EXHIBIT 10.31
EMPLOYMENT AGREEMENT
Except as otherwise specifically provided herein, this Employment
Agreement (this "Agreement") by and between Xxxxx Homes, Inc., a Florida
corporation (the "Company"), and Xxxx Xxxxx (the "Executive") is made effective
for all purposes immediately prior to the consummation of the Offer (as defined
in the Agreement and Plan of Merger dated as of October 12, 2000 among Technical
Olympic USA, Inc., a Delaware corporation (the "Parent"), Helios Acquisition
Corp., a Florida corporation, and Xxxxx Homes, Inc., a Florida corporation (the
"Merger Agreement") (the "Effective Time").
RECITALS:
The Company, its divisions, subsidiaries, and other affiliated entities
are primarily engaged in the business of developing land for, and the
construction of, detached, single family residences (the "Business"). The
Company and the Executive previously entered into a Change in Control Severance
Agreement dated May 15, 2000 (the "Severance Agreement"), the intent and purpose
of which was to specify the terms and conditions of the Executive's employment
with the Company, and the Company and the Executive now desire to cancel and
terminate the Severance Agreement and to enter into this Agreement. all
effective as of the Effective Time.
AGREEMENT
1. Employment Period. The Company hereby agrees to continue to
employ the Executive, and the Executive hereby agrees to remain in the employ of
the Company, for the period commencing on the Effective Time and ending on
December 31, 2003, unless terminated earlier in accordance with the provisions
of Section 3 hereof. However, the Company and the Executive may extend the term
of this Agreement by execution of a written amendment hereto, setting forth the
terms of such extension. If the parties fail to execute such written amendment,
but the employment relationship continues after December 31, 2003, the term of
this Agreement automatically shall continue during such period of continued
employment, which shall be on a month-to-month basis. Notwithstanding the
foregoing, if a Change of Control occurs prior to the termination of this
Agreement pursuant to Section 3, the term shall not end prior to the second
anniversary of such Change of Control, unless terminated earlier in accordance
with the provisions of Section 3 herein. The term of the Executive's employment
under this Agreement is sometimes referred to as the "Employment Period".
2. Terms of Employment
(a) Position and Duties.
(i) During the Employment Period, (1) the
Executive shall serve as the President-Xxxxx Homes/Arizona, Inc. for
the Company, (2) the Executive's status, and reporting requirements,
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held.
exercised and assigned at any time during the 180 day period
immediately preceding the Effective Time, and (3) the Executive's
services shall be performed at the location where the
Executive was employed immediately preceding the Effective Time or any
office or location less than sixty (60) miles from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote full attention and time during
normal business hours to the business and affairs of the Company and,
to the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to perform faithfully such responsibilities in
a manner consistent with prior performance. During the Employment
Period it shall not be a violation of this Agreement for the Executive
to (1) serve on corporate, civic or charitable boards or committees,
(2) deliver lectures, fulfill speaking engagements or teach at
educational institutions, and (3) manage personal investments
(including without limitation land banking for the Company and others),
so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an Executive of the
Company in accordance with this Agreement. It is expressly understood
and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Time, the continued
conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Time shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company. The Company also may, from
time to time, assign additional or other duties to the Executive in
conjunction with the restructuring of the Parent and its subsidiaries,
which additional or other duties shall be reasonably consistent with
the Executive's experience and position with the Company; provided,
however, that no such assignment shall be made without the Executive's
prior written consent. If the Executive is appointed or elected an
officer or director of any of the Company's affiliates, and the
Executive consents in writing to such appointment, the Executive will
fulfill his duties as such officer or director without additional
compensation. Upon his termination of employment with the Company, the
Executive automatically shall cease to be an employee, officer or
director of any affiliate of the Company, unless the board of directors
of the Company provides otherwise.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive will be paid an annual salary of $225,000 ("Base
Salary"), which will be payable in equal periodic installments
according to the Company's customary payroll practices for its
executives. During the Employment Period the Base Salary shall be
reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in the
base salary awarded in the ordinary course of business to other key
executives of the Company and its subsidiaries. Any increase in Base
Salary shall not serve to limit or reduce any other obligations of the
Executive under this Agreement. Base Salary shall not be reduced after
any such increase.
(ii) Quarterly Bonus. In addition to Base Salary,
the Executive shall be awarded, for each fiscal quarter of the Company
during the Employment Period, a quarterly cash bonus (the "Quarterly
Bonus") determined in accordance with the formula attached as Exhibit
A hereto and made a part hereof, payable within 15 days of the end of
each fiscal quarter; provided, however, that in no event shall the
aggregate Quarterly Bonuses payable during the Employment Period be
less than the highest bonus payable
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to the Executive from the Company and its subsidiaries in respect of
any of the three fiscal years immediately preceding the fiscal year in
which the Effective Time occurs.
(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Quarterly Bonus payable as hereinabove
provided, the Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement plans,
practices, policies and programs applicable to other executives of the
Company and its affiliates, in each case comparable to those in effect
at the Effective Time or as subsequently amended. Such plans,
practices, policies and programs, in the aggregate, shall provide the
Executive with compensation. benefits and reward opportunities that in
the aggregate are substantially the same as, and equivalent in value
to, the most favorable of such compensation, benefits and reward
opportunities provided by the Company for the Executive under such
plans, practices, policies and programs as in effect at any time during
the 180 day period immediately preceding the Effective Time or, if more
favorable to the Executive, as provided at any time thereafter with
respect to other executives of the Company and its subsidiaries.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans. practices, policies and programs
provided by the Company and its subsidiaries (including, without
limitation, medical, prescription, dental, disability, salary
continuance, life, group life, accidental death and travel accident
insurance plans and programs), that in the aggregate are substantially
the same as, and equivalent in value to the most favorable of such
plans, practices, policies and programs in effect at any time during
the 180-day period immediately preceding the Effective Time or, if more
favorable to the Executive and/or the Executive's family as in effect
at any time thereafter with respect to other executives of the Company
and its subsidiaries.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its subsidiaries in effect at any time during the 180 day period
immediately preceding the Effective Time or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other
executives of the Company and its subsidiaries.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, in
accordance with the plans, practices, programs and policies of the
Company and its subsidiaries that, in the aggregate, are substantially
the same as those in effect at any time during the 180-day period
immediately preceding the Effective Time or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other
executives of the Company and its subsidiaries.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other appointments, and to
secretarial and other assistance, at least equal to the most favorable
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of the foregoing provided to the Executive by the Company and its
subsidiaries at any time during the 180 day period immediately
preceding the Effective Time or, if more favorable to the Executive,
as provided at any time thereafter with respect to other executives of
the Company and its subsidiaries.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its subsidiaries as in effect at any time during the 180-day period
immediately preceding the Effective Time or, if more favorable to the
Executive, as in effect at any time thereafter with respect to other
executives of the Company and its subsidiaries.
3. Termination
(a) Death or Disability. This Agreement shall terminate
automatically upon the Executive's death. If the Company determines in good
faith that the Disability of the Executive has occurred (pursuant to the
definition of "Disability" set forth below), it may give to the Executive
written notice of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" means a mental or physical
incapacity, illness or disability which renders the Executive unable to perform
his duties and responsibilities for the Company and which, at least 26 weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably).
(b) The Company may terminate the Executive's employment
for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of
fraud, embezzlement or misappropriation of funds, taken by the Executive and
intended to result in substantial personal enrichment of the Executive at the
expense of the Company, (ii) repeated violations by the Executive of the
Executive's obligations under Section 2(a) of this Agreement which are
demonstrably willful and deliberate on the Executive's part and which are nor
remedied in a reasonable period of time after receipt of written notice from the
Company, or (iii) the conviction of the Executive of a felony.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for "Good Reason". For purposes of this Agreement,
"Good Reason" means:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 2(a)
of this Agreement, or any other action by the Company which results in
a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated. insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
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(ii) any failure by the Company to comply with
any of the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than that described in Section
2(a)(i)(3) hereof, except for travel reasonably required in the
performance of the Executive's responsibilities;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted by
this Agreement; or
(v) any failure by the Company to comply with
and satisfy Section 9(h) of this Agreement.
(d) Notice of Termination. Any termination by the Company
for Cause or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 5(c) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than fifteen (15)
days after the giving of such notice). The failure by the Executive to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive hereunder or
preclude the Executive from asserting such fact or circumstances in enforcing
his rights hereunder.
(e) Date of Termination. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date specified
therein, as the case may be; provided, however, that (i) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (ii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
4. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by
reason of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than those obligations accrued or earned and vested (if applicable) by the
Executive as of the Date of Termination, including, for this purpose (i) the
Executive's full Base Salary through the Date of Termination at the rate in
effect on the the Date or Termination or, if higher, at the highest rate in
effect at any time from the 180-day period preceding the Effective Time through
the Date of Termination (the "Highest Base Salary"), (ii) the earned but unpaid
Quarterly Bonuses for any fiscal quarter ending on or before the Date of
Termination, (iii) the product of the sum of Quarterly Bonuses payable to the
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Executive for the last four fiscal quarters ending prior to the Date of
Termination and a fraction. the numerator of which is the number of days from
the first day of the fiscal quarter in which the Date of Termination occurs
through and including the Date of Termination, and the denominator of which is
the number of days in the fiscal quarter which the Date of Termination occurs,
and (iv) any compensation previously deferred by the Executive (together with
any accrued interest thereon) and not yet paid by the Company and any accrued
vacation pay not yet paid by the Company (such amounts specified in clauses (i),
(ii) and (iii) are hereinafter refused to as "Accrued Obligations"). All such
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the Executive's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided by the Company and any of its subsidiaries to
surviving families of executives of the Company and such subsidiaries under such
plans, programs, practices and policies relating to family death benefits, if
any, in accordance with the plans, programs, practices and policies of the
Company and its subsidiaries in effect at any time during the 180 day period
immediately preceding the Effective Time or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the Executive's death
with respect to other executives of the Company and its subsidiaries and their
families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, this Agreement shall
terminate without further obligations to the Executive, other than those
obligations accrued or earned and vested (if applicable) by the Executive as of
the Date of Termination, including for this purpose, all Accrued Obligations.
All such Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other benefits at least
equal to the most favorable of those provided by the Company and its
subsidiaries to disabled Executives and/or their families in accordance with
such plans, programs, practices and policies relating to disability, if any, in
accordance with the plans, programs, practices and policies of the Company and
its subsidiaries in effect at any time during the 180 day period immediately
preceding the Effective Date or, if favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter on the Disability
Effective Date with respect to other executives and their families.
(c) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay
to the Executive the Highest Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive (together
with accrued interest thereon). If the Executive terminates employment other
than for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned
and vested (if applicable) by the Executive through the Date of Termination,
including for this purpose, all Accrued Obligations. All such Accrued
Obligations shall be paid to the Executive pay the Executive in a lump sum in
cash within 30 days of the Date of Termination. The Executive shall not be
released from the covenants contained in Sections 6 and 7 hereof and on the
first day of the month following the Date of Termination the Company shall pay
the Executive a lump sum cash payment equal to 1/12th of the Executive's
Highest Base Salary, multiplied by the lesser of (i) 12, or (ii) the number of
months (and fractions thereof) from the Date of Termination through December
31, 2003; provided, however, that in the event that the Company terminates the
Executive's employment for Cause, then the Company may eject, by written
notice to the Executive prior to
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the first day of the calendar month following the Date of Termination, to
release the Executive from the covenants contained in Section 6(b)(1) and (2)
hereof, in which case the Company shall be released from its obligations to make
the payment specified in this sentence.
(d) Good Reason; Other Than for Cause, Disability or
Death. If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause, Disability or death, or if the
Executive shall terminate his employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(1) the Accrued Obligations, and
(2) the Executive's Highest Base Salary
for the period from the Date of Termination until the last day
of the Employment Period under Section 1 hereof, determined
for this purpose without regard to any early termination under
Section 3 hereof or otherwise, and provided, however, that if
the Date of Termination is within the first two years of the
Employment Period, the foregoing period shall not be less than
2 years (such period being defined as the "Remaining Period");
and
(3) an amount equal to the product of
(i) the Quarterly Bonuses payable to the Executive for the
last four fiscal quarters ending on or before the Date of
Termination, or if higher, the Quarterly Bonuses payable to
the Executive for the last four fiscal quarters ending on or
before the Effective Time (the "Recent Bonuses"), multiplied
by (ii) a fraction. the numerator of which is the number of
days in the Remaining Period, and the denominator of which is
365; and
(4) in the case of compensation
previously deferred by the Executive, all amounts previously
deferred (together with any accrued interest thereon) and not
yet paid by the Company; and
(5) all other amounts accrued or earned
by the Executive through the Date of Termination and amounts
otherwise owing under the then existing plans and policies at
the Company; and
(ii) for the Remaining Period, or such longer
period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies
described in Section 2(b)(iv) and (vi) of this Agreement if the
Executive's employment had not been terminated, including health,
dental, disability insurance and life insurance, and, for purposes of
eligibility for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have
retired on the last day of such period.
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(e) Change in Control.
(i) Notwithstanding the foregoing provisions of
Section 4(d) hereof, in the event that after the Change in Control
Effective Date, as defined below, either the Company shall terminate
the Executive's employment other than for Cause. Disability or death,
or the Executive shall terminate his employment for Good Reason, then
the lump sum payable to the Executive under Section 4(d)(i) hereof (in
addition to the continuation of benefits under Section 4(d)(ii) hereof)
shall be the greater of the amount specified in Section 4(d)(i) hereof
or the aggregate of the following amounts:
(1) The Accrued Obligations; and
(2) the product of (x) two times (y)
the sum of (i) the Highest Base Salary and (ii) the Recent
Bonuses; and
(3) in the case of compensation
previously deferred by the Executive, all amounts previously
deferred (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet
paid by the Company; and
(4) all other amounts accrued or earned
by the Executive through the Date of Termination and amounts
otherwise owing under the then existing plans and policies at
the Company; and
(ii) For purposes of this Agreement:
(1) the "Change in Control Effective
Date" shall be the date on which a Change of Control occurs.
Anything in this Agreement to the contrary notwithstanding, if
the Executive's employment with the Company is terminated
prior to the date on which a Change of Control occurs, and it
is reasonably demonstrated that such termination (x) was at
the request of a third party who has taken steps reasonably
calculated to effect a Change of Control, or (y) otherwise
arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Change
in Control Effective Date" shall mean the date immediately
prior to the date of such termination; and
(2) "Change of Control" shall mean the
occurrence of any of the following events with respect to
either the Company or the Parent, or any other entity that
owns, directly or indirectly, a Controlling Interest, as
defined below, in the Company or the Parent (each an
"Applicable Entity"):
(i) consummation by the
Applicable Entity of (x) a reorganization, merger, consolidation or
other of corporate transaction or series of transactions, in each case,
with respect to which persons who were the shareholders of the
Applicable Entity immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then outstanding voting securities in substantially the
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same proportions as their ownership immediately prior to such
reorganization, or (y) a liquidation or dissolution of the Applicable
Entity, or (z) the sale of all or substantially all of the assets of
the Applicable Entity;
(ii) Individuals who, as of
the date immediately following the consummation of the Merger (as
provided in the Merger Agreement), constitute the board of directors of
the Applicable Entity (the "Incumbent Board") cease for any reason to
constitute a majority of the board of directors of the Applicable
Entity, provided that any person becoming a director subsequent to the
date of this Agreement whose election, or nomination for election by
the Applicable Entity's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors) shall be,
for purposes of this Agreement, considered as though such person were a
member of the Incumbent Board; or
(iii) the acquisition (other
than from the Applicable Entity, the Parent or its subsidiaries) by any
person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of more than 50% of either the
then outstanding shares of the Applicable Entity's Common Stock or the
combined voting power of the Applicable Entity's then outstanding
voting securities entitled to vote generally in the election of
directors (hereinafter referred to as the ownership of a "Controlling
Interest"') excluding, for this purpose, any acquisitions by (1) the
Applicable Entity, the Parent or its subsidiaries, (2) any person,
entity or "group" that as of the date of this Agreement owns beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of a Controlling Interest, or (3) any
employee benefit plan of the Applicable Entity. the Parent or its
subsidiaries.
Notwithstanding the foregoing or anything in this Agreement to the contrary, (x)
the consummation of any or all of the transactions contemplated in the Merger
Agreement shall not constitute a Change of Control and (y) no public offering by
the Applicable Entity of its shares of Common Stock (a "Public Offering") shall
constitute a Change in Control unless the stockholders of the Applicable Entity
immediately prior to the Public Offering own, immediately following the Public
Offering, less than 40% of the outstanding shares of the Applicable Entity or
less than 40% of the combined voting power of the Applicable Entity's then
outstanding voting securities entitled to vote in the election of directors, and
(z) no Change in Control shall be deemed to occur solely by reason of any
transaction among Applicable Entities.
(f) Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices
provided by the Company or any of its subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company or any of its subsidiaries at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program.
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(g) Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligation
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) commenced after the Change in Control Effective Date by
the Company or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to Section 5 of this Agreement), plus in each case interest at
the applicable Federal rate provided for in Section 7872(f)(2) of the Code.
5. Certain Reduction of Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be nondeductible by the Company for
Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of amounts payable or distributable to or for the
benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced to the Reduced Amount. The "Reduced
Amount" shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code. Anything to
the contrary notwithstanding, if the Reduced Amount is zero and it is determined
further that any Payment which is not an Agreement Payment would nevertheless be
nondeductible by the Company for Federal income tax purposes because of Section
280G of the Code, then the aggregate present value of Payments which are not
Agreement Payments shall also be reduced (but not below zero) to an amount
expressed in present value which maximizes the aggregate present value of
Payments without causing any Payment to be nondeductible by the Company because
of Section 280G of the Code. For purposes of this Section 5, present value shall
be determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this
Section 5 shall be made by BDO Xxxxxxx, LLP (the" Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Executive
within twenty (20) business days of the Date of Termination or such earlier time
as is requested by the Company and an opinion to the Executive that he has
substantial authority not to report any excise tax on his Federal income tax
return with respect to any Payments. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). Any such
determination by the Accounting Firm shall be binding upon the Company and the
Executive. The Executive shall determine which and how much of
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the Payments shall be eliminated or reduced consistent with the requirements of
this Section 5, provided that, if the Executive does not make such determination
within ten business days of the receipt of the calculations made by the
Accounting Firm, the Company shall elect which and how much of the Payments
shall be eliminated or reduced consistent with the requirements of this Section
5 and shall notify the Executive promptly of such election. Within five business
days thereafter, the Company shall pay to or distribute to or for the benefit of
the Executive such amounts as are then due to the Executive under this
Agreement. All fees and expenses of the Accounting Firm incurred in connection
with the determinations contemplated by this Section 5 shall be borne by the
Company.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Payments will have been made by
the Company which should not have been made ("Overpayment") or that additional
Payments which will not have been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm, based upon the assertion
of a deficiency by the Internal Revenue Service against the Executive which the
Accounting Firm believes has a high probability of success, determines that an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of the Executive shall be treated for all purposes
as a loan ab initio to the Executive which the Executive shall repay to the
Company together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by the Employee to the
Company if and to the extent such deemed loan and payment would not either
reduce the amount on which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the event that
the Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, any such Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
6. Non-Competition and Non-Interference.
(a) Acknowledgments by the Executive. The Company
promises to and shall provide the Executive with Confidential Information, as
defined in Section 7(b)(iii)(1) hereof, in order for the Executive to perform
his duties under this Agreement. The Executive acknowledges that: (i) the
services to be performed by him under this Agreement are of a special, unique,
unusual, extraordinary, and intellectual character, and (b) the provisions of
this Section 6 are reasonable and necessary to protect the Confidential
Information, goodwill and other business interests of the Company.
(b) Covenants of the Executive. In consideration of the
acknowledgments by the Executive, and in consideration of (i) the compensation
and benefits to be paid or provided to the Executive by the Company, (ii) the
Executive's continued employment with the Company and (iii) the provision of
Confidential Information to the Executive, the Executive covenants that he will
not, directly or indirectly:
11
(1) during the Non-compete Period, without the
express prior written consent of the board of directors of the
Company, as owner, officer, director, employee, stockholder,
principal, consultant, agent, lender, guarantor, cosigner,
investor or trustee of any corporation, partnership,
proprietorship, joint venture, association or any other entity
of any nature, engage, directly or indirectly, in the Business
in any county in the United States in which the Company is
conducting Business activities; provided, however, that the
Executive may purchase or otherwise acquire up to (but not
more than) 1% of any class of securities of any such
enterprise (but without otherwise participating in the
activities of such Enterprise) if such securities are listed
on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act
of 1934:
(2) during the Non-Compete Period, whether for
the Executive's own account or for the account of any other
person, (except for the account of the Company and its
affiliates), (x) solicit business of the same or similar type
being carried on by the Company, from any person known by the
Executive to be a customer of the Company, whether or not the
Executive had, personal contact with such person during and by
reason of the Executive's employment with the Company, or (y)
interfere with the Company's relationship with any person who
at any time during the period of his employment with the
Company, was a contractor, supplier, or customer of the
Company; or
(3) whether for the Executive's own account or
the account of any other person, at any time during his
employment with the Company or its affiliates and the Post-
Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise. any person who
is an employee of the Company, or in any manner induce, or
attempt to induce, any employee of the Company to terminate
his employment with the Company; provided, however, that
nothing in this Section 6(b)(3) shall preclude the Executive
from soliciting or employing any person who was employed by
the Company after six months have lapsed from the last date of
the former employee's employment with the Company.
(c) For purposes of this Agreement:
(i) the "Noncompete Period" shall mean the
period beginning on the date of this Agreement is executed and ending
on the earlier of (1) December 31, 2003 or (ii) the first anniversary
of the Executive's termination of employment.
(ii) the "Post-Employment Period" shall mean the
eighteen (18) month period beginning on the Date of Termination.
(d) If any covenant in Section 6(b) is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
against
12
public policy will be effective, binding, and enforceable against the
Executive. The Executive hereby agrees that this covenant is a material and
substantial part of this Agreement and that (i) the geographic limitations are
reasonable; (ii) the term of the covenant is reasonable; and (iii) the covenant
is not made for the purpose of limiting competition per se and is reasonably
related to a protectable business interest of the Company.
7. Non-Disclosure Covenant; Executive Inventions.
(a) Acknowledgments by the Executive. The Executive
acknowledges that (i) during the Employment Period and as a part of his
employment, the Executive will be afforded access to Confidential Information:
(ii) public disclosure of such Confidential Information could have an adverse
effect on the Company and its business; (iii) because the Executive possesses
substantial technical expertise and skill with respect to the Company's
business, the Company desires to obtain exclusive ownership of each Executive
Invention, and the Company will be at a substantial competitive disadvantage if
it fails to acquire exclusive ownership of each Executive Invention; and (d) the
provisions of this Section 7 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information and to provide the
Company with exclusive ownership of all Executive Inventions.
(b) Agreements of the Executive. In consideration of the
compensation and benefits to be paid or provided to the Executive by the Company
under this Agreement, and the provision of Confidential Information, the
Executive covenants as follows:
(i) Confidentiality.
(1) During his employment with the Company and
its affiliates and during the Post-Employment Period, the Executive
will hold in confidence the Confidential Information and will not
disclose it to any person other than in connection with the performance
of his duties and obligations hereunder, except with the specific prior
written consent of the board of directors of the Company or except as
otherwise expressly permitted by the terms of this Agreement or as
required by law.
(2) Any trade secrets of the Company will be
entitled to all of the protections and benefits under the federal and
state trade secret and intellectual property laws and any other
applicable law. The Executive hereby waives any requirement that the
Company submit proof of the economic value of any trade secret or post
a bond or other security.
(3) None of the foregoing obligations and
restrictions applies to any part of the Confidential Information that
the Executive demonstrates was or became generally available to the
public other than as a result of an improper disclosure by the
Executive.
(4) The Executive will not remove from the
Company's premises (except to the extent such removal is for purposes
of the performance of the Executive's duties at home or while
traveling, or except as otherwise specifically authorized by the
Company) any document, record, notebook, plan,
13
model, component, device, or computer software or code, whether
embodied in a disk or in any other form belonging to the Company or
used in Company's business (collectively, the "Proprietary Items"). The
Executive recognizes that, as between the Company and the Executive,
all of the Proprietary Items, whether or not developed by the
Executive, are the exclusive property of the Company. Upon termination
of his employment, or upon the request of the Company during the
Post-Employment Period, the Executive will return to the Company all of
the Proprietary Items and Confidential Information in the Executive's
possession or subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or other physical
embodiment, including electronic or otherwise, of any of the
Proprietary Items or Confidential Information.
(ii) Executive Inventions. Each Executive Invention will
belong exclusively to the Company. The Executive acknowledges that all of the
Executive's writing, works of authorship and other Executive Inventions are
works made for hire and the property of the Company, including any copyrights,
patents, or other intellectual property rights pertaining thereto. If it is
determined that any such Executive Inventions are not works made for hire, the
Executive hereby assigns to the Company all of the Executive's right, title and
interest, including all rights of copyright, patent, and other Intellectual
property rights, to or in such Executive Inventions. The Executive covenants
that he will promptly:
(1) disclose to the Company in writing any
Executive Invention;
(2) assign to the Company or to a party
designated by the Company. at the Company's request and without
additional compensation, all of the Executive's right to the Executive
Invention for the United Stares and all foreign jurisdictions;
(3) execute and deliver to the Company such
applications, assignments, and other documents as the Company may
request in order to apply for and obtain patents or other registrations
with respect to any Executive Invention in the United States and any
foreign jurisdictions;
(4) sign all other papers necessary to carry out
the above obligations; and
(5) give testimony and render any other
assistance but without expense to the Executive in support of the
Company's rights to any Executive Invention.
(iii) Definitions. For purposes of this Agreement:
(1) The term "Confidential Information" means
any and all intellectual property of the Company (or any of its
affiliates), including but not limited to:
14
(i) trade secrets concerning the
business and affairs of the Company (or any of its affiliates), product
specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current, and planned research and development, current
and planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer software and programs
(including object code and source code), computer software and database
technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented, that is a
trade secret under federal, state or other applicable law; and
(ii) information concerning the business
and affairs of the Company (or any of its affiliates) (which includes
historical financial statements, financial projections and budgets,
historical and projected sales, capital spending budgets and plans, the
names and backgrounds of key, personnel, personnel training and
techniques and materials), however documented; and
(iii) notes, analysis, compilations,
studies, summaries, and other material prepared by or for the Company
(or any of its affiliates) containing or based, in whole or in part, on
any information included in the foregoing.
(2) The term "Executive Invention" mean any
idea, invention, technique, modification, process, or
improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed
in a semiconductor product (whether recordable or not), and
any work of authorship (whether or not copyright protection
may be obtained for it) created, conceived, or developed by
the Executive, either solely or in conjunction with others,
during the Employment Period or at any time prior to the
Employment Period that Executive was an employee of the
Company, or a period that includes a portion of the Employment
Period, that relates in any way to, or is useful in any manner
in, the business then being conducted or proposed to be
conducted by the Company; and any such item created by the
Executive, either solely or in conjunction with others,
following termination of the Executive's employment with the
Company, that is based upon or uses Confidential Information.
(c) Disputes of Controversies. The Executive recognizes
that should a dispute or controversy arising from or relating to this Agreement
be submitted for adjudication to any court, arbitration panel, or other third
party, the preservation of the secrecy of Confidential Information may be
jeopardized. All pleadings, documents, testimony, and records relating to any
such adjudication will be maintained in secrecy and will be available for
inspection by the Company, the Executive, and their respective attorneys and
experts, who will agree, in advance and in writing, to receive and maintain all
such information in secrecy, except as may be limited by them in writing.
15
8. General Provisions.
(a) Injunctive Relief and Additional Remedy. The
Executive acknowledges that the injury that would be suffered by the Company as
a result of a breach of the provisions of Sections 6 or 7 of this Agreement
would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have
the right, in addition to any other rights it may have, to obtain a temporary
restraining order and/or injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Agreement. The
Executive agrees to waive any requirement for the Company's securing or posting
of any bond in conjunction with any such remedies. The Executive further agrees
to and hereby does submit to in personam jurisdiction before each and every
court in the jurisdiction specified in Section 9.5(b) hereof for that purpose.
Without limiting the Company's rights under this Section 8 or any other remedies
of the Company, if the Executive breaches any of the provisions of Sections 6
and 7 and such breach is proven in a court of competent jurisdiction, the
Company will have the right to cease making any payments otherwise due to the
Executive under this Agreement.
(b) Covenants of Sections 6 and 7 are Essential and
Independent Covenants. The covenants by the Executive in Sections 6 and 7 are
essential elements of this Agreement, and without the Executive's agreement to
comply with such covenants, the Company would not have entered into this
Agreement or continued the employment of the Executive. The Company and the
Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Company. The Executive's covenants in Sections 6 and 7 are independent covenants
and the existence of any claim by the Executive against the Company under this
Agreement or otherwise will not excuse the Executive's breach of any covenant in
Sections 6 or 7.
(c) Survival. Notwithstanding anything in the Agreement
to the contrary, (i) the covenants and agreements of the Executive in Sections 6
and 7 shall survive the termination of the Agreement, except as provided below,
and (ii) the covenants and agreements in Section 6 and 7 shall be effective as
of the date this Agreement is executed; however, such covenants shall
automatically lapse if the transactions contemplated by the Merger Agreement are
not consummated within 4 months of the execution of this Agreement.
(d) Legal Recourse. The Executive further agrees that the
covenants in Sections 6 and 7 are made to protect the legitimate business
interests of the Company. The Executive understands as a part of these covenants
that the Company intends to exercise whatever legal recourse against him for any
breach of this Agreement and in particular, for any breach of the covenants in
Sections 6 and 7.
9. General Provisions.
(a) Waiver. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by either party in exercising any right, power, or privilege under this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
16
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (i) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (ii) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (iii) no notice to or demand on one party will be deemed
to be a waiver of any obligation of such party or of the right of the party
giving such notice or demand to take further action without notice or demand as
provided in this Agreement.
(b) Binding Effect; Delegation of Duties Prohibited. This
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Company may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
(c) Notices. All notices, consents, waivers, and other
communications required under this Agreement must be in writing and will be
deemed to have been duly given when (i) delivered by hand (with written
confirmation of receipt), (ii) sent by facsimile (with written confirmation of
receipt), provided that a copy is mailed by certified mail, return receipt
requested, or (iii) when received by the addressee, if sent by a nationally
recognized overnight delivery service, in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
If to the Company:
Xxxxx Homes, Inc.
000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Att: Chief Financial Officer
Facsimile No.: 000-000-0000
With a copy to:
Xxxx Xxxxx
Xxxxxx & Xxxxxx
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile No.: 000-000-0000
If to the Executive:
Xxxx Xxxxx
0000 X. Xxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
17
(d) Entire Agreement: Amendments. This Agreement contains
the entire agreements between the parties with respect to the subject matter
hereof and hereby expressly terminates, rescinds, replaces and supersedes all
prior and contemporaneous agreements and understandings, oral or written,
between the parties hereto with respect to the subject matter hereof, including,
but not limited to, the Severance Agreement. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.
(e) Governing Law: Submission to Jurisdiction.
(i) This Agreement will be governed by the laws
of the state of Florida without regard to conflicts of laws principles.
(ii) Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts in Maricopa
County, Arizona, for the purposes of any proceeding arising out of this
Agreement.
(f) Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
(g) Stock Options. The Executive hereby irrevocably
agrees, effective for all purposes as of the date this Agreement is executed, to
surrender to the Company, within five days after the consummation of the tender
offer contemplated in the Merger Agreement, any options of the Executive with
respect to stock of the Company, unexercised, in exchange for payment in cash by
the Company equal to the aggregate spread on such options, (i.e., for each
option, the amount by which $19.10 exceeds the exercise price per share under
the options, multiplied by the number of shares of Common Stock of the Company
subject to the option), less applicable withholding taxes, as provided in the
Merger Agreement.
(h) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. Indemnification.
(a) The Company shall indemnify and hold harmless the
Executive to the fullest extent permitted by law from and against any and all
claims, causes of action, lawsuits, damages, expenses (including reasonable
attorneys' fees and costs), judgments, penalties, fines, amounts paid in
settlements, interest and all other liabilities incurred or paid by the
Executive in connection or in any way associated with the investigation,
defense, prosecution, settlement or appeal of any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
18
threatened to be made a party by reason of the fact that the Executive is or was
an officer, employee or agent of the Company, or any subsidiaries or affiliates,
including any property owner or condominium association that the Executive has
been asked to serve on by the Company, or by reason of anything done or not done
by the Executive in any such capacity or capacities, provided that the Executive
acted in good faith, and in a manner the Executive reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to and
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The Company also shall pay any and all expenses (including
attorney's fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the Company and/or
any of its officer or directors.
(b) The Company shall pay any expenses (including
attorneys' fees and costs), judgments, penalties, fines, settlements, interest
and other liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in this Section
10 in advance of the final disposition of such action, suit or proceeding. The
Company shall promptly pay the amount of such expenses to the Executive, but in
no event later than ten (10) days following the Executive's delivery to the
Company of a written request for an advance pursuant to this Section 10,
together with a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay
to the Company any advances made pursuant to this Section 10 if and to the
extent that it shall ultimately be found that the Executive is not entitled to
be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by
this Section 10 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee by the
Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 10 shall be unsecured and interest-free.
(e) The provisions of this Section 10 shall survive the
termination of this Agreement.
19
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement effective for all purposes as of the Effective Time, except as
otherwise provided herein.
"COMPANY"
Xxxxx Homes, Inc
By: /s/ Xxxx Xxxxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxxxx
---------------------------------------
Title: President
--------------------------------------
"EXECUTIVE"
/s/ Xxxx Xxxxx
--------------------------------------------
Xxxx Xxxxx
20
