EMPLOYMENT
AGREEMENT
AGREEMENT by and between Beazer
Homes USA, Inc., a Delaware corporation (the “Company”)
and Kenneth J. Gary (the “Executive”), dated as of the
14th day of March, 2005.
The Board of Directors of the
Company (the “Board”), has determined that it is in the
best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company. The Board believes it
is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the
Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and
benefits arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED
AS FOLLOWS:
1.
Certain Definitions .
(a)
The
“Effective Date” shall mean the first date during the
Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in
this Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Executive’s employment with the
Company is terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated
to effect a Change of Control or (ii) otherwise arose in connection
with or in anticipation of a Change of Control, then for all
purposes of this Agreement the “Effective Date” shall
mean the date immediately prior to the date of such termination of
employment.
(b)
The
“Change of Control Period” shall mean the period
commencing on the date hereof and ending on the second anniversary
of the date hereof; provided, however, that commencing on the date
one year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof shall be
hereinafter referred to as the “Renewal Date”), unless
previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such
Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2.
Change of Control . For the purpose of this Agreement, a
“Change of Control” shall mean:
(a)
The
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (a
“Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
either (i) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or
(ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
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(b)
Individuals
who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
or
(c)
Consummation
of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case,
unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(d)
Approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company.
3.
Employment Period . The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, subject to the terms and
conditions of this Agreement, for the period commencing on the
Effective Date and ending on the second anniversary of such date
(the “Employment Period”).
4.
Terms of Employment .
(a)
Position
and Duties .
(i) During the Employment
Period, (A) the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120 day period immediately
preceding the Effective Date and (B) the Executive’s services
shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location
less than 35 miles from such location.
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(ii) During the Employment Period,
and excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use
the Executive’s reasonable best efforts to perform faithfully
such responsibilities. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive’s responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive’s responsibilities to the
Company.
(b)
Compensation .
(i)
Base Salary . During the Employment Period, the Executive
shall receive an annual base salary (“Annual Base
Salary”), which shall be paid at a monthly rate, at least
equal to twelve times the highest monthly base salary paid or
payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve month period immediately
preceding the month in which the Effective Date occurs. Annual Base
Salary shall be payable in accordance with the Company’s
normal payroll practices (but not less frequently than monthly).
During the Employment Period, the Annual Base Salary shall be
reviewed (for purposes of increase only) no more than 12 months
after the last salary increase awarded to the Executive prior to
the Effective Date and thereafter at least annually. Any increase
in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the
term “affiliated companies” shall include any company
controlled by, controlling or under common control with the
Company.
(ii)
Annual
Bonus . In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the “Annual Bonus”) in cash at
least equal to the arithmetic average of the Executive’s
bonuses (whether paid or deferred) under the Company’s or its
predecessor’s annual incentive plans during the last three
full fiscal years prior to the Effective Date or for such lesser
period as the Executive has been employed by the Company or its
predecessor (annualized in the event that the Executive was not
employed by the Company for the whole of any such fiscal year),
(the “Average Annual Bonus”). Each such Annual Bonus
shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual
Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus. Without limiting the generality of
the foregoing definition, the “Average Annual Bonus”
shall include the following components, if any, pursuant to the
Company’s EVCIP Rules ( or any successor incentive plan, for so long as
any of same shall exist) :
(a)
Cash payouts from VC and IVC awards
and the “Bank” payout, subject to the Payout Cap, all
at full face value;
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(b)
Any excess in the Bank discounted at
75% of face value (which shall, for purposes hereof, be deemed to
be fully vested);
(c)
10% of the Bank contributed to the
Deferred Compensation Plan, at full face value (which shall, for
purposes hereof, be deemed to be fully vested); and
(d) Any deferred bonus under
the EVCIP which is invested in stock under the Company’s
Corporate Management Stock Purchase Program, at full face value of
said bonus (which shall, for purposes hereof, be deemed to be fully
vested);
(iii)
Incentive,
Savings and Retirement Plans . During the Employment Period,
the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs
applicable generally to other most senior executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company
and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during
the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of the
Company and its affiliated companies.
(iv)
Welfare Benefit
Plans . During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the
Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other
most senior executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in
the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 120 day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer executives of the
Company and its affiliated companies.
(v)
Expenses . During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 120 day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi)
Fringe
Benefits . During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans,
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practices, programs and policies of
the Company and its affiliated companies in effect for the
Executive at any time during the 120 day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(vii)
Office and Support
Staff . During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated
companies at any time during the 120 day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(viii)
Vacation . During the
Employment Period, the Executive shall be entitled to paid vacation
in accordance with the most favorable plans, policies, programs and
practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 120 day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
5.
Termination of Employment .
(a)
Death or
Disability . The Executive’s employment shall terminate
automatically upon the Executive’s death during the
Employment Period. If the Disability of the Executive occurs during
the Employment Period (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written notice
in accordance with Section 12(c) of this Agreement of its intention
to terminate the Executive’s employment. In such event, the
Executive’s employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the
Executive (the “Disability Effective Date”), provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive’s
duties. For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s
duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or the Executive’s legal
representative.
(b)
Cause
. The Company may terminate the Executive’s employment for
Cause. For purposes of this Agreement, “Cause” shall
mean:
(i)
the
willful and continued failure of the Executive to perform
substantially the Executive’s duties with the Company or one
of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), for more than 15
days after a written demand for substantial performance is
delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in
which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive’s
duties, or
(ii)
the willful
engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or
failure to act, on the part of the Executive, shall be considered
“willful” unless it is done, or omitted to be done, by
the Executive in bad faith or
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