Exhibit 10.2
CONFIDENTIAL RETIREMENT AND
CONSULTING AGREEMENT
This Confidential Retirement and Consulting
Agreement (“Agreement”) is entered into as of
December 20, 2007 between KIMBALL HILL, INC.
(“Company”) and William E. Long
(“Long”).
In
consideration of the mutual promises and agreements set forth in
this Agreement, Company and Long agree as follows:
1.
Employment
Separation. Effective January 31, 2008
(“Retirement Date”), Long will retire and resign from
employment and all offices and positions with Company and
Company’s parents, subsidiaries and affiliates, including but
not limited to the positions of member of the Management Committee
and President and Chief Executive Officer of KH Financial, L.P. and
Director and President of KH Financial Holding Company. Long
shall have no further rights, duties and authorities as an employee
and shall not be entitled to any further compensation or non-vested
benefits, except as provided in this Agreement. Upon
Company’s request made from time to time, Long shall execute
written resignations of his positions with Company and
Company’s parents, subsidiaries and affiliates.
2.
Consideration for
Release. In exchange for Long’s Covenants
in Section 6, Long’s Waiver and Release of Claims in
Section 7, and Long’s Covenant Not To Sue in
Section 8, and subject to the terms and conditions of this
Agreement, Company shall retain and pay Long as a consultant after
the Retirement Date in accordance with the provisions of
Section 4 of this Agreement (the “Consulting
Payments”). These Consulting Payments are made in lieu
of payments otherwise provided for under any Company policies,
including without limitation Company’s Severance Pay Policy,
and Long acknowledges that the Consulting Payments are good and
valuable consideration to which Long is not otherwise entitled. If
Long does not sign this Agreement or, after signing, cancels this
Agreement, he shall receive only those benefits and payments
required by law.
3.
Other Benefits and
Compensation.
(a)
Vacation Pay.
Company will pay
Long for any accrued and unused vacation days and floating holidays
earned by Long as of the Retirement Date, except that if Long has
taken unearned vacation days, Long’s final regular paycheck
will be reduced to reflect the cost of such vacation
days.
(b)
Continuing Health
Benefits. Company will continue to provide Long,
through the group health benefits plans maintained by Company, with
individual or family dental and vision coverage on substantially
the same basis as active employees of Company until the earlier of
the Consulting Termination Date (as hereinafter defined) or the
last day of the month in which Long commences employment with
another employer or the last day of the month in which Long ceases
to pay for this coverage (the “Coverage Period”).
The Coverage Period shall not be taken into account as a period of
continuation coverage for purposes of Part 6 of Title I of
the
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December 20, 2007
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/s/
William E. Long
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Date
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William E. Long
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Employee Retirement Income Security Act of 1974
(also known as the Consolidated Omnibus Budget Reconciliation Act
or COBRA) or for purposes of any other obligation of Company to
provide any continued coverage to Long (or, if applicable, to
Long’s family) under any group health benefits plan
maintained by Company. Notwithstanding any provision in this
Agreement to the contrary, Company reserves the right to amend,
modify or terminate any group health benefit plan maintained by
Company) and any such amendment, modification, or termination will
apply to Long during the Coverage Period to the same extent that it
applies to active employees of Company.
(c)
Withholding.
Company will
withhold from the compensation and benefits payable to Long under
this Agreement all appropriate deductions for employee benefits, if
applicable, and all amounts necessary for Company to satisfy its
withholding obligations under applicable tax laws.
4.
Consulting
Agreement.
(a)
Effective as of
February 1, 2008, Company will retain William E. Long as a
non-exclusive consultant for the period February 1, 2008
through September 30, 2008 (the “Consulting
Period”). During the Consulting Period, Long will
perform such services as may be requested from time to time by
Company on an as-needed and part-time basis (not exceeding an
average of 40 hours per month during the Consulting Period);
provided that Long shall not be required to perform services for
more than 60 hours during any calendar month without additional
compensation to be agreed upon by Company and Long. Long will
report to Company’s President and Chief Executive Officer.
This Consulting Agreement shall terminate on September 30,
2008 (the “Consulting Termination Date”) and thereafter
may be renewed only upon the written agreement of both
parties.
(b)
Consulting Fees and
Expense Reimbursements.
(1)
Company agrees to pay Long
for the consulting services as follows: (a) a monthly
fee at the rate of $37,087.50 per month; and (b) a bonus fee
in an amount equal to $148,350 multiplied by the Average Management
Bonus Percentage, which shall be the percentage calculated by
dividing the total amount of bonuses payable to members of
Company’s senior managers (excluding the Executive Chairman
and the President and Chief Executive Officer) by the total amount
of target bonuses of those senior managers, as reasonably
determined by Company as of the end of Company’s 2008 fiscal
year ending September 30, 2008. Company will pay the bonus fee
to Long contemporaneously with Company’s payment of 2008
fiscal year bonuses to Company’s senior managers, but in any
event no later than January 31, 2009.
(2)
Company agrees to
reimburse Long for all reasonable travel expenses (not including
travel expenses for travel to and from Company’s offices in
Rolling Meadows, Illinois) incurred on Company’s behalf that
are necessary and incidental to the performance of the consulting
services, provided that Long obtains the express prior written
approval of Company for all such travel. The travel expenses for
which Company will pay Long will be the actual,
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reasonable expenses of
transportation, lodging and meals. Long agrees that extraordinary
expenses shall not be incurred or reimbursed without the express
prior written consent of Company.
(3)
Long agrees to submit an
invoice to Company at the end of each month for the monthly fee due
for such month. Each invoice shall summarize the services
performed by Long during such month. Long shall also submit a
travel expense statement (including receipts) at the end of each
month which details all reasonable travel expenses incurred by Long
during that month.
(4)
Company will pay
Long’s invoices net 10 days from date of receipt of invoice.
Long agrees to pay and to be solely responsible for any and all
taxes and insurance required by federal, state, or local laws,
including but not limited to income taxes, social security taxes,
property taxes, excise taxes, sales taxes, use taxes,
retailers’ occupation taxes, service occupation taxes,
workers’ compensation insurance, unemployment compensation
insurance, and any other employment related or other taxes or
insurance incurred or due as a result of the performance of the
consultant services by Long under this Agreement or Company’s
payment of monthly fees and the bonus fee to Long, including all
obligations, reports and timely notifications relating to such
matters. Company shall have no obligation to pay or withhold any
sums for any such taxes or insurance on any amounts due or paid to
Long for his consulting services.
(c)
Long shall perform the
consulting services only as an independent contractor. Long
acknowledges that Company does not control the method or manner in
which Long performs his consulting services for Company. Under no
circumstances shall Long be construed to be an employee or agent of
Company, and he shall not be entitled to participate in any of
Company’s employee benefit programs except as specifically
provided otherwise in this Agreement. Company shall not be liable
to pay wages, withhold any taxes, provide any insurance or other
employee benefits, or otherwise be obligated to Long as an
employer. Nothing in this Agreement shall be construed as creating
a joint venture, partnership, or agency relationship between the
parties.
5.
Stock
Purchase.
(a)
Long agrees to sell, and
Company agrees to purchase, effective as of the Retirement Date,
all shares of common stock of the Company owned as of the date of
this Agreement by Long, as Trustee of the William E. Long Revocable
Trust, as amended (the “Trustee”), for an amount (the
“Purchase Price”) equal to 14,984 multiplied by the per
share Fair Market Value as of the Retirement Date determined in
accordance with the provisions of this Section 5.
(b)
The Trustee currently owns
14,984 shares of common stock of Company, represented by
Certificate No. 103 dated 12/29/2005 (5,000 shares),
Certificate No. 113 dated 7/1/2006 (2,984 shares), Certificate
No. 114 dated 7/1/2006 (2,000 shares), and Certificate
No. 119 dated 9/28/2006 (5,000 shares) (collectively, the
“Company Stock”). Long, jointly and severally in his
individual capacity and as the Trustee, represents and warrants
that the Trustee is the lawful
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owner of, and has the complete right, title,
and interest in and to the Company Stock, free and clear of any and
all liens, encumbrances, or rights of third parties, that the
Trustee has not sold, transferred, pledged or assigned the Company
Stock, and that the Trustee has full power to sell, transfer and
assign the Company Stock to Company in accordance with the terms of
this Agreement.
(c)
Company and Long,
individually and in his capacity as the Trustee, agree that the per
share Fair Market Value of Company Stock as of the Retirement Date
will be the value determined by Company’s Stock Option
Committee (the “Committee”) organized pursuant to the
Company’s Incentive Stock Option Plan (the
“Plan”). The parties understand that the Trustee of the
Company’s Employee Stock Ownership Plan (the
“ESOP”) will make a determination of the per share fair
market value of the Company’s common stock as of
December 31, 2007 for purposes of the ESOP (the “ESOP
Valuation”). Long, individually and in his capacity as the
Trustee, agrees that the Committee may determine, in its
discretion, that the per share Fair Market Value as of the
Retirement Date is the per share fair market value of the
Company’s common stock as of December 31, 2007
determined by the Trustee of the ESOP, and further agrees to accept
the Committee’s determination for all purposes of this
Agreement. Company and Long anticipate that the Trustee of the ESOP
will notify Company of the ESOP Valuation in February, 2008 and
that the Committee will make its determination of Fair Market Value
thereafter. Within one week after the Committee’s
determination of Fair Market Value as of the Retirement Date,
Company will notify Long of (1) the ESOP Valuation as
determined by the Trustee of the ESOP and (2) the Fair Market
Value as determined by the Committee.
(d)
Long, individually and in
his capacity as the Trustee, agrees to deliver to Company the
following documents not later than one week after his receipt of
the notification of the ESOP Valuation as determined by the ESOP
Trustee and the Fair Market Value as determined by the
Committee:
(1)
Certificate No. 103
dated 12/29/2005, Certificate No. 113 dated 7/1/2006,
Certificate No. 114 dated 7/1/2006, and Certificate
No. 119 dated 9/28/2006 (collectively, the
“Certificates”); and
(2)
Executed Stock Powers for
all the aforesaid stock certificates in substantially the form of
Exhibit A to this Agreement.
Long, individually and in his capacity as the
Trustee, will deliver the Certificates and the executed Stock
Powers to Company on the Retirement Date, provided that Long has
not cancelled this Agreement pursuant to Section 7 of this
Agreement. Title to the Company Stock will vest in Company
immediately upon Long’s delivery of the Certificates and the
executed Stock Powers to Company. If Long has cancelled this
Agreement pursuant to Section 7 of this Agreement, then Long,
individually and in his capacity as the Trustee, will have no
obligation under this Section 5 to deliver the Certificates
and the Stock Powers to Company.
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(e)
Payment of Purchase
Price.
(1)
Long, individually and in
his capacity as the Trustee, acknowledges that the Company’s
loan and financing agreements, including the Trust Indenture (the
“Trust Indenture”) with respect to the $203 million in
principal amount of 10½% senior subordinated notes due 2012
that subsequently were registered with the Sec
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