Former Standard Pacific Homes CEO Stephen J. Scarborough has settled a dispute over his severance package with the Irvine, Calif.-based company, agreeing to a lump sum of $1 million in damages plus attorney's fees.
Scarborough had filed an arbitration complaint in California saying he was owed $23 million in benefits in connection with his termination in March 2008, which was billed at the time as a retirement. He claimed Standard Pacific violated the terms of his change of control agreement with the company, Standard Pacific said in a filing with the U.S. Securities and Exchange Commission.
He also alleged that the termination of his employment was wrongful and that he was "fraudulently induced" to sign the termination agreement.
Standard Pacific said the claims were without merit and filed a response.
Both parties set their differences aside with the settlement, without Standard Pacific admitting any wrongdoing and with Scarborough releasing any potential future claims he may have against the company or its employees.
In addition to the check for $1 million to be sent to Scarborough, Standard Pacific also agreed to pay his legal fees and costs up to $1.75 million after verifying the bill with his attorneys.
In addition, Scarborough has until Dec. 31, 2013, to exercise 280,000 stock options, which were granted to him in February 2008. All other stock options not previously exercised are immediately cancelled with the agreement.
When Scarborough left, his severance included a "lump-sum severance payment" of $1.25 million in lieu of any salary, bonus, or equity and other compensation for 2008.
In addition, his 42,000 shares of restricted stock, which would not have vested until 2009 and 2010, were immediately vested as were 280,000 stock options that would not have vested until 2010 and 2011.
Also, the company agreed to pay his COBRA insurance premiums through February 2011, pay him $109,611.19 in unused vacation time, release him from certain claims, and not disparage him. He got to keep his cell phone.
But it appears Scarborough is not yet done working for Standard Pacific. "As a material inducement to Standard Pacific to enter into this agreement," Scarborough has agreed to cooperate with the company "in seeking to enhance its business relationships with developers, landowners, and other home building companies" until March 20, 2010.
But that agreement doesn't restrict Scarborough from competing, either directly or indirectly, with Standard Pacific.
In the wake of MatlinPatterson Global Advisors' investment in Standard Pacific, the company has been dealing with the aftermath of a string of change of control agreements triggered by the firing of executives.
Two other executives, Andrew H. Parnes, who was executive vice president and CFO before his resignation, and Clay A. Halvorsen, former executive vice president, general counsel, and secretary, settled their termination disputes with Standard Pacific within a few weeks after their February resignations.
The pair settled for 57% of the maximum amount they could have claimed they were owed under their 2008 bonus and change in control agreements, the company said.
Parnes' settlement includes a lump-sum payment of $2.4 million, reimbursement for up to 24 months of COBRA insurance payments, up to 90 days to exercise any vested stock options, and $60,577 in unpaid vacation time. He also gets to keep the company Blackberry, but he has to pay for the service himself.
Halvorsen's settlement is the same, except his lump-sum payment is for $1.55 million, and his unpaid vacation time adds up to $50,770.
Another Standard Pacific senior vice president, Jari Kartozian, has also filed an arbitration complaint. Kartozian claims she is owed $1.2 million in connection with her termination in May 2008, that her employment agreements were not honored, that she was the victim of age discrimination, and that she was fraudulently induced to sign the agreement.
Standard Pacific has said Kartozian's claims are without merit.