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EXHIBIT 10.3
NON-COMPETITION AND
NON-SOLICITATION AGREEMENT
(▇▇▇▇▇ ▇▇▇▇▇▇▇)
This NON-COMPETITION AND NON-SOLICITATION AGREEMENT (this "Agreement")
is made as of August 14, 1997, by and among Cavalier Homes, Inc., a Delaware
corporation ("CH"), Belmont Homes, Inc., a Mississippi corporation ("BH"), and
▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual residing in the State of Alabama ("Executive").
W I T N E S S E T H :
WHEREAS, Executive is currently employed by BH as Senior Vice President
of Manufacturing and General Manager; and
WHEREAS, pursuant to that certain Agreement and Plan of Merger by and
among BH, Crimson Acquisition Corp., a Mississippi corporation and wholly owned
subsidiary of CH ("Sub"), and CH, dated as of the date hereof (the "Merger
Agreement"), Sub will merge (the "Merger") with and into BH in a merger in which
BH shall be the surviving corporation; and
WHEREAS, Executive is a shareholder in BH, and is the beneficiary of an
estate which is a shareholder of BH, and as such will receive substantial
financial benefit from the Merger, and CH would not have entered into the Merger
Agreement, nor would CH have paid the substantial consideration described
therein, without Executive's execution of this Agreement; and
WHEREAS, in further consideration for the execution of this Agreement,
BH has agreed to retain Executive as an employee at will, conditioned upon the
execution of this Agreement, and Executive specifically acknowledges the
valuable nature of this consideration, and freely and voluntarily enters into
this Agreement;
NOW, THEREFORE, based upon the foregoing and on other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Acknowledgments by Executive. Executive acknowledges that (a) the
products and services of BH and CH (collectively with their subsidiaries and
affiliates, the "Companies") are marketed throughout the southeastern region of
the United States; (b) the Companies compete with other businesses that are or
could be located in any part of the United States; (c) CH, Sub and BH would not
have executed the Merger Agreement without the assurance that the covenants set
forth in Section 2 of this Agreement would be made; (d) the provisions of
Section 2 of this Agreement are reasonable and necessary to protect and preserve
the Companies'
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business; and (e) the Companies would be irreparably damaged if Executive were
to breach the covenants set forth in Section 2 of this Agreement.
2. Non-competition. As an inducement for CH and Sub to enter into the
Merger Agreement, as additional consideration for the consideration to be paid
to Executive pursuant to his employment at will with BH, and in consideration of
the matters set forth in the above recitals, Executive agrees that:
(a) Commencing as of the date hereof and for a period of two
(2) years after the Effective Time (as defined in the Merger Agreement), whether
or not Executive remains in the employ of any of the Companies, or until the
occurrence of any of the events set forth in Section 11, whichever shall first
occur (the "Non-Compete Period"):
(i) Executive will not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend
Executive's name or any similar name to, lend Executive's credit to, or
render services or advice to, any person or entity engaged in the
business of manufacturing, producing, selling or distributing
manufactured housing which has a manufacturing, distribution, warehouse
or other facility anywhere within one hundred (100) miles of Belmont,
Mississippi; provided, however, that Executive may purchase or
otherwise acquire up to (but not more than) 4.9% of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended;
(ii) Executive will not, directly or indirectly, either for
himself or any other person, except in the ordinary course of the
Companies= businesses while Executive is employed by one of the
Companies as may be necessary to carry out Executive's duties as an
employee of such Companies, (A) induce or attempt to induce any
employee of any of the Companies to leave the employ of such company,
(B) in any way interfere with the relationship between any of the
Companies and any employee of such company, or (C) induce or attempt to
induce any customer, dealer, supplier, licensee, or business relation
of any of the Companies to cease doing business with or reduce the
amount of its business with such company, or in any way interfere with
the relationship between any customer, supplier, licensee, or business
relation of any of the Companies; and
(iii) Executive will not, directly or indirectly, either for
himself or any other person, solicit the business of any person that is
a customer, dealer, supplier, licensee or business relation of any of
the Companies, whether or not Executive had personal contact with such
person, with respect to products or activities which compete, directly
or indirectly, in whole or in part with the products or activities of
any of the Companies, except on behalf of one or more of the Companies.
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(b) Executive agrees that each of the covenants in
subparagraphs (a) above are reasonable with relation to their duration,
geographical area and scope;
(c) Executive will not, at any time during or after the
Non-Compete Period, slander or libel the Companies, or any of their
stockholders, directors, officers, employees, or agents; and
(d) Executive will, at any time during the period of this
Agreement, at CH's or BH's request, confirm to BH Executive's compliance with
the provisions of this Agreement within ten (10) days of any such request for
confirmation by BH.
(e) In the event Executive=s employment is terminated by BH
prior to the Effective Time (as defined in the Merger Agreement other than for
Cause (as defined in Section 5 below), then Executive shall not be subject to
the restrictions set forth in this Section 2 unless BH agrees in writing to make
the payments set forth in Section 5 below, in which event the Non-Compete Period
and the period during which such payments are to be made will be for a period of
two years following such termination of employment.
3. Extension of the Term for Violations. The period during which the
covenants in Section 2 above shall apply shall be extended by one day for each
day in which any of the Companies establishes by adjudication before a court of
competent jurisdiction one or more violations by Executive of any provision of
this Agreement, and the Companies shall be entitled to an injunction restraining
Executive from further violations for a period of two (2) years from the date of
the final decree granting such injunction less only such number of days
subsequent to the Effective Time as Executive has not violated this Agreement;
provided, however, in no event shall the Companies be entitled to more than 730
days in the aggregate of protection following the Effective Time under this
Agreement and any such injunction taken together. The burden shall be on
Executive to establish the number of days, following the first established
violation, on which violations have not occurred. The purpose of this provision
is to prevent Executive from profiting from his own wrong if he violates this
Agreement.
4. Remedies. In addition to the rights and remedies of the Companies
set forth in Section 3, if Executive breaches the covenants set forth in Section
2 of this Agreement, the Companies will be entitled to recover monetary damages
from Executive on account thereof, and in addition to their right to damages and
any other rights they may have (whether covered in this Section 4 or otherwise),
to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of Section
2 of this Agreement, it being agreed that money damages alone would be
inadequate to compensate the Companies and would be an inadequate remedy for
such breach.
5. Payment to Executive Upon Certain Termination Events. (a) In the
event that Executive is terminated from employment after the Effective Time (as
defined in the Merger Agreement) and during the Non-Compete Period with BH for
any reason other than for Cause (as defined below) or the voluntary termination
of such employment by Executive, BH shall pay or cause to be paid to Executive
the full amount of Executive's salary for the balance of the Non-Compete Period,
in equal monthly installments payable on the first day of each calendar month
(the "Termination Payments") during such period, and shall comply with the
requirements of Part
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6 of Title I of the Employee Retirement Income Security Act of 1974, as amended.
For purposes of this Section 5, "Cause" shall mean Executive's (i) breach of
this Agreement; (ii) dishonesty, disloyalty or fraud in connection with his
employment; (iii) failure to adhere to any policy of any of the Companies to
which the Executive is subject and that is known or reasonably should be known
to Executive; (iv) appropriation (or attempted appropriation) of a material
business opportunity of the Companies, including attempting to secure or
securing any personal profit in connection with any transaction entered into on
behalf of any of the Companies; (v) misappropriation (or attempted
misappropriation) of any of the Companies' funds or property; (vi) 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 minor traffic offenses); or (vii)
Executive's insubordination, willful misconduct in the performance of, or gross
neglect of, his duties with BH or any of the Companies, as determined by the
good faith judgment of the Board of Directors of BH.
(b) This agreement on the part of BH is additional
consideration given to Executive to induce him and to make the covenants set
forth in Section 2 of this Agreement. Executive acknowledges and agrees that BH
would not have agreed to make the Termination Payments under the conditions set
forth in this Section 5 without Executive's having made the covenants set forth
in Section 2 of this Agreement. In the event Executive breaches any of the
covenants set forth in Section 2 of this Agreement, the Termination Payments, if
otherwise due, shall be forfeited by Executive, and any portion of the
Termination Payments previously paid to Executive shall be returned to and
recoverable by BH. This forfeiture and recovery right of BH shall be in addition
to and not in lieu of any other rights and remedies available to BH for such
breach, including, without limitation, the rights and remedies set forth in
Sections 3 and 4 above.
(c) Nothing in this Agreement or otherwise shall give
Executive any right to continued employment with any of the Companies, and
Executive=s employment with BH and, if applicable, the Companies is and shall
remain terminable at will.
(d) Each of the Companies hereby guarantees to Executive BH's
timely payment of the Termination Payments.
6. Successors and Assigns. This Agreement will be binding upon CH, BH
and Executive and will inure to the benefit of Executive, CH, BH and their
respective affiliates, successors, heirs and assigns.
7. Governing Law. This Agreement will be governed by the laws of the
State of Alabama without regard to conflicts of laws principles.
8. 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 any of the parties in the courts of the State
of Alabama, County of Winston, or in the United States District Court for the
Northern District of Alabama, 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 any party anywhere in the world.
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9. Severability. In the event any provision or portion of this
Agreement is held to be illegal, invalid or unenforceable, in whole or in part,
for any reason, under present or future law, such provision shall be severable
and the remainder thereof shall not be invalidated or rendered unenforceable or
otherwise adversely affected. Without limiting the generality of the foregoing,
if a court of competent jurisdiction should deem any provision of this Agreement
to create a restriction that is unreasonable as to scope, duration or
geographical area, the parties hereto agree that the provisions of this
Agreement shall be enforceable in such scope, for such duration and in such
geographic area as any court of competent jurisdiction may determine to be
reasonable.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11. Termination of Agreement Upon Certain Events. (a) This Agreement
shall be terminated and null and void effective upon and following a "Change in
Control" of CH, or upon ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇'▇ death, legal incompetency, or
termination as President and Chief Executive Officer of CH or, if applicable,
its successors and assigns. A Change in Control means any of the following: (i)
a tender offer or exchange offer is consummated for shares of common stock of
CH, provided that the person making such offer purchases or otherwise acquires
shares of CH's stock representing more than 50% of the outstanding shares of
common stock pursuant to such offer; (ii) a merger or consolidation of CH with
or into another corporation pursuant to which CH will not survive or will
survive only as a subsidiary of another corporation (other than such a merger or
consolidation involving CH (A) after which no person owns 20% or more of the
stock of the resulting corporation who did not own such stock immediately before
such merger or consolidation, or (B) in which all or substantially all of the
stockholders of CH receive 50% or more of the stock of the resulting
corporation, or (C) after which at least a majority of the board of directors of
the resulting corporation were members of the board of directors of CH
immediately prior to such merger of consolidation); (iii) a sale of all or
substantially all of the assets of CH; (iv) any person or group (as such terms
are defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) becomes the holder of 50% or more of the outstanding shares of common
stock of CH; or (v) CH sells, liquidates (other than into itself or a wholly
owned subsidiary of itself), or otherwise disposes of its entire ownership
interest in BH or other affiliate of CH which at the time employs Executive. The
Merger shall not be deemed to constitute a Change in Control of CH.
(b) This Agreement shall be terminated and deemed null and
void in its entirety ab initio in the event the Merger Agreement is terminated
in accordance with its terms and the Merger is not consummated.
(c) The restrictions upon Executive set forth in Section 2
above shall also terminate upon a breach of BH's obligation to make Termination
Payments when it is otherwise obligated to do so.
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12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior written and oral agreements and
understandings between CH, BH and Executive with respect to the subject matter
of this Agreement. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
CAVALIER HOMES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name:
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Title:
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BELMONT HOMES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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Title:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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