EXHIBIT 10.1


 


Beazer Homes USA, Inc.


2005 Executive Value Created
Incentive Plan


Effective October 1, 2004


 


Participation


 


Participation in the 2005 Executive Value Created
Incentive Plan (“Executive VCIP” or “Executive Plan”) is at the
discretion of the Compensation Committee of the Board of Directors and is
generally available only to officers who are full-time employees of Beazer
Homes USA, Inc. at the level of Corporate Senior Vice President and above.  Any participant who ceases to be a full-time
employee will cease participation in the plan at that time.


 


Definitions


 


EBIT - Earnings Before Interest and Taxes.


 


Value Created (VC) - EBIT less a
Capital Charge.


 


Incremental Value Created (IVC)
- Increase or decrease in Value Created compared to the prior year.


 


Capital Employed - Total Assets,
excluding cash, less Total Liabilities (other than debt).  Also equal to total debt plus total equity,
less cash on hand.  This represents the
total book value of the investment in the business. Capital Employed is determined
daily.


 


Capital Charge – A charge for
the use of capital employed in the business. For the Executive Plan, the
Capital Charge is in the range of 11% to 14% of the Capital Employed.  The Capital Charge for purposes of this Plan
shall be determined from time to time by, and may be adjusted individually or
for the participants as a whole, at the discretion of the Compensation
Committee of the Board of Directors in connection with its review of the
Executive Plan.


 


Adjustments to Capital Charge –
The Compensation Committee, at its sole discretion, may approve objectively
measurable adjustments to the Capital Charge, and therefore to VC and IVC, in
recognition of special circumstances or to provide special incentives in the
long term interests of value creation. As an example, credit to the Capital
Charge may be granted for purchases of land in advance of the immediate need
for development, thereby encouraging commitments for future land development.


 


Plan Rules


 


1.                           Initial Bank


Each participant may have
a bank set up when they enter the Plan. 
The maximum initial amount in the bank is half of the participant’s
salary except the initial amount in the Bank under this Plan for participants
who participated in any of the Company’s prior VCIPs is their former bank
balance adjusted pursuant to Section 6.


 





















 


2.                           Funding of the Potential  Annual Awards, and Percentages of VC and IVC


Each year the participant’s
potential award will be funded based upon a set percentage of VC (if positive)
and a set percentage of IVC (if positive). 
The percentage used of VC will vary based upon the level of VC and will
decrease as VC increases.  The percentage
of IVC is fixed regardless of the level of VC or IVC.  Exact percentages are determined by the
participant’s position.  Actual incentive
payments to each participant are subject to adjustments for three additional
performance factors:  (a) Profitable
Growth, (b) Customer Satisfaction and (c) Construction Quality and Workplace
Safety.  These additional factors are
outlined in Section 9.


 


3.                           Same Percentages of VC and IVC Put in Bank


Each year, the same
percentage of VC and the same percentage of IVC used in 2, above, are also put
into a bank.  Unlike the annual payment,
however, both positive and negative numbers are put in to the bank.  The bank balance can become negative.  The bank is subject to a maximum limit (see
Section 6).


 


4.                           One-Third of Bank Paid Out Each Year


Each year, after adding
or subtracting the current year’s amounts to the bank, one-third of the bank is
paid out.


 


5.                           Maximum Cash Payment Under
Plan Is Set Multiple of Salary; Excess in Bank


After deduction of the
deferred portion specified in Section 10 below, the maximum annual cash payment
is determined as a set multiple of the participant’s annual salary for that
year.  The multiple increases as VC
increases. Any excess over the maximum amount remains in the bank, subject to
the limit described in Section 6.


 


6.                           Bank Has Maximum Limit, Excess Paid in Restricted
Stock and/or Deferred Compensation


The maximum balance of
the bank, after current year additions and payments, is equal to one time that
year’s maximum cash payment.  Twenty-five
percent (25%) of any amount over this limit will be awarded in a combination of
restricted stock and/or deferred compensation (see Section 13).  The remaining 75% of that excess is
forfeited.  Any restricted stock and/or
deferred compensation will vest after three years after the end of the fiscal
year and is forfeited upon severance, resignation, retirement, death or
termination for any reason before vesting.


 


7.                           10% of Bank Paid in Deferred Compensation


At the end of each year
after current year adjustments have been made, all cash payments have been made
and any reduction for excess over the maximum limit specified herein, 10% of
the ending bank will be awarded as deferred compensation.  Such deferred compensation will vest three
years after the end of the fiscal year and is forfeited upon severance,
resignation, retirement, death or termination for any reason before vesting.


 


8.                           Bank Is Carried Forward And
Is Lost Upon Termination


The bank balance,
positive or negative, is carried forward to the next year.  Any positive balance in the bank is at risk
and may be reduced or eliminated by performance in subsequent years.  The bank is forfeited upon severance,
resignation, retirement, death or termination for any reason.  The bank is also forfeited when a participant
ceases to be a full-time employee.  The bank
is not deferred compensation.  It
represents future bonus potential based upon a combination of both past and
future performance.


 





















 


9.                           Additional Performance Factors-Adjustments to
Potential Annual Payment


Actual
Incentive Payments are funded based
upon 100% of the calculated Value Created and Incremental Value Created results
up to the maximum amount, and then are adjusted by the following performance
factors and percentages.  The
Compensation Committee shall adopt from time to time a schedule showing the
percentage adjustments based on scores or other elements achieved with respect
to the following:


 


	
  (a)

  	
  Profitable
  Growth:

  	
    0% to +10%

  
	
  (b) 

  	
  Customer Satisfaction:

  	
  -10% to +0%

  
	
  (c) 

  	
  Construction
  Quality and Workplace Safety:

  	
  -10% to +0%

  



 


Actual incentive payments
adjustments can vary from -20% to +10% of the amount that would be payable
under Executive VCIP before performance factor adjustments.  Each factor is outlined below.


 


(a) Profitable Growth:
To encourage growth in both revenue and profit margin, with a higher weighting
toward improving profit margin as compared to revenue growth. However, no
positive adjustment to the incentive payment would occur without revenue growth
over the prior year.


 


(b) Customer Satisfaction: To
encourage customer service, referrals, and Beazer brand development,
adjustments will occur based upon the results of customer satisfaction surveys:


 


	
  Recommend to a Friend:

  	
  -5.0% to + 0%

  
	
  Total Satisfaction:

  	
  -2.5% to + 0%

  
	
  Overall Service
  Satisfaction:

  	
  -2.5% to + 0%

  



 


(c) Construction Quality and
Workplace Safety:  To
encourage high standards of construction, workplace safety, and administrative
process, Construction and Safety Evaluation scores will be used to adjust
incentive payments using the following percents:


 


	
  Construction Quality:

  	
  -2.5% to + 0%

  
	
  Workplace Safety:

  	
  -2.5% to + 0%

  
	
  Overall Score:

  	
  -5.0% to + 0%

  



 


Overall Score incorporates Construction, Safety and
the Administrative factors of Engineering, Purchasing, and Insurance.


 


10.                     Election to Defer Portion of Annual Cash Payment


Not later than the
December 31st preceding the calendar year to which a bonus relates,
participants may elect to defer a portion of the cash bonus under the Corporate
Management Stock Purchase Program (CMSPP) and/or the Deferred Compensation
Plan.  Details of the CMSPP and the DCP are
available separately from the Corporate Human Resources Department.


 


11.                     Annual Total Award Limit


The maximum total amount
of cash paid and, restricted stock (valued at the current stock price) and
deferred compensation paid and/or awarded under Section 6 to any participant in
any one year is $10,000,000 excluding the Performance Factor adjustment and
$11,000,000 including the Performance Factor adjustment.


 


12.                     Payments At Discretion of
Compensation Committee; Review and Amendment


Payments under this Plan
are made subject to the sole discretion of the Compensation Committee of the
Board of Directors.  Without limiting the
foregoing, the Committee may reduce or disallow any payment or award under this
Plan on a case by case basis in appropriate circumstances, including the


 





















 


following: (a) if a
participant has breached any corporate policy or ethical standard, or (b) if a
participant has pursued any particular business policy to advance self-interest
at the expense of the interests or policies of the Company, provided that no
such reduction or disallowance shall be allowed to cause an increase in any
other participant’s payment or award under this Plan.  Annually, the Compensation Committee will
review and confirm the calculations of payments and awards to be made and
document such review in writing prior to such payments and awards being
made.  The Compensation Committee intends
to review the Executive Value Created Incentive Plan for potential changes at
least every three years and reserves the right to amend it for any fiscal year
prior to the commencement of such fiscal year, subject to shareholder approval
if required by law, the rules of the NYSE or in order to continue to qualify
payments hereunder as “performance-based compensation” under Internal Revenue
Code Section 162(m) as described in Section 14.


 


13.                     Restricted Stock And
Deferred Compensation


Restricted stock awarded
under this Plan is awarded based upon the closing stock price as of the date of
such award.  The combination of
restricted stock and deferred compensation to be awarded under Section 6 will
be determined by the Compensation Committee based upon an aggregate limitation
of 40,000 shares of restricted stock in any one year.  Restricted stock and deferred compensation
awarded under this Executive Plan are subject to the terms of any Beazer plan
under which such restricted stock is issued or deferred compensation is awarded
above, such reduction will be made pro rata among those participants receiving
restricted stock.


 


14.                     Status of Value Created Incentive Plan and Tax Deductibility


This Executive VCIP is
effective October 1, 2004, subject to shareholder approval at the Company’s
Annual Meeting in February 2005.  Subject
to that approval, the prior Value Created Incentive Plan is terminated for the
participants under this Executive Plan. 
Cash, restricted stock and deferred compensation payments made under
this Executive VCIP are intended to qualify as “performance-based compensation”
under Internal Revenue Code Section 162(m).