-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L6xHdJRv4nsPXNRsL4OCUgKZhl7xSIxsi0BSDIQckkW3M8yZnSAlItg2mFJ5v38H YFmlW8swa8y4c2jvKB6B2A== 0000950152-95-000526.txt : 19951005 0000950152-95-000526.hdr.sgml : 19951005 ACCESSION NUMBER: 0000950152-95-000526 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950510 FILED AS OF DATE: 19950331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: M I SCHOTTENSTEIN HOMES INC CENTRAL INDEX KEY: 0000799292 STANDARD INDUSTRIAL CLASSIFICATION: 1531 IRS NUMBER: 311210837 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12434 FILM NUMBER: 95525660 BUSINESS ADDRESS: STREET 1: 41 S HIGH ST STE 2410 CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142215700 FORMER COMPANY: FORMER CONFORMED NAME: MI SCHOTTENSTEIN HOMES INC DATE OF NAME CHANGE: 19920703 DEF 14A 1 M/I SCHOTTENSTEIN HOMES, INC. 1 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 /x/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12 / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) M/I SCHOTTENSTEIN HOMES, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: -------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: -------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): -------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: -------------------------------------------------------------- (5) Total fee paid: -------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: -------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: -------------------------------------------------------------- (3) Filing Party: -------------------------------------------------------------- (4) Date Filed: -------------------------------------------------------------- 2 [M/I SCHOTTENSTEIN HOMES, INC. LOGO] April 3, 1995 To Our Shareholders: The Annual Meeting of Shareholders of M/I Schottenstein Homes, Inc. (the "Company"), will be held at 9:00 a.m. Eastern Daylight Time on Wednesday, May 10, 1995, at the Capital Club in The Huntington Center, 41 S. High Street, Columbus, Ohio. Enclosed is a copy of our 1994 Annual Report, notice of the meeting, a proxy statement and a proxy card. Please record your vote on the card and return it promptly in the enclosed postage-paid envelope. We look forward to reviewing the activities of the Company at the meeting. We hope you can be with us. Sincerely, /s/ Irving E. Schottenstein Irving E. Schottenstein, Chief Executive Officer and President 41 South High Street Suite 2410 Columbus, Ohio 43215 3 [M/I SCHOTTENSTEIN HOMES, INC. LOGO] 41 S. High Street, Suite 2410 Columbus, Ohio 43215 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held May 10, 1995 To Each Shareholder of M/I Schottenstein Homes, Inc.: Notice is hereby given that the 1995 Annual Meeting of Shareholders of M/I Schottenstein Homes, Inc. (the "Company") will be held at 9:00 a.m. Eastern Daylight Time on May 10, 1995, at the Capital Club in The Huntington Center, 41 S. High Street, Columbus, Ohio, for the following purposes: 1) To elect three (3) directors to serve until the 1998 annual meeting of shareholders or until their successors have been duly elected and qualified; 2) To consider and vote upon a proposal to amend the Performance-Based Bonus Plan for the Chief Executive Officer of the Company; and 3) To transact such other business as may properly be brought before the meeting or any adjournment thereof. Only shareholders of record at the close of business on March 3, 1995, will be entitled to notice of, and to vote at, such meeting, or at any adjournment thereof. A complete list of shareholders entitled to vote at the meeting will be available for examination by any shareholder at the executive offices of the Company for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the Annual Meeting. It is important that your shares be represented at the Annual Meeting. Whether or not you intend to be present, please sign, date and send the enclosed proxy in the envelope provided. Proxies are revocable at any time and shareholders who are present may withdraw their proxy and vote in person if they so desire. By Order of the Board of Directors, /s/ Paul S. Coppel Paul S. Coppel, Secretary April 3, 1995 4 [M/I SCHOTTENSTEIN HOMES, INC. LOGO] 41 S. High Street, Suite 2410 Columbus, Ohio 43215 PROXY STATEMENT for the ANNUAL MEETING OF SHAREHOLDERS To Be Held May 10, 1995 April 3, 1995 GENERAL The Annual Meeting of Shareholders of M/I Schottenstein Homes, Inc. (the "Company"), will be held on May 10, 1995 (the "Annual Meeting"), for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The Company expects that this proxy statement and the accompanying form of proxy will be mailed to each shareholder of record on or about April 3, 1995. This proxy statement is furnished in connection with the solicitation by the Company's Board of Directors (the "Board") of proxies to be used at such meeting and at any adjournment thereof. The Annual Report of the Company for the year ended December 31, 1994, including financial statements, is being mailed to all shareholders together with this proxy statement. A proxy for use at the Annual Meeting is enclosed. Any proxy given may be revoked by a shareholder at any time before it is exercised by filing with the Company a notice in writing revoking it or by duly executing a proxy bearing a later date. Proxies also may be revoked by any shareholder present at the Annual Meeting who expresses a desire to vote his or her shares in person. Subject to such revocation and except as otherwise stated herein or in the form of proxy, all proxies duly executed and received prior to, or at the time of, the Annual Meeting will be voted in accordance with the specifications of the proxies. If no specification is made, proxies will be voted for the nominees for election of directors set forth herein (see "Election of Directors"), for the proposed amended performance-based bonus plan for the Chief Executive Officer of the Company (see "Proposed Amended Performance-Based Bonus Plan for the Chief Executive Officer") and at the discretion of the proxyholders on all other matters that may properly be brought before the Annual Meeting or any adjournment thereof. 1 5 OUTSTANDING SHARES AND VOTING RIGHTS There were 8,800,000 shares of the Company's Common Stock, par value $.01 per share (the "Common Stock") issued and outstanding on March 3, 1995, which date has been set as the record date for the purpose of determining shareholders entitled to notice of, and to vote at, the Annual Meeting. On any matter submitted to a shareholder vote, each holder of Common Stock will be entitled to one vote, in person or by proxy, for each share of Common Stock registered in his or her name on the books of the Company as of the record date. Under Ohio law and the Company's Code of Regulations, the aggregate number of votes entitled to be cast by all shareholders present in person or represented by proxy at the meeting, whether those shareholders vote for, against or abstain from voting on any matter, will be counted for purposes of determining the minimum number of affirmative votes required for approval of such matters, and the total number of votes cast for each of these matters will be counted for purposes of determining whether sufficient affirmative votes have been cast. Abstentions, withheld votes and broker non-votes with respect to a matter by a shareholder present in person or represented by proxy at the Annual Meeting will have the same legal effect as a vote against the matter. ELECTION OF DIRECTORS A class of three directors is to be elected at the Annual Meeting. The Board has nominated the persons set forth below for election as directors of the Company at the Annual Meeting. All of the nominees are currently serving as directors of the Company. The three nominees receiving the greatest number of votes cast will be elected to serve until the 1998 annual meeting of shareholders or until their successors are duly elected and qualified. Information concerning the class and the remaining members of the Board is set forth below. Irving E. Schottenstein, Lenore G. Schottenstein and John B. Gerlach will serve until the 1996 annual meeting of shareholders or until their successors are duly elected and qualified. Steven Schottenstein, Holly S. Kastan and Lewis R. Smoot, Sr., will serve until the 1997 annual meeting of shareholders or until their successors are duly elected and qualified. Unless otherwise specified in the accompanying proxy, the shares voted pursuant thereto will be voted FOR each of the persons named below as nominees for election as directors. The Melvin L. Schottenstein Marital Trust, together with those members of Melvin L. Schottenstein's family who are shareholders, or trusts for their benefit, and the Irving and Frankie Schottenstein Trust, together with those members of Irving E. Schottenstein's family who are shareholders, or trusts for their benefit, who collectively own 5,500,000 shares of Common Stock of the Company (62.5% of the outstanding shares) have entered into an agreement which obligates both families to vote for the election of the director selected by each of the families as their representative on the Board. The family of Melvin L. Schottenstein has selected Eric J. Schottenstein as their representative and the family of Irving E. Schottenstein has selected Robert H. Schottenstein as their representative. 2 6
- ------------------------------------------------------------------------------------------------------- YEAR FIRST CURRENT POSITIONS SERVED NAME AGE WITH COMPANY AS DIRECTOR - ------------------------------------------------------------------------------------------------------- NOMINEES Robert H. Schottenstein 42 Executive Vice President/Regional 1993 (1) Manager-Cincinnati Division and Midwest Land Operations, Assistant Secretary, Director Eric J. Schottenstein 35 Director 1993 (2) Friedrich K. M. Bohm 53 Director, member of Audit Committee, 1994 (3) member of Compensation Committee DIRECTORS Irving E. Schottenstein 66 Chief Executive Officer, 1973 (4) President, Director (Chairman), member of Executive Committee (Chairman), member of Compensation Committee Steven Schottenstein 38 Executive Vice President/Regional 1993 (1) Manager-Washington, D.C. Region, Indiana Region and Carolina Region, Assistant Secretary, Director Lewis R. Smoot, Sr. 61 Director, member of Audit 1993 Committee (Chairman), member of Compensation Committee John B. Gerlach 68 Director, member of Audit Committee, 1993 (5) member of Compensation Committee (Chairman), member of Executive Committee Lenore G. Schottenstein 60 Director, member of Executive 1993 Committee, member of Compensation Committee, Director of Community Relations Holly S. Kastan 39 Director 1993 (1) - -------------------------------------------------------------------------------------------------------
3 7 (1) Robert H. Schottenstein, Steven Schottenstein and Holly S. Kastan were directors of the Company's predecessor from 1980 until 1986. (2) Eric J. Schottenstein was a director of the Company's predecessors from 1980 until 1990. (3) On November 8, 1994, Friedrich K. M. Bohm was appointed by the Board to complete the term of John K. Pfahl, who passed away on August 9, 1994. (4) Irving E. Schottenstein has been a director of the Company or its predecessors since its inception. (5) John B. Gerlach was a director of the Company's predecessor from 1986 until 1990. Irving E. Schottenstein is the father of Steven Schottenstein and Robert H. Schottenstein. Lenore G. Schottenstein is the mother of Holly S. Kastan and Eric J. Schottenstein. BUSINESS EXPERIENCE Robert H. Schottenstein has been an Executive Vice President since February 1994. He served as a Senior Vice President from September 1993 until February 1994 and became a Vice President and Assistant Secretary of the Company in March of 1991. He became the Regional Manager for the Cincinnati Division in April 1994 and for the Midwest Land Operations in January 1993. He began his service with the Company in field operations and has been responsible for the Ohio Land Division since November 1992. He was a Director of the Company's predecessor from 1980 until August 1986. From 1977 to 1991, he was engaged in the private practice of law with Schottenstein, Zox & Dunn Co., L.P.A. and was of counsel to that firm until September 1993. He currently serves as a Director of Huntington National Bank, a subsidiary of Huntington Bancshares Incorporated. Eric J. Schottenstein was employed by the Company from 1983 until December 1993 and is currently the President of The Joshua Company. While he was employed by the Company he held a number of positions, including serving as a Director of the Company's predecessors from 1980 until November 1990, Vice President/Division Manager-Tampa Division from March 1988 until January 1990, regional responsibilities for the Raleigh Division from October 1990 until April 1992, Regional Manager-Carolina Region from April 1992 until December 1993, Vice President from April 1990 until September 1993, Senior Vice President from September 1993 until December 1993 and Assistant Secretary from April 1992 until December 1993. Friedrich K. M. Bohm has been the Managing Partner and Chief Executive Officer of NBBJ, the second largest architectural firm in the United States, since 1987. He currently serves as a member of the executive committee of the Board of Directors of Huntington National Bank, a subsidiary of Huntington Bancshares Incorporated, and as a Director of The Daimler Group and 55 Restaurants, Inc. Irving E. Schottenstein has been Chief Executive Officer since August 1986, and President and a Director of the Company or its predecessors since 1973. He has also been Chairman of the Board or President and a Director of M/I Financial Corp. since its inception in 1983. 4 8 Steven Schottenstein has been an Executive Vice President since February 1994 and an Assistant Secretary since April 1992. He served as a Senior Vice President from September 1993 until February 1994 and was a Vice President from June 1990 until September 1993. He became a Regional Manager for the Washington, D.C. Region in December 1990, Regional Manager for the Indiana Region in April 1992 and Regional Manager for the Carolina Region in February 1994. From 1984 to June 1990, he was Vice President/Division Manager-Orlando Division. He was a Director of the Company's predecessor from 1980 until August 1986. Lewis R. Smoot, Sr. has been the President and Chief Executive Officer of The Smoot Corporation since 1987, a real estate construction and management concern. He currently serves as a Director of Huntington National Bank, a subsidiary of Huntington Bancshares Incorporated. John B. Gerlach was one of the founders and was the President and a Director from 1969 until May 1994, when he was appointed Chairman of the Board and Chief Executive Officer, of Lancaster Colony Corporation, a publicly held company based in Columbus, Ohio. Lancaster Colony Corporation, through its subsidiaries, is engaged in the manufacture and sale of automotive accessories, consumer glassware, industrial glass products, candles and specialty food products. He was a Director of the Company's predecessor from 1986 to November 1990. He is also a partner in the public accounting firm of John Gerlach & Company and a Director of Huntington Bancshares Incorporated, Drug Emporium, Inc. and Scioto Downs, Inc. Lenore G. Schottenstein is the widow of Melvin L. Schottenstein. Mrs. Schottenstein serves as the trustee of various trusts that hold the Common Stock of the Company owned by her family. She has been and continues to be a major participant in many community organizations in Columbus, Ohio and was appointed as the Company's Director of Community Relations in January 1994. Holly S. Kastan was employed by Fidelity Investments, Inc. in its commercial real estate division from 1979 until 1984. From 1984 until 1986, she was employed by the Company in its marketing department. She was a Director of the Company's predecessor from 1980 until August 1986. Since 1987, she has been a private investor. NOMINATION OF DIRECTORS Nomination for the election of directors may be made by the Board or a committee appointed by the Board or by any shareholder entitled to vote in the election of directors generally. To nominate one or more persons for election as directors, the Company's Code of Regulations require that a shareholder give written notice of his or her intent to make such nomination or nominations by personal delivery or by United States Mail, postage pre-paid, to the Secretary of the Company, not later than the close of business on the seventh day following the date on which shareholders are first given notice of the meeting at which directors are to be elected. Each such notice shall set forth: 1) the name and address of the person or persons to be nominated; 2) a representation that the shareholder is a holder of record entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; 3) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or 5 9 persons) pursuant to which the nomination or nominations are to be made by the shareholder; 4) such other information regarding each nominee proposed by the shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board; and 5) the consent of each nominee to serve as a director of the Company, if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. BOARD AND COMMITTEE MEETINGS The Board held four meetings during 1994. All current members of the Board attended all meetings of the Board and of the committees on which they served. The Board does not have a nominating committee. The full Board selects the nominees for directors. The Board's Audit Committee consists of Lewis R. Smoot, Sr. (Chairman), John B. Gerlach and Friedrich K. M. Bohm. The Audit Committee's responsibilities include reviewing the Company's audit procedures and policies, reviewing potential conflicts of interest, monitoring internal controls and financial reporting, selecting the Company's independent accountants and making recommendations concerning these matters to the Board. The Audit Committee met four times in 1994. The Board also has a Compensation Committee, whose members are John B. Gerlach (Chairman), Lewis R. Smoot, Sr., Friedrich K. M. Bohm, Irving E. Schottenstein and Lenore G. Schottenstein. The Compensation Committee's duties include reviewing and reporting to the Board on specific compensation matters for officers and top executives and administering the Company's stock incentive plan (see "Stock Plans"). The Compensation Committee met four times in 1994. In March 1995, the Board created the CEO Compensation Subcommittee of the Compensation Committee (the "Subcommittee") in response to guidelines published by the Internal Revenue Service regarding the deductibility of executive officer compensation (see "Proposed Amended Performance-Based Bonus Plan for the Chief Executive Officer"). The Subcommittee's duties include developing and administering the plans necessary to ensure that the compensation paid to the Chief Executive Officer of the Company will be tax deductible. Between meetings of the Board or when the Board is not in session the Executive Committee may exercise, to the extent permitted by law, all the powers and duties of the Board. The members of the Executive Committee are Irving E. Schottenstein (Chairman), Lenore G. Schottenstein and John B. Gerlach. During 1994, the Executive Committee did not hold any meetings but did take written actions without a meeting on five occasions. 6 10 CERTAIN TRANSACTIONS The Company leases approximately 27,000 square feet of office space in Columbus, Ohio pursuant to a lease agreement dated September 1, 1992, with M/I Office Development Company, an Ohio general partnership of which the Irving and Frankie Schottenstein Trust and the Melvin L. Schottenstein Marital Trust are partners. Under the terms of its lease agreement, the Company pays base rent of $8.16 per square foot plus operating expenses which are estimated to be an additional $7.56 per square foot annually. The Company is currently subleasing 4,760 square feet of this space. The Company paid rent of approximately $367,000 in 1994 pursuant to this lease. The Company believes that the terms of this lease are no less favorable than those reasonably available from unaffiliated third parties for comparable space. In 1992, the Company became a limited partner in two limited partnerships formed to purchase and develop land and lots in the Washington, D.C. market. The general partner of these two limited partnerships is The Fabulous Eight, Inc., an Ohio corporation wholly owned by eight beneficial owners of the Company's Common Stock: Gary L. Schottenstein, Robert H. Schottenstein, Linda S. Fisher, Steven Schottenstein, Holly S. Kastan, Eric J. Schottenstein, Amy D. Schottenstein and Julie B. Saar. The Irving and Frankie Schottenstein Trust and the Melvin L. Schottenstein Marital Trust are not shareholders of The Fabulous Eight, Inc. The general partner's share of income from these two limited partnerships was $3,264 in 1994. The Company has advanced a total of approximately $1.9 million to the limited partnerships, including $1.2 million in the form of notes receivable which bear interest at prime plus 1/2%, $445,000 as expense advances and $263,000 as deposits for lots the Company has an option to purchase from the limited partnerships at fair market value. At December 31, 1994, the deposit for lots has been reduced to $48,000 through purchases of lots from the limited partnerships. The Company purchased lots totalling $2,503,000 from the limited partnerships in 1994. These limited partnerships were formed to develop a total of 199 lots, of which 59 remain on their books as of December 31, 1994. The Company expects to purchase the remaining lots from the limited partnerships during 1995. 7 11 MANAGEMENT The following table sets forth certain information with respect to the executive officers of the Company who are not also directors.
- ------------------------------------------------------------------------------------------------------- CURRENT POSITIONS YEAR STARTED NAME AGE WITH COMPANY WITH COMPANY - ------------------------------------------------------------------------------------------------------- Kerrii B. Anderson 37 Senior Vice President, Chief 1987 Financial Officer, Assistant Secretary Paul S. Coppel 36 Senior Vice President/General 1994 Counsel and Secretary Phillip G. Creek 42 Senior Vice President, Treasurer 1993 Lloyd T. Simpson 49 Senior Vice President/Regional 1984 Manager-Ohio Region James D. Bagley 60 Senior Vice President/Regional 1987 Manager-Florida Region Robert C. Moesle 43 Senior Vice President/Regional 1990 Manager-Washington, D.C. Region - -------------------------------------------------------------------------------------------------------
BUSINESS EXPERIENCE Kerrii B. Anderson is Senior Vice President, Chief Financial Officer and Assistant Secretary of the Company. She became a Senior Vice President in September 1993 and has been Chief Financial Officer since 1988. She was also made a Vice President in 1988 and has been Vice President, Chief Financial Officer and Secretary of M/I Financial since 1988. Ms. Anderson is a certified public accountant and holds a Masters of Business Administration degree. Paul S. Coppel joined the Company in January 1994 as Senior Vice President/General Counsel. Mr. Coppel became the Secretary in February 1995. Prior to joining the Company, Mr. Coppel was engaged in the private practice of law with Vorys, Sater, Seymour and Pease, Columbus, Ohio from April 1993 until December 1993; Schwartz, Kelm, Warren & Rubenstein, Columbus, Ohio from September 1986 until April 1993 and Fuller and Henry, Toledo, Ohio from June 1984 until September 1986. 8 12 Phillip G. Creek joined the Company in January 1993 as Vice President and Treasurer and became a Senior Vice President in September 1993. From 1986 to 1993, Mr. Creek was employed with The Ryland Group, Inc., a national homebuilder, as Controller and in 1992 was made a Vice President and Planning Officer for The Ryland Group, Inc. Lloyd T. Simpson joined the Company in 1984 and has been Vice President/Regional Manager-Ohio Region since 1989. He became a Senior Vice President in September 1993 and assumed division manager responsibilities for the Columbus Division in April 1994. He had regional manager responsibilities for Tampa and Orlando from 1985 to 1987, in addition to division manager responsibilities for Columbus, Ohio. From 1981 to 1984, he served as Vice President/Regional Manager of The Ryland Group, Inc. during which time his responsibilities included supervision of homebuilding and sales operations for several cities in Ohio, Kentucky and Indiana. James D. Bagley has been Vice President/Regional Manager-Florida Region since September 1987. He became a Senior Vice President in September 1993. Before joining the Company, he was employed with Ryan Homes, Inc., a national homebuilder, where he was a Senior Vice President-Operations with responsibility for operations in Atlanta, Georgia; Charlotte and Raleigh, North Carolina and Jacksonville, Florida from 1986 to 1987 and a Group Manager, with responsibility for operations in Jacksonville, Florida; Tidewater, Virginia and Syracuse and Rochester, New York from 1984 to 1986. Robert C. Moesle joined the Company in December 1990 as Division Manager of the Washington, D.C. division and became Vice President/Regional Manager-Washington, D.C. Region in September 1991. He became a Senior Vice President in September 1993. Prior to joining the Company, Mr. Moesle was employed with NV Homes L.P., a regional homebuilder, where he was an Executive Vice President, with responsibility for operations in Virginia and the Maryland/Delaware Valley from 1988 to 1990 and a Senior Vice President of Operations of all home-building divisions from 1986 to 1988. 9 13 PRINCIPAL SHAREHOLDERS The following table sets forth the number and percentage of the outstanding shares of Common Stock held by each person who, to the knowledge of the Company, beneficially owns more than 5% of the outstanding shares of Common Stock, by each of the Company's directors, nominees and executive officers and by all of the directors and executive officers of the Company as a group. Except as set forth in the footnotes to the table, the shareholders have sole voting and investment power over such shares.
- -------------------------------------------------------------------------------------------------- NUMBER OF SHARES PERCENT NAME OF BENEFICIAL OWNER OF COMMON STOCK OF CLASS - -------------------------------------------------------------------------------------------------- Irving E. Schottenstein................. 518,800 (1) 5.90% Melvin L. Schottenstein Marital Trust................................ 550,000 (2) 6.25% Gary L. Schottenstein................... 563,800 (3) 6.41% Robert H. Schottenstein................. 569,300 (4) 6.47% Linda S. Fisher......................... 569,300 (5) 6.47% Steven Schottenstein.................... 528,800 (6) 6.01% Holly S. Kastan......................... 515,000 (7) 5.85% Eric J. Schottenstein................... 550,000 (8) 6.25% Amy D. Schottenstein.................... 550,000 (9) 6.25% Julie B. Saar........................... 550,000 (9) 6.25% Wellington Management Company.............................. 826,850 9.40% Kerrii B. Anderson...................... 3,400 (11) Paul S. Coppel.......................... 1,600 (11) Phillip G. Creek........................ 1,500 (11) Lloyd T. Simpson........................ 1,000 (11) James D. Bagley......................... 500 (11) Robert C. Moesle........................ - - Lenore G. Schottenstein................. - (10) - Friedrich K. M. Bohm.................... 5,000 (11) John B. Gerlach......................... 10,000 (11) Lewis R. Smoot, Sr...................... - - All directors and executive officers as a group (15 persons).............. 3,254,900 - --------------------------------------------------------------------------------------------------
(1) Irving E. Schottenstein is the trustee of (i) the Irving and Frankie Schottenstein Trust which holds 478,300 shares, and (ii) the Steven Schottenstein Descendants Trust which holds 40,500 shares, and exercises all rights with regard to such shares. Does not include an aggregate of 2,159,500 shares held in trust as described in footnote 12 below. As trustee of such trusts, Irving E. Schottenstein may be deemed the beneficial owner of such shares. 10 14 (2) Lenore G. Schottenstein, Holly S. Kastan and Eric J. Schottenstein are co-trustees of the Melvin L. Schottenstein Marital Trust and collectively exercise all rights with regard to such shares. (3) 550,000 of these shares are held in trust by Irving E. Schottenstein in accordance with footnote 12 below. 2,800 of these shares are held by Gary L. Schottenstein individually. 11,000 of these shares are held in trust by Gary L. Schottenstein, as trustee, for the benefit of his children pursuant to trust agreements dated December 22, 1994. As trustee, Gary L. Schottenstein is empowered to exercise all rights with regard to such shares and may be deemed the beneficial owner of such shares. (4) 550,000 of these shares are held in trust by Irving E. Schottenstein in accordance with footnote 12 below. 2,800 of these shares are held by Robert H. Schottenstein individually. 16,500 of these shares are held in trust by Robert H. Schottenstein, as trustee, for the benefit of his children pursuant to trust agreements dated December 22, 1994. As trustee, Robert H. Schottenstein is empowered to exercise all rights with regard to such shares and may be deemed the beneficial owner of such shares. (5) 550,000 of these shares are held in trust by Irving E. Schottenstein in accordance with footnote 12 below. 2,800 of these shares are held by Linda S. Fisher individually. 16,500 of these shares are held in trust by Mrs. Fisher, as trustee, for the benefit of her children pursuant to trust agreements dated December 22, 1994. As trustee, Mrs. Fisher is empowered to exercise all rights with regard to such shares and may be deemed the beneficial owner of such shares. (6) 509,500 of these shares are held in trust by Irving E. Schottenstein in accordance with footnote 12 below. 2,800 of these shares are held by Steven Schottenstein individually. 16,500 of these shares are held in trust by Steven Schottenstein, as trustee, for the benefit of his children pursuant to trust agreements dated December 22, 1994. As trustee, Steven Schottenstein is empowered to exercise all rights with regard to such shares and may be deemed the beneficial owner of such shares. (7) 509,200 of these shares are held in trust by Lenore G. Schottenstein in accordance with footnote 9 below. 5,800 of these shares are held in trust by Mrs. Kastan, pursuant to a charitable trust agreement dated January 12, 1994. (8) 547,200 of these shares are held in trust by Lenore G. Schottenstein in accordance with footnote 9 below. The remaining 2,800 shares are held by Mr. Schottenstein as trustee for the benefit of his child and he exercises all rights with regard to such shares. Mr. Schottenstein may be deemed the beneficial owner of such shares. (9) These shares are held in trust by Lenore G. Schottenstein, as trustee, pursuant to trust agreements dated June 27, 1990, as amended. As trustee, Mrs. Schottenstein is empowered to exercise all rights with regard to such shares, revoke each trust, and with the agreement of each beneficiary, amend each trust. (10) Does not include an aggregate of 2,156,400 shares held in trust as described in footnote 9 above. As trustee of such trusts, Lenore G. Schottenstein may be deemed the beneficial owner of such shares. (11) Less than 1% of the outstanding shares. (12) These shares are held in trust by Irving E. Schottenstein, as trustee, pursuant to trust agreements dated August 1986, as amended. As trustee, Mr. Schottenstein is empowered to exercise all rights with regard to such shares, revoke each trust, and with the agreement of each beneficiary, amend each trust. The address of Irving E. Schottenstein, Robert H. Schottenstein, Steven Schottenstein, Gary L. Schottenstein and Linda S. Fisher is c/o Irving E. Schottenstein, 41 South High Street, Suite 2410, Columbus, Ohio 43215. The address of Lenore G. Schottenstein and the Melvin L. Schottenstein Marital Trust is 291 N. Drexel Avenue, Columbus, Ohio 43209. The address of Amy D. Schottenstein is 6727 185th Avenue, N.E., Redmond, Washington 98052. The address of Julie B. Saar is Ha Eshel #12, Apt. 32, Kfar Saba 441521 Israel. The address of Holly S. Kastan is 2355 Commonwealth Park S., Columbus, Ohio 43209. The address of Eric J. Schottenstein is c/o The Joshua Company, 110 E. Wilson-Bridge Rd., Suite 280, Worthington, Ohio 43085. The address of the Wellington Management Company is 75 State Street, Boston, Massachusetts 02109. 11 15 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth the annual compensation and other compensation for each of the fiscal years ended December 31, 1994, 1993 and 1992 for the Company's Chief Executive Officer and for the additional executive officers who together comprised the five highest paid executive officers of the Company:
- ------------------------------------------------------------------------------------------------------------- LONG-TERM ANNUAL COMPENSATION COMPENSATION ---------------------------------------- ------------------- AWARDS PAYOUTS ------ ------- OTHER SECURITIES ANNUAL UNDERLYING LTIP ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION POSITION YEAR ($) (1) ($) ($) (#) ($) (2) ($) (3) (4) - -------------------------------------------------------------------------------------------------------------- Irving E. Schottenstein 1994 575,000 715,605 (5) - (6) - 36,890 Chief Executive Officer 1993 575,000 650,000 (7) - - - 3,154 and President 1992 487,000 553,000 (7) - - - 2,485 Lloyd T. Simpson 1994 225,000 372,259 (5) - 5,000 45,257 3,140 Senior Vice President/ 1993 222,916 257,854 (8) - - 43,549 3,154 Regional Manager 1992 200,000 139,293 (8) - - 42,087 2,485 Robert H. Schottenstein 1994 292,239 140,000 (5) - 5,000 - 3,140 Executive Vice President/ 1993 209,000 170,060 (7) - - - 3,154 Regional Manager and 1992 212,000 90,000 (7) - - - 2,485 Assistant Secretary Steven Schottenstein 1994 292,239 140,000 (5) - 5,000 - 3,140 Executive Vice President/ 1993 209,000 170,060 (7) - - 6,490 3,154 Regional Manager and 1992 212,000 90,000 (7) - - 4,447 2,485 Assistant Secretary Kerrii B. Anderson 1994 175,000 140,000 (5) - 5,000 45,257 3,140 Senior Vice President, 1993 170,000 200,000 (7) - - 43,549 3,154 Chief Financial Officer 1992 145,036 125,000 (7) - - 42,087 2,485 and Assistant Secretary - -------------------------------------------------------------------------------------------------------------
(1) The amounts in this column include payments for salary and amounts paid as fees to directors or advisory committee members. (2) Represents compensation pursuant to an executive deferred compensation plan for Mr. Simpson and Ms. Anderson and compensation pursuant to a phantom stock option plan for Steven Schottenstein. 12 16 (3) The amounts shown represent the individual's share of the Company's discretionary contribution for 1994, 1993 and 1992, respectively, under the Company's 401(k) plan, with the exception of Irving E. Schottenstein for 1994, as detailed in footnote 4 below. (4) "All Other Compensation" for Irving E. Schottenstein for the 1994 fiscal year includes his share of the Company's discretionary contribution for 1994 under the Company's 401(k) plan in the amount of $3,140, the term portion of the premium for a split-dollar life insurance policy of $2,712 and the non-term portion of the premium of $31,038. (5) Represents amounts accrued pursuant to bonus incentive plans approved by the Compensation Committee of the Board. (6) Irving E. Schottenstein is not eligible to receive stock options (see "Stock Plans"). (7) Represents amounts awarded at the discretion of the Board and accrued as a discretionary bonus. (8) Represents amounts accrued pursuant to bonus incentive plans approved by the Chief Executive Officer. On August 9, 1994, the Company and Irving E. Schottenstein entered into an employment agreement under which the Company agreed to purchase and maintain a split-dollar life insurance policy for Mr. Schottenstein in an amount not less than $1.5 million. In the event Mr. Schottenstein becomes disabled, he will receive disability payments from the Company for a period of up to three years, in an annual amount equal to the average of the salary and bonus earned by Mr. Schottenstein during the three calendar years preceding his disability. In the event Mr. Schottenstein's employment ends, he has agreed to serve as a consultant to the Company for a period of two years for which he will be paid $500,000 per year. 13 17 OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth the nonqualified stock options granted by the Board during the 1994 fiscal year to certain of the five highest paid executive officers of the Company:
- ----------------------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT ACCRUED ANNUAL RATES OF STOCK PRICE APPRECIATION INDIVIDUAL GRANTS FOR OPTION TERM ----------------------------------------------------- ------------------------ NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS GRANTED OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION GRANTED FISCAL YEAR PRICE DATE 5% 10% NAME (#) (1) (%) ($/SH) ($) ($) - ----------------------------------------------------------------------------------------------------------- Irving E. Schottenstein (2) Lloyd T. Simpson 5,000 5.3 16.125 5/24/03 50,705 128,495 Robert H. Schottenstein 5,000 5.3 16.125 5/24/03 50,705 128,495 Steven Schottenstein 5,000 5.3 16.125 5/24/03 50,705 128,495 Kerrii B. Anderson 5,000 5.3 16.125 5/24/03 50,705 128,495 - -----------------------------------------------------------------------------------------------------------
(1) The nonqualified stock options granted by the Board are scheduled to vest at a rate of 20% per year over the first five years and to lapse after ten years unless sooner exercised or forfeited. (2) Irving E. Schottenstein is not eligible to receive stock options (see "Stock Plans"). 14 18 FISCAL YEAR END OPTION VALUES The following table sets forth the number of shares of common stock that underlie the unexercised nonqualified stock options, and their value at the end of the fiscal year, granted by the Board during 1994 to certain of the five highest paid executive officers of the Company:
- ----------------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (#) (1) ($) ------------------------------ ------------------------------ NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ----------------------------------------------------------------------------------------------------------- Irving E. Schottenstein (2) - - - Lloyd T. Simpson 1,000 4,000 0 0 Robert H. Schottenstein 1,000 4,000 0 0 Steven Schottenstein 1,000 4,000 0 0 Kerrii B. Anderson 1,000 4,000 0 0 - -----------------------------------------------------------------------------------------------------------
(1) The nonqualified stock options granted by the Board are scheduled to vest at a rate of 20% per year over the first five years and to lapse after ten years unless sooner exercised or forfeited. (2) Irving E. Schottenstein is not eligible to receive stock options (see "Stock Plans"). PERFORMANCE BONUSES Each of the Company's Regional Managers and Division Managers are eligible for performance bonuses. In February 1995, the Compensation Committee adopted revised bonus programs for the Regional Managers and Division Managers. The performance bonus that can be earned by each Regional Manager is based upon the region's level of income before income taxes, the region's level of customer satisfaction and the region's level of growth in income before income taxes. The total amount that can be earned by each Regional Manager has been capped at three times his annual base salary. The performance bonus that can be earned by each Division Manager is based upon the division's level of income before income taxes, the division's level of customer satisfaction and the division's level of growth in income before income taxes. The total amount that can be earned by each Division Manager has been capped at two times his annual base salary. 15 19 The Compensation Committee adopted revised bonus programs for the Executive Vice Presidents in February 1995, which retroactively amended the bonus programs in effect during 1994 (see "Board Compensation Committee Report on Executive Compensation"). The performance bonus that can be earned by the Executive Vice Presidents is based on the level of the Company's income before income taxes. The Executive Vice Presidents may be awarded up to 25% of their annual base salary at the discretion of the Chief Executive Officer. The total amount that can be earned by the Executive Vice Presidents has been capped at 85% of their annual base salary. The Compensation Committee adopted bonus programs for the Chief Financial Officer and the Treasurer in February 1994. The Chief Financial Officer's performance bonus is based upon the level of the Company's income before income taxes and the enhancement and improvement of the Company's accounting, internal audit, information systems, human resources and payroll departments. The Treasurer's performance bonus is based upon the level of growth in the Company's income before income taxes, the level of growth of loans originated by M/I Financial Corp. and the successful development of strategic long term plans. Both the Chief Financial Officer and the Treasurer may be awarded up to 5% of his or her annual base salary at the discretion of the Chief Executive Officer. The total amount that can be earned by the Chief Financial Officer has been capped at 100% of her annual base salary and the total amount that can be earned by the Treasurer has been capped at 85% of his annual base salary. The Compensation Committee adopted a bonus program for the General Counsel in May 1994. The General Counsel's performance bonus is based on the level of the Company's income before income taxes and the total amount that can be earned by the General Counsel has been capped at 60% of his annual base salary. 401(k) PLAN In October 1988, the Company adopted a 401(k) profit sharing plan (the "401(k) Plan") pursuant to which employees may defer compensation for income tax purposes under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). All employees of the Company (except model attendants) are eligible to participate in the 401(k) Plan after completing one year of service with the Company. Eligible employees may contribute annually to the 401(k) Plan through payroll deductions the maximum amount permitted under the Code, subject to certain additional limitations imposed by the Code upon highly compensated employees. The Company may, in its discretion, contribute a portion of its profits each year to the 401(k) Plan. The amount of this profit sharing contribution is determined by the Board. The Company's contributions are allocated among eligible participants in the 401(k) Plan proportionate to their relative amounts of base compensation capped at $50,000. All contributions, both of the employee and the Company, vest immediately. Participants may direct investment of the funds in their accounts among various investment options. Withdrawals from the 401(k) Plan may be made by a participant only upon attainment of age 65, total and permanent disability, hardship, death or termination of employment. The Company contributed $715,000 to the 401(k) Plan for 1994. 16 20 EXECUTIVE DEFERRED COMPENSATION PLAN In 1990, the Company adopted its Executive Deferred Compensation Plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is administered by the Board, which may grant units of participation in the Deferred Compensation Plan (the "Participation Units") to officers, employees and directors of the Company. The Company recorded expense under the Deferred Compensation Plan of approximately $181,000 in 1994. Participation Units are granted in blocks, with one-tenth of the block vesting annually on June 30 (the "Vesting Dates") for a period of ten years (the "Vesting Period"). If the holder of Participation Units ceases to be an officer, employee or director of the Company prior to the Vesting Date of any Participation Unit, all rights with respect to that Participation Unit are forfeited. Participation Units are nontransferable, except upon death of the participant. Each Participation Unit entitles the holder to payment of $1,000 plus the equivalent of interest on that amount from the date of grant of the Participation Unit to the payment date at a variable rate compounded as of each June 30. The applicable variable rate is the yield to maturity of the United States Treasury Bill with the maturity date nearest the first anniversary of the date on which the rate is being determined, as reported in the Wall Street Journal, which rate is adjusted monthly and determined on the first business day of each month. In no event can the variable rate exceed 10% per annum. Payment with respect to a vested Participation Unit is made on the earlier of the end of the Vesting Period applicable to that Unit or the ninetieth day after the holder ceases to be an officer, employee or director of the Company. Participants may elect in advance to defer payments, and the Board of Directors has discretion to accelerate the Vesting Dates and/or payment dates of Participation Units. STOCK PLANS In November 1993, the Board adopted the M/I Schottenstein Homes, Inc. 1993 Stock Incentive Plan (the "Stock Incentive Plan"). The purpose of the Stock Incentive Plan is to enable the Company to attract and retain directors, executive officers and key employees and to provide these persons incentives and rewards in the form of an equity participation in the Company. The Chief Executive Officer is not eligible to participate in the Stock Incentive Plan. It cannot be determined in advance which individuals might receive awards under the Stock Incentive Plan or in what amounts. The Stock Incentive Plan is divided into three components: a restricted stock program, a stock appreciation rights program and a stock option program. The Stock Incentive Plan is administered by the Company's Compensation Committee. The Stock Incentive Plan authorizes the issuance of an aggregate of 425,000 shares of Common Stock pursuant to the grant or exercise of restricted stock, stock appreciation rights or stock options. Amendments; Termination. The Stock Incentive Plan is generally subject to amendment or termination by the Board. Certain amendments (e.g., increasing the shares authorized to be issued under the Stock Incentive Plan) will also require shareholder approval. In addition, no amendment or termination of the Stock Incentive Plan will affect outstanding restricted stock, stock appreciation rights or stock options. 17 21 Restricted Stock. The Stock Incentive Plan authorizes the issuance of shares of Common Stock, to such eligible persons and on such terms and conditions as the Compensation Committee deems appropriate, subject to a substantial risk of forfeiture prior to attainment of one or more performance or service objectives to be specified by the Compensation Committee at the time of issuance ("Restricted Stock"). In the event that the holder of Restricted Stock fails to achieve the specified objectives, the Restricted Stock will be forfeited back to the Company (unless the Compensation Committee waives such forfeiture based on hardship or other special circumstances). Restricted Stock will not be transferable until the risk of forfeiture of such stock has terminated. Stock Appreciation Rights. The Stock Incentive Plan authorizes the issuance of stock appreciation rights ("SARs") to eligible participants. SARs entitle the participant to receive an amount (in cash, shares of Common Stock or both) equal in value to (i) the excess of (x) the fair market value per share of the Common Stock on the date of exercise of the SAR over (y) the fair value per share of the Common Stock on the date of issuance of the SAR multiplied by (ii) the number of shares to which the SAR relates. Subject to certain limitations described above and below, the Compensation Committee has the authority to determine the eligible persons to whom SARs are granted, the number of shares to which each SAR relates and all other terms and conditions affecting exercise of SARs. The maximum term for SARs will be 10 years. SARs issued to employees may not be exercisable sooner than nine months after issuance and SARs granted to non-employee directors may not be exercisable sooner than one year after issuance. SARs will not be transferable, except upon death of the participant. Stock Options. The Stock Incentive Plan authorizes the issuance of either "incentive stock options" ("ISOs") or "nonqualified stock options" ("NQSOs") (each as defined in Section 422 of the Code) or both. Subject to certain limitations described above and below, the Compensation Committee has the authority to determine the persons to whom options should be granted, the number of shares subject to each option, the exercise price of each option and all other terms and conditions that may affect the exercise of each option. The exercise price of all ISOs and NQSOs issued to non-employee directors may not be less than the fair market value of the shares subject to the option as of the date of grant and the exercise price of NQSOs issued to employees may not be less than 85% of such fair market value. The exercise price of any option may be paid in cash or in the form of unrestricted shares which the option holder already owns. The maximum terms for all options will be 10 years. Options issued to employees may not be exercisable sooner than nine months after issuance and options granted to non-employee directors may not be exercisable sooner than one year after issuance. Options will not be transferable, except upon death of the option holder. On February 21, 1995, the Compensation Committee approved the award of NQSOs for the purchase of 66,200 shares of Common Stock, at a price of $6.75 per share, to 32 officers and employees. The NQSOs are scheduled to vest at a rate of 20% per year over the first five years and to lapse after ten years unless sooner exercised or forfeited. There are NQSOs for the purchase of 150,400 shares of Common Stock currently outstanding. 18 22 COMPENSATION OF DIRECTORS John B. Gerlach, Lewis R. Smoot, Sr. and Friedrich K. M. Bohm, the independent directors on the Board, were paid a fee of $4,000 per quarter during 1994. Mr. Gerlach and Mr. Smoot received $16,000 each for their services. John K. Pfahl was also paid $16,000 for his services rendered to the Company prior to his death in August 1994. Mr. Bohm was paid $4,000 for his services during the fourth quarter of 1994. Eric J. Schottenstein resigned his positions with the Company in December 1993. Mr. Schottenstein agreed to serve as a consultant to the Company for a period of three years, for which he was paid $214,872 in 1994 and will be paid $200,000 per year for 1995 and 1996. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee is comprised of five members: John B. Gerlach (Chairman), Lewis R. Smoot, Sr., Friedrich K. M. Bohm, Irving E. Schottenstein and Lenore G. Schottenstein. John K. Pfahl also served as a member of the Compensation Committee prior to his death. Irving E. Schottenstein is the Chief Executive Officer of the Company and Lenore G. Schottenstein is the Director of Community Relations for the Company. The Company is currently negotiating a contract for the provision of certain interior design services with NBBJ, an architectural firm for which Friedrich K. M. Bohm is the Managing Partner and Chief Executive Officer (see "Election of Directors"). The services to be rendered by NBBJ involve the design of new office space for the Company in a building that would be built, owned and operated by a yet to be formed limited liability company in which the Company expects to have a minority equity interest. The contract has not been finalized, but was approved by the Audit Committee at its February 1995 meeting. The Company expects that NBBJ's fee for its services will be approximately $180,000 and believes that the terms of the contract are no less favorable than those reasonably available from competitive firms. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION General. The Compensation Committee's overall compensation policy applicable to the Company's executive officers is to provide a compensation program that is intended to attract and retain qualified executives for the Company and to provide them with incentives to achieve Company goals and increase shareholder value. The Compensation Committee implements this policy through establishing salaries, bonuses and stock options. The Compensation Committee's current policy is not to provide pension or other retirement plans for the Company's executive officers other than the 401(k) Plan. In response to recent amendments to proposed regulations issued by the Internal Revenue Service with respect to the deduction of "performance based" compensation, the Compensation Committee supports the Company's proposal for the amended performance-based bonus plan for the Chief Executive Officer (see "Proposed Amended Performance-Based Bonus Plan for the Chief Executive Officer"). 19 23 Base Salary. The base salary for the Company's executive officers is intended to be set at levels slightly higher than paid for comparable positions by publicly-held, national homebuilders, such as The Ryland Group, Inc., Centex, Inc. and Ryan Homes, Inc. These homebuilders are different from the homebuilders used for the Company's Peer Group (see "Performance Graph") because the Company has usually hired executive officers from the national homebuilders when looking for quality management personnel. The salary levels are slightly higher because of the Compensation Committee's belief that the Company's executive officers have greater responsibilities and receive lower fringe benefits compared to similar positions with the publicly-held, national homebuilders. Bonuses. A significant portion of the total compensation paid to Regional Managers and Division Managers is earned through annual bonuses. The bonus amount for 1994 was computed based on two factors; the level of growth in income before income taxes in each executive officer's region or division and the level of customer satisfaction achieved in each executive officer's region or division during 1994. The amount of bonus that could be received pursuant to the customer satisfaction factor was capped at 25% of each executive officer's base salary. In addition, the bonus that could be earned by Regional Managers was influenced by the level of growth in the Company's income before income taxes. In certain circumstances, the Compensation Committee approved discretionary bonuses to certain Regional Managers and Division Managers to reflect superior performance in light of severe weather conditions and subcontractor shortages that would have otherwise gone unrecognized under the terms of the bonus plans. In February 1995, the bonus plans for the Executive Vice Presidents in effect during 1994 were retroactively amended. The prior bonus plans were heavily dependent upon the growth in income before income taxes earned by the Company in 1994 compared with the prior year. This dependence resulted in bonuses for the Executive Vice Presidents in 1994 which were not indicative of their performance in light of two consecutive years of the highest levels of net income in the Company's history. The Compensation Committee believes that a bonus plan based upon the level of the Company's income before income taxes more accurately reflects the contributions of the Executive Vice Presidents to the Company, and accordingly adopted the amended bonus plans. Bonuses for the General Counsel, Treasurer and Chief Financial Officer were made pursuant to plans adopted by the Compensation Committee during 1994 (see "Performance Bonuses"). In addition, the Compensation Committee subjectively evaluated the performance of the General Counsel and Treasurer during the year and awarded a discretionary bonus to each of these executive officers. Stock Options. It is the Company's intent to award stock options to the Company's executive officers in amounts reflecting the participant's position and ability to influence the Company's overall performance. Options are intended to retain and motivate executive officers to improve long-term stock market performance. During 1994, the Compensation Committee approved the award of NQSOs (see "Stock Plans") for the purchase of a total of 94,200 shares 20 24 of Common Stock at a price of $16.125 per share, of which NQSOs for the purchase of 10,000 shares of Common Stock were subsequently forfeited. The NQSOs are scheduled to vest at a rate of 20% per year over the first five years and to lapse after ten years unless sooner exercised or forfeited. Chief Executive Officer Compensation. The Chief Executive Officer's base salary for 1994 was intended to be set at a level slightly higher than paid for chief executive officers of publicly-held, national homebuilders. The level of his base salary is based upon the Compensation Committee's belief that the Chief Executive Officer receives lower fringe benefits compared with the chief executive officers of the publicly-held, national homebuilders. The bonus for the Chief Executive Officer for 1994 was determined pursuant to the Performance-Based Bonus Plan which was approved by the Company's shareholders at the 1994 annual meeting. The Performance-Based Bonus Plan uses two factors to determine his bonus. The first factor is that if the Company earns income before income taxes in the amount of $10 million (the "Triggering Level"), the Chief Executive Officer receives a percentage of the earnings that exceed the Triggering Level. For each $1 million increment over the Triggering Level, the Chief Executive Officer earns a certain percentage of each dollar earned by the Company. The Chief Executive Officer's percentage for each $1 million increment varies between $.02 per dollar and $.085 per dollar depending on the level of income before incomes taxes earned by the Company, but is not a steadily rising or steadily falling percentage. Under this factor, the Chief Executive Officer earned $596,580 as a result of the Company's performance during 1994. The second factor is that if the Company reaches the Triggering Level and the Company achieves a 92% customer satisfaction rating as measured by a customer survey conducted by the Company, the Chief Executive Officer receives 17% of his base salary as a bonus. This percentage increases as the level of customer satisfaction increases and is capped at 25% of his base salary. The Chief Executive Officer earned $119,025 as a result of the Company's 95.7% customer satisfaction rating during 1994. The total bonus that may be earned by the Chief Executive Officer under the Performance-Based Bonus Plan was capped at four times his annual base salary. John B. Gerlach, Chairman Lewis R. Smoot, Sr. Friedrich K. M. Bohm Irving E. Schottenstein Lenore G. Schottenstein 21 25 PERFORMANCE GRAPH This chart graphs the Company's performance in the form of cumulative total return to shareholders from November 3, 1993 (the date the Company completed its initial public offering) until December 31, 1994 in comparison to Standard and Poor's 500 and the cumulative return on the common stock of seven publicly traded peer issuers deemed by the Company to be its principal competitors (the "Peer Group"). The Peer Group includes Continental Homes Holding Corporation; D.R. Horton, Inc.; Hovnanian Enterprises, Inc.; Kaufman and Broad Home Corporation; Lennar Corporation; Toll Brothers, Inc. and Washington Homes, Inc. COMPARISON OF CUMULATIVE TOTAL RETURN NOVEMBER 3, 1993 TO DECEMBER 31, 1994
------------------------------------------------------------------- November 3, 1993 December 31, 1993 December 31, 1994 - --------------------------------------------------------------------------------------------------------------- M/I Schottenstein Homes, Inc. 100 126.96 48.70 - --------------------------------------------------------------------------------------------------------------- S&P 500 Index 100 101.41 102.75 - --------------------------------------------------------------------------------------------------------------- Peer Group 100 114.11 64.36 - ---------------------------------------------------------------------------------------------------------------
(1) Assumes that the value of the common stock of the Company and the indices was 100 on November 3, 1993 and that all dividends were reinvested. 22 26 PROPOSED AMENDED PERFORMANCE-BASED BONUS PLAN FOR THE CHIEF EXECUTIVE OFFICER Section 162(m) of the Code prohibits a publicly held corporation from deducting compensation paid to an employee in excess of $1 million unless the compensation is paid pursuant to a performance-based plan and unless the material terms of the performance goal are disclosed to and approved by the corporation's shareholders. In May 1994 the Company's shareholders approved the Performance-Based Bonus Plan for the Chief Executive Officer. Recent amendments to proposed regulations under Section 162 impose additional requirements upon publicly held companies seeking shareholder approval of performance-based plans. In light of these recent amendments, the Amended Performance-Based Bonus Plan is proposed for shareholder approval to ensure that any compensation in excess of $1 million earned by the Chief Executive Officer in future years will remain deductible for federal tax purposes. In furtherance of this objective, the Subcommittee, comprised of the "outside directors" of the Compensation Committee, has approved and will administer the Amended Performance-Based Bonus Plan (see "Board and Committee Meetings"). The Chief Executive Officer is the only person eligible for the Amended Performance-Based Bonus Plan. It states that his yearly bonus will be determined by two factors. The first factor is that if the Company earns income before income taxes in the amount of $10 million (the "Triggering Level"), the Chief Executive Officer will receive a percentage of the earnings that exceed the Triggering Level. For each $1 million increment over the Triggering Level, the Chief Executive Officer will earn a certain percentage of each dollar earned by the Company. The Chief Executive Officer's percentage for each $1 million increment varies between $.02 per dollar and $.085 per dollar depending on the level of income before incomes taxes earned by the Company, but is not a steadily rising or steadily falling percentage. The second factor is that if the Company's pre-tax income is at least fifty percent (50%) of Budgeted Net Income and the Company achieves a 92% customer satisfaction rating as measured by a customer survey conducted by the Company, the Chief Executive Officer will receive 17% of his base salary as a bonus. This percentage increases as the level of customer satisfaction increases and is capped at 25% of his base salary. The Subcommittee has the discretion to prospectively change the targets of the Amended Performance-Based Bonus Plan. The total bonus that may be earned by the Chief Executive Officer under the Amended Performance-Based Bonus Plan is capped at four times his 1993 base salary or a maximum amount of $2.3 million. It is impossible to determine the level of the Chief Executive Officer's bonus under the Performance-Based Bonus Plan for 1995 because it is based on the above-described financial performance and level of customer satisfaction achieved by the Company during 1995. However, if the Amended Performance-Based Bonus Plan had been in effect for 1994, the Chief Executive Officer would have earned the identical bonus he earned under the Performance-Based Bonus Plan approved by the shareholders in May 1994, as detailed in the table below: 23 27
- ------------------------------------------------------------------------------------------------------- PROPOSED AMENDED PERFORMANCE-BASED BONUS PLAN BENEFITS INCOME BEFORE LEVEL OF INCOME TAXES (1) CUSTOMER SATISFACTION (2) TOTAL BONUS (3) - ------------------------------------------------------------------------------------------------------- Irving E. Schottenstein, Chief Executive Officer and President $596,580 $119,025 $715,605 - -------------------------------------------------------------------------------------------------------
(1) The Company's income before income taxes was $19,193,000 for 1994. The Chief Executive Officer would have received a bonus for each $1 million increment over the Triggering Level as follows: $45,000; $55,000; $65,000; $75,000; $85,000; $60,000; $70,000; $80,000; $50,000 and $11,580. (2) The Company achieved a 95.7% customer satisfaction level for 1994. Therefore, the Chief Executive Officer would have received a bonus of 20.7% of his base salary. (3) Mr. Schottenstein's bonus for 1994 was $715,605 (see "Executive Compensation"). Approval of the Amended Performance-Based Bonus Plan requires the affirmative vote of the holders of a majority of the Company's Common Stock present at the meeting in person or by proxy. The Board recommends a vote FOR the adoption of the Amended Performance-Based Bonus Plan. Proxies solicited by management will be so voted unless shareholders specify in their proxies a contrary choice. SELECTION OF AUDITORS The Board will select the Company's independent auditors for 1995 based upon the recommendation of the Audit Committee which is anticipated to be made in May 1995. Deloitte & Touche LLP were the independent auditors for 1994. A representative of Deloitte & Touche LLP will be present at the Annual Meeting, will have an opportunity to make a statement, if he or she so desires, and will be available to respond to appropriate questions. SHAREHOLDER PROPOSALS Any proposals of shareholders which are intended to be presented at the next annual meeting of shareholders must be received by the Company at its principal executive offices by December 4, 1995. Such proposals may be included in next year's proxy statement if they comply with certain rules and regulations promulgated by the Securities and Exchange Commission. 24 28 EXPENSES OF SOLICITATION The entire expense of preparing, assembling, printing and mailing the proxy form and the form of material used in the solicitation of proxies will be paid by the Company. The Company does not expect to pay any compensation for the solicitation of proxies. OTHER MATTERS The Board knows of no other matters to be presented at the Annual Meeting. If any other matter is properly brought before the Annual Meeting, it is the intention of the persons named in the proxy to vote in their discretion upon such matters in accordance with their judgement. You are urged to sign, date and return the enclosed proxy in the envelope provided. No postage is required if the envelope is mailed from within the United States. If you subsequently decide to attend the Annual Meeting and wish to vote your shares in person, you may do so. Your cooperation in giving this matter your prompt attention is appreciated. By Order of the Board of Directors, /s/ Paul S. Coppel --------------------------------------------- Paul S. Coppel, Secretary 25 29 PROXY M/I SCHOTTENSTEIN HOMES, INC. 41 S. HIGH STREET, SUITE 2410, COLUMBUS, OHIO 43215 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 10, 1995. The undersigned hereby appoints Irving E. Schottenstein and Paul S. Coppel and each of them, proxies, with power of substitution, to vote all shares of Common Stock of M/I Schottenstein Homes, Inc. which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on May 10, 1995, or any adjournment thereof, as follows: SAID PROXIES ARE DIRECTED TO VOTE AS CHECKED BELOW AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. 1. To elect the nominees named below as directors. __ FOR all nominees listed below __ WITHHOLD AUTHORITY (except as marked to the contrary to vote for all nominees listed below) below (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.) ROBERT H. SCHOTTENSTEIN, ERIC J. SCHOTTENSTEIN, FRIEDRICH K.M. BOHM 2. __ FOR __ AGAINST approval of the Amended Performance-Based Bonus Plan for the Chief Executive Officer. 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (To be signed on reverse side.) 30 THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIVE IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NAMED NOMINEES FOR DIRECTORS AND "FOR" APPROVAL OF THE AMENDED PERFORMANCE-BASED BONUS PLAN FOR THE CHIEF EXECUTIVE OFFICER. PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON. Joint owners should each sign. Executors, administrators, trustees, guardians, and others should give their full title. Corporations and partnerships should sign in their full name by president or other authorized person. Dated: ------------------------- , 1995 --------------------------------------- Signature of Shareholder --------------------------------------- Signature of Shareholder (held jointly) PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE. 31 M/I SCHOTTENSTEIN HOMES, INC. PERFORMANCE BASED BONUS PROGRAM CHIEF EXECUTIVE OFFICER EFFECTIVE JANUARY 1, 1995 This Performance Based Bonus Plan is for the Chief Executive Officer of M/I Schottenstein Homes, Inc., and shall be administered by a subcommittee of the Compensation Committee (the "Subcommittee") comprised of all members of the Compensation Committee who are "Outside Directors", as defined in the Treasury Regulations promulgated under Section 162(m) of the Internal Revenue Code (the "Code"). The Subcommittee shall have the authority to prospectively change the targets of the Plan. The Chief Executive Officer of M/I Schottenstein Homes, Inc. is eligible to receive as a bonus up to four times his 1993 base salary of $575,000 as per the following criteria: I. ACTUAL PRE-TAX NET INCOME: In the event the actual pre-tax net income of the Company is equal to $10,000,000, the Chief Executive Officer will receive a graduating cents per dollar amount based on the following schedule.
Million Increments greater Cents per Incremental than or equal to $10,000,000 Million awarded ---------------------------- --------------------- $10,000,000.00 - $10,999,999.99 $0.0450 Cents $11,000,000.00 - $11,999,999.99 $0.0550 Cents $12,000,000.00 - $12,999,999.99 $0.0650 Cents $13,000,000.00 - $13,999,999.99 $0.0750 Cents $14,000,000.00 - $14,999,999.99 $0.0850 Cents $15,000,000.00 - $15,999,999.99 $0.0600 Cents $16,000,000.00 - $16,999,999.99 $0.0700 Cents $17,000,000.00 - $17,999,999.99 $0.0800 Cents $18,000,000.00 - $18,999,999.99 $0.0500 Cents $19,000,000.00 - $19,999,999.99 $0.0600 Cents $20,000,000.00 - $20,999,999.99 $0.0200 Cents $21,000,000.00 - $21,999,999.99 $0.0225 Cents $22,000,000.00 - $22,999,999.99 $0.0250 Cents $23,000,000.00 - $23,999,999.99 $0.0275 Cents $24,000,000.00 - $24,999,999.99 $0.0325 Cents $25,000,000.00 - $25,999,999.99 $0.0350 Cents $26,000,000.00 - $26,999,999.99 $0.0375 Cents $27,000,000.00 - $27,999,999.99 $0.0400 Cents $28,000,000.00 - $28,999,999.99 $0.0425 Cents $29,000,000.00 - $29,999,999.99 $0.0450 Cents $30,000,000.00 - $30,999,999.99 $0.0475 Cents $31,000,000.00 - $31,999,999.99 $0.0500 Cents $32,000,000.00 + $0.0525 Cents
II. If the actual pre-tax net income of the Company is at least 50% of Budgeted Net Income and the Company achieves at least a 92% affirmative response to Question Number 16 on the Customer Questionnaire, the Chief Executive Officer will receive 17% of his December 31 base salary, increasing proportionally for each increase in customer affirmative responses over 92%, to a maximum of 25% of December 31 base salary at a 100% "yes" response level. The Budgeted Net Income shall mean the amount of the Budgeted Net Income as presented to the Board of Directors on or before the 90th day of each year. PAYMENT Upon the certification by the outside members of the Compensation Committee that the objectives and material terms of the plan have been met, payment will be rendered. ACKNOWLEDGED: ___________________________________________ ____________________ Name Date -----END PRIVACY-ENHANCED MESSAGE-----