EMPLOYMENT AGREEMENT
AGREEMENT, made as of this 1st day of December, 1997, by and between
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the "Company"), and W.
XXXXXX XXXXXXX (the "Employee").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has approved the employment
of the Employee on the terms and conditions set forth in this Agreement; and
WHEREAS, the Employee is willing, for the consideration provided, to
continue in the employment of the Company on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Employment. The Company hereby agrees to continue to employ the
Employee, and the Employee hereby accepts such continued employment, upon the
terms and conditions set forth in this Agreement.
2. Term. The term (the "Term") of the Employee's employment under this
Agreement shall be the period commencing on December 1, 1997 and shall continue
until November 30, 1999,
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unless sooner terminated by termination of the Employee's employment pursuant to
Section 5, 6 or 7.
3. Position and Duties. During the Term, the Employee shall serve as
President, Chief Executive Officer and Chief Operating Officer of the Company,
and shall have such responsibilities and authority as commensurate with such
office and as may from time to time be prescribed by or pursuant to the
Company's By-laws. The Employee shall devote substantially all of his working
time and efforts to the business and affairs of the Company.
4. Compensation. During the Term, the Company shall provide the Employee
with the following compensation and other benefits:
(a) Base Salary. The Company shall pay to the Employee base salary at the
initial rate of $300,000 per annum, which shall be payable in accordance with
the standard payroll practices of the Company. Such base salary rate shall be
reviewed annually in accordance with the Company's normal policies beginning in
calendar year 1998; provided, however, that at no time during the Term shall the
Employee's base salary be decreased from the rate then in effect except with the
written consent of the Employee.
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(b) Bonus. The Employee shall participate in a bonus program maintained by
the Company.
(c) Other Benefits. In addition to the compensation and benefits otherwise
specified in this Agreement, the Employee (and, if provided for under the
applicable plan or program, his spouse) shall be entitled to participate in, and
to receive benefits under, the Company's employee benefit plans and programs
that are or may be available to senior executives generally and on terms and
conditions that are no less favorable than those generally applicable to other
senior executives of the Company. At no time during the Term shall the
Employee's participation in or benefits received under such plans and programs
be decreased except (i) in connection with across-the-board reductions similarly
affecting substantially all senior executives of the Company or (ii) with the
written consent of the Employee.
(d) Expenses. The Employee shall be entitled to prompt reimbursement of all
reasonable expenses incurred by him in performing services hereunder, provided
he properly accounts therefor in accordance with the Company's policies.
(e) Office and Services Furnished. The Company shall furnish the Employee
with office space, secretarial assistance and such other facilities and services
as shall
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be suitable to the Employee's position and adequate for the performance of his
duties hereunder.
5. Termination of Employment by the Company.
(a) Cause. The Company may terminate the Employee's employment for Cause if
(i) the Employee willfully engages in conduct which is or would reasonably be
expected to be materially and demonstrably injurious to the Company, (ii) the
Employee willfully engages in an act or acts of dishonesty resulting in material
personal gain to the Employee at the expense of the Company, (iii) the Employee
is convicted of a felony, (iv) the Employee engages in an act or acts of gross
malfeasance in connection with his employment hereunder, (v) the Employee
commits a material breach of the confidentiality provision set forth in Section
10, or (vi) the Employee exhibits demonstrable evidence of alcohol or drug abuse
having a substantial adverse effect on his job performance hereunder. The
Company shall exercise its right to terminate the Employee's employment for
Cause by (i) giving him written notice of termination at least 45 days before
the date of such termination specifying in reasonable detail the circumstances
constituting such Cause; and (ii) delivering to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than a ma-
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jority of the entire membership of the Board of Directors (except the Employee),
after reasonable notice to the Employee and an opportunity for the Employee and
his counsel to be heard before the Board of Directors, finding that the Employee
has engaged in the conduct set forth in this subsection (a). In the event of
such termination of the Employee's employment for Cause, the Employee shall be
entitled to receive (i) his base salary pursuant to Section 4(a) and any other
compensation and benefits to the extent actually earned pursuant to this
Agreement or any benefit plan or program of the Company as of the date of such
termination at the normal time for payment of such salary, compensation or
benefits and (ii) any amounts owing under Section 4(d). Except as provided in
Section 9, the Employee shall receive no other compensation or benefits from the
Company.
(b) Disability. If the Employee incurs a Permanent and Total Disability, as
defined below, the Company may terminate the Employee's employment by giving him
written notice of termination at least 45 days before the date of such
termination. In the event of such termination of the Employee's employment
because of Permanent and Total Disability, (i) the Employee shall be entitled to
receive his base salary pursuant to Section 4(a) and any other compensation and
benefits to the extent actually earned by the Em-
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ployee pursuant to this Agreement or any benefit plan or program of the Company
as of the date of such termination of employment at the normal time for payment
of such salary, compensation or benefits, and (ii) any amounts owing under
Section 4(d). For purposes of this Agreement, the Employee shall be considered
to have incurred a Permanent and Total Disability if he is unable to engage in
any substantial gainful employment by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. The existence of such Permanent and Total Disability shall be
evidenced by such medical certification as the Secretary of the Company shall
require and shall be subject to the approval of the Compensation Committee of
the Board of Directors of the Company.
(c) Without Cause. The Company may terminate the Employee's employment at
any time and for any reason, other than for Cause or because of Permanent and
Total Disability, by giving him a written notice of termination to that effect
at least 45 days before the date of termination. In the event of such
termination of the Employee's employment without Cause, the Employee shall be
entitled to the benefits described in Section 8.
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6. Termination of Employment by the Employee.
Good Reason. The Employee may terminate his employment for Good Reason by
giving the Company a written notice of termination at least 45 days before the
date of such termination specifying in reasonable detail the circumstances
constituting such Good Reason. In the event of the Employee's termination of his
employment for Good Reason, the Employee shall be entitled to the benefits
described in Section 8. For purposes of this Agreement, Good Reason shall mean
(i) a significant reduction in the scope of the Employee's authority, functions,
duties or responsibilities from that which is contemplated by this Agreement,
(ii) the relocation of the Employee's office location to a location more than 50
miles away from the Employee's principal place of employment on December 1,
1997, (iii) any reduction in the Employee's base salary, (iv) a significant
change in the Company's annual bonus program adversely affecting the Employee,
or (v) a significant reduction in the other employee benefits provided to the
Employee (unless the Employee is fully compensated for the value of such
reduction through an increase in cash compensation); provided that, in the event
of a change of control of the Company involving X.X. Xxxxxx, Inc., a substantial
reduction in such employee benefits shall not be deemed to have occurred for the
purpose of clause (v) above after the expiration of the 6-month period beginning
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on the date of such change of control if the Employee shall be entitled to
participate in and receive benefits under the Company's or its successor's
employee benefit plans and programs that are or may be available to senior
executives generally and on terms and conditions that are no less favorable than
those generally applicable to other senior executives of the Company or its
successor. A significant reduction within the meaning of clause (i) of the
preceding sentence shall not be deemed to have occurred merely because the
Company ceases to be a public company and the Employee ceases to report directly
to the Board of Directors or because the Employee's title is changed, provided
that the Employee's authority, functions, duties and responsibilities otherwise
remain substantially the same as the authority, functions, duties and
responsibilities of a person with the Employee's position (as specified in
Section 3 herein and as of the date hereof) within a comparably sized division
of a national homebuilding company. A significant reduction within the meaning
of clause (v) of the second preceding sentence shall not be deemed to have
occurred merely by reason of the termination of the Company's Equity Split
Dollar Plan, provided that the Company assigns to the Employee all rights which
the Company may have under any life insurance policy issued on the Employee's
life under said plan, including, without limitation, the right to reimbursement
for any premiums and adminis-
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trative service fees paid by the Company (in which event, subsection (f) of
Section 8 of this Agreement shall have no further applicability). If an event
constituting a ground for termination of employment for Good Reason occurs, and
the Employee fails to give notice of termination within 3 months after the
occurrence of such event, the Employee shall be deemed to have waived his right
to terminate employment for Good Reason in connection with such event (but not
for any other event for which the 3-month period has not expired).
(a) Other. The Employee may terminate his employment at any time and for
any reason, other than pursuant to subsection (a) above, by giving the Company a
written notice of termination to that effect at least 45 days before the date of
termination. In the event of the Employee's termination of his employment
pursuant to this subsection (b), the Employee shall be entitled to receive (i)
his base salary pursuant to Section 4(a) and any other compensation and benefits
to the extent actually earned by the Employee pursuant to this Agreement or any
benefit plan or program of the Company as of the date of such termination at the
normal time for payment of such salary, compensation or benefits, and (ii) any
amounts owing under Section 4(d). Except as provided in Section 9, the Employee
shall receive no other compensation or benefits from the Company.
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7. Termination of Employment By Death. In the event of the death of the
Employee during the course of his employment hereunder, the Employee's estate
shall be entitled to receive his base salary pursuant to Section 4(a) and any
other compensation and benefits to the extent actually earned by the Employee
pursuant to this Agreement or any other benefit plan or program of the Company
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits, and any amounts owing under Section 4(d).
8. Benefits Upon Termination Without Cause or For Good Reason. If the
Employee's employment with the Company shall terminate (i) because of
termination by the Company pursuant to Section 5(c) other than for Cause or
because of Permanent and Total Disability, or (ii) because of termination by the
Employee for Good Reason pursuant to Section 6(a), the Employee shall be
entitled to the following:
(a) The Company shall pay to the Employee his base salary pursuant to
Section 4(a) and any other compensation and benefits to the extent actually
earned by the Employee under this Agreement or any benefit plan or program of
the Company as of the date of such termination at the
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normal time for payment of such salary, compensation or benefits.
(b) The Company shall pay the Employee any amounts owing under Section
4(d).
(c) The Company shall pay to the Employee as a severance benefit an amount
equal to three times the sum of (i) his annual rate of base salary immediately
preceding his termination of employment, and (ii) the average of his three
highest annual bonuses awarded under the Company's regular annual bonus program
for any of the five calendar years preceding his termination of employment (or,
if he was not eligible for a bonus for at least three calendar years in such
five-year period, then the average of such bonuses for all of the calendar years
in such five-year period for which he was eligible), with any deferred bonuses
counting for the year earned rather than the year paid. Such severance benefit
shall be paid in a lump sum within 45 days after the date of such termination of
employment.
(d) The Company shall pay to the Employee as a bonus for the year of
termination of his employment an amount equal to a portion (determined as
provided in the next sentence) of the bonus awarded to him under the Company's
regular annual bonus program for the calendar year
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immediately preceding the calendar year of the termination of his employment,
with any deferred bonuses counting for the year earned rather than the year
paid. Such portion shall be determined by dividing the number of days of the
Employee's employment during such calendar year up to his termination of
employment by 365 (366 if a leap year). Such payment shall be made in a lump sum
within 45 days after the date of such termination of employment, and the
Employee shall have no right to any further bonuses under said program. (e)
During the period of 36 months beginning on the date of the Employee's
termination of employment, the Employee shall remain covered by the medical,
dental, vision, life insurance, and, if reasonably commercially available
through nationally reputable insurance carriers, long-term disability plans of
the Company that covered him immediately prior to his termination of employment
as if he had remained in employment for such period. In the event that the
Employee's participation in any such plan is barred, the Company shall arrange
to provide the Employee with substantially similar benefits (but, in the case of
long-term disability benefits, only if reasonably commercially available). Any
medical insurance coverage for such 36-month period pursuant to this subsection
(e) shall become secondary
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upon the earlier of (i) the date on which the Employee begins to be covered by
comparable medical coverage provided by a new employer, or (ii) the earliest
date upon which the Employee becomes eligible for Medicare or a comparable
Government insurance program.
(f) At the end of the 36-month period described in subsection (e) above,
the Company shall assign to the Employee all rights which the Company may have
under any life insurance policy issued on the Employee's life under the
Company's Equity Split Dollar Plan (including, without limitation, the right to
reimbursement for any premiums and administrative service fees paid by the
Company).
(g) The Company shall arrange for an outplacement assistance firm to
provide outplacement assistance services to the Employee at the Company's
expense for a period of twelve months beginning on the date of termination of
the Employee's employment.
(h) If any payment or benefit received by or in respect of the Employee
under this Agreement or any other plan, arrangement or agreement with the
Company (determined without regard to any additional payments required under
this subsection (h) and Appendix A of this Agreement) (a "Payment") would be
subject to the excise tax imposed by
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Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or
any similar tax that may hereafter be imposed) or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, being hereinafter collectively
referred to as the "Excise Tax"), the Company shall pay to the Employee with
respect to such Payment at the time specified in Appendix A an additional amount
(the "Gross-up Payment") such that the net amount retained by the Employee from
the Payment and the Gross-up Payment, after reduction for any Excise Tax upon
the Payment and any Federal, state and local income and employment tax and
Excise Tax upon the Gross-up Payment, shall be equal to the Payment. The
calculation and payment of the Gross-up Payment shall be subject to the
provisions of Appendix A.
(i) Anything in this Agreement to the contrary notwithstanding, if the
Company approves any transaction with another business entity which it wishes to
qualify for "pooling of interests" accounting treatment and, prior to the
consummation of such transaction, the Company's accountants advise that any
benefits payable under this Agreement might adversely affect the availability of
such accounting treatment, such benefits shall not be payable, and the Company
and the Employee shall negotiate in good faith to provide, if possible, an al-
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ternative way of giving substantially equivalent economic benefits to the
Employee that would not adversely affect "pooling of interests" accounting
treatment.
9. Entitlement To Other Benefits. Except as provided in this Agreement,
this Agreement shall not be construed as limiting in any way any rights or
benefits that the Employee or his spouse, dependents or beneficiaries may have
pursuant to any other plan or program of the Company.
10. Confidential Information. The Employee shall retain in confidence any
confidential information known to him concerning the Company, its subsidiaries,
and their respective businesses until such information is publicly disclosed.
This provision shall survive the termination of the Employee's employment for
any reason under this Agreement.
11. No Duty to Seek Employment. The Employee shall not be under any duty or
obligation to seek or accept other employment following termination of
employment, and no amount, payment or benefits due to the Employee hereunder
shall be reduced or suspended if the Employee accepts subsequent employment.
12. Non-Solicitation. The Employee agrees that, for a period of eighteen
months following the date of termination
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of his employment hereunder, he will not solicit, directly or indirectly, any
officer or employee of the Company or any of its subsidiaries or affiliates to
leave and work for any other employer and, further, that he will not suggest to
others that they approach or solicit any officer or employee of the Company or
any of its subsidiaries or affiliates with respect to potential employment
elsewhere. This provision shall survive the termination of the Employee's
employment for any reason under this Agreement. If the Employee breaches this
provision in any significant respect, he shall forfeit his right to receive the
payments and benefits described in subsections (c) through (h) of Section 8
(including, without limitation, payments and benefits already received). To the
extent any payments and benefits already received are so forfeited, the Employee
shall promptly return such payments and benefits to the Company. In addition,
the Company may seek other legal and equitable relief in the event of any breach
by the Employee of this Section 12.
13. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before a panel of
three arbitrators in Phoenix, Arizona in accordance with the applicable rules
and procedures of the American Arbitration Association then in effect.
Arbitration shall be the exclusive remedy for any such dispute or controversy
except only as to the failure to abide
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by an arbitration award rendered hereunder. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction. Such
arbitration shall be final and binding on the parties. If the Employee is
awarded more than an insignificant amount compared with what the Company
asserted was due him or otherwise substantially prevails in the arbitration, the
Company shall reimburse the Employee for the costs incurred by the Employee in
connection with such arbitration, including without limitation reasonable
attorneys' fees, and hereby agrees to pay interest on any money award obtained
by the Employee from the date payment should have been made until the date
payment is made, calculated at the rate of 2% in excess of the LIBOR rate in
effect from time to time from the date that payment(s) to him should have been
made under the Agreement. If the Employee enforces the arbitration award in
court, the Company shall reimburse the Employee for the costs incurred in such
enforcement, including without limitation reasonable attorneys' fees.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Employee and his estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by the Employee.
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15. Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed sufficiently given if
delivered by hand or mailed by registered mail, return receipt requested, to his
residence in the case of the Employee and to its principal executive offices in
the case of the Company. Either party may by giving written notice to the other
party in accordance with this Section 16 change the address at which it is to
receive notices hereunder.
17. Controlling Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware (without
giving effect to principles of conflict of laws).
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18. Changes to Agreement. This Agreement may not be changed orally but only
in a writing, signed by the party against whom enforcement is sought.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
of which together shall constitute one and the same instrument.
20. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to its subject matter and supersedes all prior
agreements, drafts, and written or oral representations of either party.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the 1st
day of December, 1997.
EMPLOYEE: CONTINENTAL HOMES HOLDING CORP.
/s/ W. Xxxxxx Xxxxxxx By:/s/ Xxxxxxx X. Xxxxxxxx
------------------------ ------------------------------
W. Xxxxxx Xxxxxxx Xxxxxxx X. Xxxxxxxx
ATTEST:
By:/s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxx
Appendix A
Gross-up Payments
The following provisions shall be applicable with respect to the Gross-Up
Payments described in Section 8(h) of this Agreement.
(a) For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (i) all of the Payments
received or to be received shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax unless, in the opinion of tax counsel selected by the Company,
the Payments (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, or excess parachute
payments (as determined after application of Section 280G(b)(4)(B) of the Code),
and (ii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by independent auditors selected by the Company in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Employee shall
be deemed to pay Federal income taxes at the highest marginal rate of Federal
income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation to
which such payment could be subject based upon the state and locality of the
Employee's residence or employment, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state and local
taxes. In addition, for purposes of determining the amount of the Gross-Up
Payment, the Company shall make a determination of the amount of any employment
taxes required to be paid on the Gross-Up Payment. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the Employee shall repay the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
Federal and state and local income and employment tax imposed on the portion of
the Gross-up Payment being repaid by the Employee if such repayment results in a
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reduction in Excise Tax and/or a Federal and state and local income or
employment tax deduction), plus interest on the amount of such repayment at the
Federal short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason
of any payments the existence or amount of which cannot be determined at the
time of the Gross-up Payment), the Company shall make an additional gross-up
payment in respect of such excess (plus any interest, penalties or additions
payable with respect to such excess) at the time that the amount of such excess
is finally determined. Notwithstanding the foregoing, the Company shall withhold
from any payment due to the Employee the amount required by law to be so
withheld under Federal, state or local wage or employment tax withholding
requirements or otherwise (including without limitation Section 4999 of the
Code), and shall pay over to the appropriate government authorities the amount
so withheld.
(b) The Gross-up Payment with respect to a Payment shall be paid not later
than the forty-fifth day following the date of the Payment; provided, however,
that if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Employee on such
date an estimate, as determined in good faith by the Company, of the amount of
such payments and shall pay the remainder of such payments (together with
interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of
the Code) as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Employee, payable on the fifth day after demand by the Company (together with
interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of
the Code). At the time that payments are made under Section 8(h) and this
Appendix A, the Company shall provide the Employee with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations, including, without limitation, any opinions or other
advice the Company has received from outside counsel, auditors or consultants
(and any such opinions or advice which are in writing shall be attached to the
statement).
