EXHIBIT 10.26
NON-QUALIFIED INDUCEMENT STOCK OPTION AGREEMENT
(the "First Part")
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into on
October 17, 2002, (the "Grant Date"), by and between Champion Enterprises, Inc.,
a Michigan corporation ("the Company"), and Phyllis Knight (the "Optionee").
WITNESSETH:
WHEREAS, Optionee is to be employed as Executive Vice President and
Chief Financial Officer of the Company; and
WHEREAS, the Company wishes to induce Optionee to accept that position,
to provide additional incentive to Optionee, to encourage stock ownership by
Optionee, and to encourage Optionee to remain in the employ of the Company or
its Subsidiaries; and
WHEREAS, the Company desires that Optionee keep certain information
that Optionee has acquired during Optionee's employment with the Company
confidential, and that Optionee not compete with the Company for at least two
years after Optionee's employment with the Company is terminated.
NOW, THEREFORE, the Company and Optionee hereby agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, certain words
and phrases have the following definitions:
a) "Code" means the Internal Revenue Code of 1986, as
amended;
b) "Committee" means the Compensation Committee of the
Company;
c) "Common Stock" means the common stock of the Company,
par value $1.00;
d) "Employment" (whether or not capitalized) means
employment with the Company or any Parent or Subsidiary of the Company;
e) "Good Cause" means: (i) Optionee's dishonesty in
his/her financial dealings with the Company; (ii) the conviction of a crime by
Optionee that constitutes (x) a felony or (y) a misdemeanor involving moral
turpitude which may reasonably be expected to have an adverse effect on the
Company, it business, reputation or interest; (iii) a breach by Optionee of this
Agreement or any other contract or agreement between the Company and Optionee or
a breach by Optionee of a fiduciary duty or responsibility to the Company; or
(iv) the refusal of Optionee to follow the lawful policies and directives of the
Board of Directors of the Company;
f) "Parent" means any "parent corporation" as defined in
Section 424(e) of the Code;
g) "Subsidiary" means any "subsidiary corporation" as
defined in Section 424(f) of the Code.
2. FIRST PART. The Company grants Optionee the right and option
to purchase from the Company 120,000 shares of the Company's Common Stock at a
price equal to 40% of the closing price of the Company's Common Stock on the New
York Stock Exchange on October 17, 2002, as reported in The Wall Street Journal
($0.992) (the "First Part"). The First Part must be exercised in its entirety
within 60 days of the Grant Date. This grant of the First Part is conditioned
upon the agreement by Optionee not to sell or otherwise transfer the shares
acquired under this First Part until at least two (2) years from the date of
exercise. In addition, if prior to the second anniversary
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of the Grant Date, Optionee terminates his/her employment with the Company or
the Company terminates the Optionee's employment for Good Cause, Optionee shall
retain only the following shares:
Date Employment Terminated Shares Retained
- -------------------------- ---------------
Prior to 6 months from Grant Date 0
Prior to 12 months from Grant Date 30,000
Prior to 18 months from Grant Date 60,000
Prior to 24 months from Grant Date 90,000
24 months or more after the Grant Date 120,000
Shares not retained by Optionee above shall be forfeited and returned to the
Company in exchange for the exercise price paid by Optionee for the forfeited
shares.
3. TERMINATION OF EMPLOYMENT.
a) Before Exercise of the First Part. If Optionee's
employment with the Company shall terminate for any reason prior to Optionee's
exercise in full of the First Part, Optionee's right to exercise any option
under this Agreement shall terminate and all exercise rights hereunder shall
immediately cease.
b) Events Not Constituting a Termination. A change of
job title, a leave of absence with the written consent of the Company, or a
transfer of Optionee from one corporation to another among the Company, its
Parent, or any of its Subsidiaries shall not be deemed a termination of
employment for purposes of this Agreement.
4. EXERCISE OF OPTION. Optionee may exercise any exercisable
option granted pursuant to this Agreement by completing the following steps.
(a) Written Notice. Delivery to the Company of a written
notice signed by the Optionee in the form attached as EXHIBIT A. In addition, at
the request of the Company, Optionee may be required to provide a written
representation that Optionee is acquiring the shares for investment purposes
only, and not for resale.
(b) Purchase Price. Delivery to the Company of cash, a
personal check, bank draft, money order, or Common Stock (or any combination
thereof) equal to the purchase price of the shares then to be purchased. Any
Common Stock tendered shall be valued at the closing price of the Company's
Common Stock on the first business day prior to the exercise date, as reported
in The Wall Street Journal. After receipt of the above and subject to Section 7
below, the company shall issue the shares in the name of Optionee.
5. CONFIDENTIALITY AND NON-COMPETITION. As consideration for the
options granted by this Agreement, Optionee hereby agrees as follows:
a) Confidentiality Agreement. Except with the prior
written consent of the Company, Optionee shall not at any time during or after
the term of this Agreement: (a) disclose, publish, or in any other manner reveal
to any third party any Confidential Information (as defined below) relating to
the business or assets of the Company or its Subsidiaries; or (b) make use of
any Confidential Information (as hereinafter defined) for the Optionee's own
purposes, or for the benefit of any person or entity other than the Company and
its Subsidiaries.
b) Confidential Information Defined. "Confidential
Information" shall mean any and all nonpublic information and documentation
relating to the Company and its Subsidiaries,
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including but not limited to information relating to the operations, services,
trade secrets, dealer, distributor and customer lists, promotion and pricing
practices, operational methods, market plans, studies, and forecasts, product
development plans, acquisition plans, design and design projects, inventions and
research projects, compensation information, procurement and sales activities
and procedures, the existence or substance of any agreements between Company (or
any Subsidiary) and any third party, and any and all other information and
documentation relating to the plans and operations of the Company or its
Subsidiaries.
c) Non-Competition. Because of the highly competitive
nature of the Company's business, Optionee agrees that as long as Optionee is an
employee or officer of the Company, and for two years following Optionee's
termination of employment with the Company:
(1) Optionee will not, directly or indirectly
(other than on behalf of the Company), as owner, partner, joint venturer,
employee, broker, agent, principal, trustee, corporate officer, licensor,
consultant, or in any capacity whatsoever, engage in, become financially
interested in, or have any connection with, any business located in the United
States or Canada engaged in the production, sales, financing, insuring, or
marketing of manufactured homes, or the development of manufactured housing
parks or subdivisions;
(2) Optionee will not to supply any competing
products or provide any competing services to any customer with whom the Company
or its Subsidiaries have done any business during his/her employment with the
Company; and
(3) Optionee will not, directly or indirectly,
induce any employee of the Company or its affiliates to engage in any activity
hereby prohibited to the Optionee by this Agreement, or to terminate their
employment with the Company or its affiliates.
If any one of more of the terms contained in this Section or in this Agreement
shall for any reason be held to be excessively broad with regard to time,
duration, geographic scope, or activity, that term shall be construed in a
manner to enable it to be enforced to the maximum extent compatible with
applicable law.
d) Disclosure of Proprietary Information. Optionee shall
promptly disclose to the Company, in such form and manner as the Company may
reasonably require, all operations, systems, services, methods, developments,
inventions, improvements and other information or data pertaining to the
business or activities of the Company as are conceived, originated, discovered
or developed by Optionee (whether or not copyrighted or patented) during the
term of his/her employment with the Company, whether before or after the
execution of this Agreement. It is understood that such information is
proprietary in nature and shall be, as between the Company and Optionee, for the
exclusive use and benefit of the Company and shall be and remain the property of
the Company. If so requested by the Company, Optionee shall execute and deliver
to the Company any instrument as the Company may reasonably request to
effectuate the assignment of any such proprietary information to the Company.
e) Termination of Employment. Upon the termination of
Optionee's employment with the Company, Optionee shall deliver to the Company
all records, data and memoranda of every kind and character relating to the
Company and its affiliates, including all copies thereof, which are in
Optionee's possession or control.
f) Remedies for Breach. Optionee acknowledges and agrees
that the Company's remedies at law for any breach of the agreements contained in
this Section 5 would be inadequate. Optionee therefore agrees that in the event
of Optionee's breach of the agreements contained in this Section 5, the Company
shall be entitled to equitable relief in the form of specific
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performance, a temporary restraining order, a temporary or permanent injunction,
or any other equitable remedy or relief which may then be available. Nothing in
this Section shall be construed as prohibiting the Company from pursuing any
other remedies available to it for any such breach, whether in law, equity, or
otherwise.
6. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not give
the Optionee any right to be retained or to continued employment with the
Company or any Subsidiary of the Company.
7. COMPLIANCE WITH SECURITIES LAWS. Company's obligations under
this Agreement are subject to compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities, and
any applicable stock exchange requirements, and Company may require Optionee to
provide proof of compliance with those laws, rules, and regulations.
8. INVESTMENT INTENT AND REGISTRATION. The Optionee represents
and warrants to the Company that he or she is acquiring all shares of Common
Stock under this option for investment purposes only and not with a view to
resale. The Optionee acknowledges and agrees that such shares of Common Stock
have not yet been registered under the Act or the securities laws of any state
and may not be sold, transferred, assigned, offered, pledged or otherwise
distributed unless there is an effective registration statement under the Act
and any applicable securities laws covering such shares or the Company receives
an opinion of counsel from Optionee (and concurred to by counsel for the
Company) stating that such sale, transfer, assignment, offer, pledge or other
distribution is exempt from registration and prospectus delivery requirements of
the Act, any applicable state securities laws, or the listing requirements of
any stock exchange. Optionee further acknowledges and agrees that any
certificate for such shares shall contain an appropriate legend to the foregoing
effect and that a stop transfer order shall be placed with the Company's
transfer agent. The Company represents and warrants that as soon as practical
after the Optionee exercises any of the options granted pursuant to this
Agreement, the Company shall take any and all steps that are necessary or
required in order to register the Common Stock pursuant to the Act.
9. NON-ASSIGNABILITY. The options granted by this Agreement shall
not be transferable by Optionee, other than by will or the laws of descent and
distribution. Any transferee of these options by will or the laws of descent and
distribution shall take them subject to the terms and conditions of this
Agreement, and no such transfer shall be effective to bind the Company unless
the Company is furnished with written notice of the transfer and a copy of the
will or any other evidence the Company deems necessary to establish the validity
of the transfer. The term "Optionee", as used in this Agreement, shall include
any person or entity to whom any option is transferred.
10. WITHHOLDING OF TAXES. Optionee must pay to Company within
fourteen (14) days from the date of any exercise any amounts necessary to
satisfy any requirements for withholding of income or employment taxes in
connection with that exercise.
11. DISPUTES. As a condition to the granting the options contained
in this Agreement, Optionee and Optionee's successors and assigns agree that any
dispute or disagreement which shall arise under or as a result of this Agreement
shall be determined by the Committee in its sole discretion and judgment. Any
such determination or interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
12. NOTICES. Every notice relating to this Agreement shall be in
writing, any notice given by mail shall be by registered or certified mail with
return receipt requested. All notices to the
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Company shall be delivered to the following address:
Champion Enterprises, Inc.
2701 University Drive, Suite 320
Auburn Hills, MI 48326-9090
Attn: Secretary of the Company
All notices by the Company to Optionee shall be delivered to Optionee
personally, or addressed to Optionee at Optionee's last residence address as
then contained in the records of the Company, or such other address as Optionee
may designate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY: CHAMPION ENTERPRISES, INC.
By: /s/ WALTER R. YOUNG
-----------------------------------
Walter R. Young
President and Chief
Executive Officer
OPTIONEE:
/s/ PHYLLIS KNIGHT
-----------------------------------
Phyllis Knight
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EXHIBIT A
NOTICE OF EXERCISE OF FIRST PART
(NON-QUALIFIED STOCK OPTION SHARES)
Secretary
Champion Enterprises, Inc.
2701 University Drive, Suite 320
Auburn Hills, Michigan 48326
Dear Sir:
A stock option was granted to me which permits me to purchase 120,000
shares of Champion Enterprises, Inc. Common Stock at a price of $0.992 per
share. I elect to exercise this part of the option to purchase 120,000
non-qualified stock option shares. A personal check [or cash, bank draft, money
order, or common stock] for the purchase price is enclosed with this letter.
I acknowledge and agree that the shares of Common Stock that I am
purchasing may not currently be registered under the Securities Act of 1933 (the
"Act") or the securities laws of any state. I understand and agree that if these
shares are not currently registered, the Company will register these shares
under the Act as soon as practicable after this exercise. Notwithstanding the
foregoing, I acknowledge and agree that these shares may not be sold,
transferred, assigned, offered, pledged or otherwise distributed until they are
registered under the Act or unless the Company receives an opinion of counsel
from me (and concurred to by counsel for the Company) stating that such sale,
transfer, assignment, offer, pledge or other distribution is exempt from
registration and prospectus delivery requirements of the Act, any applicable
state securities laws, or the listing requirements of any stock exchange.
In addition, I represent that I will not sell or otherwise transfer any
shares that I purchase pursuant to this letter for a period of two years. I also
understand that if I terminate my employment with the Company or if the Company
terminates my employment for "Good Cause" within two years of the grant date of
this option, a portion of the shares, pro-rated semi-annually, shall be
forfeited and returned to the Company in exchange for the exercise price
relating to those shares.
_______________________________
Phyllis Knight
Address: _____________________
_____________________
SSN: ______-_____-________
Dated: ______________, 2000_
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