CLOSING AGREEMENT
This Closing Agreement is entered into as of the 30th day of September,
1996, between M.D.C. Holdings, Inc., a Delaware corporation (the "Company"),
and Spencer I. Browne ("Browne").
RECITALS
1. The Company, MDC Sub, Old FAMC, FAMC and Browne entered into an
Agreement dated as of April 1, 1996 (the "Agreement") pertaining to the
formation of FAMC and the contribution of property and cash to FAMC in exchange
for membership interests therein, the purchase by the Company from Browne of
certain shares of Common Stock of the Company, and certain other matters. Unless
otherwise defined or specified herein, capitalized terms have the meanings
ascribed to such terms in the Agreement.
2. In connection with the Agreement, Browne entered into an Employment
Agreement dated as of April 1, 1996 with the Company (the "Employment
Agreement") pursuant to which Browne agreed to serve as President and Chief
Executive Officer of FAMC.
3. Under the Agreement, the Company holds an option to purchase from
Browne all of the FAMC Interest at the Put/Call Price upon a Change in Control
(as defined in the Employment Agreement).
4. Effective as of September 6, 1996, FAM Acquisition LLC ("CLLC"),
MDC, Old FAMC and MDC Sub entered into an Acquisition Agreement (the
"Acquisition Agreement"). Pursuant to the Acquisition Agreement, Old FAMC and
MDC Sub agreed, among other things, to convey to CLLC all of their equity
interest in FAMC, and to cause FAMC to acquire Browne's 20% equity interest in
FAMC pursuant to certain put/call provisions of the Agreement.
5. As of the date of this Agreement, a Change in Control of FAMC has
occurred. As a result of the Change in Control, the Employment Agreement is
terminated effective as of the date hereof (the "Termination Date"), and the
parties desire to confirm the obligations of the Company to Browne and the
rights of Browne under the Employment Agreement in connection with such
termination.
6. The Company, in connection with the termination of Browne's
employment under the Employment Agreement, has agreed to afford Browne the right
to cause the Company to purchase from Browne 147,500 shares of the Company's
common stock, $.01 par value ("Common Stock"), owned by Browne and, if permitted
by the terms of the MDC Employees' 401(k) Plan (the "401(k) Plan") and
applicable law, 5,681 shares of Common Stock held by or for the account of
Browne in the 401(k) Plan (collectively, the "MDC Shares").
7. The Company has agreed to afford Browne the right to cause the
Company to acquire all of the options which, upon a Change in Control of FAMC,
may be exercised into
500,000 shares of Common Stock to the extent not previously exercised by Browne
(the "Options") held by him under the Company's Non-Qualified Stock Option Plan
and Employee Equity Incentive Plan (the "Plans"), subject to the terms and
conditions set forth herein.
8. The parties further desire to enter into certain additional
agreements and to enter into mutual releases.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. Closing. The closing of the transactions contemplated by thi
Closing Agreement (the "Closing") shall take place on September 30, 1996 at 9:00
a.m. at the office of the Company on 3600 South Yosemite Street, Suite 900,
Denver, Colorado 80237 (the "Closing Date"), or at such other date and time as
may be agreed to by the parties.
At the Closing:
(a) Browne, at his option, may elect, by notice given to the
Company at the Closing, to sell and the Company shall purchase, the MDC Shares
at a purchase price per share equal to the average closing sale price of the
Common Stock during the ten trading days ending on the trading day immediately
preceding the Closing Date less $.25 per share (the "MDC Stock Purchase Price").
Payment for the MDC Shares shall be made against delivery of such shares on or
before the close of business on the third business day following the Closing
Date;
(b) The Company shall pay Browne his Base Salary (as defined
in Section 3(b) of the Employment Agreement) through the Termination Date;
(c) The Company shall pay Browne a lump sum payment of
$1,220,000 pursuant to Section 4(f)(i) of the Employment Agreement;
(d) The Company shall pay Browne $5,000 in connection with tax
planning and/or tax preparation services pursuant to Section 3(h)(ii) of the
Employment Agreement;
(e) The Company shall pay Browne $1,000 for an annual physical
exam pursuant to Section 3(h)(iii) of the Employment Agreement;
(f) The Company shall pay Browne $25,000, representing four
weeks' vacation pay, in lieu of the four weeks' vacation allotted to Browne
pursuant to Section 3(h)(vii) of the Employment Agreement;
(g) The Company shall pay Browne all expense reimbursements
through Termination to which Browne is entitled under Section 3(f) of the
Employment Agreement net of unpaid expenses owed by Browne to the Company. If
such amounts cannot be determined
- 2 -
finally by September 30, 1996, the expense reimbursement shall be paid to
Browne within ten days after they are so determined; and
(h) Browne will sell and MDC will cause FAMC to purchase
Browne's 20% equity interest in FAMC in accordance with the terms of Sections
4(c) and 4(d) of the Agreement. The Note and Pledge Agreement shall be canceled
and returned to Browne, FAMC will pay Browne $400,000 less accrued interest on
the Note plus the estimated balance on the Put/Call Price, and final adjustments
to the Put/Call Price will be paid to Browne by FAMC or paid by Browne to FAMC
on or before November 30, 1996.
2. Continuation of Medical Insurance Benefits. From the Termination
Date through September 30, 1998, the Company shall pay for and make available to
Browne and his dependents medical insurance which provides coverage and benefits
that are comparable to coverage that the Company provides as of the Termination
Date; provided that such coverage is available and the cost of such coverage
does not exceed the cost currently paid by the Company plus 20%.
3. Executive Officer Performance Based Compensation Plan Bonus. The
Company shall pay Browne twenty-five percent (25%) of the amount of the bonus
determined to be payable to a Covered Employee (as defined in the Company's
Executive Officer Performance Based Compensation Plan) in accordance with such
plan for the 1996 calendar year at such time as such bonus is paid to other
Covered Employees, not later than April 1, 1997.
4. Annual Incentive Compensation. The Company shall pay Browne at the
Closing an estimate of an amount equal to 15% of the Pre-Tax Net Income (as
defined in Section 3(c) of the Employment Agreement) of FAMC for the period
beginning on April 1, 1996 and ending on the Termination Date, with final
adjustment of such amount to be paid to Browne by the Company, or paid by Browne
to the Company, on or prior to November 30, 1996.
5. Pre-Tax Net Income. The Company shall pay Browne, as soon as
practicable after the Closing and prior to October 31, 1996, an amount equal to
ten percent (10%) of the Pre-Tax Net Income from the remaining CMO subsidiaries
of the Company, earned from April 1, 1996 through the Termination Date.
6. Acquisition of Options. On or before October 31, 1996, Browne shall
have the right to cause the Company to acquire all, but not less than all, of
the Options. The acquisition price for such Options shall be equal to the
difference between the MDC Stock Purchase Price and the exercise price of each
Option. The Company shall pay the aggregate acquisition price to Browne on or
before the close of business on the third business day following receipt by the
Company of notice of Browne's election to cause the Company to acquire his
Options pursuant to this paragraph, and Browne shall deliver to the Company an
assignment or such other documents as the Company may require to evidence
assignment and surrender of the Options. If Browne does not elect to exercise
his right under this paragraph, the Options shall be deemed to be vested and his
rights with respect to the Options shall continue to be governed by the plans
and agreements with respect thereto.
- 3 -
7. Withholding Requirements. All of the payments to Browne hereunder
shall be net of applicable withholding taxes that are required by law to be
withheld.
8. Indemnification.
(a) The Company has indemnified and shall continue to
indemnify Browne for and hold him harmless from any action, demand, claims,
liabilities or damages and associated expenses (including attorneys' fees)
arising out of or in connection with his conduct, acts or omissions in his
capacity as an officer, director and/or employee of the Company, including its
subsidiaries and affiliates, and any other entity for which Browne serves or has
served in such capacity for the benefit of or at the request of the Company
through the Termination Date, and shall advance or pay on a current basis
defense expenses (including attorneys' fees and costs) reasonably incurred by
Browne in connection with any such action, demand, claims, liabilities or
damages, all to the fullest extent permitted by applicable law.
(b) The Company shall continue to procure insurance policies
which continue executive liability and indemnification insurance coverage for
Browne to the same extent and providing limited liability, deductibles and
exclusions as are provided for the Company's principal executive officers and
outside directors. The covenants contained in this clause (b) shall continue in
effect through September 30, 2003.
9. Turnover of Records. On or before October 31, 1996, Browne shall
deliver to the Company all Company records, materials and information in his
possession, custody or control (or which he has provided to his
representatives), including all copies thereof, which relate to the business of
the Company, FAMC, AIC or CAI, except copies of Forms 10-K, 10-Q, proxies,
annual and quarterly reports to stockholders and other publicly available
documents and reports filed with public agencies. In the event Browne locates or
otherwise comes into possession of Company information on property after the
date of this Agreement, he shall promptly deliver such information promptly.
10. Employment Agreement Covenants. The covenants of Browne contained
in Section 5 of the Employment Agreement are incorporated herein by reference
verbatim and shall survive termination of the Employment Agreement in accordance
with the terms of this Closing Agreement.
11. Mutual Releases. At the Closing, the Company and Browne shall
execute mutual releases in the forms attached to this Closing Agreement (the
"Releases").
12. Conditions to Post-Termination Payments. Payments to Browne of any
amounts due him after the Closing Date in accordance with this Closing Agreement
(including without limitation payments under Sections 3, 4 and 5 hereof) shall
be subject to the condition that Browne is not in breach of (i) any of the
provisions of this Closing Agreement or his Release.
- 4 -
13. Representations and Warranties of the Company. The Company
represents and warrants to Browne as follows:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power to execute, carry out and perform the provisions
of the transactions set forth in this Agreement and the Release;
(b) The execution, delivery and performance by the Company of
this Agreement and the Release have been duly authorized by the Company as
evidenced by the execution of this Agreement and the Release by an officer of
the Company;
(c) Neither the execution, delivery, performance of, or
compliance with, this Agreement and the Release will result in any breach or
violation of, or be in conflict with or constitute a default under, any
mortgage, indenture, contract, agreement, lease, instrument, judgment, decree,
order, statute, rule, regulation or restriction by which the Company is bound or
affected;
(d) No consent, authorization, approval, permit, order of, or
registration or filing by, the Company with any governmental or regulatory
authority or any other person will be required in connection with the execution
and delivery of this Agreement and the performance of the transactions
contemplated hereby, except for routine filings or notifications with the United
States Securities and Exchange Commission (the "Commission") and/or the New York
Stock Exchange, Inc. and The Pacific Stock Exchange Incorporated;
(e) No person, as a result of any action by the Company in
connection with the transactions set forth in this Agreement, has or will have,
to the best of the Company's knowledge, any right, interest or claim against or
upon the Company or Browne for any commission, fee or any other compensation as
a finder or broker or for acting in any similar capacity;
(f) The Company, as the issuer of the MDC Shares and the
Options, has available to it all information which it deems necessary and
advisable in connection with its decision to purchase the MDC Shares and the
Options and has no intention of disposing of the MDC Shares or the Options
except in accordance with applicable law;
(g) The Company has not omitted to disclose to Browne or
misrepresented to Browne any material fact known to its senior management
relating to its purchase of the MDC Shares or the Options or the transactions
contemplated by this Agreement; and
(h) The Company has no reason to believe that any of the
representations and warranties of Browne herein are inaccurate.
- 5 -
14. Representations and Warranties of Browne. Browne represents
and warrants to the Company as follows:
(a) Browne has all requisite power and authority to enter
into this Agreement and the Release to sell the MDC Shares and the Options;
(b) This Agreement and the Release have been duly executed and
delivered by Browne;
(c) Neither the execution, delivery, performance of, or
compliance with, this Agreement or the Release will result in any breach or
violation of, or be in conflict with or constitute a default under, any
mortgage, indenture, contract, agreement, lease, instrument, judgment, decree,
order, statute, rule, regulation or restriction by which Browne is bound or
affected;
(d) No consent, authorization, approval, permit, order of, or
registration or filing by Browne with any governmental regulatory authority or
any other person who is or will be required in connection with the execution and
delivery of this Agreement or the Release, or the sale to the Company of the MDC
Shares or the Options except for routine filings with the commission and/or the
New York Stock Exchange, Inc. and the Pacific Stock Exchange Incorporated;
(e) At the time of sale to the Company of the MDC Shares and
the Options, Browne will have good and marketable title to the MDC Shares and
the Options which are sold, free and clear of any liens, charges, encumbrances
or claims of any nature whatsoever, and upon consummation of the transactions
referenced in Section 1(a) or 6, the Company shall receive good and marketable
title to the MDC Shares or Options, as the case may be, free and clear of any
liens, charges, encumbrances or claims of any nature whatsoever;
(f) No person, as a result of any action by Browne, in
connection with the transactions set forth in this Agreement, has or will have,
to the best of Browne's knowledge, any right, interest or claim against or upon
the Company for any commission, fee or other compensation as a finder or broker,
or for acting in any similar capacity;
(g) By reason of Browne's employment relationship with the
Company and its affiliates and his experience in financial and business matters
in general, he is capable of evaluating the transactions regarding the MDC
Shares and the Options contemplated hereby;
(h) If Browne elects to sell the MDC Shares or the Options,
Browne acknowledges that he has been furnished with all information relating to
the Company and its prospects as he has requested, and has had the opportunity
to ask all questions and receive all answers as he has requested;
(i) If Browne elects to sell the MDC Shares or the Options,
Browne acknowledges that he has been afforded access to all documents, books,
accounts and records
- 6 -
relating to the Company and has performed all investigations, which he has
deemed necessary and advisable in connection with his decision to elect whether
to sell to the Company the MDC Shares and the Options;
(j) Browne has not omitted to disclose or misrepresented
any material fact known to him relating to his sale of the MDC Shares and the
Options; and
(k) Browne has no reason to believe that any of the
representations and warranties of the Company herein are inaccurate.
15. Survival. The respective representations, warranties and agreements
of the parties contained in this Closing Agreement shall survive the Closing and
shall remain in full force and effect until September 30, 1998; provided that
(a) the agreements of the Company contained in Section 8(a) shall survive
indefinitely and (b) the agreements of the Company contained in Section 8(b)
shall survive until September 30, 2003.
16. Miscellaneous.
(a) This Closing Agreement and the attached Releases supersede
all prior agreements and understandings between the parties with respect to the
subject matter hereof, including the Employment Agreement, except as otherwise
specifically set forth herein and except for Browne's notes and pledge
agreements delivered to the Company in connection with the Company's Executive
Option Purchase Program, which notes and pledge agreements shall remain in full
force and effect; and
(b) No modification, termination or attempted waiver shall be
valid unless in writing signed by the party against whom the same is sought to
be enforced.
17. Notices. Any notice, consent or other communication made given in
connection with this Closing Agreement shall be in writing and shall be deemed
to have been duly given when delivery by hand or by United States registered or
certified mail, return receipt requested, to the parties at the following
addresses or at such other address as a party may specify by notice to the
other.
TO BROWNE:
Spencer I. Browne
1660 Holly Street
Denver, CO 80220
TO THE COMPANY:
M.D.C. Holdings, Inc.
3600 South Yosemite Street, Suite 900
- 7 -
Denver, Colorado 80237
Attention: General Counsel
18. Governing Law. This Closing Agreement shall be governed by and
construed according to the laws of the State of Colorado. Any controversy or
claim arising out of or relating to this Agreement or the breach thereof, shall
be settled by arbitration administered by the American Arbitration Association
in accordance with the Commercial Arbitration Rules, and judgment on the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. All parties expressly agree that costs and attorneys' fees related to
any such arbitration shall be awarded to the prevailing party. Any arbitration
commenced pursuant to this paragraph shall be conducted in the Denver
metropolitan area, State of Colorado.
19. Captions and Paragraph Headings. Captions and paragraph headings
used herein are for the convenience of the parties, are not a part of this
Closing Agreement and shall not be used in construing it.
20. Gender; Plural. Where necessary or appropriate the meaning
thereof, the use of the singular and plural shall be deemed to include each
other, and the use of any gender shall be deemed to include any other gender
where appropriate to the meaning hereof.
IN WITNESS WHEREOF the parties have executed this Closing Agreement on
the day and year first set forth above.
M.D.C. HOLDINGS, INC.
By:
-------------------------------
Michael Touff, Vice President
-------------------------------
Spencer I. Browne
- 8 -