CHANGE IN CONTROL AGREEMENT
Exhibit
10.3
This
Change in Control Agreement (the “Agreement”) between J. Xxxxxx Xxxxx (the
“Employee”) and M/I Homes, Inc. (the “Company”) is effective July 3, 2008 (the
“Effective Date”).
WHEREAS, the Employee
currently is employed by the Company, and serves as the Company’s Executive Vice
President, General Counsel and Secretary and the Employee is willing to continue
to serve in such capacity for the Company; and
WHEREAS, the Company desires
to provide additional payments and benefits to the Employee, but only
in the event of a Change in Control of the Company and a termination of the
Employee’s employment as hereinafter provided;
NOW, THEREFORE, in
consideration of the mutual promises and agreements hereinafter set forth, the
Company and the Employee agree as follows:
1.00 DEFINITIONS
When used
in this Agreement, the following terms will have the meanings given to them in
this section unless another meaning is expressly provided elsewhere in this
Agreement. When applying these definitions, the form of any term or
word will include any of its other forms and the word “including” will mean
“including, without limitation.”
1.01 Board. The board of
directors of the Company.
1.02 Cause. [1] Any act of fraud,
intentional misrepresentation, embezzlement or misappropriation or conversion of
the assets or business opportunities of the Company by the Employee, [2] conviction of the
Employee of a felony, or [3] the Employee’s [a] willful refusal to
substantially perform assigned duties (other than any refusal resulting from
incapacity due to physical or mental illness or in the event that the assigned
duties include any activities that are unlawful or would violate acceptable
accounting, securities or other specifically defined business principles), [b] willful engagement in
gross misconduct materially injurious to the Company or [c] breach of any
material term of this Agreement. However, Cause will not arise [i] solely because the
Employee is absent from active employment during periods of vacation, consistent
with the Company’s applicable vacation policy, or other period of absence
initiated by the Employee and approved by the Company or [ii] due to any event
that constitutes Good Reason.
1.03 Change in Control. [1]
The acquisition by any person, or more than one person acting as a group,
of the ownership of stock of the Company that, together with the stock held by
such person or group, constitutes more than fifty (50) percent of the total fair
market value or total voting power of the stock of the Company; [2] the acquisition by any
person, or more than one person acting as a group, within any twelve (12) month
period, of the ownership of the stock of the Company possessing thirty (30)
percent or more of the total voting power of the stock of the Company; [3] the date a majority of the
members of the Board is replaced during any twelve (12) month period by
directors whose appointment or election is not endorsed by a majority of the
members of the Board prior to the date of the appointment or election; or [4] the acquisition by any
person, or more than one person acting as a group, within any twelve (12) month
period, of assets from the Company that have a total gross fair market value
equal to or more than forty (40) percent of the total gross fair market value of
all of the assets of the Company immediately before such acquisition or
acquisitions. The definition of “Change in Control” in this Section
1.03 shall be interpreted in a manner that is consistent with the definition of
“change in control event” under Code §409A and the Treasury Regulations
promulgated thereunder.
1.04 Code. The Internal
Revenue Code of 1986, as amended, or any successor statute.
1.05 Company. M/I Homes,
Inc. or any successor to its business or assets.
1.06 Date of
Termination. The date of the Employee's
Termination.
1.07 Effective
Period. Except as otherwise provided in this Agreement, the
twenty-four (24) consecutive calendar months beginning after a Change in Control
occurring during the Term.
1.08 Exchange Act. The
Securities Exchange Act of 1934, as amended, or any successor
statute.
1.09 Good Reason. The
occurrence of any of the following events during the Effective Period to which
the Employee has not consented in writing:
[1] Any
breach of this Agreement of any nature whatsoever by or on behalf of the
Company;
[2] A
reduction in the Employee’s title, duties or responsibilities, as compared to
either [a] the
Employee’s title, duties or responsibilities immediately before the Change in
Control or [b] any
enhanced or increased title, duties or responsibilities assigned to the Employee
after the Change in Control;
[3] The
permanent assignment to the Employee of duties that are inconsistent with [a] the Employee’s office
immediately before the Change in Control, or [b] any more senior
office to which the Employee is promoted after the Change in
Control;
[4] The
Company [a] reduces the
Employee’s base salary, [b] reduces the annual cash
bonus that the Employee is eligible to receive or changes the manner in which
such annual cash bonus is calculated, or [c] materially reduces the
aggregate value of the Employee's other annual compensation and/or fringe
benefits;
[5] A
requirement that the Employee relocate to a principal office or worksite (or
accept indefinite assignment) to a location more than thirty (30) miles from
[a] the principal
office or worksite to which the Employee was assigned immediately before the
Change in Control, or [b] any location to which
the Employee agreed, in writing, to be assigned after the Change in Control;
or
[6] The
Company attempts to amend or terminate this Agreement without regard to the
procedures described in Section 3.01 or 3.02.
1.10 Notice of
Payment. The written notice by which the Company apprises the
Employee of [1] the
amount of any payment due under this Agreement, [2] the reason that
amount is payable and [3] the basis on which
that payment was calculated.
1.11 Notice of
Termination. A written notice that describes in reasonable
detail the facts and circumstances claimed to provide a basis for
Termination.
1.12 Parties. The
Company and the Employee.
1.13 Term. The period
beginning on the Effective Date and ending as of the applicable date described
in Section 3.02.
1.14 Termination. Termination
of the employee-employer relationship between the Employee and the Company and
any person with whom the Company would be considered a single employer under
Code §§414(b) and (c); provided that such termination constitutes a “separation
from service” as defined in Treasury Regulation §1.409A-1(h).
2.00 CHANGE
IN CONTROL PAYMENTS
2.01 Calculation of Change in Control
Payments. If a Change in Control occurs and, either [1] during the Effective
Period or within six (6) months prior to the Change in Control, the Company
provides the Employee with a Notice of Termination stating that it is
Terminating the Employee’s employment without Cause, or [2] during the
Effective Period, the Employee provides the Company with a Notice of Termination
stating that the Employee is Terminating his employment for Good Reason, then
the Company will:
[a] Continue
to pay the Employee’s compensation and other benefits through the Date of
Termination and also will pay the Employee the value of any unused vacation days
determined under the Company’s personnel policy. The amounts
attributable to unused vacation will be paid no later than thirty (30) days
after the Employee’s Date of Termination (or, in the case in which employment is
Terminated within six (6) months prior to the Change in Control, within thirty
(30) days after the Change in Control).
[b] Continue
coverage for the Employee and his dependents, at no cost to either the Employee
or his dependents, in all programs subject to the benefit provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for the period
beginning on the Employee’s Date of Termination (or, in the case in which
employment is Terminated within six (6) months prior to the Change in Control,
the date of the Change in Control) and ending on the earlier of [i] the date the Employee
and his dependents acquire replacement coverage or [ii] the second
anniversary of the Employee's Date of Termination (or, in the case in which
employment is Terminated within six (6) months prior to the Change in Control,
the second anniversary of the Change in Control). In the event the
Employee's or his dependents' participation in the Company's plans is not
permitted, then the Company will provide, through insurance or otherwise, at no
after-tax cost to the Employee or his dependents, the benefits to which the
Employee or his dependents would be entitled under such plans (such benefits,
collectively, the "Medical Benefits"). Any Medical Benefits to be
paid or provided under this Section 2.01[2][b] after completion of the time
period described in Treasury Regulation §1.409A-1(b)(9)(v)(B) shall be subject
to the following: [A] the amount of expenses
eligible for reimbursement, or benefits provided, during any taxable year of the
Employee may not affect the expenses eligible for reimbursement, or benefits to
be provided, to the Employee in any other taxable year; [B] reimbursement of any
eligible expense must be made on or before the last day of the Employee's
taxable year following the taxable year in which the expense is incurred; and
[C] the right to
reimbursement or benefits is not subject to liquidation or exchange for another
benefit. In addition, any tax gross-up payment due to the Employee
under this subsection shall be made by the end of the Employee's taxable year
next following the Employee's taxable year in which the Employee remits the
related taxes.
[c] Pay
the Employee a lump sum equal to the amount described in this
subsection. This payment will be made no more than sixty (60) days
after the Employee’s Date of Termination (or, in the case in which employment is
Terminated within six (6) months prior to the Change in Control, within sixty
(60) days after the Change in Control). The amount payable under this
subsection will be the sum of:
[i] two
hundred (200) percent of the Employee’s base salary in effect at the Employee’s
Date of Termination (or, if greater, the Employee's base salary in effect
immediately prior to any event described in Section 1.09[4][a]);
plus
[ii] two
hundred (200) percent of the average annual bonus earned by the Employee during
the five (5) fiscal years of the Company immediately preceding the Employee's
Date of Termination; plus
[iii] a
pro-rated amount of the annual bonus (if any) which the Employee is eligible to
receive with respect to the fiscal year in which the Date of Termination occurs
calculated based on [A]
the Company's and/or the Employee's achievement (as applicable) of the
performance goals applicable to the Employee's bonus for such fiscal year
assuming that such fiscal year ended on the last day of the month immediately
preceding the Date of Termination (with the applicable performance goals
adjusted on a pro-rata basis to account for the partial fiscal year) and [B] the number of full calendar
months that have elapsed in the fiscal year in which the Date of Termination
occurs. Such amount shall be calculated by the Compensation Committee
of the Board in good faith and, subject to Section 4.01, shall be final and
binding on the parties.
[d] Provide any other benefits
(including change in control benefits) to which the Employee is entitled under
any other plan, program or agreement with the Company or any of its
affiliates. Such benefits shall be provided in accordance with the
terms of the applicable plan, program or agreement.
[e] If
appropriate, pay the additional amount described in Section 2.02.
2.02 Effect
of Code §280G.
[1] If
the sum of the payments and benefits described in Section 2.01 (collectively,
the “Payments”) constitute “excess parachute payments” as defined in Code §280G,
the Company will either:
[a] Pay
the Employee an additional amount (the “Gross-Up Payment”) such that the net
amount retained by the Employee, after deduction of any excise tax under
Code §4999 (the “Excise Tax”) and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
Payments to the Employee; provided, however, that this Section 2.02[1][a] shall
apply only if the sum of the Payments that constitute amounts described in Code
§280G(b)(2)(A)(i) is equal to or greater than one-hundred and ten (110) percent
of the limitation described in Code §280G(b)(2)(A)(ii) (the "280G Limit");
or
[b] Reduce
the Payments to the minimum extent necessary to avoid the imposition of the
Excise Tax or loss of deduction under Code §280G; provided, however, that
this Section 2.02[1][b] shall apply only if the sum of the Payments that
constitute amounts described in Code §280G(b)(2)(A)(i) is less than one-hundred
and ten (110) percent of the 280G Limit. Any reduction under this
Section 2.02[1][b] shall be made in compliance with
Code §409A.
[2] Subject
to the provisions of Section 2.02[3], all determinations under this Section
2.02, including whether a Gross-Up Payment is required and the amount of the
Gross-Up Payment, shall be made by a certified public accounting firm which was,
immediately before the Change in Control, the Company’s certified public
accounting firm, or such other nationally recognized certified public accounting
firm as may be designated by the Employee (the “Accounting
Firm”). The Accounting Firm shall provide detailed supporting
calculations to both the Company and the Employee within ten (10) business days
after receipt of notice from the Company or the Employee that there has been a
Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee may
appoint another nationally recognized accounting firm to make the determination
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any determination by the Accounting
Firm shall be final and binding on the Company and the
Employee. Notwithstanding the foregoing, as a result of uncertainty
in applying Code §4999, it is possible that the Company will not have made the
aggregate Gross-Up Payment that it should have made hereunder (an
“Underpayment”). If the Company exhausts its remedies pursuant to
Section 2.02[3] and the Employee thereafter is required to pay any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment, inform the
Company and the Employee of the Underpayment in writing, and, within five (5)
days of receiving such written notice, the Company shall pay the amount of such
Underpayment to the Employee.
[3] The
Employee shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than five (5) business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is required to be
paid. The Employee shall not pay such claim before the expiration of
thirty (30) days following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Employee
in writing before the expiration of such thirty (30) day period (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due) that it desires to contest such claim, the Employee shall [a] give the Company any
information reasonably requested by the Company relating to such claim, [b] take such action in
connection with contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney selected by the
Company, [c] cooperate
with the Company in good faith in order effectively to contest such claim, and
[d] permit the Company
to participate in any proceedings relating to such claim; provided that the
Company shall pay directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and shall indemnify and
hold the Employee harmless, on an after-tax basis, for any tax, including
interest and penalties, imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 2.02[3], the Company shall control all proceedings in connection
with such contest and may, at its sole option, either direct the Employee to pay
the tax claimed and xxx for a refund or to contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to a determination
before any appropriate administrative tribunal or court, as the Company shall
determine; provided, that if the Company directs the Employee to pay such claim
and xxx for a refund, the Company shall advance the amount of such payment to
the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any tax, including interest or
penalties, imposed with respect to such advance. The Company’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder, and the Employee shall be entitled
to settle or contest any other issue.
[4] If,
after the Employee receives an advance by the Company pursuant to Section
2.02[3], the Employee becomes entitled to receive a refund claimed pursuant to
such Section 2.02[3], the Employee shall (subject to the Company’s compliance
with the requirements of such Section 2.02[3]) promptly pay to the Company the
amount of such refund (together with any interest thereon, after taxes
applicable thereto). If, after the Employee receives an advance by the Company
pursuant to Section 2.02[3], a determination is made that the Employee shall not
be entitled to any refund claimed pursuant to such Section 2.02[3], and the
Company does not notify the Employee in writing of its intent to contest such
denial of refund before the expiration of thirty (30) days after such
determination, the Employee shall not be required to repay such advance, and the
amount of such advance shall offset, to the extent thereof, the amount of the
required Gross-Up Payment.
[5] Notwithstanding
anything in this Section 2.02 to the contrary, any Gross-Up Payment or other tax
gross-up payment under this Section 2.02 shall be made by the end of the
Employee's taxable year next following the Employee's taxable year in which the
Employee remits the related taxes.
2.03 Conditions
Affecting Payments.
[1] Except
as expressly provided in this Agreement, the Employee’s right to receive the
Payments will not decrease the amount of, or otherwise adversely affect, any
other benefits payable to the Employee under any other plan, agreement or
arrangement between the Employee and the Company.
[2] The
Employee is not required to mitigate the amount of any Payment by seeking other
employment or otherwise, nor, except as provided in Section 2.02[2], will
the amount of any Payment be reduced by any compensation or benefits the
Employee earns, or is entitled to receive, in any capacity after Termination or
by reason of the Employee’s receipt of or right to receive any retirement or
other benefits attributable to employment with the Company on or after
Termination.
[3] Notwithstanding
any provision contained herein, the amount of any Payment will be reduced by
amounts the Company is required to withhold in payment (or in anticipation of
payment) of any income, wage or employment taxes imposed on the
Payment.
[4] Notwithstanding
any provision contained herein, if, on the Date of Termination, the Employee is
a “specified employee,” within the meaning of Code §409A and the Treasury
Regulations promulgated thereunder and as determined under the Company’s policy
for determining specified employees, and the payment or provision of amounts and
benefits under this Agreement is required to be delayed pursuant to Treasury
Regulation §1.409A-3(i)(2), then the payment or provision of such amounts and
benefits shall not be made (or commence to be made) until the first business day
of the seventh month following the Date of Termination (or, if earlier, the
Employee’s death). The first payment that can be made shall include
the cumulative amount of any amounts or benefits that could not be paid or
provided during such postponement period.
3.00 AMENDMENT
AND TERMINATION
3.01 Amendment. This
Agreement may be amended at any time by a written agreement executed by each of
the Parties.
3.02 Termination. This
Agreement will terminate on the earliest of the following to occur:
[1] The
Employee’s employment with the Company is Terminated and a Change in Control
does not occur within six (6) months after such Termination;
[2] The
Parties mutually agree, in writing, to terminate this Agreement, whether or not
it is replaced with a similar agreement; or
[3] All
Payments due under this Agreement have been fully paid.
4.00 DISPUTE
RESOLUTION
4.01 Arbitration. Any
[1] disagreement
concerning the calculation of any payment due under this Agreement, [2] breach of any term of
this Agreement or [3] other dispute or
controversy arising out of or relating to this Agreement, including the basis on
which the Employee is Terminated, will be resolved by arbitration in accordance
with the rules of the American Arbitration Association. The award of
the arbitrator will be final, conclusive and nonappealable and judgment upon the
award rendered by the arbitrator may be entered in any court having competent
jurisdiction. The arbitrator must be an arbitrator qualified to serve
in accordance with the rules of the American Arbitration Association and one who
is approved by the Company and the Employee. If the Employee and the
Company fail to agree on an arbitrator, each must designate a person qualified
to serve as an arbitrator in accordance with the rules of the American
Arbitration Association and these persons will select the arbitrator from among
those persons qualified to serve in accordance with the rules of the American
Arbitration Association. Any arbitration relating to this Agreement
will be held in the city in which the Employee’s last principal place of
employment with the Company before the Employee’s Date of Termination is or was
located or another place the Parties mutually select immediately before the
arbitration.
4.02 Costs. The Company will bear all
reasonable costs associated with any dispute arising under this Agreement,
including reasonable accounting and legal fees incurred by the Employee through
any proceeding described in Section 4.01. Any such costs incurred by
the Employee shall be paid by the Company within sixty (60) days of the date on
which the Employee provides the Company with a written invoice for such costs
and any other evidence of such costs that the Company shall reasonably
request. Notwithstanding the foregoing, for purposes of this Section
4.02, [1] any costs being reimbursed must relate
to a claim brought within eighteen (18) months following the Date of Termination
(or, in the case in which employment is Terminated within six (6) months prior
to a Change in Control, within eighteen (18) months following the Change in
Control), [2] the costs eligible for
reimbursement during any taxable year of the Employee may not affect the costs
eligible for reimbursement in any other taxable year, [3] reimbursements must be
made on or before the last day of the Employee’s taxable year following the
taxable year in which the cost was incurred, and [4] the right to reimbursement
for such costs is not subject to liquidation or exchange for another
benefit.
4.03 Payment During Dispute Resolution
Period. If otherwise due, the Company may not defer payment of
any amount that is not being contested under Section 4.01.
5.00 MISCELLANEOUS
5.01 Assignment. Except
as otherwise provided in this Section 5.01, this Agreement shall inure to the
benefit of and be binding upon the Parties and their respective heirs,
representatives, successors and assigns. This Agreement shall not be
assignable by the Employee, and shall be assignable by the Company only to any
corporation or other entity resulting from the reorganization, merger or
consolidation of the Company with any other corporation or entity or any
corporation or entity to which the Company may sell all or substantially all of
its assets, and this Agreement must be so assigned by the Company to, and
accepted as binding by such other corporation or entity in connection with any
such reorganization, merger, consolidation or sale.
5.02 Notices. All
notices and other communications provided for in this Agreement must be written
and will be deemed to have been given when deposited with a reputable overnight
delivery service or in United States registered mail, return receipt requested,
postage prepaid, to the Parties at the following addresses or at such other
address as a Party may specify by notice to the other:
To the Company:
M/I Homes, Inc.
0 Xxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn: General
Counsel
To the Employee:
J. Xxxxxx Xxxxx
At the last address on
file
with the Company
5.03 Complete
Agreement. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement have been made by either Party that are not set forth expressly in
this Agreement.
5.04 Applicable Law. The
validity, interpretation, construction and performance of this Agreement will be
governed by the laws of the State of Ohio.
5.05 Validity. The
invalidity or unenforceability of any provisions of this Agreement will not
affect the validity or enforceability of any other provisions of this Agreement,
which will remain in full force and effect.
5.06 Section 409A of the
Code. It is intended that this Agreement comply with Code
§409A and the Treasury Regulations promulgated thereunder, and this Agreement
will be interpreted, administered and operated accordingly. Nothing
herein shall be construed as an entitlement to or guarantee of any particular
tax treatment to the Employee. Furthermore, the Company may
accelerate the time or schedule of a Payment to the Employee at any time the
Agreement fails to meet the requirements of Code §409A and the Treasury
Regulations promulgated thereunder. Such Payment may not exceed the
amount required to be included in income as a result of the failure to comply
with the requirements of Code §409A and the Treasury Regulations promulgated
thereunder.
IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement to be effective as of the date and
year first above written.
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M/I
HOMES, Inc.
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By:
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/s/Xxxxxx
X. Xxxxxxxxxxxxx
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Title:
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Chairman,
Chief Executive Officer
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| and President | |
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EMPLOYEE
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/s/J.
Xxxxxx Xxxxx
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J.
Xxxxxx Xxxxx
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