CHAMPION ENTERPRISES, INC.
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of June 13, 1997, is between Champion
Enterprises, Inc. (the "Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, who is currently
employed by the Company in the position of Chief Operating Officer (the
"Executive").
WITNESSETH:
WHEREAS, the Company believes that it is in the best interests of the
Company and its Shareholders if the Executive is assured that he will receive
appropriate financial protection in the event of a Change in Control (as
defined in Section 4 below), thus ensuring that the Executive will have an
incentive to perform valuable services for the Company and will not be
distracted in the event of an actual or threatened Change in Control; and
WHEREAS, the Company believes that the assurance of appropriate
financial protection to the Executive in the event of a Change in Control will
encourage the Executive to remain in the employ of the Company through the
transition period following a Change in Control, which is the best interests
of the Company and its Shareholders; and
WHEREAS, the Executive is willing to provide dedicated services to the
Company on the condition that he receives adequate assurance that he will
receive appropriate financial protection in the event of a Change in Control;
NOW THEREFORE, in consideration of the premises and mutual covenants,
the parties hereto agree as follows:
AGREEMENT
1. Operation of Agreement. This Agreement sets forth the severance
compensation that the Company shall pay the Executive if the Executive's
employment with the Company terminates under one of the applicable provisions
set forth herein following a Change in Control.
2. Term of the Agreement. This Agreement shall be effective upon its
execution by both parties and shall terminate upon the first of the following
events to occur: (a) five years from the date hereof if a Change in Control
has not occurred within such five-year period; (b) the termination of the
Executive's employment with the Company prior to a Change in Control except
under the circumstances described in Section 6 hereunder; (c) the expiration
of two years following a Change in Control (or two years following the later
of one or more successive Changes in Control that occur within the two year
period immediately following the initial Change in Control); (d) the
termination of the Executive's employment with the Company following a Change
in Control due to the Executive's death, Disability (as defined in Section
3(a) below) or Retirement (as defined in Section 3(b) below); (e) the
termination of the Executive's employment by the Company for Cause (as defined
in Section 3(c) below) following a Change in Control; or (f) termination of
employment by the Executive for other than Good Reason (as defined in Section
5) following the date of a Change in Control. Unless the Agreement has first
terminated under clauses (a) through (f) hereof, commencing on the fifth
anniversary of the date of this Agreement, and each one-year anniversary
thereafter, this Agreement shall be extended for one additional year, unless
at least 30 days prior to each such anniversary, the Company notifies the
Executive in writing that it will not extend the term of this Agreement.
3. Defined Terms. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(a) "Disability" shall mean the Executive's total and permanent
disability which prevents the Executive from performing the duties he was
assigned immediately prior to the Change in Control for a continuous period
exceeding 9 months. The termination of Disability shall be made by a medical
board certified physician mutually acceptable to the Company and the Executive
(or the Executive's legal representative, if one has been appointed), and if
the parties cannot mutually agree to the selection of a physician, then each
party shall select such a physician and the two physicians so selected shall
select a third physician who shall make this determination.
(b) "Retirement" shall mean retirement on or after age 65.
(c) "Cause" shall mean the Executive's willful gross misconduct,
willful and material breach of his duties or an act of fraud or dishonesty by
the Executive that directly or indirectly results in material harm to the
Company.
4. Change in Control. A Change in Control shall be deemed to have
occurred upon the occurrence of any of the following events:
(a) the acquisition of ownership by a person, firm or corporation, or
a group acting in concert, of 51%, or more, of the outstanding common stock of
the Company in a single transaction or a series of related transactions within
a one-year period;
(b) a sale of all or substantially all of the assets of the Company to
any person, firm or corporation through a single transaction or multiple
transactions; or
(c) a merger, consolidation or similar transaction between the Company
and another entity if shareholders of the Company do not own a majority of the
voting stock of the corporation surviving the transaction.
5. Termination of Employment Following a Change in Control. Subject
to Sections 6 and 11(a) hereunder, the Executive shall be entitled to
severance payments under this Agreement only if there has been a Change in
Control and the Executive has incurred a Termination of Employment.
(a) For purposes of this Agreement during the two-year period
following any Change in Control that occurs during the term of this Agreement,
"Termination of Employment" shall be defined as:
(i) The Executive's involuntary termination by the Company for
any reason other than death, Disability, Retirement or Cause; or
(ii) The Executive's termination for "Good Reason," defined as
the occurrence of any of the following events without the Executive's written
consent:
(A) Any reassignment of the Executive to duties
inconsistent with his position, title, duties, responsibilities and status
with the Company immediately prior to the Change in Control, or a change in
the Executive's reporting responsibilities, including a change in the identity
or the corporate position to which the Executive reports, or a change in title
(except for a promotion) in effect immediately prior to the Change in Control;
(B) Any reduction in the Executive's base salary in effect
immediately prior to the Change in Control, or failure by the Company to
continue any bonus, stock or incentive plans in effect immediately prior to
the Change in Control (without the implementation of a comparable successor
plan which provides the same benefits), or any removal of the Executive from
participation in such aforementioned plans;
(C) The discontinuance or reduction in benefits to the
Executive of any qualified or non-qualified retirement or welfare plan
maintained by the Company immediately prior to the Change in Control, or the
discontinuance of any fringe benefits or other perquisites which the Executive
received immediately prior to the Change in Control:
(D) Required business travelling by the Executive on a
significantly more frequent basis and for significantly longer periods of time
than the Executive was required to travel immediately prior to the Change in
Control unless the increase in required business travelling is on account of
the Executive's promotion;
(E) Any reassignment of the Executive's duties that would
require the Executive to relocate his primary residence; or
(F) The Company's breach of any provision in this
Agreement.
(b) If the Executive believes that he is entitled to a
Termination of Employment for Good Reason as defined in subparagraph (a)(ii)
above, he may apply in writing to the Company for confirmation of such
entitlement prior to the Executive's actual separation from employment, by
following the claims procedure set forth in Section 15 hereof. The submission
of such a request by the Executive shall not constitute "Cause" for the
Company to terminate the Executive as defined under Section 3(c) hereof. If
the Executive's request for a Good Reason Termination of Employment is denied
under both the request and appeal procedures set forth in paragraphs (b) and
(c) of Section 15 hereof, then the parties shall use their best efforts to
resolve the claim within 90 days after the claim is submitted to arbitration
pursuant to Section 15(d).
6. Termination Prior to Change in Control. If within a period of 180
days prior to the first public announcement of a proposed Change in Control
the Company terminates the employment of the Executive for reasons other than
the Executive's death, Disability, Retirement or Cause, and a Change in
Control event subsequently occurs, unless the Company establishes that the
Executive's termination was not in connection with the Change in Control, the
Executive's termination shall be deemed to have been in connection with the
Change in Control, and the Executive shall be entitled to severance payments
under this Agreement, to be paid in cash within 10 days following the Change
in Control.
7. Severance Payment.
(a) Upon satisfaction of the requirements set forth in Sections 5, 6
and 11(a) hereof and with respect to any one or more Changes in Control that
may occur during the term of this Agreement, the Executive shall be entitled
to a cash severance benefit equal to not less than 18 months of the terminated
Executive's then annual base salary, plus the unpaid prorated portion of his
annual bonus (but excluding commissions and other nonrecurring cash
compensation payments), to be determined at the discretion of the Board of
Directors.
(b) In addition to the cash payment described in paragraph (a) above,
upon satisfaction of the requirements set forth in Sections 5, 6 and 11(a)
hereof, the Executive shall be entitled to continued participation in the
Company's hospitalization, medical, life insurance and disability insurance
programs until the earlier of the first anniversary of the Executive's
termination of employment or the commencement of comparable coverage from
another corporation or partnership.
(c) The cash value of the severance benefits provided in paragraphs
(a) and (b) above, when aggregated with any other "golden parachute" amounts
(defined under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code") as compensation that becomes payable or accelerated due to a
Change in Control) payable under any other plans, agreements or policies of
the Company, shall be reduced to the highest amount permissible under Sections
280G and 4999 of the Code before the Executive becomes subject to the excess
parachute payment excise tax under Section 4999 of the Code and the Company
loses all or part of its compensation deduction for such payments.
8. Time of Payment. Subject to Sections 6 and 11(a) hereof, the
Executive's severance benefit under Section 7(a) shall be paid in a lump sum
cash payment within 10 days following the Executive's Termination of
Employment, as defined in Section 5. Any payment made later than 10 days
following the Executive's Termination of Employment (or applicable due dates
under Sections 6 and 11(a) hereof) for whatever reason, shall include interest
at the prime rate plus two percent, which shall begin accruing on the 10th day
following the Executive's Termination of Employment (or applicable due dates
under Sections 6 and 11(a) hereof). For purposes of this Section 8, "prime
rate" shall be determined by reference to the prime rate established by
Comerica Bank (or its successor), in effect from time to time commencing on
the 10th day following the Executive's Termination of Employment (or
applicable due dates under Sections 6 and 11(a) hereof).
9. No Mitigation or Duty to Seek Reemployment. The Executive shall
be under no duty or obligation to seek or accept other employment after
Termination of Employment and, subject to Section 7(b) hereof, shall not be
required to mitigate the amount of any payments provided for by this Agreement
by seeking employment or otherwise.
10. Tax Withholdings. The Company may withhold from any cash amounts
payable to the Executive under this Agreement to satisfy all applicable
Federal, State, local or other income and employment withholding taxes. In
the event the Company fails to withhold such sums for any reason, or
withholding is required for the non-cash payments provided in Section 7(b)
hereof, the Company may require the Executive to promptly remit to the Company
sufficient cash to satisfy all applicable income and employment withholding
taxes.
11. Binding Effect.
(a) This Agreement shall be binding upon the successors and assigns of
the Company. The Company shall take whatever actions are necessary to ensure
that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes the
obligations under this Agreement and will cause such successor to evidence the
assumption of such obligations in an agreement satisfactory to the Executive.
Notwithstanding any other provisions in this Agreement, if the Company fails
to obtain an agreement evidencing the assumption of the Company's obligations
by any such successor, the Executive shall be entitled to immediate payment of
the severance compensation provided under Section 7, irrespective of whether
his employment has then terminated. For purposes of implementing the
foregoing, the date on which any succession becomes effective shall be deemed
to constitute the date of the Executive's Termination of Employment.
(b) This Agreement shall be binding upon the Executive and shall inure
to the benefit of and be enforceable by his legal representative and heirs.
However, the rights of the Executive under this Agreement shall not be
assigned, transferred, pledged, hypothecated or otherwise encumbered, except
by operation of law.
12. Amendment of Agreement. This Agreement may not be modified or
amended except by instrument in writing signed by the parties hereto.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall continue in full force and effect.
14. Limitations on Rights.
(a) This Agreement shall not be deemed to create a contract of
employment between the Company and the Executive and shall create no right in
the Executive to continue in the Company's employment for any specific period
of time, or to create any other rights in the Executive or obligations on the
part of the Company, except as set forth herein. This Agreement shall not
restrict the right of the Company to terminate the Executive, or restrict the
right of the Executive to terminate his employment.
(b) This Agreement shall not be construed to exclude the Executive
from participation in any other compensation or benefit programs in which he
is specifically eligible to participate either prior to or following the
execution of this Agreement, or any such programs that generally are available
to other executive personnel of the Company, nor shall it affect the kind and
amount of other compensation to which the Executive is entitled.
(c) The rights of the Executive under this Agreement shall be solely
those of an unsecured general creditor of the Company.
15. Claims Procedure.
(a) The administrator for purposes of this Agreement shall be the
Company ("Administrator"), whose address is Champion Enterprises, Inc., ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and whose telephone number
is (▇▇▇) ▇▇▇-▇▇▇▇. The "Named Fiduciary" as defined in Section 402(a)(2) of
ERISA, also shall be the Company. The Company shall have the right to
designate one or more Company employees as the Administrator and the Named
Fiduciary at any time, and to change the address and telephone number of the
same. The Company shall give the Executive written notice of any change in
the Administrator and Named Fiduciary, or in the address or telephone number
of the same.
(b) The Administrator shall make all determinations as to the right of
any person to receive benefits under the Agreement. Any denial by the
Administrator of a claim for benefits by the Executive ("the claimant") shall
be stated in writing by the Administrator and delivered or mailed to the
claimant within 10 days after receipt of the claim, unless special
circumstances require an extension of time for processing the claim. If such
an extension is required, written notice of the extension shall be furnished
to the claimant prior to the termination of the initial 10-day period. In no
event shall such extension exceed a period of 10 days from the end of the
initial period. Any notice of denial shall set forth the specific reasons for
the denial, specific reference to pertinent provisions of this Agreement upon
which the denial is based, a description of any additional material or
information necessary for the claimant to perfect his claim, with an
explanation of why such material or information is necessary, and any
explanation of claim review procedures, written to the best of the
Administrator's ability in a manner that may be understood without legal or
actuarial counsel.
(c) A claimant whose claim for benefits has been wholly or partially
denied by the Administrator may request, within 10 days following the date of
such denial, in a writing addressed to the Administrator, a review of such
denial. The claimant shall be entitled to submit such issues or comments in
writing or otherwise, as he shall consider relevant to a determination of his
claim, and he may include a request for a hearing in person before the
Administrator. Prior to submitting his request, the claimant shall be
entitled to review such documents as the Administrator shall agree are
pertinent to his claim. The claimant may, at all stages of review, be
represented by counsel, legal or otherwise, of his choice. All requests for
review shall be promptly resolved. The Administrator's decision with respect
to any such review shall be set forth in writing and shall be mailed to the
claimant not later than 10 days following receipt by the Administrator of the
claimant's request unless special circumstances, such as the need to hold a
hearing, require an extension of time for processing, in which case the
Administrator's decision shall be so mailed not later than 20 days after
receipt of such request.
(d) A claimant who has followed the procedure in paragraphs (b) and
(c) of this section, but who has not obtained full relief on his claim for
benefits, may, within 60 days following his receipt of the Administrator's
written decision on review, apply in writing to the Administrator for binding
arbitration of his claim before an arbitrator mutually acceptable to both
parties, the arbitration to be held in Detroit, Michigan, in accordance with
the commercial arbitration rules of the American Arbitration Association, as
then in effect. If the parties are unable to mutually agree upon an
arbitrator, then the arbitration proceedings shall be held before three
arbitrators, one of which shall be designated by the Company, one of which
shall be designated by the claimant and the third of which shall be designated
by the first two arbitrators in accordance with the commercial arbitration
rules referenced above. The arbitrator(s) sole authority shall be to
interpret and apply the provisions of this Agreement; the arbitrator(s) shall
not change, add to, or subtract from, any of its provisions. The
arbitrator(s) shall have the power to compel attendance of witnesses at the
hearing. Any court having jurisdiction may enter a judgment based upon such
arbitration. All decisions of the arbitrator(s) shall be final and binding on
the claimant and the Company without appeal to any court. Upon execution of
this Agreement, the Executive shall be deemed to have waived his right to
commence litigation proceedings outside of arbitration without the express
written consent of the Company.
16. Legal Fees and Expenses. In the event any arbitration or
litigation is brought to enforce any provision of this Agreement and the
Executive prevails, then he shall be entitled to recover from the Company his
reasonable costs and expenses of such arbitration or litigation, including
reasonable fees and disbursements of counsel (both at trial and in appellate
proceedings). If the Company prevails, then each party shall be responsible
for its/his respective costs, expenses and attorneys fees, and the costs of
arbitration shall be equally divided. In the event that it is determined that
the Executive is entitled to compensation, legal fees and expenses hereunder,
he also shall be entitled to interest thereon, payable to him at the prime
rate of interest plus two percent. For purposes of this Section 16, "prime
rate" shall be determined by the reference to the prime rate established by
Comerica Bank as in effect from time to time during the period from the date
such amounts should have been paid to the date of actual payment. For
purposes of the determining the date when legal fees and expenses are payable,
such amounts are not due until 30 days after notification to the Company of
such amounts.
17. Nonalienation of Benefits. Except in so far as this provision may
be contrary to applicable law, no sale, transfer, alienation, assignment,
pledge, collateralization or attachment of any benefits under this Agreement
shall be valid or recognized by the Company.
18. ERISA. This Agreement is an unfunded compensation arrangement for
a member of a select group of the Company's management and any exemptions
under ERISA, as applicable to such an arrangement shall be applicable to this
Agreement.
19. Reporting and Disclosure. The Company, from time to time, shall
provide government agencies with such reports concerning this Agreement as may
be required by law, and the Company shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Company may deem appropriate.
20. Notices. Any notice required or permitted by this Agreement shall
be in writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at the Company's then principal office,
or to the Executive at the Executive's last address on file with the Company,
as the case may be, or to such other address or addresses as any party hereto
may from time to time specify in writing for the purpose of this Agreement in
a notice given to the other parties in compliance with this Section 20.
Notices shall be deemed given when received.
21. Miscellaneous/Severability. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. To the
extent that any provision or benefit under this Agreement is not deemed to be
in accordance with any applicable law, ordinance, rule or regulation, the
noncomplying provision shall be construed, or benefit limited, to the extent
necessary to comply with all applicable laws, ordinances and regulations and
any such provision or benefit shall not affect the validity of any other
provision or benefit provided by this Agreement. The headings in this
Agreement are inserted for convenience of reference only and shall not be a
part of or control or affect the meaning of any provision hereof.
22. Governing Law. To the extent not preempted by Federal law, this
Agreement shall be governed and construed in accordance with the laws of the
State of Michigan.
23. Entire Agreement. This document represents the entire agreement
and understanding of the parties with respect to the subject matter of the
Agreement and it may not be altered or amended except by an Agreement in
writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
CHAMPION ENTERPRISES, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Chairman of the Board of
Directors, President and
Chief Financial Officer
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇