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Exhibit 10(t)
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of October 6, 1997, between
Avatar Retirement Communities, Inc., a Delaware corporation (the "Company"), and
Xxxxxxx X. Xxxxx (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Employee as its
President and the Employee desires to accept such employment, all on the terms
and conditions specified herein; and
WHEREAS, the Employee and the Company desire to set forth in
writing all of their respective duties, rights and obligations with respect to
the Employee's employment by the Company; and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and obligations hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the Company, in the
capacity and upon the terms and conditions hereinafter set forth. The term of
employment under this Agreement shall be for the period commencing on the date
hereof (the "Commencement Date") and ending on the second anniversary thereof,
unless earlier terminated as herein provided (the "Term of Employment"). The
last day of the Employee's Term of Employment shall be referred to in this
Agreement as the "Date of Termination."
2. DUTIES. During the Term of Employment, the Employee shall
serve as the Company's President, and shall perform such duties, functions and
responsibilities as are customarily associated with and incident to the position
of President and as the Company may, from time to time, require of him, subject
to the direction of the Company's Board of Directors. The Employee shall serve
the Company faithfully, conscientiously and to the best of the Employee's
ability and shall promote the interests and reputation of the Company. Unless
prevented by sickness or disability, the Employee shall devote all of his time,
attention, knowledge, energy and skills, during normal working hours, and at
such other times as the Employee's duties may reasonably require,
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to the duties of the Employee's employment, subject to the terms and conditions
of that certain Management Services Agreement (the "Management Services
Agreement"), of even date herewith, between the Company and Hilcoast Development
Corp. ("Hilcoast"). The principal place of employment of the Employee shall be
the principal executive offices of the Company and/or such other location in the
state of Florida as shall be necessary for the Employee to discharge the
obligations of the Company under the Management Services Agreement. The Employee
acknowledges that in the course of his employment he may be required, from time
to time, to travel on behalf of the Company.
3. COMPENSATION AND BENEFITS. As full and complete
compensation for the Employee's execution and delivery of this Agreement and
performance of any services hereunder, the Company shall pay, grant or provide
the Employee, and the Employee agrees to accept, the following compensation and
benefits:
(a) BASE SALARY: The Company shall pay the Employee a base
salary at an annual rate of $200,000 payable at such times and in accordance
with the Company's standard payroll practices. Upon completion by the Employee
of one year of employment with the Company, the Employee's base salary shall be
reviewed, and in the sole discretion of the Board of Directors of the Company,
the Company may increase (but not decrease) the Employee's base salary.
(b) EMPLOYEE BENEFITS. The Company shall afford the Employee
the opportunity to participate during the Term of Employment in any medical,
dental, disability insurance, retirement, savings and any other employee
benefits plans or programs which its parent, Avatar Holdings Inc. ("Avatar"),
maintains for its senior executives. Nothing in this Agreement shall require the
Company, Avatar or their affiliates to establish, maintain or continue any
benefit programs already in existence or hereafter adopted for senior executives
of Avatar, and nothing in the Agreement shall restrict the right of Avatar or
any of its affiliates to amend, modify or terminate any such benefit program.
(c) EXPENSES: The Employee shall be entitled to reimbursement
or payment of reasonable business expenses (in accordance with Avatar's policies
for its senior executives, as the same may be amended from time to time in
Avatar's sole discretion), following the Employee's submission of appropriate
receipts and/or vouchers to the Company.
(d) INCENTIVE COMPENSATION. In addition to any
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other compensation hereunder, the Employee shall receive incentive compensation
as set forth in Annex A attached hereto, which Annex shall constitute a part of
this Agreement.
(e) VACATIONS, HOLIDAYS OR TEMPORARY LEAVE: The Employee shall
be entitled to take three (3) weeks of vacation per year, without loss or
diminution of compensation. Such vacation shall be taken at such time or times,
and as a whole or in increments, as the Employee shall elect, consistent with
the reasonable needs of the Company's business. The Employee shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the policies of Avatar for its senior executives
(as such policies may be amended from time to time or terminated in Avatar's
sole discretion).
4. NON-COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION:
(a) RESTRICTIVE COVENANTS:
(1) During the Term of Employment and for two years
following the Date of Termination, the Employee shall not directly or indirectly
engage, participate, own or make any financial investments in, or become
employed by or render (whether or not for compensation) any consulting, advisory
or other services to or for the benefit of, any person, firm or corporation
that, directly or indirectly, engages in, the development of adult retirement
communities, or otherwise engage, directly or indirectly, in the development of
adult retirement communities and/or active adult communities; PROVIDED, HOWEVER,
that it shall not be a violation of this Agreement for the Employee to have
beneficial ownership of less than 1% of the outstanding amount of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on a national
securities exchange or quoted on an inter-dealer quotation system.
(2) During the Term of Employment and for three years
following the Date of Termination, the Employee shall not, directly or
indirectly, solicit, in competition with the Company or Avatar, any person who
is a customer of any business conducted by the Company or Avatar.
(3) During the Term of Employment and for three years
following the Date of Termination, the Employee
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shall not, directly or indirectly, solicit or induce any employee of the Company
or Avatar to terminate his or her employment for any purpose, including without
limitation, in order to enter into employment with any entity which competes
with any business conducted by the Company or Avatar.
(4) During the Term of Employment and for all time
following the Date of Termination, the Employee shall not, directly or
indirectly, furnish or make accessible to any person, firm, or corporation or
other business entity, whether or not he, she, or it competes with the business
of the Company, any trade secret or know-how acquired by the Employee during his
employment by the Company which relates to the business practices, methods,
processes or other confidential or secret aspects of the business of the Company
or Avatar without the prior written consent from the Company, unless such
information is or hereafter may become in the public domain other than by being
divulged or made accessible by the Employee in breach of this provision, or
which is demonstrated by the Employee to the Company's and Avatar's reasonable
satisfaction to be known by him prior to the disclosure to him by the Company or
Avatar, or which is or may hereafter be disclosed by the Company or Avatar to
third parties without similar restrictions on disclosure or use, or which is
required to be disclosed pursuant to governmental or judicial process or
procedure.
(b) GEOGRAPHIC SCOPE: The provisions of this Section 4 (other
than Section 4(a)(3), which shall be in full force and effect without regard to
the geographic limitations set forth in this Section 4(b)) shall be in full
force and effect (i) within a 50-mile radius of a site for which the Company or
Avatar has commenced development or has a binding commitment therefor and (ii)
within a 50-mile radius of Ponciana, Cape Coral and Ocala, Florida and Rio Rico,
Arizona, whether or not the Company or Avatar has commenced development in such
locations or has a binding commitment therefor.
(c) REMEDIES: The Employee acknowledges that his services are
of a special, unique and extraordinary character and, his position with the
Company and Avatar places him in a position of confidence and trust with the
clients and employees of the Company and Avatar, and that in connection with his
services to the Company, the Employee will have access to confidential
information vital to the Company's and Avatar's businesses. The Employee further
acknowledges that in view of the nature of the business in
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which the Company and Avatar are engaged, the foregoing restrictive covenants in
this Section 4 hereof are reasonable and necessary in order to protect the
legitimate interests of the Company and Avatar and that violation thereof would
result in irreparable injury to the Company and Avatar. Accordingly, the
Employee consents and agrees that if the Employee violates or threatens to
violate any of the provisions of this Section 4 hereof the Company and Avatar
would sustain irreparable harm and, therefore, the Company and Avatar shall be
entitled to obtain from any court of competent jurisdiction, without posting any
bond or other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to
any other rights or remedies in law or equity to which the Company or Avatar may
be entitled.
(d) TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON;
FAILURE TO CONTINUE EMPLOYMENT. The Employee's covenants under Section 4(a)(1)
and 4(a)(2) shall be of no force or effect in the event that (i) the Company
terminates the Employee's employment Without Cause pursuant to Section 5(a)(5)
hereof, (ii) the Employee resigns for Good Reason pursuant to Section 5(a)(6)
hereof, or (iii) the Company shall not have offered to continue the Employee's
employment with the Company for an additional period of at least two years on
terms that are at least as favorable as the terms of this Agreement prior to the
second anniversary of the Commencement Date. All other covenants hereunder shall
remain in full force and effect if any of the events described in the foregoing
clauses (i), (ii) or (iii) of this Section 4(d) shall occur.
5. TERMINATION OF EMPLOYMENT:
(a) The Employee's employment with the Company shall
terminate upon the occurrence of any of the following events:
(1) the termination of the Employee's
employment upon and at any time following the Date of Termination and absent the
parties having entered into a written agreement for the renewal of this
Agreement;
(2) the death of the Employee during the
Term of Employment;
(3) the Disability (as defined below) of
Employee during the Term of Employment;
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(4) at any time upon written notice to the
Employee from the Company of termination of his employment for Cause (as defined
below);
(5) at any time upon written notice to the
Employee from the Company of termination of his employment Without Cause (as
defined below);
(6) the resignation by the Employee for Good
Reason (as defined below) during the Term of Employment; or
(7) the resignation by the Employee Without
Good Reason (as defined below) during the Term of Employment.
(b) For purposes of this Agreement, the "Disability" of the
Employee shall mean his inability, because of mental or physical illness or
incapacity, whether total or partial, to perform his full time duties under this
Agreement with or without reasonable accommodation for a period aggregating 60
days out of any 12-month period under circumstances where in the opinion of a
qualified physician reasonably acceptable to the Company it is reasonably
certain that the Employee will not be able to resume his duties on a regular
full time basis within 30 days of the date the Employee receives notice of
termination for Disability.
(c) For purposes of this Agreement, the term "Cause" shall
mean the Employee's (a) conviction or entry of a plea of guilty or nolo
contendere, with respect to any felony; (b) commission of any act of dishonesty
in the performance of the Employee's duties or obligations to the Company, any
material act of wilful misconduct, or any act of gross negligence or fraud; or
(c) violation of any material term of this Agreement or any material written
policy of the Company, PROVIDED that the Company first deliver written notice
thereof to the Employee and the Employee shall not have cured such violation
within 30 days after receipt of such written notice.
(d) For purposes of this Agreement, "Without Cause" shall mean
any reason other than the reasons described in Sections 5(a)(1), 5(a)(2),
5(a)(3) and 5(a)(4) hereof. The parties expressly agree that a termination of
employment Without Cause pursuant to Section 5(a)(5) hereof may be for any
reason whatsoever, or for no reason, in the sole discretion of the Company.
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(e) For purposes of this Agreement, "Good Reason" shall mean:
(i) at any time the Employee is required, without his written consent, to
relocate his office more than fifty miles from the principal location of the
Company on the date hereof; (ii) the Company materially decreases the Employee's
compensation below the levels provided for by the terms of Section 3(a) (taking
into account increases made from time to time in accordance with Section 3(a));
and (iii) a material breach of the provisions of this Agreement by the Company
(except those set forth in Section 3(a)) and Employee provides at least 30 days'
prior written notice to at least three members of the Company's Board of
Directors of the existence of such breach and his intention to terminate this
Agreement (it being understood that no such termination shall be effective if
such breach is cured during such period).
(f) For purposes of this Agreement, "Without Good Reason"
shall mean any reason other than that defined in this Agreement as constituting
Good Reason.
6. PAYMENTS UPON TERMINATION OF EMPLOYMENT:
(a) DEATH OR DISABILITY: If the Employee's employment
hereunder is terminated due to the Employee's death or Disability pursuant to
Sections 5(a)(2) or (3) hereof, the Company shall pay or provide to the
Employee, his designated beneficiary or to his estate (i) all base salary
pursuant to Section 3(a) hereof and any vacation pay pursuant to Section 3(e)
hereof, in each case which has been earned but unpaid as of the Date of
Termination; and (ii) any benefits to which the Employee may be entitled under
any employee benefits plan or program pursuant to Section 3(b) hereof in which
he is a participant in accordance with the terms of such plan or program up to
and including the Date of Termination. Should the Company wish to purchase
insurance to cover the costs associated with the Employee's termination of
employment pursuant to Sections 5(a)(2) or (3), the Employee agrees to execute
any and all necessary documents necessary to effectuate said insurance. Upon
termination of the Employee's employment due to the Employee's Disability, the
Employee shall continue to have the obligations provided for in Section 4
hereof.
(b) TERMINATION FOR CAUSE, RESIGNATION WITHOUT GOOD REASON, OR
EXPIRATION OF TERM OF EMPLOYMENT: If the Employee's employment hereunder is
terminated due to the termination of the Employee's employment by the Company
for Cause pursuant to Section 5(a)(4), due to the Employee's
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resignation Without Good Reason pursuant to Section 5(a)(7), or due to a
termination of employment upon or at any time following the Date of Termination
and absent the parties having entered into a written agreement for the renewal
of this Agreement pursuant to Section 5(a)(1), the Company shall pay or provide
to the Employee (i) all base salary pursuant to Section 3(a) hereof and any
vacation pay pursuant to Section 3(e) hereof, in each case which has been earned
but unpaid as of the Date of Termination; and (ii) any benefits to which the
Employee may be entitled under any employee benefits plan or program pursuant to
Section 3(b) hereof in which he is a participant in accordance with the terms of
such plan or program up to and including the Date of Termination.
(c) TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON:
(i) If the Employee's employment hereunder is terminated by the Company Without
Cause pursuant to Section 5(a)(5), or due to the Employee's resignation for Good
Reason pursuant to Section 5(a)(6), the Company shall, subject to Section
6(c)(ii), (i) if Employee's employment is so terminated prior to the second
anniversary of the Commencement Date, pay or provide to Employee any benefits to
which the Employee may be entitled under any employee benefit plan or program
pursuant to Section 3(b) hereof in which he is a participant in accordance with
the terms of such plan or program up to and including the date immediately prior
to the second anniversary of the Commencement Date, and (ii) continue to pay to
the Employee, in lieu of any other payments or benefits (other than as provided
in clause (i) above and payments due with respect to any vested portions of the
Employee's Incentive Compensation referred to in Section 3(d) which shall not be
affected by the limitations of this Section 6(c)(i)) and on the regular payroll
dates of the Company, his base salary through the second anniversary of the
Commencement Date, at the rate provided in Section 3(a) hereof.
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(ii) In addition, the Employee agrees to keep the Chairman of
the Board of the Company (or the Chairman's designee) apprised of the Employee's
employment status during the entire period of time that the Employee shall be
entitled to receive benefits pursuant to Section 6(c)(i) above, and, if
requested, to provide appropriate supporting documentation with respect to the
salary, bonuses or other compensation earned by and benefits made available to
the Employee in respect of any employment secured by the Employee. In the event
the Employee secures employment, the Company shall be entitled to deduct from
the amounts payable to the Employee pursuant to Section 6(c)(i), any salary,
bonuses or other compensation paid to the Employee in connection with such
employment, and the Employee shall promptly repay to the Company any amounts
paid to him by the Company pursuant to Section 6(c)(i) which the Company was
entitled to deduct from such amounts pursuant to this Section 6(c)(ii).
(d) NO OTHER PAYMENTS: Except as provided in this Section 6,
and except for payments due with respect to vested portions of the Employee's
Incentive Compensation referred to in Section 3(d), which payments shall be due
and payable as set forth in Annex A hereto, the Employee shall not be entitled
to receive any other payments or benefits from the Company due to the
termination of his employment, including but not limited to, any employee
benefits under any of the Company's or Avatar's employee benefits plans or
programs (other than at the Employee's expense under the Consolidated Omnibus
Budget Reconciliation Act of 1985 or pursuant to the terms of any pension plan
which the Company or Avatar may have in effect from time to time) or any right
to be paid severance pay. If the Employee is entitled to any notice or payment
in lieu of any notice of termination required by Federal, State or local law,
including but not limited to the Worker Adjustment and Retraining Notification
Act, the Company's obligation to make payments pursuant to Section 6(c)(i) shall
be reduced by the amount of any such payment in lieu of notice.
7. NO CONFLICTING AGREEMENTS. The Employee hereby represents
and warrants that he is not a party to any agreement, or non-competition or
other covenant or restriction contained in any agreement, commitment,
arrangement or understanding (whether oral or written), which would in any way
conflict with or limit his ability to commence work on the first day of the Term
of Employment or would otherwise limit his ability to perform all
responsibilities in accordance with the terms and subject to the conditions of
this Agreement.
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8. DEDUCTIONS AND WITHHOLDING. The Employee agrees that the
Company shall withhold from any and all compensation required to be paid to the
Employee pursuant to this Agreement all federal, state, local and/or other taxes
which the Company determines are required to be withheld in accordance with
applicable statutes and/or regulations from time to time in effect and all
amounts required to be deducted in respect of the Employee's coverage under
applicable employee benefit plans.
9. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement of the parties with respect to the Employee's employment and
supersedes any other prior oral or written agreements between the Employee and
the Company and its affiliates. This Agreement may not be changed or terminated
orally but only by an agreement in writing signed by the parties hereto.
10. WAIVER. The waiver by the Company of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee. The waiver by the Employee of
a breach of any provision of this Agreement by the Company shall not operate or
be construed as a waiver of any subsequent breach by the Company.
11. GOVERNING LAW. This Agreement shall be subject to, and
governed by, the laws of the State of Florida applicable to contracts made and
to be performed in the State of Florida, regardless of where the Employee is in
fact required to work.
12. EFFECTIVENESS. This Agreement shall terminate and have no
further force or effect if the transaction contemplated by that certain Asset
Purchase and Option Agreement, dated as of the date hereof, between Avatar, the
Company, Hilcoast and NewCen Communities, Inc. (the "Asset Purchase Agreement"),
shall fail to be consummated.
13. NOTIFICATION OF CONTINUATION OF EMPLOYMENT. The Company
agrees to notify the Employee on or prior to the 18-month anniversary of the
Commencement Date, whether or not it desires to continue the Employee's
employment with the Company, and if so, whether such continuation will be
pursuant to a renewal of the term of this Agreement or to a new employment
agreement. The failure of the Company to provide timely notice shall not be
deemed to constitute an extension of employment or a termination of employment
hereunder.
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14. ASSIGNABILITY. The obligations of the Employee may not be
delegated and, except as expressly provided in Section 6(a) relating to the
designation of beneficiaries, the Employee may not, without the Company's
written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate
or otherwise dispose of this Agreement or any interest therein. Any such
attempted delegation or disposition shall be null and void and without effect.
The Company and the Employee agree that this Agreement and all of the Company's
rights and obligations hereunder may be assigned or transferred by the Company
to and shall be assumed by and binding upon and shall inure to the benefit of
any affiliate of or successor to the Company. The term "successor" shall mean,
with respect to the Company or any of its subsidiaries, and any other
corporation or other business entity which, by merger, consolidation, purchase
of the assets, or otherwise, acquires all or a material part of the assets of
the Company. Any assignment by the Company of its rights and obligations
hereunder to any affiliate or successor shall not be considered a termination of
employment for purposes of this Agreement.
15. SEVERABILITY. If any provision of this Agreement as
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement. If any court construes any of the provisions of Section 4
hereof, or any part thereof, to be unreasonable because of the duration of such
provision or the geographic or other scope thereof, such court may reduce the
duration or restrict the geographic or other scope of such provision and enforce
such provision as so reduced or restricted.
16. NOTICES. All notices to the Employee hereunder shall be in
writing and shall be delivered personally or sent by registered or certified
mail, return receipt requested, to:
Xxxxxxx X. Xxxxx
00000 X.X. 000xx Xxxxxx
Xxxxx, XX 00000
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All notices to the Company hereunder shall be in writing and shall be delivered
personally or sent by registered or certified mail, return receipt requested,
to:
Avatar Holdings Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Avatar Holdings Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party.
17. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
18. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.
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19. NEUTRAL CONSTRUCTION. All of the parties to this Agreement
were represented by counsel, or had the opportunity to consult with counsel. No
party may rely on any drafts of this Agreement in any interpretation of the
Agreement. Each party to this Agreement has reviewed this Agreement and has
participated in its drafting and, accordingly, no party shall attempt to invoke
the normal rule of construction to the effect that ambiguities are to be
resolved against the drafting party in any interpretation of this Agreement.
(signature page follows)
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
AVATAR RETIREMENT COMMUNITIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
/s/ Xxxxxxx X. Xxxxx
--------------------------------------
Employee
Name: Xxxxxxx X. Xxxxx
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ANNEX A TO EMPLOYMENT AGREEMENT
Terms of Incentive Compensation for Xxxxxxx X. Xxxxx (the "Employee")
(1) Upon commencement of his Employment, the Employee is to be
granted a Stock Appreciation Right with respect to the number of shares of
Company Common Stock which at any time shall constitute five-eighths of one
percent of the outstanding capital stock of the Company (such number of shares,
the "Employee Allocation"). The Employee Allocation may be increased (but not
decreased) by the Board of Directors of the Company in its sole discretion,
PROVIDED, HOWEVER, that the sum of the employee allocations allocated to all
employees of the Company outstanding at any one time may not exceed the SAR
Pool. The Stock Appreciation Right shall vest over a five year period, at a rate
of 20% per year, with the vesting of each such 20% portion requiring the
completion by the Employee of a full year of employment with the Company.
(2) Except as provided in paragraph 3 below, all amounts
payable on account of vested portions of the Stock Appreciation Right shall be
due and payable in cash on the later of (i) seven years from the date on which
the Employee commences employment with the Company, or (ii) two years after the
Employee ceases to be employed by the Company.
(3) Notwithstanding the provisions of paragraphs 1 and 2
above, upon a sale, disposition, conveyance or other transfer of Company Common
Stock by Avatar to an unaffiliated third party that results in Avatar and/or its
affiliates beneficially owning, directly or indirectly, less than a majority of
the Company (a "Sale"), a percentage of the vested Employee Allocation equal to
the percentage of Company Common Stock held by Avatar and/or its affiliates
immediately prior to such Sale represented by the shares subject to such Sale
shall be due and payable at the closing of such Sale in the same form of
consideration received by Avatar from such Sale or, at Avatar's election, in
cash. By way of example only, assuming that at the date of determination (i) the
Employee's Employee Allocation represented 5/8 of one percent of the outstanding
capital stock of the Company and (ii) 100% of the Employee's Stock Appreciation
Right had vested, if the Company sold 51% of the Company Common Stock, the
Employee would be entitled to receive Stock Appreciation Rights with respect to
51% of 5/8 of one percent the outstanding capital stock of the Company
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at the closing of such sale pursuant to this paragraph (3), and thereafter the
Employee would continue to have the rights set forth in paragraphs (1) and (2)
of this Annex A; provided that thereafter only the percentage of the Company's
Common Stock not sold in the Sale shall be counted in determining such
Employee's Employee Allocation.
(4) On or prior to October 5, 1999, the Company will allocate
any remaining unallocated portions of the SAR Pool to employees selected by the
Board of Directors of the Company, PROVIDED, HOWEVER, that the Company shall
have no obligation to reallocate unvested portions of the SAR Pool forfeited by
its employees upon termination of their employment with the Company.
(5) For purposes of this Annex A, the following terms shall
have the following meanings:
"Company Common Stock" shall mean the common stock of the
Company, par value $1.00 per share.
"Date of Determination" shall mean the later of (i) the date
three months prior to the date
referred to in paragraph (2) above
(i.e., June 1, if the date referred
to in paragraph (2) were September
1), or (ii) the date on which a Sale
occurs.
"Fair Market Value" with respect to the Company, shall
mean:
(i) if the Company Common
Stock is readily tradeable on a
national securities exchange or
quoted on Nasdaq on the Date of
Determination, the product of (a)
the number of shares of Company
Common Stock issued and outstanding
on such date, times (b) the closing
price of a share of Company Common
Stock on such exchange on that day
(or if shares were not traded on
that day, then on the next preceding
date on which a trade occurred), or
the mean between the closing
representative bid and asked prices
for the Company Common Stock on that
date as reported by Nasdaq, as
applicable; and
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(ii) if the Company Common
Stock is not readily tradeable or
quoted on Nasdaq on the Date of
Determination, then Fair Market
Value shall mean the amount
determined in good faith by the
Board of Directors of Avatar (or a
committee thereof) as the fair
market value of all of the issued
and outstanding shares of Company
Common Stock, without taking into
account any minority discount.
"SAR Pool" shall mean the number of
shares of common stock of the
Company which at any time shall
constitute five percent (5%) of the
outstanding capital stock of the
Company.
"Stock Appreciation Right" shall mean the right to receive a
payment in cash, in an amount equal
to (i) the Employee Allocation,
multiplied by (ii) the excess of the
Fair Market Value on the Date of
Determination of the Company, over
the sum of (a) the Acquisition Cost
(as defined below), (b) the value of
land contributed by Avatar to the
Company prior to the Date of
Determination, as determined by a
qualified land appraiser based on
the aggregate number of acres
contributed at their state of
improvement on the date such land
was so contributed to the Company,
(c) the cost or value (whichever is
higher) of any other assets or
businesses acquired by the Company
or contributed by Avatar to the
Company prior to the Date of
Determination, and (d) all
additional capital investments (to
the extent not repaid) made or
deemed made by Avatar to the Company
prior to the Date of Determination,
less (e) the amount of all dividends
and distributions
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made by Company to Avatar, as
reasonably determined by the Board
of Directors of the Company.
"Acquisition Cost" shall mean an
amount equal to a portion of the
Purchase Consideration and the IP
Consideration, if any, valued as of
the Closing Date (as such terms are
defined in the Asset Purchase
Agreement), which amount shall be
determined by the Board of Directors
of Avatar (or a committee thereof),
in its sole discretion.
(6) If there shall be any change in the Company Common Stock,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spinoff, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to shareholders of the
Company, an adjustment shall be made by the Board of Directors of the Company to
each outstanding Stock Appreciation Right and/or to the Employee Allocation such
that each Stock Appreciation Right shall thereafter be exercisable for such
consideration as would have been received in respect of the Company Common Stock
subject to such Stock Appreciation Right had such Stock Appreciation Right been
exercised in full immediately prior to such change or distribution, and such an
adjustment shall be made successively each time any such change shall occur.
18
