Document:

Exhibit 10.1

Exhibit 10.1

CONSULTING AGREEMENT
 
 
This Consulting Agreement (the “Agreement”) is entered into this 30th day of September, 2014 (the “Signing Date”) and is effective as of October 1, 2014 (the “Commencement Date”), between D.R. Horton, Inc., a Delaware corporation (along with its subsidiaries and affiliates, the “Company”) and Donald J. Tomnitz (the “Consultant”). 
 
WHEREAS, the Board of Directors of the Company (the “Board”) has approved and authorized the entry into this Agreement with Consultant; and 
 
WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions for the engagement relationship of Consultant with the Company. 
 
NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Company and Consultant hereby agree as follows:
 
1.    Term.  Subject to the termination provisions of Section 7 below, the term of this Agreement shall be three (3) years (“Term”), commencing on the Commencement Date and ending at the close of business on September 30, 2017. The termination date shall be the earlier of any termination under Section 7 or September 30, 2017 (the “Termination Date”). 
 
2.    Engagement.  Consultant shall be engaged in an “at-will” consultant relationship to provide consulting services to the Company related to the Company’s business and operations as directed by Donald R. Horton, Chairman of the Board or David V. Auld, Chief Executive Officer. Consultant agrees and commits to provide consulting services to the Company of at least 30 hours per week in his role as a consultant to the Company. The Consultant is an independent contractor of the Company and not an employee.
 
3.    Consulting Fee.  The Company shall pay Consultant a consulting fee at an annual rate of Year 1: $1,000,000 for the period of October 1, 2014 through September 30, 2015; Year 2: $1,200,000 for the period of October 1, 2015 through September 30, 2016; and Year 3: $1,400,000 for the period of October 1, 2016 through September 30, 2017 (collectively, the “Consulting Fees”). The Consulting Fees shall be payable by the Company to Consultant in substantially equal installments not less frequently than semi-monthly (two times per month). 
 
4.    Benefit Plans.  The Company shall provide the Consultant and his wife with medical, health and dental insurance coverage during the Term of this Agreement so long as the Agreement has not been terminated.
 
5.    Business Expenses.  During such time as Consultant is rendering services hereunder, Consultant shall be entitled to incur and be reimbursed by the Company for all reasonable business expenses, including but not limited to mobile telephone and text messaging charges. The Company agrees that it will reimburse Consultant for all such expenses upon the presentation by Consultant, on a monthly basis, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Company’s established policies. Reimbursement for approved expenses shall be made within a reasonable period.

6.    Indemnity.  The Company shall to the extent permitted and required by law, indemnify and hold Consultant harmless from costs, expense or liability arising out of or relating to any acts or decisions made by Consultant in the course of his engagement to the same extent the Company indemnifies and holds harmless other officers and directors of the Company in accordance with the Company’s established policies. This indemnity shall include, without limitation, advancing Consultant attorney’s fees to the fullest extent permitted by applicable law. 
 

7.     Termination.  Consultant’s consulting engagement with the Company may be terminated for the reasons set forth below:

7.1    At-Will. At any time and for any reason by the Company or by the Consultant upon seven (7) calendar days’ notice to the other party. The Company shall pay Consultant on the date it would have been payable to Consultant any earned and unpaid Consulting Fee earned prior to the date of Consultant’s termination, and any unpaid reimbursements due Consultant for expenses incurred by Consultant prior to Consultant’s termination date, upon receipt.

7.2    Death.  This Agreement shall terminate upon Consultant’s death. The Company shall pay Consultant’s estate (i) on the date it would have been payable to Consultant any earned and unpaid Consulting Fee earned prior to the date of Consultant’s death, and (ii) any unpaid reimbursements due Consultant for expenses incurred by Consultant prior to Consultant’s death, upon receipt from Consultant’s personal representative of receipts therefor.  
 
8.    Covenants, Confidentiality, Non-Competition, Non-Solicitation, and Non-Interference.
8.1    Confidential Information.  During the Term of this Agreement and for a period of one (1) year from the Termination Date, Consultant shall not, except as may be required to perform his duties hereunder or as required by applicable law or court order, disclose to others for use, whether directly or indirectly, any Confidential Information regarding the Company. “Confidential Information” shall mean information about the Company, its subsidiaries and affiliates, and their respective clients and customers that is not available to the general public or that does not otherwise become available to the general public, and that was learned by Consultant in the course of his engagement by the Company, including, without limitation, any financial data, cost structures, product costs, inventory costs and bases, data, formulae, methods, information, proprietary knowledge, trade secrets, house plans and client and customer lists and all papers, resumes, records and other documents containing such Confidential Information. Consultant acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Company, and that such information gives the Company a competitive advantage. Upon the termination of his engagement, Consultant will promptly deliver to the Company all documents, maintained in any format, including electronic or print, (and all copies thereof) in his possession containing any Confidential Information. 

8.2.    Non-Competition.  In consideration of the Company’s promises under this Agreement, Consultant agrees that for a period of one (1) year from the Termination Date of this Agreement (“the non-compete period”), Consultant will not engage directly or indirectly (except on behalf of the Company, its subsidiaries and affiliates under this Agreement) as an individual, owner, agent, principal, director, officer, partner, member, manager, stockholder, employee, servant, independent contractor, joint venturer, creditor, consultant, advisor, guarantor, holder of an interest, or in any other form in any or all of the following activities within a 50 mile radius of any location where the Company (including its parent, subsidiaries or affiliates) conducts business or has conducted business in the past five (5) years prior to the Commencement Date of this Agreement:
control, enter into, engage in, or carry on or attempt to enter into, engage in or carry on any business involving (i) the construction or sale of single-family or multi-family residences, except where such activities are for the benefit of the Company, (ii) the purchase or the development of real property for use as lots for residential construction, except this clause, or (iii) any activities ancillary or related to the foregoing activities such as developing or engaging in the construction of single-family or multi-family residential properties for rental or leasing purposes, or such as investing in or loaning money to finance the activities listed herein. Notwithstanding the preceding sentence, the Consultant shall have the right to at any time to (i) purchase, construct, or remodel any personal, primary and secondary residence(s), farm homes, farm acreage, investment properties (not in competition with the Company) or vacation homes and, (ii) own, as a passive investor, securities of any competitor corporation listed on a national securities exchange or traded in the over-the-counter market, so long as his holdings in any one such corporation shall not constitute more than three percent (3%) of the issued and outstanding voting stock of such corporation. 

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8.3    Right to Company Materials.  Consultant agrees that all financial information, trademarks, patents, copyrights, designs, house plans, lists, materials, books, files, reports, correspondence, records, and other documents (“Company Materials”) used, prepared, or made available to Consultant, shall be and shall remain the property of the Company. Upon the termination of his engagement and/or the expiration of this Agreement, all Company Materials shall be returned immediately to the Company, and Consultant shall not make or retain any copies thereof. 
 
8.4    Non-solicitation.  Consultant further agrees that during the one (1) year period from the Termination Date of this Agreement he will not solicit (i.e. initiate discussions with directly or indirectly) or cause to be solicited for employment any employees of the Company. The Company agrees that the Consultant’s placement of any general advertisement for employment in any newspaper, magazine, staff recruitment website or other publication does not constitute solicitation hereunder. The Company further agrees that nothing in this Agreement prohibits the Consultant from hiring any Company employee who contacts the Consultant on his or her own initiative and without any solicitation by the Consultant.

 8.5    Non-disparagement.  Except for statements of fact, internal Company communications relating to the performance of the Company, disclosures required under applicable law or in connection with any legal proceedings with respect to which Consultant is a party or witness, Consultant will not make any disparaging remarks regarding the Company at any time during or after the termination of his engagement with the Company. Except for statements of fact, internal communications relating to the performance of Consultant, and disclosures required under applicable law or in connection with any legal proceedings with respect to which the Company is a party or witness, the Company will not make any disparaging remarks regarding Consultant at any time during or after the termination of his engagement with the Company. 
 
9.    Notice.  For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or when mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other addresses as either party may have furnished to the other in writing in accordance herewith, with the exception that notice of a change of address shall be effective only upon actual receipt:
	
			
	 
	Company:
	D.R. Horton, Inc. 

	 
	 
	301 Commerce Street 

	 
	 
	Suite 500

	 
	 
	Fort Worth, Texas  76102

	 
	 
	Attention: Chief Executive Officer 

	 
	 
	 

	 
	Consultant:
	Donald J. Tomnitz

	 
	 
	4417 Belclaire Avenue

	 
	 
	Dallas, Texas  75205

10.    Amendments or Additions.  No amendment or additions to this Agreement shall be binding unless in writing and signed by both parties hereto. 
 
11.    Section Headings.  The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. 
 
12.    Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 
 
13.    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument. 

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14.    Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Consultant and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas without regard to its conflicts of law principles.

(Signature Page Follows)

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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first indicated above.
	
				
	 
	 
	 
	 

	 
	D.R. Horton, Inc.
	 

	 
	 
	 

	 
	By: 
	 /s/ Donald R. Horton
	 

	 
	 
	Donald R. Horton, Chairman of the Board
	 

	 
	 
	 
	 

	 
	Consultant:
	 

	 
	 
	 

	 
	By: 
	 /s/ Donald J. Tomnitz
	 

	 
	 
	Donald J. Tomnitz 
	 

 

5Exhibit: Modification Agreement

Exhibit 10.1

	
		
	 
	LOAN MODIFICATION
AGREEMENT

This Sixth Loan Modification Agreement (“Sixth Modification”) modifies the Loan Agreement dated December 10, 2008 (“Agreement”), regarding a revolving line of credit originally in the maximum principal amount of $10,000,000, since increased to $15,000,000; a within-line letter of credit and a nonrevolving term facility (the “Facilities”), executed by Key Technology, Inc. ("Borrower") and Bank of America, N.A. ("Bank").  Terms used in this Sixth Modification and defined in the Agreement shall have the meaning given to such terms in the Agreement.  For mutual consideration, Borrower and Bank agree to amend the Agreement as follows:
1.Availability Period.  Section 1.2 of the Agreement is amended to read as follows:

1.2    Availability Period.  The line of credit is available until March 31, 2016, or such earlier date as the availability may terminate as provided in this Agreement (the "Facility No. 1 Expiration Date").
2.Interest Rate.  Sections 1.4 and 1.5 of the Agreement are amended in their entirety to read as follows:

1.4    Interest Rate.
(a)    The interest rate for Facility No. 1 is a rate per year equal to the Bank's Prime Rate plus the Applicable Rate as defined below.
(b)    The Prime Rate is the rate of interest publicly announced from time to time by the Bank as its Prime Rate.  The Prime Rate is set by the Bank based on various factors, including the Bank’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans.  The Bank may price loans to its customers at, above, or below the Prime Rate.  Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank's Prime Rate.

1.5    Optional Interest Rates.  Instead of the interest rate based on the rate stated in Subsection 1.4(a) above, the Borrower may elect the optional interest rates listed below for Facility No. 1 during interest period specified in Subsection 1A.2(a) of this Agreement.  The optional interest rates shall be subject to the terms and conditions of Article 1A of this Agreement.  Any principal amount bearing interest at an optional rate under this Agreement is referred to as a "Portion."  The following optional interest rate is available:
		
	•
	The LIBOR Rate plus the Applicable Rate as defined below.

3.Applicable Rate.  A new Section 1.7 is added to the Agreement, to read as follows:

1.7    Applicable Rate.  The Applicable Rate shall be the following amounts per annum, based upon the ratio of Funded Debt to EBITDA (as defined in Section 8.4 of this Agreement, the "Financial Test"), as set forth in the most recent compliance certificate (or, if no compliance certificate is required, the Borrower’s most recent financial statements) received by the Bank as required in the Covenants section.  Until the Bank receives the first compliance certificate or financial statement, the Applicable Rate shall be the amounts indicated for pricing level indicated below with an asterisk:

      	
				
	Funded Debt to EBITDA
	APPLICABLE RATE

	 
	For LIBOR Portions:
	For Prime-Based Loans
	Unused Commitment Fee

	< 1.0x
	2.25%
	0.75%
	0.25%

	*>/= 1.00x and < 2.00x
	2.50%
	1.00%
	0.30%

	>/= 2.00x
	2.75%
	1.25%
	0.35%

The Applicable Rate shall be in effect from the date the most recent compliance certificate or financial statement is received by the Bank until the date the next compliance certificate or financial statement is received; provided, however, that if the Borrower fails to timely deliver the next compliance certificate or financial statement, the Applicable Rate from the date such compliance certificate or financial statement was due until the date such compliance certificate or financial statement is received by the Bank shall be the highest pricing level set forth above.
If, as a result of any restatement of or other adjustment to the financial statements of the Borrower or for any other reason, the Borrower or the Bank determines that (i) the Financial Test as calculated by the Borrower as of any applicable date was inaccurate and (ii) a proper calculation of the Financial Test would have resulted in higher pricing for such period, the Borrower shall immediately and retroactively be obligated to pay to the Bank an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period.  The Bank’s acceptance of payment of such amounts will not constitute a waiver of any default under this Agreement.  The Borrower’s obligations under this paragraph shall survive the termination of this Agreement and the repayment of all other obligations.

4.Optional Rate.  A new Article 1A is added to the Agreement, to read as follows:

1A.    OPTIONAL INTEREST RATES
1A.1    Optional Rates.  Each optional interest rate is a rate per year.  No Portion will be converted to a different interest rate during the applicable interest period.  Upon the occurrence of an event of default under this Agreement, the Bank may terminate the availability of optional interest rates for interest periods commencing after the default occurs.  At the end of any interest period, the interest rate will revert to the rate stated in Subsection 1.4(a) above, unless the Borrower has designated another optional interest rate for the Portion.
1A.2    LIBOR Rate.  The election of LIBOR Rates shall be subject to the following terms and requirements:
(a)    The interest period during which the LIBOR Rate will be in effect will be one month.  The first day of the interest period must be a day other than a Saturday or a Sunday on which banks are open for business in New York and London and dealing in offshore dollars (a "LIBOR Banking Day").  The last day of the interest period and the actual number of days during the interest period will be determined by the Bank using the practices of the London inter-bank market.
(b)    Each Portion will be for an amount not less than $100,000.
(c)    The "LIBOR Rate" means the interest rate determined by the following formula (all amounts in the calculation will be determined by the Bank as of the first day of the interest period.):
LIBOR Rate =    __________LIBOR_________    
(1.00 - Reserve Percentage)
Where,
(i)    "LIBOR" means, for any applicable interest period, the rate per annum equal to the London Interbank Offered Rate (or a comparable or successor rate which is approved by the Bank), as published by Bloomberg (or other commercially available source providing quotations of such rate as selected by the Bank from time to time) at approximately 11:00 a.m. London time two (2) London Banking Days before the commencement of the interest period, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a term equivalent to such interest period.  If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably 

selected by the Bank.  A "London Banking Day" is a day on which banks in London are open for business and dealing in offshore dollars.
(ii)    "Reserve Percentage" means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent.  The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages.
(d)    The Borrower shall irrevocably request a Portion no later than 12:00 noon Pacific time on the LIBOR Banking Day preceding the day on which the London Inter-Bank Offered Rate will be set, as specified above.  For example, if there are no intervening holidays or weekend days in any of the relevant locations, the request must be made at least three days before the LIBOR Rate takes effect.
(e)    The Bank will have no obligation to accept an election for a Portion if any of the following described events has occurred and is continuing:
(i)    Dollar deposits in the principal amount, and for periods equal to the interest period, of a Portion are not available in the London inter-bank market;
(ii)    the LIBOR Rate does not accurately reflect the cost of a Portion; or
(iii)    adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Interest Period.
(f)    Each prepayment of a Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a prepayment fee as described below.  A "prepayment" is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement.
(g)    The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost or expense incurred by it as a result of the prepayment, including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Portion or from fees payable to terminate the deposits from which such funds were obtained.  The Borrower shall also pay any customary administrative fees charged by the Bank in connection with the foregoing.  For purposes of this paragraph, the Bank shall be deemed to have funded each Portion by a matching deposit or other borrowing in the applicable interbank market, whether or not such Portion was in fact so funded.

5.Unused Commitment Fee.  Subsection 3.1(c) is amended to read as follows:

(c)    Unused Commitment Fee.  The Borrower agrees to pay a fee on any difference between the Facility No. 1 Commitment and the amount of credit it actually uses, determined by the daily amount of credit outstanding during the specified period.  The fee will be calculated at the Applicable Rate.  This fee is due on the last day of each calendar quarter until the expiration of the availability period.

6.Funded Debt to EBITDA Ratio.  Section 8.4 of the Agreement is amended to change the definition of “EBITDA” to read as follows:

"EBITDA" means net income, less income or plus loss from discontinued operations, less income or plus loss from non-cash extraordinary items, plus non-cash stock compensation expense, plus income taxes, plus interest expense, plus depreciation, depletion and amortization. Notwithstanding the preceding, the EBITDA used for covenant calculations for the quarters ended 12/31/13, 3/31/14 and 6/30/14 shall remain unchanged from the amounts for those respective periods as presented on the Borrower’s compliance certificate for the period ended 6/30/14. EBITDA will not include any positive or negative mark-to-market adjustments from derivatives, futures or otherwise, including gains or losses from foreign exchanges.  This ratio will be calculated at the end of each reporting period for which the Bank requires financial statements from Borrower, using the results of the 12-month period ending with that reporting period.

7.Basic Fixed Charge Coverage Ratio.  Section 8.5 of the Agreement is amended to change the definition of “EBITDA” to read as follows:

“EBITDA” means net income, less income or plus loss from discontinued operations, less income or plus loss from non-cash extraordinary items, plus non-cash stock compensation expense, plus income taxes, plus interest expense, plus depreciation, depletion and amortization. Notwithstanding the preceding, the EBITDA used for covenant calculations for the quarters ended 12/31/13, 3/31/14 and 6/30/14 shall remain unchanged from the amounts for those respective periods as presented on the Borrower’s compliance certificate for the period ended 6/30/14. EBITDA will not include any positive or negative mark-to-market adjustments from derivatives, futures or otherwise, including gains or losses from foreign exchanges.  This ratio will be calculated at the end of each reporting period for which the Bank requires financial statements from Borrower, using the results of the twelve-month period ending with that reporting period.  The current portion of long-term liabilities will be measured as of the date 12 months prior to the current financial statement.

8.Collateral.  Borrower acknowledge and agrees, for purposes of clarification, that the Security Agreement dated December 10, 2008, between Borrower and Bank, and the Deed of Trust dated December 10, 2008, and recorded under Walla Walla County recording number 2008-12359, are each intended to secure all Indebtedness of the Borrower to the Bank, including but not limited to Facility No. 1, Facility No. 2, and all other obligations of the Borrower to the Bank. These obligations include all principal, interest, late charges, loan fees, collection costs and expenses, attorneys' fees and legal expenses (including all legal fees incurred in any action, bankruptcy proceeding, arbitration or other alternative dispute resolution proceeding, or appeal, or in the course of exercising any judicial or nonjudicial remedies) that Borrower may now owe to Bank or for which Borrower may become obligated to pay or reimburse Bank for in the future, under promissory notes, guaranties, or other instruments executed by Borrower, and any other obligation which may arise from Borrower to Bank of any kind or type.

9.Modification Fee.  Borrower shall pay to Bank a modification fee of $7,500 upon execution of this Sixth Modification.

10.Representations and Warranties.  When Borrower signs this Sixth Modification, Borrower represents and warrants to Bank that:  (a) there is no event that is, or with notice or lapse of time or both would be, an event of default under the Agreement except those events, if any, that have been disclosed in writing to Bank or waived in writing by Bank, (b) the representations and warranties in the Agreement are true as of the date of this Sixth Modification as if made on the date of this Sixth Modification, (c) this Sixth Modification does not conflict with any law, agreement, or obligation by which Borrower is bound, and (d) this Sixth Modification is within Borrower's powers, has been duly authorized, and does not conflict with any of Borrower's governing documents.

11.Conditions.  This Sixth Modification will be effective when Bank receives the following items, in form and content acceptable to Bank:
(a)If required by Bank, evidence that the execution, delivery, and performance by Borrower, and/or any guarantor of the Loan Documents who is not a natural person, of this Sixth Modification and any instrument or agreement required under this Sixth Modification have been duly authorized.
(b)Payment by Borrower of a loan fee in the amount set forth in Section 9.
(c)Payment by Borrower of all costs, expenses, and attorneys' fees incurred by Bank in connection with this Sixth Modification.

12.Other Terms.  Except as specifically amended by this Sixth Modification or any prior amendment, all other terms, conditions, and definitions of the Agreement, including but not limited to the Dispute Resolution Provision, and all other documents, instruments, or agreements entered into with regard to the Loan, shall remain in full force and effect.

13.Counterparts.  This Sixth Modification may be executed in counterparts, each of which when so executed shall be deemed an original, but all such counterparts together shall constitute but one and the same agreement.

14.Statutory Notice.  ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

	
		
	DATED as of September 30, 2014.

	 
	 

	Bank:

Bank of America, N.A.

By   /s/ Christopher A. Swindell
Christopher A. Swindell,
Senior Vice President
	Borrower:

Key Technology, Inc.

By  /s/ John J. Ehren
John J. Ehren,
Chief Executive Officer

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