Exhibit 10.1
EMPLOYMENT
AGREEMENT
AGREEMENT by and between Beazer
Homes USA, Inc., a Delaware corporation (the “Company”)
and FRED J. FRATTO (the “Executive”), dated as of the 1
ST day of January, 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 Amended and Restated VCIP 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 VCIP 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 peer 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 peer 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
consid
