line, as well as
the investigation of any such reports and any responsive action taken.
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Conclusion
Based on the reviews and discussions with management and
PricewaterhouseCoopers LLP noted above, the Audit Committee recommended to the
Board of Directors (and the Board of Directors approved) that the Company's
audited consolidated financial statements and report on management's assessment
of the design and effectiveness of internal control over financial reporting be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2004, to be filed with the Securities and Exchange Commission.
This report of the Audit Committee was adopted by each of the members of
the Audit Committee on March 10, 2005.
Audit Committee
Carl A. Nelson, Jr., Chairman
Gerald E. Mayo
Zuheir Sofia
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SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent registered public accounting firm, as the Company's independent
auditors for the year ending December 31, 2005. 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.
Audit Fees
The aggregate fees billed for audit services rendered by
PricewaterhouseCoopers LLP during the years ended December 31, 2004 and 2003
were $757,100 and $265,335, respectively. Audit fees for these periods were for
professional services rendered for the audits and quarterly reviews of the
consolidated financial statements of the Company, audit of internal control over
financial reporting, statutory audits, issuance of consents, income tax
provision procedures, and assistance with review of documents that the Company
filed with the Securities and Exchange Commission.
Audit-Related Fees
The aggregate fees billed for audit-related services rendered by
PricewaterhouseCoopers LLP during the year ended December 31, 2003 were $29,300.
Audit-related fees for the period indicated were for assurance services related
to consultations concerning financial accounting and reporting standards and
Sarbanes-Oxley Act of 2002 Section 404 advisory services. No audit-related fees
were billed during the year ended December 31, 2004.
Tax Fees
The aggregate fees billed for tax services rendered by
PricewaterhouseCoopers LLP during the years ended December 31, 2004 and 2003
were $158,100 and $56,100, respectively. Tax fees for the periods indicated were
for services related to tax compliance, including the preparation of tax
returns, tax planning and tax advice.
All Other Fees
No "Other" fees were incurred for services rendered during the years ended
December 31, 2004 and December 31, 2003.
Audit Services for Benefits Plans
Audit services were rendered by PricewaterhouseCoopers LLP to the
Company's 401(k) Plan and the Health and Welfare Plan during the years ended
December 31, 2004 and December 31, 2003. The aggregate fees billed for such
audit services during these periods were $31,450 and $26,700, respectively, and
were paid by the 401(k) Plan and the Health and Welfare Plan.
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Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has adopted policies and procedures regarding its
pre-approval of the audit, audit-related, tax and all other non-audit services
to be provided by the Company's independent registered public accounting firm to
the Company (the "Pre-Approval Policy"). This policy is designed to assure that
the provision of such services does not impair the independence of the Company's
independent registered public accounting firm. Under the Pre-Approval Policy, at
the beginning of each fiscal year, the Audit Committee will review the services
proposed by management and the Company's independent registered public
accounting firm to be provided during that year. The Audit Committee will then
provide its pre-approval based on the limitations set forth in the Pre-Approval
Policy. Under the Pre-Approval Policy adopted by the Audit Committee for the
year ending December 31, 2005, these limitations include the following:
o In no case should the Company retain the Company's independent
registered public accounting firm to provide management consulting
services or any non-audit services that are not permitted under
applicable laws and regulations, including, without limitation, the
Sarbanes-Oxley Act of 2002 and the Commission's related rules and
regulations.
o Unless a type of service to be provided by the independent
registered public accounting firm has received general pre-approval,
it will require specific pre-approval by the Audit Committee.
o Pre-approval fee levels for all services to be provided by the
independent registered public accounting firm will be established
annually by the Audit Committee, and the independent registered
public accounting firm will update the Audit Committee on a
quarterly basis on fees incurred for audit-related, tax, and other
services. Any proposed services exceeding these levels will require
separate pre-approval by the Audit Committee.
Under the Pre-Approval Policy, the Audit Committee Chairman is authorized
to pre-approve audit, audit-related, tax and other services that exceed the
pre-approved fee levels or are services that the Audit Committee has not
specifically pre-approved under the Pre-Approval Policy. The Chairman shall
report any pre-approval decisions to the Audit Committee at its next scheduled
meeting for its review and approval. The Audit Committee has not delegated to
management its responsibilities to pre-approve services performed by the
independent registered public accounting firm.
All of the fees and services provided by PricewaterhouseCoopers LLP as
noted herein were authorized and approved by the Audit Committee in compliance
with the Pre-Approval Policy.
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PERFORMANCE GRAPH
The following performance graph does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filings under the Securities Act or the Exchange Act, except to the
extent that the Company specifically incorporates this performance graph by
reference in such filing.
The following performance graph compares the cumulative total shareholder
return on our common shares from December 31, 1999, until December 31, 2004,
with the cumulative total return of (a) the NASDAQ Composite Index and (b) the
Standard and Poor's Homebuilding Index. The performance graph assumes the
investment, on December 31, 1999, of $100 in our common shares, the NASDAQ
Composite Index, and the Standard and Poor's Homebuilding Index, and that all
dividends were reinvested.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
NASDAQ S&P
Composite Homebuilding DHOM
December 31, 1999 100.0 100.0 100.0
December 31, 2000 60.7 155.5 135.0
December 31, 2001 47.9 197.5 249.6
December 31, 2002 32.8 195.5 228.0
December 31, 2003 49.2 385.4 485.3
December 31, 2004 53.5 512.1 403.8
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Description and Ownership of BRC
BRC is in the business of owning, managing and consulting on multifamily
housing, commercial real estate and undeveloped real estate. Douglas G. Borror
and David S. Borror, who are directors and executive officers of the Company,
and Donald A. Borror, who is a director and officer of the Company, also are
directors of BRC. David S. Borror, Douglas G. Borror and Terry E. George also
serve as President, Executive Vice President and Vice President, respectively,
of BRC. Mr. George additionally serves as Secretary and Treasurer of BRC. The
Borror family, directly and through its ownership of BRC, beneficially owned
approximately 49.2% of the Company's outstanding common shares as of March 21,
2005.
BRC has issued and outstanding 81,567 Class A (voting) common shares and
273,195 Class B (non-voting) common shares, all of which are beneficially owned
by the children of Donald A. Borror, in some cases through trusts for their
benefit, and by Terry E. George. Through their ownership and control of BRC,
such persons are in a position to control the Company. See "Ownership of Our
Common Shares by Principal Shareholders" beginning at page 3. The following
table sets forth the share ownership of BRC as of March 21, 2005:
Percentage Percentage Percentage
Class A of Class A Class B of Class B Combined of
Shareholders Shares Shares Shares Shares Total Combined
- ----------------------------- --------- ---------- ---------- ---------- ---------- ----------
Douglas G. Borror, Trustee 43,099 52.84% 120,656 44.16% 163,755 46.16%
of the Douglas G. Borror
Revocable Trust(1)
David S. Borror 23,328 28.60% 81,874 29.97% 105,202 29.65%
David S. Borror, Trustee, 9,321 11.43% 54,605 19.99% 63,926 18.02%
1987 Irrevocable Qualified
Subchapter S Trust(2)
Terry E. George 5,819 7.13% 16,060 5.88% 21,879 6.17%
------- -------- --------
Totals 81,567 273,195 354,762
- ----------
(1) The Douglas G. Borror Revocable Trust is a revocable trust established by
Douglas Borror pursuant to a trust agreement dated June 18, 2001. During
his lifetime, Douglas Borror is the sole trustee and beneficiary of the
Douglas G. Borror Revocable Trust. Upon the death of Douglas Borror, David
Borror becomes the trustee and Douglas Borror's children become the sole
beneficiaries of the Douglas G. Borror Revocable Trust.
(2) The 1987 Irrevocable Qualified Subchapter-S Trust is an irrevocable trust
established by Donald Borror pursuant to a trust agreement dated June 26,
1987 (the "Irrevocable Trust"). 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.
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BRC and its shareholders are parties to a Close Corporation Agreement (the
"BRC Agreement") that governs the operation of BRC and certain relationships
among its shareholders. The BRC Agreement provides that all 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 A. Borror and Douglas G. Borror jointly until the
death or incapacity of either of them and, thereafter, by the other of them
solely. David S. Borror has the right to appoint the directors of BRC in the
event Douglas G. Borror and Donald A. Borror are both deceased or incapacitated
and, in such event, it is anticipated that David S. Borror will appoint an
advisory committee of the then existing members of the Board of Directors of the
Company to assist him with material decisions affecting BRC, including issues
involving BRC's ownership of common shares of the Company.
Under the provisions of the BRC Agreement, David S. Borror is required to
be elected as a director of BRC as long as he continues to hold at least 10% of
the common shares of BRC, absent his removal for "cause" within the meaning of
the BRC Agreement. As long as he continues to hold at least 10% of the common
shares of BRC 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 S.
Borror as a director of the Company. The BRC Agreement generally prohibits the
transfer of common shares of BRC to persons who are not members of the Borror
family unless certain procedures are followed. BRC is required to repurchase all
of the common shares of BRC owned by Terry E. George in the event of his death
or incapacity. BRC also is required to purchase a certain number of common
shares of BRC from the estates of Borror family members. Under certain
conditions, Borror family members who are not employed by BRC have the right to
require BRC to repurchase common shares of BRC held by such family members. In
certain instances, the obligation of BRC to repurchase common shares of BRC may
be assumed by certain Borror family shareholders.
Transactions with BRC and Related Persons
The Company has an internal policy that requires transactions with our
affiliates be on terms no less favorable to us than those reasonably available
from unrelated third parties. All material transactions with affiliates must be
reviewed for consistency with this policy, and approved, by the Audit Committee
of the Board of Directors. Prior to October 2003, when the Audit Committee
assumed responsibility for approval of related party transactions, all such
material transactions were required to be approved by the Affiliated
Transactions Review Committee.
We lease from BRC our two corporate offices in Central Ohio. The first
building is approximately 40,000 gross square feet (37,557 net rentable square
feet) and the lease commenced January 1, 1998. The lease has a term of twelve
years and a triple net rental rate of $12.00 per square foot. The lease provides
two options for the Company to renew for periods of five years each at
then-current market rates. The rental rate for the building was established by
an MAI appraiser commissioned by the Affiliated Transactions Review Committee,
and confirmed in a review by a second MAI appraiser. We paid $451,000 to BRC
under this lease during 2004. We believe that the terms of this lease are no
less favorable to us than those reasonably available from unrelated third
parties for comparable space.
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The second office building that we lease from BRC is approximately 35,000
gross square feet (33,260 net rentable square feet) and the lease commenced
November 1, 2003. The lease has a term of fifteen years and a triple net rental
rate per square foot of $12.58 for the first five years, $13.18 for the second
five years and $13.83 for the last five years. The lease also provides for two
options for the Company to renew for periods of five years each at then-current
market rates. During 2002, we purchased land and contracted to build this second
corporate office building. On October 31, 2003, we sold the corporate office
building to BRC for $4.5 million and leased it back. The sales price
approximated our cost of the land and building. The terms of the sale and
leaseback were negotiated based on bids from multiple third parties, reviewed by
an MAI appraiser and approved by the Affiliated Transactions Review Committee.
We paid $419,000 to BRC under this lease during 2004. We believe that the terms
of this lease are no less favorable to us than those reasonably available from
unrelated third parties for comparable space.
Occasionally, our employees provide limited administrative services to
BRC, for which we receive fees. We received aggregate fees of $9,000 from BRC
for such administrative services in 2004.
Since 1998, we have purchased merchandise from The Johnson Family's
Diamond Cellar for employee service awards (to recognize years of service with
the Company) and sales achievement awards. R. Andrew Johnson, a member of the
Company's Board of Directors since May 2004, is the Chief Executive Officer and
a shareholder of The Johnson Family's Diamond Cellar. In 2004, the Company
purchased merchandise from The Johnson Family's Diamond Cellar totaling
approximately $152,291. This transaction was approved by our Audit Committee.
For 2005, the Audit Committee has approved the Company's purchase of a maximum
of $200,000 of merchandise from The Johnson Family's Diamond Cellar. Any
purchases exceeding this amount in 2005 will require additional prior approval
from the Audit Committee. We believe that the terms of our transactions with The
Johnson Family's Diamond Cellar are no less favorable to us than those
reasonably available from unrelated third parties for comparable merchandise.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors, and
greater than 10% shareholders, to file reports of ownership and changes in
ownership of our securities with the Securities and Exchange Commission. Copies
of the reports are required by Commission regulation to be furnished to us.
Based on our review of these reports and written representations from reporting
persons, we believe that all reporting persons complied with all filing
requirements during the year ended December 31, 2004, except that Mr. Thomas was
inadvertently late in reporting the acquisition of 493 "phantom" common shares
through our Executive Deferred Compensation Plan. This transaction was reported
on a Form 4 filed with the Commission on January 5, 2005.
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PROPOSAL 1
ELECTION OF DIRECTORS
Number and Term of Directors
Section 2.02 of our Regulations provides for our directors to be divided
into two classes, designated Class I directors and Class II directors. The
directors are empowered to fix or change the number of directors, subject to the
limitations that the number of directors may not be increased to more than ten
(10) nor reduced to less than three (3). In March 2004, the Board of Directors
increased the authorized number of directors from nine (9) to ten (10) in order
to allow for the addition of an independent director to the Board, and
designated the newly created vacancy as a Class I director. As a result of Mr.
Donnell's resignation from the Board in October 2004, there are currently nine
(9) directors serving on our Board, and only four (4) Class I directors. Proxies
can not, however, be voted for more than four (4) nominees. The vacancy is
intended to provide the Board with flexibility in determining the Board's
composition in the future.
Nominees For Election at the Annual Meeting
Class I Directors
At the recommendation of our Governance Committee, the Board of Directors
proposes the election of the four (4) nominees listed in the table below as
Class I directors, each to serve until the 2007 annual meeting of shareholders.
The table sets forth for each nominee: his name, age, principal occupation,
occupation held during the past five years, other companies of which he is a
director, and the year in which he first became a director of the Company.
CLASS I DIRECTORS
(NOMINEES FOR TERMS EXPIRING IN 2007)
Director
--------
Name Age Principal Occupation/Past Experience Since
- ---- --- ------------------------------------ -----
David P. Blom 51 Mr. Blom has served as the Chief Executive Officer of 2004
OhioHealth, a not-for-profit, charitable health system based
in Columbus, Ohio, since March 2002, and as its President
since 1999. Prior to that time, Mr. Blom served OhioHealth as
Executive Vice President and Chief Operating Officer from 1998
to 1999. Currently, Mr. Blom serves on the board of the Ohio
Hospital Association.
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Douglas G. Borror 49 Mr. Borror has served as Chief Executive Officer of the 1984
Company since September 1992, as Chairman of the Board of
Directors since July 1999 and as President of the Company
since November 2004. Currently, Mr. Borror also serves on the
board of directors of Bancinsurance Corporation and Columbia
Gas of Ohio, Inc., and is a member of the Board of Trustees of
The Ohio State University.
Zuheir Sofia 60 Mr. Sofia is the Chairman of Sofia & Company, Inc., a private 2003
investment firm, and is Managing Director of Cleary Gull Inc.
and MBO Cleary Advisors Inc., registered investment advisors.
From 1986 to 1998, Mr. Sofia served as President, Chief
Operating Officer, Treasurer and Director of Huntington
Bancshares, Incorporated. Currently, Mr. Sofia serves on the
board of directors of Lancaster Colony Corporation.
C. Ronald Tilley 69 Mr. Tilley served as Chief Executive Officer and Chairman of 1996
the Board of Directors of Columbia Gas Distribution Companies,
an Ohio-based natural gas company, from 1991 until his
retirement in March 1996.
Class II Directors
The following table sets forth for each Class II director who will
continue to serve as a director until the 2006 annual meeting of shareholders:
his name, age, principal occupation, occupation held during the past five years,
other companies of which he is a director, and the year in which he first became
a director of the Company.
CLASS II DIRECTORS
(TERMS EXPIRE IN 2006)
Director
--------
Name Age Principal Occupation/Past Experience Since
- ---- --- ------------------------------------ -----
Donald A. Borror 75 Mr. Borror has served as Chairman Emeritus of the Company 1978
since July 1999. Prior to that time, Mr. Borror served as
Chairman of the Board of Directors from 1978 through July
1999, and as President of the Company from 1977 to March 1987.
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David S. Borror 46 Mr. Borror has served as Corporate Executive Vice President of 1985
the Company since October 2003. From 1988 through September
2003, Mr. Borror served as Executive Vice President of the
Company. Since December 2000, Mr. Borror has also served as
President of BRC.
R. Andrew Johnson 51 Mr. Johnson has served as Chief Executive Officer of The 2004
Johnson Family's Diamond Cellar, a Columbus, Ohio based retail
jewelry store and one of the largest independently owned
jewelry companies in the nation, since January 2000.
Currently, Mr. Johnson serves on the Board of Directors of
Children's Hospital and as Chairman of the Columbus Chapter of
the Young Presidents' Organization.
Gerald E. Mayo 72 Mr. Mayo served as the Chairman and a Director of the Midland 1994
Life Insurance Company, and as Chairman and a Director of
Midland Financial Services, Inc. from 1992 until his
retirement in October 1997. Currently, Mr. Mayo also serves on
the board of directors of Depositor Assistance Corp. and
Columbia Energy, Inc.
Carl A. Nelson, Jr. 59 Mr. Nelson has been an independent business consultant and 2003
lecturer at The Ohio State University since March 2002, when
he retired as a partner from Arthur Andersen after 31 years of
service. Mr. Nelson served as Managing Partner of the Arthur
Andersen Columbus, Ohio office from 1994 until his retirement,
and was the leader of the firm's consulting services for the
products industry in the United States. Currently, Mr. Nelson
also serves on the board of directors of Worthington
Industries, Inc., Market Sphere Consulting, Shearer's Foods,
Inc., Star Leasing, and Stonehenge Partners, Inc. Mr. Nelson
also currently serves as chairman of the audit committee of
Worthington Industries, Inc.
Election Procedures
The Company has not received from any shareholder any notice of a proposed
nominee for election at the 2005 annual meeting. It is intended that, unless
otherwise directed, the shares represented by the enclosed proxy will be voted
FOR the election of Messrs. Blom, Douglas Borror, Sofia and Tilley as Class I
directors. In the event that any nominee for director should become unavailable,
the number of our directors may be decreased pursuant to the Regulations,
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or our Board of Directors may designate a substitute nominee, in which event the
shares represented by the enclosed proxy will be voted for the substitute
nominee.
All the nominees for election at the 2005 annual meeting have indicated a
willingness to stand for election and to serve if elected, and our Board of
Directors has no reason to believe that any of the nominees will be unable to
serve if elected as a director.
Recommendation and Vote
Our shareholders do not have cumulative voting rights in the election of
directors. The four nominees receiving the greatest number of votes will be
elected as directors.
Our Board of Directors recommends that you vote FOR the election of each of its
nominees for director.
PROPOSALS AND NOMINATIONS BY SHAREHOLDERS
FOR 2006 ANNUAL 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 2006 (the "2006 Annual Meeting"), a shareholder must have
continuously held at least $2,000 in market value, or 1% of our 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 our common shares through the date of the 2006 Annual
Meeting. 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 our common shares through
the date of the 2006 Annual Meeting. If the proponent is not a shareholder of
record, proof of beneficial ownership of the requisite number of our 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 2006 Annual Meeting.
Any eligible shareholder who intends to submit a proposal for the 2006
Annual Meeting for inclusion in the proxy statement and form of proxy relating
to that meeting is advised that the proposal must be received by the Company at
its principal executive offices not later than December 15, 2005. The Company
will not be required to include in its proxy statement or form of proxy a
shareholder proposal which is received after that date or which otherwise fails
to meet the requirements for shareholder proposals established by the rules of
the Securities and Exchange Commission.
In addition, if a shareholder intends to submit a proposal at the 2006
Annual Meeting without the inclusion of that proposal in the Company's proxy
statement and form of proxy relating to that meeting and written notice of the
proposal is not received by the Company on or before February 28, 2006, proxies
solicited by the Board of Directors for the 2006 Annual
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Meeting will confer discretionary authority to vote on such proposal at such
meeting.
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, 2004, excluding exhibits, which was filed with the
Securities Exchange Commission on March 16, 2005. Such request should be
addressed to Dominion Homes, Inc., Attn: Terry E. George, 5000 Tuttle Crossing
Boulevard, Dublin, Ohio 43016-5555. The written request must include a statement
that, as of the close of business on March 21, 2005, the person was the
beneficial owner of our common shares.
OTHER MATTERS
As of the date of this proxy statement, our management knows of no other
business that will come before the annual meeting. Should any other matter
requiring a vote of the shareholders arise, the proxy in the enclosed form
confers upon the persons designated to vote the shares discretionary authority
to vote with respect to these matters in accordance with their best judgment.
Our 2004 Annual Report to Shareholders, including financial statements, was
furnished to our shareholders prior to or concurrently with the mailing of this
proxy material.
By Order of the Board of Directors,
Robert A. Meyer, Jr.
Secretary
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