EXHIBIT 99.2
EXECUTION COPY
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of July 12, 2004,
between Champion Enterprises, Inc., a Michigan corporation (the "Company"), and
Xxxxxxx X. Xxxxxxxxx (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive as Chief Executive
Officer of the Company;
WHEREAS, the Company and the Executive desire to enter into the
Agreement as to the terms of his employment by the Company;
NOW THEREFORE, in consideration of the foregoing, of the mutual
promises contained herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. POSITION/DUTIES.
(a) During the Employment Term (as defined in Section 2 below), the
Executive shall serve as the Chief Executive Officer of the Company. In this
capacity, the Executive shall have such duties, authorities and responsibilities
commensurate with the duties, authorities and responsibilities of persons in
similar capacities in similarly sized companies, and such other duties,
authorities and responsibilities as the Board of Directors of the Company (the
"Board") shall designate that are consistent with the Executive's position as
Chief Executive Officer of the Company. The Executive shall report to the Board.
(b) During the Employment Term, the Executive shall devote all of his
business time, energy and skill and his best efforts to the performance of his
duties with the Company, provided the foregoing shall not prevent the Executive
from (i) serving on the board of directors of non-profit organizations and, with
the prior written approval of the Board, other companies, (ii) participating in
charitable, civic, educational, professional, community or industry affairs and
(iii) managing his and his family's passive personal investments so long as such
activities in the aggregate do not interfere or conflict with his duties
hereunder or create a potential business conflict.
(c) The Board shall take such action as may be necessary to appoint or
elect the Executive as a member of the Board as of the Effective Date.
Thereafter, during the Employment Term, the Board shall nominate the Executive
for re-election as a member of the Board at the expiration of the then current
term, provided that the foregoing shall not be required to the extent prohibited
by legal or regulatory requirements.
2. EMPLOYMENT TERM. The Executive's term of employment under this
Agreement shall be for a term commencing on August 1, 2004 (the "Effective
Date") and, unless terminated earlier as provided in Section 8, ending on
December 31, 2008 (the "Employment Term").
3. BASE SALARY. The Company agrees to pay the Executive a base salary
at an annual rate of not less than $600,000, payable in accordance with the
regular payroll practices of the Company, but not less frequently than monthly.
The Executive's Base Salary shall be subject to annual review by the Board (or a
committee thereof) and may be increased, but not decreased, from time to time by
the Board. The base salary as determined herein from time to time shall
constitute "Base Salary" for purposes of this Agreement.
4. BONUS. (a) During the Employment Term, the Executive shall be
eligible for an annual discretionary incentive payment under the Company's 1995
Stock Option and Incentive Plan, as amended (the "1995 Plan") or any successor
annual bonus plan with a target of at least 100% of Executive's then-current
Base Salary (the "Target Bonus") and with a potential maximum annual incentive
payment of 200% of Executive's then-current Base Salary (as prorated for partial
years), upon the attainment of one or more pre-established performance goals
established by the Board or the Company's Compensation and Human Resources
Committee (the "Compensation Committee"). Executive acknowledges that currently
any annual bonus amounts earned by Executive in excess of the Target Bonus shall
be deferred automatically and paid to the Executive in discounted restricted
stock in accordance with Company policy. Executive further acknowledges that
such policy may be changed in the future in Company's sole discretion. The
Executive shall be guaranteed a minimum annual cash bonus for 2004 of $170,000,
provided he is employed by the Company at the time bonuses are paid for 2004 or
as otherwise provided herein, but in no event later than March 31, 2005.
(b) Within 30 days after the Effective Date, the Company shall pay the
Executive a one-time lump sum cash payment in the amount of $200,000 (the
"Sign-On Bonus"). In the event the Executive's employment with the Company
terminates as a result of a termination by the Company for Cause (as defined in
Section 8(c)) or by the Executive without Good Reason (as defined in Section
8(e)) at any time during the 24-month period commencing on the Effective Date,
the Executive shall be required to pay the Company an amount equal to the
Sign-On Bonus. Such amount shall be paid to the Company no later than 30 days
following such termination date and, at the Company's election, the Company may
offset such amount against any amount owed by the Company to the Executive.
5. EQUITY AWARDS.
(a) 2004 STOCK OPTION. The Compensation Committee shall grant the
Executive a stock option (the "Option") to purchase 100,000 shares of the
Company's common stock, par value $1.00 (the "Common Stock") at an exercise
price equal to the fair market value of the Common Stock on the Effective Date.
Subject to the Executive's continued employment by the Company through each
vesting date, the Option shall vest and become exercisable in three equal annual
installments on the first, second and third anniversaries of the Effective Date.
The Option shall be for a term of five years, subject to earlier termination as
provided in the 1995 Plan or herein. The Option shall be granted pursuant to,
and shall be subject to, the terms and conditions of the 1995 Plan and the
Company's standard stock option agreement.
(b) 2004 PERFORMANCE SHARE AWARD. The Compensation Committee shall
grant the Executive a performance share award (the "Performance Share Award")
for that number of shares of Common Stock that have a Fair Market Value (as
defined in the 1995 Plan)
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of $1,200,000 on the Effective Date. Subject to the Executive's continued
employment by the Company through the third anniversary of the Effective Date
(i) 50% of the Performance Share Award shall vest on the third anniversary of
the Effective Date if the applicable performance goals have been attained (the
"Conditional PSA Portion") and (ii) 50% of the Performance Share Award shall
vest on the third anniversary of the Effective Date without regard to
performance goals (the "Time PSA Portion"); provided, however, that
notwithstanding the foregoing, if the Executive's employment by the Company is
terminated by the Company without Cause or by the Executive for Good Reason
prior to the third anniversary of the Effective Date then (x) if such
termination date is after February 28, 2005, two-thirds of the shares subject to
the Time PSA Portion shall vest on such termination and (y) if such termination
date is after February 28, 2006, all of the shares subject to the Time PSA
Portion shall vest on such termination date. The Conditional PSA Portion shall
be earned to the extent cumulative performance goals for 2004-2006 have been
achieved. Such structure and goals shall be similar to those currently existing
for the 2004 performance share awards for other senior executives of the
Company, but adjusted to reflect the Effective Date. The Performance Share Award
shall be granted pursuant to, and shall be subject to, the terms and conditions
of the 1995 Plan and the Company's performance share award agreement.
(c) DISCRETIONARY LONG-TERM PERFORMANCE AWARDS. For fiscal years
beginning on and after January 1, 2005, the Executive shall be eligible to
participate in the Company's long-term performance incentive program as
generally applicable to other senior executives at a level commensurate with his
position, but any grant shall be at the sole discretion of the Board or the
Compensation Committee.
6. STOCK OWNERSHIP REQUIREMENT. The Executive shall be subject to the
terms and conditions of the Company's stock ownership requirements for senior
executives as in effect from time to time. Under the terms of the current
policy, fifty percent of the after-tax shares of Common Stock awarded to the
Executive pursuant to any annual incentive deferrals as provided in Section 4 or
performance share award pursuant to Section 5, shall be "held" by the Company in
accordance with its policies and will not be transferable by the Executive until
the Executive has accumulated 300,000 shares of the Company's Common Stock or
terminates employment. All shares of Common Stock owned outright by the
Executive shall count towards satisfying the Company's stock ownership
requirements, including shares acquired in the open market or shares retained
from the exercise of the stock option granted pursuant to Section 5.
7. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. The Executive shall be entitled to participate in
any employee benefit plan that the Company has adopted or may adopt, maintain or
contribute to for the benefit of its senior executives at a level commensurate
with his position, subject to satisfying the applicable eligibility
requirements. The Company shall use its commercially reasonable efforts to cause
the waiver of any waiting period from the Effective Date for the Executive under
any employee welfare benefit plan (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) other than the Company's
health plan, but at no extra cost to it and without jeopardizing tax-favored
status of any plan. The Company shall pay the Executive's (and his dependents')
premiums for continuation coverage under the health plan of his prior employer
until the Executive first becomes eligible to participate in the
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Company's health plan. Notwithstanding the foregoing, the Company may modify or
terminate any employee benefit plan at any time.
(b) VACATIONS. The Executive shall be entitled to an annual paid
vacation of four weeks per calendar year (as prorated for partial years) in
accordance with the Company's policy on accrual and use applicable to senior
executives; provided, however that at all times, the Executive shall be
reachable during vacation.
(c) BUSINESS AND ENTERTAINMENT EXPENSES. Upon presentation of
appropriate documentation, the Executive shall be reimbursed in accordance with
the Company's expense reimbursement policy, for all reasonable and necessary
business and entertainment expenses incurred in connection with the performance
of his duties hereunder.
(d) RELOCATION. The Executive shall promptly relocate to the vicinity
of the Company's current headquarters. The Executive shall be entitled to
relocation benefits commensurate with his position, in accordance with the
Company's relocation program. The Company shall pay or reimburse the Executive
for the reasonable moving and relocation expenses and costs, including
transaction costs (but not losses, fix up costs or similar costs) involved with
the sale of his current principal residence and the purchase of his new
residence. During the period prior to the Executive's relocation (but in no
event for a period in excess of 180 days), the Company shall provide suitable
temporary housing for the Executive's use while he is at the Company's
headquarters. The Company shall gross up for tax purposes any income arising
from such reimbursement that is treated as nondeductible taxable income to the
Executive so that the economic benefit is the same to the Executive as if such
payment or benefits were provided on a non-taxable basis to the Executive. All
amounts payable under this Section 7(d) shall be subject to the Executive's
presentment to the Company of appropriate documentation and shall be subject to
the limitations and procedures set forth in the Company's relocation program.
8. TERMINATION. The Executive's employment and the Employment Term
shall terminate on the first of the following to occur:
(a) DISABILITY. Upon 10 days' prior written notice by the Company to
the Executive of termination due to Disability. For purposes of this Agreement,
"Disability" shall be defined as the Executive's physical or mental incapacity
which has prevented the Executive from performing his material duties hereunder
for 180 days (including weekends and holidays) in any 365-day period or the
Board's good faith determination that the Executive will not be able to perform
his material duties for six consecutive months (including any consecutive period
of prior incapacity).
(b) DEATH. Automatically on the date of death of the Executive.
(c) CAUSE. The Company may terminate the Executive's employment
hereunder for Cause immediately upon written notice by the Company to the
Executive of a termination for Cause. "Cause" shall mean (i) the Executive's
dishonesty in his financial dealings with, or on behalf of, the Company; (ii)
the Executive's commission of, indictment for or pleading guilty or nolo
contendere to a crime by the Executive which constitutes (x) a felony (other
than a traffic related offense) or (y) a misdemeanor
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involving moral turpitude and which, in the case of (y), may reasonably be
expected to have an adverse effect on the Company, its business, reputation or
interest; (iii) Executive's material breach of this Agreement or any other
contract or agreement between the Executive and the Company, which breach, if
curable, is not cured within 20 days of the giving of written notice thereof to
the Executive; (iv) the Executive's material violation of the Company's code of
conduct, code of ethics or any other written policy or a material breach by the
Executive of a fiduciary duty or responsibility to the Company; (v) the refusal
of the Executive to follow the lawful policies and directives of the Board
within five days of the giving of written notice thereof to the Executive; (vi)
the willful misconduct or gross negligence of the Executive with regard to the
Company or in the performance of his duties that is materially injurious to the
Company; or (vii) the willful and continued failure of the Executive to attempt
to perform the Executive's duties with the Company (other than for any such
failure resulting from the Executive's incapacity due to physical or mental
illness) after written notice of such failure has been give to the Executive.
(d) WITHOUT CAUSE. Upon written notice by the Company to the Executive
of an involuntary termination without Cause, other than for death or Disability.
(e) GOOD REASON. Upon written notice by the Executive to the Company of
a termination for Good Reason. "Good Reason" shall mean the occurrence of any of
the following events, without the express written consent of the Executive,
unless such events are fully corrected in all material respects by the Company
within 30 days following written notification by the Executive to the Company
that he intends to terminate his employment hereunder for one of the reasons set
forth below:
(i) any reduction or diminution (except temporarily during any
period of physical or mental incapacity) in the Executive's titles or a
material reduction or diminution in the Executive's authorities, duties
or responsibilities or reporting requirements with the Company
including but not limited to a failure to elect the Executive to the
Board or removal of the Executive from the Board, except if such
removal is necessary as a result of legal or regulatory requirements or
the assignment to the Chairman of the Company of any or all of the
material authorities, duties or responsibilities normally assigned to
the chief executive officer; provided that if the Executive is Chairman
of the Board, removal or non-reelection of him to such position shall
not be Good Reason;
(ii) a material breach by the Company of any provisions of
this Agreement, including, but not limited to, any reduction in any
part of the Executive's Base Salary;
(iii) the failure of the Company to obtain and deliver to the
Executive a satisfactory written agreement from any successor to the
Company to assume and agree to perform this Agreement; or
(iv) the Executive is required to relocate to a principal
place of employment more than 60 miles from his principal place of
employment with the Company.
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(f) WITHOUT GOOD REASON. Upon 60 days' prior written notice by the
Executive to the Company of the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole discretion, make
effective earlier than any notice date).
9. CONSEQUENCES OF TERMINATION.
(a) DISABILITY. Upon such termination, the Company shall pay or provide
the Executive (i) any unpaid Base Salary through the date of termination; (ii)
any bonus earned but unpaid with respect to the fiscal year ending on or
preceding the date of termination; (iii) reimbursement for any unreimbursed
expenses incurred through the date of termination; (iv) a pro-rata portion of
the Executive's bonus for the fiscal year in which the Executive's termination
occurs based on actual results for the plan year (determined by multiplying the
amount of such bonus which would be due for the full fiscal year by a fraction,
the numerator of which is the number of days during the fiscal year of
termination that the Executive is employed by the Company and the denominator of
which is 365); (v) any accrued but unused vacation time in accordance with
Company policy; and (vi) any benefits or rights to equity interests in
accordance with applicable plans and grants (collectively items (i) through (vi)
shall be hereafter referred to as "Accrued Benefits").
(b) DEATH. In the event the Employment Term ends on account of the
Executive's death, the Executive's estate shall be entitled to any Accrued
Benefits.
(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If the Executive's
employment should be terminated (x) by the Company for Cause, or (y) by the
Executive without Good Reason or (z) upon expiration of the Term on the fourth
anniversary of the Effective Date, the Company shall pay to the Executive any
Accrued Benefits (other than, in the case of (x) or (y), those described in
Sections 8(a)(ii) and 8(a)(iv)).
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If the Executive's
employment by the Company is terminated (x) by the Company other than for Cause
or (y) by the Executive for Good Reason, the Company shall pay or provide the
Executive with (i) Accrued Benefits; and (ii) subject to the Executive's
compliance with the obligations in Sections 10, 12 and 13 hereof, an amount
equal to the Executive's monthly Base Salary rate (but not as an employee) which
would continue to be paid monthly for a period of 24 months. Payments provided
in this Section 9(d) shall be in lieu of any termination or severance payments
or benefits for which the Executive may be eligible under any of the plans,
policies or programs of the Company.
10. RELEASE. Any and all amounts payable and benefits or additional
rights provided pursuant to this Agreement beyond Accrued Benefits shall only be
payable if the Executive delivers to the Company and does not revoke a general
release of all claims in such form as required by the Company.
11. CHANGE IN CONTROL AGREEMENT/EXCISE TAX. The Executive and the
Company will promptly after the execution of this Agreement enter into the
Company's current standard form of change in control severance agreement (the
"Standard Change in
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Control Agreement"), except that the Executive's agreement shall be for a term
of two years, shall be based on a multiple of two times Base Salary and bonus
for severance, and in lieu of the provision in the Standard Change in Control
Agreement as to Internal Revenue Code Section 280G, the provisions of Exhibit A
shall apply.
12. (a) CONFIDENTIALITY. The Executive agrees that he shall not,
directly or indirectly, use, make available, sell, disclose or otherwise
communicate to any person, other than in the course of the Executive's assigned
duties and for the benefit of the Company, either during the period of the
Executive's employment or at any time thereafter, any nonpublic, proprietary or
confidential information, knowledge or data relating to the Company, any of its
subsidiaries, affiliated companies or businesses, which shall have been obtained
by the Executive during the Executive's employment by the Company. The foregoing
shall not apply to information that (i) was known to the public prior to its
disclosure to the Executive; (ii) becomes generally known to the public
subsequent to disclosure to the Executive through no wrongful act of the
Executive or any representative of the Executive; or (iii) the Executive is
required to disclose by applicable law, regulation or legal process (provided
that the Executive provides the Company with prior notice of the contemplated
disclosure and reasonably cooperates with the Company at its expense in seeking
a protective order or other appropriate protection of such information).
(b) NONSOLICITATION. During the Executive's employment with the Company
and for the two year period thereafter, the Executive agrees that he will not,
except in the furtherance of his duties hereunder, directly or indirectly,
individually or on behalf of any other person, firm, corporation or other
entity, (i) solicit, aid or induce any employee, representative or agent of the
Company or any of its subsidiaries or affiliates to leave such employment or
retention or to accept employment with or render services to or with any other
person, firm, corporation or other entity unaffiliated with the Company or hire
or retain any such employee, representative or agent, or take any action to
materially assist or aid any other person, firm, corporation or other entity in
identifying, hiring or soliciting any such employee, representative or agent,
(ii) solicit, aid or induce any customer of the Company or any of its
subsidiaries or affiliates to purchase goods or services then sold by the
Company or any of its subsidiaries or affiliates from another person, firm,
corporation or other entity or assist or aid any other persons or entity in
identifying or soliciting any such customer or (iii) solicit, aid or induce any
vendor of the Company or any of its subsidiaries or affiliates to provide goods
or services then provided to the Company or any of its subsidiaries or
affiliates to another person, firm, corporation or other entity or assist or aid
any other persons or entity in identifying or purchasing goods or services from
such vendor. An employee, representative or agent shall be deemed covered by
this paragraph while so employed or retained and for six months thereafter.
Subpart (ii) shall not be violated by general advertising or solicitation not
specifically targeted at activities of the Company.
(c) NONCOMPETITION. The Executive acknowledges that he performs
services of a unique nature for the Company that are irreplaceable, and that his
performance of such services to a competing business will result in irreparable
harm to the Company. Accordingly, during the Executive's employment hereunder
and for the two year period thereafter, the Executive agrees that the Executive
will not, directly or indirectly, own, manage, operate, control, be employed by
(whether as an employee, consultant, independent contractor or
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otherwise, and whether or not for compensation) or render services to any
person, firm, corporation or other entity, in whatever form, engaged in the
production, sales or marketing of manufactured housing or any other material
business in which the Company or any of its subsidiaries or affiliates is
engaged on the date of termination (or, if earlier, the date of determination)
or in which they have planned, on or prior to such date, to be engaged in on or
after such date, in any locale of any country in which the Company conducts
business. This Section 12(c) shall not prevent the Executive from owning not
more than two percent of the total shares of all classes of stock outstanding of
any publicly held entity engaged in such business.
(d) NONDISPARAGEMENT. The Executive shall not make or induce other
persons or entities to make any negative statements as to the Company, its
affiliates, employees, past or present officers, directors, products, services,
businesses or reputation. Notwithstanding the foregoing, truthful statements
made in the course of sworn testimony in administrative, judicial or arbitral
proceedings (including, without limitation, depositions in connection with such
proceedings) shall not be subject to this Section 12(d).
(e) REFORMATION. If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 12 is excessive
in duration or scope or is unreasonable or unenforceable under the laws of that
state, it is the intention of the parties that such restriction may be modified
or amended by the court to render it enforceable to the maximum extent permitted
by the law of that state.
(f) SURVIVAL OF PROVISIONS. The obligations contained in this Section
12 shall survive the termination or expiration of the Executive's employment
with the Company and shall be fully enforceable thereafter.
13. COOPERATION. Upon the receipt of reasonable notice from the Company
(including outside counsel), the Executive agrees that while employed by the
Company and thereafter, the Executive will respond and provide information with
regard to matters in which he has knowledge as a result of his employment with
the Company, and will provide reasonable assistance to the Company, its
affiliates and their respective representatives in defense of any claims that
may be made against the Company or its affiliates, and will assist the Company
and its affiliates in the prosecution of any claims that may be made by the
Company or its affiliates, to the extent that such claims may relate to the
period of the Executive's employment with the Company. The Executive agrees to
promptly inform the Company if he becomes aware of any lawsuits involving such
claims that may be filed or threatened against the Company or its affiliates.
The Executive also agrees to promptly inform the Company (to the extent he is
legally permitted to do so) if he is asked to assist in any investigation of the
Company or its affiliates (or their actions), regardless of whether a lawsuit or
other proceeding has then been filed against the Company or its affiliates with
respect to such investigation, and shall not do so unless legally required. Upon
presentation of appropriate documentation, the Company shall pay or reimburse
the Executive for all reasonable out-of-pocket travel, duplicating or telephonic
expenses incurred by the Executive in complying with this Section 13.
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14. EQUITABLE RELIEF AND OTHER REMEDIES.
(a) The Executive acknowledges and agrees that the Company's remedies
at law for a breach or threatened breach of any of the provisions of this
Section 12 or Section 13 would be inadequate and, in recognition of this fact,
the Executive agrees that, in the event of such a breach or threatened breach,
in addition to any remedies at law, the Company, without posting any bond, shall
be entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, a temporary or permanent injunction or any other
equitable remedy which may then be available.
(b) In the event of a violation of Section 12 or 13 of this Agreement,
any severance being paid to the Executive pursuant to this Agreement, the
Standard Change in Control Agreement (or any successor agreement) or otherwise
shall immediately cease.
15. NO ASSIGNMENTS.
(a) This Agreement is personal to each of the parties hereto. Except as
provided in Section 15(b) below, no party may assign or delegate any rights or
obligations hereunder without first obtaining the written consent of the other
party hereto.
(b) The Company may assign this Agreement to any successor to all or
substantially all of the business and/or assets of the Company provided the
Company shall require such successor to expressly assume and agree to perform
this Agreement and, if applicable, any Change in Control Agreement (but without
creating any rights on a second change in control), 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.
16. NOTICE. For the purpose 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 (i) on the date of delivery if delivered by hand,
(ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on
the first business day following the date of deposit if delivered by guaranteed
overnight delivery service, or (iv) on the fourth business day following the
date delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
At the address (or to the facsimile number) shown
on the records of the Company
If to the Company:
Champion Enterprises, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attention: General Counsel
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
17. SECTION HEADINGS; INCONSISTENCY. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement. In the event of any
inconsistency between the terms of this Agreement and any form, award, plan or
policy of the Company, the terms of this Agreement shall control.
18. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity of unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instruments.
20. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement or the Executive's employment with the Company,
other than injunctive relief under Section 14 hereof, shall be settled
exclusively by arbitration, conducted before a single arbitrator in Detroit,
Michigan (applying Michigan law) in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The decision of the arbitrator will be final and binding upon the
parties hereto. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The parties acknowledge and agree that in connection with
any such arbitration and regardless of outcome (a) each party shall pay all its
own costs and expenses, including without limitation its own legal fees and
expenses, and (b) joint expenses shall be borne equally among the parties.
21. INDEMNIFICATION. The Company hereby agrees to indemnify the
Executive and hold him harmless to the extent provided under the by-laws of the
Company against and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including reasonable attorney's
fees), losses, and damages resulting from the Executive's good faith performance
of his duties and obligations with the Company. This obligation shall survive
the termination of the Executive's employment with the Company.
22. LIABILITY INSURANCE. The Company shall cover the Executive under
directors and officers liability insurance both during and, while potential
liability exists, after the term of this Agreement in the same amount and to the
same extent as the Company covers its other officers and directors.
23. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer or director as may be
designated by the Board. 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. This Agreement together with all exhibits hereto sets
forth the entire
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agreement of the parties hereto in respect of the subject matter contained
herein. 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. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Michigan without regard to its conflicts of law principles.
24. NO MITIGATION. In no event shall the Executive be obliged to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, nor
shall the amount of any payment hereunder be reduced by any compensation earned
by the Executive as a result of employment by another employer, except as
provided in Section 14(b) hereof.
25. REPRESENTATIONS. The Executive represents and warrants to the
Company that he has the legal right to enter into this Agreement and to perform
all of the obligations on his part to be performed hereunder in accordance with
its terms and that he is not a party to any agreement or understanding, written
or oral, which could prevent him form entering into this Agreement or performing
all of his obligations hereunder.
26. WITHHOLDING. The Company may withhold from any and all amounts
payable under this Agreement such federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.
27. COUNSEL FEES: Upon presentation of appropriate documentation, the
Company shall pay the Executive's reasonable counsel fees (based on the lowest
standard hourly rate of such counsel) incurred in connection with entering this
Agreement, up to a maximum of $10,000.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CHAMPION ENTERPRISES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Its: Chairman, Compensation and Human
Resources Committee of the Board of
Directors
XXXXXXX X. XXXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxxx
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EXHIBIT A
GROSS-UP PROVISIONS
(a) In the event that the Executive shall become entitled to payments
and/or benefits provided by this Agreement or any other amounts in the "nature
of compensation" (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 of ownership or effective control covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority) the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or payroll tax upon
the Gross-up Payment provided for by this paragraph (a), but before deduction
for any U.S. federal, state, and local income or payroll tax on the Company
Payments, shall be equal to the Company Payments.
Notwithstanding the foregoing, if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that if the Company Payments
(other than that portion valued under Treasury Regulation Section 1.280G, Q&A
24(c)) (the "Cash Payments") are reduced by the amount necessary such that the
receipt of the Company Payments would not give rise to any Excise Tax (the
"Reduced Payment") and the Reduced Payment would not be less than 92.5% of the
Cash Payment, then no Gross-Up Payment shall be made to the Executive and the
Cash Payments, in the aggregate, shall be reduced to the Reduced Payments. If
the Reduced Payments is to be effective, payments shall be reduced in the
following order (1) acceleration of vesting of any stock options for which the
exercise price exceeds the then fair market value, (2) any cash severance based
on a multiple of Base Salary or Bonus, (3) any other cash amounts payable to the
Executive, (4) any benefits valued as parachute payments; and (5) acceleration
of vesting of any equity not covered by (1) above, unless the Executive elects
another method of reduction by written notice to the Company prior to the change
of ownership or effective control.
In the event that the Internal Revenue Service or court ultimately
makes a determination that the excess parachute payments plus the base amount is
an amount other than as determined initially, an appropriate adjustment shall be
made with regard to the Gross-Up Payment or Reduced Payment, as applicable to
reflect the final determination and the resulting impact on whether the
preceding paragraph applies.
(b) For purposes of determining whether any of the Company Payments and
Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise
Tax, unless and except to the extent that, in the determination of the Company's
independent certified public accountants or tax counsel selected by such
accountants or the Company (the "Accountants") such Total Payments (in whole or
in part) either do not constitute
"parachute payments," including giving effect to the recalculation of stock
options in accordance with Treasury Regulation Section 1.280G-1, Q&A 33,
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G of the Code. To
the extent permitted under Revenue Procedure 2003-68, the value determination
shall be recalculated to the extent it would be beneficial to the Company. The
determination of the Accountants shall be final and binding upon the Company and
the Executive, except to the extent provided herein with regard to Internal
Revenue Service determinations. The Company shall be responsible for all charges
of the Accountants..
(c) In the event that the Excise Tax is subsequently determined by the
Accountants to be less than the amount taken into account hereunder at the time
the Gross-up Payment is made, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the prior Gross-up Payment attributable to such reduction (plus the
portion of the Gross-up Payment attributable to the Excise Tax and U.S. federal,
state and local income tax imposed on the portion of the Gross-up Payment being
repaid by the Executive if such repayment results in a reduction in Excise Tax
or a U.S. federal, state and local income tax deduction), plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. The Company shall be responsible for all charges of the Accountant.
In the event that the Excise Tax is later determined by the Accountant
or the Internal Revenue Service to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in subsection
(c) above shall be paid not later than the thirtieth (30th) day following an
event occurring which subjects the Executive to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the
Accountant, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), subject to further payments pursuant to subsection
(c) hereof, as soon as the amount thereof can reasonably be determined, but in
no event later than the ninetieth day after the occurrence of the event
subjecting the Executive to the Excise Tax. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(e) In the event of any controversy with the Internal Revenue Service
(or other taxing authority) with regard to the Excise Tax, the Executive shall
permit the Company to control
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issues related to the Excise Tax (at its expense). In the event of any
conference with any taxing authority as to the Excise Tax or associated income
taxes, the Executive shall permit the representative of the Company to accompany
the Executive, and the Executive and the Executive's representative shall
cooperate with the Company and its representative.
(f) The Executive shall promptly deliver to the Company copies of any
written communications, and summaries of any verbal communications, with any
taxing authority regarding the Excise Tax covered by this provision.
(g) Nothing in this Section is intended to violate the Xxxxxxxx-Xxxxx
Act and to the extent that any advance or repayment obligation hereunder would
do so, such obligation shall be modified so as to make the advance a
nonrefundable payment to you and the repayment obligation null and void.
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