EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of May 1, 1998 by and between
California Coastal Communities, Inc., a Delaware corporation (formerly known as
Xxxx Real Estate Group, Inc.) ("Employer"), and XXXXXXX X. XXXXXX ("Executive").
WITNESSETH:
WHEREAS, Executive has served Employer in various executive capacities
and Employer desires to obtain the benefit of continued service by Executive,
and Executive desires to render continued services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Executive's substantial experience and business
relationships in connection with the business of Employer, it is in the
Employer's best interest and that of its stockholders to secure services of
Executive and to provide Executive certain additional benefits; and
WHEREAS, Employer and Executive desire to set forth in this Agreement
the terms and conditions of Executive's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
SECTION 1. TERM. Employer agrees to employ Executive and Executive
agrees to serve Employer, in accordance with the terms of this Agreement, for a
term of two (2) years, commencing on the date hereof.
SECTION 2. SERVICES. So long as this Agreement shall continue in
effect, Executive shall use his commercially reasonably efforts and abilities to
promote Employer's business, affairs and interests, and shall perform the
services contemplated by this Agreement in accordance with policies established
by and under the direction of the Board.
SECTION 3. SPECIFIC POSITION; DUTIES AND RESPONSIBILITIES. Employer
and Executive agree that, subject to the provisions of this Agreement, Employer
will employ Executive and Executive will serve Employer as a senior officer for
the duration of this Agreement. The specific job position in which Executive
shall serve shall be President and Chief Executive Officer. Executive agrees to
observe and comply with the rules and regulations of Employer as adopted by the
Board respecting the performance of Executive's duties and agrees to carry out
and perform directions and policies of Employer and its Board as they may be,
from time to time, stated either orally or in writing. Employer agrees that the
duties which may be assigned to Executive shall be usual and customary duties of
the job position set forth in this Section 3, and shall not be inconsistent with
the provisions of the charter documents of Employer or applicable law.
Executive
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shall have such corporate power and authority as shall reasonably be required to
enable the discharge of duties in any office that may be held.
SECTION 4. COMPENSATION.
(a) BASE SALARY AND TAX EQUALIZATION.
(i) BASE SALARY. During the term of this Agreement, Employer
agrees to pay Executive a base salary of at least Two Hundred Seventy Five
Thousand Dollars ($275,000) per year in semi-monthly installments on the same
dates the other senior officers of Employer are paid ("Base Salary").
(ii) TAX EQUALIZATION. Executive shall also be entitled to receive
a tax equalization payment of One Million Fifty Eight Thousand Four Hundred
Forty Six Dollars ($1,058,446), which is intended to reimburse Executive for
the amount of federal and state income taxes payable in connection with this
amount and the grant of the restricted shares provided in Section 4(d) below,
and which amount shall be paid on the date the restricted shares are issued to
Executive.
(b) ADDITIONAL BENEFITS. Executive shall also be entitled to all rights
and benefits under any bonus plan, incentive, participation or extra
compensation plan, pension plan, profit-sharing plan, life, medical, dental,
disability, or insurance plan or policy or other plan or benefit that Employer
or its subsidiaries may provide for Executive (provided Executive is eligible to
participate therein) or employees of Employer generally as from time to time in
effect during the term of this Agreement (the "Plans"). In any event, Employer
shall provide Executive with term life insurance, health insurance and long-term
disability insurance provided for Employer's executive employees generally.
Executive shall also be entitled to fringe benefits in accordance with the
plans, practices, programs and policies as in effect generally with respect to
other peer executives of Employer.
(c) STOCK OPTIONS. The stock options ("Stock Options") previously granted
to Executive as of April 28, 1997 shall remain in full force and effect with
respect to the purchase of 189,996 shares of Employer's common stock ("Option
Shares"), at the exercise price per share equal to $11.99. The Stock Options
will continue to vest, subject to Employer's Amended and Restated 1993 Stock
Option/Stock Issuance Plan, over the three year period that commenced on April
28, 1997 with 40%, 30% and 30% vesting on each of the first, second and third
anniversaries of the effective date of the grant of the Stock Options. The
vesting of the Stock Options shall continue to be subject to acceleration as
provided in Section 5(d) below upon a termination without cause or upon the
occurrence of a Change in Control, as defined below in Section 5(d). The more
specific terms and conditions of such Stock Options shall continue to be
governed by the Stock Option Agreement entered into by and between Employer and
Executive ("Stock Option Agreement").
(d) RESTRICTED STOCK. Executive shall immediately be granted 100,000
shares of common stock of Employer 50% of which shall vest on each anniversary
of the effective date of this Agreement, and which shall be subject to the
following restrictions (the "Restricted Stock"):
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(i) the number of unvested shares of the Restricted Stock, shall be
subject to forfeiture and return to the Employer in the event that Employee is
terminated "for cause" pursuant to the provisions of Section 5(c), or
voluntarily terminates his employment prior to the expiration of the term of
this Agreement;
(ii) during the term of this Agreement, without the prior consent of
the Board of Directors of Employer, none of the shares of Restricted Stock shall
be subject to sale, transfer, hypothecation or encumbrance; and
(iii) during the term of this Agreement, the stock certificate(s)
representing the Restricted Stock shall bear a legend with respect to the
foregoing restrictions.
(e) PERQUISITES.
(i) VACATION. Executive shall be entitled to four (4) weeks of
paid vacation each twelve-month period, which shall accrue on a monthly basis.
Such vacation shall be taken at such time or times as shall not unduly disrupt
the orderly conduct of the business of Employer and the duties of Executive. At
the time of any termination of employment, Executive shall be paid for all
accrued but unused vacation.
(ii) AUTO ALLOWANCE. During the term of this agreement, Employer
shall provide Executive a monthly automobile allowance in the amount of $800
plus reimbursement of operating costs as is currently covered under Employer's
Auto Allowance Policy.
(f) OVERALL QUALIFICATION. Employer reserves the right to modify, suspend
or discontinue any and all practices, policies and programs generally applicable
to executives and other similarly situated executives at any time (whether
before or after termination of employment) without notice to or recourse by
Executive; however, Employer shall not amend the perquisites set forth in
Section 4(e) to reduce Executive's benefits thereunder during the term of this
Agreement.
SECTION 5. TERMINATION. The compensation and other benefits provided
to Executive pursuant to this Agreement, and the employment of Executive by
Employer, shall be terminated prior to expiration of the term of this Agreement
only as provided in this Section 5:
(a) DISABILITY. In the event that Executive shall fail, because of
illness, incapacity or injury which is determined to be total ("Disability") by
a physician selected by Employer or its insurers and acceptable to Executive or
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably), to render, for three consecutive months or for shorter
periods aggregating ninety (90) or more business days in any twelve (12)-month
period, the services contemplated by this Agreement, Executive's employment
hereunder may be terminated by sixty (60) days' prior written notice of
termination from Employer to Executive. Thereafter, Employer shall continue to
(i) pay the Base Salary to Executive for a period of six (6) months after the
date of termination, subject to adjustments referenced in the following
paragraph, and (ii) provide medical insurance as in effect prior to such
termination for a period of six (6) months following the date of termination.
Thereafter, no further salary shall be paid or medical insurance be provided.
Executive's rights under the Plans subsequent to termination of employment
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pursuant to this paragraph shall be determined under the applicable provisions
of the respective Plans, unless otherwise expressly stated herein. This
Agreement in all other respects will terminate upon the termination of
employment pursuant to this paragraph.
The amount of compensation to be paid to Executive pursuant to the
preceding paragraph shall be adjusted in the event Executive becomes entitled to
and receives disability benefits under any disability payment plan, including
disability insurance. The amount of Executive's compensation otherwise payable
by Employer pursuant to the preceding paragraph shall be reduced, on a
dollar-for-dollar basis, but not to less than zero, by the amount of any such
disability benefits received by Executive, but only to the extent such benefits
are attributable to payments made by Employer.
(b) DEATH. In the event of Executive's death during the term of this
Agreement, Executive's Base Salary shall immediately terminate and Employer
shall pay to the estate of Executive the Base Salary accrued to the date of
Executive's death to the extent not theretofore paid. If Executive's death
occurs while receiving payments under Section 5(a) above, such payments shall
cease. Executive's rights under the Plans subsequent to his death shall be
determined under the applicable provisions of the respective Plans; PROVIDED
that, notwithstanding any provisions to the contrary therein, (i) Employer shall
continue to provide medical insurance to the dependents of Executive for a
period of six (6) months following the death of Executive, (ii) Stock Options
shall be exercisable only to the extent the rights had vested at the time of
death of Executive. This Agreement in all other respects will terminate upon
the death of Executive; and (iii) all restrictions applicable to the Restricted
Stock shall be removed.
(c) FOR CAUSE. The employment of Executive hereunder shall be terminable
by Employer in the event that Executive (i) is or has been engaging in willful
or grossly negligent conduct which has resulted in a failure to perform
Executive's duties hereunder or, (ii) has committed an act of dishonesty, gross
negligence or misconduct, which has a direct, substantial and adverse effect on
Employer, its business or reputation.
Notwithstanding the foregoing, Executive shall not be terminated for
cause pursuant to the first paragraph of this subsection 5(c) unless and until
Executive has received written notice of a proposed termination for cause and
Executive has had an opportunity to be heard before at least a majority of the
number of members of the Board authorized to take such action. Executive shall
be deemed to have had such opportunity if given written or telephonic notice by
any director at least 72 hours in advance of a meeting.
In the event of Executive's termination pursuant to this subsection
5(c), Executive's rights to receive Base Salary shall immediately terminate and
Employer shall pay to Executive his Base Salary and vacation accrued to the date
of such termination to the extent not theretofore paid. Executive's rights
under the Plans subsequent to termination shall be determined under the
applicable provisions of the respective plans; provided, however, that Stock
Options shall be exercisable only to the extent the rights had vested at the
time of such termination, and only the shares of Restricted Stock determined in
accordance with the provisions of Section 4(d) shall be retained by Executive
with all other shares of Restricted Stock shall be returned to Employer for
cancellation. This Agreement in all other respects will terminate upon such
termination.
4.
(d) WITHOUT CAUSE. Notwithstanding any other provision of this Section 5,
the Board shall have the right to terminate Executive's employment with Employer
without cause at any time upon at least thirty (30) days' prior written notice
to Executive. The following conditions shall thereupon become applicable:
(i) SEVERANCE PAY. Employer shall continue to pay Executive the
Base Salary on a semi-monthly basis for the remainder of the two (2) year term
of this Agreement.
(ii) MEDICAL INSURANCE CONTINUATION. Employer shall continue to
provide (under COBRA) medical insurance as in effect prior to such termination
for twelve (12) months following such termination, and Employer shall bear all
costs for such insurance.
(iii) ACCELERATED VESTING; REMOVAL OF STOCK RESTRICTIONS. Despite
the vesting requirements set forth in the Stock Option Agreement and the
restrictions applicable to the Restricted Stock as set forth in Section 4(d),
termination of employment pursuant to this subsection 5(d) or the occurrence of
a Change in Control (as defined below) shall result in an immediate vesting of
the right to exercise the Stock Options with respect to one hundred percent
(100%) of the Option Shares and the immediate removal of all restrictions
applicable to then Restricted Stock.
For purposes of the foregoing paragraph, a "Change of Control" means,
and shall be deemed to have taken place upon, the occurrence of: (i) a
transaction requiring stockholder approval involving the sale of all or
substantially all of the assets of Employer or the merger of Employer with or
into another corporation or business entity, other than a transaction in which
stockholders of Employer immediately prior to the closing of such transaction
own a majority of the acquiring corporation or entity immediately after giving
effect to such transaction, or (ii) the acquisition by any Person as Beneficial
Owner (as such terms are defined in the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Employer representing fifty
percent (50%) or more of the total voting power represented by Employer's then
outstanding voting securities.
(e) VOLUNTARY TERMINATION. At any time during the term of this Agreement,
Executive shall have the right, upon thirty (30) days' prior written notice to
Employer, to terminate his employment with Employer. Upon termination of
Executive's employment pursuant to this subsection 5(e), (i) Executive's right
to receive Base Salary shall immediately terminate and Employer shall pay to
Executive his Base Salary accrued to the date of such termination to the extent
not theretofore paid, (ii) Executive's rights under the Plans subsequent to such
termination shall be determined under the applicable provisions of the
respective Plans, and (iii) Stock Options held by Executive shall be exercisable
only to the extent the rights had vested at the time of such termination, and
only the shares of Restricted Stock determined in accordance with the provisions
of Section 4(d) shall be retained by Executive and all other shares of
Restricted Stock shall be returned to Employer for cancellation. This Agreement
in all other respects will terminate upon such termination.
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(f) TERMINATION BY EXECUTIVE FOR "GOOD REASON". Notwithstanding any other
provisions of this Agreement, Employer shall provide Executive with the payments
and benefits set forth in Section 5(d) in the event Executive terminates
employment for "Good Reason." For purposes of this Agreement, "Good Reason" for
Executive to terminate employment shall mean voluntary termination as a result
of (i) the assignment to Executive of duties inconsistent with the position and
status of Executive as set forth in this Agreement without Executive's prior
written consent, (ii) a substantial alteration in the nature, status or prestige
of Executive's responsibilities as set forth in this Agreement or a change in
Executive's title or reporting level from that set forth in this Agreement,
(iii) the relocation of Employer's executive offices or principal business
location to a point more than twenty-five (25) miles from the location of such
offices or business as of the date of this Agreement, (iv) reduction by Employer
of Executive's Base Salary in effect on the date hereof or as the same may be
increased from time to time, (v) any action by Employer (including the
elimination of benefit plans without providing substitutes therefor or the
reduction of Executive's benefits thereunder) that would substantially diminish
the aggregate value of Executive's incentive awards and other fringe benefits,
or (vi) a failure by Employer to obtain from any successor, before the
succession takes place, an agreement to assume and perform this Agreement.
SECTION 6. BUSINESS EXPENSES. During the term of this Agreement,
Employer shall reimburse Executive promptly for reasonable business
expenditures, including travel, entertainment, parking, business meetings,
Pacific Club dues, and professional dues made and substantiated in accordance
with policies, practices and procedures established from time to time by the
Board and incurred in pursuit and furtherance of Employer's business and
goodwill.
SECTION 7. MISCELLANEOUS.
(a) SUCCESSION; SURVIVAL. This Agreement shall inure to the benefit of
and shall be binding upon Employer, its successors and assigns. Absent the
prior written consent of Executive, this Agreement may not be assigned by
Employer other than in connection with a merger or sale of all or substantially
all the assets of Employer or a similar transaction in which the successor or
assignee assumes (whether by operation of law or express assumption) all
obligations of Employer hereunder. The obligations and duties of Executive
hereunder are personal and otherwise not assignable. Executive's obligations
and representations under this Agreement will survive the termination of
Executive's employment, regardless of the manner of such termination.
(b) NOTICES. Any notice or other communication provided for in this
Agreement shall be in writing and sent if to Employer to its office at:
California Coastal Communities, Inc.
0000 Xxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Secretary
or at such other address as Employer may from time to time in writing designate,
and if to Executive at such address as Executive may from time to time in
writing designate (or Executive's business address of record in the absence of
such designation). Each such
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notice or other communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number so specified in (or
pursuant to) this Section 7 and an appropriate answer back is received, (ii) if
given by mail, three days after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when actually delivered at such address.
(c) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and it supersedes
any prior agreements, undertakings, commitments and practices relating to
Executive's employment by Employer including, without limitation, the Employment
Agreement between Employer and Executive dated as of April 28, 1997. No
amendment or modification of the terms of this Agreement shall be valid unless
made in writing and signed by Executive and, on behalf of Employer, by an
officer expressly so authorized by the Board.
(d) WAIVER. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of any other
right, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.
(e) CHOICE OF LAW. This Agreement, the legal relations between the
parties and any action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement, the relationship of the parties
or the subject matter hereof shall be governed by and construed in accordance
with the laws of the State of California, applicable to contracts made and
performed in such State and without regard to conflicts of law doctrines, to the
extent permitted by law.
(f) ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees, costs and necessary
disbursements from the non-prevailing party in addition to any other relief to
which such party may be entitled.
(g) CONFIDENTIALITY; PROPRIETARY INFORMATION. Executive agrees to not
make use of, divulge or otherwise disclose, directly or indirectly, any trade
secret or other confidential or proprietary information concerning the business
(including but not limited to its products, employees, services, practices or
policies) of Employer or any of its affiliates of which Executive may learn or
be aware as a result of Executive's employment during the term of the Agreement
or prior thereto as stockholder, employee, officer or director of, or consultant
to, Employer, except to the extent such use or disclosure is (i) necessary to
the performance of this Agreement and in furtherance of Employer's best
interests, (ii) required by applicable law, (iii) lawfully obtainable from other
public sources, or (iv) authorized in writing by or pursuant to a written
agreement with Employer. The provisions of this subsection (g) shall survive
the expiration, suspension or termination, for any reason, of this Agreement.
(h) SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect, and if any provision is held invalid or unenforceable with
respect to particular
7.
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances, to the fullest extent permitted by law.
(i) WITHHOLDING; DEDUCTIONS. All compensation payable hereunder,
including salary and other benefits, shall be subject to applicable taxes,
withholding and other required, normal or elected employee deductions.
(j) SECTION HEADINGS. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(k) COUNTERPARTS. This Agreement and any amendment hereto may be executed
in one or more counterparts. All of such counterparts shall constitute one and
the same agreement and shall become effective when a copy signed by each party
has been delivered to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"EMPLOYER"
CALIFORNIA COASTAL COMMUNITIES, INC.
By /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Chief Financial Officer
"EXECUTIVE"
/s/ XXXXXXX X. XXXXXX
------------------------------------
XXXXXXX X. XXXXXX
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