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EXHIBIT 10.2
NON-COMPETITION AND
NON-SOLICITATION AGREEMENT
(XXXXX X. XXXXX)
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"), Bellcrest Homes, Inc., a Georgia corporation and a wholly
owned subsidiary of BH ("BH Sub"), and Xxxxx X. Xxxxx, an individual residing in
the State of Georgia ("Executive").
W I T N E S S E T H :
WHEREAS, Executive is currently employed by BH Sub as President; 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 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, contemporaneously herewith, BH and certain former shareholders
of BH Sub are entering into an amendment to that certain Stock Purchase
Agreement among BH and the Shareholders of BH Sub dated as of October 25, 1996,
providing for the acceleration of certain earnout payments by BH to such
shareholders in the event of the consummation of the Merger (the "Earnout
Acceleration"), and Executive will receive substantial financial benefit from
such acceleration, and BH would not enter into such amendment, nor would CH
permit BH to enter into such amendment, unless Executive entered into this
Agreement; and
WHEREAS, in further consideration for the execution of this Agreement,
BH Sub 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, BH Sub and CH (collectively with their subsidiaries
and affiliates, the "Companies") are marketed throughout the southeastern region
of the United States; (b) the
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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; (e) the provisions of Section 2 of this Agreement
are reasonable and necessary to protect and preserve the Companies' business;
and (f) 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 Sub, 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 Millen,
Georgia; 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' business 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
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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.
(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, BH's or BH Sub'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
Sub 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 Sub 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 set forth 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 Sub
for any reason other than for Cause (as defined below) or the voluntary
termination of such employment by Executive, BH
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Sub 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 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
and other similarly situated employees are subject and that is known or
reasonably should be known to Executive; (iv) appropriation (or attempted
appropriation) of a material business opportunity of any of the Companies,
including attempting to secure or securing any personal profit in connection
with any transaction entered into on behalf of the Companies; provided, however,
that the foregoing shall not apply to the rental of housing to certain of BH
Sub's employees by a company controlled by Executive's wife; (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
traffic offenses); or (vii) Executive's insubordination, willful misconduct in
the performance of, or gross neglect of, his duties with BH Sub or any of the
Companies, as determined by the good faith judgment of the Board of Directors of
BH Sub.
(b) This agreement on the part of BH Sub is additional
consideration given to Executive to induce him to make the covenants set forth
in Section 2 of this Agreement. Executive acknowledges and agrees that BH Sub
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 Sub. This forfeiture and recovery right of BH Sub shall be in
addition to and not in lieu of any other rights and remedies available to BH Sub
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 Sub 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 Earnout Acceleration and BH Sub's timely payment of the
Termination Payments.
6. Successors and Assigns. This Agreement will be binding upon CH, BH,
BH Sub and Executive and will inure to the benefit of Executive, CH, BH, BH Sub
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.
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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.
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 Xxxxx X. Xxxxxxxx'x 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 Sub 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.
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(c) The restrictions upon Executive set forth in Section 2
above shall also terminate upon the earlier of a breach of BH's obligation to
pay the Earnout Acceleration when it is otherwise obligated to do so or a breach
of BH Sub's obligation to make Termination Payments when it is otherwise
obligated to do so.
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, BH Sub 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.
[SIGNATURE PAGE FOLLOWS]
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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/ Xxxxx X. Xxxxxxxx
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Name:
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Title:
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BELMONT HOMES, INC.
By: /s/ Xxxx X. Xxxxxxx
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Name:
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Title:
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BELLCREST HOMES, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
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Name:
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Title:
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/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
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