Exhibit
10.22


November 2, 2006


 


 


Mr. Charles E. Cauthen

1105 Valladolid de Avila

Tampa, FL 33613


Dear Charles:


Confirming our
recent discussions, we are pleased that you have accepted our position as Chief
Financial Officer of the Homes Group (“the Company”) and President of Mid-State
Homes, Inc. effective November 13, 2006. The following outlines the terms of
your employment. This document supersedes all previous agreements you had with
the Company or any of its affiliates and includes an updated Change in Control
Agreement dated October, 2006.  These
documents will be final and binding on the date you sign.


1.                                       You
will serve as Chief Financial Officer of the Homes Group and President of
Mid-State Homes, Inc. reporting to the Chief Executive Officer of the Homes
Group. You will be responsible for the management of all financial matters
affecting the Company, including financial reporting, balance sheet management,
capital structure, strategic issues and working with the corporate accounting
department of Walter Industries, Inc. 
You will also manage the P&L of the Financial Services Group
including its growth and return objectives.


2.                                       Your
compensation package will be as follows:


(a)                                  Your
annualized base salary will be increased from $300,440 to $325,000 per year
effective January 1, 2007 and your salary and performance will be reviewed
annually consistent with the practices of the Company.


(b)                                 You
will participate in the Executive Incentive Plan (EIP) as established by the
Company.  For the 2006 fiscal year, you
will continue to participate in the Walter Industries, Inc. EIP with a bonus
target of 60% of your base salary to a maximum of 2 times target.  Your bonus will be calculated 













using the performance of
Jim Walter Homes from January 1, 2006 through August 15, 2006, then using the
performance of the Homes Group (combined Jim Walter Homes and Financial
Services Group) for the period August 16, 2006 through December 31, 2006. The
amount of your incentive will fluctuate based upon actual performance under the
performance metrics associated with the EIP. In situations other than those
described in section 3 of this agreement, a bonus will not be paid or payable
in the event you are not employed by the Company on the date the bonus is paid.  Please note that participation in the
Employee Stock Purchase Plan is a requirement of the Walter Industries’ EIP.


(c)                              You
will be eligible for the Walter Industries, Inc. annual long-term incentive
program.  In addition, you will receive a
one-time grant of non-qualified stock options on the equivalent of 2.5% of the
total combined equity of the Homes Group (or another vehicle that will deliver
equivalent value). The strike price of these options will be equal to the
strike price used in the equity grant for the CEO of the Homes Group pursuant
to his agreement of March 2, 2006. These options will vest at the rate of 1/3
per year commencing on 03/02/07, 03/02/08, and 03/02/09 respectively. The
options will be evidenced by an option agreement and option plan, which are
substantially equivalent to the form of plan and agreement currently used by
Walter Industries, Inc., with such revisions as are necessary to conform to
this agreement.  Except as provided
below, these options will expire ten years from the grant date.  The options will vest on any change in
control of the Homes Group.  A spin-off
or other transaction separating the Homes Group from Walter Industries, Inc.
shall not be considered a change in control and in the case of such a
transaction your options and this agreement will continue in full force and
effect.  In the event of your termination
by the Homes Group for Cause or your voluntary termination of employment other
than for a reason specified in the next sentence, your unvested options will
expire immediately and you will have 90 days to exercise any options which are
vested on the date your employment terminates. 
In the event of your termination by the Homes Group for any other
reason, your resignation because of a significant diminution in pay or
responsibilities, your normal retirement after the third anniversary of the
date of this agreement, your resignation because of the Homes Group’s or Walter
Industries’ material breach of this agreement which is not cured within a
reasonable period after notice, or your death, your options will accelerate and
fully vest on the date of termination and you will have two years after
termination to exercise your vested options. 
If you have vested options at any time when there is no public market
for the common stock of the Homes Group and you notify the Homes Group of your
intention to exercise such options, the per share price of the common stock of
the Homes Group shall be calculated by reference to a valuation of the Homes
Group as a going concern conducted by a mutually agreeable, experienced
valuation firm of national reputation. The Homes Group shall not be 



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required to conduct more
than one such valuation in any calendar year. Following receipt of such
valuation, the Homes Group shall, upon your request, pay you an amount in cash
equal to the difference between the price of the common stock as so calculated
and the strike price of the options you wish to exercise upon your surrender of
such options to the Homes Group.


(d)                                 You
will receive a vehicle allowance of $1,500 per month, subject to usual
withholding taxes.


(e)                                  You
will receive the benefits generally applicable to senior executives of the
Company in the location in which you are primarily based, as well as the
following additional benefits:


·                  Reimbursement
for all reasonable and customary business-related travel and entertainment
expenses in accordance with the terms of the policy generally applicable to the
executives in the location in which you are primarily based, as it may change
from time to time.


·                  Participation
in the group life and health insurance benefit programs, generally applicable
to executives employed in the location in which you are primarily based, in
accordance with their terms, as they may change from time to time.


·                  Participation
in the Company’s retirement plan, generally applicable to salaried employees in
the location in which you are primarily based, as it may change from time to
time and in accordance with its terms.


·                  Participation
in the Employee Stock Purchase Plan, generally applicable to salaried employees
in the location in which you are primarily based and as it may change from time
to time and in accordance with its terms.


·                  Eligibility
for 30 days of annual vacation to be used each year in accordance with policy
generally applicable to executives employed in the location in which you are
primarily based, as it may change from time to time.


3.                                       In
the event of your involuntary termination, other than for “Cause” (defined
below), in the event of your Constructive Termination (also defined below), or
if you are required to relocate more than 50 miles from the current
headquarters location in Tampa, Florida, in each case, other than as a result
of death or disability, you will be entitled to (i) payment of base salary for
18 months, (ii) payment of the target amount of your cash bonus (including your
vehicle allowance) for 18 months, and (iii) continued participation in benefits
until the earlier of the 18-month anniversary of the termination date or until
you are 



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eligible to receive comparable benefits from
subsequent employment. The COBRA election period will not commence until the
expiration of that 18-month period. Payment must be in accordance with all
government regulations e.g. IRC 409A.


4.                                       You
agree that all inventions, improvements, trade secrets, reports, manuals,
computer programs, systems, tapes and other ideas and materials developed or
invented by you during the period of your employment with the Company, either
solely or in collaboration with others, which relate to the actual or
anticipated business or research of the Company, which result from or are
suggested by any work you may do for the Company, or which result from use of
the Company’s premises or the Company’s or its customers’ property
(collectively, the “Developments”) shall be the sole and exclusive property of
the Company.  You hereby assign to the
Company your entire right and interest in any Developments and will hereafter
execute any documents in connection therewith that the Company may reasonably
request.  This section does not apply to
any inventions that you made prior to your employment by the Company or any of
its predecessors or affiliates, or to any inventions that you develop entirely
on your own time without using any of the Company’s equipment, supplies,
facilities or the Company’s or its customers’ confidential information and
which do not relate to the Company’s business, anticipated research and
developments or the work you have performed for the Company.


5.                                       Non-Compete/Non-Solicit.
It is understood and agreed that the nature and methods employed in the Company’s
business are such that you will have substantial relationships with specific
businesses and personnel, prospective and existing, vendors, contractors,
customers, and employees of the Company that result in the creation of customer
goodwill.  Therefore, following the
termination of employment under this agreement for any reason that results in
the payment of severance and continuing for a period of eighteen (18) months
from the date of such termination, so long as the Company or any affiliate,
successor or assigns thereof carries on the name or like business within the
Restricted Area (defined below), including the states that the Company operates
in as of the date of your separation, you shall not, directly or indirectly,
for yourself or on behalf of, or in conjunction with, any other person,
persons, company, partnership, corporation, business entity or otherwise:


(a)                                  Call
upon, solicit, write, direct, divert, influence, or accept business (either
directly or indirectly) with respect to any account or customer or prospective
customer of the Company or any corporation controlling, controlled by, under
common control with, or otherwise related to Company, including but not limited
to any other affiliated companies; or



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(b)                                 Hire
away any independent contractors or personnel of Company and/or entice any such
persons to leave the employ of Company or its affiliated entities without the
prior written consent of Company.


Notwithstanding the foregoing, following the
termination of employment under this agreement for any reason and continuing
for a period of eighteen (18) months from the date of such termination, you
shall not, directly or indirectly, for yourself or on behalf of, or in
conjunction with, any other person, persons, company, partnership, corporation,
business entity or otherwise, hire away any independent contractors or
personnel of Employer and/or entice any such persons to leave the employ of
Employer or its affiliated entities without the prior written consent of
Company.


6.                                       Non-Disparagement.  Except as may be legally required following
the termination of employment under this agreement for any reason and
continuing for so long as the Company or any affiliate, successor or assigns
thereof carries on the name or like business within the Restricted Area, neither
you nor the company shall not, directly or indirectly, for themselves or on
behalf of, or in conjunction with, any other person, persons, company,
partnership, corporation, business entity or otherwise:


(a)                                  Make
any statements or announcements or permit anyone to make any public statements
or announcements concerning your termination with Company, or


(b)                                 Make
any statements that are inflammatory, detrimental, slanderous, or negative in
any way to the interests of you or the Company or its affiliated entities.


7.                                       As
an inducement to the Company to make this offer to you, you represent and
warrant that you are not a party to any agreement or obligation for personal
services and that there exists no impediment or restraint, contractual or
otherwise on your power, right or ability to accept this offer and to perform
the duties and obligations specified herein.


8.                                       You
acknowledge and agree that you will respect and safeguard the Company’s property,
trade secrets and confidential information. 
You acknowledge that the Company’s electronic communication systems
(such as email and voicemail) are maintained to assist in the conduct of the
Company’s business and that such systems and data exchanged or stored thereon
are Company property.  In the event that
you leave the employ of the Company, you will not disclose any trade secrets or
confidential information you acquired while an employee of the Company to any
other person or entity, including without limitation, a subsequent employer, or
use such information in any manner.



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9.                                       Definitions:


 “Cause” shall
mean: (a) a willful and continued material failure to act in accordance with
the reasonable instructions of the CEO of the Homes Group, (b) conviction of a
felony arising from any act of fraud, embezzlement or willful dishonesty in
relation to the business or affairs of the Company or any other felonious
conduct on your part that is demonstrably detrimental to the best interests of
the Company or any subsidiary or affiliate, (c) being repeatedly under the
influence of illegal drugs or alcohol while performing your duties, or (d)
commission of any other willful act that is demonstrably injurious to the
financial condition or business reputation of the Company or any subsidiary or
affiliate. However, no act or failure to act on your part shall be deemed “willful”
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that the action or omission was in the best interests of the
Company.


“Constructive Termination”
shall mean, without your written consent: (a) a material failure of the Company
to comply with the provisions of this agreement, (b) a material diminution of
your position (including status, offices, title and reporting relationships),
duties or responsibilities, (c) any purported termination of your employment
other than for Cause, or (d) the failure of a successor corporation to assume
the Company’s obligations under this agreement.


For purposes of this agreement, a significant
diminution in pay or responsibility shall not have occurred if: (i) the
amount of your bonus fluctuates due to performance considerations under the EIP
or other Company incentive plan applicable to you and in effect from time to
time or (ii) you are transferred to a position of comparable responsibility and
compensation with the Homes Group, as long as you retain the position of Chief
Financial Officer and report to the  Chief Executive Officer.


“Restricted Area” shall mean in the homebuilding and
financing industries that we compete at the time of your separation, unless
management approves an exception.


 10.                      As discussed,
the Company desires to have you, as a senior executive of the Company, make a
meaningful investment in the Company. If and when the Homes Group spins-off
from Walter Industries, you have committed to invest at least $100,000 in the
Company’s common stock within two years after the date of the spin-off.


11.                                 In the event that any portion of any payment under
this agreement, or under any other agreement with, or plan of the Company (in
the aggregate, Total Payments) would constitute an “excess parachute payment,”
such that a golden parachute excise tax is due, the Company shall provide to
you, in cash, an additional payment in an amount sufficient to cover the full
cost of any excise tax and all of your additional federal, state, and local
income, excise, and employment taxes 



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that arise on this additional
payment (cumulatively, the Full Gross-Up Payment), such that you are in the
same after-tax position as if you had not been subject to the excise tax. For
this purpose, you shall be deemed to be in the highest marginal rate of
federal, state, and local income taxes in the state and locality of your
residence on the date of your termination. This payment shall be made as soon
as possible following the date of your termination, but in no event later than
ten (10) calendar days from such date. 
For purposes of this agreement, the term “excess parachute payment”
shall have the meaning assigned to such term in Section 280G of the Internal
Revenue Code, as amended (the Code), and the term “excise tax” shall mean the
tax imposed on such excess parachute payment pursuant to Sections 280G and 4999
of the Code.


12.                                 It
is agreed and understood that this offer letter, if and when accepted, shall
constitute our entire agreement with respect to the subject matter herein and
shall supersede all prior agreements, discussions, understandings and proposals
(written or oral) relating to your employment with the Jim Walter Homes, the
Homes Group and related business units.


Charles, your
signature below confirms your acceptance of this employment agreement. Please
sign one of the enclosed copies and return it to me in the envelope provided.


	
  

  	
  Very truly
  yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Mark O’Brien

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mark O’Brien

  	
   

  
	
   

  	
  Chief Executive
  Officer of the Homes Group

  	
   

  



MO: lac

Enclosures


Agreed and
Accepted


	
  /s/ Charles E. Cauthen

  	
   

  
	
   

  	
   

  
	
  Charles E.
  Cauthen

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date

  	
   

  



 



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