EXHIBIT 10.20
EMPLOYMENT AGREEMENT
AGREEMENT, made as of this 1st day of December, 1997, by and between
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the "Company"), and W.
XXXXXX XXXXXXX (the "Employee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has approved the
employment of the Employee on the terms and conditions set forth in this
Agreement; and
WHEREAS, the Employee is willing, for the consideration provided, to
continue in the employment of the Company on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Employment. The Company hereby agrees to continue to employ the
Employee, and the Employee hereby accepts such continued employment, upon the
terms and conditions set forth in this Agreement.
2. Term. The term (the "Term") of the Employee's employment under this
Agreement shall be the period commencing on December 1, 1997 and shall continue
until November 30, 1999, unless sooner terminated by termination of the
Employee's employment pursuant to Section 5, 6 or 7.
3. Position and Duties. During the Term, the Employee shall serve as
President, Chief Executive Officer and Chief Operating Officer of the Company,
and shall have such responsibilities and authority as commensurate with such
office and as may from time to time be prescribed by or pursuant to the
Company's By-laws. The Employee shall devote substantially all of his working
time and efforts to the business and affairs of the Company.
4. Compensation. During the Term, the Company shall provide the
Employee with the following compensation and other benefits:
(a) Base Salary. The Company shall pay to the Employee base
salary at the initial rate of $300,000 per annum, which shall be payable in
accordance with the standard payroll practices of the Company. Such base salary
rate shall be reviewed annually in accordance with the Company's normal policies
beginning in calendar year 1998; provided, however, that at no time during the
Term shall the Employee's base salary be decreased from the rate then in effect
except with the written consent of the Employee.
(b) Bonus. The Employee shall participate in a bonus program
maintained by the Company.
(c) Other Benefits. In addition to the compensation and
benefits otherwise specified in this Agreement, the Employee (and, if provided
for under the applicable plan or program, his spouse) shall be entitled to
participate in, and to receive benefits under, the Company's employee benefit
plans and programs that are or may be available to senior executives generally
and on terms and conditions that are no less favorable than those generally
applicable to other senior executives of the Company. At no time during the Term
shall the Employee's participation in or benefits received under such plans and
programs be decreased except (i) in connection with across-the-board reductions
similarly affecting substantially all senior executives of the Company or (ii)
with the written consent of the Employee.
(d) Expenses. The Employee shall be entitled to prompt
reimbursement of all reasonable expenses incurred by him in performing services
hereunder, provided he properly accounts therefor in accordance with the
Company's policies.
2
(e) Office and Services Furnished. The Company shall furnish
the Employee with office space, secretarial assistance and such other facilities
and services as shall be suitable to the Employee's position and adequate for
the performance of his duties hereunder.
5. Termination of Employment by the Company.
(a) Cause. The Company may terminate the Employee's employment
for Cause if (i) the Employee willfully engages in conduct which is or would
reasonably be expected to be materially and demonstrably injurious to the
Company, (ii) the Employee willfully engages in an act or acts of dishonesty
resulting in material personal gain to the Employee at the expense of the
Company, (iii) the Employee is convicted of a felony, (iv) the Employee engages
in an act or acts of gross malfeasance in connection with his employment
hereunder, (v) the Employee commits a material breach of the confidentiality
provision set forth in Section 10, or (vi) the Employee exhibits demonstrable
evidence of alcohol or drug abuse having a substantial adverse effect on his job
performance hereunder. The Company shall exercise its right to terminate the
Employee's employment for Cause by (i) giving him written notice of termination
at least 45 days before the date of such termination specifying in reasonable
detail the circumstances constituting such Cause; and (ii) delivering to the
Employee a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board of Directors (except the
Employee), after reasonable notice to the Employee and an opportunity for the
Employee and his counsel to be heard before the Board of Directors, finding that
the Employee has engaged in the conduct set forth in this subsection (a). In the
event of such termination of the Employee's employment for Cause, the Employee
shall be entitled to receive (i) his base salary pursuant to Section 4(a) and
any other compensation and benefits to the extent actually earned pursuant to
this Agreement or any benefit plan or program of the Company as of the date of
3
such termination at the normal time for payment of such salary, compensation or
benefits and (ii) any amounts owing under Section 4 (d). Except as provided in
Section 9, the Employee shall receive no other compensation or benefits from the
Company.
(b) Disability. If the Employee incurs a Permanent and Total
Disability, as defined below, the Company may terminate the Employee's
employment by giving him written notice of termination at least 45 days before
the date of such termination. In the event of such termination of the Employee's
employment because of Permanent and Total Disability, (i) the Employee shall be
entitled to receive his base salary pursuant to Section 4(a) and any other
compensation and benefits to the extent actually earned by the Employee pursuant
to this Agreement or any benefit plan or program of the Company as of the date
of such termination of employment at the normal time for payment of such salary,
compensation or benefits, and (ii) any amounts owing under Section 4 (d). For
purposes of this Agreement, the Employee shall be considered to have incurred a
Permanent and Total Disability if he is unable to engage in any substantial
gainful employment by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months. The
existence of such Permanent and Total Disability shall be evidenced by such
medical certification as the Secretary of the Company shall require and shall be
subject to the approval of the Compensation Committee of the Board of Directors
of the Company.
(c) Without Cause. The Company may terminate the Employee's
employment at any time and for any reason, other than for Cause or because of
Permanent and Total Disability, by giving him a written notice of termination to
that effect at least 45 days before the date of termination. In the event of
4
such termination of the Employee's employment without Cause, the Employee shall
be entitled to the benefits described in Section 8.
6. Termination of Employment by the Employee.
Good Reason. The Employee may terminate his employment for Good Reason
by giving the Company a written notice of termination at least 45 days before
the date of such termination specifying in reasonable detail the circumstances
constituting such Good Reason. In the event of the Employee's termination of his
employment for Good Reason, the Employee shall be entitled to the benefits
described in Section 8. For purposes of this Agreement, Good Reason shall mean
(i) a significant reduction in the scope of the Employee's authority, functions,
duties or responsibilities from that which is contemplated by this Agreement,
(ii) the relocation of the Employee's office location to a location more than 50
miles away from the Employee's principal place of employment on December 1,
1997, (iii) any reduction in the Employee's base salary, (iv) a significant
change in the Company's annual bonus program adversely affecting the Employee,
or (v) a significant reduction in the other employee benefits provided to the
Employee (unless the Employee is fully compensated for the value of such
reduction through an increase in cash compensation); provided that, in the event
of a change of control of the Company involving X.X. Xxxxxx, Inc., a substantial
reduction in such employee benefits shall not be deemed to have occurred for the
purpose of clause (v) above after the expiration of the 6-month period beginning
on the date of such change of control if the Employee shall be entitled to
participate in and receive benefits under the Company's or its successor's
employee benefit plans and programs that are or may be available to senior
executives generally and on terms and conditions that are no less favorable than
those generally applicable to other senior executives of the Company or its
successor. A significant reduction within the meaning of clause (i) of the
5
preceding sentence shall not be deemed to have occurred merely because the
Company ceases to be a public company and the Employee ceases to report directly
to the Board of Directors or because the Employee's title is changed, provided
that the Employee's authority, functions, duties and responsibilities otherwise
remain substantially the same as the authority, functions, duties and
responsibilities of a person with the Employee's position (as specified in
Section 3 herein and as of the date hereof) within a comparably sized division
of a national homebuilding company. A significant reduction within the meaning
of clause (v) of the second preceding sentence shall not be deemed to have
occurred merely by reason of the termination of the Company's Equity Split
Dollar Plan, provided that the Company assigns to the Employee all rights which
the Company may have under any life insurance policy issued on the Employee's
life under said plan, including, without limitation, the right to reimbursement
for any premiums and administrative service fees paid by the Company (in which
event, subsection (f) of Section 8 of this Agreement shall have no further
applicability). If an event constituting a ground for termination of employment
for Good Reason occurs, and the Employee fails to give notice of termination
within 3 months after the occurrence of such event, the Employee shall be deemed
to have waived his right to terminate employment for Good Reason in connection
with such event (but not for any other event for which the 3-month period has
not expired).
(a) Other. The Employee may terminate his employment at any time and
for any reason, other than pursuant to subsection (a) above, by giving the
Company a written notice of termination to that effect at least 45 days before
the date of termination. In the event of the Employee's termination of his
employment pursuant to this subsection (b), the Employee shall be entitled to
receive (i) his base salary pursuant to Section 4(a) and any other compensation
6
and benefits to the extent actually earned by the Employee pursuant to this
Agreement or any benefit plan or program of the Company as of the date of such
termination at the normal time for payment of such salary, compensation or
benefits, and (ii) any amounts owing under Section 4(d). Except as provided in
Section 9, the Employee shall receive no other compensation or benefits from the
Company.
7. Termination of Employment By Death. In the event of the death of the
Employee during the course of his employment hereunder, the Employee's estate
shall be entitled to receive his base salary pursuant to Section 4(a) and any
other compensation and benefits to the extent actually earned by the Employee
pursuant to this Agreement or any other benefit plan or program of the Company
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits, and any amounts owing under Section 4(d).
8. Benefits Upon Termination Without Cause or For Good Reason. If the
Employee's employment with the Company shall terminate (i) because of
termination by the Company pursuant to Section 5(c) other than for Cause or
because of Permanent and Total Disability, or (ii) because of termination by the
Employee for Good Reason pursuant to Section 6 (a), the Employee shall be
entitled to the following:
(a) The Company shall pay to the Employee his base salary
pursuant to Section 4(a) and any other compensation and benefits to the extent
actually earned by the Employee under this Agreement or any benefit plan or
program of the Company as of the date of such termination at the normal time for
payment of such salary, compensation or benefits.
(b) The Company shall pay the Employee any amounts owing
under Section 4(d).
(c) The Company shall pay to the Employee as a severance
benefit an amount equal to three times the sum of (i) his annual rate of base
7
salary immediately preceding his termination of employment, and (ii) the average
of his three highest annual bonuses awarded under the Company's regular annual
bonus program for any of the five calendar years preceding his termination of
employment (or, if he was not eligible for a bonus for at least three calendar
years in such five-year period, then the average of such bonuses for all of the
calendar years in such five-year period for which he was eligible), with any
deferred bonuses counting for the year earned rather than the year paid. Such
severance benefit shall be paid in a lump sum within 45 days after the date of
such termination of employment.
(d) The Company shall pay to the Employee as a bonus for the
year of termination of his employment an amount equal to a portion (determined
as provided in the next sentence) of the bonus awarded to him under the
Company's regular annual bonus program for the calendar year immediately
preceding the calendar year of the termination of his employment, with any
deferred bonuses counting for the year earned rather than the year paid. Such
portion shall be determined by dividing the number of days of the Employee's
employment during such calendar year up to his termination of employment by 365
(366 if a leap year). Such payment shall be made in a lump sum within 45 days
after the date of such termination of employment, and the Employee shall have no
right to any further bonuses under said program.
(e) During the period of 36 months beginning on the date of
the Employee's termination of employment, the Employee shall remain covered by
the medical, dental, vision, life insurance, and, if reasonably commercially
available through nationally reputable insurance carriers, long-term disability
plans of the Company that covered him immediately prior to his termination of
employment as if he had remained in employment for such period. In the event
that the Employee's participation in any such plan is barred, the Company shall
arrange to provide the Employee with substantially similar benefits (but, in the
8
case of long-term disability benefits, only if reasonably commercially
available). Any medical insurance coverage for such 36-month period pursuant to
this subsection (e) shall become secondary upon the earlier of (i) the date on
which the Employee begins to be covered by comparable medical coverage provided
by a new employer, or (ii) the earliest date upon which the Employee becomes
eligible for Medicare or a comparable Government insurance program.
(f) At the end of the 36-month period described in subsection
(e) above, the Company shall assign to the Employee all rights which the Company
may have under any life insurance policy issued on the Employee's life under the
Company's Equity Split Dollar Plan (including, without limitation, the right to
reimbursement for any premiums and administrative service fees paid by the
Company).
(g) The Company shall arrange for an outplacement assistance
firm to provide outplacement assistance services to the Employee at the
Company's expense for a period of twelve months beginning on the date of
termination of the Employee' s employment.
(h) If any payment or benefit received by or in respect of
the Employee under this Agreement or any other plan, arrangement or agreement
with the Company (determined without regard to any additional payments required
under this subsection (h) and Appendix A of this Agreement) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be
imposed) or any interest or penalties are incurred by the Employee with respect
to such excise tax (such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to the Employee with respect to such Payment at the time
specified in Appendix A an additional amount (the "Gross- up Payment") such that
the net amount retained by the Employee from the Payment and the Gross-up
9
Payment, after reduction for any Excise Tax upon the Payment and any Federal,
state and local income and employment tax and Excise Tax upon the Gross-up
Payment, shall be equal to the Payment. The calculation and payment of the
Gross-up Payment shall be subject to the provisions of Appendix A.
(i) Anything in this Agreement to the contrary
notwithstanding, if the Company approves any transaction with another business
entity which it wishes to qualify for "pooling of interests" accounting
treatment and, prior to the consummation of such transaction, the Company's
accountants advise that any benefits payable under this Agreement might
adversely affect the availability of such accounting treatment, such benefits
shall not be payable, and the Company and the Employee shall negotiate in good
faith to provide, if possible, an alternative way of giving substantially
equivalent economic benefits to the Employee that would not adversely affect
"pooling of interests" accounting treatment.
9. Entitlement To Other Benefits. Except as provided in this
Agreement, this Agreement shall not be construed as limiting in any way any
rights or benefits that the Employee or his spouse, dependents or beneficiaries
may have pursuant to any other plan or program of the Company.
10. Confidential Information. The Employee shall retain in confidence
any confidential information known to him concerning the Company, its
subsidiaries, and their respective businesses until such information is publicly
disclosed. This provision shall survive the termination of the Employee's
employment for any reason under this Agreement.
11. No Duty to Seek Employment. The Employee shall not be under any
any duty or obligation to seek or accept other employment following termination
10
of employment, and no amount, payment or benefits due to the Employee hereunder
shall be reduced or suspended if the Employee accepts subsequent employment.
12. Non-Solicitation. The Employee agrees that, for a period of
eighteen months following the date of termination of his employment hereunder,
he will not solicit, directly or indirectly, any officer or employee of the
Company or any of its subsidiaries or affiliates to leave and work for any other
employer and, further, that he will not suggest to others that they approach or
solicit any officer or employee of the Company or any of its subsidiaries or
affiliates with respect to potential employment elsewhere. This provision shall
survive the termination of the Employee's employment for any reason under this
Agreement. If the Employee breaches this provision in any significant respect,
he shall forfeit his right to receive the payments and benefits described in
subsections (c) through (h) of Section 8 (including, without limitation,
payments and 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. In addition, the Company may seek other
legal and equitable relief in the event of any breach by the Employee of this
Section 12.
13. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled by arbitration, conducted before
a panel of three arbitrators in Phoenix, Arizona in accordance with the
applicable rules and procedures of the American Arbitration Association then in
effect. Arbitration shall be the exclusive remedy for any such dispute or
controversy except only as to the failure to abide by an arbitration award
rendered hereunder. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction. Such arbitration shall be final and
binding on the parties. If the Employee is awarded more than an insignificant
amount compared with what the Company asserted was due him or otherwise
11
substantially prevails in the arbitration, the Company shall reimburse the
Employee for the costs incurred by the Employee in connection with such
arbitration, including without limitation reasonable attorneys' fees, and hereby
agrees to pay interest on any money award obtained by the Employee from the date
payment should have been made until the date payment is made, calculated at the
rate of 2% in excess of the LIBOR rate in effect from time to time from the date
that payment(s) to him should have been made under the Agreement. If the
Employee enforces the arbitration award in court, the Company shall reimburse
the Employee for the costs incurred in such enforcement, including without
limitation reasonable attorneys' fees.
14. Successors. This Agreement shall be binding upon and inure to
the benefit of the Employee and his estate and the Company and any successor of
the Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by the Employee.
15. Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
16. Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed sufficiently given if
delivered by hand or mailed by registered mail, return receipt requested, to his
residence in the case of the Employee and to its principal executive offices in
the case of the Company. Either party may by giving written notice to the other
party in accordance with this Section 16 change the address at which it is to
receive notices hereunder.
12
17. Controlling Law. This Agreement shall in all respects be governed
by and construed in accordance with the laws of the State of Delaware (without
giving effect to principles of conflict of laws).
18. Changes to Agreement. This Agreement may not be changed orally but
only in a writing, signed by the party against whom enforcement is sought.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
of which together shall constitute one and the same instrument.
20. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to its subject matter and supersedes all prior
agreements, drafts, and written or oral representations of either party.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
____ day of December, 1997.
EMPLOYEE: CONTINENTAL HOMES HOLDING CORP.
/s/ W. Xxxxxx Xxxxxxx By:/s/ Xxxxxxx X. Xxxxxxxx
-------------------------- ---------------------------------
W. Xxxxxx Xxxxxx
ATTEST:
By:/s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
13
APPENDIX A
GROSS-UP PAYMENTS
The following provisions shall be applicable with respect to the
Gross-Up Payments described in Section 8(h) of this Agreement.
(a) For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of
the Payments received or to be received shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of tax counsel selected by
the Company, the Payments (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b)(4)(A) of the Code, or excess
parachute payments (as determined after application of Section 280G(b)(4)(B) of
the Code), and (ii) the value of any non-cash benefits or any deferred payment
or benefit shall be determined by independent auditors selected by the Company
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Employee
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation to which such payment could be subject based upon the state and
locality of the Employee's residence or employment, net of the maximum reduction
in Federal income taxes which could be obtained from deduction of such state and
local taxes. In addition, for purposes of determining the amount of the Gross-Up
Payment, the Company shall make a determination of the amount of any employment
taxes required to be paid on the Gross- Up Payment. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the Employee shall repay the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
Federal and state and local income and employment tax imposed on the portion of
the Gross-up Payment being repaid by the Employee if such repayment results in a
reduction in Excise Tax and/or a Federal and state and local income or
employment tax deduction), plus interest on the amount of such repayment at the
Federal short-term rate as defined in Section 1274 (d)(1)(C)(i) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason
of any payments the existence or amount of which cannot be determined at the
time of the Gross-up Payment), the Company shall make an additional gross-up
payment in respect of such excess (plus any interest, penalties or additions
payable with respect to such excess) at the time that the amount of such excess
is finally determined. Notwithstanding the foregoing, the Company shall withhold
from any payment due to the Employee the amount required by law to be so
withheld under Federal, state or local wage or employment tax withholding
requirements or otherwise (including without limitation Section 4999 of the
Code), and shall pay over to the appropriate government authorities the amount
so withheld.
(b) The Gross-up Payment with respect to a Payment shall be
paid not later than the forty-fifth day following the date of the Payment;
provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, the Company shall
pay to the Employee on such date an estimate, as determined in good faith by the
Company, of the amount of such payments and shall pay the remainder of such
payments (together with interest at the Federal short-term rate provided in
Section 1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Employee, payable on the fifth day after demand by
the Company (together with interest at the Federal short-term rate provided in
Section 1274(d)(1)(C)(i) of the Code). At the time that payments are made under
Section 8(h) and this Appendix A, the Company shall provide the Employee with a
written statement setting forth the manner in which such payments were
calculated and the basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from outside counsel,
auditors or consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
2
