Exhibit 10.4
DEL WEBB CORPORATION
MANAGEMENT INCENTIVE PLAN
Fiscal 1999 (July 1, 1998 - June 30, 1999)
Plan Objectives
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o To motivate key management personnel to achieve or exceed Corporate
financial goals and to contribute to the short and longer term interest
of shareholders.
o To provide a competitive bonus program necessary to attract, retain and
motivate high quality management.
Administration
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1. Bonuses may be paid in cash or in stock, less applicable tax deductions
and subject to prior deferral agreements as soon as practicable after
the end of the Fiscal Year.
2. In order to receive a bonus, the participant must be on the active
payroll at the time the bonus is paid unless approval for a pro rata
bonus is granted by the Chairman/Chief Executive Officer (CEO).
3. At the discretion of the CEO and upon approval of the Human Resources
Committee, financial objectives may be adjusted upward or downward as a
result of significant windfalls or disasters beyond the control of
management. In addition, the Human Resources Committee can revise
financial objectives during the year if significant events occur that
were not included in the budget. Total incentives payable under the MIP
will not exceed 11 1/2% of pre-tax, pre-incentive earnings of the
Company for the 1999 fiscal year.
4. Bonuses are computed under the plan criteria for corporate earnings,
community earnings and cash flow approved by the Human Resources
Committee of the Board. Bonus calculations are reviewed by the CEO and
the Human Resources Department, and presented to the Human Resources
Committee of the Board for final approval.
5. All terms and conditions of the Plan and its very existence are at the
sole discretion of the Human Resources Committee of the Board of
Directors.
Eligibility
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Key Management personnel:
o whose duties and responsibilities can materially affect the
growth, development and profitability of the Company and,
o who are nominated by a subsidiary or Company officer and are
approved by the CEO, and
o who are assigned to an eligible position on or before July 1st
unless otherwise approved by the CEO.
Bonus Opportunity Levels
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Each participant will have a Target Bonus which will be the amount earned for
meeting the Plan objectives. The Target Bonus will be expressed as a percentage
of actual base salary earned throughout the 1998/1999 fiscal year and will be
established by the CEO and the Human Resources Department based on competitive
compensation data and internal equity.
Target Bonuses
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Target bonus levels will range from 10% to 75% of salary based on the
participant's salary grade and organizational level and recommendation of the
CEO. No bonuses will be payable until the minimum acceptable threshold earnings
target is achieved unless specifically approved by the Human Resources Committee
of the Board of Directors. A bonus of 100% of the target bonus will be payable
for achieving 100% of Plan objectives. A maximum bonus of 200% of Target Bonus
will be payable for attaining the maximum expected performance.
Bonus Objectives
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Bonus objectives will be comprised of the financial and cash flow objectives
relating to the participant's area of responsibility for participants in
operating entities and Corporate, and on project milestone achievements for
communities in start-up prior to initiation of sales and closings.
o Depending upon the business unit of the company involved, financial
objectives for a participant may be based on Corporate net after-tax
earnings, budgeted Group or Project operating earnings before interest
and cash discounts and/or operations cash flow. The minimum acceptable
threshold, target and maximum expected earnings levels will be
determined by the CEO based on the degree of difficulty and the level
of acceptability of the budget.
o Project milestone objectives are the most significant non-financial
goals which the individual participant is expected to accomplish during
the Plan year in conjunction with the project start-up schedule.
Corporate Start-up
After Tax Operating Cash Project Milestone
Earnings Earnings(1) Flow Objectives
-------- ----------- ---- ----------
I. Target Bonus
35% and above
(Corporate officers,
Coventry Division Managers
Associate GMS & Fairmount
Operations VP)
A. Headquarters 85% 0 15% 0
B. Operating Sun City Communities 20% 60% 20% 0
Coventry/Coventry Tucson
Coventry Las Vegas
Bellasera
Clover Springs
Fairmount
Spruce Creek
II. Target Bonus below 35%
A. Headquarters 85% 0 15% 0%
B. Operating Sun City Communities 20% 60% 20% 0%
Coventry
Coventry Tucson/Las Vegas
Bellasera
Clover Springs
Fairmount
Coventry Verde Valley
Spruce Creek
Anthem Country Club Las Vegas
C. Anthem Phoenix 20% 0 80%
(1) Operating earnings are the pre-tax, pre-interest, pre-cash discounts
earnings achieved at the operation where the individual is assigned.
Financial Objectives
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A minimum bonus will be paid upon the corporation or operation achieving the
threshold earnings forecast as shown on the income schedules included as part of
this Management Incentive Plan. For results between a threshold and maximum
expected earnings, the bonus percent will increase incrementally to a maximum of
200% of target bonus based upon operating earnings and the achievement of the
other formula targets. (See attached for net after-tax earnings and operating
income schedules.)
Cash Flow Component
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As the fiscal year unfolds, cash flow will vary from budget and previous
indicated actuals based upon sales and housing deposits collected, closings,
land development and housing needs within each operation, and decisions made on
the timing of phases and amenities of some projects. The ultimate recommendation
of cash flow component awards which will, of necessity, be subjective, will be
made by the chief executive officer with input from the corporate chief
financial officer and corporate controller. The recommendation will be based
upon how well cash flow is being managed and reported acknowledging the business
decisions by Webb's executive management team affecting cash throughout the year
and cash flow estimates for subsequent years. The cash flow element of the Plan
works independently of all other Plan components, including the earnings
component. Plan participants can earn up to 200% of target based upon overall
cash management.
Project Milestone Performance Objectives
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Non-financial performance objectives will be established at the beginning of the
fiscal year for each participant whose primary responsibility is in a start-up
community. These objectives, which will be submitted to the CEO for final
approval, will reflect the project milestones which must be successfully met in
order for the community to open for sales on time and on budget. Objectives must
be specific, realistic, quantifiable and time-limited before they will be
approved and will be mutually agreed to by the participant and management.
In the event circumstances or directions change, affecting any participant's
pre-established project milestone objectives, the senior vice president
overseeing the start-up project and the chief operating officer are responsible
for revising them or establishing new objectives during the year.
The achievement of performance objectives is measured by the participant's
immediate superior based upon documented evaluation of results. Accomplishments
will be evaluated using the following scale:
Threshold Target Maximum
--------- ------ -------
Overall Rating Poor Good Excellent Superior
Percent of Target 0 - 49 50 - 75 76 - 125 126 - 200
Evaluation of results should take into account the difficulty the objective, the
timeliness of accomplishment, the effectiveness of results and the overall
impact on the individual's organizational unit. Achievement of overall Corporate
operating earnings is paramount in the bonus computation formula; project
milestone objectives are reviewed and evaluated only if minimum earnings
objectives have been met or if specifically approved by the Human Resources
Committee.
Rating Definitions
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Maximum A "superior" rating is achieved if the participant
------- accomplishes highly challenging objectives resulting
in significant contribution to the Company or
business unit. This rating incorporates superior
reaction to crisis and superior exploitation of
unanticipated opportunities.
Target An "excellent" rating is achieved if the participant
------ accomplishes all objectives in a timely and effective
manner and overall performance for the year is
considered standard or, if the participant
accomplished most of a number of significant and
highly challenging objectives and overall performance
is considered above standard.
Threshold A "good" rating is achieved if the participant
--------- accomplished most of the objectives in an acceptable
manner or all of a group of objectives that were
minimally challenging. Overall performance of the
year is considered standard.
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