Exhibit 10.16

 

FLEETWOOD ENTERPRISES, INC.
ELDEN L. SMITH STOCK OPTION PLAN AND AGREEMENT

 

THIS STOCK OPTION PLAN AND AGREEMENT (this “Agreement”) is made effective as of
March 8, 2005 (the “Grant Date”), by and between FLEETWOOD ENTERPRISES, INC., a
Delaware corporation (the “Company”), and Elden L. Smith (“Optionee”).

 

A.  The Company and Optionee have entered into that certain Employment Agreement
dated as of [the Grant Date] pertaining to Optionee’s appointment to the office
of President and Chief Executive Officer (the “Employment Agreement”).

 

B.  As a part of Optionee’s appointment, and effective on the Grant Date, the
Company has granted to Optionee a nonstatutory stock option (the “Option”) to
purchase shares of the common stock of the Company (the “Common Stock”) on the
terms and conditions set forth herein. This Agreement memorializes the terms and
conditions upon which the board of directors of the Company (the “Board”)
granted the Option to Optionee.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

AGREEMENT

 

1.  Grant of Option.  Optionee may, at Optionee’s election and upon the terms
and conditions set forth herein, purchase all or any part of an aggregate of
79,000 shares of Common Stock (the “Optioned Shares”) at the price per share
equal to $8.91 (the “Option Price”). The Option Price equals the closing price
of the Common Stock on the Grant Date.

 

2.  Vesting Schedule.  The Option shall vest and become exercisable according to
the following vesting schedule:

 

Stock Options granted by this Agreement shall, as provided in more detail in the
Plan, be exercisable as follows:

 

A.                                   One-third of the options granted hereby
shall become exercisable twelve months from the date hereof; one-third of the
options granted hereby shall become exercisable twenty-four months from the date
hereof; and one-third of the options granted hereby shall become exercisable
thirty-six months from the date hereof, in each case assuming that Optionee has
been continuously employed by the Company, a subsidiary or affiliate during such
periods.  Fractional options will not be granted.  If the total number of
options granted hereby is not divisible evenly by three, options exercisable
after the first twelve months hereof, and after the second twelve months hereof,
if necessary, shall be increased by one, respectively, so that options covering
the three periods equal the total number of options granted hereby.

 

B.                                     Once exercisable, Options generally
expire if not exercised upon the earlier to occur of (i) the periods specified
in Section 5 of this Plan, or (ii) ten years after the date of grant of such
Option.  For this Option Grant, however, the Plan is modified as described on
Annex A delivered to you with this Agreement.

 

3.  Exercise of Option.

 

(a)          Extent of Exercise.  The Option may be exercised at the time or
after installments vest as specified in Section 2 to this Agreement with respect
to all or part of the Optioned Shares covered by such vested installments,
subject to the further restrictions contained in this Agreement. In the event
that Optionee

 

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exercises the Option for less than the full number of Optioned Shares included
within a vested installment, Optionee shall be entitled to exercise the Option
(in one or more subsequent increments) for the balance of the Optioned Shares
included in said vested installment; provided, however, that in no event shall
Optionee be entitled to exercise the Option for fractional shares of Common
Stock or for a number of shares exceeding the maximum number of Optioned Shares.

 

(b)         Procedure.  The Option shall be deemed to be exercised when the
Secretary of the Company receives written notice of exercise from or on behalf
of Optionee, together with payment of the applicable Option Price and any
amounts required under Section 3(c). The Option Price shall be payable upon
exercise in (i) legal tender of the United States; or (ii) such other
consideration as the Company may deem acceptable in any particular instance;
provided, however, that the Company may, in its discretion and to the extent
permitted by applicable law, including Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), allow exercise of the Option in a
broker-assisted or similar transaction in which the Option Price and any amounts
required under Section 3(c) are not received by the Company until promptly after
exercise.

 

(c)          Withholding Taxes.  Whenever shares of Common Stock are to be
issued upon exercise of the Option, the Company shall have the right to require
Optionee to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to such issuance. The Company
may, in its discretion, allow satisfaction of tax withholding requirements by
accepting delivery of Common Stock.

 

4.              Term of Option.  Unless earlier terminated as provided in
Section 5, the Option shall automatically expire and terminate, and thereby
become unexercisable, on the tenth (10th) anniversary of the Grant Date.

 

5.              Effect of Termination.

 

(a)  Termination for Cause.  In the event of termination of Optionee’s
employment for Cause, this Option, whether vested or unvested, shall terminate
and expire as of the date of termination. For purposes hereof, “Cause” shall be
as defined in the Employment Agreement.

 

(b)  Death.  In the event of the death of Optionee during the term of the
Option, Options will expire and become unexercisable as of the earlier of
(A) the date the options expire in accordance with their terms or (B) one year
after the date of death, and the vesting of all or any portion of any options
that had not become exercisable on or prior to the date of death will be
accelerated.  In the event of the death of Optionee while he is an employee of
the Company or within the period after termination of such status during which
he is permitted to exercise the Option, the Option may be exercised by any
person or persons designated by Optionee on a beneficiary designation form
adopted by the Company for such purpose or, if there is no effective beneficiary
designation form on file with the Company, by the executors or administrators of
Optionee’s estate or by any person or persons who shall have acquired the Option
directly from Optionee by his will or the applicable laws of descent and
distribution.

 

(c)  Disability.  In the event of Disability of Optionee during the term of the
Option, Options will expire and become unexercisable as of the earlier of
(A) the date the Options expire in accordance with their terms or (B) one year
after the date of termination and the vesting of all or any portion of any
Options that had not become exercisable on or prior to the date of retirement
will continue on the same schedule as before without acceleration.  For purposes
hereof, “Disability” shall be as defined in Optionee’s Employment Agreement.(d) 
Normal Retirement.  In the event of the normal retirement of Optionee, during
the term of the Option, Options will expire and become unexercisable as of the
earlier of (A) the date the Options expire in accordance with their terms or
(B) three years after the date of retirement, and the vesting of all or any
portion of any Options that had not become exercisable on or prior to the date
of retirement will be accelerated.  “Normal Retirement” means the Optionee’s
employment with the Company has terminated and the Optionee has reached age 65.

 

(e)  Early Retiremen.t Upon Early Retirement (defined below), Options will
expire and become unexercisable as of the earlier of (A) the date the Options
expire in accordance with their terms or (B) two

 

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years after the date of retirement, and the vesting of all or any portion of any
Options that had not become exercisable on or prior to the date of retirement
will continue on the same schedule as before without acceleration.  “Early
Retirement” means the Optionee’s employment with the Company has terminated and
the Optionee has reached age 55 and either (a) the Optionee’s age plus years of
service equals at least 70 if the Optionee has had no break in employment or
(b) the Optionee’s age plus years of service equals at least 75 if the Optionee
has had a break in service.

 

(f)  Other Terminations.  In the event of all other terminations of employment,
Options will expire and become unexercisable as of the earlier of (A) the date
the Options expire in accordance with their terms or (B) 90 days after the date
of termination, and all Options that are unvested at the date of termination
will be terminated and forfeited..

 

6.  Anti-Dilution Adjustments.  If the outstanding shares of Common Stock of the
Company are increased, decreased, changed into or exchanged for a different
number or kind of shares of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock
split, upon authorization of the Board or the Compensation Committee of the
Board (the “Committee”), an appropriate and proportionate adjustment shall be
made in the number or kind of Optioned Shares and the Option Price; provided,
however, that no such adjustment need be made if, upon the advice of counsel,
the Board or the Committee determines that such adjustment may result in the
receipt of federally taxable income to Optionee, to holders of other derivative
securities of the Company or holders of Common Stock or other classes of the
Company’s securities.

 

7.  Change in Control.

 

(a)  Effect of Change in Control.  As of the effective time and date of any
Change in Control, this Option (whether or not vested) will automatically
terminate unless: (i) provision is made in writing in connection with such
transaction for the continuance and assumption of this Option, or for the
substitution for such new awards covering the securities of a successor entity
or an affiliate thereof, with appropriate adjustments as to the number and kind
of securities and exercise prices or other measurement criteria, in which event
this Option will continue or be replaced, as the case may be, in the manner and
under the terms so provided; or (ii) the Board otherwise provides in writing for
such adjustments as it deems appropriate in the terms and conditions of this
Option (whether or not vested), including, without limitation, (A) accelerating
the vesting of this Option, and/or (B) providing for the cancellation of this
Option and its automatic conversion into the right to receive the securities,
cash or other consideration that a holder of the shares underlying this Option
would have been entitled to receive upon consummation of such Change in Control
had such shares been issued and outstanding immediately prior to the effective
date and time of the Change in Control (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this Section 7(a), this
Option terminates by reason of the occurrence of a Change in Control without
provision for any of the action(s) described in clause (i) or (ii) hereof, then
subject to Section 4 of this Agreement, the Optionee will have the right, at
such time prior to the consummation of the Change in Control as the Board
designates, to exercise or receive the full benefit of this Option to the full
extent not theretofore exercised, including any installments which have not yet
become vested.

 

(b)  Definition of Change in Control.  A “Change in Control” shall be as defined
in the Employment Agreement.

 

8.  Delivery of Certificates.  As soon as practicable after any proper exercise
of the Option in accordance with the provisions of this Agreement, the Company
shall deliver to Optionee at the main office of the Company, or such other place
as shall be mutually acceptable, a certificate or certificates representing such
shares of Common Stock to which Optionee is entitled upon exercise of the
Option.

 

9.  No Rights in Shares Before Issuance and Delivery.  Neither Optionee, his
estate nor his transferees by will or the laws of descent and distribution shall
be, or have any rights or privileges of, a stockholder of the Company with
respect to any shares issuable upon exercise of the Option, unless and until
certificates representing such shares shall have been issued and delivered. No
adjustment will be made for a dividend or their rights where the record date is
prior to the date such stock certificates are issued.

 

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10.  Nonassignability.  The Option is not assignable or transferable by Optionee
except by will, by the laws of descent and distribution, pursuant to a qualified
domestic relations order, or, in the discretion of the Company and under
circumstances that would not adversely affect the interests of the Company,
pursuant to a transfer for estate planning purposes or pursuant to a nominal
transfer that does not result in a change in beneficial ownership. The transfer
by a Participant to a trust created by the Participant for the benefit of the
Participant or the Participant’s family which is revocable at any and all times
during the Participant’s lifetime by the Participant and as to which the
Participant is the sole acting Trustee during his or her lifetime, will
ordinarily not be deemed to be a transfer for purposes of the Plan. Any
permitted transfer of the Option shall not prevent or otherwise modify
termination of the Option and its vesting following Optionee’s termination of
employment (as provided in Section 5 above) or in connection with a Change in
Control (as provided in Section 7 above).   During the lifetime of Optionee, the
Option shall be exercisable only by Optionee (or Optionee’s permitted
transferee(s)) or his or their guardian or legal representative.

 

11.  Certain Representations and Warranties.   Optionee expressly acknowledges,
represents and agrees as follows:

 

(a)  If Optionee proposes to transfer all or any part of the Option or the
Optioned Shares or uses Common Stock of the Company to pay the Option Price,
Optionee has been advised to consult with a competent tax advisor regarding the
applicable tax consequences prior to making such transfer or utilizing such
Common Stock to exercise the Option;

 

(b)  Optionee has been advised to consult with a competent federal securities
law advisor as to the reporting obligations and potential liability for profits
under Section 16 of the Exchange Act with respect to the granting, exercise and
transfer of the Option; and

 

(c)  Optionee hereby represents, warrants, acknowledges and covenants to the
Company that Optionee is, and upon exercise of the Option will be, acquiring the
Option and the Optioned Shares for his own account, not as nominee or agent, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the “Securities Act”). Optionee does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to any third person with respect to the Option or any of the
Optioned Shares.

 

12.  No Employment Rights or Obligations.   This Agreement does not confer upon
Optionee any right to continue as an employee of the Company or one of its
subsidiaries, nor does it limit in any way the right of the Company or a
subsidiary to terminate Optionee’s services to the Company or the subsidiary at
any time, with or without cause. Unless otherwise set forth in a written
agreement binding upon the Company or the subsidiary, Optionee’s employment by
the Company or a subsidiary is “at will.” Any questions as to whether and when
there has been a termination of Optionee’s employment, the reason (if any) for
such termination, and/or the consequences thereof under the terms of this
Agreement, shall be determined by the Board in its sole discretion, and the
Board’s determination thereof shall be final, binding and conclusive.

 

13.  Governing Law.   This Agreement shall be governed by, interpreted under,
and construed and enforced in accordance with the internal laws, and not the
laws pertaining to conflicts or choice or laws, of the State of California
applicable to agreements made and to be performed wholly within the State of
California.

 

14.  Agreement Binding on Successors.   The terms of this Agreement shall be
binding upon the executors, administrators, heirs, successors, transferees and
assigns of Optionee.

 

15.  Necessary Acts.  Optionee agrees to perform all acts and execute and
deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement, including but not limited to all acts and
documents related to compliance with federal and/or state securities and/or tax
laws.

 

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16.  Restrictions Under Applicable Laws and Regulations.

 

(a)  Government Approvals.  If at any time the Company determines, in its
discretion, that the listing, registration or qualification of the Optioned
Shares upon any securities exchange or interdealer quotation system or under any
federal, state or foreign law, or the consent or approval of any government or
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of this Option or the issuance of the Optioned Shares, this
Option may not be exercised as a whole or in part unless and until such listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions not acceptable to the Company. During the term of this
Option, the Company will use its reasonable efforts to seek to obtain from the
appropriate governmental and regulatory agencies any requisite qualifications,
consents, approvals or authorizations in order to issue the Optioned Shares. The
inability of the Company to obtain any such qualifications, consents, approvals
or authorizations will relieve the Company of any liability in respect of the
nonissuance or sale of the Optioned Shares.

 

(b)  No Registration Obligation; Recipient Representations.  The Company will be
under no obligation to register or qualify the issuance of the Option or the
Optioned Shares under the Securities Act or applicable state securities laws.
Unless the issuance of the Optioned Shares has been registered under the
Securities Act, and qualified or registered under applicable state securities
laws, the Company shall be under no obligation to issue the Optioned Shares
unless they may be issued pursuant to applicable exemptions from such
registration or qualification requirements. In connection with any such exempt
issuance, the Company may require Optionee to provide a written representation
and undertaking to the Company, satisfactory in form and scope to the Company,
that the Optionee is acquiring the Optioned Shares for his own account as an
investment and not with a view to, or for sale in connection with, the
distribution of the Optioned Shares, and that he will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, and other applicable law, and that if
the Optioned Shares are issued without registration, a legend to this effect
(together with any other legends deemed appropriate by the Company) may be
endorsed upon the Optioned Shares, and to the effect of any additional
representations that are appropriate in light of applicable securities laws and
rules. The Company may also order its transfer agent to stop transfers of such
shares. The Company may also require the Optionee to provide the Company such
information and other documents as the Company may request in order to satisfy
the Company as to the investment sophistication and experience of the Optionee
and as to any other conditions for compliance with any such exemptions from
registration or qualification.

 

17.  Lock-Up Agreements.  The Optionee agrees as a condition to receipt of the
Option that, in connection with any public offering by the Company of its equity
securities and upon the request of the Company and the principal underwriter (if
any) in such public offering, any Optioned Shares acquired or that may be
acquired upon exercise or vesting of this Option may not be sold, offered for
sale, encumbered, or otherwise disposed of or subjected to any transaction that
will involve any sales of securities of the Company, without the prior written
consent of the Company or such underwriter, as the case may be, for a period of
not more than 365 days after the effective date of the registration statement
for such public offering. The Optionee will, if requested by the Company or the
principal underwriter, enter into a separate agreement to the effect of this
Section 17.

 

18.  Interpretation.  Headings herein are for convenience of reference only, do
not constitute a part of the Agreement, and will not affect the meaning or
interpretation of the Agreement. References herein to Sections are references to
the referenced Section hereof, unless otherwise specified.

 

19.  Severability.  Should any provision of this Agreement be held to be
unenforceable or invalid for any reason, the remaining portions or provisions of
this Agreement shall be unaffected by such holding.

 

20.  Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall be
deemed one instrument.

 

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IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
effective as of the Grant Date.

 

 

FLEETWOOD ENTERPRISES, INC.,

 

OPTIONEE

a Delaware corporation

 

 

 

 

 

By:

/s/ Leonard J. McGill

 

/s/ Elden L. Smith

 

Leonard J. McGill

 

Elden L. Smith

 

Sr. Vice President and General Counsel

 

 

 

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