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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Section 240.14a-12
ENGLE HOMES, INC.
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(Name of Registrant as specified in its Charter)
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if Other Than Registrant)
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into on this 7th day of December effective as of November 1, 1998
by and between ENGLE HOMES, INC., a Florida corporation (the
"Company"), and ALEC ENGELSTEIN (hereinafter called the
"Executive").
R E C I T A L S
A. The Executive is currently employed as the Chief
Executive Officer of the Company.
B. The Executive possesses intimate knowledge of the
business and affairs of the Company, its policies, methods and
personnel.
C. The Board of Directors of the Company (the "Board")
recognizes that the Executive has contributed to the growth and
success of the Company, and desires to assure the Company of the
Executive's continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will
reinforce and encourage the Executive's continued attention and
dedication to the Company.
E. The Executive is willing to make his services available
to the Company and on the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on
the terms and conditions set forth herein.
1.2 Duties of Executive. During the Term of Employment
under this Agreement, the Executive shall serve as the Chairman of
the Board and for such period of time as he elects as the Chief
Executive Officer of the Company and/or the President and shall
exercise such power and authority as may from time to time be
delegated to him by the Board. The Executive shall be entitled to
receive the compensation and benefits provided under this
Agreement, whether or not he elects to cease serving as the Chief
Executive Officer and/or President of the Company, provided that he
continues to serve as the Chairman of the Board of the Company
pursuant to this Agreement. The Executive shall devote his full
time and attention to the business and affairs of the Company,
render such services to the best of his ability, and use his best
efforts to promote the interests of the Company. It shall not be
a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver
lectures, fulfill speaking engagements or teach at educational
institutions, or (iii) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive's responsibilities to the Company in accordance with
this Agreement.
2. Term of Employment.
2.1 Initial Term. The initial Term of Employment under
this Agreement, and the employment of the Executive hereunder,
shall commence effective as of November 1, 1998 (the "Commencement
Date") and shall expire on October 31, 2003, unless sooner
terminated in accordance with Section 5 hereof.
2.2 Extension of Term. On the first anniversary of the
Commencement Date, and on each subsequent anniversary of the
Commencement Date during the Term of Employment, the Term of
Employment under this Agreement automatically shall extend for an
additional 1 year period (subject to earlier termination as
provided in Section 5 hereof) unless the Company or the Executive
delivers written notice to the other at least 6 months prior such
anniversary of the Commencement Date of its or his election not to
extend the Term of Employment.
2.3 Term of Employment. The period during which the
Executive shall be employed by the Company pursuant to the terms of
this Agreement is sometimes referred to in this Agreement as the
"Term of Employment".
3. Compensation.
3.1 Base Salary. The Executive shall receive a base
salary at the annual rate of $500,000 (the "Base Salary") during
the Term of Employment, with such Base Salary payable in
installments consistent with the Company's normal payroll schedule,
subject to applicable withholding and other taxes. The Base Salary
shall be reviewed, at least annually, for merit increases and may,
by action and in the discretion of the Compensation Committee of
the Board, be increased at any time or from time to time. In
addition, on each anniversary of the Commencement Date of this
Agreement, the Base Salary shall be increased, but shall not be
decreased, by that percentage by which the Consumer Price Index,
for the Palm Beach, Florida area published by the United States
government (the "Index") for the immediately preceding calendar
year exceeds such index for the next preceding calendar year. If
publication of the Index is discontinued, the parties hereto shall
accept comparable statistics on the cost of living for the Palm
Beach, Florida area as computed and published by an agency of the
United States government, or if no such agency computes and
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publishes such statistics, by any regularly published national
financial periodical that does compute and publish such statistics.
Base Salary, if increased, shall not thereafter be decreased for
any reason.
3.2 Bonuses.
a. The Executive shall be eligible to receive
bonuses under this paragraph "a" for each fiscal year of the
Company ending during the Term of Employment only in the event that
the Company's "Adjusted Pre-Tax Income" equals or exceeds 10% of
the "Average Stockholders' Equity", for such fiscal year. If the
Company's Adjusted Pre-Tax Income equals or exceeds 10% of the
Average Stockholders' Equity for any such fiscal year, the Company
shall pay the Executive a bonus for such year equal to the sum of
(i) 1% of 10% of the Company's Adjusted Pre-Tax Income for the year
plus (ii) 2 1/2% of the amount by which the Adjusted Pre-Tax Income
exceeds 10% of the Adjusted Pre-Tax Income for such year. For
purposes of this provision;
(i) "Adjusted Pre-Tax Income" means the Company's
income or loss before income taxes, extraordinary gains or losses
and cumulative effect of accounting changes plus any amounts paid
or accrued for bonuses payable to the Executive pursuant to this
Section 3.2a and
(ii) "Average Stockholders' Equity" means the
average of the Company's year-end stockholders' equity for the two
fiscal years preceding the fiscal year of the Company for which the
bonus is being determined.
b. For the Bonus Period in which the Executive's
employment with the Company terminates for any reason other than by
the Company for Cause under Section 5.1 hereof, the Company shall
pay the Executive a pro rata portion (based upon the period ending
on the date on which the Executive's employment with the Company
terminates) of the bonus otherwise payable under Section 3.2a for
the Bonus Period in which such termination of employment occurs;
provided, however, that (i) the Bonus Period shall be deemed to end
on the last day of the fiscal quarter of the Company in which the
Executive's employment so terminates, and (ii) the Adjusted Pre-Tax
Income for this Bonus Period shall be annualized and shall be
determined based upon unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, and reviewed and approved by the
Compensation Committee of the Board. The Incentive Compensation
for this Bonus Period is sometimes hereinafter referred to as the
"Termination Year Bonus".
c. The Executive may elect, by notice to the
Company given within the earlier of (i) 30 days after the end of
the Bonus Period for the year and (ii) 15 days after the date on
which the Executive's employment with the Company terminates, to
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receive payment of all or any portion of his Incentive Compensation
payable for the Bonus Period in the form of shares of Common Stock
of the Company (the "Shares"), valued based upon the average
closing price for the Shares as reported by any national securities
exchange or reporting system or as quoted on the National
Association of Securities Dealers Automated Quotations System (or
any similar system of automated dissemination of quotations of
securities prices on common use) during the last calendar month of
the Bonus Period.
d. The Executive's rights to receive the amounts
provided under paragraphs a through c of this Section 3.2 shall be
conditioned upon approval of such amounts by a majority of the
votes cast by shareholders of the Company in a separate vote, in a
manner that satisfies the requirements of Section 162(m)(4)(C)(ii)
of the Internal Revenue Code of 1986, as amended, and such amounts
shall not be payable unless and until such shareholder approval is
obtained.
e. Executive also shall receive such additional
bonuses, if any, as the Compensation Committee of the Board may
determine in its sole and absolute discretion.
f. Any bonuses payable pursuant to this Section
3.2 are sometimes hereinafter referred to as "Incentive
Compensation." Each period for which Incentive Compensation is
payable to the Executive is sometimes hereinafter referred to as a
Bonus Period. Unless otherwise specified by the Board, the Bonus
Period shall be the fiscal year of the Company.
g. Any Incentive Compensation payable pursuant to
this Section 3.2 shall be paid by the Company to the Executive with
2 1/2 months after the end of the Bonus Period for which it is
payable.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. Upon the submission of
proper substantiation by the Executive, and subject to such rules
and guidelines as the Company may from time to time adopt, the
Company shall reimburse the Executive for all reasonable expenses
actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company. The Executive shall
account to the Company in writing for all expenses for which
reimbursement is sought and shall supply to the Company copies of
all relevant invoices, receipts or other evidence reasonably
requested by the Company.
4.2 Compensation/Benefit Programs. During the Term of
Employment, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
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Company to its executives, including savings, pension,
profit-sharing and deferred compensation plans, subject to the
general eligibility and participation provisions set forth in such
plans. During the Term of Employment, the Company shall pay all
premiums up to a maximum of $90,000 of premiums per year) necessary
to maintain in force Transamerica Occidental Life Policy #92487325
and Hartford Life Insurance Company Policy #UL 1543530, each with
a death benefit of $5,000,000 payable upon the second death of the
Executive and the Executive's wife, Sheila. The Company's
obligation to pay the foregoing premiums shall cease in the event
that the Executive, and the Executive's spouse and descendants,
ceases to own in the aggregate, directly or indirectly, at least
20% of the outstanding shares of the Company's common stock. The
Company shall have no interest in the policies.
4.3 Working Facilities. During the Term of Employment,
the Company shall furnish the Executive with an office, secretarial
help and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
4.4 Automobile. During the Term of Employment, the
Company shall continue to provide the Executive with an automobile
comparable to the existing automobile provided by the Company to
Executive, together with reimbursement of the reasonable operating
expenses thereof, including without limitation the costs of
gasoline, oil, repairs, maintenance and insurance.
4.5 Stock Options. During the Term of Employment, the
Executive shall be eligible to be granted options (the "Stock
Options") to purchase common stock (the "Common Stock") of the
Company under (and therefore subject to all terms and conditions
of) the Company's 1991 Stock Option Plan as amended, and any
successor plan thereto (the "Stock Option Plan") and all rules of
regulations of the Securities and Exchange Commission applicable to
stock option plans then in effect. The number of Stock Options and
terms and conditions of the Stock Options shall be determined by
the Committee appointed pursuant to the Stock Option Plan, or by
the Board of Directors of the Company, in its discretion and
pursuant to the Stock Option Plan.
4.6 Retirement Benefits. In the event that the
Executive's employment with the Company terminates for any reason
other than by the Company for Cause pursuant to Section 5.1 hereof,
the Company shall pay to the Executive (or to the Executive's
beneficiary or estate if there is no surviving beneficiary) a
monthly retirement benefit (the "Retirement Benefits") equal to one
twelfth of the Executive's annual Base Salary at the time of such
termination of employment. Payment of the Retirement Benefits shall
commence on the first day of the calendar month that immediately
follows the date of termination of the Executive's employment with
the Company and shall continue for a period of 60 consecutive
months.
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4.7 Other Benefits. The Executive shall be entitled to
six (6) weeks of vacation each calendar year during the Term of
Employment, to be taken at such times as the Executive and the
Company shall mutually determine and provided that no vacation time
shall interfere with the duties required to be rendered by the
Executive hereunder. Any vacation time not taken by Executive
during any calendar year may be carried forward into any
succeeding calendar year. The Executive shall receive such
additional benefits, if any, as the Compensation Committee of the
Board of the Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at
all times have the right, upon written notice to the Executive, to
terminate the Executive's employment hereunder, for Cause. For
purposes of this Agreement, the term "Cause" only shall mean (i) an
act or acts of personal dishonesty taken by the Executive and
intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violation by
the Executive of the Executive's material obligations under this
Agreement which are demonstrably willful and deliberate on the
Executive's part and which are not remedied in a reasonable period
of time after receipt of written notice from the Company, or (iii)
the conviction of the Executive for any criminal act which is a
felony. Any termination for Cause shall be made in writing to the
Executive, which notice shall set forth in detail all acts or
omissions upon which the Company is relying for such termination.
The Executive shall have the right to address the Board regarding
the acts set forth in the notice of termination. Upon any
termination pursuant to this Section 5.1, the Company shall (i) pay
to the Executive his Base Salary to the date of termination and
(ii) pay to the Executive his accrued but unpaid Incentive
Compensation, if any, for any Bonus Period ending on or before the
date of the termination of Executive's employment with the Company.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated at the time such
termination occurs).
5.2 Disability. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, if the Executive shall as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
12 consecutive calendar months. Upon any termination pursuant to
this Section 5.2, the Company shall (i) pay to the Executive any
unpaid Base Salary through the effective date of termination
specified in such notice, (ii) pay to the Executive his accrued but
unpaid Incentive Compensation, if any, for any Bonus Period ending
on or before the date of termination of the Executive's employment
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with the Company, and (iii) pay to the Executive his Termination
Year Bonus at the time provided in Section 3.2(f) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated at the time such termination occurs, and (z)
payment of the Retirement Benefits payable under Section 4.6
hereof).
5.3 Death. Upon the death of the Executive during
the Term of Employment, the Company shall (i) pay to the estate of
the deceased Executive any unpaid Base Salary through the
Executive's date of death, (ii) pay to the estate of the deceased
Executive his accrued but unpaid Incentive Compensation, if any,
for any Bonus Period ending on or before the Executive's date of
death, and (iii) pay to the estate of the deceased Executive the
Termination Year Bonus at the time provided in Section 3.2(f). The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated at the time such
termination occurs and (z) payment of the Retirement Benefits under
Section 4.6 hereof).
5.4 Termination Without Cause. At any time the
Company shall have the right to terminate the Executive's
employment hereunder by written notice to the Executive. Upon any
termination pursuant to this Section 5.4 (that is not a termination
under any of Sections 5.1, 5.2, 5.3, 5.5 or 5.6), the Company shall
(i) pay to the Executive any unpaid Base Salary through the
effective date of termination specified in such notice, (ii) pay to
the Executive the accrued but unpaid Incentive Compensation, if
any, for any Bonus Period ending on or before the date of the
termination of the Executive's employment with the Company, (iii)
pay to the Executive his Termination Year Bonus, at the time
provided in Section 3.2(f), (iv) pay to the Executive as a single
lump sum payment, within 30 days of the termination of his
employment hereunder, an amount (the "Continuation Amount") equal
to the product of (a) the number of months (rounded to the nearest
whole month) during the period (the "Continuation Period")
beginning on the date of the termination of the Executive's
employment with the Company and ending on the date on which the
Term of Employment would have ended pursuant to Section 2 hereof in
the absence of an earlier termination pursuant to this Section 5,
multiplied by (b) one-twelfth of the sum of the Executive's annual
Base Salary, Incentive Compensation, and the value of the annual
fringe benefits (based upon their cost to the Company) required to
be provided to the Executive under Sections 4.2 and 4.4 hereof, for
the year immediately preceding the year in which his employment
terminates, and (v) pay to the Executive as a single lump sum
payment within 30 days of the termination of his employment
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hereunder, an amount equal to the value of the portion of his
benefits under any savings, pension, profit sharing or deferred
compensation plans that are forfeited under such plans by reason of
the termination of his employment hereunder prior to the end of the
Continuation Period. Further, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (x) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, (y) payment of
compensation for unused vacation days that have accumulated at the
time such termination occurs, and (z) payment of the Retirement
Benefits payable under Section 4.6 hereof.)
5.5 Termination by Executive.
a. The Executive shall at all times have the
right, upon six (6) months written notice to the Company, to
terminate the Executive's employment hereunder.
b. Upon termination of employment with the
Company pursuant to this Section 5.5 (that is not a termination
under Section 5.6) by the Executive without Good Reason, the
Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice,
(ii) pay to the Executive his accrued but unpaid Incentive
Compensation, if any, for any Bonus Period ending on or before the
termination of Executive's employment with the Company, and (iii)
pay to the Executive his Termination Year Bonus, at the time
provided in Section 3.2(f). The Company shall have no further
liability hereunder (other than for (x) reimbursement for
reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 4.1,
(y) payment of compensation for unused vacation days that have
accumulated at the time such termination occurs, and (z) payment of
the Retirement Benefits payable under Section 4.6 hereof.)
c. Upon any termination pursuant to this
Section 5.5 (that is not a termination under Section 5.6) by the
Executive for Good Reason, the Company shall pay to the Executive
the same amounts that would have been payable by the Company to the
Executive under Section 5.4 of this Agreement if the Executive's
employment had been terminated by the Company without Cause. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated at the time such termination occurs, and (z)
payment of the Retirement Benefits payable under Section 4.6
hereof,
d. For purposes of this Agreement, "Good
Reason" shall mean (i) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's position
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(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
1.2 of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive; (ii) any failure by the Company to
comply with any of the provisions of Article 3 of this Agreement,
other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location outside of Palm Beach County, except for travel
reasonably required in the performance of the Executive's
responsibilities; (iv) any purported termination by the Company of
the Executive's employment otherwise than for Cause pursuant to
Section 5.1, or by reason of the Executive's disability pursuant to
Section 5.2 of this Agreement, prior to the Expiration Date. For
purposes of this Section 5.5(d), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
5.6 Change in Control of the Company.
a. In the event that a Change in Control (as
defined in paragraph (b) of this Section 5.6) in the Company shall
occur prior during the Term of Employment, and within one year
after the date of the Change in Control, the Executive's employment
with the Company is terminated for any reason other than by the
Company for Cause under Section 5.1 hereof or by reason of the
Executive's Disability or death pursuant to Sections 5.2 or 5.3
hereof, the Company shall pay to the Executive within 30 days of
the termination of the Executive's employment with the Company (i)
any unpaid Base Salary through the effective date of termination,
(ii) the Incentive Compensation, if any, not yet paid to the
Executive for any year prior to such termination, (iii) an amount
equal to the larger of (x) the Continuation Amount provided in
Section 5.4 (iv) hereof or (y) three times the sum of Executive's
annual Base Salary, Incentive Compensation, and the value of the
annual fringe benefits (based upon their cost to the Company)
required to be provided to the Executive under Sections 4.2 and 4.4
hereof, for the year immediately preceding the year in which his
employment terminates, and (iv) the value of the portion of his
benefits under any savings, pension, profit sharing or deferred
compensation plans that are forfeited under those plans by reason
of the termination of his employment hereunder. In addition, the
Company shall pay to the Executive his Termination Year Bonus, at
the time provided in Section 3.2(f). Further, upon the Change in
Control, the Executive's Stock Options shall immediately vest. The
Company shall have no further liability hereunder (other than for
(1) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (2) payment of compensation for unused vacation days
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that have accumulated at the time such termination occurs, and (3)
payment of the Retirement Benefits under Section 4.6 hereof).
b. For purposes of this Agreement, the term
"Change in Control" shall mean:
(i) Approval by the shareholders of the
Company of (x) a reorganization, merger, consolidation or other
form of corporate transaction or series of transactions, in each
case, with respect to which persons who were the shareholders of
the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter,
own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged
or consolidated company's then outstanding voting securities in
substantially the same proportions as their ownership immediately
prior to such reorganization, or (y) a liquidation or dissolution
of the Company or (z) the sale of all or substantially all of the
assets of the Company (unless such reorganization, merger,
consolidation or other corporate transaction, liquidation,
dissolution or sale is subsequently abandoned);
(ii) Individuals who, as of the
Commencement Date of this Agreement, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the Commencement Date whose election, or nomination
for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election
of the Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities Exchange
Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) the acquisition (other than from the
Company) by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of
more than 50% of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally in the election of directors (hereinafter referred to as
the ownership of a "Controlling Interest") excluding, for this
purpose, any acquisitions by (1) the Company or its Subsidiaries,
(2) any person, entity or "group" that as of the date on which this
Agreement is entered into owns beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange
Act) of a Controlling Interest or (3) any employee benefit plan of
the Company or its Subsidiaries.
5.7 Certain Additional Payments by the Company.
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a. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
(including without limitation any additional payments required
under this Section 5.7), (a "Payment") would be subject to an
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are
incurred by the Executive with respect to any such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the
Company shall make a payment to the Executive (a "Gross-Up
Payment") in an amount such that after payment by the Executive of
all taxes (including any Excise Tax) imposed upon the Gross-Up
Payment, the Executive retains (or has had paid to the Internal
Revenue Service on his behalf) an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments
and (y) the product of any deductions disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross
income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to
be made. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to (i) pay federal income
taxes at the highest marginal rates of federal income taxation for
the calendar year in which the Gross-Up Payment is to be made, and
(ii) pay applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes.
b. Subject to the provisions of paragraph (c)
of this Section 5.7, all determinations required to be made under
this Section 5.7, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall
be made by BDO Seidman & Co. (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment, or such earlier time
as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 5.7, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination.
If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written
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opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 5.7 and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive.
c. The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which
it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;provided, however, that the
Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 5.7(c), the Company shall control all proceedings taken in
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connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
d. If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Resignation. Upon any termination of employment
pursuant to this Article 5, the Executive shall be deemed to have
resigned as an officer, and if he or she was then serving as a
director of the Company, as a director, and if required by the
Board, the Executive hereby agrees to immediately execute a
resignation letter to the Board.
5.9 Survival. The provisions of this Article 5 shall
survive the termination of this Agreement, as applicable.
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6. Restrictive Covenants.
6.1 Non-competition. At all times while the Executive is
employed by the Company and for a two (2) year period after the
termination of the Executive's employment with the Company for any
reason other than by the Company without Cause (as defined in
Section 5.1 hereof) or by the Executive for Good Reason (as defined
in Section 5.5(d) hereof), the Executive shall not, directly or
indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other
person or entity (whether as an employee, officer, director,
partner, agent, security holder, creditor, consultant or otherwise)
that directly or indirectly (or through any affiliated entity)
engages in competition with the Company (for this purpose, any
business that engages in the construction of single family homes
for sale or in the construction of any other type of shelter for
sale that the Company is engaged in at that time); provided that
such provision shall not apply to the Executive's ownership of
Common Stock of the Company or the acquisition by the Executive,
solely as an investment, of securities of any issuer that is
registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and that are listed or admitted for
trading on any United States national securities exchange or that
are quoted on the National Association of Securities Dealers
Automated Quotations System, or any similar system or automated
dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling
interest in or become a member of a group which exercises direct or
indirect control or, more than five percent of any class of capital
stock of such corporation.
6.2 Nondisclosure. The Executive shall not at any time
divulge, communicate, use to the detriment of the Company or for
the benefit of any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined) pertaining to
the business of the Company. Any Confidential Information or data
now or hereafter acquired by the Executive with respect to the
business of the Company (which shall include, but not be limited
to, information concerning the Company's financial condition,
prospects, technology, customers, suppliers, sources of leads and
methods of doing business) shall be deemed a valuable, special and
unique asset of the Company that is received by the Executive in
confidence and as a fiduciary, and Executive shall remain a
fiduciary to the Company with respect to all of such information.
For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as
a consequence of or through his employment by the Company
(including information conceived, originated, discovered or
developed by the Executive) prior to or after the date hereof, and
not generally known, about the Company or its business.
Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to
the extent required by law.
14
6.3 Nonsolicitation of Employees and Clients. At all
times while the Executive is employed by the Company and for a two
(2) year period after the termination of the Executive's employment
with the Company for any reason, for the Executive shall not,
directly or indirectly, for himself or for any other person, firm,
corporation, partnership, association or other entity (a) employ or
attempt to employ or enter into any contractual arrangement with
any employee or former employee of the Company, unless such
employee or former employee has not been employed by the Company
for a period in excess of six months, and/or (b) call on or solicit
any of the actual or targeted prospective clients of the Company on
behalf of any person or entity in connection with any business
competitive with the business of the Company, nor shall the
Executive make known the names and addresses of such clients or any
information relating in any manner to the Company's trade or
business relationships with such customers, other than in
connection with the performance of Executive's duties under this
Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Article 6, the term "Company" also shall include any existing or
future subsidiaries of the Company that are operating during the
time periods described herein and any other entities that directly
or indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive
acknowledges and confirms that (a) the restrictive covenants
contained in this Article 6 are reasonably necessary to protect the
legitimate business interests of the Company, and (b) the
restrictions contained in this Article 6 (including without
limitation the length of the term of the provisions of this Article
6) are not overbroad, overlong, or unfair and are not the result of
overreaching, duress or coercion of any kind. The Executive further
acknowledges and confirms that his full, uninhibited and faithful
observance of each of the covenants contained in this Article 6
will not cause him any undue hardship, financial or otherwise, and
that enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
15
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Article 6. The Executive further
acknowledges that the restrictions contained in this Article 6 are
intended to be, and shall be, for the benefit of and shall be
enforceable by, the Company's successors and assigns.
6.7 Reformation by Court. In the event that a court of
competent jurisdiction shall determine that any provision of this
Article 6 is invalid or more restrictive than permitted under the
governing law of such jurisdiction, then only as to enforcement of
this Article 6 within the jurisdiction of such court, such
provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.8 Extension of Time. If the Executive shall be in
violation of any provision of this Article 6, then each time
limitation set forth in this Article 6 shall be extended for a
period of time equal to the period of time during which such
violation or violations occur. If the Company seeks injunctive
relief from such violation in any court, then the covenants set
forth in this Article 6 shall be extended for a period of time
equal to the pendency of such proceeding including all appeals by
the Executive.
6.9 Survival. The provisions of this Article 6 shall
survive the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by
the parties hereto that a breach by the Executive of any of the
covenants contained in Article 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Article 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Mediation. Except to the extent the Company has the
right to seek an injunction under Section 7 hereof, in the event a
dispute arises out of or relates to this Agreement, or the breach
thereof, and if the dispute cannot be settled through negotiation,
the parties hereby agree first to attempt in good faith to settle
the dispute by mediation administered by the American Arbitration
Association under its Employment Mediation Rules before resorting
to litigation or some other dispute resolution procedure.
9. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by
16
arbitration in Palm Beach County, Florida, in accordance with the
Rules of the American Arbitration Association then in effect
(except to the extent that the procedures outlined below differ
from such rules). Within thirty (30) days after written notice by
either party has been given that a dispute exists and that
arbitration is required, each party must select an arbitrator and
those two arbitrators shall promptly, but in no event later than
thirty (30) days after their selection, select a third arbitrator.
The parties agree to act as expeditiously as possible to select
arbitrators and conclude the dispute. The selected arbitrators
must render their decision in writing. The cost and expenses of
the arbitration and of enforcement of any award in any court shall
be borne equally by both parties. If advances are required, each
party will advance one-half of the estimated fees and expenses of
the arbitrators. Judgment may be entered on the arbitrators' award
in any court having jurisdiction. Although arbitration is
contemplated to resolve disputes hereunder, either party may
proceed to court to obtain an injunction to protect its rights
hereunder, the parties agreeing that either could suffer
irreparable harm by reason of any breach of this Agreement.
Pursuit of an injunction shall not impair arbitration on all
remaining issues.
10. Assignment. Neither party shall have the right to assign
or delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
13. Notices. All notices required or permitted to be given
hereunder shall be in writing and shall be personally delivered by
courier, sent by registered or certified mail, return receipt
requested or sent by confirmed facsimile transmission addressed as
set forth herein. Notices personally delivered, sent by facsimile
or sent by overnight courier shall be deemed given on the date of
delivery and notices mailed in accordance with the foregoing shall
be deemed given upon the earlier of receipt by the addressee, as
evidenced by the return receipt thereof, or three (3) days after
deposit in the U.S. mail. Notice shall be sent (i) if to the
Company, addressed to 123 N.W. 13th Street, Suite 300, Boca Raton,
Florida 33432, , Attention: Chief Financial Officer , and (ii) if
to the Executive, to his address as reflected on the payroll
records of the Company, or to such other address as either party
17
hereto may from time to time give notice of to the other.
14. Benefits; Binding Effect. This Agreement shall be for
the benefit of and binding upon the parties hereto and their
respective heirs, personal representatives, legal representatives,
successors and, where applicable, assigns, including, without
limitation, any successor to the Company, whether by merger,
consolidation, sale of stock, sale of assets or otherwise.
15. Severability. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in this
Agreement shall not affect the enforceability of the remaining
portions of this Agreement or any part thereof, all of which are
inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared
invalid, this Agreement shall be construed as if such invalid word
or words, phrase or phrases, sentence or sentences, clause or
clauses, or section or sections had not been inserted. If such
invalidity is caused by length of time or size of area, or both,
the otherwise invalid provision will be considered to be reduced to
a period or area which would cure such invalidity.
16. Waivers. The waiver by either party hereto of a breach
or violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
17. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
18. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
19. No Third Party Beneficiary. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer
upon or give any person other than the Company, the parties hereto
and their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
20. Indemnification.
a. Subject to limitations imposed by law, the
Company shall indemnify and hold harmless the Executive to the
18
fullest extent permitted by law from and against any and all
claims, damages, expenses (including reasonable attorneys' fees),
judgments, penalties, fines, settlements, and all other liabilities
incurred or paid by him in connection with the investigation,
defense, prosecution, settlement or appeal of any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and to which the
Executive was or is a party or is threatened to be made a party by
reason of the fact that the Executive is or was an officer,
employee or agent of the Company, or by reason of anything done or
not done by the Executive in any such capacity or capacities,
provided that the Executive acted in good faith, in a manner that
was not grossly negligent or constituted willful misconduct and in
a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. The Company also shall pay any and all expenses
(including attorney's fees) incurred by the Executive as a result
of the Executive being called as a witness in connection with any
matter involving the Company and/or any of its officers or
directors.
b. The Company shall pay any expenses (including
attorneys' fees), judgments, penalties, fines, settlements, and
other liabilities incurred by the Executive in investigating,
defending, settling or appealing any action, suit or proceeding
described in this Section 20 in advance of the final disposition of
such action, suit or proceeding. The Company shall promptly pay
the amount of such expenses to the Executive, but in no event later
than 10 days following the Executive's delivery to the Company of
a written request for an advance pursuant to this Section 21,
together with a reasonable accounting of such expenses.
c. The Executive hereby undertakes and agrees to
repay to the Company any advances made pursuant to this Section 20
if and to the extent that it shall ultimately be found that the
Executive is not entitled to be indemnified by the Company for such
amounts.
d. The Company shall make the advances
contemplated by this Section 20 regardless of the Executive's
financial ability to make repayment, and regardless whether
indemnification of the Indemnitee by the Company will ultimately be
required. Any advances and undertakings to repay pursuant to this
Section 20 shall be unsecured and interest-free.
e. The provisions of this Section 20 shall survive
the termination of this Agreement.
19
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
ENGLE HOMES, INC.
By:______________
Name:____________
Title:___________
EXECUTIVE
_________________
ALEC ENGELSTEIN
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