SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 18, 1997
CONTINENTAL HOMES HOLDING CORP.
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(Exact name of registrant as specified in its charter)
Delaware 0-14830 86-0554624
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:(602) 483-0006
Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On December 18, 1997, Continental Homes Holding Corp. (the "Company")
announced that it had entered into an Agreement and Plan of Merger, between the
Company and D.R. Horton, Inc. ("DRHI") pursuant to which DRHI would acquire the
Company in a stock-for-stock merger transaction. A copy of the press release,
dated December 18, 1997, is filed herewith as exhibit 99.1.
For information on employment arrangements entered into by the Company and
DRHI with certain executive officers, see exhibits 10.1 through 10.5.
Item 7. Exhibits.
Number Description
10.1 Employment Agreement between the Company and W. Thomas Hickcox, dated
as of December 1, 1997.
10.2 Employment Agreement between the Company and Julie E. Collins, dated
as of December 1, 1997.
10.3 Form of Employment Agreement between the Company and certain employees
of the Company.
10.4 Severance Plans between the Company and certain employees of the
Company.
10.5 Amendment No. 1 to Employment Agreement (Noncompetition Agreement)
between DRHI and W. Thomas Hickcox, dated as of December 18,
1997.
10.6 Letter to Donald R. Loback from the Company, dated October 28, 1997.
99.1 Press Release dated December 18, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 24, 1997 CONTINENTAL HOMES HOLDING CORP.
/s/ Julie E. Collins
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Julie E. Collins
Chief Financial Officer
EMPLOYMENT AGREEMENT
AGREEMENT, made as of this 1st day of December, 1997, by and between
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the "Company"), and W.
THOMAS HICKCOX (the "Employee").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has approved the employment
of the Employee on the terms and conditions set forth in this Agreement; and
WHEREAS, the Employee is willing, for the consideration provided, to
continue in the employment of the Company on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Employment. The Company hereby agrees to continue to employ the
Employee, and the Employee hereby accepts such continued employment, upon the
terms and conditions set forth in this Agreement.
2. Term. The term (the "Term") of the Employee's employment under this
Agreement shall be the period commencing on December 1, 1997 and shall continue
until November 30, 1999,
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unless sooner terminated by termination of the Employee's employment pursuant to
Section 5, 6 or 7.
3. Position and Duties. During the Term, the Employee shall serve as
President, Chief Executive Officer and Chief Operating Officer of the Company,
and shall have such responsibilities and authority as commensurate with such
office and as may from time to time be prescribed by or pursuant to the
Company's By-laws. The Employee shall devote substantially all of his working
time and efforts to the business and affairs of the Company.
4. Compensation. During the Term, the Company shall provide the Employee
with the following compensation and other benefits:
(a) Base Salary. The Company shall pay to the Employee base salary at the
initial rate of $300,000 per annum, which shall be payable in accordance with
the standard payroll practices of the Company. Such base salary rate shall be
reviewed annually in accordance with the Company's normal policies beginning in
calendar year 1998; provided, however, that at no time during the Term shall the
Employee's base salary be decreased from the rate then in effect except with the
written consent of the Employee.
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(b) Bonus. The Employee shall participate in a bonus program maintained by
the Company.
(c) Other Benefits. In addition to the compensation and benefits otherwise
specified in this Agreement, the Employee (and, if provided for under the
applicable plan or program, his spouse) shall be entitled to participate in, and
to receive benefits under, the Company's employee benefit plans and programs
that are or may be available to senior executives generally and on terms and
conditions that are no less favorable than those generally applicable to other
senior executives of the Company. At no time during the Term shall the
Employee's participation in or benefits received under such plans and programs
be decreased except (i) in connection with across-the-board reductions similarly
affecting substantially all senior executives of the Company or (ii) with the
written consent of the Employee.
(d) Expenses. The Employee shall be entitled to prompt reimbursement of all
reasonable expenses incurred by him in performing services hereunder, provided
he properly accounts therefor in accordance with the Company's policies.
(e) Office and Services Furnished. The Company shall furnish the Employee
with office space, secretarial assistance and such other facilities and services
as shall
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be suitable to the Employee's position and adequate for the performance of his
duties hereunder.
5. Termination of Employment by the Company.
(a) Cause. The Company may terminate the Employee's employment for Cause if
(i) the Employee willfully engages in conduct which is or would reasonably be
expected to be materially and demonstrably injurious to the Company, (ii) the
Employee willfully engages in an act or acts of dishonesty resulting in material
personal gain to the Employee at the expense of the Company, (iii) the Employee
is convicted of a felony, (iv) the Employee engages in an act or acts of gross
malfeasance in connection with his employment hereunder, (v) the Employee
commits a material breach of the confidentiality provision set forth in Section
10, or (vi) the Employee exhibits demonstrable evidence of alcohol or drug abuse
having a substantial adverse effect on his job performance hereunder. The
Company shall exercise its right to terminate the Employee's employment for
Cause by (i) giving him written notice of termination at least 45 days before
the date of such termination specifying in reasonable detail the circumstances
constituting such Cause; and (ii) delivering to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than a ma-
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jority of the entire membership of the Board of Directors (except the Employee),
after reasonable notice to the Employee and an opportunity for the Employee and
his counsel to be heard before the Board of Directors, finding that the Employee
has engaged in the conduct set forth in this subsection (a). In the event of
such termination of the Employee's employment for Cause, the Employee shall be
entitled to receive (i) his base salary pursuant to Section 4(a) and any other
compensation and benefits to the extent actually earned pursuant to this
Agreement or any benefit plan or program of the Company as of the date of such
termination at the normal time for payment of such salary, compensation or
benefits and (ii) any amounts owing under Section 4(d). Except as provided in
Section 9, the Employee shall receive no other compensation or benefits from the
Company.
(b) Disability. If the Employee incurs a Permanent and Total Disability, as
defined below, the Company may terminate the Employee's employment by giving him
written notice of termination at least 45 days before the date of such
termination. In the event of such termination of the Employee's employment
because of Permanent and Total Disability, (i) the Employee shall be entitled to
receive his base salary pursuant to Section 4(a) and any other compensation and
benefits to the extent actually earned by the Em-
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ployee pursuant to this Agreement or any benefit plan or program of the Company
as of the date of such termination of employment at the normal time for payment
of such salary, compensation or benefits, and (ii) any amounts owing under
Section 4(d). For purposes of this Agreement, the Employee shall be considered
to have incurred a Permanent and Total Disability if he is unable to engage in
any substantial gainful employment by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. The existence of such Permanent and Total Disability shall be
evidenced by such medical certification as the Secretary of the Company shall
require and shall be subject to the approval of the Compensation Committee of
the Board of Directors of the Company.
(c) Without Cause. The Company may terminate the Employee's employment at
any time and for any reason, other than for Cause or because of Permanent and
Total Disability, by giving him a written notice of termination to that effect
at least 45 days before the date of termination. In the event of such
termination of the Employee's employment without Cause, the Employee shall be
entitled to the benefits described in Section 8.
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6. Termination of Employment by the Employee.
Good Reason. The Employee may terminate his employment for Good Reason by
giving the Company a written notice of termination at least 45 days before the
date of such termination specifying in reasonable detail the circumstances
constituting such Good Reason. In the event of the Employee's termination of his
employment for Good Reason, the Employee shall be entitled to the benefits
described in Section 8. For purposes of this Agreement, Good Reason shall mean
(i) a significant reduction in the scope of the Employee's authority, functions,
duties or responsibilities from that which is contemplated by this Agreement,
(ii) the relocation of the Employee's office location to a location more than 50
miles away from the Employee's principal place of employment on December 1,
1997, (iii) any reduction in the Employee's base salary, (iv) a significant
change in the Company's annual bonus program adversely affecting the Employee,
or (v) a significant reduction in the other employee benefits provided to the
Employee (unless the Employee is fully compensated for the value of such
reduction through an increase in cash compensation); provided that, in the event
of a change of control of the Company involving D.R. Horton, Inc., a substantial
reduction in such employee benefits shall not be deemed to have occurred for the
purpose of clause (v) above after the expiration of the 6-month period beginning
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on the date of such change of control if the Employee shall be entitled to
participate in and receive benefits under the Company's or its successor's
employee benefit plans and programs that are or may be available to senior
executives generally and on terms and conditions that are no less favorable than
those generally applicable to other senior executives of the Company or its
successor. A significant reduction within the meaning of clause (i) of the
preceding sentence shall not be deemed to have occurred merely because the
Company ceases to be a public company and the Employee ceases to report directly
to the Board of Directors or because the Employee's title is changed, provided
that the Employee's authority, functions, duties and responsibilities otherwise
remain substantially the same as the authority, functions, duties and
responsibilities of a person with the Employee's position (as specified in
Section 3 herein and as of the date hereof) within a comparably sized division
of a national homebuilding company. A significant reduction within the meaning
of clause (v) of the second preceding sentence shall not be deemed to have
occurred merely by reason of the termination of the Company's Equity Split
Dollar Plan, provided that the Company assigns to the Employee all rights which
the Company may have under any life insurance policy issued on the Employee's
life under said plan, including, without limitation, the right to reimbursement
for any premiums and adminis-
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trative service fees paid by the Company (in which event, subsection (f) of
Section 8 of this Agreement shall have no further applicability). If an event
constituting a ground for termination of employment for Good Reason occurs, and
the Employee fails to give notice of termination within 3 months after the
occurrence of such event, the Employee shall be deemed to have waived his right
to terminate employment for Good Reason in connection with such event (but not
for any other event for which the 3-month period has not expired).
(a) Other. The Employee may terminate his employment at any time and for
any reason, other than pursuant to subsection (a) above, by giving the Company a
written notice of termination to that effect at least 45 days before the date of
termination. In the event of the Employee's termination of his employment
pursuant to this subsection (b), the Employee shall be entitled to receive (i)
his base salary pursuant to Section 4(a) and any other compensation and benefits
to the extent actually earned by the Employee pursuant to this Agreement or any
benefit plan or program of the Company as of the date of such termination at the
normal time for payment of such salary, compensation or benefits, and (ii) any
amounts owing under Section 4(d). Except as provided in Section 9, the Employee
shall receive no other compensation or benefits from the Company.
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7. Termination of Employment By Death. In the event of the death of the
Employee during the course of his employment hereunder, the Employee's estate
shall be entitled to receive his base salary pursuant to Section 4(a) and any
other compensation and benefits to the extent actually earned by the Employee
pursuant to this Agreement or any other benefit plan or program of the Company
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits, and any amounts owing under Section 4(d).
8. Benefits Upon Termination Without Cause or For Good Reason. If the
Employee's employment with the Company shall terminate (i) because of
termination by the Company pursuant to Section 5(c) other than for Cause or
because of Permanent and Total Disability, or (ii) because of termination by the
Employee for Good Reason pursuant to Section 6(a), the Employee shall be
entitled to the following:
(a) The Company shall pay to the Employee his base salary pursuant to
Section 4(a) and any other compensation and benefits to the extent actually
earned by the Employee under this Agreement or any benefit plan or program of
the Company as of the date of such termination at the
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normal time for payment of such salary, compensation or benefits.
(b) The Company shall pay the Employee any amounts owing under Section
4(d).
(c) The Company shall pay to the Employee as a severance benefit an amount
equal to three times the sum of (i) his annual rate of base salary immediately
preceding his termination of employment, and (ii) the average of his three
highest annual bonuses awarded under the Company's regular annual bonus program
for any of the five calendar years preceding his termination of employment (or,
if he was not eligible for a bonus for at least three calendar years in such
five-year period, then the average of such bonuses for all of the calendar years
in such five-year period for which he was eligible), with any deferred bonuses
counting for the year earned rather than the year paid. Such severance benefit
shall be paid in a lump sum within 45 days after the date of such termination of
employment.
(d) The Company shall pay to the Employee as a bonus for the year of
termination of his employment an amount equal to a portion (determined as
provided in the next sentence) of the bonus awarded to him under the Company's
regular annual bonus program for the calendar year
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immediately preceding the calendar year of the termination of his employment,
with any deferred bonuses counting for the year earned rather than the year
paid. Such portion shall be determined by dividing the number of days of the
Employee's employment during such calendar year up to his termination of
employment by 365 (366 if a leap year). Such payment shall be made in a lump sum
within 45 days after the date of such termination of employment, and the
Employee shall have no right to any further bonuses under said program. (e)
During the period of 36 months beginning on the date of the Employee's
termination of employment, the Employee shall remain covered by the medical,
dental, vision, life insurance, and, if reasonably commercially available
through nationally reputable insurance carriers, long-term disability plans of
the Company that covered him immediately prior to his termination of employment
as if he had remained in employment for such period. In the event that the
Employee's participation in any such plan is barred, the Company shall arrange
to provide the Employee with substantially similar benefits (but, in the case of
long-term disability benefits, only if reasonably commercially available). Any
medical insurance coverage for such 36-month period pursuant to this subsection
(e) shall become secondary
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upon the earlier of (i) the date on which the Employee begins to be covered by
comparable medical coverage provided by a new employer, or (ii) the earliest
date upon which the Employee becomes eligible for Medicare or a comparable
Government insurance program.
(f) At the end of the 36-month period described in subsection (e) above,
the Company shall assign to the Employee all rights which the Company may have
under any life insurance policy issued on the Employee's life under the
Company's Equity Split Dollar Plan (including, without limitation, the right to
reimbursement for any premiums and administrative service fees paid by the
Company).
(g) The Company shall arrange for an outplacement assistance firm to
provide outplacement assistance services to the Employee at the Company's
expense for a period of twelve months beginning on the date of termination of
the Employee's employment.
(h) If any payment or benefit received by or in respect of the Employee
under this Agreement or any other plan, arrangement or agreement with the
Company (determined without regard to any additional payments required under
this subsection (h) and Appendix A of this Agreement) (a "Payment") would be
subject to the excise tax imposed by
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Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or
any similar tax that may hereafter be imposed) or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, being hereinafter collectively
referred to as the "Excise Tax"), the Company shall pay to the Employee with
respect to such Payment at the time specified in Appendix A an additional amount
(the "Gross-up Payment") such that the net amount retained by the Employee from
the Payment and the Gross-up Payment, after reduction for any Excise Tax upon
the Payment and any Federal, state and local income and employment tax and
Excise Tax upon the Gross-up Payment, shall be equal to the Payment. The
calculation and payment of the Gross-up Payment shall be subject to the
provisions of Appendix A.
(i) Anything in this Agreement to the contrary notwithstanding, if the
Company approves any transaction with another business entity which it wishes to
qualify for "pooling of interests" accounting treatment and, prior to the
consummation of such transaction, the Company's accountants advise that any
benefits payable under this Agreement might adversely affect the availability of
such accounting treatment, such benefits shall not be payable, and the Company
and the Employee shall negotiate in good faith to provide, if possible, an al-
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ternative way of giving substantially equivalent economic benefits to the
Employee that would not adversely affect "pooling of interests" accounting
treatment.
9. Entitlement To Other Benefits. Except as provided in this Agreement,
this Agreement shall not be construed as limiting in any way any rights or
benefits that the Employee or his spouse, dependents or beneficiaries may have
pursuant to any other plan or program of the Company.
10. Confidential Information. The Employee shall retain in confidence any
confidential information known to him concerning the Company, its subsidiaries,
and their respective businesses until such information is publicly disclosed.
This provision shall survive the termination of the Employee's employment for
any reason under this Agreement.
11. No Duty to Seek Employment. The Employee shall not be under any duty or
obligation to seek or accept other employment following termination of
employment, and no amount, payment or benefits due to the Employee hereunder
shall be reduced or suspended if the Employee accepts subsequent employment.
12. Non-Solicitation. The Employee agrees that, for a period of eighteen
months following the date of termination
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of his employment hereunder, he will not solicit, directly or indirectly, any
officer or employee of the Company or any of its subsidiaries or affiliates to
leave and work for any other employer and, further, that he will not suggest to
others that they approach or solicit any officer or employee of the Company or
any of its subsidiaries or affiliates with respect to potential employment
elsewhere. This provision shall survive the termination of the Employee's
employment for any reason under this Agreement. If the Employee breaches this
provision in any significant respect, he shall forfeit his right to receive the
payments and benefits described in subsections (c) through (h) of Section 8
(including, without limitation, payments and benefits already received). To the
extent any payments and benefits already received are so forfeited, the Employee
shall promptly return such payments and benefits to the Company. In addition,
the Company may seek other legal and equitable relief in the event of any breach
by the Employee of this Section 12.
13. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before a panel of
three arbitrators in Phoenix, Arizona in accordance with the applicable rules
and procedures of the American Arbitration Association then in effect.
Arbitration shall be the exclusive remedy for any such dispute or controversy
except only as to the failure to abide
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by an arbitration award rendered hereunder. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction. Such
arbitration shall be final and binding on the parties. If the Employee is
awarded more than an insignificant amount compared with what the Company
asserted was due him or otherwise substantially prevails in the arbitration, the
Company shall reimburse the Employee for the costs incurred by the Employee in
connection with such arbitration, including without limitation reasonable
attorneys' fees, and hereby agrees to pay interest on any money award obtained
by the Employee from the date payment should have been made until the date
payment is made, calculated at the rate of 2% in excess of the LIBOR rate in
effect from time to time from the date that payment(s) to him should have been
made under the Agreement. If the Employee enforces the arbitration award in
court, the Company shall reimburse the Employee for the costs incurred in such
enforcement, including without limitation reasonable attorneys' fees.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Employee and his estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by the Employee.
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15. Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed sufficiently given if
delivered by hand or mailed by registered mail, return receipt requested, to his
residence in the case of the Employee and to its principal executive offices in
the case of the Company. Either party may by giving written notice to the other
party in accordance with this Section 16 change the address at which it is to
receive notices hereunder.
17. Controlling Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware (without
giving effect to principles of conflict of laws).
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18. Changes to Agreement. This Agreement may not be changed orally but only
in a writing, signed by the party against whom enforcement is sought.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
of which together shall constitute one and the same instrument.
20. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to its subject matter and supersedes all prior
agreements, drafts, and written or oral representations of either party.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the 1st
day of December, 1997.
EMPLOYEE: CONTINENTAL HOMES HOLDING CORP.
/s/ W. Thomas Hickcox By:/s/ Timothy C. Westfall
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W. Thomas Hickcox Timothy C. Westfall
ATTEST:
By:/s/ Bradley S. Andersen
----------------------------
Bradley S. Andersen
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Appendix A
Gross-up Payments
The following provisions shall be applicable with respect to the Gross-Up
Payments described in Section 8(h) of this Agreement.
(a) For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (i) all of the Payments
received or to be received shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax unless, in the opinion of tax counsel selected by the Company,
the Payments (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, or excess parachute
payments (as determined after application of Section 280G(b)(4)(B) of the Code),
and (ii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by independent auditors selected by the Company in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Employee shall
be deemed to pay Federal income taxes at the highest marginal rate of Federal
income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation to
which such payment could be subject based upon the state and locality of the
Employee's residence or employment, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state and local
taxes. In addition, for purposes of determining the amount of the Gross-Up
Payment, the Company shall make a determination of the amount of any employment
taxes required to be paid on the Gross-Up Payment. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the Employee shall repay the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
Federal and state and local income and employment tax imposed on the portion of
the Gross-up Payment being repaid by the Employee if such repayment results in a
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reduction in Excise Tax and/or a Federal and state and local income or
employment tax deduction), plus interest on the amount of such repayment at the
Federal short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason
of any payments the existence or amount of which cannot be determined at the
time of the Gross-up Payment), the Company shall make an additional gross-up
payment in respect of such excess (plus any interest, penalties or additions
payable with respect to such excess) at the time that the amount of such excess
is finally determined. Notwithstanding the foregoing, the Company shall withhold
from any payment due to the Employee the amount required by law to be so
withheld under Federal, state or local wage or employment tax withholding
requirements or otherwise (including without limitation Section 4999 of the
Code), and shall pay over to the appropriate government authorities the amount
so withheld.
(b) The Gross-up Payment with respect to a Payment shall be paid not later
than the forty-fifth day following the date of the Payment; provided, however,
that if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Employee on such
date an estimate, as determined in good faith by the Company, of the amount of
such payments and shall pay the remainder of such payments (together with
interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of
the Code) as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Employee, payable on the fifth day after demand by the Company (together with
interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of
the Code). At the time that payments are made under Section 8(h) and this
Appendix A, the Company shall provide the Employee with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations, including, without limitation, any opinions or other
advice the Company has received from outside counsel, auditors or consultants
(and any such opinions or advice which are in writing shall be attached to the
statement).
EMPLOYMENT AGREEMENT
AGREEMENT, made as of this 1st day of December, 1997, by and between
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the "Company"), and
JULIE E. COLLINS (the "Employee").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has approved the employment
of the Employee on the terms and conditions set forth in this Agreement; and
WHEREAS, the Employee is willing, for the consideration provided, to
continue in the employment of the Company on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Employment. The Company hereby agrees to continue to employ the
Employee, and the Employee hereby accepts such continued employment, upon the
terms and conditions set forth in this Agreement.
2. Term. The term (the "Term") of the Employee's employment under this
Agreement shall be the period commencing on December 1, 1997 and shall continue
until November 30, 1999,
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unless sooner terminated by termination of the Employee's employment pursuant to
Section 5, 6 or 7.
3. Position and Duties. During the Term, the Employee shall serve as Chief
Financial Officer of the Company, and shall have such responsibilities and
authority as commensurate with such office and as may from time to time be
prescribed by or pursuant to the Company's By-laws. The Employee shall devote
substantially all of her working time and efforts to the business and affairs of
the Company.
4. Compensation. During the Term, the Company shall provide the Employee
with the following compensation and other benefits:
(a) Base Salary. The Company shall pay to the Employee base salary at the
initial rate of $150,000 per annum, which shall be payable in accordance with
the standard payroll practices of the Company. Such base salary rate shall be
reviewed annually in accordance with the Company's normal policies beginning in
calendar year 1998; provided, however, that at no time during the Term shall the
Employee's base salary be decreased from the rate then in effect except with the
written consent of the Employee.
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(b) Bonus. The Employee shall participate in a bonus program maintained by
the Company.
(c) Other Benefits. In addition to the compensation and benefits otherwise
specified in this Agreement, the Employee (and, if provided for under the
applicable plan or program, her spouse) shall be entitled to participate in, and
to receive benefits under, the Company's employee benefit plans and programs
that are or may be available to senior executives generally and on terms and
conditions that are no less favorable than those generally applicable to other
senior executives of the Company. At no time during the Term shall the
Employee's participation in or benefits received under such plans and programs
be decreased except (i) in connection with across-the-board reductions similarly
affecting substantially all senior executives of the Company or (ii) with the
written consent of the Employee.
(d) Expenses. The Employee shall be entitled to prompt reimbursement of all
reasonable expenses incurred by her in performing services hereunder, provided
she properly accounts therefor in accordance with the Company's policies.
(e) Office and Services Furnished. The Company shall furnish the Employee
with office space, secretarial assistance and such other facilities and services
as shall
<PAGE>
-4-
be suitable to the Employee's position and adequate for the performance of her
duties hereunder.
5. Termination of Employment by the Company.
(a) Cause. The Company may terminate the Employee's employment for Cause if
(i) the Employee willfully engages in conduct which is or would reasonably be
expected to be materially and demonstrably injurious to the Company, (ii) the
Employee willfully engages in an act or acts of dishonesty resulting in material
personal gain to the Employee at the expense of the Company, (iii) the Employee
is convicted of a felony, (iv) the Employee engages in an act or acts of gross
malfeasance in connection with her employment hereunder, (v) the Employee
commits a material breach of the confidentiality provision set forth in Section
10, or (vi) the Employee exhibits demonstrable evidence of alcohol or drug abuse
having a substantial adverse effect on her job performance hereunder. The
Company shall exercise its right to terminate the Employee's employment for
Cause by (i) giving her written notice of termination at least 45 days before
the date of such termination specifying in reasonable detail the circumstances
constituting such Cause; and (ii) delivering to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than a ma-
<PAGE>
-5-
jority of the entire membership of the Board of Directors (except the Employee),
after reasonable notice to the Employee and an opportunity for the Employee and
her counsel to be heard before the Board of Directors, finding that the Employee
has engaged in the conduct set forth in this subsection (a). In the event of
such termination of the Employee's employment for Cause, the Employee shall be
entitled to receive (i) her base salary pursuant to Section 4(a) and any other
compensation and benefits to the extent actually earned pursuant to this
Agreement or any benefit plan or program of the Company as of the date of such
termination at the normal time for payment of such salary, compensation or
benefits and (ii) any amounts owing under Section 4(d). Except as provided in
Section 9, the Employee shall receive no other compensation or benefits from the
Company.
(b) Disability. If the Employee incurs a Permanent and Total Disability, as
defined below, the Company may terminate the Employee's employment by giving her
written notice of termination at least 45 days before the date of such
termination. In the event of such termination of the Employee's employment
because of Permanent and Total Disability, (i) the Employee shall be entitled to
receive her base salary pursuant to Section 4(a) and any other compensation and
benefits to the extent actually earned by the Em-
<PAGE>
-6-
ployee pursuant to this Agreement or any benefit plan or program of the Company
as of the date of such termination of employment at the normal time for payment
of such salary, compensation or benefits, and (ii) any amounts owing under
Section 4(d). For purposes of this Agreement, the Employee shall be considered
to have incurred a Permanent and Total Disability if she is unable to engage in
any substantial gainful employment by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. The existence of such Permanent and Total Disability shall be
evidenced by such medical certification as the Secretary of the Company shall
require and shall be subject to the approval of the Compensation Committee of
the Board of Directors of the Company.
(c) Without Cause. The Company may terminate the Employee's employment at
any time and for any reason, other than for Cause or because of Permanent and
Total Disability, by giving her a written notice of termination to that effect
at least 45 days before the date of termination. In the event of such
termination of the Employee's employment without Cause, the Employee shall be
entitled to the benefits described in Section 8.
<PAGE>
-7-
6. Termination of Employment by the Employee.
(a) Good Reason. The Employee may terminate her employment for Good Reason
by giving the Company a written notice of termination at least 45 days before
the date of such termination specifying in reasonable detail the circumstances
constituting such Good Reason. In the event of the Employee's termination of her
employment for Good Reason, the Employee shall be entitled to the benefits
described in Section 8. For purposes of this Agreement, Good Reason shall mean
(i) a significant reduction in the scope of the Employee's authority, functions,
duties or responsibilities from that which is contemplated by this Agreement,
(ii) the relocation of the Employee's office location to a location more than 50
miles away from the Employee's principal place of employment on December 1,
1997, (iii) any reduction in the Employee's base salary, (iv) a significant
change in the Company's annual bonus program adversely affecting the Employee,
or (v) a significant reduction in the other employee benefits provided to the
Employee (unless the Employee is fully compensated for the value of such
reduction through an increase in cash compensation); provided that, in the event
of a change of control of the Company involving D.R. Horton, Inc., a substantial
reduction in such employee benefits shall not be deemed to have occurred for the
purpose of
<PAGE>
-8-
clause (v) above after the expiration of the 6-month period beginning on the
date of such change of control if the Employee shall be entitled to participate
in and receive benefits under the Company's or its successor's employee benefit
plans and programs that are or may be available to senior executives generally
and on terms and conditions that are no less favorable than those generally
applicable to other senior executives of the Company or its successor. A
significant reduction within the meaning of clause (i) of the preceding sentence
shall not be deemed to have occurred merely because the Company ceases to be a
public company and the Employee ceases to perform investor relations functions
(such as discussing the Company's financial reports with analysts) or because
the Employee's title is changed, provided that the Employee's authority,
functions, duties and responsibilities otherwise remain substantially the same
as the authority, functions, duties and responsibilities of a person with the
Employee's position (as specified in Section 3 herein and as of the date hereof)
within a comparably sized division of a national homebuilding company. A
significant reduction within the meaning of clause (v) of the second preceding
sentence shall not be deemed to have occurred merely by reason of the
termination of the Company's Equity Split Dollar Plan, provided that the Company
assigns
<PAGE>
-9-
to the Employee all rights which the Company may have under any life insurance
policy issued on the Employee's life under said plan, including, without
limitation, the right to reimbursement for any premiums and administrative
service fees paid by the Company (in which event, subsection (f) of Section 8 of
this Agreement shall have no further applicability). If an event constituting a
ground for termination of employment for Good Reason occurs, and the Employee
fails to give notice of termination within 3 months after the occurrence of such
event, the Employee shall be deemed to have waived her right to terminate
employment for Good Reason in connection with such event (but not for any other
event for which the 3-month period has not expired).
(b) Other. The Employee may terminate her employment at any time and for
any reason, other than pursuant to subsection (a) above, by giving the Company a
written notice of termination to that effect at least 45 days before the date of
termination. In the event of the Employee's termination of her employment
pursuant to this subsection (b), the Employee shall be entitled to receive (i)
her base salary pursuant to Section 4(a) and any other compensation and benefits
to the extent actually earned by the Employee pursuant to this Agreement or any
benefit plan or program of the Company as of the date of such termination at
<PAGE>
-10-
the normal time for payment of such salary, compensation or benefits, and (ii)
any amounts owing under Section 4(d). Except as provided in Section 9, the
Employee shall receive no other compensation or benefits from the Company.
7. Termination of Employment By Death. In the event of the death of the
Employee during the course of her employment hereunder, the Employee's estate
shall be entitled to receive her base salary pursuant to Section 4(a) and any
other compensation and benefits to the extent actually earned by the Employee
pursuant to this Agreement or any other benefit plan or program of the Company
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits, and any amounts owing under Section 4(d).
8. Benefits Upon Termination Without Cause or For Good Reason. If the
Employee's employment with the Company shall terminate (i) because of
termination by the Company pursuant to Section 5(c) other than for Cause or
because of Permanent and Total Disability, or (ii) because of termination by the
Employee for Good Reason pursuant to Section 6(a), the Employee shall be
entitled to the following:
(a) The Company shall pay to the Employee her base salary pursuant to
Section 4(a) and any other compensation and benefits to the extent actually
earned by the Em-
<PAGE>
-11-
ployee under this Agreement or any benefit plan or program of the Company as of
the date of such termination at the normal time for payment of such salary,
compensation or benefits.
(b) The Company shall pay the Employee any amounts owing under Section
4(d).
(c) The Company shall pay to the Employee as a severance benefit an amount
equal to twice the sum of (i) her annual rate of base salary immediately
preceding her termination of employment, and (ii) the average of her three
highest annual bonuses awarded under the Company's regular annual bonus program
for any of the five calendar years preceding her termination of employment (or,
if she was not eligible for a bonus for at least three calendar years in such
five-year period, then the average of such bonuses for all of the calendar years
in such five-year period for which she was eligible), with any deferred bonuses
counting for the year earned rather than the year paid. Such severance benefit
shall be paid in a lump sum within 45 days after the date of such termination of
employment.
(d) The Company shall pay to the Employee as a bonus for the year of
termination of her employment an amount equal to a portion (determined as
provided in the
<PAGE>
-12-
next sentence) of the bonus awarded to her under the Company's regular annual
bonus program for the calendar year immediately preceding the calendar year of
the termination of her employment, with deferred bonuses counting for the year
earned rather than the year paid. Such portion shall be determined by dividing
the number of days of the Employee's employment during such calendar year up to
her termination of employment by 365 (366 if a leap year). Such payment shall be
made in a lump sum within 45 days after the date of such termination of
employment, and the Employee shall have no right to any further bonuses under
said program.
(e) During the period of 24 months beginning on the date of the Employee's
termination of employment, the Employee shall remain covered by the medical,
dental, vision, life insurance, and, if reasonably commercially available
through nationally reputable insurance carriers, long-term disability plans of
the Company that covered her immediately prior to her termination of employment
as if she had remained in employment for such period. In the event that the
Employee's participation in any such plan is barred, the Company shall arrange
to provide the Employee with substantially similar benefits (but, in the case of
long-term disability benefits, only if reasonably commercially avail-
<PAGE>
-13-
able). Any medical insurance coverage for such 24-month period pursuant to this
subsection (e) shall become secondary upon the earlier of (i) the date on which
the Employee begins to be covered by comparable medical coverage provided by a
new employer, or (ii) the earliest date upon which the Employee becomes eligible
for Medicare or a comparable Government insurance program.
(f) At the end of the 24-month period described in subsection (e) above,
the Company shall assign to the Employee all rights which the Company may have
under any life insurance policy issued on the Employee's life under the
Company's Equity Split Dollar Plan (including, without limitation, the right to
reimbursement for any premiums and administrative service fees paid by the
Company).
(g) The Company shall arrange for an outplacement assistance firm to
provide outplacement assistance services to the Employee at the Company's
expense for a period of twelve months beginning on the date of termination of
the Employee's employment.
(h) Notwithstanding the other provisions of this Agreement, in the event
that the amount of payments or other benefits payable to the Employee under this
Agreement, together with any payments or benefits payable under any other
<PAGE>
-14-
plan, program, arrangement or agreement maintained by the Company or one of its
affiliates, would constitute an "excess parachute payment" (within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended), the payments
under this Agreement shall be reduced (by the minimum possible amounts) until no
amount payable to the Employee under this Agreement constitutes an "excess
parachute payment" (within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended); provided, however, that no such reduction shall be
made if the net after-tax payment (after taking into account Federal, state,
local or other income and excise taxes) to which the Employee would otherwise be
entitled without such reduction would be greater than the net after-tax payment
(after taking into account Federal, state, local or other income and excise
taxes) to the Employee resulting from the receipt of such payments with such
reduction. If, as a result of subsequent events or conditions (including a
subsequent payment or absence of a subsequent payment under this Agreement or
other plans, programs, arrangements or agreements maintained by the Company or
one of its affiliates), it is determined that payments under this Agreement have
been reduced by more than the minimum amount required to prevent any payments
from constituting an "excess parachute payment," then an addi-
<PAGE>
-15-
tional payment shall be promptly made to the Employee in an amount equal to the
additional amount that can be paid without causing any payment to constitute an
"excess parachute payment." All determinations required to be made under this
subsection (h), including whether a payment would result in an "excess parachute
payment" and the assumptions to be utilized in arriving at such determination,
shall be made by a Big Six accounting firm selected by the Company which shall
provide detailed supporting calculations both to the Company and the Employee as
requested by the Company or the Employee. All fees and expenses of the
accounting firm shall be borne solely by the Company and shall be paid by the
Company. All determinations made by the accounting firm under this subsection
(h) shall be final and binding upon the Company and the Employee.
(i) Anything in this Agreement to the contrary notwithstanding, if the
Company approves any transaction with another business entity which it wishes to
qualify for "pooling of interests" accounting treatment and, prior to the
consummation of such transaction, the Company's accountants advise that any
benefits payable under this Agreement might adversely affect the availability of
such accounting treatment, such benefits shall not be payable, and the Company
and the Employee shall negotiate in good faith to pro-
<PAGE>
-16-
vide, if possible, an alternative way of giving substantially equivalent
economic benefits to the Employee that would not adversely affect "pooling of
interests" accounting treatment.
9. Entitlement To Other Benefits. Except as provided in this Agreement,
this Agreement shall not be construed as limiting in any way any rights or
benefits that the Employee or her spouse, dependents or beneficiaries may have
pursuant to any other plan or program of the Company.
10. Confidential Information. The Employee shall retain in confidence any
confidential information known to her concerning the Company, its subsidiaries,
and their respective businesses until such information is publicly disclosed.
This provision shall survive the termination of the Employee's employment for
any reason under this Agreement.
11. No Duty to Seek Employment. The Employee shall not be under any duty or
obligation to seek or accept other employment following termination of
employment, and no amount, payment or benefits due to the Employee hereunder
shall be reduced or suspended if the Employee accepts subsequent employment.
<PAGE>
-17-
12. Non-Solicitation. The Employee agrees that, for a period of eighteen
months following the date of termination of her employment hereunder, she will
not solicit, directly or indirectly, any officer or employee of the Company or
any of its subsidiaries or affiliates to leave and work for any other employer
and, further, that she will not suggest to others that they approach or solicit
any officer or employee of the Company or any of its subsidiaries or affiliates
with respect to potential employment elsewhere. This provision shall survive the
termination of the Employee's employment for any reason under this Agreement. If
the Employee breaches this provision in any significant respect, she shall
forfeit her right to receive the payments and benefits described in subsections
(c) through (h) of Section 8 (including, without limitation, payments and
benefits already received). To the extent any payments and benefits already
received are so forfeited, the Employee shall promptly return such payments and
benefits to the Company. In addition, the Company may seek other legal and
equitable relief in the event of any breach by the Employee of this Section 12.
13. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before a panel of
three arbitrators in Phoenix, Arizona in accordance with the applicable rules
and procedures of the American Arbitration Association then in ef-
<PAGE>
-18-
fect. Arbitration shall be the exclusive remedy for any such dispute or
controversy except only as to the failure to abide by an arbitration award
rendered hereunder. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction. Such arbitration shall be final and
binding on the parties. If the Employee is awarded more than an insignificant
amount compared with what the Company asserted was due her or otherwise
substantially prevails in the arbitration, the Company shall reimburse the
Employee for the costs incurred by the Employee in connection with such
arbitration, including without limitation reasonable attorneys' fees, and hereby
agrees to pay interest on any money award obtained by the Employee from the date
payment should have been made until the date payment is made, calculated at the
rate of 2% in excess of the LIBOR rate in effect from time to time from the date
that payment(s) to her should have been made under the Agreement. If the
Employee enforces the arbitration award in court, the Company shall reimburse
the Employee for the costs incurred in such enforcement, including without
limitation reasonable attorneys' fees.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Employee and her estate and the Company and any successor of the
Company, but neither
<PAGE>
-19-
this Agreement nor any rights arising hereunder may be assigned or pledged by
the Employee.
15. Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed sufficiently given if
delivered by hand or mailed by registered mail, return receipt requested, to her
residence in the case of the Employee and to its principal executive offices in
the case of the Company. Either party may by giving written notice to the other
party in accordance with this Section 16 change the address at which it is to
receive notices hereunder.
17. Controlling Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware (without
giving effect to principles of conflict of laws).
<PAGE>
-20-
18. Changes to Agreement. This Agreement may not be changed orally but only
in a writing, signed by the party against whom enforcement is sought.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
of which together shall constitute one and the same instrument.
20. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to its subject matter and supersedes all prior
agreements, drafts, and written or oral representations of either party.
<PAGE>
-21-
IN WITNESS WHEREOF, the parties have executed this Agreement on the 1st
day of December, 1997.
EMPLOYEE: CONTINENTAL HOMES HOLDING CORP.
/s/ Julie E. Collins By:/s/ Timothy C. Westfall
- -------------------------- ------------------------------
Julie E. Collins Timothy C. Westfall
ATTEST:
By:/s/ Bradley S. Andersen
------------------------------
Bradley S. Andersen
Exhibit 10.3
FORM OF EMPLOYMENT AGREEMENT
AGREEMENT, made as of this 1st day of December, 1997, by and between
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the "Company"), and
[Employee] (the "Employee").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has approved the employment
of the Employee on the terms and conditions set forth in this Agreement; and
WHEREAS, the Employee is willing, for the consideration provided, to
continue in the employment of the Company on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Employment. The Company hereby agrees to continue to employ the
Employee, and the Employee hereby accepts such continued employment, upon the
terms and conditions set forth in this Agreement.
2. Term. The term (the "Term") of the Employee's employment under this
Agreement shall be the period commencing
<PAGE>
-2-
on December 1, 1997 and shall continue until November 30, 1999, unless sooner
terminated by termination of the Employee's employment pursuant to Section 5, 6
or 7.
3. Position and Duties. During the Term, the Employee shall serve as
[Position] of MIS of the Company, and shall have such responsibilities and
authority as commensurate with such office and as may from time to time be
prescribed by or pursuant to the Company's By-laws. The Employee shall devote
substantially all of his working time and efforts to the business and affairs of
the Company.
4. Compensation. During the Term, the Company shall provide the Employee
with the following compensation and other benefits:
(a) Base Salary. The Company shall pay to the Employee base salary at the
initial rate of $[ ] per annum, which shall be payable in accordance
with the standard payroll practices of the Company. Such base salary
rate shall be reviewed annually in accordance with the Company's
normal policies beginning in calendar year 1998; provided, however,
that at no time during the Term shall the Employee's base salary be
decreased from the rate
<PAGE>
-3-
then in effect except with the written consent of the Employee.
(b) Bonus. The Employee shall participate in a bonus program maintained by
the Company.
(c) Other Benefits. In addition to the compensation and benefits otherwise
specified in this Agreement, the Employee (and, if provided for under
the applicable plan or program, his spouse) shall be entitled to
participate in, and to receive benefits under, the Company's employee
benefit plans and programs that are or may be available to senior
executives generally and on terms and conditions that are no less
favorable than those generally applicable to other senior executives
of the Company. At no time during the Term shall the Employee's
participation in or benefits received under such plans and programs be
decreased except (i) in connection with across-the-board reductions
similarly affecting substantially all senior executives of the Company
or (ii) with the written consent of the Employee.
(d) Expenses. The Employee shall be entitled to prompt reimbursement of
all reasonable expenses
<PAGE>
-4-
incurred by him in performing services hereunder, provided he properly
accounts therefor in accordance with the Company's policies.
(e) Office and Services Furnished. The Company shall furnish the Employee
with office space, secretarial assistance and such other facilities
and services as shall be suitable to the Employee's position and
adequate for the performance of his duties hereunder.
5. Termination of Employment by the Company.
(a) Cause. The Company may terminate the Employee's employment for Cause
if (i) the Employee willfully engages in conduct which is or would
reasonably be expected to be materially and demonstrably injurious to
the Company, (ii) the Employee willfully engages in an act or acts of
dishonesty resulting in material personal gain to the Employee at the
expense of the Company, (iii) the Employee is convicted of a felony,
(iv) the Em-
<PAGE>
-5-
ployee engages in an act or acts of gross malfeasance in connection
with his employment hereunder, (v) the Employee commits a material
breach of the confidentiality provision set forth in Section 10, or
(vi) the Employee exhibits demonstrable evidence of alcohol or drug
abuse having a substantial adverse effect on his job performance
hereunder. The Company shall exercise its right to terminate the
Employee's employment for Cause by (i) giving him written notice of
termination at least 45 days before the date of such termination
specifying in reasonable detail the circumstances constituting such
Cause; and (ii) delivering to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors (except the Employee),
after reasonable notice to the Employee and an opportunity for the
Employee and his counsel to be heard before the Board of Directors,
finding that the Employee has engaged in the conduct set forth in this
subsection (a). In the event of such termination of the Employee's
employment for Cause, the Employee shall be entitled to receive (i)
his base salary pursuant to Section 4(a) and any other compensation
and benefits to the extent actually earned pursuant to this Agreement
or any benefit plan or program of the Company as of the date of such
termination at the
<PAGE>
-6-
normal time for payment of such salary, compensation or benefits and
(ii) any amounts owing under Section 4(d). Except as provided in
Section 9, the Employee shall receive no other compensation or
benefits from the Company.
(b) Disability. If the Employee incurs a Permanent and Total Disability,
as defined below, the Company may terminate the Employee's employment
by giving him written notice of termination at least 45 days before
the date of such termination. In the event of such termination of the
Employee's employment because of Permanent and Total Disability, (i)
the Employee shall be entitled to receive his base salary pursuant to
Section 4(a) and any other compensation and benefits to the extent
actually earned by the Employee pursuant to this Agreement or any
benefit plan or program of the Company as of the date of such
termination of employment at the normal time for payment of such
salary, compensation or benefits, and (ii) any amounts owing under
Section 4(d). For purposes of this Agreement, the Employee shall be
considered to have incurred a Permanent and Total Disability if he is
unable to engage in any substantial gain-
<PAGE>
-7-
ful employment by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not
less than 12 months. The existence of such Permanent and Total
Disability shall be evidenced by such medical certification as the
Secretary of the Company shall require and shall be subject to the
approval of the Compensation Committee of the Board of Directors of
the Company.
(c) Without Cause. The Company may terminate the Employee's employment at
any time and for any reason, other than for Cause or because of
Permanent and Total Disability, by giving him a written notice of
termination to that effect at least 45 days before the date of
termination. In the event of such termination of the Employee's
employment without Cause, the Employee shall be entitled to the
benefits described in Section 8.
6. Termination of Employment by the Employee.
(a) Good Reason. The Employee may terminate his employment for Good Reason
by giving the Company a written notice of termination at least 45 days
be-
<PAGE>
-8-
fore the date of such termination specifying in reasonable detail the
circumstances constituting such Good Reason. In the event of the
Employee's termination of his employment for Good Reason, the Employee
shall be entitled to the benefits described in Section 8. For purposes
of this Agreement, Good Reason shall mean (i) a significant reduction
in the scope of the Employee's authority, functions, duties or
responsibilities from that which is contemplated by this Agreement,
(ii) the relocation of the Employee's office location to a location
more than 50 miles away from the Employee's principal place of
employment on December 1, 1997, (iii) any reduction in the Employee's
base salary, (iv) a significant change in the Company's annual bonus
program adversely affecting the Employee, or (v) a significant
reduction in the other employee benefits provided to the Employee
(unless the Employee is fully compensated for the value of such
reduction through an increase in cash compensation); provided that, in
the event of a change of control of the Company involving D.R. Horton,
Inc., a substantial reduction in such employee benefits shall not be
deemed
<PAGE>
-9-
to have occurred for the purpose of clause (v) above after the
expiration of the 6-month period beginning on the date of such change
of control if the Employee shall be entitled to participate in and
receive benefits under the Company's or its successor's employee
benefit plans and programs that are or may be available to senior
executives generally and on terms and conditions that are no less
favorable than those generally applicable to other senior executives
of the Company or its successor. A significant reduction within the
meaning of clause (i) of the preceding sentence shall not be deemed to
have occurred merely because the Company ceases to be a public company
or because the Employee's title is changed, provided that the
Employee's authority, functions, duties and responsibilities otherwise
remain substantially the same as the authority, functions, duties and
responsibilities of a person with the Employee's position (as
specified in Section 3 herein and as of the date hereof) within a
comparably sized division of a national homebuilding company. A
significant reduction within the meaning of clause (v) of the second
preceding sentence shall not be
<PAGE>
-10-
deemed to have occurred merely by reason of the termination of the
Company's Equity Split Dollar Plan, provided that the Company assigns
to the Employee all rights which the Company may have under any life
insurance policy issued on the Employee's life under said plan,
including, without limitation, the right to reimbursement for any
premiums and administrative service fees paid by the Company (in which
event, subsection (f) of Section 8 of this Agreement shall have no
further applicability). If an event constituting a ground for
termination of employment for Good Reason occurs, and the Employee
fails to give notice of termination within 3 months after the
occurrence of such event, the Employee shall be deemed to have waived
his right to terminate employment for Good Reason in connection with
such event (but not for any other event for which the 3-month period
has not expired).
(b) Other. The Employee may terminate his employment at any time and for
any reason, other than pursuant to subsection (a) above, by giving the
Company a written notice of termination to that effect at least 45
days before the date of termination. In
<PAGE>
-11-
the event of the Employee's termination of his employment pursuant to
this subsection (b), the Employee shall be entitled to receive (i) his
base salary pursuant to Section 4(a) and any other compensation and
benefits to the extent actually earned by the Employee pursuant to
this Agreement or any benefit plan or program of the Company as of the
date of such termination at the normal time for payment of such
salary, compensation or benefits, and (ii) any amounts owing under
Section 4(d). Except as provided in Section 9, the Employee shall
receive no other compensation or benefits from the Company.
7. Termination of Employment By Death. In the event of the death of the
Employee during the course of his employment hereunder, the Employee's estate
shall be entitled to receive his base salary pursuant to Section 4(a) and any
other compensation and benefits to the extent actually earned by the Employee
pursuant to this Agreement or any other benefit plan or program of the Company
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits, and any amounts owing under Section 4(d).
<PAGE>
-12-
8. Benefits Upon Termination Without Cause or For Good Reason. If the
Employee's employment with the Company shall terminate (i) because of
termination by the Company pursuant to Section 5(c) other than for Cause or
because of Permanent and Total Disability, or (ii) because of termination by the
Employee for Good Reason pursuant to Section 6(a), the Employee shall be
entitled to the following:
(a) The Company shall pay to the Employee his base salary pursuant to
Section 4(a) and any other compensation and benefits to the extent
actually earned by the Employee under this Agreement or any benefit
plan or program of the Company as of the date of such termination at
the normal time for payment of such salary, compensation or benefits.
(b) The Company shall pay the Employee any amounts owing under Section
4(d).
(c) The Company shall pay to the Employee as a severance benefit an amount
equal to twice the sum of (i) his annual rate of base salary
immediately preceding his termination of employment, and (ii) the
average of his three highest annual bonuses awarded under the
Company's regular annual bonus program for any of the five calendar
years
<PAGE>
-13-
preceding his termination of employment (or, if he was not eligible
for a bonus for at least three calendar years in such five-year
period, then the average of such bonuses for all of the calendar years
in such five-year period for which he was eligible), with any deferred
bonuses counting for the year earned rather than the year paid. Such
severance benefit shall be paid in a lump sum within 45 days after the
date of such termination of employment.
(d) The Company shall pay to the Employee as a bonus for the year of
termination of his employment an amount equal to a portion (determined
as provided in the next sentence) of the bonus awarded to him under
the Company's regular annual bonus program for the calendar year
immediately preceding the calendar year of the termination of his
employment, with any deferred bonuses counting for the year earned
rather than the year paid. Such portion shall be determined by
dividing the number of days of the Employee's employment during such
calendar year up to his termination of employment by 365 (366 if a
leap year). Such payment shall be made in a lump sum within 45 days
after the date
<PAGE>
-14-
of such termination of employment, and the Employee shall have no
right to any further bonuses under said program.
(e) During the period of 24 months beginning on the date of the Employee's
termination of employment, the Employee shall remain covered by the
medical, dental, vision, life insurance, and, if reasonably
commercially available through nationally reputable insurance
carriers, long-term disability plans of the Company that covered him
immediately prior to his termination of employment as if he had
remained in employment for such period. In the event that the
Employee's participation in any such plan is barred, the Company shall
arrange to provide the Employee with substantially similar benefits
(but, in the case of long-term disability benefits, only if reasonably
commercially available). Any medical insurance coverage for such
24-month period pursuant to this subsection (e) shall become secondary
upon the earlier of (i) the date on which the Employee begins to be
covered by comparable medical coverage provided by a new employer, or
(ii) the earliest date upon which the
<PAGE>
-15-
Employee becomes eligible for Medicare or a comparable Government
insurance program.
(f) At the end of the 24-month period described in subsection (e) above,
the Company shall assign to the Employee all rights which the Company
may have under any life insurance policy issued on the Employee's life
under the Company's Equity Split Dollar Plan (including, without
limitation, the right to reimbursement for any premiums and
administrative service fees paid by the Company).
(g) The Company shall arrange for an outplacement assistance firm to
provide outplacement assistance services to the Employee at the
Company's expense for a period of twelve months beginning on the date
of termination of the Employee's employment.
(h) Notwithstanding the other provisions of this Agreement, in the event
that the amount of payments or other benefits payable to the Employee
under this Agreement, together with any payments or benefits payable
under any other plan, program, arrangement or agreement maintained by
the Company or one of its affiliates, would constitute an "excess
parachute payment" (within the meaning of
<PAGE>
-16-
Section 280G of the Internal Revenue Code of 1986, as amended), the
payments under this Agreement shall be reduced (by the minimum
possible amounts) until no amount payable to the Employee under this
Agreement constitutes an "excess parachute payment" (within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended). If, as a result of subsequent events or conditions
(including a subsequent payment or absence of a subsequent payment
under this Agreement or other plans, programs, arrangements or
agreements maintained by the Company or one of its affiliates), it is
determined that payments under this Agreement have been reduced by
more than the minimum amount required to prevent any payments from
constituting an "excess parachute payment", then an additional payment
shall be promptly made to the Employee in an amount equal to the
additional amount that can be paid without causing any payments to
constitute an "excess parachute payment." All determinations required
to be made under this subsection (h), including whether a payment
would result in an "excess parachute payment" and the assumptions to
be utilized in arriving at such de-
<PAGE>
-17-
termination, shall be made by a Big Six accounting firm selected by
the Company which shall provide detailed supporting calculations both
to the Company and the Employee as requested by the Company or the
Employee. All fees and expenses of the accounting firm shall be borne
solely by the Company and shall be paid by the Company. All
determinations made by the accounting firm under this subsection (h)
shall be final and binding upon the Company and the Employee.
(i) Anything in this Agreement to the contrary notwithstanding, if the
Company approves any transaction with another business entity which it
wishes to qualify for "pooling of interests" accounting treatment and,
prior to the consummation of such transaction, the Company's
accountants advise that any benefits payable under this Agreement
might adversely affect the availability of such accounting treatment,
such benefits shall not be payable, and the Company and the Employee
shall negotiate in good faith to provide, if possible, an alternative
way of giving substantially equivalent economic benefits to the
Employee that would not ad-
<PAGE>
-18-
versely affect "pooling of interests" accounting treatment.
9. Entitlement To Other Benefits. Except as provided in this Agreement,
this Agreement shall not be construed as limiting in any way any rights or
benefits that the Employee or his spouse, dependents or beneficiaries may have
pursuant to any other plan or program of the Company.
10. Confidential Information. The Employee shall retain in confidence any
confidential information known to him concerning the Company, its subsidiaries,
and their respective businesses until such information is publicly disclosed.
This provision shall survive the termination of the Employee's employment for
any reason under this Agreement.
11. No Duty to Seek Employment. The Employee shall not be under any duty or
obligation to seek or accept other employment following termination of
employment, and no amount, payment or benefits due to the Employee hereunder
shall be reduced or suspended if the Employee accepts subsequent employment.
12. Non-Solicitation. The Employee agrees that, for a period of eighteen
months following the date of termination of his employment hereunder, he will
not solicit, directly or
<PAGE>
-19-
indirectly, any officer or employee of the Company or any of its subsidiaries or
affiliates to leave and work for any other employer and, further, that he will
not suggest to others that they approach or solicit any officer or employee of
the Company or any of its subsidiaries or affiliates with respect to potential
employment elsewhere. This provision shall survive the termination of the
Employee's employment for any reason under this Agreement. If the Employee
breaches this provision in any significant respect, he shall forfeit his right
to receive the payments and benefits described in subsections (c) through (h) of
Section 8 (including, without limitation, payments and benefits already
received). To the extent any payments and benefits already received are so
forfeited, the Employee shall promptly return such payments and benefits to the
Company. In addition, the Company may seek other legal and equitable relief in
the event of any breach by the Employee of this Section 12.
13. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before a panel of
three arbitrators in Phoenix, Arizona in accordance with the applicable rules
and procedures of the American Arbitration Association then in effect.
Arbitration shall be the exclusive remedy for any such dispute or controversy
except only as to the failure to abide by an arbitration award rendered
hereunder. Judgment upon the
<PAGE>
-20-
award rendered by the arbitrators may be entered in any court having
jurisdiction. Such arbitration shall be final and binding on the parties. If the
Employee is awarded more than an insignificant amount compared with what the
Company asserted was due him or otherwise substantially prevails in the
arbitration, the Company shall reimburse the Employee for the costs incurred by
the Employee in connection with such arbitration, including without limitation
reasonable attorneys' fees, and hereby agrees to pay interest on any money award
obtained by the Employee from the date payment should have been made until the
date payment is made, calculated at the rate of 2% in excess of the LIBOR rate
in effect from time to time from the date that payment(s) to him should have
been made under the Agreement. If the Employee enforces the arbitration award in
court, the Company shall reimburse the Employee for the costs incurred in such
enforcement, including without limitation reasonable attorneys' fees.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Employee and his estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by the Employee.
<PAGE>
-21-
15. Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed sufficiently given if
delivered by hand or mailed by registered mail, return receipt requested, to his
residence in the case of the Employee and to its principal executive offices in
the case of the Company. Either party may by giving written notice to the other
party in accordance with this Section 16 change the address at which it is to
receive notices hereunder.
17. Controlling Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware (without
giving effect to principles of conflict of laws).
<PAGE>
-22-
18. Changes to Agreement. This Agreement may not be changed orally but only
in a writing, signed by the party against whom enforcement is sought.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
of which together shall constitute one and the same instrument.
20. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to its subject matter and supersedes all prior
agreements, drafts, and written or oral representations of either party.
IN WITNESS WHEREOF, the parties have executed this Agreement on the ____
day of December, 1997.
EMPLOYEE: CONTINENTAL HOMES HOLDING CORP.
______________________ By:______________________________
[Employee]
ATTEST:
By:______________________________
<PAGE>
-23-
Exhibit A
Employee Position Annual Salary
Robert R. Ryan Vice President $150,000
Timothy C. Westfall Vice President and General Counsel $165,000
Bruce F. Dickson President of Austin Division $176,000
CONTINENTAL HOMES HOLDING CORP.
SEVERANCE PLAN FOR SELECTED PRESIDENTS
ARTICLE I. DEFINITIONS
For purposes of this Plan, the following terms have the meanings indicated:
1.1 "Affiliated Company" means any trade or business, whether or not
incorporated, which is a member of the controlled group of corporations (within
the meaning of Section 414(b) of the Code) that includes the Company or which is
under common control with the Company within the meaning of Section 414(c) of
the Code.
1.2 "Cause" means a Participant's (i) willfully engaging in conduct which
is or would reasonably be expected to be materially and demonstrably injurious
to the Company, (ii) willfully engaging in an act or acts of dishonesty
resulting in material personal gain to the Participant at the expense of the
Company, (iii) conviction of a felony, (iv) engaging in an act or acts of gross
malfeasance in connection with his employment hereunder, (v) committing a
material breach of the confidentiality provision set forth in Section 6.4, or
(vi) exhibiting demonstrable evidence of alcohol or drug abuse having a
substantial adverse effect on his job performance.
<PAGE>
-2-
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Committee" means the committee appointed by the Board of Directors of
the Company to administer the Plan.
1.5 "Company" means Continental Homes Holding Corp.
1.6 "Good Reason" means (i) a significant reduction in the scope of a
Participant's authority, functions, duties or responsibilities, (ii) the
relocation of a Participant's office location to a location more than 50 miles
from the Participant's prior principal place of employment, (iii) any reduction
in a Participant's base salary, (iv) a significant change in the Company's
annual bonus program adversely affecting the Participant, or (v) a significant
reduction in the other employee benefits provided to a Participant (unless the
Participant is fully compensated for the value of such reduction through an
increase in cash compensation) ; provided that, in the event of a change of
control of the Company involving D.R. Horton, Inc., a substantial reduction in
such employee benefits shall not be deemed to have occurred for the purpose of
clause (v) above after the expiration of the 6-month period beginning on the
date of such change of control if the Participant shall be entitled to
participate in and receive benefits under the Company's or its successor's
employee benefit plans and programs that are or
<PAGE>
-3-
may be available to comparable employees generally and on terms and conditions
that are no less favorable than those generally applicable to other comparable
employees of the Company or its successor. A significant reduction within the
meaning of clause (i) of the preceding sentence shall not be deemed to have
occurred merely because the Company ceases to be a public company or because the
Participant's title is changed, provided that the Participant's authority,
functions, duties and responsibilities otherwise remain substantially the same
as the authority, functions, duties and responsibilities of a person with the
Participant's job title (as of December 1, 1997) within a comparably sized
division of a national homebuilding company. A significant reduction within the
meaning of clause (v) of the second preceding sentence shall not be deemed to
have occurred in the case of a Participant covered by the Company's Equity Split
Dollar Plan merely by reason of the termination of said plan, provided that the
Company assigns to the Participant all rights which the Company may have under
any life insurance policy issued on the Participant's life under said plan,
including, without limitation, the right to reimbursement for any premiums and
administrative service fees paid by the Company (in which event, subsection (E)
of Article IV of this Plan shall have no further applicability).
<PAGE>
-4-
1.7 "Participant" means any employee of the Company who is designated as a
Participant by the Committee; provided, however, that in no event may a person
be designated as a Participant hereunder if such person is covered by a written
employment agreement with the Company.
1.8 "Permanent and Total Disability" means a Participant's inability to
engage in any substantial gainful employment by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or is expected to last for a continuous period of not
less than 12 months. The existence of such Permanent and Total Disability shall
be evidenced by such medical certification as the Secretary of the Company shall
require and shall be subject to the approval of the Compensation Committee of
the Board of Directors of the Company.
1.9 "Plan" means this plan, the Continental Homes Holding Corp. Severance
Plan for Selected Presidents.
1.10 "Termination Date" means the date on which a Participant's employment
with the Company and its Affiliated Companies terminates.
<PAGE>
-5-
ARTICLE II. PARTICIPATION
The Committee shall in its sole discretion select those Presidents of
divisions or subsidiaries of the Company who shall be Participants in the Plan.
Once a person has been designated as a Participant by the Committee, such
designation may not be revoked (even if such person ceases to serve as a
President of a division or subsidiary of the Company).
ARTICLE III. ELIGIBILITY FOR BENEFITS
A Participant shall be entitled to severance benefits under this Plan if
and only if his employment with the Company and its Affiliated Companies
terminates under either of the following circumstances:
(A) a termination by the Company or an Affiliated Company other than for
Cause or Permanent and Total Disability, or
(B) a termination by the Participant for Good Reason.
If an event constituting a ground for termination of employment for Good Reason
occurs, and the Participant fails to give notice of termination within 3 months
after the occurrence of such event, the Participant shall be deemed to have
waived his right to terminate employment for Good Reason in connection
<PAGE>
-6-
with such event (but not for any other event for which the 3-month period has
not expired).
ARTICLE IV. AMOUNT OF BENEFITS
A Participant who becomes entitled to severance benefits pursuant to
Article III shall receive the following benefits:
(A) The Company shall pay to the Participant as a severance benefit an
amount equal to one or one and one-half times the sum of (i) the Participant's
annual rate of base salary immediately preceding his Termination Date, and (ii)
the average of the Participant's three highest annual bonuses awarded under the
Company's regular annual bonus program for any of the five calendar years
preceding his Termination Date (or, if he was not eligible for a bonus for at
least three calendar years in such five-year period, then the average of such
bonuses for all of the calendar years in such five-year period for which he was
eligible), with any deferred bonuses counting for the year earned rather than
the year paid. The Committee shall designate one or one and one-half as the
applicable multiple for a Participant at the time of his designation as a
Participant. Such severance benefit shall be paid in a lump sum within 45 days
after the Participant's Termination Date.
(B) The Company shall pay to the Participant as a bonus for the year in
which his Termination Date falls an amount equal to a portion (determined as
provided in the next sentence) of the bonus awarded to him under the Company's
regular annual bonus program for the calendar year immediately preceding the
calendar year in which his Termination Date falls, with any deferred bonuses
counting for the year earned rather than the year paid. Such portion shall be
determined by dividing the number of days of the Participant's employment during
such calendar year up to his Termination Date by 365 (366 if a leap year). Such
payment shall be made in a lump sum within 45 days after such Termination Date,
and the Participant shall have no right to any further bonuses under said
program.
<PAGE>
-7-
(C) During the period of 12 or 18 months beginning on the Participant's
Termination Date (the 12-month period to apply in the case of Participants whose
multiple under subsection (A) above is one, and the 18-month period to apply in
the case of Participants whose multiple under subsection (A) above is one and
one-half), the Participant shall remain covered by the medical, dental, vision,
life insurance, and, if reasonably commercially available through nationally
reputable insurance carriers, long-term disability plans of the Company that
covered him immediately prior to his Termination Date as if he had remained in
employment for such period. In the event that the Participant's participation in
any such plan is barred, the Company shall arrange to provide the Participant
with substantially similar benefits (but, in the case of long-term disability
benefits, only if reasonably commercially available). Any medical insurance
coverage for such 12 or 18-month period, as the case may be, pursuant to this
subsection (C) shall become secondary upon the earlier of (i) the date on which
the Participant begins to be covered by comparable medical coverage provided by
a new employer, or (ii) the earliest date upon which the Participant becomes
eligible for Medicare or a comparable Government insurance program.
(D) The Company shall arrange for an outplacement assistance firm to
provide outplacement assistance services to the Participant at the Company's
expense for a period of twelve months beginning on the Participant's Termination
Date.
(E) If the Participant participates in the Company's Equity Split Dollar
Plan, at the end of the 12 or 18 month period (as the case may be) described in
subsection (C) above, the Company shall assign to the Participant all rights
which the Company may have under any life insurance policy issued on the
Participant's life under such plan (including, without limitation, the right to
reimbursement for any premiums and administrative service fees paid by the
Company).
(F) Anything in this Plan to the contrary notwithstanding, if the Company
approves any transaction with another business entity which it wishes to qualify
for "pooling of interests" accounting treatment and, prior to the consummation
of such transaction, the Company's accountants advise that any benefits payable
under this Plan might adversely affect the availability of such accounting
treatment, such benefits shall not be payable, and the Company and the
Participant shall negotiate in good faith to provide, if possible, an
alternative way of giving substantially equivalent economic benefits to the
<PAGE>
-8-
Participant that would not adversely affect "pooling of interests" accounting
treatment.
ARTICLE V. PLAN ADMINISTRATION
5.1 Committee The Plan shall be administered by the Committee. The
Committee shall interpret the provisions of the Plan and shall determine all
questions arising in the administration thereof, including without limitation
the reconciliation of any inconsistent provisions, the resolution of any
ambiguities, the correction of defects, and the supplying of omissions. Any such
determination by the Committee shall be conclusive and binding on all persons
and shall be consistently and uniformly applied to all persons similarly
situated.
5.2 Claims Procedure In the event that a claim for a benefit under the Plan
has been denied, the decision shall be subject to review by the Committee upon
written request of the claimant received by the Committee within sixty (60) days
after mailing or delivery to the claimant of written notice of such denial. The
decision of the Committee upon such review shall be in writing and shall state
the reasons for the decision and the provisions of the Plan on which the
decision is based. Such decision shall be made within sixty (60) days after the
Committee's receipt of written request for such review unless a hearing is
necessitated to determine the facts and circum-
<PAGE>
-9-
stances, in which event a decision shall be rendered as soon as possible, but
not later than one hundred and twenty (120) days after the claimant's written
request for review. The decision of the Committee upon review shall be final and
binding on all persons.
ARTICLE VI. MISCELLANEOUS
6.1 Plan Not Employment Agreement. The Plan does not constitute an
agreement or contract of employment and shall not be construed to limit in any
manner the right of the Company or any Affiliated Company to terminate a
Participant's employment.
6.2 No Duty to Seek Employment. A Participant shall not be under any duty
or obligation to seek other employment following his Termination Date, and no
amount, payment or benefits due to a Participant hereunder shall be reduced or
suspended if the Participant accepts subsequent employment.
6.3 Arbitration. Any dispute or controversy arising under or in connection
with this Plan shall be settled by arbitration, conducted before a panel of
three arbitrators in Phoenix, Arizona in accordance with the applicable rules
and procedures of the American Arbitration Association then in effect.
Arbitration shall be the exclusive remedy for any such dispute
<PAGE>
-10-
or controversy except only as to the failure to abide by an arbitration award
rendered hereunder. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction. Such arbitration shall be final and
binding on the parties. If the Participant is awarded more than an insignificant
amount compared to what the Company asserted was due to him or otherwise
substantially prevails in the arbitration, the Company shall reimburse the
Participant for the costs incurred by the Participant in connection with such
arbitration, including without limitation reasonable attorneys' fees, and shall
pay interest on any money award obtained by the Participant from the date
payment should have been made to the date payment is made, calculated at the
rate of 2% in excess of the LIBOR rate in effect from time to time from the date
that payment(s) to him should have been made under the Plan. If the Participant
enforces the arbitration award in court, the Company shall reimburse the
Participant for the costs incurred in such enforcement, including without
limitation reasonable attorneys' fees.
6.4 Confidential Information. Each Participant shall retain in confidence
any confidential information known to him concerning the Company, its
subsidiaries and their respective businesses until such information is publicly
dis-
<PAGE>
-11-
closed. This provision shall apply both before and after the Participant's
Termination Date.
6.5 Non-Solicitation. For a period of eighteen months following a
Participant's Termination Date, such Participant will not solicit, directly or
indirectly, any officer or employee of the Company or any of its subsidiaries or
affiliates to leave and work for any other employer and, further, such
Participant will not suggest to others that they approach or solicit any officer
or employee of the Company or any of its subsidiaries or affiliates with respect
to potential employment elsewhere. If a Participant breaches this provision in
any significant respect, such Participant shall forfeit his right to receive the
payments and benefits described in Article IV (including, without limitation,
payments and benefits already received). To the extent any payments and benefits
already received are so forfeited, the Participant shall promptly return such
payments and benefits to the Company. In addition, the Company may seek other
legal and equitable relief in the event of any breach by a Participant of this
Section 6.5.
6.6 Successors. This Plan shall be binding upon and inure to the benefit of
the Participant and his estate and the Company and any successor of the Company,
but neither this Plan
<PAGE>
-12-
nor any rights arising hereunder may be assigned or pledged by the Participant.
6.7 Controlling Law. This Plan shall in all respects be governed by and
construed in accordance with the laws of the State of Delaware (without giving
effect to principles of conflict of laws).
6.8 Plan Amendment and Termination. The Company reserves the right to amend
or terminate the Plan at any time and for any reason, provided, however, that
(i) no amendment or termination adopted prior to June 1, 1999 may adversely
affect the rights under this Plan of any person who has been designated as a
Participant prior to the adoption of such amendment or termination, and (ii) no
amendment or termination may adversely affect the rights under this Plan of any
Participant whose Termination Date preceded the date of adoption of such
amendment or termination.
<PAGE>
CONTINENTAL HOMES HOLDING CORP.
SEVERANCE PLAN FOR SELECTED VICE PRESIDENTS
ARTICLE I. DEFINITIONS
For purposes of this Plan, the following terms have the meanings indicated:
1.1 "Affiliated Company" means any trade or business, whether or not
incorporated, which is a member of the controlled group of corporations (within
the meaning of Section 414(b) of the Code) that includes the Company or which is
under common control with the Company within the meaning of Section 414(c) of
the Code.
1.2 "Cause" means a Participant's (i) willfully engaging in conduct which
is or would reasonably be expected to be materially and demonstrably injurious
to the Company, (ii) willfully engaging in an act or acts of dishonesty
resulting in material personal gain to the Participant at the expense of the
Company, (iii) conviction of a felony, (iv) engaging in an act or acts of gross
malfeasance in connection with his employment hereunder, (v) committing a
material breach of the confidentiality provision set forth in Section 6.3, or
(vi) exhibiting demonstrable evidence of alcohol or drug abuse having a
substantial adverse effect on his job performance.
<PAGE>
-2-
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Committee" means the committee appointed by the Board of Directors of
the Company to administer the Plan.
1.5 "Company" means Continental Homes Holding Corp.
1.6 "Good Reason" means (i) a significant reduction in the scope of a
Participant's authority, functions, duties or responsibilities, (ii) the
relocation of a Participant's office location to a location more than 50 miles
from the Participant's prior principal place of employment, (iii) any reduction
in a Participant's base salary, (iv) a significant change in the Company's
annual bonus program adversely affecting the Participant, or (v) a significant
reduction in the other employee benefits provided to a Participant (unless the
Participant is fully compensated for the value of such reduction through an
increase in cash compensation); provided that, in the event of a change of
control of the Company involving D.R. Horton, Inc., a substantial reduction in
such employee benefits shall not be deemed to have occurred for the purpose of
clause (v) above after the expiration of the 6-month period beginning on the
date of such change of control if the Participant shall be entitled to
participate in and receive benefits under the Company's or its successor's
employee benefit plans and programs that are or
<PAGE>
-3-
may be available to comparable
employees generally and on terms and conditions that are no less favorable than
those generally applicable to other comparable employees of the Company or its
successor. A significant reduction within the meaning of clause (i) of the
preceding sentence shall not be deemed to have occurred merely because the
Company ceases to be public company or because the Participant's title is
changed, provided that the Participant's authority, functions, duties and
responsibilities otherwise remain substantially the same as the authority,
functions, duties and responsibilities of a person with the Participant's job
title (as of December 1, 1997) within a comparably sized division of a national
homebuilding company. A significant reduction within the meaning of clause (v)
of the second preceding sentence shall not be deemed to have occurred in the
case of a Participant covered by the Company's Equity Split Dollar Plan merely
by reason of the termination of said plan, provided that the Company assigns to
the Participant all rights which the Company may have under any life insurance
policy issued on the Participant's life under said plan, including, without
limitation, the right to reimbursement for any premiums and administrative
service fees paid by the Company (in which event, subsection (E) of Article IV
of this Plan shall have no further applicability).
<PAGE>
-4-
1.7 "Participant" means any employee of the Company who is designated as a
Participant by the Committee; provided, however, that in no event may a person
be designated as a Participant hereunder if such person is covered by a written
employment agreement with the Company.
1.8 "Permanent and Total Disability" means a Participant's inability to
engage in any substantial gainful employment by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or is expected to last for a continuous period of not
less than 12 months. The existence of such Permanent and Total Disability shall
be evidenced by such medical certification as the Secretary of the Company shall
require and shall be subject to the approval of the Compensation Committee of
the Board of Directors of the Company.
1.9 "Plan" means this plan, the Continental Homes Holding Corp. Severance
Plan for Selected Vice Presidents.
1.10 "Termination Date" means the date on which a Participant's employment
with the Company and its Affiliated Companies terminates.
<PAGE>
-5-
ARTICLE II. PARTICIPATION
The Committee shall in its sole discretion select those Vice Presidents of
the Company and its subsidiaries who shall be Participants in the Plan. Once a
person has been designated as a Participant by the Committee, such designation
may not be revoked (even if such person ceases to serve as a Vice President of
the Company or a subsidiary).
ARTICLE III. ELIGIBILITY FOR BENEFITS
A Participant shall be entitled to severance benefits under this Plan if
and only if his employment with the Company and its Affiliated Companies
terminates under either of the following circumstances:
(A) a termination by the Company or an Affiliated Company other than for
Cause or Permanent and Total Disability, or
(B) a termination by the Participant for Good Reason.
If an event constituting a ground for termination of employment for Good Reason
occurs, and the Participant fails to give notice of termination within 3 months
after the occurrence of such event, the Participant shall be deemed to have
waived his right to terminate employment for Good Reason in connection
<PAGE>
-6-
with such event (but not for any other event for which the 3-month period has
not expired).
ARTICLE IV. AMOUNT OF BENEFITS
A Participant who becomes entitled to severance benefits pursuant to
Article III shall receive the following benefits:
(A) The Company shall pay to the Participant (or, in the event of his
death, his estate) his base salary at the rate in effect on his Termination Date
for the period of six months beginning on his Termination Date, such salary to
be paid at the normal time for payment of such salary.
(B) The Company shall pay to the Participant as a bonus for the year in
which his Termination Date falls an amount equal to a portion (determined as
provided in the next sentence) of the bonus awarded to him under the Company's
regular annual bonus program for the calendar year immediately preceding the
calendar year in which his Termination Date falls, with any deferred bonuses
counting for the year earned rather than the year paid. Such portion shall be
determined by dividing the number of days of the Participant's employment during
such calendar year up to his Termination Date by 365 (366 if a leap year). Such
payment shall be made in a lump sum within 45 days after such Termination Date,
and the Participant shall have no right to any further bonuses under said
program.
(C) During the period of 6 months beginning on the Participant's
Termination Date, the Participant shall remain covered by the medical, dental,
vision, life insurance, and, if reasonably commercially available through
nationally reputable insurance carriers, long-term disability plans of the
Company that covered him immediately prior to his Termination Date as if he had
remained in employment for such period. In the event that the Participant's
participation in any such plan is barred, the Company shall arrange to provide
the Participant with substantially similar benefits (but, in the case of
long-term disability benefits, only if reasonably commercially available). Any
medical insurance coverage for such 6-month
<PAGE>
-7-
period pursuant to this subsection (C) shall become secondary upon the earlier
of (i) the date on which the Participant begins to be covered by comparable
medical coverage provided by a new employer, or (ii) the earliest date upon
which the Participant becomes eligible for Medicare or a comparable Government
insurance program.
(D) The Company shall arrange for an outplacement assistance firm to
provide outplacement assistance services to the Participant at the Company's
expense for a period of 6 months beginning on the Participant's Termination
Date.
(E) If the Participant participates in the Company's Equity Split Dollar
Plan, at the end of the 6 month period described in subsection (C) above, the
Company shall assign to the Participant all rights which the Company may have
under any life insurance policy issued on the Participant's life under such plan
(including, without limitation, the right to reimbursement for any premiums and
administrative service fees paid by the Company).
(F) Anything in this Plan to the contrary notwithstanding, if the Company
approves any transaction with another business entity which it wishes to qualify
for "pooling of interests" accounting treatment and, prior to the consummation
of such transaction, the Company's accountants advise that any benefits payable
under this Plan might adversely affect the availability of such accounting
treatment, such benefits shall not be payable, and the Company and the
Participant shall negotiate in good faith to provide, if possible, an
alternative way of giving substantially equivalent economic benefits to the
Participant that would not adversely affect "pooling of interests" accounting
treatment.
ARTICLE V. PLAN ADMINISTRATION
5.1 Committee The Plan shall be administered by the Committee. The
Committee shall interpret the provisions of the Plan and shall determine all
questions arising in the administration thereof, including without limitation
the reconciliation of any inconsistent provisions, the resolution of any am-
<PAGE>
-8-
biguities, the correction of defects, and the supplying of omissions. Any such
determination by the Committee shall be conclusive and binding on all persons
and shall be consistently and uniformly applied to all persons similarly
situated.
5.2 Claims Procedure In the event that a claim for a benefit under the Plan
has been denied, the decision shall be subject to review by the Committee upon
written request of the claimant received by the Committee within sixty (60) days
after mailing or delivery to the claimant of written notice of such denial. The
decision of the Committee upon such review shall be in writing and shall state
the reasons for the decision and the provisions of the Plan on which the
decision is based. Such decision shall be made within sixty (60) days after the
Committee's receipt of written request for such review unless a hearing is
necessitated to determine the facts and circumstances, in which event a decision
shall be rendered as soon as possible, but not later than one hundred and twenty
(120) days after the claimant's written request for review. The decision of the
Committee upon review shall be final and binding on all persons.
<PAGE>
-9-
ARTICLE VI. MISCELLANEOUS
6.1 Plan Not Employment Agreement. The Plan does not constitute an
agreement or contract of employment and shall not be construed to limit in any
manner the right of the Company or any Affiliated Company to terminate a
Participant's employment.
6.2 No Duty to Seek Employment. A Participant shall not be under any duty
or obligation to seek other employment following his Termination Date, and no
amount, payment or benefits due to a Participant hereunder shall be reduced or
suspended if the Participant accepts subsequent employment.
6.3 Confidential Information. Each Participant shall retain in confidence
any confidential information known to him concerning the Company, its
subsidiaries and their respective businesses until such information is publicly
disclosed. This provision shall apply both before and after the Participant's
Termination Date.
6.4 Non-Solicitation. For a period of eighteen months following a
Participant's Termination Date, such Participant will not solicit, directly or
indirectly, any officer or employee of the Company or any of its subsidiaries or
affiliates to leave and work for any other employer and, further,
<PAGE>
-10-
such Participant will not suggest to others that they approach or solicit any
officer or employee of the Company or any of its subsidiaries or affiliates with
respect to potential employment elsewhere. If a Participant breaches this
provision in any significant respect, such Participant shall forfeit his right
to receive the payments and benefits described in Article IV (including, without
limitation, payments and benefits already received). To the extent any payments
and benefits already received are so forfeited, the Participant shall promptly
return such payments and benefits to the Company. In addition, the Company may
seek other legal and equitable relief in the event of any breach by a
Participant of this Section 6.4.
6.5 Successors. This Plan shall be binding upon and inure to the benefit of
the Participant and his estate and the Company and any successor of the Company,
but neither this Plan nor any rights arising hereunder may be assigned or
pledged by the Participant.
6.6 Controlling Law. This Plan shall in all respects be governed by and
construed in accordance with the laws of the State of Delaware (without giving
effect to principles of conflict of laws).
6.7 Plan Amendment and Termination. The Company reserves the right to amend
or terminate the Plan at any time and
<PAGE>
-11-
for any reason, provided, however, that (i) no amendment or termination adopted
prior to December 1, 1998 may adversely affect the rights under this Plan of any
person who has been designated as a Participant prior to the adoption of such
amendment or termination, and (ii) no amendment or termination may adversely
affect the rights under this Plan of any Participant whose Termination Date
preceded the date of adoption of such amendment or termination.
AMENDMENT NO. 1 to EMPLOYMENT AGREEMENT
NONCOMPETITION AGREEMENT
This is Amendment No. 1 (the "Amendment") to the Employment Agreement (the
"Agreement") dated as of December 1, 1997, between W. Thomas Hickcox (the
"Employee") and Continental Homes Holding Corp. (the "Company"). This Amendment
is dated December 18, 1997, and shall be effective upon the date (the "Effective
Date") of the consummation of the Merger (as defined below).
Recitals
A. Since the execution of the Agreement the Company has agreed to merge (in
the "Merger") with D. R. Horton, Inc. ("Horton"). In the Merger Horton will
assume the Company's obligations under the Agreement.
B. Horton and the Employee wish to amend the Agreement, inter alia, to
reflect certain bonus arrangements for and grant of stock options to Employee
and the Employee's execution of the noncompetition provisions contained herein.
NOW, THEREFORE, in consideration of the consideration reflected in this
Amendment and in the Agreement, Employee and Horton agree as follows:
Agreement
1. Definitions. Capitalized terms in this Amendment shall have the meanings
given to them in the Agreement. Horton and Company are used interchangeably in
this Amendment.
2. Grant of options. In addition to salary, bonus, and benefits provided to
Employee under the Agreement, on the Effective Date the Company shall grant to
Employee 100,000 options, pursuant to Horton's 1991 Stock Incentive Plan (the
"Option Plan"), on the terms and conditions specified on Schedule A to this
Amendment. This option grant shall be subject to all the terms and conditions of
the Option Plan, a copy of which is annexed as Schedule B.
3. Bonus. (a) Employee and Company agree that payment of a bonus to
Employee during the first two years following the Merger shall be governed by
this Section 3. Following the Merger, Horton will operate the acquired company
as a separate region (the "Continental Region") of the Company. Employee shall
be paid an annual bonus equal to one and one-half per cent (1.5%) of the annual
pre-tax earnings of the Continental Region of the Company (the "Region
Earnings"). The Region Earnings shall be calculated (i) using accounting
principles used by the Company for all of its homebuilding divisions, (ii) after
appropriate charges for overhead, interest, and other charges incurred at the
corporate level and allocated by
<PAGE>
the Company based upon usage by the Continental Region in a manner similar to
the way such charges are allocated to the Company's other homebuilding
divisions, but (iii) before provision for incentive bonuses.
(b) Promptly after the end of the Company's first fiscal month following
the first anniversary of the Merger, and at the end of the same month one year
later, the Company shall prepare a calculation of the Region Earnings for the
preceding twelve month period, and forward such calculation (and any supporting
documentation that Employee may reasonably request) to the Employee for his
review. Within ten days after receipt of this calculation the Employee shall
notify the Company in writing of his agreement with the calculation, or of any
disagreement. A notice of disagreement shall include the basis for disagreement
with reasonable specificity. If the Employee and the Company cannot resolve any
disagreement, the matter shall be finally resolved in the same manner as a
dispute under Section 8(h) of the Agreement, except that (i) each party shall
submit a figure and supporting documentation to the accounting firm (the
"Umpire"), which shall select one of the figures submitted and no other figure,
and (ii) the Umpire's fees and expenses shall be borne by the party whose figure
is not selected.
(c) In addition to the bonus payable under part (b) above, the Company
shall pay a bonus (the "Stub Period Bonus") to Employee for the period (the
"Stub Period") from the Effective Date to the date immediately prior to the
twelve month period used to calculate his annual bonus. The Stub Period Bonus
will be calculated on the basis used to calculate Employee's bonus for the year
immediately preceding the Effective Date, based upon the number of days in the
Stub Period.
(d) The Company shall pay each annual bonus within fifteen days after
Employee's agreement with the calculation of Region Earnings, or, if a
disagreement, within fifteen days after resolution as provided in part (b).
(e) In the event that the Continental Region is amalgamated with operations
that are new to the Company following a merger or internal reorganization,
Employee and Company shall negotiate in good faith a replacement formula for the
formula specified in part (a) above.
4. Non-Disclosure Agreement. (a) In connection with his employment with the
Company, Employee will have access to and become acquainted with various trade
secrets and other proprietary and confidential information of the Company.
"Trade secrets and other proprietary and confidential information" include but
are not limited to the following: (1) business, pricing, marketing, and cost
data; (2) technical information regarding the Company's products; (3)
confidential customer information; (4) customer and supplier lists; (5) contents
of contracts and agreements with customers; (6) customer requirements and
specifications, and (7) home designs, development techniques, and other products
or processes, whether or not developed or used by Employee. Employee
acknowledges that the Company has taken steps to keep trade secrets and other
proprietary and confidential information secret, including disclosing the
information only on a need-to-know basis, labeling documents as "confidential,"
and keeping confidential information in secure areas. Employee further
acknowledges that the trade secrets
2
<PAGE>
and other proprietary and confidential information have been developed or
acquired by the Company through expenditure of substantial time, effort, and
money and provide the Company with an advantage over competitors who do not know
or use such trade secrets and other proprietary and confidential information.
(b) In consideration for access to trade secrets and other proprietary and
confidential information, Employee agrees that during the Noncompetition Period
(as defined in Section 5) he will not directly or indirectly disclose or use for
any reason whatsoever any trade secrets and other proprietary and confidential
information obtained by him by reason of his employment with the Company, except
as required to conduct the business of the Company or as authorized by express
written permission of the Board or as otherwise required by law.
(c) Employee confirms that all trade secrets and other proprietary and
confidential information, and all documents reflecting such information, remain
the exclusive property of the Company. All business records, papers, and
documents kept or made by Employee relating to the business of the Company shall
be and remains the property of the Company and shall remain in the possession of
the Company during the term of Employee's employment and at all times
thereafter. Upon the termination of his employment with the Company or upon the
request of the Company at any time, Employee shall promptly deliver to the
Company, and shall retain no copies of, any materials, records, and documents
(in whatever form or medium) made by Employee or coming into his possession
concerning the business or affairs of the Company.
(d) Employee acknowledges and agrees that the nature of the trade secrets
and other proprietary and confidential information to which he will be given
access would make it impossible for him to perform in the capacity of officer,
director, employee, agent, consultant, or representative of any Competitor (as
defined in Section 5) in the Prohibited Territory (as defined in Section 5)
during the Noncompetition Period without disclosing or utilizing the trade
secrets and other proprietary and confidential information to which he will be
given access during the course of his employment. Employee further acknowledges
and agrees that the Company's products are marketed in a highly competitive
market.
5. Non-Competition. (a) In addition to the consideration specified in
Section 5(b) below, in consideration of access to trade secrets and other
proprietary information of the Company, and in consideration of the options and
bonus specified in Sections 2 and 3 of this Amendment, for a period (the
"Noncompetition Period") from the Effective Date to the later of (x) two years
thereafter or (y) one year after the Employee leaves the employ of the Company,
Employee will not:
(i) accept a position as an officer, director, employee, agent,
consultant, representative of (A) a person or entity that is engaged in
development of raw land for residential construction or in the construction
and sale of single family homes in any area that includes metropolitan
Denver, metropolitan Phoenix, South Florida, California, Texas, or any area
in which the Continental Region has done business for the twelve preceding
calendar months (collectively, the "Prohibited Territory") or (B) any
3
<PAGE>
other person or entity that, as of the date of Employee's termination,
competes directly with the Company or any of its subsidiaries in the
Prohibited Territory (an entity described in either part (A) or (B) is
referred to in this Agreement as a "Competitor" and the activities
described in part (A) as "Competing Activities");
(ii) acquire or fail to dispose of any stock or other ownership
interest in any Competitor, other than investments equal to less than one
per cent of the outstanding stock of any class issued by any publicly
traded company;
(iii) undertake any Competing Activities in the Prohibited Territory
for his own account;
(iv) solicit or seek business from any of the Company's customers,
prospective customers, suppliers, or prospective suppliers; or
(v) hire or engage any employee of the Company or induce any employee
of the Company to leave his or her employment with the Company on behalf of
any Competitor.
(b) Upon termination of the Agreement (i) by the Company without Cause or
(ii) by Employee for Good Reason, provided that the Company does not at such
time have grounds for termination for Cause, the Company shall pay to Employee
an amount equal to two times the sum referred to in Section 8(c) of the
Agreement as further consideration for Employee's agreement not to compete with
the Company during the Noncompetition Period.
(c) In consideration of the payment provided in part (b) above and the
options in bonus in Sections 2 and 3 above, Employee agrees that Section 8(c) of
the Agreement shall be amended by deleting the words three times in the second
line thereof.
6. Remedies. (a) Without intending to limit the remedies available to the
Company, Employee acknowledges that a breach or threatened breach of any of the
covenants contained in Sections 4 and 5 may result in material irreparable
injury to the Company or one of its subsidiaries for which there is no adequate
remedy at law, that it may not be possible to measure damages for such injuries
precisely, and that in the event of such a breach or threat thereof, the Company
shall be entitled to obtain a temporary restraining order, a preliminary or
permanent injunction, or other comparable provisional or equitable relief
restraining Employee from engaging in activities prohibited by Sections 4 or 5,
and such other relief as may be required to enforce specifically any of the
covenants in such Sections. Employee agrees to personal jurisdiction of any
state or federal court in the State of Arizona in any proceeding brought by the
Company to enforce Employee's covenants under Sections 4 and 5.
(b) If in any action brought by the Company to enforce Employee's breach or
threatened breach of any of Employee's covenants contained in Sections 4 and 5
in which a preliminary or final order of the Court includes a finding that
Employee willfully breached his obligations under Section 4 or 5, the Company
shall be entitled to recover from Employee the Company's reasonable attorneys'
fees incurred in connection with the action.
4
<PAGE>
(c) If Employee materially breaches any of his obligations under Sections 4
and 5, in addition to any other remedies available to Company under the
Agreement, at law, or in equity, the Employee shall forfeit his right to receive
the options described in Section 2 above, and one-third of the bonus described
in Section 3 above (such amount being the increase in Employee's bonus pursuant
to Section 3 hereof) including without limitation any such benefits already
received. To the extent any payments and benefits already received are so
forfeited, the Employee shall promptly return such payments and benefits to the
Company.
(d) Nothing in Section 13 of the Agreement shall prevent the Company from
seeking equitable relief pursuant to this Section 6.
7. Reformation. (a) The Employee agrees that the restrictions in Section 5
are reasonable in scope and duration in light of the Company's business and
competitors.
(b) If any provision of Section 5 or 6 is held by a court or arbitrator to
be unreasonable in scope or duration, the court or arbitrator shall, to the
extent permitted by law, reform such provision so that it is enforceable, and
enforce the applicable provision as so reformed. Reformation pursuant to this
Section 7 shall not affect any other provision of the Agreement or render the
Agreement unenforceable or void.
8. Survival. The provisions of Sections 4 through 7 of this Amendment shall
survive termination of the Agreement for any reason.
9. Agreement remains in force. As modified by this Amendment, the Agreement
remains in full force and effect. In the event of any conflict between this
Amendment and the Agreement, this Amendment shall control.
Company: D. R. Horton, Inc. EMPLOYEE:
By:/s/ D.R. Horton /s/ W. Thomas Hickcox
-------------------------- -----------------------------
D.R. Horton W. Thomas Hickcox
5
Donald R. Loback
5738 Via Buena Vista
Paradise Valley, AZ 85253
Dear Don:
The Board of Directors of Continental Homes has unanimously approved the payment
to you of your pro-rated fiscal year 1998 bonus in the amount of $250,882
through October 3, 1997.
The Company has also agreed to assign to you your split dollar life insurance
policies effective as of October 3, 1997. We have spoken to Patti Hermanns at
ECA to arrange for the assignment. Please call Debi Granado if you have any
questions in this regard.
As you know, we have spoken with Dan Nahom at Arthur Andersen regarding these
matters to make sure that paying your bonus and assigning the insurance policies
to you does not effect the "pooling treatment" which may be desired by a
potential buyer of our Company. While we have now concluded that this should not
effect the pooling treatment, Dan felt it would be prudent to require that you
repay your bonus and reassign your insurance policies in the event an opinion on
pooling treatment in connection with an acquisition or other such transaction
with this Company) takes the position that doing so is necessary to allow for
pooling treatment. Therefore, I would like you to acknowledge by signing below
where indicated that you will return you bonus and reassign you insurance
policies at our request in the event that position is taken. I will forward your
check (or wire, as you wish) upon receipt of a copy of this letter with your
acknowledgment.
Don, I am sorry this has taken so long and hope you understand that we were
simply proceeding cautiously in light of the pooling treatment issue.
Hope all is well,
Sincerely,
/s/ Timothy C. Westfall /s/ Donald R. Loback
- ------------------------------- ----------------------------
Timothy C. Westfall Donald R. Loback
Vice President, General Counsel
For Immediate Release: D.R. Horton, Inc. and Continental
Homes Announce Merger
D.R. Horton, Inc. (NYSE: DHI) and Continental Homes Holding Corp. (NYSE:
CON) Friday (December 19, 1997) announced that they have entered into a
definitive agreement and plan of merger pursuant to which Continental would be
merged into Horton.
The merger, which was unanimously approved by both companies' Boards of
Directors, will create one of the largest and most geographically diversified
single-family homebuilders in the United States, with operations in 21 states
and 29 markets. Using the latest public information, the Companies had latest
twelve months combined revenues of $1.6 billion and closed 10,172 homes. Over
the last twelve months, the combined company would be the fourth largest
homebuilder in the United States based upon revenues and homes closed and would
be among the best capitalized companies in the homebuilding industry. ARLINGTON,
Texas, Dec. 19.
Donald R. Horton, Chairman and President of D.R. Horton, Inc. said, "We are
extremely excited about the prospects of combining the operations of D.R.
Horton, Inc. and Continental Homes. The merger represents the combination of two
of the best performing homebuilders in the industry and is expected to be
accretive to D.R. Horton earnings. The combined company will be one of the
largest builders in the United States and our combined equity will provide an
excellent platform for continued growth. Together, we will have a leading market
share in six of the strongest homebuilding markets in the United States:
Arizona, California, Colorado, Florida, Georgia and Texas. In addition, there
will be significant opportunities for operating synergies and expansion of
Continental's mortgage operations. We are delighted to join forces with the
outstanding management team led by President and Chief Executive Officer of
Continental, Tom Hickcox. Given Continental's management depth and historical
success, we plan to operate Continental as a separate operating region."
Tom Hickcox, President and Chief Executive Officer of Continental, stated,
"D.R. Horton, Inc. has a proven track record of success in the homebuilding
industry. We at Continental are pleased to be teaming-up with D.R. Horton, Inc.
<PAGE>
-2-
and look forward to continued growth and profitability. By combining our
operations, we expand our product line to capture more price points, as well as
solidify our presence in several of the best homebuilding markets in the United
States. Our Board is confident that the merger with D.R. Horton, Inc. is in the
best interests of our stockholders and our people."
Under the terms of the merger agreement, the ratio of the number of Horton
shares to be exchanged for Continental shares in the proposed merger will be
determined pursuant to a floating exchange ratio. The final exchange ratio will
be determined based on the average of Horton's closing stock price for 15
randomly selected trading within the 30 consecutive trading days ending five
days prior to the closing date. The floating exchange ratio operates as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Horton Below $14.50- $16.88- $18.79- Above
Share $14.50 $16.87 $18.78 $19.78 $19.79
Price
Exchange
Ratio* 2.759 2.759-2.370 2.370 2.370-2.250 2.250
Implied Below $40.00 $40.00 $40.00-$44.50 $44.50 Above $44.50
Purchase
Price
</TABLE>
(*) Represents the number of Horton shares issued for each share of
Continental.
The merger has been structured as a tax-free transaction and will be
treated as a pooling of interests for accounting purposes. Based upon the
closing stock price of D.R. Horton, Inc. on December 18, 1997, the exchange
ratio for the transaction would be 2.312, and implies a purchase price per share
of $44.50. The merger is subject to the approval of stockholders of both
companies, various pre-merger regulatory approvals, and other customary closing
conditions and is expected to close late in the first calendar quarter of 1998.
As part of the merger, Continental's Interim Chairman of the Board Bradley
Anderson and Chief Executive Officer and President Tom Hickcox will join
Horton's board, increasing the number of directors to eleven.
As of September 30, 1997, D.R. Horton, Inc. had $719.8 million in assets.
For the year then ended, D.R. Horton reported revenue of $837.3 million and net
income of $36.2 million.
As of November 30, 1997, Continental Homes Holding Corp. had $544.4 million
in assets. For the latest twelve
<PAGE>
-3-
months ended November 30, 1997, Continental reported revenues of $737.3 million
and net income of $27.7 million.
Donaldson, Lufkin & Jenrette acted as the financial advisor to Horton and
Smith Barney Inc. acted as financial advisor to Continental. Morgan Stanley &
Co. acted as financial advisor to the independent members of Continental's Board
of Directors.
Portions of this document may constitute "forward looking statements" as
defined by federal law. Although the companies believe any such statements are
based on reasonable assumptions, there is no assurance that actual outcomes will
not be materially different. Additional information about issues that could lead
to material changes in performance is contained in the companies' annual reports
on Form 10-K, which are filed with the Securities and Exchange Commission.
Source D.R. Horton, Inc.
CONTACT: Rick Beckwitt, EVP, or David J. Keller, EVP, both of
D.R. Horton, Inc., 817-856-8200.
