Exhibit 10.2
EMPLOYMENT AND CONSULTING AGREEMENT
-----------------------------------
This Employment and Consulting Agreement (the "Agreement") is entered
into as of the 10th day of July, 1996 between DEL WEBB CORPORATION, a Delaware
corporation (the "Company"), and PHILIP J. DION ("Dion").
1. DEFINITIONS
-----------
Throughout this Agreement, certain defined terms will be identified by
the capitalization of the first letter of the defined word or the first letter
of each substantive word in a defined phrase. Whenever used, these terms will be
given the indicated meaning.
2. TERM OF AGREEMENT; DUTIES
-------------------------
(a) Employment Period
-----------------
The "Employment Period" shall begin on July 10, 1996 and end on
November 30, 1999. During the Employment Period, Dion shall perform the duties
of Chairman of the Board and Chief Executive Officer of Company. As Chief
Executive Officer, Dion shall supervise and direct the entire operation of
Company and, to the extent practicable, its "Subsidiaries". During the
Employment Period, Dion also shall perform such additional duties related to the
business and affairs of Company and its Subsidiaries as may be delegated to him
from time to time by the Board of Directors of Company (the "Board"). Any
additional duties delegated to Dion by the Board shall be consistent with Dion's
position as Chief Executive Officer and Chairman of the Board and shall be of
the type customarily assigned to the Chief Executive Officer and Chairman of the
Board of a comparable corporation. For purposes of this Agreement, the term
"Subsidiary" shall mean any corporation, partnership, joint venture, or other
entity in which Company directly or indirectly has a 20% or greater equity
interest.
(b) Consulting Period
-----------------
Dion's status as an "employee" of Company shall end on November 30,
1999, the last day of the Employment Period, unless this Agreement is terminated
previously pursuant to the provisions hereof. If this Agreement has not been
previously terminated, Dion shall become a part-time consultant to Company on
December 1, 1999 and shall continue to serve as a part-time consultant to
Company until November 30, 2001. The period beginning on December 1, 1999 and
ending on November 30, 2001 shall be referred to as the "Consulting Period".
During the Consulting Period, Dion shall serve as Chairman of the Board of
Company if he is elected to the Board of Directors by the stockholders and is
appointed as Chairman by the directors, in each case pursuant to Company's
Bylaws. In such case, Dion shall perform the duties assigned to the Chairman of
the Board by Company's Bylaws. If he is serving as a member of the Board of
Directors during the Consulting
Period Mr. Dion shall receive, in addition to the Consulting Fee set forth in
Section 5, the same fees for attendance and committee assignments as other
non-employee Board members; provided, that during the Consulting Period he shall
not receive any additional fee for acting as Chairman of the Board. Regardless
of whether Dion is serving as Chairman of the Board during the Consulting
Period, Dion shall perform such additional or other duties as may be assigned to
him by the Board as long as such duties are of the type customarily assigned to
a retired Chief Executive Officer acting as a part-time consultant to a
comparable corporation. Dion shall not be required to perform more than 600
hours of consulting services in either of the 12-month periods (December 1, 1999
to November 30, 2000 and December 1, 2000 to November 30, 2001) included in the
Consulting Period. The Consulting Period shall not commence and Dion shall not
be a consultant if this Agreement is terminated prior to December 1, 1999
pursuant to the provisions hereof. The Consulting Period may be extended for an
additional one-year period on such terms and conditions as the parties may agree
to.
(c) Board Nomination
----------------
Company will recommend to the Nominating Committee that Dion be
submitted to the stockholders as a Board candidate following the expiration of
his term on the Board that begins in calendar year 1996. Dion's nomination will
be left to the discretion of the Nominating Committee, which shall act in a
manner that it deems to be in the best interests of Company's stockholders. As
provided in Section 11(b)(1), if Dion is not nominated and elected to the Board,
or is elected to the Board but not the Chairmanship, he shall have Good Reason
to terminate this Agreement.
(d) General
-------
Dion agrees that at all times during both the Employment Period and the
Consulting Period he will faithfully, industriously, and to the best of his
ability, experience, and talents, perform all of the duties that may be required
of and from him and fulfill all of his responsibilities hereunder pursuant to
the express and explicit terms hereof, to the reasonable satisfaction of the
Board. Dion also agrees that during the Employment Period, he will devote
substantially all of his undivided time, attention, knowledge, and skills,
during customary business hours, to the business and interests of Company,
subject to such reasonable vacations and sick leave as are provided under the
general policies of Company as they may exist from time to time and consistent
with past practice. During the Employment Period, Dion also shall maintain his
residence at a location within the city or in or near a suburban community of
the city in which the executive offices of Company are located.
3. DEATH BENEFIT
-------------
In addition to any other benefits to which Dion may become entitled
pursuant to any plan or program sponsored by Company, if this Agreement is
terminated during the Employment Period by reason of the death of Dion, Dion's
widow or, if she shall not survive him, his estate shall be paid at
-2-
the rate of Dion's "Base Salary" (as determined pursuant to Section 4) as in
effect at the time of his death for a period of 12 calendar months following the
date of his death.
4. COMPENSATION FOR EMPLOYMENT PERIOD
----------------------------------
Dion shall receive the following compensation for services during the
Employment Period.
(a) Base Salary
-----------
Dion shall receive "Base Salary" during the Employment Period at the
rate of $500,000 per year. Base Salary shall be payable as nearly as possible in
equal bi-weekly installments. The Base Salary may be adjusted from time to time
in accordance with the procedures established by Company for salary adjustments
for executive officers, but it may not be reduced below the Base Salary provided
above.
(b) Incentive and Benefit Plans
---------------------------
During the Employment Period, Dion shall participate in any incentive
compensation plans, pension or profit sharing plans, stock purchase plans,
executive retirement plans, any annuity or group benefit plans and any medical
plans and other benefit plans that are now or in the future may be maintained by
Company for its executive officers, all in accordance with the terms and
conditions of the plans. Dion shall not be entitled to participate in these
plans during the Consulting Period except to the extent that Dion's
participation is continued pursuant to other provisions of this Agreement (e.g.,
Section 6) because of the circumstances pursuant to which his employment is
terminated. During the Employment Period (but not the Consulting Period),
Company will provide Dion with an automobile and an active membership in a
country club of Dion's choice in accordance with the policies and practices
applicable to the Chief Executive Officer. The automobile and country club
policies for executive officers may be modified from time to time, but no
reduction in the level of benefits provided or expenses reimbursed will apply to
Dion in the absence of his consent. At the conclusion of the Employment Period,
Dion shall retain the country club membership in his name and shall be
responsible for dues and other expenses associated therewith.
5. CONSULTING FEE
--------------
Dion shall receive a "Consulting Fee" of $200,000 per year during the
Consulting Period. The Consulting Fee shall be payable as nearly as possible in
equal bi-weekly installments or in such other installments as Company and Dion
may agree. Except as provided elsewhere in this Agreement, the Consulting Fee is
the only compensation to which Dion will be entitled for services rendered
during the Consulting Period. The Consulting Fee will represent a payment for
services rendered by an independent contractor and will not be subject to
withholding or employment taxes.
-3-
6. RETIREE MEDICAL COVERAGE
------------------------
If Dion's employment is continued until the expiration of the
Employment Period, or if Dion's employment is terminated prior to the expiration
of the Employment Period by Company without Cause pursuant to Sections 10 or 12
or by Dion for Good Reason pursuant to Sections 11 or 12, Dion also shall be
entitled to continued coverage under any and all health plans sponsored by
Company for the benefit of its executive level employees (the "Executive Health
Plans"), with such coverage to continue until the later of the death of Dion or
his spouse. The coverage afforded to Dion and his spouse under the Executive
Health Plans and the premiums they will be required to pay shall be the same as
the coverage afforded to and the premiums charged to any active executive level
employee, provided that the benefits may be reduced by any benefits payable
pursuant to Part A or Part B of Medicare or any replacement national or state
health care program (all of which programs are collectively referred to as
"Medicare").
After Dion becomes eligible for Medicare coverage, in lieu of the
continued coverage of Dion under the Executive Health Plans, Company may, at its
expense, purchase a Medicare supplement for Dion, with such Medicare supplement
to provide the best coverage available under any Medicare supplement generally
available in the location in which Dion resides; provided, however, that Company
may elect to provide a Medicare supplement other than the best available
supplement as long as such supplement provides Dion (when combined with the
coverage afforded to Dion by Medicare) with coverage reasonably comparable to
the coverage offered to executive level employees under the Executive Health
Plans. If Dion becomes eligible to receive Medicare coverage prior to the date
on which Dion's spouse becomes eligible to receive Medicare coverage, Dion's
spouse shall continue to receive coverage under Company's Executive Health Plans
until she, too, is eligible for Medicare coverage, at which point Company may
purchase a Medicare supplement for Dion's spouse on the same terms set forth
above for Dion.
Notwithstanding anything in this Section to the contrary, Company will
exert its best efforts to assure that any coverage afforded to Dion and his
spouse pursuant to this Section under the Executive Health Plans or any Medicare
supplement allows Dion and his spouse to choose their own physicians and other
medical care providers.
If Company, after a good faith effort, is unable to provide continued
coverage to Dion and/or his spouse under the Executive Health Plans because of
restrictions imposed by any insurance carrier that provides coverage for any
claims incurred under the Executive Health Plans, in lieu of the continued
coverage of Dion and/or his spouse, Company may pay Dion or his spouse a monthly
amount equal to 150% of the cost of providing coverage under the Executive
Health Plans to executive level employees with covered families the size of
Dion's. Such cost shall be determined conclusively by Company. Such payments
shall continue unless or until the Company provides Dion and his spouse with a
Medicare supplement in accordance with the preceding provisions of this Section.
-4-
Company intends to provide Dion and his spouse with medical coverage
that is the same as or comparable to the coverage offered to its senior level
executives until such time as they become eligible for Medicare. Following
eligibility for Medicare, Company intends to provide Dion and his spouse with a
high quality Medicare supplement. If due to changes in medical programs
available to Company or in Medicare the preceding provisions of this Section do
not accomplish this objective, Company and Dion (or his spouse if Dion
predeceases her) will enter into good faith negotiations to reach an alternative
agreement that will carry out this intention.
7. CONFIDENTIALITY
---------------
Dion covenants and agrees to hold in strictest confidence, and not
disclose to any person, firm or corporation, without the express written consent
of Company, any and all of Company's or any Subsidiary's confidential data,
including but not limited to information and documents concerning Company's or
any Subsidiary's business, customers, and suppliers, market methods, files,
trade secrets, or other "know-how" or techniques or information not of a
published nature which shall come into his possession, knowledge, or custody
concerning the business of Company or any Subsidiary, except as such disclosure
may be required by law or in connection with Dion's employment hereunder. This
covenant and agreement of Dion shall survive this Agreement and continue to be
binding upon Dion after the expiration or termination of this Agreement, whether
by passage of time or otherwise so long as such information and data shall
remain confidential.
Dion acknowledges that, in the event of his breach of the
confidentiality provisions of this Section 7, money damages will not
sufficiently compensate Company or the applicable Subsidiary for its injury.
Dion accordingly agrees that in addition to such money damages, Dion may be
restrained and enjoined from continuing breach of the provisions of this Section
7 without any bond or other security being required by any court. Dion also
acknowledges that any breach of this Section 7 would result in irreparable
damage to Company or the applicable Subsidiary.
8. TERMINATION DUE TO DEATH OR DISABILITY
--------------------------------------
(a) Death
-----
This Agreement shall terminate upon Dion's death. Dion's estate shall
be entitled to receive the Base Salary, or Consulting Fee, due through the date
of his death, but no Base Salary, Consulting Fee, or other payment or benefit
will be payable in the future except as expressly provided elsewhere in this
Agreement.
(b) Permanent Disability
--------------------
At Company's option, this Agreement also shall terminate in the event
of Dion's "Permanent Disability" upon notice in writing to Dion to that effect.
For purposes of this Agreement, "Permanent Disability" shall mean that because
of physical or mental illness or disability, with or without
-5-
accommodation, Dion shall have been continuously unable to perform his duties
hereunder for a consecutive period of 180 days.
If this Agreement is terminated during the Employment Period due to
Dion's Permanent Disability, Dion shall receive all of the payments and benefits
called for by Section 10, other than the benefits called for by Section 10(b)(8)
and (9) relating to stock options, stock appreciation rights and restricted
stock. If this Agreement is terminated during the Consulting Period due to
Dion's Permanent Disability, Dion shall be entitled to receive the Consulting
Fee throughout the balance of the Consulting Period and Dion shall not be
entitled to receive any other amounts or benefits except to the extent expressly
provided in other provisions of this Agreement (e.g., Section 6).
(c) Lapse of Provisions
-------------------
This Section 8 shall cease to apply following the termination of Dion's
employment pursuant to Sections 10, 11, or 12.
9. TERMINATION FOR CAUSE
---------------------
(a) General
-------
Company may terminate this Agreement for "Cause" upon written notice to
Dion. If Company terminates this Agreement for "Cause", Dion's Base Salary or
Consulting Fee, whichever is applicable at the time, shall immediately cease and
Dion shall be entitled to no other payments or benefits pursuant to this
Agreement, except for any vested rights pursuant to any benefit plans in which
Dion participates.
(b) "Cause" Defined
---------------
Termination of this Agreement for "Cause" shall mean (i) breach of any
material provision of this Agreement by Dion which is not cured within a
reasonable time after receipt by Dion of written notice of such breach from
Company, or (ii) conviction of Dion of any felony, or any other crime involving
moral turpitude (meaning a crime that necessarily includes the commission of an
act of gross depravity, dishonesty, or bad morals).
10. TERMINATION WITHOUT CAUSE
-------------------------
(a) General
-------
Termination of this Agreement by Company for reasons other than (i)
death, (ii) Permanent Disability, (iii) Cause, or (iv) upon expiration of the
Employment Period and the Consulting Period shall be referred to as a
termination "without Cause". If this Agreement is terminated without Cause,
-6-
Dion is entitled to receive 30 days advance written notice. This Agreement shall
continue during such notice period. The termination of this Agreement shall be
effective on the 30th day (the "Termination Date") following the day on which
the notice is given (the "Notice Date").
(b) Payments and Benefits
---------------------
If Company terminates this Agreement without Cause pursuant to this
Section:
(1) If the Termination Date occurs during the Employment
Period, Company will pay Dion his Base Salary as set
forth in Section 4 (or as it may be increased from
time to time), plus 16-2/3% of the Base Salary in
lieu of employee benefits referred to in Section
4(b), in equal bi-weekly installments. With each such
payment, Company also shall make an "Incentive
Compensation Payment" to Dion. The "Incentive
Compensation Payment" shall equal the average annual
"Incentive Compensation" paid to Dion by Company
during the five fiscal years preceding the fiscal
year in which the Termination Date occurs divided by
26. For purposes of this Section, "Incentive
Compensation" refers to the amounts payable to Dion
pursuant to any management incentive compensation or
bonus program sponsored by Company during the fiscal
years included in the five-year averaging period. The
payments called for by the preceding provisions of
this Section shall continue throughout the Employment
Period. Company then shall pay Dion the Consulting
Fee in equal bi-weekly payments throughout the
Consulting Period.
(2) If the Termination Date occurs during the Consulting
Period, Company shall continue to pay the Consulting
Fee for the balance of the Consulting Period.
(3) If the Notice Date occurs during the Employment
Period (but not the Consulting Period), Company will
pay any reasonable expenses incurred by Dion in
finding new employment and any reasonable costs of
moving Dion and his family and possessions to a new
location, with such expenses not to exceed $50,000 in
the aggregate. Alternatively, Dion may elect to
receive a lump sum payment of $50,000 in lieu of
reimbursement for such expenses.
(4) Company will pay Dion's automobile expenses for the
remainder of the Employment Period in accordance with
the provisions of Section 4(b).
(5) Company will pay the dues of the club referred to in
Section 4(b) for the remainder of the Employment
Period in accordance with the provisions of Section
4(b).
-7-
(6) Company will pay any expenses incurred in connection
with any conventions, seminars, or travel scheduled
prior to the Notice Date, regardless of whether the
Notice Date occurs during the Employment Period or
the Consulting Period.
(7) If the termination occurs during the Employment
Period, Dion will continue to accrue benefits under
Company's Supplemental Executive Retirement Plan No.
1 (the "SERP") until the end of the Employment Period
to the same extent and on the same basis as if Dion's
actual employment were continued to the end of the
Employment Period. At the end of the Employment
Period, Dion will be entitled to begin to draw
benefits pursuant to the provisions of the SERP and
his SERP Participation Agreement.
(8) If the Notice Date occurs during the Employment
Period, any stock options or stock appreciation
rights to purchase or relating to Common Stock of
Company held by Dion on the Notice Date which are not
at the Notice Date currently exercisable shall on the
Notice Date automatically become exercisable and be
exercisable for 90 days thereafter.
(9) If the Notice Date occurs during the Employment
Period, all shares of Common Stock of Company held by
Dion under any Company Restricted Stock Plans which
are still subject to restrictions on the Notice Date
shall as of that date automatically become free of
all restrictions.
(c) Office Space and Services
-------------------------
If Company terminates this Agreement without Cause pursuant to this
Section 10, from the Notice Date until the "Benefit Termination Date" Company
will provide Dion with suitable office space (substantially equivalent to that
occupied by Dion on the Notice Date) and private secretarial services away from
Company's offices in an office complex of Dion's choice in Phoenix, Arizona. The
"Benefit Termination Date" shall be the date following the Termination Date
which is the later of (i) the expiration of both the Employment and Consulting
Periods as provided in Section 2 hereof, or (ii) the first anniversary of the
Termination Date.
(d) Non-Disparagement
-----------------
Provided that Company duly performs all of its obligations arising by
virtue of a termination of Dion pursuant to this Section, Dion will not publicly
disparage Company or its officers, directors, employees, or agents and will
refrain from any action which would reasonably be expected to cause material
adverse public relations or embarrassment to Company or to any of such persons.
Similarly, provided that Dion duly performs all of his obligations to Company,
Company (including its officers, directors, employees, and agents) will not
disparage Dion and will refrain from any action which
-8-
would reasonably be expected to result in embarrassment to Dion or to materially
and adversely affect his opportunities for employment. The preceding two
sentences shall not apply to disclosures required by applicable law, regulation,
or order of court or governmental agency.
(e) Other Plans
-----------
Except to the extent specified in this Section 10, this Agreement shall
not affect Dion's participation in, distributions from and vested rights under
any pension, profit sharing, or other employee benefit plan of Company or any of
its Subsidiaries, which will be governed by the terms of those respective plans.
(f) Minimum Benefit Period; COBRA
-----------------------------
At a minimum, if Dion's employment is terminated without Cause pursuant
to this Section 10 during the Employment Period, until the later of (i) the
expiration of the Employment Period or (ii) for one year after the Termination
Date, Company shall arrange to provide Dion with life, disability, accident, and
group health benefits and coverages substantially similar to those which Dion
was receiving immediately prior to the Notice Date. The cost to Dion of such
coverage shall not be more than the cost to Dion of similar coverage immediately
prior to the Notice Date. The benefits provided by this Section 10(f) shall not
be due for any period for which Dion is entitled to receive a payment of 16-2/3%
of his Base Salary for the Employment Period pursuant to Section 10(b)(1). In
addition, the parties do not intend to duplicate any benefits. As a result, the
provisions of this Section shall not apply with respect to a particular benefit
if and so long as the benefit is continued, or if a payment in lieu of the
benefit is due, pursuant to any other provision of this Agreement. Dion's right
to continued life, disability, accident, and health benefits shall be in
addition to and not in lieu of Dion's rights under the Consolidated Omnibus
Reconciliation Act of 1986 ("COBRA").
11. TERMINATION BY DION
-------------------
(a) General
-------
Dion may terminate this Agreement at any time, with or without "Good
Reason". If Dion terminates this Agreement without "Good Reason", Dion shall
provide Company with 90 days advance written notice. If Dion terminates this
Agreement with Good Reason, Dion shall provide Company with 30 days advance
written notice.
(b) Good Reason Defined
-------------------
For purposes of this Agreement, "Good Reason" shall mean and include
each of the following:
-9-
(1) Without Dion's express written consent, the
assignment to him of any duties that are inconsistent
with his positions, duties, responsibilities, and
status with Company as in effect on the "Relevant
Date", or demotion, or a change in his titles or
offices as in effect on the Relevant Date (except as
specifically contemplated by this Agreement), or any
removal of him from or any failure to re-appoint or
re-elect him to any of such positions, except in
connection with the termination of this Agreement for
Cause, Permanent Disability, as a result of his
death, by him other than for Good Reason, or by
Company upon the expiration of the Employment and
Consulting Periods.
(2) A reduction by Company in Dion's Base Salary or
Consulting Fee as in effect on the date hereof or as
the same may be increased from time to time.
(3) During the Employment Period, the taking of any
action by Company which would adversely affect Dion's
participation in or materially reduce his benefits
under any thrift, incentive, or compensation plan, or
any pension, life insurance, health and accident or
disability plan in which Dion is participating on the
Relevant Date, unless a comparable replacement
program is offered to Dion.
(4) Assignment of Dion to, or the relocation of Company's
office at which Dion is principally employed as of
the Relevant Date to, a location which would require
a round-trip commute to work from Dion's present
residence of more than 120 miles per day.
(5) Failure of Company to obtain an agreement
satisfactory to Dion from any successor to the
business, or substantially all the assets, of Company
to assume this Agreement or issue a substantially
similar agreement.
(6) The termination of this Agreement by Company without
Cause or any attempted termination by Company
purportedly for Cause if it is thereafter determined
that Cause did not exist under this Agreement with
respect to the termination.
(7) Breach of any material provisions of this Agreement
by Company which is not cured within 30 days after
receipt by Company of written notice of such breach
from Dion.
For purposes of this Section 11, the "Relevant Date" is the date of execution of
this Agreement. For purposes of Section 12, the "Relevant Date" is the date
specified in Section 12(d).
-10-
(c) Effect of Good Reason Termination
---------------------------------
If Dion terminates this Agreement for Good Reason, Dion shall be
entitled to receive all of the payments and benefits provided by Section 10 to
the same extent as if this Agreement had been terminated by Company without
Cause.
(d) Effect of Termination without Good Reason
-----------------------------------------
If Dion terminates this Agreement without Good Reason, Dion shall be
entitled to receive his Base Salary or Consulting Fee (as the case may be)
through the effective date of his termination. Dion's entitlement to receive any
other amount shall be determined in accordance with the provisions of any
incentive or benefit plans in which Dion participates on the effective date of
the termination.
12. CHANGE IN CONTROL OF COMPANY
----------------------------
(a) General
-------
The Board recognizes that the continuing possibility of a "Change in
Control" of Company is unsettling to Dion and other senior executives of
Company. Therefore, the arrangements set forth below are being made to help
assure a continuing dedication by Dion to his duties to Company, notwithstanding
the occurrence or potential occurrence of a "Change in Control." In particular,
the Board believes it important, should Company receive proposals from third
parties with respect to its future, to enable Dion, without being influenced by
the uncertainties of his own situation, to assess and advise the Board whether
such proposals would be in the best interests of Company and its stockholders
and to take such other action regarding such proposals as the Board might
determine to be appropriate. The Board also wishes to demonstrate to executives
of Company that Company is concerned with the welfare of its executives and
intends to see that loyal executives are treated fairly.
(b) Eligibility to Receive a Severance Benefit
------------------------------------------
In view of the foregoing and in further consideration of Dion's
continued employment with Company, Company agrees that if a Change in Control of
Company occurs during the Employment Period (but not the Consulting Period) Dion
shall be entitled to the severance benefits provided in subparagraph (f) of this
Section 12 if prior to the expiration of 24 months after the Change in Control
of Company Dion terminates his employment with Company for Good Reason or
Company terminates Dion's employment without Cause. If Dion triggers the
application of this Section by terminating employment for Good Reason, he must
do so within 120 days following the occurrence of the last event that
constitutes Good Reason. The full severance benefits provided by this Section
shall be payable regardless of the period remaining until the end of the
Employment Period.
-11-
(c) Change in Control Defined
-------------------------
For purposes of this Agreement, a "Change in Control" shall include
both an "Actual Change in Control" and a "Potential Change in Control".
An "Actual Change in Control" shall be deemed to have occurred in any
or all of the following instances:
(1) Any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended, other than a trustee or other fiduciary
holding securities under an employee benefit plan of
Company or a corporation owned directly or indirectly
by the stockholders of Company in substantially the
same proportions as their ownership of stock of
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of Company representing 20%
or more of the total voting power represented by
Company's then outstanding Voting Securities (as
defined below); or
(2) During any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors of Company and any
new director whose election by the Board of Directors
or nomination for election by Company's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a
majority thereof; or
(3) The stockholders of Company approve a merger or
consolidation of Company with any other corporation,
other than a merger or consolidation which would
result in the Voting Securities of Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into Voting Securities of the
surviving entity) at least 80% of the total voting
power represented by the Voting Securities of Company
or such surviving entity outstanding immediately
after such merger or consolidation; or
(4) The stockholders of Company approve a plan of
complete liquidation of Company or an agreement for
the sale or disposition by Company of (in one
transaction or a series of transactions) all or
substantially all Company's assets.
A "Potential Change in Control" shall be deemed to have occurred in any
or all of the following instances:
-12-
(1) Company enters into an agreement, the consummation of
which would result in the occurrence of an Actual
Change in Control;
(2) Any person (including Company) publicly announces an
intention to take or to consider taking actions which
if consummated would constitute a Change in Control;
(3) Any person other than a trustee or other fiduciary
holding securities under an employee benefit plan of
Company or a corporation owned, directly or
indirectly, by the stockholders of Company in
substantially the same proportions as their ownership
of stock of Company who is or becomes the beneficial
owner, directly or indirectly, of securities of
Company representing 10% or more of the combined
voting power of the Company's then outstanding Voting
Securities, increases such person's beneficial
ownership of such securities by five percentage
points (5%) or more over the percentage so owned by
such person; or
(4) The Board of Directors adopts a resolution to the
effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
For purposes of this Section, the term "Voting Securities" shall mean
and include any securities of the Company which vote generally for the election
of directors.
(d) Good Reason Defined
-------------------
For purposes of this Section, "Good Reason" shall have the meaning
assigned to it in Section 11, except that for purposes of this Section the
"Relevant Date" shall be the day prior to the Change in Control and paragraph
(3) of Section 11(b) shall read as follows:
(3) The failure by Company to continue in effect any thrift,
incentive, or compensation plan, or any pension, life
insurance, health and accident or disability plan in which
Dion is participating on the Relevant Date (or plans providing
Dion with substantially similar benefits), the taking of any
action by Company which would adversely affect Dion's
participation in or materially reduce his benefits under any
of such plans or deprive him of any material fringe benefit
enjoyed by him as of the Relevant Date or any later date
(except for acceleration of stock options or restricted stock
as contemplated by this Agreement).
-13-
(e) Notice of Termination by Dion
-----------------------------
Any termination by Dion under this Section 12 shall be communicated by
written notice to Company which shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for such termination.
(f) Effect of Termination
---------------------
If Dion is entitled to receive a severance benefit pursuant to Section
12(b) hereof, Company will provide Dion with the following severance benefits in
addition to the benefits to which Dion is entitled pursuant to Section 10 or 11:
(1) Within five days following Dion's termination, a lump
sum severance payment equal to the difference between
(i) the sum of three years of Dion's yearly Base
Salary as set forth in Section 4 or as it may be
increased from time to time, three years of fringe
benefits calculated at 16-2/3% of such Base Salary
and three year's of Incentive Compensation Payments
calculated in accordance with Section 10(b)(1); and
(ii) the total amounts due to Dion, if any, pursuant
to Section 10(b)(1).
(2) The amounts due to Dion pursuant to Section 10(b)(1)
will be accelerated and paid to Dion in one lump sum
within five days following Dion's termination without
any discount for early payment.
(3) The office space and secretarial services to which
Dion is entitled pursuant to Section 10(c) shall be
provided until the earlier of (i) the second
anniversary of Dion's Notice Date or (ii) when Dion
secures suitable other employment.
(g) Excise and Income Tax Gross-Up
------------------------------
The Internal Revenue Code of 1986 (the "Code") imposes significant tax
burdens on Dion and Company if the total amounts received by Dion due to a
change in control exceed prescribed limits. These tax burdens include a
requirement that Dion pay a 20% excise tax on certain amounts received in excess
of the prescribed limits and a loss of deduction for Company. If, as a result of
these Code provisions, Dion is required to pay such excise tax, then upon
written notice from Dion to Company, Company shall pay Dion an amount equal to
the total excise tax imposed on Dion (including the excise taxes on any excise
tax reimbursements due pursuant to this sentence and the excise taxes on any
federal and state tax reimbursements due pursuant to the next sentence). If
Company is obligated to pay Dion pursuant to the preceding sentence, Company
also shall pay Dion an amount equal to the "total presumed federal and state
taxes" that could be imposed on Dion with respect to the excise tax
reimbursements due to Dion pursuant to the preceding sentence and the federal
and state tax reimbursements due to Dion pursuant to this sentence. For purposes
of the preceding sentence, the
-14-
"total presumed federal and state taxes" that could be imposed on Dion shall be
conclusively calculated using a combined tax rate equal to the sum of the
maximum marginal federal and state income tax rates and the hospital insurance
(or "HI") portion of FICA. Based on rates in effect as of the date of execution
of this Agreement, the "total presumed federal and state taxes" rate is 46.65%
(39.6% federal income tax rate plus 5.6% state income tax rate plus 1.45% HI tax
rate). No adjustments will be made in this combined rate for the deduction of
state taxes on the federal return, the loss of itemized deductions or
exemptions, or for any other purpose. Dion shall be responsible for paying the
actual taxes. The amounts payable to Dion pursuant to this or any other
agreement or arrangement with Company shall not be limited in any way by the
amount that may be paid pursuant to the Code without the imposition of an excise
tax or the loss of Company deductions. Either Dion or Company may elect to
challenge any excise taxes imposed by the Internal Revenue Service and Dion and
Company agree to cooperate with each other in prosecuting such challenges. If
Dion elects to litigate or otherwise challenge the imposition of such excise
tax, however, Company will join Dion in such litigation or challenge only if
Company's General Counsel determines in good faith that Dion's position has
substantial merit and that the issues should be litigated from the standpoint of
Company's best interest.
13. COMPETITION
-----------
(a) Restrictive Covenant
--------------------
In consideration of Company's agreements contained herein and the
payments to be made by it to Dion pursuant hereto, Dion agrees that, during the
duration of this restrictive covenant he will not:
(1) Without the prior written consent of the Board of
Directors of Company, engage in a Competing Business
within the geographical limits of any state (or such
lesser geographical area as may be set by a court of
competent jurisdiction) in which any of the
businesses of Company are being conducted on the date
of termination of this Agreement or within the
geographical limits of any state (or such lesser
geographical area as may be set by a court of
competent jurisdiction) in which the Company's
business plan, as in effect on the earlier of the
date of the competitive activity by Dion or the date
of termination of this Agreement, contemplates
conducting business within two years following the
date of termination of this Agreement; or
(2) Directly or indirectly, for himself, or on behalf of,
or in conjunction with, any other person or entity,
seek to hire and/or hire any individual employed by
Company or any Subsidiary immediately prior to such
hiring or solicitation or during the prior one-year
period.
-15-
(b) Duration of Covenant.
--------------------
Generally, this restrictive covenant shall apply during the Employment
Period and the Consulting Period and for the one-year period following the date
of termination of this Agreement and any renewals thereof. If the Competing
Business in which Dion engages or intends to engage is a business involving the
development or management of an age-restricted community, however, the
limitations of Section 13(a)(1) shall apply during the Employment Period and the
Consulting Period and for the two-year period following the date of the
termination of this Agreement and any renewals thereof.
(c) Remedies; Reasonableness.
------------------------
Dion acknowledges and agrees that a breach by Dion of the provisions of
this Section will constitute such damage as will be irreparable and the exact
amount of which will be impossible to ascertain and, for that reason, agrees
that Company will be entitled to an injunction to be issued by any court of
competent jurisdiction restraining and enjoining Dion from violating the
provisions of this Section. The right to an injunction shall be in addition to
and not in lieu of any other remedy available to Company for such breach or
threatened breach, including the recovery of damages from Dion.
Dion expressly acknowledges and agrees that (i) this Restrictive
Covenant is reasonable as to time and geographical area and does not place any
unreasonable burden upon him; (ii) the general public will not be harmed as a
result of enforcement of this restrictive covenant; and (iii) Dion understands
and hereby agrees to each and every term and condition of this Restrictive
Covenant.
(d) Survival of Provision.
---------------------
Termination of this Agreement, whether by passage of time or any other
cause, shall not constitute a waiver of Company's rights under this Section 13,
nor a release of Dion from his obligations thereunder.
(e) Competing Business
------------------
For purposes of this Agreement, Dion shall be deemed to be engaged in a
"Competing Business" if, in any capacity, including but not limited to
proprietor, partner, officer, director, or employee, he engages or participates,
directly or indirectly, in the operation, ownership, or management of any
proprietorship, partnership, corporation, or other business entity which
competes, in whole or in part, with the then actual business of Company or any
business contemplated by Company's business plan as in effect on the earlier of
the date of the competitive activity by Dion or the date of termination of this
Agreement. Indirect participation in the operation or ownership of any such
entity shall include any investment by Dion in any such entity, by way of loan,
guaranty, or stock ownership (other than ownership of 1% or less of any class of
equity or other securities of a company
-16-
which is listed and regularly traded on any national securities exchange or
which is regularly traded over-the-counter). At the written request of Dion from
time to time, Company shall furnish Dion with a written description of the
business or businesses in which Company is then actively engaged.
(f) Change of Control.
-----------------
The provisions of this Section shall lapse and be of no further force
or effect if Dion's employment is terminated by Company without Cause, or by
Dion for Good Reason, following a Change in Control.
14. DISPUTE RESOLUTION
------------------
(a) Mediation
---------
Any and all disputes arising under, pertaining to or touching upon this
Agreement (excepting the Confidentiality provisions of Section 7 and the
Restrictive Covenant and Competing Business provisions of Section 13), or the
statutory rights or obligations of either party hereto, shall, if not settled by
negotiation, be subject to non-binding mediation before an independent mediator
selected by the parties pursuant to Section 14(d). Any demand for mediation
shall be made in writing and served upon the other party to the dispute, by
certified mail, return receipt requested, at the address specified in Section
18. The demand shall set forth with reasonable specificity the basis of the
dispute and the relief sought. The mediation hearing will occur at a time and
place convenient to the parties in Maricopa County, Arizona, within 30 days of
the date of selection or appointment of the mediator.
(b) Arbitration
-----------
In the event that the dispute is not settled through mediation, the
parties shall then proceed to binding arbitration before a panel of three
independent arbitrators selected pursuant to Section 14(d). The mediator shall
not serve as an arbitrator. ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT
DISCRIMINATION, TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY, OR ALLEGED
EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY, INCLUDING
CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR PUBLIC
POLICY, SHALL BE RESOLVED PURSUANT TO THIS PARAGRAPH (b) AND THERE SHALL BE NO
RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall
occur at a time and place convenient to the parties in Maricopa County, Arizona,
within 30 days of selection or appointment of the last of the three arbitrators.
If Company has adopted a policy that is applicable to arbitrations with
executives, the arbitration shall be conducted in accordance with said policy to
the extent that the policy is consistent with this Agreement and the Federal
Arbitration Act, 9 U.S.C. ss.ss. 1-16. If no such policy has been adopted, the
arbitration shall be governed by the then current arbitration rules of the
American Arbitration Association or its successor (the "Association").
Notwithstanding any provisions in such rules to the contrary, the
-17-
arbitrators shall issue findings of fact and conclusions of law, and an award,
within 15 days of the date of the hearing unless the parties otherwise agree.
(c) Damages
-------
In case of breach of contract or policy, damages shall be limited to
contract damages. In cases of intentional discrimination claims prohibited by
statute, the arbitrators may direct payment consistent with 42 U.S.C. ss.
1981(a) and the Civil Rights Act of 1991. In cases of employment tort, the
arbitrators may award punitive damages if proved by clear and convincing
evidence. Issues of procedure, arbitrability, or confirmation of award shall be
governed by the Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16, except that Court
review of the arbitrators' award shall be that of an appellate court reviewing a
decision of a trial judge sitting without a jury.
The arbitrators may not award reinstatement. Instead, if the
arbitrators find that the termination by Company was not for Permanent
Disability or not for Cause or that the termination by Dion was for Good Reason,
Dion shall only be entitled to the benefits of Section 10 or 12 (in the case of
termination by Company) and Sections 11 or 12 (in the case of termination by
Dion) and, in either case, payment of his reasonable legal expenses in such
arbitration. Until a final, binding determination has been entered relieving
Company of its duty to provide payments hereunder, Company shall pay Dion all
amounts to which he would be entitled under Section 10, calculated on the
assumption that Dion's employment had been terminated without Cause.
(d) Selection of Mediator or Arbitrators
------------------------------------
The parties shall select the mediator from a panel list made available
by the Association. If the parties are unable to agree to a mediator within ten
days of receipt of a demand for mediation, the mediator will be chosen by
alternatively striking from a list of five mediators obtained by Company from
the Association. Executive shall have the first strike.
The parties also shall select the arbitrators from a panel list made
available by the Association. Company and Dion each shall select one arbitrator
from such panel list within ten days of receipt of such list. After Company and
Dion have each selected an arbitrator, the two arbitrators so selected shall
select the third arbitrator from such list within the next ten days.
(e) Expenses
--------
The costs and expenses of any arbitration shall be borne by Company.
Should Dion or Company, at any time, initiate mediation or arbitration for
breach of this Agreement, Company shall reimburse Dion for all amounts spent by
Dion to pursue such mediation or arbitration, regardless of the outcome, unless
the mediator or arbitrator finds Dion's action to have been frivolous and
without merit.
-18-
15. OFFICE AND CLERICAL SUPPORT.
---------------------------
Company shall provide Dion with an appropriate office and part-time
secretarial and other support during the Consulting Period. Company shall
continue to provide such office and part-time secretarial and other support
after the expiration of the Consulting Period until the earlier of the Annual
Meeting that occurs in 2005 or the last day of Dion's service as a member of
Company's Board of Directors. This Section shall survive the termination of this
Agreement, but only if the termination occurs due to the expiration of the
Consulting Period on November 30, 2001 (or November 30, 2002 if the Consulting
Period is extended pursuant to Section 2(b)).
16. BENEFIT AND BINDING EFFECT
--------------------------
This Agreement shall inure to the benefit of and be binding upon
Company, its successors and assigns, including but not limited to any
corporation, person, or other entity which may acquire all or substantially all
of the assets and business of Company or any corporation with or into which
Company may be consolidated or merged, and Dion, his heirs, executors,
administrators, and legal representatives, provided that the obligations of Dion
may not be delegated.
17. OTHER AGREEMENTS OF DION
------------------------
Dion represents that the execution and performance of this Agreement
will not result in a breach of any of the terms and conditions of any employment
or other agreement between Dion and any third party.
18. NOTICES
-------
All notices hereunder shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid:
If to Company, to: Del Webb Corporation
6001 North 24th Street
Phoenix, Arizona 85016
Attention: General Counsel
If to Dion, to: Philip J. Dion
6110 East Caballo Lane
Paradise Valley, Arizona 85253
Either party may change the address to which notices are to be sent to it by
giving 10 days' written notice of such change of address to the other party in
the manner above provided for giving notice. Notices will be considered
delivered on personal delivery or on the date of deposit in the United States
mail in the manner provided for giving notice by mail.
-19-
19. ENTIRE AGREEMENT
----------------
The entire understanding and agreement between the parties has been
incorporated into this Agreement, and this Agreement supersedes all other
agreements and understandings between Dion and Company with respect to the
relationship of Dion with Company.
20. GOVERNING LAW
-------------
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Arizona.
21. CAPTIONS
--------
The captions included herein are for convenience and shall not
constitute a part of this Agreement.
22. SEVERABILITY
------------
If any one or more of the provisions or parts of a provision contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law. Any such
reformation shall be read as narrowly as possible to give the maximum effect to
the mutual intentions of Dion and Company.
23. MITIGATION
----------
In the event that Dion's employment is terminated and payments become
due to Dion pursuant to this Agreement, Dion shall have no duty to mitigate
damages or to become re-employed by another employer.
24. TERMINATION OF EMPLOYMENT
-------------------------
The termination of this Agreement by either party also shall result in
the termination of Dion's employment and consulting relationship with Company in
the absence of an express written agreement providing to the contrary. Neither
party intends that any oral employment or consulting relationship continue after
the termination of this Agreement.
-20-
25. NO CONSTRUCTION AGAINST COMPANY
-------------------------------
This Agreement is the result of negotiation between Company and Dion
and both have had the opportunity to have this Agreement reviewed by their legal
counsel and other advisors. Accordingly, this Agreement shall not be construed
for or against Company or Dion, regardless of which party drafted the provision
at issue.
DEL WEBB CORPORATION
By: /s/ Mary Lynn Schuttenberg
---------------------------------------
Its: V.P. Human Resources
--------------------------------------
7/10/96
COMPANY
/s/ Philip J. Dion
-------------------------------------
PHILIP J. DION
DION
7/10/96
-21-