Exhibit 10.3
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
NONCOMPETITION AGREEMENT
This is Amendment No. 1 (the "Amendment") to the Employment Agreement (the
"Agreement") dated as of December 1, 1997, between W. Xxxxxx Xxxxxxx (the
"Employee") and Continental Homes Holding Corp. (the "Company"). This Amendment
is dated December 18, 1997, and shall be effective upon the date (the "Effective
Date") of the consummation of the Merger (as defined below).
RECITALS
A. Since the execution of the Agreement the Company has agreed to merge
(in the "Merger") with X. X. Xxxxxx, Inc. ("Xxxxxx"). In the Merger Xxxxxx will
assume the Company's obligations under the Agreement.
X. Xxxxxx and the Employee wish to amend the Agreement, inter alia, to
reflect certain bonus arrangements for and grant of stock options to Employee
and the Employee's execution of the noncompetition provisions contained herein.
NOW, THEREFORE, in consideration of the consideration reflected in this
Amendment and in the Agreement, Employee and Xxxxxx agree as follows:
AGREEMENT
1. Definitions. Capitalized terms in this Amendment shall have the
meanings given to them in the Agreement. Xxxxxx and Company are used
interchangeably in this Amendment.
2. Grant of options. In addition to salary, bonus, and benefits
provided to Employee under the Agreement, on the Effective Date the Company
shall grant to Employee 100,000 options, pursuant to Xxxxxx'x 1991 Stock
Incentive Plan (the "Option Plan"), on the terms and conditions specified on
Schedule A to this Amendment. This option grant shall be subject to all the
terms and conditions of the Option Plan, a copy of which is annexed as Schedule
B.
3. Bonus. (a) Employee and Company agree that payment of a bonus to
Employee during the first two years following the Merger shall be governed by
this Section 3. Following the Merger, Xxxxxx will operate the acquired company
as a separate region (the "Continental Region") of the Company. Employee shall
be paid an annual bonus equal to one and one-half per cent (1.5%) of the annual
pre-tax earnings of the Continental Region of the Company (the "Region
Earnings"). The Region Earnings shall be calculated (i) using accounting
principles used by the Company for all of its homebuilding divisions, (ii) after
appropriate charges for overhead, interest, and other charges incurred at the
corporate level and allocated by the
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Company based upon usage by the Continental Region in a manner similar to the
way such charges are allocated to the Company's other homebuilding divisions,
but (iii) before provision for incentive bonuses.
(b) Promptly after the end of the Company's first fiscal month
following the first anniversary of the Merger, and at the end of the same month
one year later, the Company shall prepare a calculation of the Region Earnings
for the preceding twelve month period, and forward such calculation (and any
supporting documentation that Employee may reasonably request) to the Employee
for his review. Within ten days after receipt of this calculation the Employee
shall notify the Company in writing of his agreement with the calculation, or of
any disagreement. A notice of disagreement shall include the basis for
disagreement with reasonable specificity. If the Employee and the Company
cannot resolve any disagreement, the matter shall be finally resolved in the
same manner as a dispute under Section 8(h) of the Agreement, except that (i)
each party shall submit a figure and supporting documentation to the accounting
firm (the "Umpire"), which shall select one of the figures submitted and no
other figure, and (ii) the Umpire's fees and expenses shall be borne by the
party whose figure is not selected.
(c) In addition to the bonus payable under part (b) above, the Company
shall pay a bonus (the "Stub Period Bonus") to Employee for the period (the
"Stub Period") from the Effective Date to the date immediately prior to the
twelve month period used to calculate his annual bonus. The Stub Period Bonus
will be calculated on the basis used to calculate Employee's bonus for the year
immediately preceding the Effective Date, based upon the number of days in the
Stub Period.
(d) The Company shall pay each annual bonus within fifteen days after
Employee's agreement with the calculation of Region Earnings, or, if a
disagreement, within fifteen days after resolution as provided in part (b).
(e) In the event that the Continental Region is amalgamated with
operations that are new to the Company following a merger or internal
reorganization, Employee and Company shall negotiate in good faith a replacement
formula for the formula specified in part (a) above.
4. Non-Disclosure Agreement. (a) In connection with his employment
with the Company, Employee will have access to and become acquainted with
various trade secrets and other proprietary and confidential information of the
Company. "Trade secrets and other proprietary and confidential information"
include but are not limited to the following: (1) business, pricing, marketing,
and cost data; (2) technical information regarding the Company's products; (3)
confidential customer information; (4) customer and supplier lists; (5) contents
of contracts and agreements with customers; (6) customer requirements and
specifications, and (7) home designs, development techniques, and other products
or processes, whether or not developed or used by Employee. Employee
acknowledges that the Company has taken steps to keep trade secrets and other
proprietary and confidential information secret, including disclosing the
information only on a need-to-know basis, labeling documents as "confidential,"
and keeping confidential information in secure areas. Employee further
acknowledges that the trade secrets and other proprietary and confidential
information have been developed or acquired by the
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Company through expenditure of substantial time, effort, and money and provide
the Company with an advantage over competitors who do not know or use such trade
secrets and other proprietary and confidential information.
(b) In consideration for access to trade secrets and other proprietary
and confidential information, Employee agrees that during the Noncompetition
Period (as defined in Section 5) he will not directly or indirectly disclose or
use for any reason whatsoever any trade secrets and other proprietary and
confidential information obtained by him by reason of his employment with the
Company, except as required to conduct the business of the Company or as
authorized by express written permission of the Board or as otherwise required
by law.
(c) Employee confirms that all trade secrets and other proprietary and
confidential information, and all documents reflecting such information, remain
the exclusive property of the Company. All business records, papers, and
documents kept or made by Employee relating to the business of the Company shall
be and remains the property of the Company and shall remain in the possession of
the Company during the term of Employee's employment and at all times
thereafter. Upon the termination of his employment with the Company or upon the
request of the Company at any time, Employee shall promptly deliver to the
Company, and shall retain no copies of, any materials, records, and documents
(in whatever form or medium) made by Employee or coming into his possession
concerning the business or affairs of the Company.
(d) Employee acknowledges and agrees that the nature of the trade
secrets and other proprietary and confidential information to which he will be
given access would make it impossible for him to perform in the capacity of
officer, director, employee, agent, consultant, or representative of any
Competitor (as defined in Section 5) in the Prohibited Territory (as defined in
Section 5) during the Noncompetition Period without disclosing or utilizing the
trade secrets and other proprietary and confidential information to which he
will be given access during the course of his employment. Employee further
acknowledges and agrees that the Company's products are marketed in a highly
competitive market.
5. Non-Competition. (a) In addition to the consideration specified
in Section 5(b) below, in consideration of access to trade secrets and other
proprietary information of the Company, and in consideration of the options and
bonus specified in Sections 2 and 3 of this Amendment, for a period (the
"Noncompetition Period") from the Effective Date to the later of (x) two years
thereafter or (y) one year after the Employee leaves the employ of the Company,
Employee will not:
(i) accept a position as an officer, director, employee, agent,
consultant, representative of (A) a person or entity that is engaged in
development of raw land for residential construction or in the construction
and sale of single family homes in any area that includes metropolitan
Denver, metropolitan Phoenix, South Florida, California, Texas, or any area
in which the Continental Region has done business for the twelve preceding
calendar months (collectively, the "Prohibited Territory") or (B) any other
person or entity that, as of the date of Employee's termination, competes
directly with the Company or any of its subsidiaries in the Prohibited
Territory (an entity described
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in either part (A) or (B) is referred to in this Agreement as a
"Competitor" and the activities described in part (A) as "Competing
Activities");
(ii) acquire or fail to dispose of any stock or other ownership
interest in any Competitor, other than investments equal to less than one
per cent of the outstanding stock of any class issued by any publicly
traded company;
(iii) undertake any Competing Activities in the Prohibited
Territory for his own account;
(iv) solicit or seek business from any of the Company's
customers, prospective customers, suppliers, or prospective suppliers; or
(v) hire or engage any employee of the Company or induce any
employee of the Company to leave his or her employment with the Company on
behalf of any Competitor.
(b) Upon termination of the Agreement (i) by the Company without
Cause or (ii) by Employee for Good Reason, provided that the Company does not at
such time have grounds for termination for Cause, the Company shall pay to
Employee an amount equal to two times the sum referred to in Section 8(c) of the
Agreement as further consideration for Employee's agreement not to compete with
the Company during the Noncompetition Period.
(c) In consideration of the payment provided in part (b) above and
the options in bonus in Sections 2 and 3 above, Employee agrees that Section
8(c) of the Agreement shall be amended by deleting the words three times in the
second line thereof.
6. Remedies. (a) Without intending to limit the remedies available
to the Company, Employee acknowledges that a breach or threatened breach of any
of the covenants contained in Sections 4 and 5 may result in material
irreparable injury to the Company or one of its subsidiaries for which there is
no adequate remedy at law, that it may not be possible to measure damages for
such injuries precisely, and that in the event of such a breach or threat
thereof, the Company shall be entitled to obtain a temporary restraining order,
a preliminary or permanent injunction, or other comparable provisional or
equitable relief restraining Employee from engaging in activities prohibited by
Sections 4 or 5, and such other relief as may be required to enforce
specifically any of the covenants in such Sections. Employee agrees to personal
jurisdiction of any state or federal court in the State of Arizona in any
proceeding brought by the Company to enforce Employee's covenants under Sections
4 and 5.
(b) If in any action brought by the Company to enforce Employee's
breach or threatened breach of any of Employee's covenants contained in Sections
4 and 5 in which a preliminary or final order of the Court includes a finding
that Employee willfully breached his obligations under Section 4 or 5, the
Company shall be entitled to recover from Employee the Company's reasonable
attorneys' fees incurred in connection with the action.
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(c) If Employee materially breaches any of his obligations under
Sections 4 and 5, in addition to any other remedies available to Company under
the Agreement, at law, or in equity, the Employee shall forfeit his right to
receive the options described in Section 2 above, and one-third of the bonus
described in Section 3 above (such amount being the increase in Employee's bonus
pursuant to Section 3 hereof) including without limitation any such benefits
already received. To the extent any payments and benefits already received are
so forfeited, the Employee shall promptly return such payments and benefits to
the Company.
(d) Nothing in Section 13 of the Agreement shall prevent the Company
from seeking equitable relief pursuant to this Section 6.
7. Reformation. (a) The Employee agrees that the restrictions in
Section 5 are reasonable in scope and duration in light of the Company's
business and competitors.
(b) If any provision of Section 5 or 6 is held by a court or
arbitrator to be unreasonable in scope or duration, the court or arbitrator
shall, to the extent permitted by law, reform such provision so that it is
enforceable, and enforce the applicable provision as so reformed. Reformation
pursuant to this Section 7 shall not affect any other provision of the Agreement
or render the Agreement unenforceable or void.
8. Survival. The provisions of Sections 4 through 7 of this
Amendment shall survive termination of the Agreement for any reason.
9. Agreement remains in force. As modified by this Amendment, the
Agreement remains in full force and effect. In the event of any conflict
between this Amendment and the Agreement, this Amendment shall control.
Company: X.X. Xxxxxx, Inc. EMPLOYEE:
By: /s/ X.X. Xxxxxx, Inc. /s/ W. Xxxxxx Xxxxxxx
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