Exhibit 10.1
EMPLOYMENT AGREEMENT
(Amended and Restated as of July 1, 2003)
This EMPLOYMENT AGREEMENT (the "AGREEMENT") is effective as of July 1,
2003 by and between MERITAGE CORPORATION, a Maryland corporation (the "COMPANY")
and ______________, an individual ("EXECUTIVE").
RECITALS
WHEREAS, Executive is currently the Co-Chief Executive Officer and
Co-Chairman of the Company;
WHEREAS, the Company desires to continue to obtain the services of
Executive, and Executive desires to provide services to the Company, in
accordance with the terms, conditions and provisions of this Agreement;
NOW THEREFORE, in consideration of the covenants and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the
representations, covenants and mutual agreements contained herein, the Company
and Executive agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive as Co-Chairman and Co-Chief Executive Officer
of the Company, and Executive agrees to diligently perform the duties associated
with such positions. Executive will report directly to the Board of Directors.
Executive will devote substantially all of his business time, attention and
energies to the business of the Company and will comply with the charters,
policies and guidelines established by the Company from time to time applicable
to its directors and senior management executives.
2. TERM. Executive will be employed under this Agreement until December
31, 2005, unless Executive's employment is terminated earlier pursuant to
Section 7. The Agreement will renew for an additional period of one year (the
"Renewal Term(s)"), unless on or before February 15, 2005 (or February 15 of any
Renewal Term), either Executive or the Company notifies the other in writing
that it wishes to terminate employment under this Agreement at the end of the
term then in effect.
3. DIRECTOR STATUS. For so long as Executive is Co-Chief Executive
Officer, the Company shall use commercially reasonable efforts, subject to
applicable law and regulation of the New York Stock Exchange ("NYSE"), to cause
Executive to be nominated for election as a director and to be recommended to
the stockholders for election as a director. Upon any termination of employment
as Co-Chief Executive Officer, Executive will be deemed to have resigned from
the Board of Directors, unless (a) the Executive is not terminated for Cause (as
defined below) and owns 5% or more of the Company's common stock outstanding, or
(b) within 30 days thereof a majority of the independent directors of the Board
(as defined by rules of the NYSE) vote to enable Executive to continue on the
Board through the balance of his term.
4. SALARY. The Company will pay Executive a base salary (the "BASE
SALARY") at the annual rate of $850,000 per year commencing July 1, 2003. Such
salary will increase to $925,000 commencing January 1, 2005. The Base Salary
will increase ten percent on January 1 of each Renewal Term. The Base Salary
will be payable in accordance with the payroll practices of the Company in
effect from time to time. The Base Salary may be raised, but not lowered,
without Executive's consent.
5. INCENTIVE COMPENSATION.
A. Bonus. Executive will be entitled to incentive compensation based on
the achievement of certain performance targets pursuant to the plan specified in
Exhibit A hereto (the "BONUS"). The Bonus will be due and payable in accordance
with Exhibit A.
B. Options. During the term of this Agreement, commencing in 2004, the
Company annually shall grant the Executive options to acquire 40,000 shares (or
equivalent consideration at the discretion of the Board of Directors). The
options will have an exercise price equal to the fair market value on the date
of grant as defined under the relevant plan or, if the options are incentive
stock options, at the fair market value or 110% of the fair market value, as may
be required by law. Subject to the provisions hereof and Executive's Change of
Control Agreement, the options will be on the same terms and conditions as other
standard option grants.
6. EXECUTIVE BENEFITS. During the term of this Agreement, Executive will
be entitled to reimbursement of reasonable and customary business expenses. The
Company will provide to Executive such fringe benefits and other Executive
benefits as are regularly provided by the Company to its senior management
(e.g., health and long-term disability insurance, paid vacation, etc.);
provided, however, that nothing herein shall preclude the Company from amending
or terminating any employee or general executive benefit plans or programs. In
addition, the Company shall provide the Executive with the benefits set forth on
Exhibit B, which benefits may not be terminated or reduced during the term
hereof.
7. TERMINATION.
A. Voluntary Resignation by Executive or Termination Without Cause.
If Executive voluntarily terminates his employment with the Company for
any reason after December 31, 2003 (or before such date, if with Good Reason),
or the Company terminates Executive without Cause, then (i) the Company will be
obligated to pay Executive's Base Salary through the Date of Termination; (ii)
no Bonus shall be payable for the fiscal year in which the termination occurs
(except as provided below); (iii) the Company shall pay Executive $10 million
(the Consulting, Severance and Non-Competition Payment"), in monthly
installments of $416,666.67 in cash or by check, over the next two years (the
"Consulting Period")(subject to Executive's compliance with this Agreement,
including Sections 8 and 9 as provided therein); (iv) the Company shall
reimburse Executive for COBRA premiums for the period that the Company is
required to offer COBRA coverage as a matter of law; (v) in connection with any
termination without Cause by the Company, any options granted after the date
hereof shall vest in full; and (vi) at the option of the Company, the Executive
shall render consulting services to the Company as may be requested from time to
time by the Chairman of the Board, not to exceed 20 hours per month. If
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the Company terminates employment under this Agreement without Cause during the
last three months of the Company's fiscal year, Executive will be paid a pro
rata bonus based upon the Company's performance for the fiscal year, payable at
the time set forth in Exhibit A.
B. Termination upon Death or Disability. If Executive's employment is
terminated as a result of Executive's death or Disability, then the Company will
be obligated to pay (i) Executive's then current Base Salary through the Date of
Termination, (ii) a pro rated amount of Executive's Bonus for the year, payable
at the time set forth in Exhibit A, and (iii) Executive's COBRA premiums for the
period that the Company is required to offer COBRA coverage as a matter of law.
In addition, upon such a termination, the Executive's options granted shall
accelerate and become vested without further action and, to the extent permitted
under the plan's governing documents, Executive shall have a period of one year
from the Date of Termination to exercise such options. If Executive dies or
becomes disabled during any period that the Company is obliged to make payments
under Section 7(A), the Company shall make a lump sum payment to Executive (or
his estate) of any unpaid amount within thirty (30) days of such death or
disability.
C. Voluntary Termination (Without Good Reason) before December 31, 2003 or
Termination for Cause by the Company.
(1) If the Executive resigns without Good Reason before December 31,
2003, or if the Company discharges Executive for Cause, then the Company
will be obligated to pay Executive's Base Salary through the Date of
Termination. No bonus shall be payable.
(2) Upon voluntary termination (without Good Reason) by Executive
before December 31, 2003, or a termination for Cause by the Company, the
provisions of Section 8 (Restrictive Covenant) shall automatically become
applicable for the two-year period set forth therein, without any further
payment due Executive. Executive acknowledges and agrees that the
compensation herein is adequate consideration for such covenants.
D. Definitions. For purposes of this Agreement:
(1) "CAUSE" and "GOOD REASON" shall have the meanings ascribed to
them in the Amended and Restated Change of Control Agreement (the "Change
of Control Agreement"), effective as of July 1, 2003,
(2) "DATE OF TERMINATION" shall mean (i) if this Agreement is
terminated as a result of Executive's death, the date of Executive's
death, (ii) if this Agreement is terminated by Executive, the date on
which he notifies the Company in writing, (iii) if this Agreement is
terminated by the Company for Disability, the date a notice of termination
is given, (iv) if this Agreement is terminated by the Company for Cause,
the date a notice of termination is given to Executive by the Company, or
(v) if this Agreement is terminated by the Company without Cause, the date
notice of termination is given to Executive by the Company, and
(3) "DISABILITY" shall mean a disability that results in Executive
being medically unable to fulfill his duties under this Agreement for six
consecutive months.
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E. Procedures for Notices of Termination. The procedures set forth in
Section 10 (a), (b) and (d) of the Change of Control Agreement shall apply under
this Agreement in connection with a notice of termination as to the kind of
termination events described in those subsections.
8. RESTRICTIVE COVENANT. In consideration of Executive's employment, but
subject to Section 7, Executive agrees to the following:
A. During the Restriction Period (as defined below), Executive will not,
directly or indirectly, either as an executive, partner, owner, lender,
director, adviser or consultant or in any other capacity or through any entity:
(1) engage in any production homebuilding or home sales or within
100 miles of any Company project, provided, that, for purposes of this
Section 8(a)(1), Executive (a) may own stock in the Company and less than
1% of any other publicly traded homebuilder, and (b) may engage in custom
homebuilding (up to 5 homes annually for third parties and 2 for family
members), land banking or lot or land development; provided, however, that
Executive may not directly or indirectly engage in the sale of finished
lots within the restricted areas described above, unless at least 10
business days prior to any offer to a third party, the lots are offered to
the Company, and if the Company (or its nominee) determines to purchase
the property, the applicable selling party negotiates a sale in good
faith. If no such sale is then consummated, then the applicable selling
party may pursue a sale with a third party. If the terms of such
third-party sale are materially different than the offer made to the
Company, the Company (or its nominee) will have the right of first refusal
to purchase the lots within three business days of notice of the proposed
sale to such a third party. This notice must contain the specific terms
and conditions thereof and the proposed buyer. If the Company (or a
nominee) does not respond to the right of first offer within 10 days or
the right of first refusal within three days, the Company will be deemed
to have waived the applicable right. The Company or nominee can substitute
cash for any non-cash consideration (at the fair market value thereof).
This right will arise again if the third party offer is materially
modified or amended.
(2) hire any person who is, or within the six month period preceding
the date of such activity was, an employee of or consultant to the Company
(other than as a result of a general solicitation for employment); or
(3) solicit any customer or supplier of the Company (including lot
developers and land bankers) for a production homebuilding business or
otherwise attempt to induce any such customer or supplier to discontinue
or materially modify its relationship with the Company. During the
Restriction Period, Executive may utilize the services of Company
suppliers for business operations permitted under Section 8a(1), i.e.,
custom homebuilding, land banking and land or lot development, so long as
these activities do not disrupt or adversely affect the Company's
relationships with such suppliers.
B. The provisions of this Section 8 shall begin as of the date hereof,
will survive the termination of this agreement under Section 7 and will expire
two years from the Date of Termination, provided that, to the extent required,
the notices under Section 7 are given and the payments made as provided therein
(the "RESTRICTION PERIOD").
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C. Executive represents to the Company that he is willing and able to
engage in businesses that are not competing businesses hereunder and that
enforcement of the restrictions set forth in this Section 8 would not be unduly
burdensome to Executive. Executive hereby agrees that the period of time
provided for in this Section 8 and other provisions and restrictions set forth
herein are reasonable and necessary to protect the Company and its successors
and assigns in the use and employment of the goodwill of the business conducted
by Executive. Executive agrees that, if Executive in any non-immaterial respect
violates the terms of this Section 8(A) or Section 9, the Company shall not be
obliged to pay any remaining Consulting, Severance, and Non-Competition
Payments, provided that the Company must first provide Executive with written
notice of such violation and the opportunity to provide within thirty (30) days
any information showing that he has not in any non-immaterial respect breached
such Agreement. During any notice period or any dispute regarding the violation
of the terms of this Section 8 or Section 9, the Company will place such
payments in an interest bearing escrow account at Bank of America, Phoenix, or
its successor. Executive further agrees that damages cannot compensate the
Company in the event of a violation of this Section 8 and that, if such
violation should occur, injunctive relief shall be essential for the protection
of the Company and its successors and assigns. Accordingly, Executive hereby
covenants and agrees that, in the event any of the provisions of this Section 8
shall be violated or breached, the Company shall be entitled to obtain
injunctive relief against the party or parties violating such covenants without
bond but upon due notice, in addition to such further or other relief as may be
available at equity or law. An injunction by the Company shall not be considered
an election of remedies or a waiver of any right to assert any other remedies
which the Company has at law or in equity. No waiver of any breach or violation
hereof shall be implied from forbearance or failure by the Company to take
action thereof. The prevailing party in any litigation, arbitration or similar
dispute resolution proceeding to enforce this provision will recover any and all
reasonable costs and expenses, including attorneys' fees.
D. Executive agrees that the period of time in which this Section 8 is in
effect shall be extended for a period equal to the duration of any breach of
this Section 8 by Executive.
E. For purposes of Sections 8 and 9, the term "COMPANY" includes Meritage
Corporation and its subsidiaries and affiliates. For purposes hereunder, an
affiliate shall be deemed to be any corporation or other business entity in
which the Company or its subsidiaries owns a controlling interest.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
A. It is understood that in the course of Executive's employment with
Company, Executive will become acquainted with Company Confidential Information
(as defined below). Executive recognizes that Company Confidential Information
has been developed or acquired at great expense, is proprietary to the Company,
and is and shall remain the exclusive property of the Company. Accordingly,
Executive agrees that he will not, disclose to others, copy, make any use of, or
remove from Company's premises any Company Confidential Information, except as
Executive's duties may specifically require, without the express written consent
of the Company, during Executive's employment with the Company and thereafter
until such time as Company Confidential Information becomes generally known, or
readily ascertainable by proper means by persons unrelated to the Company.
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B. Upon any termination of employment, Executive shall promptly deliver to
the Company the originals and all copies of any and all materials, documents,
notes, manuals, or lists containing or embodying Company Confidential
Information, or relating directly or indirectly to the business of the Company,
in the possession or control of Executive.
C. Executive hereby agrees that the period of time provided for in this
Section 9 and other provisions and restrictions set forth herein are reasonable
and necessary to protect the Company and its successors and assigns in the use
and employment of the goodwill of the business conducted by Executive. Executive
further agrees that damages cannot compensate the Company in the event of a
violation of this Section 9 and that, if such violation should occur, injunctive
relief shall be essential for the protection of the Company and its successors
and assigns. Accordingly, Executive hereby covenants and agrees that, in the
event any of the provisions of this Section 9 shall be violated or breached, the
Company shall be entitled to obtain injunctive relief against the party or
parties violating such covenants, without bond but upon due notice, in addition
to such further or other relief as may be available at equity or law. Obtainment
of such an injunction by the Company shall not be considered an election of
remedies or a waiver of any right to assert any other remedies which the Company
has at law or in equity. No waiver of any breach or violation hereof shall be
implied from forbearance or failure by the Company to take action thereof. The
prevailing party in any litigation, arbitration or similar dispute resolution
proceeding to enforce this provision will recover any and all reasonable costs
and expenses, including attorneys' fees.
D. "COMPANY CONFIDENTIAL INFORMATION" shall mean confidential, proprietary
information or trade secrets of Company and its subsidiaries and affiliates
including without limitation the following: (1) customer lists and customer
information as compiled by Company; (2) Company's internal practices and
procedures; (3) Company's financial condition and financial results of
operation; (4) supply of materials information, including sources and costs,
designs, information on land and lot inventories, and current and prospective
projects; (5) strategic planning, manufacturing, engineering, purchasing,
finance, marketing, promotion, distribution, and selling activities; (6) all
other information which Executive has a reasonable basis to consider
confidential or which is treated by Company as confidential; and (7) all
information having independent economic value to Company that is not generally
known to, and not readily ascertainable by proper means by, persons who can
obtain economic value from its disclosure or use. Notwithstanding the foregoing
provisions, the following shall not be considered "Company Confidential
Information": (i) the general skills of the Executive as an experienced real
estate and homebuilding entrepreneur and senior management level employee; (ii)
information generally known by senior management executives within the
homebuilding and/or land development industry; (iii) persons, entities, contacts
or relationships of Executive that are also generally known in the industry; and
(iv) information which becomes available on a non-confidential basis from a
source other than Executive which source is not prohibited from disclosing such
confidential information by legal, contractual or other obligation.
10. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any applicable law, then such provision
will be deemed to be modified to the extent necessary to render it legal, valid
and enforceable, and if no such modification will make the provision legal,
valid and enforceable, then this Agreement will be construed as if not
containing the
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provision held to be invalid, and the rights and obligations of the parties will
be construed and enforced accordingly.
11. ASSIGNMENT BY COMPANY. Nothing in this Agreement shall preclude the
Company from consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or entity that assumes
this Agreement and all obligations and undertakings hereunder. Upon such
consolidation, merger or transfer of assets and assumption, the term "Company"
as used herein shall mean such other corporation or entity, as appropriate, and
this Agreement shall continue in full force and effect.
12. ENTIRE AGREEMENT. This Agreement, the Change of Control Agreement with
Executive, and any agreements concerning stock options or other benefits, embody
the complete agreement of the parties hereto with respect to the subject matter
hereof and supersede any prior written, or prior or contemporaneous oral,
understandings or agreements between the parties that may have related in any
way to the subject matter hereof. This Agreement may be amended only in writing
executed by the Company and Executive. Notwithstanding the foregoing, nothing in
this Agreement is intended to affect any previous agreements pertaining to the
grant of options to the Executive, including without limitation, provisions in
Executive's prior Change of Control Agreement, providing for acceleration upon a
change-in-control.
13. GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the internal laws, and not the law of conflicts, of
the State of ___________.
14. NOTICE. Any notice required or permitted under this Agreement must be
in writing and will be deemed to have been given when delivered personally or by
overnight courier service or three days after being sent by mail, postage
prepaid, at the address indicated below or to such changed address as such
person may subsequently give such notice of:
if to Parent or Company: Meritage Corporation
8501 E. Princess Drive, Suite 290
Scottsdale, Arizona 85255
Attention: Chief Financial Officer
with a copy to: Snell & Wilmer L.L.P.
One Arizona Center
400 E. Van Buren Street
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
Fax: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
if to Executive:
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Phone:
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Fax:
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with a copy to:
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Phone:
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Fax:
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15. ARBITRATION. Any dispute, controversy, or claim, whether contractual
or non-contractual, between the parties hereto arising directly or indirectly
out of or connected with this Agreement, relating to the breach or alleged
breach of any representation, warranty, agreement, or covenant under this
Agreement, unless mutually settled by the parties hereto, shall be resolved by
binding arbitration in accordance with the Employment Arbitration Rules of the
American Arbitration Association (the "AAA"). Any arbitration shall be conducted
by arbitrators approved by the AAA and mutually acceptable to Company and
Executive. All such disputes, controversies, or claims shall be conducted by a
single arbitrator, unless the dispute involves more than $50,000 in the
aggregate in which case the arbitration shall be conducted by a panel of three
arbitrators. If the parties hereto are unable to agree on the arbitrator(s),
then the AAA shall select the arbitrator(s). The resolution of the dispute by
the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable
by a court of competent jurisdiction under the Federal Arbitration Act. The
arbitrator(s) shall award damages to the prevailing party. The arbitration award
shall be in writing and shall include a statement of the reasons for the award.
The arbitration shall be held in _____________________________. The
arbitrator(s) shall award reasonable attorneys' fees and costs to the prevailing
party.
16. WITHHOLDING; RELEASE; NO DUPLICATION OF BENEFITS. All of Executive's
compensation under this Agreement will be subject to deduction and withholding
authorized or required by applicable law. The Company's obligation to make any
post-termination payments hereunder (other than salary payments and expense
reimbursements through a date of termination), shall be subject to receipt by
the Company from Executive of a mutually agreeable release, and compliance by
Executive with the covenants set forth in Sections 8 and 9 hereof. If there is
any conflict between the provisions of the Change of Control Agreement and this
Agreement, such conflict shall be resolved so as to provide the greater benefit
to Executive. However, in order to avoid duplication of any monetary benefits,
any payments or benefits due under Executive's Change of Control Agreement, will
be reduced by any payments or benefits provided hereunder. Any payment required
under the Change of Control Agreement to be paid in a lump sum, as set forth in
the Change of Control Agreement, shall be so paid, and the remainder, if any,
due under this Agreement will be paid in equal monthly installments over the
Consulting Period, except that in no event shall the payment of the Consulting,
Non-Competition and Severance payment be accelerated.
17. SUCCESSORS AND ASSIGNS. This Agreement is solely for the benefit of
the parties and their respective successors, assigns, heirs and legatees.
Nothing herein shall be construed to provide any right to any other entity or
individual.
18. RELATED PARTY TRANSACTIONS. Executive may not engage in any related
party transactions with the Company unless approved in the specific instance by
the Audit Committee of the Board of Directors of Meritage Corporation.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
MERITAGE CORPORATION, a Maryland
corporation
By:
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Name:
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Title:
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EXECUTIVE: ______________________
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EXHIBIT A
INCENTIVE COMPENSATION SCHEDULE
CEO BONUS COMPENSATION
BASE SALARY $500,000 (effective July 1, 2002); $850,000 (effective
July 1, 2003); $925,000 (effective January 1, 2005)
PART I - BONUS
2003 - For 2003, as provided in the plan previously approved.
2004/05 - For 2004 and 2005 and any Renewal Term, Executive shall be
entitled to a bonus equal to 1.65% of the EBITDA if
Company's ROA and ROE are each in the top 1/2 of public
homebuilders having revenues of $500 million or more per
year, based upon revenues for the preceding year.
PART II - PAYMENT
The bonus shall be paid within a reasonable time after year-end, but, in any
event, no later than 10 days after ROE and ROA information on public
homebuilders becomes available. Co-CEOs do not have to wait until the Form 10-K
is filed with the SEC.
EXHIBIT B
SPECIFIED BENEFITS
1. Payments (including a tax gross up) annually for Executive to purchase
life insurance in the amount of $5,000,000.
2. Payments (including a tax gross up) annually for Executive to purchase
disability insurance providing for monthly payments of an estimated
$20,000 per month.
3. Executive Supplemental Savings Plan enabling deferred compensation in
excess of 401(k) limitations.
4. Supplemental Retirement Benefits Program to provide the Executive
retirement payments equal to 60% of his final five years average base
salary beginning at age 65 and continuing through death.
5. Use of Company's plane for up to 1/2 of a 1/16 fractional ownership (but
not to exceed 28.75 hours) for personal use for Executive and his family
upon payment by Executive of the equivalent of lowest available coach fare
for each person traveling.
6. Use of Company car (same as current policy.)