exhibit10-2.htm


    Exhibit
10.2

       

      CHANGE IN
CONTROL AGREEMENT

      


      


      Change in
Control Agreement (the “Agreement”) made and
entered into as of this 14th day of
June 2009, by and between CAVALIER HOMES, INC., a Delaware corporation (the
“Employer”),
and Michael R. Murphy (the “Executive”).

      


      W I T N E
S S E T H:

      


      WHEREAS,
the Executive has been employed by Employer and desires to remain in the employ
of the Employer and continue providing services for, the Employer and any
present or future parent, subsidiary or affiliate of the Employer, and its
successors and assigns, including any entity succeeding to substantially all the
assets of the Employer in such capacity;

      


      WHEREAS,
it is anticipated that the Employer will enter into a transaction resulting in a
Change in Control (as defined below) of the Employer.

      


      WHEREAS,
the Executive desires certain assurances with respect to any Change in Control
of the Employer; and

      


      WHEREAS,
the Parent and the Employer desire to induce the Executive to remain in such
employ;

      


      NOW,
THEREFORE, the parties hereto hereby agree as follows:

      


      1.           Term.  The
term of this Agreement (the “Term”) shall continue
until the earlier of (i) the expiration of the first anniversary of this
Agreement, (ii) the Executive’s death or Disability, or (iii) the Executive’s
earlier voluntary termination (except for a termination for Good
Reason).

      
 

      Notwithstanding
the foregoing, in the event a Change in Control occurs during the original or
any extended Term of this Agreement, this Agreement will remain in effect for
the longer of: (i) twelve (12) months beyond the month in which such Change in
Control occurred; or (ii) until all obligations of the Employer hereunder have
been fulfilled, and until all benefits required hereunder have been paid to the
Executive.

      


      2.           Definitions.  Whenever
used in this Agreement, the following terms shall have the meanings set forth
below:

      


      
        	
                 
      

              	
                (a)

              	
                “Affiliate”
      shall have the meaning ascribed to such term in Rule 12b-2 under the
      Exchange Act, as in effect on the date of this
  Agreement.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                “Agreement”
      means this Change in Control
Agreement.

              


      


      
        
          
              

          

           


        

        
           


          
            

          

        

        
           


        

      


      (c)           “Base Salary” means,
(i) in the event of a Qualifying Termination, the salary paid to the Executive
by the Employer as annual salary (whether or not deferred) in effect immediately
prior to the Qualifying Termination, or (ii) in the event of a Qualifying
Reduction, the salary paid to the Executive by the Employer as annual salary
(whether or not deferred) in effect immediately prior to the beginning of the
Protection Period, in each case exclusive of amounts received under incentive or
other bonus plans, reimbursements (including, without limitation, moving,
relocation and other expense reimbursements), and all other types of
compensation; provided, however, that in no event shall “Base Salary” mean an
amount less than $210,000 per year.

      


      (d)           “Board” means the
Board of Directors of the Employer.

      


      (e)           “Cause” means, as
determined by the Board, acting in good faith and based on information then
known to it, the Executive’s:

      


      
        	
                 
      

              	
                (i)

              	
                material
      breach of any agreement with the Employer, which the Executive has not
      cured within thirty (30) days written notice
  thereof;

              


      

      


      
        	
                 
      

              	
                (ii)

              	
                conviction
      of, or plea of guilty or nolo contendere to, a felony under the laws of
      the United States or any State thereof;
or

              


      

      


      
        	
                 
      

              	
                (iii)

              	
                gross
      negligence or willful misconduct in the scope of the Executive’s service
      to the Employer, which the Executive has not cured within thirty (30) days
      of written notice thereof.

              


      

      


      
        	
                 
      

              	
                (f)

              	
                “Change in
      Control” means any of the
following:

              


      

      


      
        	
                 
      

              	
                (i)

              	
                The
      consummation of a merger or consolidation of the Employer with or into
      another entity or any other corporate reorganization, if persons who were
      not stockholders of Employer immediately prior to such merger,
      consolidation or other reorganization own immediately after such merger,
      consolidation or other reorganization fifty percent (50%) or more of the
      voting power of the outstanding securities of each of (A) the continuing
      or surviving entity and (B) any direct or indirect parent corporation of
      such continuing or surviving
entity;

              


      

      


      
        	
                 
      

              	
                (ii)

              	
                The
      sale, lease, exchange, transfer or other disposition (in one transaction
      or in a series of related transactions) of all or substantially all of the
      Employer’s assets;

              


      

      


      
        	
                 
      

              	
                (iii)

              	
                A
      change in the composition of the Board of Directors of the Employer, as a
      result of which fewer than fifty percent (50%) of the incumbent directors
      are directors who either (A) had been directors of the Employer on the
      date 24 months prior to the
date

              


      


      
        
          
              

          

           


        

        
          2

          
            

          

        

        
           


        

      


      of such
change in the composition of the Board of Directors of the Employer (the “Original Directors”),
or (B) were appointed by the Board of Directors of the Employer, or nominated
for election to the Board of the Directors of the Employer, with the affirmative
votes of at least a majority of (1) the Original Directors who were in office at
the time of their appointment or nomination and (2) the directors whose
appointment or nomination was previously approved in a manner consistent with
this paragraph (B);

      


      
        	
                 
      

              	
                (iv)

              	
                Any
      transaction as a result of which any person is the “beneficial owner” (as
      defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
      securities of the Employer representing at least fifty percent (50%) of
      the total voting power represented by the Employer’s then-outstanding
      voting securities; or

              


      

      


      
        	
                 
      

              	
                (v)

              	
                Employer’s
      stockholders approve a liquidation or dissolution of
    Employer.

              


      

      


      


      (g)           “Change in Control
Payment” has the meaning given to such term in Section 3(b).

      


      (h)           “Code” means the
Internal Revenue Code of 1986, as the same may be from time to time
amended.

      


      (i)           “Disability” means the
Executive has become permanently disabled and is unable to work for a period of
180 consecutive days.

      


      (j)           “Employer” means
Cavalier Homes, Inc., a Delaware corporation, and its successors and assigns,
including any entity succeeding to substantially all the assets of the
Employer.

      


      
        	
                 
      

              	
                (k)

              	
                “Exchange Act”
      means the Securities Exchange Act of 1934, as
  amended.

              


      

      


      (l)           “Executive” means the
executive officer of the Employer identified in the initial paragraph of this
Agreement.

      


      (m)           “Good Reason” means
the occurrence during the Protection Period of any of the following events
without Executive’s prior written consent:

      


      
        	
                 
      

              	
                (i)

              	
                the
      assignment to Executive by Employer of duties inconsistent with
      Executive’s employment as a member of Employer’s senior management with
      responsibility for accounting and financial matters, including a
      significant reduction in authority, responsibilities and status, if such
      assignment or change results in
a

              


      


      
        
          
              

          

           


        

        
          3

          
            

          

        

        
           


        

      


      substantial
diminution of Executive’s position, authority, duties, responsibilities or
status;

      


      
        	
                 
      

              	
                (ii)

              	
                Executive’s
      relocation by Employer to any place more than 25 miles from the location
      at which the Executive performed the substantial portion of Executive’s
      duties prior to the Change in Control, except for required travel by
      Executive on Employer’s business to an extent substantially consistent
      with Executive’s business travel obligations immediately prior to such
      Change in Control;

              


      

      


      
        	
                 
      

              	
                (iii)

              	
                any
      material breach by Employer of any provision of this Agreement or any
      other Agreement between Employer and Executive which breach continues for
      a period of thirty (30) days following delivery by Executive to Employer
      of written notice of such breach;
or

              


      

      


      
        	
                 
      

              	
                (iv)

              	
                The
      failure of any successor of the Employer to assume in a writing delivered
      to the Executive and reasonably satisfactory to the Executive the
      obligations of Employer hereunder.

              


      

      


      
        	
                 
      

              	
                (n)

              	
                “Notice of
      Termination” has the meaning given to such term in Section
      5.

              


      

      


      (o)           “Protection Period”
means the period commencing with the first to occur of (i) the earliest date
that a Change in Control occurs or (ii) Employer shareholder approval of a
transaction which upon consummation will constitute a Change in Control, and
ending on the first to occur of (iii) the last day of the twelfth (12th)
calendar month following the calendar month during which such Change in Control
occurred or (iv) a determination by the Board that such Change in Control will
not be consummated.  Anything in this Agreement to the contrary
notwithstanding, if a Change in Control occurs, and if the Termination Date with
respect to Executive’s employment by Employer or the Reduction Date with respect
to Executive’s Base Salary occurs prior to the date on which the Change in
Control occurs, unless it is reasonably demonstrated by Employer that such
termination of employment or reduction in salary (i) was not at the request of a
third party who has taken steps reasonably calculated to effect the Change in
Control and (ii) did not otherwise arise in connection with or in anticipation
of the Change in Control, then for all purposes of this Agreement the
“Protection Period” shall be deemed to have commenced on the date immediately
preceding the Termination Date or the Reduction Date, respectively

      


      (p)           “Qualifying Reduction”
means a reduction in Executive’s Base Salary.

      


      
        	
                 
      

              	
                (q)

              	
                “Qualifying
      Termination” means:

              


      

      


      
        	
                 
      

              	
                (i)

              	
                An
      involuntary termination of the Executive’s employment by the Employer (or
      any successor to the Parent or the Employer after
  the

              


      


      
        
          
              

          

           


        

        
          4

          
            

          

        

        
           


        

      


      Change in
Control) for reasons other than Cause (and other than on account of the
Executive’s death or Disability);

      


      
        	
                 
      

              	
                (ii)

              	
                A
      voluntary termination of employment by the Executive for Good Reason;
      or

              


      

      


      
        	
                 
      

              	
                (iii)

              	
                A
      repudiation or breach by the Employer of any of the provisions of this
      Agreement, or the failure of any successor of the Employer to assume in a
      writing delivered to the Executive and reasonably satisfactory to the
      Executive the obligations of Employer
hereunder.

              


      

      


      
        	
                 
      

              	
                (r)

              	
                “Reduction Date”
      means the date that a reduction in the Executive’s Base Salary is
      effective.

              


      

      


      
        	
                 
      

              	
                (s)

              	
                “Salary Reduction
      Payments” has the meaning given to such term in Section
      3(c).

              


      

      


      
        	
                 
      

              	
                (t)

              	
                “Term” has the
      meaning given to such term in Section
1.

              


      

      


      
        	
                 
      

              	
                (u)

              	
                “Termination
      Date” means the date that a termination of Executive’s employment
      with Employer is first effective.

              


      

      


      3.           Change in Control/Severance
Payment/Salary Reduction Payments.

      


      (a)           Entitlement to Benefits upon
Termination.  If a Qualifying Termination of Executive’s
employment occurs during the Protection Period, the Employer shall pay to the
Executive the Change in Control benefits described in this Section
3.  Change in Control benefits will not be payable if Executive’s
employment is terminated for Cause, if Executive’s employment is terminated by
Executive voluntarily without Good Reason, or if Executive’s employment is
terminated by reason of Disability or death.  In addition, the Change
in Control benefits will not be payable if Executive’s employment is terminated
for any or no reason prior to or following the Protection Period.

      


      (b)           Change in Control Payment
and Benefits.  Executive shall be entitled to receive a lump
sum cash payment equal to 100% of the Executive’s Base Salary in effect
immediately prior to the Termination Date (the “Change in Control
Payment”).  Except as otherwise provided in Section 4, the
Change in Control Payment will be paid in one lump sum on the fifth (5th)
business day following the Termination Date.  Employer shall maintain
for the remaining duration of the Protection Period Executive’s health insurance
coverage (including dental coverage and other insurance coverage and benefits
generally available to employees of the Employer as of the Termination Date)
under the Employer’s insurance policy and pay the Employer’s portion of such
coverage, with the intent of the parties being that Executive shall continue to
receive such health insurance coverage for a period of twelve (12) months
following a Change in Control.  Executive shall have the right to
elect COBRA health insurance coverage at the end of the


      
        
          
              

          

           


        

        
          5

          
            

          

        

        
           


        

      


      Protection
Period.  The Executive’s Change in Control Payment shall be reduced by
the aggregate amount of the Executive’s Base Salary paid to the Executive during
the Protection Period.

      


      (c)           Salary Reduction
Payments.  If a Qualifying Reduction of Executive’s Base Salary
occurs during the Protection Period, the Employer shall pay to the Executive on
a monthly basis for each month, beginning on the Reduction Date and continuing
through the Protection Period, an amount equal to the difference between the
Executive’s reduced salary and the Executive’s Base Salary (the “Salary Reduction
Payments”).  The Salary Reduction Payments shall increase if,
during the remaining months in the Protection Period (following a Reduction
Date), Executive’s Base Salary is further reduced, with the intent of the
parties being that Executive shall continue to receive his original Base Salary
for a period of twelve (12) months following a Change in Control.

      


      4.           Compliance with Section
409A.

      


      (a)           The
Executive shall not have any right to make any election regarding the time or
form of any payment due under this Agreement.

      


      (b)           Payments
and benefits under this Agreement are intended to comply with Section 409A of
the Code and all provisions of this Agreement shall be interpreted in accordance
with Section 409A of the Code and Department of Treasury regulations and other
interpretive guidance issued thereunder, including without limitation any such
regulations or other guidance that may be issued after the date of this
Agreement. Notwithstanding any provision of this Agreement to the contrary, in
the event Board determines that any payments or benefits may or do not comply
with Section 409A of the Code, the Board may, with the consent of Executive
which shall not be unreasonably withheld, take any actions that the Board
determines are necessary or appropriate to (i) exempt this Agreement and
payments and benefits thereunder from the application of Section 409A of the
Code and/or preserve the intended tax treatment of the payments and benefits
provided under the Agreement, or (ii) comply with the requirements of Section
409A of the Code.  Without limiting the generality of the foregoing,
in the event that Employer determines that a severance payment pursuant to
Section 3 hereof would cause the imposition of an excise tax on the
Executive pursuant to Code Section 409A(a)(1)(B) if made at the time set
forth in Section 3, payment shall be made at the earliest date that payment
can be made without the imposition of such excise tax.

      


      5.           Notice of
Termination.  Any termination of the Executive’s employment by
the Employer for Cause or by the Executive for Good Reason shall be communicated
by a Notice of Termination.  For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon, and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provisions so
indicated.


      
        
          
              

          

           


        

        
          6

          
            

          

        

        
           


        

      


      6.           At Will
Employment.  Nothing in this Agreement shall confer upon the
Executive the right to remain in the employ of the Employer, it being understood
and agreed that (a) the Executive is an employee at will and serves at the
pleasure of the Employer at such compensation as the Employer shall determine
from time to time, subject to Section 3 herein, and (b) the Employer shall have
the right to terminate the Executive’s employment at any time, with or without
Cause subject to Section 3 herein.

      


      7.           Costs of
Enforcement.  In the event that Executive incurs any costs or
expenses, including attorneys’ fees, in the enforcement of his rights under this
Agreement then, unless the Employer is wholly successful in defending against
the enforcement of such rights, the Employer shall promptly pay to the Executive
all such costs and expenses. Any such reimbursement shall be made as promptly as
practicable after the final disposition of the Executive’s enforcement claims,
but in no event later than March 15th of the
calendar year following the calendar year in which occurs such final
disposition.

      


      8.           Notices.  All
notices hereunder shall be in writing and shall be sent by registered or
certified mail, return receipt requested, if intended for the Employer shall be
addressed to it, attention of Employer’s Chief Executive Officer, 32 Wilson
Boulevard 100, Addison, AL 35540, or at such other address of which the Employer
shall have given notice to the Executive in the manner herein provided; and if
intended for the Executive, shall be mailed to him at the address of the
Executive set forth in the payroll records of the Employer or at such other
address of which the Executive shall have given notice to the Employer in the
manner herein provided.

      


      9.           Entire
Agreement.  This Agreement constitutes the entire understanding
between the parties with respect to the matters referred to herein, and no
waiver of or modification to the terms hereof shall be valid unless in writing
signed by the party to be charged and only to the extent therein set forth. All
prior and contemporaneous agreements and understandings with respect to the
subject matter of this Agreement are hereby terminated and superseded by this
Agreement.

      


      10.           No Mitigation or
Offset.  Except as otherwise provided herein, in the event of
any termination of the Executive’s employment, the Executive shall not be
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Employer pursuant to this
Agreement.  Further, the amount of any payment under this Agreement
shall not be reduced by any compensation earned by the Executive or benefit
provided to the Executive as the result of employment by another employer or
otherwise.  The amounts payable hereunder shall not be subject to
set-off, counterclaim, recoupment, defense or other right that the Employer may
have against the Executive.

      


      11.           Withholding.  The
Employer shall be entitled to withhold from amounts payable to the Executive
hereunder such amounts as may be required by applicable law.

      


      12.           Assumption.  Upon
sale of all or substantially all of the business and/or assets of Employer,
successor to Employer (whether direct or indirect, by purchase,
merger,


      
        
          
              

          

           


        

        
          7

          
            

          

        

        
           


        

      


      consolidation
or otherwise) shall assume in a writing reasonably acceptable to Executive the
obligations of Employer under this Agreement.

      


      13.           Binding
Nature.  This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, administrators,
executives, personal representatives, successors and assigns.

      


      14.           Validity.  The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

      


      15.           Governing
Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Alabama without giving
effect to conflicts of laws.

      


      16.           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

      



      
        
          
              

          

           


        

        
          8

          
            

          

        

        
           


        

      


      


      IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.

       

      


      
        
          
            
              
                
                  
                    	 
      	
                            Employer:

                             

                            CAVALIER
      HOMES, INC.

                          
	 
      	
                             

                            By:

                          	
                            /s/
      Bobby Tesney

                          
	 
      	
                            Name:

                          	
                            Bobby
      Tesney

                          
	 
      	
                            Title

                          	
                            President
      and Chief Executive Officer

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            Executive:

                             

                            /s/
      Michael R. Murphy

                          
	 
      	
                            Michael
      R.
Murphy

                          


                  

                

              

            

          

        

         

        

          
            
              
                  

              

               


            

            
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