EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is entered into this 1st day
of July 2000 by and between GEATON A. DECESARIS, JR., residing at 5806 Sonny
Drive, Lothian, Maryland 20711, (the "Executive") and WASHINGTON HOMES, INC., a
Maryland corporation with its principal offices at 1802 Brightseat Road,
Landover, Maryland 20875-4235 (the "Company").
Recitals
WHEREAS, the Company desires to provide for the service and employment of
the Executive with the Company and the Executive wishes to perform services for
the Company, all in accordance with the terms and conditions provided herein;
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
Agreement
1. Employment; Term.
(a) The Company hereby agrees to employ the Executive, and the Executive
hereby accepts employment by the Company, as the Company's Chairman of the
Board, President and Chief Executive Officer, such employment to commence as of
July 1, 2000 (the "Commencement Date"), and to continue until the close of
business on June 30, 2003, subject to extension as provided in this Section
l(a), unless sooner terminated in accordance herewith (the "Initial Employment
Period"). On each June 30, commencing with June 30, 2001, the term of the
Executive's employment hereunder shall be automatically extended for twelve (12)
months unless either he or the Company shall have given written notice to the
other that such automatic extension shall not occur, which notice shall have
been given no later than thirty (30) days prior to the relevant June 30th (the
Initial Employment Period, together with any extensions, until termination in
accordance herewith, is referred to herein as the "Employment Period").
(b) The Company also hereby agrees that the Executive currently serves as a
director on the Board of Directors of the Company (the "Board"), and as a
director and either the President or Chairman of the Board of Directors of each
Subsidiary(as defined in Section 17 hereof), and the Executive hereby accepts
such appointments.
(c) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the Chairman of the Board, President and
Chief Executive Officer of the Company, including, without limitation, the
general supervision and control over, and responsibility for, the general
management and operation of the Company and its Subsidiaries, subject, however,
to the supervision of the Board insofar as such supervision is required by the
Maryland General Corporation Law, and the Company's Articles of Incorporation
and By-Laws. Such responsibilities, duties and authority shall not be expanded
or contracted without the express consent of the Executive.
The Executive will report only to the Board.
(d) The Executive will devote his full time and his best efforts to the
business and affairs of the Company and its subsidiaries; provided, however,
that nothing contained in this Section 1 shall be deemed to prevent or limit the
Executive's right to: (i) make investments in the securities of any
publicly-owned corporation; or (ii) make any other investments with respect to
which he is not obligated or required to, and to which he does not in fact,
devote substantial managerial efforts which materially interfere with his
fulfillment of his duties hereunder; or (iii) to continue to serve on boards of
directors on which he currently serves and to serve in such other positions with
non-profit and for-profit organizations as to which the Board may from time to
time consent, which consent shall not be unreasonably withheld or delayed.
(e) The principal location at which the Executive will perform his duties
will be the Company's principal offices. The Company's principal offices may be
transferred by the Executive or by the Board, with the Executive's consent. In
the event of such a transfer, the Company will pay moving, temporary living and
other reasonable expenses in connection with the Executive's relocation from his
present primary residence to a location in proximity to the Company's principal
offices.
2. Salary; Bonuses; Expenses.
(a) During the Employment Period, the Company will pay a salary to the
Executive at the annual rate of Five Hundred Thousand Dollars ($500,000) per
year (the "Base Salary"), payable in substantially equal installments in
accordance with the Company's existing payroll practices. The Company will
increase the Executive's Base Salary on a yearly basis, effective as of July 1
on each anniversary date of this Agreement, by an amount equal to 10% of the
Base Salary as in effect for the prior year.
(b) For each annual period commencing July 1, 2000, the Executive shall be
eligible to receive a cash bonus of 50% of his Base Salary if the Company
achieves a pre-tax return-on-equity ("ROE") in any fiscal year of at least 15%.
If the Company achieves a pre-tax ROE of 20% in any fiscal year, the Executive
will be entitled to receive a cash bonus of 100% of his Base Salary. In
addition, in the event that the Company's pre-tax ROE is in excess of 20% in any
fiscal year, the Executive will also be entitled to receive, as an additional
cash bonus, 5% of the amount by which the Company's pre-tax ROE exceeds 20% in
any fiscal year. The Executive's annual bonus determined in accordance with this
Section 2(b) is referred to herein as the "Annual Bonus."
(c) The Executive is authorized to incur and shall be reimbursed by the
Company for all reasonable expenses, including, but not limited to travel,
lodging, meal and other expenses as determined by him in his sole discretion,
incurred by him in carrying out his duties hereunder.
3. Stock Options.
(a) The company hereby grants to the Executive, in accordance with a
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resolution adopted by the Compensation Committee of the Board of Directors of
the Company at a meeting held on June 29, 2000, a non-statutory stock option
(the "Stock Option") to acquire 50,000 of the Company's common stock, $0.01 par
value per share (the "Common Stock"). The date of the grant of the Stock Option
will be June 30, 2000. The exercise price of the Stock Option will be the
closing price of the Company's Common Stock on the New York Stock Exchange on
the date of grant. The Stock Option will be exercisable immediately on the date
of grant and will remain exercisable for a period of ten (10) years from the
date of grant. The Executive will be vested with respect to the Stock Option in
accordance with the following vesting schedule
Amount Vested Date of Vesting
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25% Date of Grant
25% First Anniversary from Date of Grant
25% Second Anniversary from Date of Grant
25% (fully vested) Third Anniversary from Date of Grant
The Stock Option has been granted pursuant to a resolution adopted by the Board
of Directors of the Company at a meeting held on June 29, 2000 and pursuant to a
nonstatutory stock option agreement attached hereto as Exhibit B. The
Executive's aggregate annual bonus determined in accordance with this Section
3(a) is referred to herein as the "Stock Option Grant."
(b) The Company agrees that it will use its best efforts to comply with the
requirements of Rule 16b-3 promulgated pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act"), as such rule shall be in effect from time
to time, or with any successor provision to said rule (Rule 16b-3") such that in
the event the Executive shall become subject to Section 16 (or a successor
provision) of the 1934 Act with respect to shares of the Company's capital
stock, the Executive shall be afforded the benefits of Rule 16b-3 with respect
to such options, including without limitation providing for the grant of
restricted stock or options pursuant to stock plans which comply with Rule 16b-3
and permit the terms of options contemplated by this Agreement.
4. Benefit Plans; Vacations. In connection with the Executive's employment
hereunder, he shall be entitled during the Employment Period (and thereafter to
the extent provided in Section 5(f) hereof) to the following additional
benefits:
(a) At the Company's expense, such fringe benefits, including, without
limitation, group medical and dental, life, executive life, accident and
disability insurance and retirement plans and supplemental and excess retirement
benefits, as the Company may provide from time to time for its senior
management.
(b) The Executive shall be entitled to no less than the number of vacation
days in each calendar year determined in accordance with the Company's vacation
policy as in effect from time to time, but not
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less than four (4) weeks in any calendar year (prorated in any calendar year
during which he is employed hereunder for less than the entire year in
accordance with the number of days in such calendar year in which he is so
employed). The Executive shall also be entitled to all paid holidays and
personal days given by the Company to its executives.
(c) The Company shall lease an automobile for the Executive substantially
similar to the automobile currently leased for the Executive and shall pay all
expenses, including but not limited to insurance, repair and maintenance,
incurred by the Executive in connection with the use of the automobile during
the Employment Term.
(d) Nothing herein contained shall preclude the Executive, to the extent he
is otherwise eligible, from participation in all group insurance programs or
other fringe benefit plans which the Company may from time to time in its sole
and absolute discretion make available generally to its personnel, or for
personnel similarly situated, but the Company shall not be required to establish
or maintain any such program or plan except as may be otherwise expressly
provided herein.
(e) The Executive shall be entitled to participate in all other Company
benefit plans, as well as any supplemental benefit or perquisite plans as the
Company may provide from time to time for its senior executives, on a basis
commensurate with his position.
5. Termination, Change in Control and Reassignment of Duties.
(a) Termination By Company. The Company shall have the right to terminate
the Executive's employment under this Agreement for Cause (as defined below) at
any time without obligation to make any further payments to the Executive
hereunder. The Company shall have the right to terminate the Executive's
employment for any reason other than for Cause only upon at least ninety (90)
days prior written notice to him, except as otherwise provided in Section 5(b),
which Section shall apply in the event the Executive becomes unable to perform
his obligations hereunder by reason of Disability (as defined below). In the
event the Company terminates the Executive's employment hereunder for any reason
other than for Cause or Disability, then for the purpose of effecting a
transition during the ninety (90) day notice period of the management of the
Company from the Executive to another person or persons, during such period the
Company may reassign the Executive's duties hereunder to another person or other
persons. Such reassignment shall not reduce the Company's obligations hereunder
to make salary, bonus and other payments to the Executive and to provide other
benefits to him during the remainder of his employment and following the
termination of employment, including without limitation the use of his office
and secretarial services during the remainder of his employment.
As used in this Agreement, the term "Cause" shall mean: (i) the willful and
continued failure by the Executive to substantially perform his duties hereunder
(other than (A) any such willful or continued failure resulting from his
incapacity due to physical or mental illness or physical injury or (B) any such
actual or anticipated failure after the issuance of a notice of termination by
the Executive for Good Reason (as defined below)), after demand for
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substantial performance is delivered by the Company to the Executive that
specifically identifies the manner in which the Company believes the Executive
has not substantially performed his duties; or (ii) the willful engaging by the
Executive in misconduct which is materially injurious to the Company, monetarily
or otherwise; or (iii) the conviction of a felony by a court of competent
jurisdiction. For purposes of this paragraph, no act, or failure to act, on the
part of the Executive shall be considered "willful" unless done or omitted to be
done by him in bad faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the foregoing,
the Executive's employment shall not be deemed to have been terminated for Cause
unless (A) reasonable notice shall have been given to him setting forth in
detail the reasons for the Company's intention to terminate for Cause, and if
such termination is pursuant to clause (i) or (ii) above and any damage to the
Company is curable, only if Executive has been provided a period of ten (10)
business days from receipt of such notice to cease the actions or inactions, and
he has not done so; (B) an opportunity shall have been provided for the
Executive, together with his counsel, to be heard before the Board; and (C) if
such termination is pursuant to clause (i) or (ii) above, delivery shall have
been made to the Executive of a notice of termination from the Board finding
that in the good faith opinion of a majority of the Board (excluding the
Executive) he was guilty of conduct set forth in clause (i) or (ii) above, and
specifying the particulars thereof in detail.
(b) Termination upon Disability and Temporary Reassignment of Duties Due to
Disability.
(i) If the Executive becomes totally and permanently disabled during
the Employment Period so that he is unable to perform his obligations
hereunder by reasons involving physical or mental illness or physical
injury (A) for a period of ninety (90) consecutive days, or (B) for an
aggregate of ninety (90) days during any period of twelve (12) consecutive
months ("Disability"), then the term of the Executive's employment
hereunder may be terminated by the Board within sixty (60) days after the
expiration of said ninety (90) day period (whether consecutive or in the
aggregate, as the case may be), said termination to be effective ten (10)
days after written notice to the Executive. In the event the Company shall
give a notice of termination under this Section 5(b)(i), then the Company
may reassign the Executive's duties hereunder to another person or other
persons. Such reassignment shall not reduce the Company's obligations
hereunder to make salary, bonus and other payments to the Executive and to
provide other benefits to him, during the remainder of his employment and
following the termination of employment.
(ii) During any period that the Executive is totally disabled such
that he is unable to perform his obligations hereunder by reason involving
physical or mental illness or physical injury, as determined by a physician
chosen by the Company and reasonably acceptable to the Executive (or his
legal representative), the Company may reassign the Executive's duties
hereunder to another person or other persons, provided if the Executive
shall again be able to perform his obligations hereunder, all such duties
shall again be the
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Executive's duties. The cost of any examination by such physician shall be borne
by the Company. Notwithstanding the foregoing, if the Executive has been unable
to perform his obligations hereunder for reasons involving physical or mental
illness or physical injury for a period of ninety (90) consecutive days or an
aggregate of ninety (90) days during any period of twelve (12) consecutive
months, then a determination by a physician of disability will not be required
prior to any such reassignment. Any such reassignment shall not be a termination
of employment and in no event shall such reassignment reduce the Company's
obligations to make salary, bonus and other payments to the Executive and to
provide other benefits to him under this Agreement during his employment or, if
applicable, following a termination of employment.
(c) Termination by Executive. The Executive's employment may be terminated
by him by giving written notice to the Company as follows: (i) at any time by
notice of at least thirty (30) days; (ii) at any time by notice for a Good
Reason, effective upon giving such notice; (iii) at any time, if his health
should become impaired, provided he has obtained a written statement from a
qualified doctor to such effect, effective upon giving such notice; or (iv) at
any time following but prior to the first anniversary of a Change in Control (as
defined below), effective upon giving such notice. In the event of a termination
by the Executive of his employment, the Company may reassign the Executive's
duties hereunder to another person or other persons.
As used herein, a "Good Reason" shall mean any of the following:
(A) Failure to be nominated by the Board for election to the Board at
any time such nominations are made, or failure of the stockholders of the
Company to elect the Executive to the Board, or failure of the Board to
elect the Executive as Chairman of the Board, President and Chief Executive
Officer of the Company, or failure to be nominated by the Board of
Directors of any Subsidiary for election to such Board of Directors at any
time such nominations are made, or failure of the stockholders of any
Subsidiary to elect the Executive to the Board of Directors of such
Subsidiary, or failure of the Board of Directors of any Subsidiary to elect
the Executive as President or Chairman of the Subsidiary, or removal from
the Board, the Board of Directors of a Subsidiary or any such office of the
Company or of a Subsidiary, provided that such failure or removal is not in
connection with a termination of the Executive's employment hereunder for
Cause in accordance with Section 5(a) and provided further that any notice
of termination hereunder shall be given by the Executive within ninety (90)
days of such failure or removal;
(B) Material change by the Company in the Executive's authority,
functions, duties or responsibilities as Chairman of the Board, President
and Chief Executive Officer of the Company (including, without limitation,
material changes in the control or structure of the Company) which would
cause his position with the Company to become of less responsibility,
importance, scope
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or dignity than his position as of the Commencement Date, provided that (I)
such material change is not in connection with a termination of Executive's
employment hereunder for Cause in accordance with Section 5(a), (II) such
material change is not made in accordance with Section 5(a) following a
termination of Executive's employment by the Company other than for Cause
or Disability, (III) such material change is not made in accordance with
Section 5(b) pertaining to disability, including without limitation the
time period restrictions applicable thereunder, and (IV) any notice of
termination hereunder shall be given by him within ninety (90) days of when
he becomes aware of such change; or
(C) Failure by the Company to comply with any provision of Section 1,
2, 3, 4 or 8 of this Agreement, which has not been cured within fifteen
(15) days after notice of such noncompliance has been given by the
Executive to the Company, provided any notice of termination hereunder
shall be given by the Executive within ninety (90) days after the end of
such fifteen (15) day period;
(D) Failure by the Company to obtain an assumption of this Agreement
by a successor in accordance with Section 14 unless payment or provision
for continuation of benefits under this Agreement have been made in a
manner permitted by Section 5; and
(E) Any purported termination by the Company of the Executive's
employment which is not effected in accordance with the terms of this
Agreement, including without limitation pursuant to a notice of termination
not satisfying the requirements set forth herein (and for purposes of this
Agreement no such purported termination by the Company shall be effective),
which has not been cured within ten (10) days after notice of such
nonconformance has been given by the Executive to the Company, provided any
notice of termination hereunder shall be given by the Executive within
thirty (30) days of receipt of notice of such purported termination.
(F) The Company giving to the Executive the notice contemplated by
Section 1(a) of this Agreement.
For purpose of this Agreement, a "Change in Control" of the Company shall
have the same meaning as set forth in Exhibit A hereto.
(d) Severance Compensation.
(i) Termination for Good Reason or Other than for Cause. In the event
the Executive's employment hereunder is terminated (A) by the Executive or
by the Company (or its successors) following a Change in Control, or (B) by
the Executive for a Good Reason or (C) by the Company other than for Cause
(including without limitation in the event the Company elects at any time
not to automatically extend the Executive's employment hereunder pursuant
to the second sentence of Section 1(a) hereof), the Executive shall be
entitled, in addition to the other compensation and benefits herein
provided for, to severance compensation in an aggregate amount equal to
three times the sum of the Final Average Base Salary and the Final Average
Annual Bonus where
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(A) the "Final Average Base Salary" means the average of the Executive's
Annual Base Salary as in effect for each of the three years preceding the
date of termination and commencing no earlier than July 1, 2000 (or, if
shorter, the number of years from July 1, 2000 to the date of termination)
and (B) the "Final Average Bonus" means the average of the annual bonuses
awarded to the Executive pursuant to Section 2(b) of this Agreement with
respect to the three years preceding the date of termination and commencing
no earlier than July 1, 2000 (or, if shorter, the number of years from July
1, 2000 to the date of termination; provided that if the Executive's
employment is terminated prior to his eligibility to earn an Annual Bonus
for the period July 1, 2000 to June 30, 2001, then for purposes of making
the aforementioned computation he shall be deemed to have earned the
maximum Annual Bonus to which he would have been entitled assuming the
attainment by the Executive of the specified performance and other targets
related to designated performance and other goals selected by the
Compensation Committee under the Performance Compensation Plan), payable in
a lump sum at the end of the calendar month in which the termination date
occurs; provided, however, that if the Executive's employment is terminated
following a Change in Control or is terminated by the Company other than
for Cause in anticipation of a Change in Control, such severance
compensation shall be paid in one lump sum on the date of such termination.
(ii) Termination Following Disability. In the event the Executive's
employment should be terminated by the Company as a result of Disability in
accordance with Section 5(b) hereof, then the Executive shall be entitled,
in addition to the other compensation and benefits herein provided for, to
severance compensation in an aggregate amount equal to three times the sum
of the Final Average Base Salary as defined in Section 5(d)(i)above, plus
the Final Average Bonus as defined in Section 5(d)(i) above payable in a
lump sum at the end of the calendar month in which the termination date
occurs, reduced by the amount of any disability insurance proceeds actually
paid to the Executive or for his benefit during the said time period.
(e) Effect of Termination or Change in Control upon Equity Compensation.
(i) In the event the Executive's employment hereunder is terminated by
the Company for any reason other than for Cause (including without
limitation an election by the Company not to automatically extend the
Executive's employment hereunder pursuant to the second sentence of Section
l(a) hereof), or in the event the Executive should terminate his employment
for Good Reason, then any unexpired options held by the Executive (or his
assignee) entitling the Executive (or his assignee) to purchase securities
of the Company shall, notwithstanding any contrary provision in the
agreement or plan pursuant to which such options were granted, vest and/or
be exercisable for the remainder of the original term of such option as set
forth in the pertinent option agreement.
(ii) In the event the Executive's employment hereunder is terminated
by the Company for Cause or the Executive voluntarily terminates his
employment (other than for "Good Reason," death or "Disability"), then
effective upon the date such termination is effective, any options not
previously vested shall be forfeited,
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unless there shall be a contrary provision in the agreement or plan
pursuant to which such options were granted.
(iii) In the event of the Executive's death while employed or in the
event the Executive's employment should terminate as a result of
Disability, then, any unexpired options held by the Executive (or his
assignee) entitling the Executive (or his assignee) to purchase securities
of the Company shall, notwithstanding any contrary provision in the
agreement or plan pursuant to which such options were granted, be vested
and/or be exercisable for the remainder of the original term of such option
as set forth in the pertinent option agreement.
(iv) In the event of a Change in Control while the Executive is
employed, then as of the date immediately prior to the date such Change in
Control shall occur, any options held by the Executive (or his assignee)
entitling the Executive (or his assignee) to purchase securities of the
Company, which restricted stock or options are subject to vesting, shall,
notwithstanding any contrary provision in the agreement or plan pursuant to
which such options were granted, become fully vested and any such options
shall become exercisable as of such date and shall remain exercisable
during the respective terms of such options as set forth in the pertinent
option agreement.
(f) Continuation of Benefits, etc.
(i) Subject to the Sections 5(f)(ii) and 5(f)(iii) below, in the event
the Executive's employment hereunder is terminated by the Executive for a
Good Reason or by the Company other than for "Cause" (including, without
limitation, death or "Disability" or in the event the Company elects not to
automatically extend the Executive's employment hereunder pursuant to the
second sentence of Section l(a) hereof):
(A) The Executive shall continue to be entitled to the benefits
that the Executive was receiving or to which the Executive was
entitled, as of the date immediately preceding the applicable
termination date, pursuant to Section 4 hereof at the Company's
expense for a period of time following the termination date ending on
the first to occur of (I) the third anniversary of the termination
date or (II) the date on which the Executive commences full-time
employment by another employer, but only if and to the extent the
Executive is eligible to receive through such other employer benefits
which are at least equivalent on an aggregate basis to those benefits
the Executive was receiving or to which the Executive was entitled
under Section 4 hereof as of immediately preceding the applicable
termination date. If because of limitations required by third parties
or imposed by law, the Executive cannot be provided such benefits
through the Company's plans, then the Company will provide the
Executive with substantially equivalent benefits, on an aggregate
basis, at the Company's expense. For purposes of the determination of
any benefits which require a particular period of employment by the
Company and/or the attainment of a particular age while employed by
the Company in order to be payable, the Executive shall be treated as
having continued in the employment of the Company
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during such period of time as the Executive is entitled to receive
benefits under this Section 5(f). At such time as the Company is no
longer required to provide the Executive with life and/or disability
insurance, as the case may be, the Executive shall be entitled at the
Executive's expense to convert such life and disability insurance, as
the case may be, except if and to the extent such conversion is not
available from the provider of such insurance.
(ii) In the event the Executive's employment is terminated following a
Change in Control or is terminated by the Company other than for Cause in
anticipation of a Change in Control, the Company shall pay to the
Executive, in lieu of providing the benefits contemplated by Section
5(f)(i) above, an amount in cash equal to the aggregate reasonable expenses
that the Company would incur if it were to provide such benefits for a
period of time following the termination date ending on the third
anniversary of the termination date, which amount shall be paid in one lump
sum on the date of such termination.
(iii) With respect to any termination of the Executive's employment
(other than by the Company for "Cause" or a voluntary termination by the
Executive) as described in sections 5(f)(i) and 5(f)(ii) above, the
Executive shall be entitled to receive continued participation in medical,
dental and life insurance coverage until (A) the Executive receives
equivalent coverage and benefits under the plans and programs of a
subsequent employer (such coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis) or (B) the third
anniversary from the date of the Executive's termination; provided that (I)
if the Executive is precluded from continuing his participation in any
applicable Executive benefit plan or program as described above and in
Section 4, he shall be provided with the after-tax economic equivalent of
the benefits provided under the plan or program in which he is able to
participate for the period specified above, (II) the economic equivalent of
any benefit forgone shall be deemed to be the lowest cost that would be
incurred by the Executive in obtaining such benefit himself on an
individual basis, and (III) payment of such after-tax economic equivalent
shall be made quarterly in advance.
(g) Accrued Compensation. In the event of any termination of the
Executive's employment for any reason, the Executive (or his estate)
shall be paid such portion of his Base Salary and bonuses as he has
accrued (including without limitation as provided below) by virtue of
his employment during the period prior to termination and has not yet
been paid, together with any amounts for expense reimbursement and
similar items which have been properly incurred in accordance with the
provisions hereof prior to termination and have not yet been paid.
Such amounts shall be paid within ten (10) days of the termination
date. The amount due to the Executive (or his estate) under this
Section 5(g) in payment of any bonus or stock option, including
without limitation the Annual Bonus and/or the Stock Option Grant,
shall be a proportionate amount of the bonus or stock option that
would next be payable (or vested) to him and would otherwise have been
due (or vested) to the Executive if such termination had not occurred
and such bonus or stock option had been fully earned or vested, and
which proportion shall be based on the number of elapsed
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days in the applicable bonus period prior to the termination date and
in which the termination date occurs.
(h) Resignation. If the Executive's employment hereunder shall be
terminated by him or by the Company in accordance with the terms set
forth herein, then effective upon the date such termination is
effective, he will be deemed to have resigned from all positions as an
officer and Director of the Company and of any of its Subsidiaries,
except as the parties (or with respect to positions with a Subsidiary,
the Executive and the Subsidiary) may otherwise agree.
(i) Certain Tax Consequences. Whether or not the Executive
becomes entitled to the payments and benefits described in this
Section 5, if any of the payments or benefits received or to be
received by the Executive in connection with a change in ownership or
control of the Company (a "Statutory Change in Control"), as defined
in section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any person whose actions result in a
Statutory Change in Control or any person affiliated with the Company
or such person) (collectively, the "Severance Benefits") will be
subject to any excise tax (the "Excise Tax") imposed under section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Company shall pay to the Executive an additional amount equal to
the Excise Tax, plus any additional taxes resulting from the payment
to the Executive by the Company for such Excise Tax (the "Excise Tax
Payment").
For purposes of determining whether any of the Severance Benefits will be
subject to the Excise Tax and the amount of such Excise Tax:
(i) all of the Severance Benefits shall be treated as "parachute
payments" within the meaning of Code section 280G(b)(2), and all "excess
parachute payments" within the meaning of Code section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless, in the opinion of tax counsel
selected by the Company and reasonably acceptable to the Executive, such
other payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Code section 280G(b)(4)(A), or
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Code
section 280G(b)(4)(B), in excess of the "Base Amount" as defined in Code
section 280G(b)(3) allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax; and
(ii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by a certified public accountant as is selected
by the Company and is reasonably acceptable to the Executive, in accordance
with the principles of Code section 280G(d)(3) and (4).
In the event that the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in
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Excise Tax is finally determined (the "Reduced Excise Tax"), the difference of
the Excise Tax Payment and the Reduced Excise Tax, plus an additional amount
representing the difference between (A) the amount of any additional taxes paid
by the Company to the Executive for such Excise Tax and (B) the amount of any
additional taxes which should have been paid to the Executive by the Company
with respect to such Reduced Excise Tax. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which could not be determined at the time of the
Excise Tax Payment), the Company shall make an additional Excise Tax payment in
respect of such excess (plus any interest or penalties payable by the Executive
with respect to such excess) at the time that the amount of such excess if
finally determined, plus any additional taxes resulting from the payment to the
Executive by the Company for such excess and the interest and penalties thereon.
The Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Severance
Benefits.
6. Confidential Information; Non-Solicitation; Non-Competition;
Restrictions on Dispositions of Equity Securities.
(a) The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret, confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its affiliated companies and that shall not
have been or now or hereafter have become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). During the Employment Period and for a period of one year
thereafter, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.
(b) The Executive shall not, at any time during the Employment Period and
for a period of one year thereafter (x) attempt to bid in opposition to the
Company or otherwise interfere with any prospective land acquisition or other
business opportunity which the Company has under contract, or is negotiating or
evaluating or (y) recruit, solicit for employment, hire or engage any employee
or consultant of the Company or any person who was an employee or consultant of
the Company within one (1) year prior to the date of termination. The Executive
acknowledges that these provisions (I) have been specifically bargained for by
the Company and are supported by separate and specific consideration provided to
him by the Company and (II) are necessary for the Company's protection and are
not unreasonable. The duration and the scope of these restrictions on the
Executive's activities are divisible, so that if any provision of this paragraph
is held or deemed to be invalid, that provision shall be automatically modified
to the extent necessary to make it valid. The provisions contained in this
paragraph of Section 6(b) of this Agreement shall not be applicable to the
Executive in the event that
-12-
his employment is terminated as a result of or in anticipation of a "Change in
Control."
(c) Executive agrees that any breach of the covenants contained in this
Section 6 would irreparably injure the Company. Accordingly, Executive agrees
that the Company may, in addition to pursuing any other remedies it may have in
law or in equity, withhold payment of any amounts due hereunder and obtain an
injunction against Executive from any court having jurisdiction over the matter
restraining any further violation of this Agreement by Executive.
7. Enforceability. If any provision of this Agreement shall be deemed invalid or
unenforceable as written, this Agreement shall be construed, to the greatest
extent possible, or modified, to the extent allowable by law, in a manner which
shall render it valid and enforceable and any limitation on the scope or
duration of any such provision necessary to make it valid and enforceable shall
be deemed to be a part thereof. No invalidity or unenforceability of any
provision contained herein shall affect any other portion of this Agreement
unless the provision deemed to be so invalid or unenforceable is a material
element of this Agreement, taken as a whole.
8. Legal Expenses. The Company shall pay the Executive's reasonable fees for
legal and other related expenses associated with any disputes arising hereunder
or under the stock option agreements referred to herein if a court of competent
jurisdiction shall render a final judgement in favor of the Executive on the
issues in such dispute, from which there is no further right of appeal. If it
shall be determined in such judicial adjudication that the Executive is
successful on some of the issues in such dispute, but not all, then the
Executive shall be entitled to receive a portion of such legal fees and other
expenses as shall be appropriately prorated.
9. Notices. All notices which the Company is required or permitted to give to
the Executive shall be given by registered or certified mail or overnight
courier, with a receipt obtained, addressed to the Executive at the address
referred to above, or at such other place as the Executive may from time to time
designate in writing, or by personal delivery, and to counsel for the Executive
as may be requested in writing by the Executive from time to time. All notices
which the Executive is required or permitted to give to the Company shall be
given by registered or certified mail or overnight courier, with a receipt
obtained, addressed to the Company at the address set forth above, or at such
other address as the Company may from time to time designate in writing, or by
personal delivery, and to counsel for the Company as may be requested in writing
by the Company. A notice will be deemed given upon the mailing thereof or
delivery to an overnight courier for delivery the next business day, except for
a notice of a change of address, which will not be effective until receipt, and
except as otherwise provided in Section 5(a).
10. Waivers. No waiver by either party of any breach or nonperformance of any
provision or obligation of this Agreement shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision of this
Agreement.
11. Headings; Other Language. The headings contained in this Agreement are for
reference purposes only and shall in no way affect
-13-
the meaning or interpretation of this Agreement. In this Agreement, as the
context may require, the singular includes the plural and the singular, the
masculine gender includes both male and female reference, the word "or" is used
in the inclusive sense and the words "including," "includes," and "included"
shall not be limiting.
12. Counterparts. This Agreement may be executed in duplicate counterparts, each
of which shall be deemed to be an original and all of which, taken together,
shall constitute one agreement.
13. Agreement Complete; Amendments. This Agreement, together with the stock
option agreement pertaining to the stock option referred to in Section 3(a)
hereof, is the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto. This Agreement may not be amended, supplemented, canceled or discharged
except by a written instrument executed by both of the parties hereto, provided,
however, that the immediately foregoing provision shall not prohibit the
termination of rights and obligations under this Agreement which termination is
made in accordance with the terms of this Agreement.
14. Benefit and Binding Nature/Nonassignability. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
respective parties hereto. This Agreement and the rights and obligations
hereunder are personal to the Company and the Executive and are not assignable
or transferable to any other person, firm or corporation without the consent of
the other party, except as contemplated hereby; provided, however, in the event
of the merger or consolidation of the Company, whether or not the Company is the
surviving or resulting corporation, the transfer of all or substantially all of
the assets of the Company, or the voluntary or involuntary dissolution of the
Company, then the surviving or resulting corporation or the transferee or
transferees of the Company's assets shall be bound by this Agreement and the
Company shall take all actions necessary to insure that such corporation,
transferee or transferees are bound by the provisions of this Agreement, and
provided, further, this Agreement shall inure to the benefit of the Executive's
estate, heirs, executors, administrators, personal and legal representatives,
distributees, devisees, and legatees. Notwithstanding the foregoing provisions
of this Section 14, the Company shall not be required to take all actions
necessary to insure that a transferee or transferees of the Company's assets are
bound by the provisions of this Agreement and such transferee or transferees of
the Company's shall not be bound by the obligations of the Company under this
Agreement if the Company shall have (a) paid to the Executive or made provision
satisfactory to the Executive for payment to him of all amounts which are or may
become payable to him hereunder in accordance with the terms hereof and (b) made
provision satisfactory to the Executive for the continuance of all benefits
required to be provided to him in accordance with the terms hereof.
15. Governing Law. This Agreement will be governed and construed in accordance
with the law of Maryland applicable to agreements made and to be performed
entirely within such state, without giving effect to
-14-
the conflicts of laws principles thereof.
16. Survival. The provisions of Sections 3, 5(d), (e), (f), (g) and (h), 6, 7
and 8 hereof, and any stock option agreement entered into as described in or
pursuant to Section 3 hereof or during the Executive's employment hereunder
shall survive the termination of the Executive's employment as continuing and
separate agreements between the parties.
17. Subsidiaries. As used herein, the term "Subsidiaries" shall mean all
corporations a majority of the capital stock of which entitling the holder
thereof to vote is owned by the Company or a Subsidiary.
18. Interpretation. The Company and the Executive each acknowledge and agree
that this Agreement has been reviewed and negotiated by such party and its or
his counsel, who have contributed to its revision, and the normal rule of
construction, to the effect that any ambiguities are resolved against the
drafting party, shall not be employed in the interpretation of it.
[SIGNATURE PAGE TO FOLLOW]
-15-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
WASHINGTON HOMES, INC.
BY: /s/ Christopher Spendley
----------------------------------------
Christopher Spendley
Senior Vice President and
Secretary
EXECUTIVE
/s/ Geaton A. DeCesaris, Jr.
----------------------------------------
Geaton A. DeCesaris, Jr.
-16-
EXHIBIT A
Definition of Change in Control
For purposes of this Agreement, a "Change in Control" of the Company shall be
deemed to have occurred:
(a) If any person (as defined in Section 3(a)(9) of the 1934 Act (or
any successor provision)), other than the Company, becomes the beneficial owner
directly or indirectly of more than fifty percent (50%) of the outstanding
Common Stock of the Company, determined in accordance with Rule 13d-3 under the
1934 Act (or any successor provision), or otherwise becomes entitled to vote
more than fifty percent (50%) of the voting power entitled to be cast at
elections for directors ("Voting Power") of the Company, or in any event such
lower percentage as may at any time be provided for in any similar provision for
any director or officer of the Company or of any subsidiary approved by the
Board; provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by Geaton A.
DeCesaris, Sr., or Geaton A. DeCesaris, Jr. or members of their family or (iii)
any acquisition in which Geaton A. DeCesaris, Sr., or Geaton A. DeCesaris, Jr.
and members of their family control the acquiring entity following the
acquisition of the Company or hold forty percent (40%) of the seats on the
acquiring entity's Board of Directors;
(b) If the Company is subject to the reporting requirements of Section
13 or 15(d) (or any successor provision) of the 1934 Act, and any person (as
defined in Section 3(a)(9) of the 1934 Act), other than the Company, purchases
shares pursuant to a tender offer or exchange offer to acquire Common Stock of
the Company (or securities convertible into or exchangeable for or exercisable
for Common Stock) for cash, securities or any other consideration, if after
consummation of the offer, the person in question is the beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the outstanding
Common Stock of the Company, determined in accordance with Rule 13d-3 under the
1934 Act (or any successor provision) or such lower percentages as may at any
time be provided for in any similar provision for any director or officer of the
Company or of any Subsidiary approved by the Board; provided, however, that for
purposes of this subsection (b), the following acquisitions shall not constitute
a Change in Control: (i) any acquisition by Geaton A. DeCesaris, Sr. or Geaton
A. DeCesaris, Jr. or members of their family or (ii) any acquisition in which
Geaton A. DeCesaris, Sr. or Geaton A. DeCesaris, Jr. and members of their family
control the acquiring entity following the acquisition of the Company or hold
forty percent (40%) of the seats on the acquiring entity's Board of Directors;
(c) If the stockholders or the Board approve any consolidation or
merger of the Company (i) in which the Company is not the continuing or
surviving corporation unless such merger is with a Subsidiary at least eighty
percent (80%) of the voting power of which is held by the Company or (ii)
pursuant to which the holders of the Company's shares of Common Stock
immediately prior to such merger or consolidation would not be the holders
immediately after such merger or consolidation of at least a majority of the
voting power of the Company or such lower percentage as may at any time be
provided for in any similar provision for any director or officer of the Company
or of any Subsidiary approved by the Board; provided, however, that any merger
or consolidation in which Geaton A. DeCesaris, Sr. or Geaton A. DeCesaris, Jr.
or members of their family control the acquiring or resulting entity or forty
percent (40%) of the seats on such entity's Board of Directors shall not be
deemed a "Change in Control";
(d) The stockholders or the Board shall have approved any sale, lease,
exchange or other transfer (in one transaction or a series of transactions) of
all or substantially all of the assets of the Company; or
(e) Upon the election of one or more new directors of the Company, a
majority of the directors holding office, including the newly elected directors,
were not nominated as candidates by a majority of the directors in office
immediately before such election.
As used in this definition of "Change in Control", "Common Stock" means
the Common Stock, or if changed, the capital stock of the Company as it shall be
constituted from time to time entitling the holders thereof to share generally
in the distribution of all assets available for distribution to the Company's
stockholders after the distribution to any holders of capital stock with
preferential rights.
As used in this definition of "Change in Control", "Subsidiary" means
any corporation (whether now or hereafter existing) which constitutes a
"subsidiary" of the Company, as defined in Section 424(f) of the Code.
-2-
EXHIBIT B
WASHINGTON HOMES, INC.
NONSTATUTORY STOCK OPTION
Optionee: Geaton A. DeCesaris, Jr.
1. Grant of Stock Option. As of the Grant Date (identified in Section
18 below) Washington Homes, Inc. a Maryland corporation (the "Company"), hereby
grants a Nonstatutory Stock Option (the "Option") to the Optionee (identified
above), an employee of the Company to purchase the number of shares of the
Company's common stock $0.01 par value per share (the "Common Stock"),
identified in Section 18 below (the "Shares"), subject to the terms and
conditions of this agreement (the "Agreement"). The Shares, when issued to
Optionee upon the exercise of the Option, shall be fully paid and nonassessable,
The Option is not an "incentive stock option" as defined in Section 422 of the
Internal Revenue Code.
2. Definitions. All capitalized terms used herein shall have the
meanings set forth in Exhibit A hereto unless otherwise provided herein. Section
18 below sets forth meanings for various capitalized terms used in this
Agreement.
3. Option Term. The Option shall commence on the Grant Date (identified
in Section 18 below) and terminate on the date immediately prior to the tenth
(10th) anniversary of the Grant Date. The period during which the Option is in
effect and may be exercised is referred to herein as the "Option Period".
4. Option Price. The Option price per Share is identified in Section 18
below.
5. Vesting. The total number of shares subject to this Option shall
vest in accordance with the Vesting Schedule (identified in Section 18 below).
The Shares may be purchased at any time after they become vested, in whole or in
part, during the Option Period; provided, however, the Option may only be
exercisable to acquire whole Shares. The right of exercise provided herein shall
be cumulative so that if the Option is not exercised to the maximum extent
permissible after vesting, the vested portion of the Option shall be
exercisable, in whole or in part, at any time during the Option Period.
6. Method of Exercise. The Option is exercisable by delivery of a
written notice to the Company, signed by the Optionee, specifying the number of
Shares to be acquire don, and the effective date of, such exercise. the Optionee
may withdraw notice of exercise of this Option at any time prior to the close of
business on the business day preceding the proposed exercise date.
7. Method of Payment. The Option Price upon exercise of the Option
shall be payable to the Company in full either: (i) in cash or its equivalent,
or (ii) subject to prior approval
by the Compensation Committee in its discretion, by tendering previously
acquired shares having an aggregate Fair Market Value (as defined in Exhibit A
hereto) at the time of exercise equal to the total Option Price (provided that
the Shares must have been held for at least six (6) months prior to their tender
to satisfy the Option Price), or (iii) subject to prior approval by the
Compensation Committee in its discretion, by withholding shares which otherwise
would be acquired on exercise having an aggregate Fair Market Value at the time
of exercise equal to the total Option price, or (iv) subject to prior approval
by the Compensation Committee in its discretion, by a combination of (i), (ii),
and (iii) above. Any payment in shares of common stock shall be effected by the
delivery of such shares to the Secretary of the company, duly endorsed in blank
or accompanied by stock powers duly executed in blank, together with any other
documents as the Secretary may require. if the payment of the Option price is
remitted partly in shares, the balance of the payment of the Option price shall
be paid in either cash, certified check, bank cashiers' check, or by wire
transfer.
The Compensation Committee, in its discretion, may allow (i) a
"cashless exercise" as permitted under Federal Reserve Board's regulation T, 12
CFR Part 220 (or its successor), and subject to applicable securities law
restrictions and tax withholdings, or (ii) any other means of exercise which the
Compensation Committee, in its discretion, determines to be consistent with the
Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the company shall deliver to or on behalf of the
Optionee, in the name of the Optionee or other appropriate recipient, Share
certificates for the number of shares purchased under the Option. Such delivery
shall be effected for all purposes when a stock transfer agent of the Company
shall have deposited such certificates in the United States mail, addressed to
Optionee or other appropriate recipient.
8. Restriction on Exercise. The Option may not be exercised if the
issuance of such Shares or the method of payment of the consideration for such
Shares would constitute a violation of any applicable federal or state
securities or other laws or regulations, including any rule under part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by
the Federal Reserve board, or any rules or regulations of any stock exchange on
which the Common Stock may be listed.
9. Termination of employment. Voluntary or involuntary termination of
employment and the death or Disability of Optionee shall affect Optionee's
rights under the Option as follows:
(a) Termination for Cause. The vested and non-vested portions of the
Option shall terminate immediately and shall not be exercisable to any
extent if Optionee's employment with the company is terminated for Cause
(as defined in Exhibit A hereto at the time of such termination).
(b) Other Involuntary Termination or voluntary Termination. If
Optionee's employment with the Company is terminated for any reason other
than for Cause, death
-2-
or Disability (as defined in Exhibit A hereto at the time of termination),
then (i) the Option will immediately terminate to the extent it is unvested
and (ii) the vested portion of the Option will terminate to the extent not
exercised within 180 calendar days after the date of such termination. In
no event may the Option be exercised by anyone after the earlier of (i) the
expiration of the Option Period or (ii) 180 calendar days after termination
of employment.
(c) Death or Disability. If Optionee's employment with the Company is
terminated by death or disability, then (i) the Option will immediately
terminate to the extent it is unvested and (ii) the vested portion of the
Option will terminate 180 calendar days after the date of such termination
to the extent not exercised by Optionee or, in the case of death, by the
person or persons to whom Optionee's rights under the Option have passed by
will or by the laws of descent and distribution or, in the case of
Disability, by Optionee's legal representative. In no event may the Option
be exercised by anyone after the earlier of (i) the expiration of the
Option Period or (ii) 180 days after the Optionee's death or termination of
employment due to disability.
10. Independent Legal and Tax Advice. Optionee acknowledges that the
Company has advised Optionee to obtain independent legal and tax advice
regarding the grant and exercise of the Option and the disposition of any Shares
acquired thereby.
11. Reorganization of Company. The existence of the Option shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations or other
changes in company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Shares or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
In the event of a "Change in Control" of the Company (as defined in
Exhibit A hereto at the time of such event), all of the Option then outstanding
shall become 100% vested and immediately and fully exercisable.
12. Adjustment of Shares. In the event of stock dividends, spin-offs of
assets or other extraordinary dividends, stock splits, combinations of shares,
recapitalizations, mergers, consolidations, reorganizations, liquidations,
issuances of rights or warrants and similar transactions or events involving
company, appropriate adjustments shall be made to the terms and provisions of
this Option as provided in the Plan.
13. No Rights in Shares. Optionee shall have no rights as a stockholder
in respect of the Shares until the Optionee becomes the record holder of such
Shares.
14. Investment Representation. Optionee will enter into such written
representation, warranties and agreements as Company may reasonably request in
order to comply with any federal or state securities law. Moreover, any stock
certificate for any Shares
-3-
issued to Optionee hereunder may contain a legend restricting their
transferability as determined by the Company in its discretion. Optionee agrees
that Company shall not be obligated to take any affirmative action in order to
cause the issuance or transfer of Shares hereunder to comply with any law, rule
or regulation that applies to the Shares subject to the Option.
15. No Guarantee of Employment. The Option shall not confer upon
Optionee any right to continued employment with the Company.
16. Withholding of Taxes. The Company shall have the right to (a) make
deductions from the number of Shares otherwise deliverable upon exercise of the
Option in an amount sufficient to satisfy withholding of any federal, state or
local taxes required by law, or (b) take such other action as may be necessary
or appropriate to satisfy any such tax withholding obligations.
17. General.
(a) Notices. All notices under this Agreement shall be mailed or
delivered by hand to the parties at their respective addresses set forth
beneath their signatures below or at such other address as may be designate
din writing by either of the parties to one another. notices shall be
effective upon receipt.
(b) Shares Reserved. The Company shall at all times during the Option
period reserve and keep available under the Plan such number of shares as
shall be sufficient to satisfy the requirements of this Option.
(c) Nontransferability of Option. The Option granted pursuant to this
Agreement is not transferable other than by will, the laws of descent and
distribution or by a qualified domestic relations order (as defined in
Section 414(p) of the Internal Revenue Code). The Option will be
exercisable during Optionee's lifetime only by Optionee or by Optionee's
legal representative in the event of Optionee's Disability. no right or
benefit hereunder shall in any manner be liable for or subject to any
debts, contracts, liabilities, obligations or torts of Optionee.
(d) Amendment and Termination. No amendment, modification or
termination of the Option or this Agreement shall be made at any time
without the written consent of Optionee and Company.
(e) No Guarantee of Tax Consequences. the Company and the Committee
make no commitment or guarantee that any federal or state tax treatment
will apply or be available to any person eligible for benefits under the
Option. the Optionee has been advised and been provided the opportunity to
obtain independent legal and tax advice regarding the grant and exercise of
the Option and the disposition of any Shares acquired thereby.
(f) Severability. In the event that any provision of this Agreement
shall be held illegal, invalid, or unenforceable for any reason, such
provision shall be fully
-4-
severable, but shall not affect the remaining provisions of the Agreement,
and the Agreement shall be construed and enforced as if the illegal,
invalid, or unenforceable provision had not been included herein.
(g) Supersedes Prior Agreements. This Agreement shall supersede and
replace all prior agreements and understandings, oral or written, between
the Company and the Optionee regarding the grant of the Options covered
hereby.
(h) Governing Law. The Option shall be construed in accordance with
the laws of the State of Maryland without regard to its conflict of law
provision, to the extent federal law does not supersede and preempt
Maryland law.
18. Definitions and Other Terms. The following capitalized terms shall
have those meanings set forth opposite them:
(a) Optionee: Geaton A. DeCesaris, Jr.
(b) Grant Date: June 30, 2000
(c) Shares: Fifty Thousand (50,000) Shares of the Company's
Common Stock
(d) Option Price: Six dollars ($6.00) per Share
(e) Option Period: June 30, 2000 through June 30, 2010 until
11:59 p.m.
(f) Vesting Schedule: Options for 12,500 of the Shares shall
vest on the Grant Date, and Options for an additional
one-third of the Shares shall vest on each subsequent
anniversary of the Grant Date until fully vested, as
follows:
Date Options Vesting
---- ---------------
June 30, 2001 12,500
June 30, 2002 12,500
June 30, 2003 12,500
Total 50,000
======
IN WITNESS WHEREOF, the Company has, as of June 30, 2000, caused this
Agreement to be executed on its behalf by its duly authorized officer and
Optionee has hereunto set his hand as of the same date.
-5-
WASHINGTON HOMES, INC.
By: /s/ Christopher Spendley
------------------------------------
Christopher Spendley, Senior Vice
President and Secretary
Washington Homes, Inc.
1802 Brightseat Road
Landover, MD 20785-4235
Attention: Christopher Spendley, Senior
Vice president and Secretary
OPTIONEE
/s/ Geaton A. DeCesaris, Jr.
-----------------------------------
Geaton A. DeCesaris, Jr.
Address:
5806 Sonny Drive
Lothian, MD 20711
-6-
Exhibit A
Definitions for Nonstatutory Stock Option Agreement
for Geaton DeCesaris, Jr.
(a) Cause. When used in connection with the termination of a Grantee's
Employment, Cause shall mean the termination of the Grantee's Employment by the
Company by reason of (i) the conviction of the Grantee by a court of competent
jurisdiction as to which no further appeal can be taken of a crime involving
moral turpitude or a felony; (ii) the proven commission by the Grantee of an act
of fraud upon the Company; (iii) the willful and proven theft, embezzlement or
other misappropriation of any funds or property of the Company by the Grantee;
(iv) the willful and continued failure by the Grantee to perform the material
duties assigned to him; (v) the knowing engagement by the Grantee in any direct,
material conflict of interest with the Company without compliance with the
Company's conflict of interest policy, if any, then in effect; (vi) the knowing
engagement by the Grantee, without the written approval of the Board, in any
activity which competes with the business of the Company or which would result
in a material injury to the business, reputation or goodwill of the Company;
(vii) the unauthorized disclosure of trade secrets or proprietary information of
the Company or of a third party who has entrusted such information to the
Company, (viii) the knowing and intentional engagement in any activity which
would constitute a material violation of the provisions of the Company's
policies and procedures manual, if any, then in effect; or (ix) a termination
for cause as defined in any employment agreement with the Grantee. For purposes
of this definition of "Cause", the term "Company" shall also refer to any Parent
or Subsidiary.
(b) Disability. As determined by the Compensation Committee in its
discretion exercised in good faith, a physical or mental condition of the
Employee that would entitle him to payment of disability income payments under
the Company's long term disability insurance policy or plan for employees, as
then effective, if any; or in the event that the Grantee is not covered, for
whatever reason, under the Company's long-term disability insurance policy or
plan, "Disability" means a permanent and total disability as defined in Section
22(e)(3) of the Code. A determination of Disability may be made by a physician
selected or approved by the Compensation Committee and, in this respect, the
Grantee shall submit to an examination by such physician upon request.
(c) Fair Market Value. The fair market value of one share of Common
Stock on the date in question, which is deemed to be (i) the closing sales price
on the immediately preceding business day of a share of Common Stock as reported
on the principal securities exchange on which Shares are then listed or admitted
to trading, or (ii) if not so reported, the average of the closing bid and asked
prices for a Share on the immediately preceding business day as quoted n the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the closing bid and
asked prices for a Share as quoted by the National Quotation Bureau's "Pink
Sheets" or the National Association of Securities Dealers' OTC Bulletin Board
System.
If the Common Stock is not traded in accordance with clauses (i), (ii)
or (iii) of the preceding paragraph at the time a determination of its Fair
Market Value is required to be made hereunder, the
determination of Fair Market Value for purposes of the Plan shall be made by the
Compensation Committee in its discretion exercised in good faith. In this
respect, the Compensation Committee may rely on such financial data, valuations
or experts as it deems advisable under the circumstances.
(d) For purposes of this Nonstatutory Stock Option Agreement, a "Change
in Control": of the Company shall be deemed to have occurred:
(i) If any person (as defined in Section 3(a)(9) of the Exchange
Act (or any successor provision)), other than the Company, becomes the
beneficial owner directly or indirectly of more than fifty percent
(50%) of the outstanding common Stock of the Company, determined in
accordance with Rule 13d-3 under the Exchange Act (or any successor
provision), or otherwise becomes entitled to vote more than fifty
percent (505) of the voting power entitled to be cast at elections for
directors ("Voting Power") of the company, or in any event such lower
percentage as may at any time be provided for in any similar provision
for any director or officer of the company or of any Subsidiary
approved by the Board; provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a
Change in Control: (A) any acquisition directly from the Company, (B)
any acquisition by Geaton A. DeCesaris, Sr., or Geaton A. DeCesaris,
Jr. or members of their family or (C) any acquisition in which Geaton
A. DeCesaris, Sr., or Geaton A. DeCesaris, Jr. and members of their
family control the acquiring entity following the acquisition of the
Company or hold forty percent (40%) of the seats on the acquiring
entity's Board of Directors;
(ii) If the Company is subject to the reporting requirements of
Section 13 or 15(d) (or any successor provision) of the Exchange Act,
and any person (as defined in section 3(a)(9) of the Exchange Act),
other than the Company, purchases shares pursuant to a tender offer or
exchange offer to acquire common Stock of the company (or securities
convertible into or exchangeable for or exercisable for Common Stock)
for cash, securities or any other consideration, if after consummation
of the offer, the person in question is the beneficial owner, directly
or indirectly, of more than fifty percent (50%) of the outstanding
Common Stock of the company, determined in accordance with Rule 13d-3
under the Exchange Act (or any successor provision) or such lower
percentages as may at any time be provided for in any similar
provision for any director or officer of the company or of any
subsidiary approved by the Board; provided, however, that for purposes
of this subsection (ii), the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by Geaton A.
DeCesaris, Sr. or Geaton A. DeCesaris, Jr. or members of their family
or (B) any acquisition in which Geaton A. DeCesaris, Sr. or Geaton A.
DeCesaris, Jr. and members of their family control the acquiring
entity following the acquisition of the Company or hold forty percent
(40%) of the seats on the acquiring entity's Board of Directors;
(iii) If the stockholders or the Board approve any consolidation
or merger of the Company (i) in which the Company is not the
continuing or surviving corporation unless such merger is with a
Subsidiary at least eighty percent (80%) of the voting power of which
is held by the Company or (ii) pursuant to which the holders of the
Company's shares of Common Stock immediately prior to such merger or
consolidation would not be the holders
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immediately after such merger or consolidation of at least a majority
of the voting power of the Company or such lower percentage as may at
any time be provided for in any similar provision for any director or
officer of the Company or of any Subsidiary approved by the Board;
provided, however, that any merger or consolidation in which Geaton A.
DeCesaris, Sr. or Geaton A. De Cassowaries, Jr. or members of their
family control the acquiring or resulting entity or forty percent
(40%) of the seats on such entity's Board of Directors shall not be
deemed a "Change in Control";
(iv) The stockholders or the Board shall have approved any sale,
lease, exchange or other transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of the
Company; or
(v) Upon the election of one or more new directors of the
Company, a majority of the directors holding office, including the
newly elected directors, were not nominated as candidates by a
majority of the directors in office immediately before such election.
As used in this definition of "Change in Control", "Common Stock" means
the Common Stock, or if changed, the capital stock of the Company as it shall be
constituted from time to time entitling the holders thereof to share generally
in the distribution of all assets available for distribution to the Company's
stockholders after the distribution to any holders of capital stock with
preferential rights.
(e) Subsidiary. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section 424(f) of
the Internal Revenue Code.
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