Document:

exv10w6

 

EXHIBIT 10.6

CAVCO INDUSTRIES, INC. STOCK INCENTIVE PLAN

(Effective
June   ,  2003)

	1.	 	Objectives. The Cavco Industries, Inc. Stock Incentive Plan (the “Plan”)
is designed to retain selected Directors of Cavco Industries, Inc. and
employees of Cavco Industries, Inc. and all subsidiaries, partnerships and
affiliates with regard to which Cavco Industries, Inc. owns, directly or
indirectly, at least 80% of the ownership interest therein, and reward
them for making significant contributions to the success of Cavco
Industries, Inc. These objectives are to be accomplished by making awards
under the Plan and thereby providing Participants with a financial
interest in the growth and performance of the Company. The Plan shall not
constitute a “qualified plan” subject to the limitations of Section 401(a)
of the Code, nor shall it constitute a “funded plan” for purposes of such
requirements. This Plan shall be exempt from the participation, vesting,
funding requirements and the fiduciary requirements of the Employee
Retirement Income Security Act of 1974 , as amended (“ERISA”).
	 
	2.	 	Definitions. As used herein, the terms set forth below shall have the
following respective meanings:

	 	 	 	"Act” means the Securities Exchange Act of 1934, as amended.
	 
	 	 	 	"Administrator” means the Compensation Committee of the
Board which will be comprised of two or more nonemployee
Directors.
	 
	 	 	 	"Affiliate” means any direct or indirect subsidiary or
parent of Cavco Industries and any partnership, joint
venture, limited liability company or other business venture
or entity in which Cavco Industries owns directly or
indirectly at least 80% of the ownership interest in such
entity, as determined by the Administrator in its sole and
absolute discretion (such determination by the Administrator
to be conclusively established by the grant of an Award by
the Administrator to an officer or employee of such an
entity).
	 
	 	 	 	"Award” means a Cash Award, Option, Restricted Stock Award,
or Restricted Stock Unit Award.
	 
	 	 	 	“Award Agreement” means an agreement between Cavco
Industries and a Participant that sets forth the terms,
conditions and limitations applicable to an Award.
	 
	 	 	 	"Beneficiary” means such person or persons, or the trustee
of an inter vivos trust for the benefit of natural persons,
designated by the Participant in a written election filed
with the Administrator as entitled to receive the
Participant’s Award(s) in the event of the Participant’s
death, or if no such 

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	 	 	 	election shall have been so filed, or
if no designated Beneficiary survives the Participant or can
be located by the Administrator, the person or persons
entitled thereto under the last will of such deceased
Participant, or if such decedent left no will, to the legal
heirs of such decedent determined in accordance with the
laws of intestate succession of the state of the decedent’s
domicile.

	 	 	 	"Board” means the Board of Directors of Cavco Industries, as
the same may be constituted from time to time.
	 
	 	 	 	“Cash Award” means an award denominated in cash.
	 
	 	 	 	"Cavco Industries” means Cavco Industries, Inc., a Delaware
corporation, or any successor thereto.
	 
	 	 	 	“Change in Control” unless otherwise defined by the Committee,
means a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended,
whether or not the Cavco Industries is then subject to such
reporting requirement; provided, that, without limitation, such a
change in control shall be deemed to have occurred if:
	 
	 	 	 	(i) a third person, including a “Group” as defined in Section
13(d)(3) of the Act, becomes the beneficial owner of Shares having
fifty (50) percent or more of total number of votes that may be
cast for the election of Directors; or
	 
	 	 	 	(ii) as a result of, or in connection with, a contested election
for Directors, persons who were Directors immediately before such
election shall cease to constitute a majority of the Board.
	 
	 	 	 	"Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	 	 	"Company” means each of Cavco Industries, Inc. and its
Affiliates.
	 
	 	 	 	“Director” means an individual who is a member of the Board.
	 
	 	 	 	"Disability” means a disability that entitles the
Participant to benefits under the long-term disability plan
sponsored or adopted by a Company that covers the
Participant.

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	 	 	 	"Employment” means employment with a Company.
	 
	 	 	 	"Expiration Date” means, as to an Award, that date which is
seven years from the Grant Date of such Award or such other period
(not beyond seven years) as the Administrator may determine.
	 
	 	 	 	"Fair Market Value” means the closing price per Share as of
a particular date reported on the consolidated transaction
reporting system for The Nasdaq Stock Market, Inc. or, if
there shall have been no such sale so reported on that date,
on the last preceding date on which such a sale was
reported.
	 
	 	 	 	"Grant Date” means the date an Award is made to a
Participant hereunder.
	 
	 	 	 	“Grant Price” means the Fair Market Value on the Grant Date.
	 
	 	 	 	“Option” means a non-qualified Option to purchase one more
Shares granted under and pursuant to the Plan. A
non-qualified Option does not satisfy the requirements of
Section 422 of the Code, or any successor provision.
	 
	 	 	 	"Participant”
means an employee or a nonemployee Director of
a Company to whom an Award has been made under this Plan.
	 
	 	 	 	"Payout”
means the issuance or delivery of shares that were the subject of
a Restricted Stock Award or Restricted
Stock Unit Award without restrictions.
	 
	 	 	 	"Payout Date” means the date a Award becomes payable
pursuant to subsection 7(c)(iii).
	 
	 	 	 	"Plan”
means this Cavco Industries, Inc. Stock Incentive Plan, as
set forth herein and as may be amended from time to time.
	 
	 	 	 	"Restricted Stock” means a right to receive at Payout the
number of Shares covered by an Award, subject to the terms
of this Plan and the applicable Award Agreement. Restricted
Stock does not represent any actual legal or beneficial
interest in Cavco Industries.
	 
	 	 	 	“Restricted Stock Award” means an award of Restricted Stock
granted to a Participant pursuant to any applicable terms,
conditions and limitations as the Administrator may
establish in order to fulfill the objectives of the Plan.
	 
	 	 	 	“Restricted Stock Unit” means a unit equal to one Share
subject to the terms of the Plan and the applicable Award
Agreement.
	 
	 	 	 	“Restricted Stock Unit Award” means an award of Restricted
Stock Units 

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	 	 	 	granted to a Participant pursuant to any
applicable terms, conditions and limitations as the
Administrator may establish in order to fulfill the
objectives of the Plan.

	 	 	 	"Retirement”means the termination of a Participant’s
Employment due to retirement on or after age 62 provided
that the Participant has at least ten years of service with
one or more Companies.
	 
	 	 	 	"Share” means a share of Cavco Industries common stock, par
value $ .01, and any share or shares of capital stock or
other securities of Cavco Industries hereafter issued or
issuable upon, in respect of or in substitution or in
exchange for each present share. Such shares may be
unissued or reacquired shares, as the Board, in its sole and
absolute discretion, shall from time to time determine.
	 
	 	 	 	"Termination Date” means the last date on which the
Participant is carried on a Company’s payroll as an
employee.

	3.	 	Eligibility. Certain officers, Directors, and key employees of the
Company and individuals who have agreed to become employees of the Company
and are expected to become such employees within the following six months
are eligible for Awards under this Plan, as determined in the sole
discretion of the Administrator. The Administrator shall select the
Participants in the Plan from time to time as evidenced by the grant of
Awards under the Plan.
	 
	4.	 	Plan Administration. The Plan shall be administered by the
Administrator, which shall have full and exclusive power to interpret this
Plan and to adopt such rules, regulations and guidelines for carrying out
this Plan as it may deem necessary or appropriate in its sole discretion.
The Administrator shall determine all terms and conditions of the Awards.
The Administrator may, in its discretion, provide for the extension of the
exercisability of an Option, accelerate the vesting, exercisability, or
Payout of an Award, eliminate or make less restrictive any restrictions
contained in an Award Agreement, waive any restriction or other provision
of this Plan or an Award Agreement or otherwise amend so as to reduce
the exercise price thereof, or modify an Award
in any manner that is either (i) not adverse to the Participant
holding the Award or (ii) consented to by such Participant, provided,
however, that except for adjustments described in Section 11, the Grant
Price of any Option shall not be amended, and no option may be
granted in exchange for a previously granted option if the exercise
price of the previously granted option is greater than the exercise
price of the replacement option. The
Administrator may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Award in the manner and to the
extent the Administrator deems necessary or desirable to further the
purposes of the Plan. Any decision of the Administrator in the
interpretation and administration of the Plan is final, conclusive and
binding on all parties concerned.

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	5.	 	Delegation of Authority. The Administrator may delegate to one or more
employees of the Company the performance of non-discretionary functions
under this Plan.
	 
	6.	 	Shares Available for Awards. Subject to Section 11 below, the maximum
number of Shares that may be awarded under this Plan is 450,000, provided
that no more than 200,000 of such Shares will be subject to awards of
Restricted Stock or Restricted Stock Units. Shares covered by Options
that terminate or are canceled prior to exercise and Shares of Restricted
Stock or Shares covered by Restricted Stock Units returned to the Company
will again be available for grants of Options, Restricted Stock Awards,
and Restricted Stock Unit Awards. Also, if the Option price or any
applicable tax withholding obligation payable upon exercise of an Option
is satisfied by the tender or withholding of Shares, the number of Shares
so tendered or withheld will be eligible for grants of Options, Restricted
Stock Awards, and Restricted Stock Unit Awards under this Plan. The
Administrator may from time to time adopt and observe such procedures
concerning the counting of Shares against the Plan maximum as it may deem
appropriate. The Board and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that Shares are available for issuance
pursuant to Awards.
	 
	7.	 	Awards. The granting of Awards under this Plan shall be entirely
discretionary, and nothing in this Plan shall be deemed to give any
employee of the Company any right to participate in this Plan or to be
granted an Award. Awards shall be granted to Participants at such times
and subject to Section 6 above, in such amounts as the Administrator, in
its sole and absolute discretion, shall determine.
	 
	 	 	(a)  Cash Award. An Award to an officer or key employee of the Company
may be in the form of a Cash Award. The terms, conditions and
limitations applicable to any Cash Awards granted pursuant to this Plan
shall be determined by the Administrator in order to fulfill the
objectives of the Plan.
	 
	 	 	(b)  Option. An Award to an officer, key employee, or Director of the
Company may be in the form of an Option. The Grant Price of an Option
shall be not less than 100% of the Fair Market Value of the Shares
subject to such Option on the Grant Date. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any
Options awarded pursuant to this Plan, including the Grant Price, the
term of the Options and the date or dates upon which they become
exercisable, shall be determined by the Administrator.

		
	 	     (i) Option Period. Options will become exercisable at such time or
times not more than seven (7) years from the Grant Date as may       be
provided by the 

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	 	      applicable Award Agreement, subject to the
following limits:

	 	 	 	(A) Except as is otherwise provided in the Award Agreement
and as provided below in this subsection (A), all rights to
exercise an Option shall terminate within four (4) months
after the date the optionee ceases to be an employee of the
Company, or ceases to be a Director, whichever may
occur later, for any reason other than death or Disability
(but in no event later than the end of the original period of
the Option). In the event of an optionee’s death, an Option
will terminate fifteen (15) months thereafter. In the event
of an optionee’s Disability and resulting termination of
Employment, an Option will terminate six (6) months after
such optionee’s Employment Termination Date. However, if an
Option is held by a Director who, on the date he or she
ceases to be a Director (and, if also an employee, ceases to
be an employee), has at least ten (10) years of service as a
Director, then all Shares subject to such Option will vest on
the date the Director ceases to be a Director, and all rights
to exercise such Option will terminate three (3) years
thereafter. Also, if an Option is held by a Director who, on
the date he or she ceases to be a Director (and, if also an
employee, ceases to be an employee), has less than ten (10)
years of service as a Director, then all rights to exercise
such Options will terminate three (3) months after he or she
ceases to be a Director.
	 
	 	 	 	(B) The Administrator may, in its discretion, grant a new
Option or amend an outstanding Option to provide an extended
period of time during which an optionee can exercise such
Option to the maximum permissible exercise period (seven (7)
years from the original Grant Date) for which such Option
would have been exercisable in the absence of the optionee’s
ceasing to be an employee of the Company or ceasing to be a
Director. In no case may any Option be exercised later than
seven years from the Grant Date. If the Employment of the
optionee or the optionee’s service as a Director is
terminated for cause, the Option shall thereafter be null and
void for all purposes.

		
	 	     

(ii) Payment of Option/Exercise Price. The exercise price of an
Option may be paid in cash, by check or wire transfer or, with the
      consent of the Administrator, by delivery of Shares, including
actual or deemed multiple exchanges of Shares.

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	 	 	(c)  Restricted Stock Award/Restricted Stock Unit Award. An Award to an
officer, key employee, or Director of the Company may be in the form of a
Restricted Stock Award or Restricted Stock Unit Award. The term of a
Restricted Stock Award or Restricted Stock Unit Award shall run from the
Grant Date to the Expiration Date, subject to early Payout or forfeiture
as described below. Credit for cash dividends on Restricted Stock or
Restricted Stock Unit may be allowed (or accrued) prior to Payout.

	 	 	 	(i)Vesting of Awards.
	 

	 	 	 	(A) Unless different terms are set by the Administrator, a
Restricted Stock Award or Restricted Stock Unit Award shall
be immediately 25% vested on its Grant Date and shall become
vested in cumulative 25% increments on
each of the first through third anniversaries of such Grant
Date, so that on the third anniversary of the Grant Date the
Award will be 100% vested; provided, however, that the
Participant must be in continuous Employment from the Grant
Date through the date of the applicable anniversary in order
for the Restricted Stock Award or Restricted Stock Unit Award
to vest.
	 
	 	 	 	(B) A Participant’s Restricted Stock Award or Restricted
Stock Unit Award shall be fully vested, irrespective of the
limitations set forth in subparagraph (A) above, in the event
of (i) a Change in Control, as provided for in Section 8
below, provided that the Participant has been in continuous
Employment from the Grant Date until the date of such Change
in Control or (ii) Retirement of the Participant.

	 	 	 	(ii)Forfeiture of Restricted Stock Awards or Restricted Stock Unit
Awards. Except as otherwise provided in subsection (i) above and
the applicable Award Agreement, if a Participant’s Employment is
terminated for any reason, the Participant shall forfeit his or her
Restricted Stock Award(s) or Restricted Stock Unit Award(s) with
respect to any portion that is not vested as of such Participant’s
Termination Date and such portion will be transferred at no cost to
Cavco Industries unless otherwise determined by the Administrator.
	 
	 	 	 	(iii)Payouts of Restricted Stock Awards and Restricted Stock Unit
Awards. Payouts will occur as follows:

	 	 	 	(A) Automatic Payout on Expiration Date. When a
Participant’s Restricted Stock Award or Restricted Stock Unit
Award has vested, such Award shall have an automatic Payout
on the Expiration Date of such Restricted Stock Award or
Restricted Stock Unit Award.
	 
	 	 	 	(B)Early Payouts. In addition to automatic Payout on the
Expiration Date, there may be an early Payout of the vested
portion of an Restricted Stock Award or Restricted Stock Unit
Award as follows:

	 	 	 	(1)Termination of Employment (whether voluntary or
involuntary). The vested portion of each Restricted
Stock Award or Restricted Stock Unit Award shall have
an automatic Payout on the 

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	 	 	 	Participant’s Termination
Date.

	 	 	 	(2)Death. If a Participant dies prior to the
Expiration Date, such Participant’s Restricted Stock
Award or Restricted Stock Unit Award, to the extent
vested, shall have an automatic Payout as of the date
of the Participant’s death and be made to the
Participant’s Beneficiary.
	 
	 	 	 	(3)Disability. Prior to the Expiration Date, a
Restricted Stock Award or Restricted Stock Unit Award,
with the approval of the Administrator, shall both be
fully vested and have an automatic Payout on the date
selected by the Administrator on or after the date the
Participant satisfies the definition of Disability.
	 
	 	 	 	(4)Early Payout Request. A Participant may request
that the Administrator consider an early Payout to him
or her with respect to any vested portion of a
Restricted Stock Award or Restricted Stock Unit Award.
The Administrator will consider such request at such
time as it deems appropriate and determine in its sole
and absolute discretion whether to allow such early
Payout, and then notify the Participant of its
decision.

	 	 	 	(iv)Form of Payout. As soon as practicable following a
determination that Payout of a Participant’s Restricted Stock Award
or Restricted Stock Unit Award shall be made as described in
paragraph (iii), but not later than five (5) business days after
the required Payout Date, Cavco Industries shall make a Payout to
the Participant. All Payouts shall be made in Shares except that
no fractional Shares will be issued and in lieu thereof cash will
be paid to the Participant.
	 
	 	 	 	(v)Delivery of Share Certificates. As promptly as may be
practicable following a Payout, Cavco Industries shall make
delivery of one or more Share certificates, either by delivery of a
physical certificate or an electronic transfer to a broker, for the
appropriate number of Shares.

	 	 	(d)Performance Award. The Administrator may determine that an Award
will be subject to restriction until one or more pre-established,
objective performance goals established by the Administrator have been
achieved. With respect to any such Award, the restrictions will lapse
and the Award will vest only upon achievement of the goals. A
performance goal may be based on one or more business criteria that apply
to the recipient, one or more business units of Cavco Industries or Cavco
Industries and its Affiliates as a whole, and may include one or more of
the following criteria: operating income, operating margin, earnings
before interest, taxes, depreciation and amortization (EBITDA), pre-tax
income, net income, net earnings per Share, net earnings per Share

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	 	 	growth, return on beginning stockholders’ equity, return on average net
assets, total Shareholder return relative to other companies in a
relevant industry group, debt/capitalization ratio and customer
satisfaction. A performance goal need not be based upon an increase or
positive result under a particular business criterion but may include,
for example, maintaining the status quo or limiting economic losses, as
measured by reference to such criterion. Performance goals must be
established prior to the earlier to occur of ninety (90) days after the
commencement of the period of service to which the goals relate and the
lapse of twenty-five (25) percent of the period of service. Prior to the
lapse of any applicable restrictions and the vesting of any Award based
on the
achievement of performance goals, the Administrator must determine that
the applicable performance goals were, in fact, satisfied.

	 	 	(e) Notwithstanding anything contrary contained in this Plan, the
following limitations shall apply to any Awards made hereunder:

	 	 	 	(i) No individual may be awarded Options (including Options awarded
as Performance Awards) that are exercisable for more than 450,000
Shares in any one-year period;
	 
	 	 	 	(ii) No individual may be awarded a Restricted Stock Award or
Restricted Stock Unit Award subject to performance goals designed
to comply with Section 162(m) of the Code on more than $1,000,000
in any one-year period (the limitation set forth in this clause
(ii), together with the limitation set forth in clause (i) above,
being hereinafter referred to as the “Stock Based Awards
Limitations”); and
	 
	 	 	 	(iii) No individual may be awarded a Cash Award subject to
performance goals designed to comply with Section 162(m) of the
Code having a value of more than $1,000,000 in any one-year period.

	8.	 	Change in Control. Notwithstanding the provisions of Section 7 hereof,
unless otherwise expressly provided in the applicable Award Agreement, or
as otherwise specified in the terms of an Award, in the event of a Change
in Control during a Participant’s employment (or service as a nonemployee
Director) with the Company or one of its Affiliates, each Award granted
under this Plan to the Participant shall become immediately vested and
fully exercisable, with performance-based awards vested at target level
(regardless of the otherwise applicable vesting or exercise schedules or
performance goals provided for under the Award Agreement or the terms of
the Award); provided however, that this Section 8 shall not apply with respect to Awards that
have expired or been terminated, canceled or forfeited.

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	9.	 	Tax Withholding. Cavco Industries may satisfy withholding obligations with
respect to any Award or Payout by retaining at the time of Award or
Payout, as appropriate, a number of Shares, based on the Fair Market Value
on such date, for payment of taxes required by law.
	 
	10.	 	Non-Assignability. Unless otherwise determined by the Administrator and provided in the applicable Award Agreement, no
Award or Payout or any other benefit under this Plan shall be assignable
or otherwise transferable except to a Beneficiary or by will, the laws of
descent and distribution or a domestic relations order, and during the
lifetime of the optionee the Option may be exercised only by the optionee
or the optionee’s guardian or legal representative. The Administrator may
prescribe other restrictions on transfer. Any attempted assignment of an
Award or any other benefit under this Plan in violation of this Section 11
shall be null and void.

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	11.	 	Changes in Shares and Certain Corporate Transactions.
	 
	 	 	(a) The existence of outstanding Awards shall not affect in any manner
the right or power of Cavco Industries or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of Cavco Industries or its business or
any merger or consolidation of Cavco Industries, or any issue of bonds,
debentures, preferred or prior preference stock (whether or not such
issue is prior to, on a parity with or junior to the existing Shares) or
the dissolution or liquidation of Cavco Industries, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
	 
	 	 	(b) In the event of any subdivision or consolidation of outstanding
Shares, declaration of a dividend payable in Shares or other stock split,
then (i) the number of Shares reserved under this Plan, (ii) the number
of Shares covered by outstanding Awards, (iii) the Grant Price or other
price in respect of such Awards, (iv) the appropriate Fair Market Value
and other price determinations for such Awards, and (v) the Stock Based
Awards Limitations shall each be proportionately adjusted by the Board as
appropriate to reflect such transaction. In the event of any other
recapitalization or capital reorganization of Cavco Industries, any
consolidation or merger of Cavco Industries with another corporation or
entity, the adoption by Cavco Industries of any plan of exchange
affecting Shares or any distribution to holders of Shares of securities
or property (other than normal cash dividends or dividends payable in
Shares), the Board shall make appropriate adjustments to (x) the number
of Shares reserved under this Plan and (y)(i) the number of Shares
covered by Awards, (ii) the Grant Price or other price in respect of such
Awards, (iii) the appropriate Fair Market Value and other price
determinations for such Awards, and (iv) the Stock Based Awards
Limitations to reflect such transaction; provided that such adjustments
shall only be such as are necessary to maintain the proportionate
interest of the holders of the Awards and preserve, without increasing,
the value of such Awards. In the event of a merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Administrator shall be authorized (x) to issue new Awards in substitution for previously issued compensatory awards,
including Awards, as deemed appropriate by the Board or (y) to reflect the assumption of, any
other compensatory award (including Awards), whether or not awarded
under the Plan.
	 
	12.	 	Requirements of Law. Notwithstanding anything herein to the contrary,
Cavco Industries shall not be required to issue Shares under any
Restricted Stock Award or Restricted Stock Unit Award if the issuance
thereof would constitute a violation by the Participant or Cavco
Industries of any provisions of any law or regulation of any governmental
authority or any national securities exchange, automated quotation
system or other self regulated organization, and as a condition of any
issuance of Shares under any Restricted Stock Award or Restricted Stock
Unit Award, Cavco Industries may require such agreements or undertakings,
if any, as Cavco Industries may 

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	 	 	deem necessary or advisable to ensure
compliance with any such law or regulation.

	13.	 	Amendment, Suspension or Termination. The Board may amend,
suspend or terminate this Plan for the purpose of meeting or addressing
any changes in legal requirements or for any other purpose permitted by
law, except that (i) no amendment or alteration that would adversely
affect the rights of any Participant under any Award previously granted to
such Participant shall be made without the consent of such
Participant,
(ii) no amendment or alteration shall be effective prior to its approval
by the stockholders of Cavco Industries to the extent such approval is
required by applicable legal requirements or the requirements of the
securities exchange on which Cavco Industries’s stock is listed
or automated quotation system or other self regulated organization to
which such stock is admitted for trading and (iii) after the Plan has been approved by the stockholders of
Cavco Industries, the Board may not, except pursuant to Section 12
hereof, amend the Plan to increase the maximum number of Shares
subject
hereto or decrease the option Price below 100% of the fair market
value at the time of grant.
	 
	14.	 	Unfunded Plan. This Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants representing
Awards, any such accounts shall be used merely as a bookkeeping
convenience. Cavco Industries shall not be required to segregate any
assets that may at any time be represented by Awards, nor shall this Plan
be construed as providing for such segregation, nor shall Cavco
Industries, the Board or the Administrator be deemed to be a trustee of
any Awards to be granted under this Plan. Any liability or obligation of
Cavco Industries to any Participant with respect to a grant of Awards
under this Plan shall be based solely upon any contractual obligations
that may be created under this Plan, and no such liability or obligation
of Cavco Industries shall be deemed to be secured by any pledge or other
encumbrance on any property of Cavco Industries. None of Cavco Industries
or any other Company, the Board or the Administrator shall be required to
give any security or bond for the performance of any obligation that may
be created by this Plan.
	 
	 	 	Notwithstanding the foregoing,
upon the occurrence of a Change in Control,
each Company whose employees are Participants shall, as soon as possible,
but in no event longer than 15 days following the Change in Control, make
an irrevocable contribution to a trust established by Cavco Industries in
an amount sufficient to fully pay the entire benefit to which each
Participant employed by such company would be entitled pursuant to the
terms of this Plan as of the date on which such Change in Control occurs.
In its sole discretion, Cavco Industries may establish such a trust at
any time prior to a Change in Control and may make contributions to such
trust in Shares or in cash which would be used to acquire Shares to
transfer to Participant. Any such trust shall be designed to assist
Cavco Industries in satisfying its obligations under this Plan; but it
shall remain subject to the claims of its creditors.

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	15.	 	No Employment Guaranteed. No provision of this Plan or any Award
Agreement hereunder shall confer any right upon any employee to continued
Employment with the Company.
	 
	16.	 	Stockholder Rights. A
recipient of an Option shall have no rights as a holder of the Shares
subject thereto unless and until the Option has been exercised in
accordance with this Plan and the Award Agreement. Unless specifically provided otherwise in the applicable Award Agreement,
and in accordance with the terms of the Plan, the recipient of any Restricted Stock Award or Restricted Stock Unit Award shall be the
record owner of the such Shares, and have all the rights of a stockholder with respect to such Shares, including the right to vote and the right to receive dividends or other
distributions made or paid with respect to such Shares.

	 
	17.	 	Governing Law. This Plan and all determinations made and actions taken
pursuant hereto,
to the extent not otherwise governed by mandatory provisions of the Act
or other securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to any conflicts of law principles thereof that would require
the application of the laws of another jurisdiction.
	 
	18.	 	Indemnification. Neither the members of the Board nor any member of the
Compensation Committee, acting in the capacity of Administrator, shall be
liable for any act, omission or determination taken or made in good faith
with respect to the Plan or any Award granted under it, and the members of
the Board and the Administrator shall be entitled to indemnification and
reimbursement by Cavco Industries in respect of any claim, loss, damage or
expense (including counsel fees) arising therefrom to the full extent
permitted by law and under any Directors and officers liability or similar
insurance coverage that may be in effect from time to time.
	 
	19.	 	Release. Any issuance or transfer of Shares to a Participant or to his
legal representative, heir, legatee or distributee in accordance with the
provisions hereof shall, to the extent thereof, be in full satisfaction of
all claims of such persons hereunder. The Board or Administrator may
require any Participant or legal representative, heir, legatee or
distributee, as a condition precedent to such payment, to execute a
release and receipt therefor in such form as it shall determine.

Page 13exv10w7

 

     EXHIBIT 10.7

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of
                    , 2003 by and between CAVCO INDUSTRIES, INC., a Delaware
corporation (the “Company”), and SEAN K. NOLEN (the “Executive”).

WITNESSETH:

     WHEREAS, the Board of Directors of Centex Corporation (“Centex”) has
determined that it would be advisable and in the best interests of Centex and
its stockholders for Centex to organize the Company, and to transfer
substantially all of the business, operations, assets and liabilities related
to Cavco Industries, LLC to the Company; and

     WHEREAS, the Company has agreed to assume substantially all of the
business, operations, assets and liabilities related to Cavco Industries, LLC;
and

     WHEREAS, the Board of Directors of Centex has also determined that it
would be advisable and in the best interests of Centex and its stockholders for
Centex to distribute on a pro-rata basis to the holders of record of Centex
common stock, par value $0.25 per share (the “Centex Common Stock”), without
any consideration being paid by such holders, all of the outstanding shares of
the Company’s common stock, par value $.01 per share (the “Cavco Common
Stock”), owned by Centex (the “Distribution”); and

     WHEREAS, for United States federal income tax purposes, the Distribution
is intended to qualify as a tax-free spin-off within the meaning of Sections
355 and 368(a)(1)(D) of the United States Internal Revenue Code of 1986, as
amended (the “Code”); and

     WHEREAS, from and after the date (the “Effective Date”) upon which the
Distribution is effectuated, the Company desires to employ the Executive, and
the Executive is willing to accept such employment, all upon the terms and
conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises, the terms and provisions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and subject to the Distribution being effectuated on
or before June 30, 2003, the parties hereto agree as follows:

     SECTION 1. Definitions. For purposes of this Agreement, the following
definitions shall apply:

1

 

		
	 	“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
for 15 days after written notice is received by the party in breach from
the party asserting the breach.
	 
	 	“Change in Control” shall be deemed to have occurred if, subsequent to
the Distribution: (i) the Company merges or consolidates with any other
corporation (other than a wholly-owned 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 wholly-owned
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 Directors 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.
	 
	 	“Common Stock” means the common stock of the Company, par value $.01.
	 
	 	“Disability” shall mean the Executive’s inability, by reason of a mental
or physical impairment, to perform his duties and responsibilities, as
set forth in Section 4, below for a period of at least six (6)
consecutive months.
	 
	 	“Termination for Cause” shall mean the Company’s termination of the
Executive’s employment pursuant to a determination by the Company’s Board
of Directors, 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 Without Cause” shall mean the Company’s termination of the
Executive’s employment other than a Termination for Cause. In addition,
if the Company alters the Executive’s duties so that he no longer renders
such services of an executive and administrative character to the Company
as are usual and

2

 

		
	 	customary in the case of the chief financial officer of an entity such as
the Company, and the Executive thereafter terminates employment with the
Company, such termination by the Executive shall be deemed not a
voluntary termination of employment by the Executive but a Termination
Without 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 Executive
will be employed by the Company 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 the third anniversary thereof (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 Company 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 initially serve in the capacity of Vice President,
Chief Financial Officer and Treasurer of the Company, subject to the direction
of the President and Chief Executive Officer 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 President and Chief Executive
Officer of the Company. Such duties shall be performed within the policies and
guidelines established from time to time by the Company.

     (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 Company.

     (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.

3

 

     SECTION 5. Compensation.

     (a)  Base Salary. During the Term, the Company shall pay a salary (the
“Base Salary”) of $150,000 per annum to the Executive, payable in accordance
with the general payroll practices of the Company in effect from time to time.
The Company shall review the Base Salary then being paid to the Executive at
such times as the Company regularly reviews the compensation being paid to its
executives generally (but no less frequently than once each year). Upon
completion of such review, the Company may in its sole discretion adjust the
Executive’s then current Base Salary; provided, however, that the Company may
not decrease the Executive’s then current Base Salary without the prior written
consent of the Executive.

     (b)  Bonus. In addition to the payment of Base Salary, for each fiscal year
of the Company during the Term, the Executive shall be awarded a bonus in an
amount to be determined from time to time by the Board of Directors of the
Company after consultation with the Chief Executive Officer of the Company.

     (c)  Stock Options. In connection with the Distribution, the Company has
established or will establish a stock incentive plan (the “Plan”). As soon as
reasonably practicable following the Effective Date, the Company will grant the
Executive a non-qualified option to purchase fifty thousand (50,000)
shares of Cavco Common Stock. This grant shall be subject to pro rata vesting
over a three-year period (i.e., 25% on the grant date, with the remainder
becoming vested in cumulative 25% increments on each of the first through third
anniversaries of the grant date). Said option grant shall be memorialized in a
written agreement. The per share exercise price 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 paragraph (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

4

 

applicable to other similarly situated executives of the Company. The
provisions of this paragraph (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.

     (g)  Vacation. The Executive shall be entitled to 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.

     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)  Pro Rata Payment. If the Company terminates the Executive’s employment
for Cause, or if the Executive voluntarily resigns prior to the occurrence of a
Change in Control of the Company at a time when there is no uncured Breach by
the Company of this Agreement, then in either case the Executive shall be
entitled to receive only his then current Base Salary on a pro rata basis to
the date of such termination or resignation.

     (b)  Base Salary Payment. If the Executive dies, or becomes Disabled, or if
the Company terminates the Executive’s employment Without Cause prior to the
occurrence of a Change in Control, or if the Executive resigns because of a
Breach by the Company of this Agreement, then in each case the Executive (or
his heirs or executors) shall be entitled to receive the Executive’s Base
Salary for a period of twelve (12) months.

     (c)  Lump Sum Payment. If within one (1) year after the occurrence of a
Change in Control of the Company, the Company terminates the Executive’s
employment hereunder for any reason other than for Cause, then the Company will
pay to the Executive the
Executive’s then current Base Salary for a period of
twelve (12)  months.

     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

5

 

secrets, or any part thereof, that he becomes aware of during his
employment, to any person, firm, corporation, association or other entity.

     SECTION 9. Competitive Activity.

     (a)  The Executive recognizes and acknowledges that the relationship
created by this Agreement is one of trust, and the Executive agrees that, while
he is employed by the Company or is being paid under this Agreement in
accordance with a Non-Compete Election (as defined below), the Executive shall
not (whether acting alone or through any affiliate) or in any other capacity
whatsoever and whether by investing in, or holding securities of, any
corporation or other entity, advancing or lending any funds to, making
available any facilities, equipment or other assets to any entity or other
person, engage in any of the following activities (the “Competitive
Activities”):

		
	 	     (i) except in connection with the due and proper performance of his
duties hereunder, engage in the business of designing, manufacturing or
selling manufactured housing;
	 
	 	     (ii) except in connection with the due and proper performance of his
duties hereunder, solicit or contact (with respect to the manufactured
housing industry) retailers, dealers, suppliers, customers or potential
customers on behalf of any corporation or other entity or any other
person engaged in the business of designing, manufacturing and selling
manufactured housing;
	 
	 	     (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 12-month period immediately
prior to the date of termination or expiration of the Executive’s
employment hereunder.

     (b)  Notwithstanding anything to the contrary in this Section 9, the
Executive may own, for investment purposes only, up to two percent of the stock
of any publicly-held corporation that engages in the business of designing,
manufacturing and selling manufactured housing or that otherwise directly or
indirectly competes with the Company if the stock of such corporation is either
listed on a national securities exchange or traded on the NASDAQ National
Market and if the Executive is not an employee or consultant of, and is not
otherwise affiliated with, such corporation.

     (c)  The Executive specifically acknowledges and agrees that in the event
of the Executive’s termination of employment, the Company may elect in its sole
discretion to have the Executive refrain from engaging in any Competitive
Activities (the “Non-Compete Election”) for any period not to exceed two (2)
years as the Company may reasonably determine. If the Company makes the
Non-Compete Election, it shall provide written notice thereof to the Executive
and the Executive agrees not to engage in any Competitive Activities for the
period of time specified by the Company in the notice. As

6

 

compensation therefor, the Company shall compensate the Executive by
making periodic Base Salary Payments to the Executive as though he were still
employed by the Company during the specified period.

     (d)  It is hereby agreed by and between the Executive and the Company that
if (notwithstanding the provisions of paragraph (d) below) the non-competition
covenants contained in this Agreement should be held by any court or other
constituted legal authority to be void or unenforceable in any particular area
or jurisdiction, then the parties hereto shall consider this Agreement to be
amended and modified so as to eliminate therefrom that particular area or
jurisdiction as to which the non-competition covenants are held to be void or
otherwise unenforceable, and as to all other areas and jurisdictions covered by
this Agreement, the terms and provisions hereof shall remain in full force and
effect as originally written.

     (e)  It is further agreed that if the non-competition covenants contained
in this Agreement should be held by any court or other constituted legal
authority to be effective in any particular area or jurisdiction only if said
covenants are modified to limit their duration or scope, then the parties
hereto shall consider such non-competition covenants to be amended and modified
with respect to that particular area or jurisdiction so as to comply with the
order of any court or other constituted legal authority, and as to all other
areas and jurisdictions, the non-competition covenants contained herein shall
remain in full force and effect as originally written.

     (f)  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 business of designing, manufacturing and selling manufactured
housing as 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.

     SECTION 10. Miscellaneous.

     (a) 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.

7

 

     (b)  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.

     (c)  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.

     (d)  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. Either party may,
by notice as aforesaid, designate a different address or addresses.

     (e)  Severability. In any 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.

     (f)  Headings. 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.

     (g)  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.

     (h) Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Arizona.

8

 

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

	 	 	 	 
	
CAVCO INDUSTRIES, INC.	 
	 	 	 	 
	 	 	 	 
	By:	 	 	 
	 	 	

	 
	Its	 	 	 
	 	 	

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	

	 
	
SEAN K. NOLEN
	 

9

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