CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
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AGREEMENT by and between Washington Homes, Inc. a Maryland corporation
(the "Company") and __________________________ (the "Executive"), dated as of
the 1st day of December, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1 (b)) on which
a Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control,
or (ii) otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective Date" shall mean
the date immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
(c) The term "Company" shall mean Washington Homes, Inc. and its
subsidiaries and any successor in interest to the business and/or assets or
such entities as provided for herein.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control", shall mean:
(a) The acquisition of any individual, entity, group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent (50%) or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by
Geaton X. XxXxxxxxx, Xx., or Geaton X. XxXxxxxxx, Xx. or members of their
family, or (iv) any acquisition in which Geaton X. XxXxxxxxx, Xx., or
Geaton X. XxXxxxxxx, Xx. and members of their family control the acquiring
entity following the acquisition of the Company or hold forty percent (40%)
of the seats on the acquiring entity's Board of Directors.
(b) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than fifty percent (50%) of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, fifty percent (50%)
or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination or (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; provided, however, that any Business Combination in which
Geaton X. XxXxxxxxx, Xx. or Geaton X. XxXxxxxxx, Xx. or members of their
family control the acquiring or resulting entity or forty percent (40%) of
the seats on such entity's Board of Directors shall not be deemed a "Change
of Control".
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the second anniversary of
such date (the "Employment Period").
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles 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 120-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or
location less than 50 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 to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee 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 Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
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(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), at
least equal to twenty-six times the highest bi-weekly base salary paid or
payable, in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs.
(ii) ANNUAL BONUS. In Addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash in
accordance with the standards set forth in the Company's annual
incentive plans.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than
the most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 120-day period
immediately preceding the Effective Date.
(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 affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives
of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at anytime during the 120-day period
immediately preceding the Effective Date.
(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
affiliated companies in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) 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
affiliated companies as in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance
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with Section 12(b) of this Agreement 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" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers.
(b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct.
(c) GOOD REASON. The Executive' s employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of duties materially
inconsistent with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a permanent
diminution in such position, authorities or responsibilities,
excluding for this purpose a temporary (not to exceed 90 days)
isolated, insubstantial or inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(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 as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to
the Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by 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
12(b) 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) to the extent
applicable, 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 thirty days after
the giving of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights
hereunder.
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(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) 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 (iii) 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.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER
THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate 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:
A. the Executive's Annual Base Salary through the Date of Termination
to the extent not theretofore paid; and
B. an amount equal to the Executive's Annual Base Salary (* 18 months
in the case of Xx. Xxxxxx) and the greater of (a) 50% of Annual Base Salary
or (b) the amount of bonus which would be payable to Executive under the
current Company bonus plans in effect on the date of this Agreement accrued
to the Date of Termination.
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligation to the Executive.
(d) CAUSE: OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive the Annual Base Salary through the Date
of Termination. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
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 and such amounts
shall not be reduced whether or not the Executive obtains other employment.
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9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it.
10. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) 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.
11. NON-COMPETE. During the period ending on the earlier of (a) two
years following the date of this Agreement or (b) the occurrence of the
Effective Date, Executive shall not become an employee, agent, consultant,
representative, shareholder, owner, partner, member, director or officer of any
person or entity which is engaged in any business which is similar to or in
competition with the business of the Company. Executive shall not during the
Employment Period and for one year following termination of employment hereunder
(1) solicit or hire for employment any person who was employed by the Company
during the preceding twelve months, (2) attempt to contract for or acquire land
for which the Company was negotiating during the previous 12 months. The
forgoing restrictions shall be limited to all Metropolitan Statistical Areas in
which the Company conducts its homebuilding activities.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or, by registered or
certified mail, return receipt requested, postage prepaid addressed as
follows:
IF TO THE EXECUTIVE: IF TO THE COMPANY:
Washington Homes, Inc.
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0000 Xxxxxxxxxx Xxxx
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Xxxxxxxx, XX 00000
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Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
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d) The Company may withhold from any amount payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(iv) of this
Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section 1 hereof, prior to the
Effective Date, the Executive's employment and/or this Agreement may
be terminated by either the Executive or the Company at any time prior
to the Effective Date, in which case the Executive shall have no
further rights under this Agreement. From and after the Effective Date
this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
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Executive
WASHINGTON HOMES, INC.
By:
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Geaton X. XxXxxxxxx, Xx.
President
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