August 26, 1998
Xx. Xxxxxxx X. Xxxxxx
Cavalier Homes, Inc.
Highway 00 Xxxxx xxx Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Re: Retention and Severance Agreement
Dear Xx. Xxxxxx:
Cavalier Homes, Inc., a Delaware corporation (the "Company"), considers
the establishment and maintenance of a sound and vital senior management team to
be essential to protecting and enhancing the best interests of the Company and
its stockholders. In this connection, the Company recognizes that the
possibility of a change in control may exist in the future, and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders. Accordingly, the Board of
Directors of the Company (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's senior management, including yourself, to
their assigned duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a change in control of
the Company. The Board has also determined that appropriate steps should be
taken to encourage senior management's participation, in the event of a proposed
change of control, in the successful completion of the change of control
transaction while maintaining their focus on business performance and strategy
execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 2 of this letter agreement) under the
circumstances described below.
1. Company's Right to Terminate. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits hereinafter specified, if
applicable, in accordance with the terms hereof.
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 2
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change of control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control of the Company" means with
respect to the Company, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules
13d-1 through 13d-6 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (other than any subsidiary or affiliate as of the date hereof
of the Company or any employee benefit plan of the Company) (i) has acquired or
agreed to acquire beneficial ownership of 20% or more of the voting and/or
economic interest in the capital stock of the Company, or (ii) has obtained or
agreed to obtain the power (whether or not exercised) to elect a majority of the
board of directors of the Company; or
(b) A majority of the board of directors of the Company shall
consist at such time of individuals other than (x) members of the board of
directors on the date hereof and (y) other members of such board of directors
nominated, recommended, elected, or approved to succeed or become a director by
a majority of such members referred to in clause (x) or a nominating committee
elected or appointed by such members referred to in clause (x) or by members so
nominated, recommended, elected or approved (such directors described in clauses
(x) and (y) above being hereinafter sometimes referred to as "Continuing
Directors"); or
(c) The approval by the stockholders of the Company of (i) a
merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation (other than such a transaction that is solely for the purpose of
changing the domicile of the Company) or shares of common stock of the Company
are to be converted into or exchanged for cash, securities other than common
stock of the Company, or other property, (ii) a sale or disposition of all or
substantially all of the assets of the Company, or (iii) the dissolution of the
Company; or
(d) Any transaction or event relating to the Company occurs
which is (or which would be if the Company had a class of equity securities
registered under Section 12 of the Exchange Act) required to be described
pursuant to the requirements of Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act.
3. Termination Following Change in Control. If any of the events
described in Section 2 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 4
hereof upon the subsequent voluntary or involuntary termination of your
employment, whether by you or by the Company, if such termination occurs within
the period beginning on the date that the change of control is completed (the
"Change of Control Date") and ending on the second anniversary of the Change of
Control Date (the "Trigger
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August 26, 1998
Page 3
Period") unless such termination is (i) because of your death or Retirement,
(ii) by the Company for Cause or (iii) by the Company or you for Disability
(such termination within such period, as limited by clauses (i) through (iii),
being sometimes referred to hereinafter as a "Payment Trigger"). In the event
your employment is terminated within the Trigger Period, whether by you or the
Company, following the occurrence of any of the events set forth at paragraph
(c) below, such termination of your employment shall be deemed to be an
involuntary termination of your employment by the Company and shall entitle you
to the benefits provided in Section 4 hereof.
(a) Disability; Retirement.
(i) "Disability" shall mean a disability which
entitles you to a disability benefit under a disability program
sponsored or maintained by the Company; provided, that if no such
program is applicable to you, then "Disability" shall mean that, based
on medical evidence reasonably satisfactory to the Compensation
Committee of the Board, you are totally and permanently unable to
engage in any occupation or gainful employment for which you are
reasonably suited by background, training, education or experience.
(ii) Termination by the Company or you of your
employment based on "Retirement" shall mean termination in accordance
with the Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(b) Cause. Termination by the Company of your employment for
"Cause" shall mean termination based upon on any of the following:
(i) dishonesty or fraud by you in connection with
your employment;
(ii) appropriation (or attempted appropriation) by
you of a material business opportunity of the Company, including
attempting to secure or securing any personal profit in connection with
any transaction entered into on behalf of the Company;
(iii) misappropriation by you (or attempted
misappropriation) of any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its
procedural equivalent) or entering of a guilty plea or plea of no
contest with respect to, a felony or any other criminal offense
involving moral turpitude (other than traffic offenses); or
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 4
(v) willful misconduct by you in the performance of
your duties with the Company, as determined by the good faith judgment
of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company. Notwithstanding the foregoing, you shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to you a copy of a Notice of Termination (as defined below) from the
Chief Executive Officer of the Company or the Compensation Committee of the
Board, after reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Compensation Committee of the Board (or, if
there be no such committee or such committee delivers the Notice of Termination,
the Board of Directors), finding that in the good faith opinion of such
committee (or the Board) you were guilty of conduct set forth above in clauses
(i), (ii), (iii), (iv) or (v) of the first sentence of this paragraph and
specifying the particulars thereof in detail.
(c) Constructive Termination. Your employment will be deemed
to have been involuntarily terminated by the Company upon the termination of
your employment, whether by you or by the Company, following the occurrence of
any of the following without your prior written consent (any such event being
sometimes referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company,
any reduction in your title, duties, responsibilities or authority with
the Company immediately prior to the change in control, except in
connection with the termination of your employment for Cause,
Disability, Retirement or as a result of your death or voluntarily by
you; or
(ii) subsequent to a change in control of the
Company, a reduction by the Company in your base salary as in effect
immediately prior to the change in control; or
(iii) subsequent to a change in control of the
Company, a failure by the Company to continue any bonus plans in which
you are presently entitled to participate as the same may be modified
from time to time prior to (but not in anticipation of) such change in
control, or as the same may be modified following such change in
control as may be required by or desirable for the Company due to
changes to (x) the Internal Revenue Code of 1986, as amended (the
"Code"), (y) applicable accounting rules or principles or (z)
applicable laws or regulations, including, without limitation, the
Employee Retirement Income and Security Act of 1974, as amended, (the
"Bonus Plans") or a failure by the Company to continue you
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 5
as a participant in the Bonus Plans on at least the same basis as you
are participating in accordance with the Bonus Plans immediately prior
to the change in control; or
(iv) subsequent to a change in control of the
Company, the failure by the Company to continue in effect any benefit
or compensation plan, life insurance plan, health-and-accident plan or
disability plan in which you are participating immediately prior to the
change in control of the Company (or plans providing you with
substantially similar benefits), the taking of any action by the
Company which would materially adversely affect your participation in
or materially reduce your benefits under any of such plans or deprive
you of any material fringe benefit enjoyed by you immediately prior to
the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect
immediately prior to the change in control; or
(v) subsequent to a change in control of the Company,
the failure by the Company to obtain the assumption of or the agreement
to perform this Agreement by any successor as contemplated in Section 7
hereof; or
(vi) subsequent to a change in control of the
Company, a change in the location of your employment greater than fifty
(50) miles from your office location immediately prior to the change in
control; or
(vii) subsequent to a change in control of the
Company, any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (d) below (and, if applicable, paragraph (b)
above); or
(viii) subsequent to a change in control of the
Company, (A) at the direction or with the concurrence of members of the
Board or management of the Company who became such members following
the change in control, a material business strategic plan, direction,
policy or program of the Company is altered in a material manner
(hereinafter a "Policy Change"), and (B) if the individual who was
serving as President and Chief Executive Officer of the Company at the
time of the change in control is continuing to serve in such capacity,
said officer disagrees with such Policy Change in a written notice
delivered to the Board within thirty (30) days of his becoming aware of
such Policy Change, and (C) you disagree in good faith with such Policy
Change and believe in good faith that such Policy Change will have a
material adverse effect on the Company and so state in a written notice
delivered to the Board within thirty (30) days of becoming aware (or
thirty (30) days after you, exercising reasonable diligence, should
have become aware) of such Policy Change, and (D) the Policy Change is
not reversed within thirty (30) days of the date on which
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 6
your written notice is received by the Board, and (E) you terminate
your employment with the Company as a result of such disagreement and
belief.
(d) Notice of Termination. Any purported termination by the
Company pursuant to your Disability or Retirement, as defined in paragraph (a)
above, or for Cause, as defined in paragraph (b) above, or by you pursuant to
your Disability or Retirement, as defined in paragraph (a) above or by you or
the Company based on an event of Constructive Termination, as defined in
paragraph (c) above, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean (A)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if you employment is terminated due to your death, the date of your
death, (C) if your employment is terminated pursuant to paragraph (b) above, the
date specified in the Notice of Termination, (D) if your employment is
terminated for Retirement, the date specified in the Notice of Termination, and
(E) if your employment is terminated for any other reason, the date on which a
Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
4. Certain Benefits Upon Termination. (a) If, after a change in control
of the Company shall have occurred, as defined in Section 2 above, your
employment with the Company shall be terminated (including a Constructive
Termination) within the Trigger Period by the Company or you other than for
Cause, Disability, Retirement or death, and other than by your voluntarily
terminating your employment with the Company, then you shall be entitled to the
benefits provided below:
(i) the Company shall pay to you within thirty (30)
days following the Date of Termination in a lump sum cash payment your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given plus (A) credit for any vacation earned but not taken,
(B) the amount, if any, of any bonus or long-term incentive
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 7
compensation for a past fiscal year which has been earned but not yet been paid
to you, (C) the amount, if any, of any bonus for the current year to be paid as
a percentage of Company profit based on the Company's results through the most
recent fiscal quarter as of the Date of Termination without pro-ration, (D) a
pro-rated payment, based on the Company's results through the most recent fiscal
quarter as of the Date of Termination under the Company's performance based
long-term incentive program for the long-term performance period that next ends
following the Date of Termination, and (E) a pro-rated payment, based on the
Company's results as of the Date of Termination, of any other bonus due under
any other Bonus Plans;
(ii) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, the Company shall pay as
severance pay to you within thirty (30) days following the Date of Termination
a lump sum cash amount equal to 2.00 times the sum of (A) the amount of your
annual base salary at the highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination, and (B) the average annual bonus
received by you with respect to the three (3) years immediately preceding the
Date of Termination, or with respect to the period beginning January 1, 1997
and ending on December 31 of the calendar year immediately preceding the Date
of Termination, if such period is less than three years at the Date of
Termination, and (C) (x) the most recent amount earned by you (whether in stock
or cash or a combination thereof) under the Company's performance based
long-term incentive program established under the Company's Executive Incentive
Compensation Plan or, (y) if the Date of Termination giving rise to your right
to benefits hereunder occurs before the end of the initial Long-Term Performance
Period established under the long-term incentive program so that benefits have
not yet accrued under the long-term incentive program, the target amount
established for you under the program for the Long-Term Performance Period next
ending; and
(iii) the Company shall maintain in full force and
effect, for your continued benefit until the earlier of (A) three (3) years
after the Date of Termination or (B) you obtain substantially the same coverage
from a new employer, all life insurance, medical, health and accident, and
disability plans, programs or arrangements in which you were entitled to
participate immediately prior to the Date of Termination, provided that your
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that your participation in any such plan
or program is barred, the Company shall use reasonable efforts to arrange to
provide you with benefits substantially similar to those which you are entitled
to receive under such plans and programs.
(b) If, after a change in control of the Company shall have
occurred, as defined in Section 2 above, you shall voluntarily terminate your
employment with the Company within the Trigger Period other than for Disability,
Retirement or death or in connection with an event of Constructive Termination,
then you shall be entitled to the benefits set forth below:
(i) the Company shall pay to you within thirty (30)
days following the Date of Termination in a lump sum cash payment your full base
salary through the Date of
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 8
Termination at the rate in effect at the time Notice of Termination is given
plus (A) credit for any vacation earned but not taken, (B) the amount, if any,
of any bonus or long-term incentive compensation for a past fiscal year which
has been earned but not yet been paid to you, (C) the amount, if any, of any
bonus for the current year to be paid as a percentage of Company profit based on
the Company's results through the most recent fiscal quarter as of the Date of
Termination without pro-ration, (D) a pro-rated payment, based on the Company's
results through the most recent fiscal quarter as of the Date of Termination
under the Company's performance based long-term incentive program for the
long-term performance period that next ends following the Date of Termination,
and (E) a pro-rated payment, based on the Company's results as of the Date of
Termination, of any other bonus due under any other Bonus Plans;
(ii) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, the Company shall pay as
severance pay to you within thirty (30) days following the Date of Termination
a lump sum cash amount equal to the sum of (A) the amount of your annual base
salary at the highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination, and (B) the average annual
bonus received by you with respect to the three (3) years immediately preceding
the Date of Termination, or with respect to the period beginning January 1, 1997
and ending on December 31 of the calendar year immediately preceding the Date of
Termination, if such period is less than three years at the Date of Termination,
and (C) (x) the most recent amount earned by you (whether in stock or cash or a
combination thereof) under the Company's performance based long-term incentive
program established under the Company's Executive Incentive Compensation Plan
or, (y) if the Date of Termination giving rise to your right to benefits
hereunder occurs before the end of the initial Long-Term Performance Period
established under the long-term incentive program so that benefits have not yet
accrued under the long-term incentive program, the target amount established
for you under the program for the Long-Term Performance Period next ending; and
(iii) the Company shall maintain in full force and
effect, for your continued benefit until the earlier of (A) the first
anniversary of the Date of Termination or (B) you obtain substantially the
same coverage from a new employer, all life insurance, medical, health and
accident, and disability plans, programs or arrangements in which you were
entitled to participate immediately prior to the Date of Termination, provided
that your continued participation is possible under the general terms and
provisions of such plans and programs. In the event that your participation in
any such plan or program is barred, the Company shall use reasonable efforts to
arrange to provide you with benefits substantially similar to those which you
are entitled to receive under such plans and programs.
(c) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise. In the event that you voluntarily
terminate your employment with the Company and are paid the benefits
contemplated
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August 26, 1998
Page 9
by paragraph (b) of this Section 4 and, at any time within five (5) years
following the receipt of such payment, you are reemployed by the Company or any
subsidiary thereof in a position where your duties or responsibilities with the
Company or such subsidiary are commensurate with those of your position with the
Company immediately prior to the original termination of your employment which
gave rise to the Company's payment of benefits under this Section 4, you shall,
on the date of such reemployment, be obligated to repay to the Company, in cash,
an amount equal to the benefit paid to you under paragraph (b) of this Section
4, plus any amounts paid to you under Section 5 hereof in connection with the
payments to you pursuant to paragraph (b) of this Section 4 (and not previously
repaid by you pursuant to the terms of Section 5).
5. Tax Gross-Up.
(a) If you become entitled to any payments or benefits whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a change in
control or any person affiliated with the Company or such persons (in the
aggregate, "Payments" or singularly, "Payment") which are subject to taxes under
Section 4999 (or any successor provision thereto) of the Code (the "Excise
Tax"), the Company shall pay to you an additional amount ("Gross-Up Payment")
such that the net amount retained by you, after deduction of (A) any Excise Tax
on Payments, (B) any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section, and (C) any interest and penalties imposed
because the Excise Tax is not paid during the period beginning with the earlier
of the date (i) the IRS issues a notice stating that an Excise Tax is due with
respect to a Payment, (ii) you deliver to the Company an opinion of tax counsel
selected by you and reasonably acceptable to the Company that all or a portion
of the Payment is subject to the Excise Tax and setting forth the estimated
amount of the Excise Tax on the Payment, and (iii) the Company delivers to you
an opinion of tax counsel selected by the Company and reasonably acceptable to
you that all or a portion of the payment is subject to the Excise Tax and
setting forth the estimated amount of the Excise Tax on the Payment (the "Excise
Tax Imposition Date") and ending ten (10) days after the Excise Tax Imposition
Date, shall be equal to the full amount of the Payments. For purposes of
determining the amount of the Gross-Up Payment, you shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the state and
locality of your residence on the date 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) The Gross-Up Payment for any Payment made shall be paid to
you within ten (10) days after the Excise Tax Imposition Date, unless the
Company undertakes to indemnify you as provided in Section 5 (c).
(c) In lieu of paying the Gross-Up Payment for any Payment,
the Company may elect to undertake, at its sole expense, the defense and
settlement of any assessment by the IRS of
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August 26, 1998
Page 10
the Excise Tax on any Payment. In the alternative, the Company may elect to pay
the Gross-Up Payment and seek to recover the Excise Tax by pursuing a claim for
a refund. If the Company so elects to undertake the defense or settlement of any
assessment by the IRS of the Excise Tax on any Payment or the recovery of the
Excise Tax through a claim for refund, the Company shall protect, defend,
indemnify and hold you forever harmless from and against the Excise Tax on such
Payment and payments pursuant to this Section 5(c) and any federal, state and
local income tax (determined pursuant to the last sentence of Section 5(a)) upon
payments pursuant to this Section 5(c) and any and all liabilities, demands,
claims, actions, causes of action, assessments, losses, costs, damages or
expenses, including attorneys' and accountants' fees in connection with any
thereof, and any interest and penalties sustained by you as a result of or
arising out of or by virtue of the Company's undertaking. You shall cooperate
with the Company as reasonably requested by the Company in the conduct of such
defense, settlement or refund claim.
(d) If the Excise Tax is determined to be less than the amount
taken into account in determining the Gross-Up Payment paid pursuant to Section
5(a), you shall repay to the Company within ten (10) days after the time that
the amount of such reduction in Excise Tax is finally determined the portion of
the Gross-Up Payment attributable to such reduction plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code for
debt instruments with a maturity after issuance equal to the period beginning on
the date the Gross-Up Payment was made and ending on the date of repayment
required by this sentence, or in the case of a refund, plus interest paid on
such refund. If the Excise Tax is determined to exceed the amount taken into
account in determining the Gross-Up Payment paid pursuant to Section 5(a) (the
"Excise Tax Deficit"), the Company within ten (10) days after the time that the
amount of the Excise Tax Deficit is finally determined shall make an additional
payment to you in an amount equal to (i) the Excise Tax Deficit, plus (ii) an
amount equal to any interest and penalties payable to the IRS with respect to
the Excise Tax Deficit, plus (iii) any federal, state and local income tax and
Excise Tax (determined pursuant to the last sentence of Section 5(a)) upon
payments made pursuant to this sentence.
6. Term of Agreement. This Agreement shall become effective on the date
hereof and, subject to the first sentence of the second paragraph of this
Section 6, shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 3(e) or
other termination of your employment with the Company shall have
occurred prior to a change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term
of this Agreement, the performance by the Company of all its
obligations, and the satisfaction by the Company of all its obligations
and liabilities, under this Agreement;
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August 26, 1998
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(iii) the date that is the fifth (5th) anniversary of the date
of this Agreement; provided, however, that if a change in control of
the Company occurs prior to such fifth (5th) anniversary, the Company's
obligation to you under this Agreement due to such change in control
shall not lapse upon the fifth (5th) anniversary, but shall continue
through the final day of the Trigger Period that begins with such
change in control if such final day of the Trigger Period is later than
such fifth (5th) anniversary.
Any change in control of the Company during the term of this
Agreement that for any reason ceases to constitute a change in control or is not
followed by a Payment Trigger shall not effect a termination or lapse of this
Agreement, and, in such event, this Agreement shall continue to apply to the
event of any subsequent change in control of the Company occurring prior to the
end of the term of this Agreement. Any transfer of your employment from the
Company to a subsidiary, from a subsidiary to the Company, or from one
subsidiary to another subsidiary shall not constitute a termination of your
employment for purposes of this Agreement.
7. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and, if such failure occurs
subsequent to a change in control of the Company, shall constitute an event of
Constructive Termination and entitle you to compensation from the Company in
accordance with Section 4 hereof, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement provided for in
this Section 7 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there be no such designee, to your estate.
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August 26, 1998
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8. Notice. For the purposes 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 personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
President of the Company with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. 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; provided,
however, that this Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Alabama without regard
to principles regarding conflicts of laws.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Enforcement; Expenses. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part thereof are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts hereof
and the applicability thereof shall not be affected thereby. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) (herein,
collectively, "Costs") incurred by you in connection with any dispute arising
under or relating to this Agreement or any action(s) or proceeding(s) to enforce
your rights under this Agreement, should you prevail in such action or
proceeding, and, in addition to paying your Costs, the Company shall pay to you
(i) interest on such Costs and on the aggregate amount of the benefits due to
you under Section 4 above (said benefits being referred to in this Section 11 as
the "Termination Benefits") from your Date of Termination to the date such Costs
and Termination Benefits are paid to you at an annual rate equal to the prime
lending rate charged by First Commercial Bank, or the successor thereto, in
effect on the Date of Termination, and (ii) liquidated and agreed compensatory
damages in an amount equal to twenty-five percent (25%) of the Termination
Benefits.
Mr. Xxxxxxx Xxxxxx
August 26, 1998
Page 13
12. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against either party only in the courts of the state
and county in which you are employed by the Company and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
CAVALIER HOMES, INC.
/s/ XXXXX X. XXXXXXXX
---------------------------
Its President and Chief
Executive Officer
AGREED TO THIS 21ST DAY OF AUGUST, 1998.
/s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx
