Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is entered into as
of April 1, 2011 (the “Effective Date”) by and between CAVCO INDUSTRIES, INC., a
Delaware corporation (the “Company”), and JOSEPH H. STEGMAYER, an individual
resident of the State of Arizona (the “Executive”).
The Company and Executive hereby agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, the following
definitions shall apply:
“Annual Bonus” shall mean the bonus paid based upon pretax income for each
fiscal year of the Company pursuant to Section 5(b)(i) of this Agreement.
“Average Bonus” shall mean the result obtained by dividing by two the sum of the
Annual Bonus payments, if any, paid to the Executive in respect of the two
(2) fiscal years next preceding the fiscal year in which the Average Bonus is
due.
“Board” shall mean the Board of Directors of the Company.
“Breach” shall mean a breach by either the Executive or the Company, as the case
may be, of a term of this Agreement which breach remains uncured at the end of
the applicable “cure period.” In the case of a Breach by the Company, the “cure
period” will be the 30 day period beginning on the day of its receipt of written
notice from Executive specifying the provision of this Agreement which Executive
believes has been violated. In the case of a breach by Executive, the “cure
period” shall be the 30 day period described below in the definition of
“Termination for Good Reason.”
“Change in Control” shall be deemed to have occurred if: (i) the Company merges
or consolidates with any other corporation (other than a Subsidiary) and is not
the surviving corporation (or survives only as a Subsidiary of another
corporation), (ii) the Company sells all or substantially all of its assets to
any other person or entity (other than a Subsidiary), (iii) the Company is
dissolved, or (iv) a third person, including a “group” as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of
shares of Cavco Common Stock having 50% or more of the total number of votes
that may be cast for the election of directors of the Company; or as a result
of, or in connection with, a contested election for directors, the persons who
were directors of the Company before such election shall cease to constitute a
majority of the Board of the Company. Notwithstanding any provision of this
paragraph, an event, transaction, or corporate action described in this
Subsection which would otherwise be deemed a Change in Control, will not be
deemed a Change in Control if: it is a management led or supported transaction
by persons who were the directors of the Company and persons who were the
executive officers of the Company as of six months prior to such event; and if
immediately after such event such persons constitute a majority of the directors
and constitute a majority of executive officers for, and own in the aggregate at
least fifteen percent of the voting securities or interest of, the Company or
the surviving or resulting corporation or the parent of the resulting
corporation. Notwithstanding anything in this Agreement to the contrary, an
event will not be considered a Change in Control unless the event also qualifies
as a “change in control event” as defined in Treas. Reg. §1.409A-3(i)(5)(i). In
addition, an event will not be considered a Change in Control unless the
transaction which will result in the Change in Control closes.

 

 

--------------------------------------------------------------------------------

 

“Code” means the Internal Revenue Code of 1986.
“Common Stock” means the common stock of the Company, par value $.01 per share.
“Compensation Committee” shall mean the Compensation Committee of the Board of
Directors of the Company.
“Disability” shall mean that the Executive, with or without any accommodation
required by law, is, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident and health
plan covering employees of the Company. For purposes of this Agreement, the
Executive will be deemed to have a “Disability” on the last day of the third
month for which the Executive receives the income replacement benefits.
“Plan” means the Cavco Industries, Inc. 2005 Stock Incentive Plan as it may be
amended from time to time, or such other plan that may be adopted by the
Company.
“Subsidiary” shall mean a corporation, partnership, joint venture, limited
liability company, or any other entity in which the Company owns 50% or more of
the stock, partnership interests, joint venture interests, membership interests,
or other equity in such entity, or controls, through the right to vote for the
management of the entity or otherwise, such entity, and shall include all
entities which are controlling, controlled by, or under common control with such
corporation, partnership, joint venture, limited liability company, or other
entity.
“Termination for Cause” shall mean the Company’s termination of the Executive’s
employment pursuant to a determination by the Board, in its sole and absolute
discretion, but acting in good faith, that the Executive is guilty of engaging
in acts during the Term of this Agreement that constitute theft, dishonesty,
fraud, or embezzlement, or that constitute willful and repeated insubordination.
“Termination for Good Reason” shall mean the Executive’s termination of this
Agreement and the Executive’s employment for “Good Reason.” For purposes of this
Agreement, “Good Reason” means the occurrence of any of the following (unless
Executive has expressly agreed to such event in a signed writing): (i) a
material diminution in the Executive’s authority, duties, or responsibilities;
(ii) a material diminution in the authority, duties or responsibilities of the
supervisor to whom the Executive is required to report, including a requirement
that the Executive report to an officer or employee of the Company instead of
reporting directly to the Company’s Board; or (iii) the Company’s material
Breach of this Agreement.

 

2

--------------------------------------------------------------------------------

 

The Executive must provide the Company with written notice of the occurrence of
the action or Breach giving rise to Good Reason within 90 days of the initial
existence of such action or Breach. Notwithstanding any provisions of this
Agreement to the contrary, none of the events described above will constitute
Good Reason if, within 30 days after the Executive provides the Company with a
written notice specifying the occurrence or existence of the action or Breach
that the Executive believes constitutes Good Reason, the Company has fully
corrected (or reversed) such action or Breach. Executive’s employment will
terminate on the day following the expiration of this 30 day “cure period,”
unless the Executive and the Company agree to a later date (not later than two
years following the initial existence of such breach or action). The Executive
shall be deemed to have waived his right to terminate for Good Reason with
respect to any such action or breach if he does not notify the Company in
writing of such action or breach within 90 days of the event that gives rise to
such action or Breach.
“Termination Without Cause” shall mean the Company’s termination of the
Executive’s employment for any reason other than a Termination for Cause.
All other defined terms set forth in the text of this Agreement will have the
meaning assigned to them in this Agreement.
SECTION 2. Employment. From and after the Effective Date, the Company will
employ the Executive upon the terms and conditions set forth herein.
SECTION 3. Term. Subject to the terms and conditions set forth herein, the
Executive shall be employed for a term commencing on the Effective Date and
ending on March 31, 2015 (the “Initial Term”), unless earlier terminated as
provided in this Agreement. Thereafter, the term of this Agreement shall
automatically be extended for successive one (1) year periods (“Renewal Terms”)
unless either the Board or the Executive gives written notice to the other at
least ninety (90) days prior to the end of the Initial Term or any Renewal Term,
as the case may be, of its or his intention not to renew the term of this
Agreement. The Initial Term and any Renewal Terms of this Agreement shall be
collectively referred to as the “Term.”
SECTION 4. Duties and Responsibilities.
(a) The Executive shall serve in the capacity of Chairman of the Board,
President and Chief Executive Officer of the Company, subject to the direction
of the Board of Directors of the Company. The Executive’s duties under this
Agreement shall consist of the performance of such services as are consistent
with the responsibilities of said office and such other services commensurate
with his position as a senior executive of the Company as may be assigned to him
from time to time by the Board. Such duties shall be performed within the
policies and guidelines established from time to time by the Board, subject at
all times to the ultimate control and direction of the Board.
(b) At all times during the Term, the Executive shall devote substantially all
of his business time, attention and energies to the performance of his duties
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair his ability to fulfill his duties to the Company
under this Agreement, without the prior written consent of the Board.

 

3

--------------------------------------------------------------------------------

 

(c) The Executive shall perform his duties under this Agreement with fidelity
and loyalty, to the best of his ability, experience and talent and in a manner
consistent with his fiduciary responsibilities.
SECTION 5. Compensation.
(a) Base Salary. During the Term, the Company shall pay a salary (the “Base
Salary”) to the Executive as set forth in following schedule, payable in
accordance with the general payroll practices of the Company in effect from time
to time.

          PERIOD   ANNUAL SALARY  
April 1, 2011 to March 31, 2012
  $ 400,000  
April 1, 2012 to March 31, 2013
  $ 450,000  
April 1, 2013 to March 31, 2015
  $ 500,000  

Notwithstanding the foregoing, the Compensation Committee may review the
Executive’s Base Salary at any time and in its sole discretion adjust the
Executive’s then current Base Salary; provided, however, that the Compensation
Committee may not decrease the Executive’s then current Base Salary without the
prior written consent of the Executive. If the term of this Agreement is
extended into a Renewal Term as provided in Section 3 above, then the annual
salary of the Executive shall be determined by the Compensation Committee in its
reasonable business judgment provided that in no event may the Compensation
Committee decrease the annual salary of the Executive below that of any previous
fiscal year during the Renewal Term.
(b) Bonus.
(i) Annual Bonus. In addition to the payment of Base Salary, for each fiscal
year of the Company during the Term, the Executive shall be awarded cash in an
amount equal to (i) five percent (5%) of the first $4 million of pretax income
of the Company, plus (ii) six percent (6%) of the next $16 million of pretax
income of the Company, plus (iii) three percent (3%) of pretax income of the
Company above $20 million, provided that the cash award on pre-tax earnings of
any material assets or businesses acquired after June 30, 2011 shall be
determined by the Compensation Committee in its sole judgment, in good faith, in
consultation with the Executive (with “material” being determined by the
Compensation Committee in good faith). The amount of pretax income of the
Company, upon which the award is made, will be determined by the Board after the
conclusion of the relevant fiscal year. The Annual Bonus shall be made pursuant
to Section 7(e) of the Plan (or similar provision in any other plan that may be
adopted by the Company) in accordance with Section 162(m) of the Code. The
Annual Bonus payable to the Executive for any fiscal year of the Company may not
exceed the limit set forth in Section 7(f)(iii) of the Plan. The cash bonus
payment described in this Section 5(b)(i) shall be paid to the Executive in a
single lump sum payment within 65 days following the end of the fiscal year for
which Executive earns such cash bonus.

 

4

--------------------------------------------------------------------------------

 

(ii) Other Bonus Awards.
(1) Special Performance Bonus. The Executive shall be awarded cash in the sum of
$1 million (or a percentage thereof as indicated below), conditioned upon the
attainment of the following 4-year compounded annual growth rate
(CAGR) performance targets, using the Company’s pre-tax earnings for the four
fiscal quarters ended on December 31 2010 as a base year (i.e., calendar year
2010) compared to the four fiscal quarters ending December 31, 2014 (i.e.,
calendar year 2014):

          FOUR YEAR CAGR   PERCENT VESTING  
Below 30%
    0 %
30% to 39.9%
    50 %
40% to 49.9%
    80 %
50% and up
    100 %

If the four-year CAGR in pre-tax earnings exceeds 30% but is less than 50%, the
Compensation Committee shall compute the percent vesting pro-rata using linear
interpolation to the nearest tenth of percent of vesting (as an example only, if
four-year CAGR is computed at 35%, then vesting would be 65%). This cash award
shall be paid promptly after December 31, 2014 as soon as practicable after the
Company files its financial statements for the quarter ending December 14, 2014
with the Securities and Exchange Commission (but no later than February 28,
2015) upon confirmation by the Compensation Committee of achievement of the
performance target(s).
(2) On December 31, 2014, the Executive shall be awarded cash in the sum of
$3 million. The cash bonus payment described in this Section 5(b)(ii)(2) is
subject to the requirements of Section 409A of the Code and shall be payable in
accordance with Section 10 in $500,000 increments (together with simple interest
at 5% per annum on the unpaid balance) on a date selected by the Company between
January 1 and January 30 in each of years 2015 through 2020.
(iii) Subject to the provisions of Section 5(b)(iv) below, the payment of any
bonus under Section 5(b)(ii) shall be conditioned upon the Executive’s
employment by the Company on December 31, 2014.
(iv) With respect to the bonuses set forth in Section 5(b)(ii), vesting shall
accelerate in the event of (a) a Change in Control, (b) Separation from Service
due to a Termination Without Cause or a Termination for Good Reason, (c) the
Executive’s death, or (d) the Executive’s Disability. Subject to the
requirements of Section 9(e) in the event of a Termination Without Cause, and
subject to the requirements of Section 10, payment then will be made within
65 days following the occurrence of the event (e.g., the closing of the
transaction that results in the Change in Control, the Executive’s Separation
from Service or the Executive’s death or Disability) that results in the
payment. The Executive may not select the calendar year of payment. In the case
of the “Special Performance Bonus” provided pursuant to Section 5(b)(ii)(1), in
calculating the amount of the bonus, it will be assumed that the performance
goal was satisfied at the 100% level. Notwithstanding the foregoing, the
payments and benefits provided in this Section 5 are subject to and conditioned
upon the Executive executing a general release and waiver (in the form
reasonably acceptable to the Company), waiving all claims the Executive may have
against the Company, its successors, assigns, affiliates, executives, officers
and directors, and such payments are subject to and conditioned upon the
Executive’s compliance with the Noncompetition covenants provided in Section 9
hereof.

 

5

--------------------------------------------------------------------------------

 

(v) In the event the Executive Separates from Service for any reason after
December 31, 2014 (e.g., Separation from Service due to retirement, voluntary
resignation by Executive, Termination for Cause, Termination Without Cause,
Termination for Good Reason, termination without Good Reason, or upon death, or
Disability), before or after a Change in Control, any bonus payable under
Section 5(b)(ii) that has not been paid, including accrued but unpaid interest
under Section 5(b)(ii)(2), shall, subject to Section 10 below, be paid to
Executive (or his heirs or executors) within 65 days following the occurrence of
the event that results in the payment. The Executive may not select the calendar
year of payment.
(c) Stock Options. The Executive shall be entitled to receive an annual grant of
options in each fiscal year during the term of this Agreement to acquire shares
of the Common Stock of the Company, the value of which shall equal 100% of the
Executive’s then Base Salary using the Black-Scholes option value model (i.e.,
the number of shares shall equal the grant date Base Salary divided by the
Black-Scholes option value. For example, assuming a Base Salary of $400,000 and
a Black-Scholes option value of $20 per share, a grant of 20,000 shares would be
made). The number of shares to be granted shall be rounded to the nearest 500
shares and shall not exceed the maximum grant limit for an individual as set
forth in the Plan. Vesting criteria (and achievement of such) and vesting timing
shall be at the sole discretion of the Compensation Committee.
Each such option grant shall be made from, and shall be subject to the standard
terms set forth in, the Plan and shall be memorialized in a written agreement.
The per share exercise price of options will be equal to the fair market value
of Cavco Common Stock on the date of the grant, as determined in accordance with
the Plan.
(d) Expense Reimbursement. During the Term, the Executive shall be entitled to
receive prompt reimbursement for all reasonable out-of-pocket expenses incurred
in the reasonable discretion of the Executive in connection with the due and
proper performance of his duties hereunder in accordance with the Company’s
regular practices with respect to other similarly situated executives of the
Company.
(e) Incentive, Savings and Retirement Plans. During the Term, the Executive
shall be entitled to participate in all incentive, savings and retirement plans
(whether or not qualified under the Code) as amended, established or adopted and
maintained by the Company from time to time, in accordance with the Company’s
regular practices applicable to other similarly situated executives of the
Company. The provisions of this Section 5(e) shall not affect in any way the
rights of the Company to amend or terminate any such incentive, savings or
retirement plans in accordance with the terms of such plans and the provisions
of applicable law.
(f) Group Benefit Plans. During the Term, the Executive shall be entitled to
participate in all group benefit plans (including, but not limited to,
disability, accident, medical, life insurance and hospitalization plans)
established or adopted and maintained by the Company from time to time, in
accordance with the Company’s regular practices applicable to other similarly
situated executives of the Company. The provisions of this Section 5(f) shall
not affect in any way the rights of the Company to amend or terminate any such
group benefit plans in accordance with the terms of such plans and the
provisions of applicable law.

 

6

--------------------------------------------------------------------------------

 

(h) Vacation. The Executive shall be entitled to such vacation, holidays and
other paid or unpaid leaves of absence as are consistent with the Company’s
normal policies or as are otherwise approved by the Company.
(i) Withholding. All cash payments made to Executive shall be subject to
customary federal, state and local income tax withholding.
SECTION 6. Termination and Resignation. The Company shall have the right to
terminate the Executive’s employment hereunder at any time and for any reason,
and upon any such termination the Executive shall be entitled to receive from
the Company prompt payment of the amount determined pursuant to the applicable
Subsection of Section 7 below. The Executive shall have the right to terminate
his employment hereunder at any time by resignation, and thereupon the Executive
will be entitled to receive from the Company prompt payment of the amount
determined pursuant to the applicable Subsection of Section 7 below.
SECTION 7. Payments Upon Termination and Resignation.
(a) Termination for Cause; Voluntary Resignation. In the event of a Termination
for Cause, or if the Executive voluntarily resigns prior to the occurrence of a
Change in Control of the Company and such resignation does not constitute a
Termination for Good Reason, then the Executive shall be entitled to receive
only his then current Base Salary up to the date of the Executive’s termination
or resignation, as the case may be. The Executive shall not be entitled to the
cash bonus described in Section 5(b)(i) for the year of such termination or
resignation.
(b) Termination Prior to a Change in Control. If, prior to the occurrence of a
Change in Control, Executive dies or becomes Disabled, or if the Executive’s
employment is terminated as the result of a Termination Without Cause or if the
Executive terminates his employment for Good Reason, and in each case such
termination constitutes a Separation from Service as defined in Section 10, the
Executive (or his heirs or executors) shall be entitled to the following:
(i) Continued payment of Executive’s then current Base Salary for the remaining
Term of this Agreement plus one (1) year following the expiration of the Term of
the Agreement. Subject to Section 10, the Base Salary payments to which the
Executive is entitled pursuant to this Section 7(b)(i) shall be paid in
accordance with the Company’s normal payroll procedures commencing on the first
pay period immediately following the date on which the Executive dies, becomes
Disabled or incurs a Separation from Service due to a Termination without Cause
or a Termination for Good Reason, as the case may be.
(ii) A single lump sum cash payment in an amount equal to two times the Average
Bonus. The lump sum payment to which the Executive is due pursuant to this
Section 7(b)(ii) shall be paid to Executive in a single lump sum payment within
65 days following the date on which the Executive dies, becomes Disabled or
incurs a Separation from Service, due to a Termination without Cause or a
Termination for Good Reason, as the case may be. The Executive may not select
the calendar year of payment.

 

7

--------------------------------------------------------------------------------

 

(iii) Continued health insurance benefits, at substantially the level the
Executive was receiving immediately prior to the date on which the Executive
dies, becomes Disabled or incurs a Separation from Service, as the case may be,
for a period of 18 months following the date on which the Executive dies,
becomes Disabled or incurs a Separation from Service, due to a Termination
without Cause or a Termination for Good Reason, as the case may be. The Company
will satisfy the obligation to provide the health insurance benefits pursuant to
this Section 7(b)(iii) by either paying for or reimbursing the Executive for the
actual cost of COBRA coverage (and Executive shall cooperate with Company in all
respects in securing and maintaining such benefits, including exercising all
appropriate COBRA elections and complying with all terms and conditions of such
coverage in a manner to minimize the cost). In order to ensure compliance with
Section 409A of the Code, the amount of expenses eligible for reimbursement, or
the amount of benefits provided to the Executive, in one taxable year may not
affect the expenses eligible for reimbursement or the amount of benefits
provided in any other taxable year. All reimbursements must be made no later
than December 31 of the calendar year following the calendar year in which the
expense was incurred. The Executive may not elect to receive cash or any other
benefit in lieu of the benefits provided by this Section 7(b)(iii). The
Company’s obligation under this Section 7(b)(iii) will cease when and if the
Executive becomes eligible to receive substantially similar coverage with a
successor employer.
(c) Termination Following a Change in Control. If within two years after the
occurrence of a Change in Control of the Company: (i) the Executive’s employment
is terminated as the result of a Termination Without Cause, or (ii) the
executive voluntarily resigns his employment hereunder for any reason, and in
each case such termination constitutes a Separation from Service as defined in
Section 10, the Company will pay to the Executive a lump sum termination payment
equal to two times the sum of the Executive’s then current Base Salary and
Average Bonus. Subject to Section 10, the lump sum termination payment described
in this Section 7(c) will be paid to the Executive within 65 days following the
Executive’s Separation from Service. If the Executive receives payments pursuant
to this Section 7(c), no payments will be due pursuant to Section 7(b). The
Executive may not select the calendar year of payment.
(d) Notwithstanding the foregoing, the payments and benefits provided in this
Section 7 are subject to and conditioned upon the Executive executing a general
release and waiver (in the form reasonably acceptable to the Company), waiving
all claims the Executive may have against the Company, its successors, assigns,
affiliates, executives, officers and directors, and such payments are subject to
and conditioned upon the Executive’s compliance with the Noncompetition
covenants provided in Section 9 hereof.
SECTION 8. Confidentiality. The Executive recognizes and acknowledges that the
names of the Company’s customers, the Company’s methods of operation, sales,
engineering and other trade secrets, as they may exist from time to time, are
valuable, special and unique assets of the Company. The Executive shall not,
during or after the term of his employment under this Agreement, disclose any
such names or other trade secrets, or any part thereof, that he becomes aware of
during his employment, to any person, firm, corporation, association or other
entity.

 

8

--------------------------------------------------------------------------------

 

SECTION 9. Non-competition.
(a) During the Term of this Agreement and for a period of two years following
the resignation of the Executive, a Termination for Cause, a Termination Without
Cause (but subject to Section 9(d) below), or a Termination for Good Reason (and
in no event for a period of less than four years from the Effective Date) the
Executive shall not:
(i) engage in any Competing Business, or become associated with any entity,
whether as a principal, partner, employee, consultant, shareholder or otherwise
(other than as a holder of not in excess of 5% of the outstanding voting shares
of any publicly traded company) that is actively engaged in any Competing
Business, in the Business Territory. The term “Competing Business” means: the
manufacturing, distribution, sale (wholesale and retail), financing (wholesale
and retail), and insuring of manufactured homes, modular homes, park model
recreational trailers and cabins, and modular commercial structures. The term
“Business Territory” means: any geographic area in which the Company conducts
business or sells products as of the Effective Date or at the time of the
alleged competition; provided, however, if a court determines such a geographic
scope is unenforceable, Business Territory shall mean the continent of North
America; provided, however, if a court determines such a geographic scope is
unenforceable, Business Territory shall mean the 48 continental states and the
southern portion of Canada (for the purposes of this Agreement, the “Southern
Portion” of Canada is that area within 200 miles of the Unites States Border);
provided, however, if a court determines such a geographic scope is
unenforceable, Business Territory shall mean the United States; provided,
however, if a court determines such a geographic scope is unenforceable,
Business Territory shall mean any state to which the Company has shipped a
manufactured home, modular home, park model recreational trailer, cabin, or
modular commercial structure in the twenty-four (24) month period prior to the
date of this Agreement; provided, however, if a court determines such a
geographic scope is unenforceable then Business Territory shall mean any
location within a fifty (50) mile radius of any Company office or manufacturing
facility.
(ii) except in connection with the due and proper performance of his duties
hereunder, solicit or contact (with respect to any business conducted by the
Company or any of its subsidiaries) retailers, dealers, suppliers, financing
parties, customers or potential customers on behalf of any corporation or other
entity or any other person engaged in any business conducted by the Company or
any of its subsidiaries or affiliates.
(iii) solicit or otherwise induce any employee of the Company or any of its
subsidiaries to terminate his or her service with the Company or any such
subsidiary, or hire any person who was an employee of the Company or any such
subsidiary at any time during the 6-month period immediately prior to the date
of termination or expiration of the Executive’s employment hereunder.
(b) It is hereby agreed by and between the Executive and the Company that if a
court of competent jurisdiction determines that the four (4) year
non-competition and non-solicitation periods identified in this Section 9 are
too broad to be enforced, the parties agree that the non-solicitation period
shall be three (3) years in duration. If a court of competent jurisdiction
determines that this non-solicitation period as modified is still too broad to
be enforced, the parties agree that the non-solicitation period shall be two
(2) years in duration.

 

9

--------------------------------------------------------------------------------

 

(c) The Executive and the Company agree that the covenants set forth herein are
appropriate and reasonable when considered in light of the nature and extent of
the businesses conducted by the Company and its subsidiaries. The Executive
acknowledges that (i) the Company has a legitimate interest in protecting its
business, (ii) the covenants set forth herein are not oppressive to the
Executive and contain such reasonable limitations as to time, scope,
geographical area and activity, (iii) the covenants do not harm in any manner
whatsoever the public interest, and (iv) the Executive has received and will
receive substantial consideration for agreeing to such covenants.
(d) It is further agreed that in the event of a Termination Without Cause prior
to December 31, 2014, Executive may elect, immediately after such discharge, by
written notice which, to be effective, must be received by the Company on or
before the tenth (10th) day after such discharge, to forego the bonuses payable
under Section 5(ii) in which case the Non-Compete provisions of Section 9(a)(i)
herein shall be null and void.
SECTION 10. Section 409A.
(a) The Company intends, but cannot warrant or guarantee, that this Agreement
complies with the requirements of Section 409A of the Code or any amendments or
exceptions thereto. This Agreement shall be operated in compliance with
Section 409A of the Code or an exception thereto and each provision of this
Agreement shall be interpreted, to the extent possible, to comply with
Section 409A of the Code or an exception thereto.
(b) If the Executive is a “Specified Employee” (as defined in Treasury
Regulation §1.409A-1(i)) on the date on which the Executive incurs a Separation
from Service, the payments described in Sections 5(b)(v), 7(b)(i), and 7(c), to
the extent such payments are subject to the requirements of Section 409A (and do
not qualify for an exception thereto) shall not be made to Executive prior to
the first (1st) business day following the date which is six (6) months
following the date on which the Executive’s Separation from Service occurs. Any
amounts that would have been paid during the six (6) months following the
Executive’s Separation from Service will be paid on the first business day
following the expiration of the six-month period without interest thereon.
(c) For purposes of this Agreement, the term “Separation from Service” means,
either (i) termination of the Executive’s employment with the Company and all
Affiliates, or (ii) a permanent reduction in the level of bona fide services the
Executive provides to Company and all Affiliates to an amount that is 20% or
less of the average level of bona fide services the Executive provided to the
Company in the immediately preceding 36 months, with the level of bona fide
service calculated in accordance with Treasury Regulation §1.409A-1(h)(1)(ii).
For purposes of determining whether a Separation from Service has occurred under
this Section 10, the term “Affiliate” shall have the meaning assigned in
Treasury Regulation §1.409A-1(h)(3) (which generally requires fifty percent
(50%) common ownership).

 

10

--------------------------------------------------------------------------------

 

The Executive’s employment relationship is treated as continuing while the
Executive is on military leave, sick leave, or other bona fide leave of absence
(if the period of such leave does not exceed six (6) months, or if longer, so
long as the Executive’s right to reemployment with Company or an Affiliate is
provided either by statute or contract). If the Executive’s period of leave
exceeds six (6) months and the Executive’s right to reemployment is not provided
either by statute or by contract, the employment relationship is deemed to
terminate on the first day immediately following the expiration of such
six-month period. Whether a Separation from Service has occurred will be
determined based on all of the facts and circumstances and in accordance with
regulations issued by the United States Treasury Department pursuant to
Section 409A of the Code.
(d) If the Company fails to make any payment, either intentionally or
unintentionally, within the time period specified in this Agreement, but the
payment is made within the same calendar year, such payment will be treated as
made within the time period specified in this Agreement pursuant to Treasury
Regulation §1.409A-3(d). In addition, if a payment is not made due to a dispute
with respect to such payment, the payment may be delayed in accordance with
Treasury Regulation §1.409A-3(g).
(e) Under no circumstances may the time or schedule of any payment made or
benefit provided pursuant to this Agreement be accelerated or subject to a
further deferral except as otherwise permitted or required pursuant to
regulations and other guidance issued pursuant to Section 409A of the Code. The
Executive does not have any right to make any election regarding the time or
form of any payment due under this Agreement.
SECTION 11. Miscellaneous.
(a) Entire Agreement; Amendment; Termination of Previous Agreement. This
Agreement cancels and supersedes all previous agreements relating to the subject
matter of this Agreement, written or oral, between the parties hereto (including
for periods of time on and after April 1, 2011, the Employment Agreement dated
June 30, 2003 between Employee and Company, as amended by the First Amendment to
Employment Agreement, dated March 26, 2007 and the Amendment to Employment
Agreement dated December 29, 2010, provided that such Employment Agreement, as
amended, shall continue in full force and effect for periods of time prior to
April 1, 2011) and contains the entire understanding of the parties hereto with
respect to the subject matter hereof and shall not be amended, modified or
supplemented in any manner whatsoever except as otherwise provided herein or in
writing signed by each of the parties hereto.
(b) Reimbursement of Legal Expenses. If at any time the Executive (or his
beneficiary or beneficiaries, or his estate, as the case may be) shall commence
any legal action to enforce any of the terms or provisions of this Agreement,
including, without limitation, any term or provision requiring the payment of
compensation to the Executive hereunder, whether in installments or in a lump
sum, or the payment of the severance benefit hereunder, and such legal action
results in a decision favorable to the person so commencing such action, the
Company agrees to reimburse such person for all costs and expenses of such
action, including reasonable attorney’s fees, incurred by such person in
connection therewith. The reimbursement payment to which any person becomes
entitled pursuant to this Section 11(b) shall be paid to such person on or
before March 15 of the calendar year following the calendar year in which the
favorable decision is rendered.

 

11

--------------------------------------------------------------------------------

 

(c) Succession. This Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns, including without limitation, any
person, partnership or corporation which may acquire all or substantially all or
a majority of the Company’s assets and business, or with or into which the
Company may be consolidated or merged, and this provision shall apply in the
event of any subsequent mergers, consolidations, and transfers, and shall be
binding upon the Executive, his heirs and personal representatives.
(d) No Waiver. The failure of either party to insist, in any one or more
instances, upon performance of any of the terms or conditions of this Agreement
shall not be construed as a waiver or a relinquishment of any right granted
hereunder or of the future performance of any such term or condition, but the
obligation of the other party with respect thereto shall continue in full force
and effect.
(e) Notice. Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company in writing and personally delivered or
mailed by certified mail to its office at 1001 N. Central Avenue, 8th Floor,
Phoenix, Arizona 85004, Attn: Secretary. Any notice to be given to the Executive
hereunder shall be deemed sufficient if addressed to the Executive in writing
and personally delivered or mailed by certified mail to 1001 N. Central Avenue,
8th Floor, Phoenix, Arizona 85004, Attn: Joseph H. Stegmayer, Chief Executive
Officer. Either party may, by notice as aforesaid, designate a different address
or addresses.
(f) Severability. Subject to the provisions of Section 9 (but only with respect
to any court determinations described in Section 9(a)(i) and Section 9(b)), in
the event any provision of this Agreement shall be held to be illegal, invalid
or unenforceable for any reason, the illegality, invalidity, or unenforceability
shall not affect the remaining provisions hereof, but such illegal, invalid or
unenforceable provision shall be fully severable and this Agreement shall be
construed and enforced as if the illegal, invalid or unenforceable provision had
never been included herein.
(g) Headings; Drafting. The titles and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof. Neither this Agreement nor any provision contained in
this Agreement will be interpreted in favor of or against any party hereto
because such party or its legal counsel drafted this Agreement or such
provision.
(h) Word Usage. Words used in the masculine shall apply in the feminine where
applicable, and wherever the context of this Agreement dictates, the plural
shall be read as the singular and the singular as the plural.
(i) Governing Law. This Agreement shall be governed in all respects by, and
construed and interpreted with, the substantive laws of the State of Arizona
(without giving effect to any conflict of laws rule, principle, statute or
regulation that would result in the application of the laws of another
jurisdiction).

 

12

--------------------------------------------------------------------------------

 

(j) Counterparts. This Agreement may be executed in one or more counterparts
(including by facsimile or portable document format (pdf)) for the convenience
of the parties hereto, each of which will be deemed an original, but all of
which together will constitute one and the same instrument, notwithstanding that
both parties are not signatories to the same counterpart.
(k) Action by the Company. Any action or decision to be made by the Company
under this Agreement shall be made by the Compensation Committee unless this
Agreement expressly provides that such action or decision is to be made by the
Board (but, in such an event, without the participation by the Executive in the
vote with respect to such decision or action).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
CAVCO INDUSTRIES, INC.,
a Delaware corporation

         
By:
  /s/ David A. Greenblatt
 
David A. Greenblatt    
 
  Chairman, Compensation Committee of the Board of Directors    
 
        EXECUTIVE    
 
        /s/ Joseph H. Stegmayer           Joseph H. Stegmayer, an individual
resident of the State of Arizona    

 

13