1
Exhibit 99.3
[CONFORMED COPY]
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (the "Agreement"), entered into as of
December 4, 1996 by and between CAVCO INDUSTRIES, INC., an Arizona corporation
(the "Company"), and XX X. XXXXXX (the "Consultant"),
W I T N E S S E T H:
WHEREAS, the Consultant is currently employed by the Company as its
Chairman of the Board;
WHEREAS, concurrently with the execution and delivery hereof, Centex
Real Estate Corporation, a Nevada corporation ("CREC"), MFH Holding Company, a
Nevada corporation, MFH Acquisition Company, an Arizona corporation (the "Merger
Subsidiary"), the Consultant, Xxxxx X. Xxxxxx and Xxxxx Limited Partnership, an
Arizona limited partnership ("Xxxxx Partnership" and, together with the
Consultant and Xxxxx X. Xxxxxx, the "Shareholder Parties") are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), upon the terms and
subject to the conditions of which the Merger Subsidiary will be merged with and
into the Company (the "Merger");
WHEREAS, concurrently with the execution and delivery hereof, CREC and
the Shareholder Parties are entering into a Stock Purchase Agreement (the "Stock
Purchase Agreement"), upon the terms and subject to the conditions of which the
Shareholder Parties will sell an aggregate of 1,047,288 shares of Common Stock,
par value $.05 per share ("Common Stock"), of the Company owned by them to CREC
in the event that the Merger Agreement is terminated under the circumstances
described therein (the "Subject Share Purchase");
WHEREAS, at the date (the "Effective Date") upon which the Merger or
the Subject Share Purchase is consummated in accordance with the terms of the
Merger Agreement or the Stock Purchase Agreement, as the case may be, CREC, the
Shareholder Parties and (if applicable) the Company will enter into a
Shareholders' Agreement (the "Shareholders' Agreement"), the form of which is
attached to the Merger Agreement and the Stock Purchase Agreement, which will
provide that, among other things, (i) the
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Shareholder Parties will have the right to require CREC to purchase the shares
of Common Stock held by them and (ii) CREC will have the right to require the
Shareholder Parties to sell to CREC the shares of Common Stock held by them, in
each case upon the terms and conditions set forth therein;
WHEREAS, the Consultant acknowledges that he and his affiliates will
derive substantial benefits from the consummation of the Merger or the Subject
Share Purchase, as the case may be, and the transactions contemplated by the
Shareholders' Agreement, including, but not limited to, the payment of
consideration for the shares of Common Stock held by the Consultant and his
affiliates in accordance with the aforementioned agreements; and
WHEREAS, from and after the Effective Date, the Company desires to
retain the services of the Consultant, and the Consultant is willing to provide
such services to the Company, all upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises, the terms and
provisions set forth herein, the mutual benefits to be gained by the performance
thereof and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Engagement of Consultant. From and after the Effective Date,
the Company hereby retains the Consultant to provide the consulting services
described herein, and the Consultant hereby agrees to provide such services to
the Company, all upon the terms and conditions set forth herein.
SECTION 2. Term. Subject to the terms and conditions set forth herein,
the Consultant agrees to provide to the Company the consulting services
described herein during the period commencing on the Effective Date and ending
on the fifth anniversary thereof, which term may be extended from time to time
pursuant to a written instrument executed by the Company and the Consultant.
Notwithstanding the foregoing, either the Company or the Consultant may elect to
accelerate the date upon which such term expires upon written notice to the
other party within 60 days after the date upon which CREC acquires all of the
shares of Common Stock held by the Shareholder Parties. As used herein, the
"Term" means the term determined in accordance with this Section 2 during which
the Consultant agrees to provide consulting services to the Company.
SECTION 3. Consulting Services. The services to be provided by the
Consultant hereunder shall consist of such consulting services as the Board of
Directors of
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the Company may reasonably request from time to time in connection with the
business of the Company. The Consultant shall devote such time, attention and
energies to the business of the Company as is reasonably necessary in order to
provide the services described herein.
SECTION 4. Compensation.
(a) Consulting Fee. During the Term, the Company shall pay a fee (the
"Consulting Fee") to the Consultant in the amount of $350,000 per annum, which
fee shall be paid in equal monthly installments on the last day of each month.
(b) Expense Reimbursement. During the Term, the Consultant shall be
entitled to receive prompt reimbursement for all reasonable out-of-pocket
expenses incurred in the reasonable discretion of the Consultant in connection
with the due and proper performance of his duties hereunder in accordance with
the Company's regular expense reimbursement practices.
(c) Group Benefit Plans. During the Term, the Consultant shall (to the
extent that he is eligible to participate in such plans under the terms thereof
and in accordance with any contracts related thereto) participate in all group
benefit plans (including, but not limited to, disability, accident, medical,
life insurance and hospitalization plans) established or adopted and maintained
by the Company from time to time. The provisions of this paragraph (c) shall not
affect in any way the rights of the Company to amend or terminate any such group
benefit plans in accordance with the terms of such plans and the provisions of
applicable law.
SECTION 5. Termination.
(a) This Agreement shall terminate and be of no further force or effect
if the Effective Date does not occur prior to or on December 31, 1997.
(b) This Agreement shall terminate if the Consultant shall die. The
termination of this Agreement pursuant to this paragraph (b) shall be effective
at the time of death.
(c) This Agreement may be terminated by the Consultant if the Company
commits a material breach of the terms and conditions of this Agreement and the
Company fails to cure such breach prior to the expiration of a period of ten
days after delivery by the Consultant to the Company of a written notice setting
forth the nature and
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extent of such breach. The termination of this Agreement pursuant to this
paragraph (c) shall be effective at a time specified by the Consultant that is
no more than 60 days after the aforesaid ten-day period.
(d) This Agreement may be terminated by the Company in any
of the following circumstances:
(i) for "cause," i.e., acts of theft, embezzlement, fraud,
dishonesty or sexual harassment, which acts are either admitted by the
Consultant in writing or determined to be one or more of such acts by
the Board of Directors of the Company by a Supermajority Board Vote (as
defined in the Shareholders' Agreement), or for which the Consultant is
convicted;
(ii) if the Consultant shall materially breach this Agreement
or habitually neglect his duties hereunder, as determined by the Board
of Directors of the Company by a Supermajority Board Vote, after
written notice to the Consultant (which notice shall specify in
reasonable detail the possible grounds for termination of this
Agreement) and opportunity for the Consultant to be heard before a
meeting of the Board of Directors;
(iii) if the Consultant shall be unable to perform his
material duties hereunder owing to illness or incapacity for 90
consecutive days during any 360-day period; or
(iv) If the Company determines that it no longer requires the
services of the Consultant for any other reason.
The termination of this Agreement pursuant to this paragraph (d) shall be
effective (A) in the case of a termination of this Agreement pursuant to
subparagraph (d)(i) or (d)(ii) above, immediately upon the determination of the
Board of Directors referred to in such provision (or, if no such determination
is required to be made, immediately upon receipt by the Consultant of written
notice of termination from the Company) or (B) in the case of a termination
pursuant to subparagraph (d)(iii) or (d)(iv) above, 30 days after receipt by the
Consultant of written notice of termination from the Company.
(e) This Agreement shall terminate upon the expiration of
the Term, as the same may be extended from time to time in accordance with
Section 2.
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(f) If this Agreement is terminated by the Consultant pursuant to
paragraph (c) above or by the Company pursuant to paragraph (d)(iv) above, the
Company shall pay to the Consultant (i) the Consulting Fee for the balance of
the Term in accordance with the provisions of Section 4(a) and (ii) all expenses
incurred by the Consultant through the date of termination for which the
Consultant is entitled to reimbursement in accordance with Section 4(b) above.
(g) If this Agreement is terminated by the Company pursuant to
subparagraphs (d)(i) or (d)(ii) above, the Company shall pay to the Consultant
(i) the Consulting Fee through the date of termination and (ii) all expenses
incurred by the Consultant through the date of termination for which the
Consultant is entitled to reimbursement in accordance with Section 4(b);
provided, however, that, in the case of a termination pursuant to subparagraph
(d)(i) above, the Company may set off against such amounts for acts of theft,
embezzlement, fraud or dishonesty which result in liquidated amounts owing to
the Company by the Consultant.
(h) If this Agreement is terminated upon the death of the Consultant
pursuant to paragraph (b) above, by reason of the inability of the Consultant to
perform his duties hereunder owing to illness or incapacity pursuant to
subparagraph (d)(iii) above or upon the expiration of the Term pursuant to
paragraph (e) above, the Company shall pay to the Consultant (or, if applicable,
his personal representative) (i) the Consulting Fee through the date of
termination and (ii) all expenses incurred by the Consultant through the date of
termination for which the Consultant is entitled to reimbursement in accordance
with Section 4(b).
(i) If this Agreement is terminated by reason of the inability of the
Consultant to perform his duties hereunder owing to illness or incapacity
pursuant to subparagraph (d)(iii) above, by the Company pursuant to subparagraph
(d)(iv) above or upon the expiration of the Term pursuant to paragraph (e)
above, the Company shall pay to the Consultant a fee (in addition to payment of
the Consulting Fee for the balance of the Term, if applicable, pursuant to
paragraph (f) above) in an amount equal to $150,000 per annum for a period of
three years after the date of termination, which fee shall be paid in equal
monthly installments on the last day of each month, in consideration of the
Consultant's obligations after the date of termination under Section 6.
(j) The failure or delay by either party hereto to exercise its right
to terminate this Agreement with respect to any one or more of the matters
referred to in this Section 5 shall not be taken or held to be a waiver by such
party of its right of termination of this Agreement in respect to such matter or
any subsequent matter.
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(k) Except as expressly provided in this Section 5, upon the
expiration or termination of this Agreement, the Company shall not have any
liability or obligation of any kind or character to the Consultant under the
terms of this Agreement or in connection with the expiration or termination
hereof.
(l) Upon any termination or expiration of this Agreement
(other than any termination pursuant to paragraph (a) above), the Consultant
shall continue to be subject to the provisions of Sections 6, 7, 8, 9, 10, 11,
12, 13, 14, 15 and 16 (it being understood and agreed that such provisions shall
survive any such termination or expiration and shall continue in full force and
effect thereafter).
SECTION 6. Competitive Activity.
(a) The Consultant recognizes and acknowledges that the
relationship created by this Agreement is one of trust, and the Consultant
agrees that, during the Non-Competition Period (as hereinafter defined), the
Consultant shall not (whether acting alone or through any of his affiliates, as
a member of a partnership or a joint venture or in conjunction with any
corporation or other entity or any other person (including, but not limited to,
any present or former director, officer or consultant of the Company) or in any
other capacity whatsoever and whether by investing in, or holding securities of,
any corporation or other entity, advancing or lending any funds to, making
available any facilities, equipment or other assets to any corporation or other
person or any other person or assisting or participating in any other
transaction or arrangement whatsoever), engage in any of the following
activities:
(i) except in connection with the due and proper performance
of his duties hereunder, engage in any of the Covered Businesses in the
Territory;
(ii) except in connection with the due and proper performance
of his duties hereunder, solicit or contact (with respect to any of the
Covered Businesses) retailers, dealers, suppliers, customers or
potential customers on behalf of any corporation or other entity or any
other person engaged in any of the Covered Businesses in the Territory;
or
(iii) solicit or otherwise induce any employee of the Company
or any of its subsidiaries to terminate his service with the Company or
any such subsidiary or hire any person who was an employee of the
Company
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or any such subsidiary at any time during the 12-month period
immediately prior to the date of termination of this Agreement.
As used in this Section 6, the terms set forth below have the
following respective meanings:
"Covered Businesses" means the businesses of (i) designing,
manufacturing and selling manufactured housing to be used for residential,
recreational and other purposes and (ii) developing housing subdivisions and
selling manufactured, modular and conventional housing units or lots located
therein.
"Non-Competition Period" means the period commencing on the
Effective Date and ending on (i) if this Agreement is terminated by the
Consultant pursuant to Section 5(c), the date of termination of this Agreement
or (ii) if this Agreement is terminated pursuant to any provision of Section 5
(other than Section 5(c)), the third anniversary of the date of termination of
this Agreement.
"Territory" means the territory consisting of the States of
Arizona, California, Colorado, Idaho, Nevada, New Mexico, Texas and Utah.
(b) Notwithstanding anything to the contrary in this Section
6, the Consultant may own, for investment purposes only, up to one percent of
the stock of any publicly-held corporation that engages in the Covered
Businesses or that otherwise directly or indirectly competes with the Company if
the stock of such corporation is either listed on a national securities exchange
or traded on the Nasdaq National Market and if the Consultant is not an employee
or consultant of, and is not otherwise affiliated with, such corporation.
(c) It is hereby agreed by and between the Consultant and the
Company that if (notwithstanding the provisions of paragraph (d) below) the
non-competition covenants contained in this Agreement should be held by any
court or other constituted legal authority to be void or unenforceable in any
particular area or jurisdiction, then the parties hereto shall consider this
Agreement to be amended and modified so as to eliminate therefrom that
particular area or jurisdiction as to which the non-competition covenants are
held to be void or otherwise unenforceable, and as to all other areas and
jurisdictions covered by this Agreement, the terms and provisions hereof shall
remain in full force and effect as originally written.
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(d) It is further agreed that if the non-competition covenants
contained in this Agreement should be held by any court or other constituted
legal authority to be effective in any particular area or jurisdiction only if
said covenants are modified to limit their duration or scope, then the parties
hereto shall consider such non-competition covenants to be amended and modified
with respect to that particular area or jurisdiction so as to comply with the
order of any court or other constituted legal authority, and as to all other
areas and jurisdictions, the non-competition covenants contained herein shall
remain in full force and effect as originally written.
(e) The Consultant and the Company agree that the covenants
set forth herein are appropriate and reasonable when considered in light of the
nature and extent of the Covered Businesses as conducted by the Company and its
subsidiaries. The Consultant acknowledges that (i) the Company has a legitimate
interest in protecting the Covered Businesses as conducted by the Company and
its subsidiaries, (ii) the covenants set forth herein are not oppressive to the
Consultant and contain reasonable limitations as to time, scope, geographical
area and activity, (iii) the covenants do not harm in any manner whatsoever the
public interest, (iv) the Consultant has received and will receive substantial
consideration for agreeing to such covenants, (v) the Consultant is agreeing to
such covenants in order, among other things, to induce CREC to enter into the
Merger Agreement and the Stock Purchase Agreement and (vi) the Consultant and
his affiliates will derive substantial benefits from the consummation of the
Merger or the Subject Share Purchase, as the case may be, and the transactions
contemplated by the Shareholders' Agreement, including, but not limited to, the
payment of consideration for the shares of Common Stock held by the Consultant
and his affiliates in accordance with the Merger Agreement, the Stock Purchase
Agreement and the Shareholders' Agreement.
SECTION 7. Confidentiality.
(a) The Consultant acknowledges that the Trade Secrets and
Confidential Information are valuable, special and unique assets of the Company,
and the Consultant agrees that he (i) shall not reveal, divulge or disclose any
Trade Secrets or Confidential Information and (ii) except as required in
connection with the due and proper performance of his duties hereunder, shall
not use or exploit any Trade Secrets or Confidential Information.
(b) The Consultant shall not be subject to the restrictions
set forth in paragraph (a) above with respect to information which:
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(i) becomes generally available to the public other than as
a result of disclosure by the Consultant;
(ii) becomes available to such party on a non-confidential
basis from a source other than the Company or its directors, officers
or other representatives, provided that, to the knowledge of the
Consultant, such source lawfully obtained such information and is not
bound by a confidentiality agreement with the Company; or
(iii) is required to be disclosed by law or judicial or
administrative process (provided, however, that the Consultant has
complied with his obligations under paragraph (c) below).
(c) If the Consultant is requested (whether by oral
questions, interrogatory, request for documents, subpoena, civil investigative
demand or other legal process) to disclose any part of the Trade Secrets or
Confidential Information, the Consultant shall (i) give prompt written notice to
the Company of the existence of, and the circumstances attendant to, such
request, (ii) consult with the Company as to the advisability of taking legally
available steps, at the Company's expense, to resist or narrow any such request
or otherwise to eliminate the need for such disclosure and (iii) if disclosure
is required, cooperate with the Company, at its expense, to obtain a protective
order or other reliable assurance in form and substance reasonably satisfactory
to the Company that confidential treatment will be accorded to such portion of
the Trade Secrets and Confidential Information as is required to be disclosed.
(d) As used in this Section 7, the terms set forth below
have the following meanings:
"Confidential Information" means information that, although
not a Trade Secret, is not generally known and from which the Company derives
actual or potential economic value because such information is not generally
known by others, including, but not limited to, sales and marketing information,
customer lists, customer account records, training and operations materials and
memoranda, personnel records, pricing and financial information relating to the
business, dealers, retailers, customers, employees and affairs of the Company,
any information marked "Confidential" by the Company, and any other such
information that does not rise to the level of a Trade Secret.
"Trade Secrets" means (i) any scientific or technical
information, design, process, procedure, formula or improvement that is secret
and of value and (ii) any other
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information, including, but not limited to, technical or nontechnical data,
formula patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, and lists of actual or potential customers,
which, in each case, the Company has taken reasonable efforts to protect from
disclosure and from which the Company derives actual or potential economic value
due to its confidential nature.
SECTION 8. Remedies. The Consultant hereby agrees that a
violation of the provisions of Section 6 or 7 would cause irreparable injury to
the Company for which it would have no adequate remedy at law. Accordingly, in
the event of any such violation, the Company shall be entitled to preliminary
and other injunctive relief without necessity of complying with any requirement
as to the posting of a bond or other security (it being understood that the
Consultant hereby waives any such requirement). Any such injunctive relief shall
be in addition to any other remedies to which the Company may be entitled at law
or in equity, or otherwise.
SECTION 9. Rights of Payment. All payments to be made to the
Consultant under the terms of this Agreement shall be paid in cash from the
general funds of the Company, and no special or separate funds shall be
established and no other segregation of assets shall be made to assure payment.
The Consultant shall have no right, title or interest whatsoever in or to any
investments which the Company may make to aid it in meeting its obligations
hereunder. Nothing contained in this Agreement, and no action taken pursuant to
the provisions hereof, shall create, or be construed to create, a trust of any
kind or any fiduciary responsibility of the Company to the Consultant or any
other person. To the extent that any person acquires a right to receive payments
from the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
SECTION 10. Relationship of the Parties. The relationship of
the Consultant to the Company in performing any consulting services hereunder
shall be that of an independent contractor. This Agreement shall not be
construed to entitle the Consultant or any of his agents to any of the benefits,
privileges or other amenities of employment by the Company.
SECTION 11. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement (other than any dispute or
controversy arising from a violation or alleged violation by the Consultant of
the provisions of Section 6 or 7) shall be settled by arbitration in Dallas,
Texas. The arbitration shall be heard and determined by a single arbitrator
selected in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. In addition, any arbitration proceeding pursuant to
this
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Section 11 shall be conducted in accordance with such arbitral rules. The cost
of the arbitration proceedings (including fees and disbursements of counsel)
shall be borne in the manner determined by the arbitrator. The decision of the
arbitrator shall be final, binding and conclusive, and judgment on the award (if
any) of the arbitrator may be entered in any court of competent jurisdiction.
SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be given by delivery in person, by
registered or certified mail (return receipt requested and with postage prepaid
thereon) or by cable, telex or facsimile transmission to the parties at the
following addresses (or at such other address as either party shall have
furnished to the other in accordance with the terms of this Section 12):
if to the Company:
Cavco Industries, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with copies to (which shall not constitute notice to the Company):
Centex Real Estate Corporation
0000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000-0000
Facs: (000) 000-0000
Attention: Xxxxx X. Xxxxx
and
Xxxxx & Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx
if to the Consultant:
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Xx X. Xxxxxx
0000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
with copies to (which shall not constitute notice to the Consultant):
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 12 shall be deemed duly and validly given (a) if
delivered in person, upon delivery, (b) if delivered by registered or certified
mail (return receipt requested and with postage paid thereon), 72 hours after
being placed in a depository of the United States mails and (c) if delivered by
cable, telex or facsimile transmission, upon transmission thereof and receipt of
the appropriate answerback.
SECTION 13. Amendment; Waiver. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto (provided, however, that if any modification to or
amendment of this Agreement is proposed at any time prior to the Effective Date,
such modification or amendment shall also require the prior written approval of
CREC), and compliance with the terms and provisions hereof may be waived only by
a written instrument executed by each party entitled to the benefits thereof. No
failure or delay on the part of any party in exercising any right, power or
privilege granted hereunder shall constitute a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege granted hereunder.
SECTION 14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior written or oral agreements or understandings between the
parties relating thereto.
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SECTION 15. Severability. In the event that any provision
contained in this Agreement is found to be invalid, illegal or unenforceable,
the invalidity, illegality and unenforceability thereof shall not affect any
other provisions hereof, which shall remain in full force and effect.
SECTION 16. Binding Effect; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns. Neither party may assign this Agreement without the
prior written consent of the other party; provided, however, that the Company
may assign this Agreement to any of its affiliates or to any successor (whether
by operation of law or otherwise) to all or substantially all of its business
and assets without the consent of the Consultant.
SECTION 17. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas (without regard
to any conflicts of law principles that would require the application of the
laws of any other state or jurisdiction).
SECTION 18. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
COMPANY:
CAVCO INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
---------------------------------
Title: President/CEO
--------------------------------
CONSULTANT:
/s/ Xx X. Xxxxxx
--------------------------------
Xx X. Xxxxxx
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