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Exhibit 10 (aa)
CASH BONUS AWARD AGREEMENT
THIS CASH BONUS AWARD AGREEMENT, dated October 20, 2000 (the
"Agreement"), is made between Avatar Holdings Inc., a Delaware corporation (the
"Company") and Xxxxxx X. Xxxxxx (the "Participant").
1. AWARD. Pursuant to the provisions of the Avatar Holdings Inc. Executive
Incentive Compensation Plan, as the same may be amended, modified and
supplemented from time to time (the "Plan"), the Committee (as defined in the
Plan) hereby awards to the Participant, on the date hereof, subject to the
terms and conditions of the Plan and subject further to the terms and
conditions and other provisions herein set forth, an opportunity to receive the
performance based compensation described herein (the "Award") if, as of a
Performance Goal Test Date (as defined below), the Performance Goal (as defined
below) is satisfied. For all purposes of this Agreement, the "Performance Goal"
hereunder shall have been satisfied as of a Performance Goal Test Date, if and
only if Cash Flow (as defined below) on such date shall exceed the Hurdle Level
(as defined below) on such date.
2. CERTAIN DEFINITIONS.
(a) Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Plan.
(b) Each reference contained in this Agreement to:
"10% Return Measurement Amount" shall mean, as at the end of
any month, the excess, if any of (A) the sum of (x) the Property
Amount and (y) the sum of the Monthly 10% Returns Included In Hurdle
Level for all months during the period from and including the First
Day of the Performance Period and through and including the end of
such month over (B) Adjusted Cash Flow at the end of such month.
"Adjusted Cash Flow" shall mean, as at any date of
determination, Cash Flow at such date, but without giving any effect
to either of the provisos contained in the definition of "Cash Flow"
herein.
"Bonus Measurement Amount" shall mean, as at any date of
determination, the excess, if any, of Cash Flow at such date over the
Property Amount.
"Bonus Percentage" shall mean eight (8) percent.
"Cash Flow" shall mean, as at any date of determination, an
amount equal to (i) total cumulative cash receipts less total
cumulative cash disbursements, in each case, by or on behalf of the
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Company or any of its subsidiaries, with respect to the Project,
during the period from and including the First Day of the Performance
Period through and including such date of determination (it being
understood that: such cash receipts shall include funds received from
a sale of the Project or any part thereof; such cash receipts shall
not include any interest received on any funds attributable to the
Project (other than on a purchaser's promissory note received as sale
proceeds); such cash disbursements for any month shall include the
Inflation Adjustment in respect of such month; such cash disbursements
shall not include the Property Amount; and such cash disbursements
shall not include amounts paid in respect of deficit funding of the
home owners' association at the Project), MINUS (ii) reserves with
respect to the Project as the Committee deems appropriate, including,
without limitation, reserves for costs, expenses, and contingencies,
MINUS (iii) the product of (A) the amount of monies funded by the
Company or any of its subsidiaries (in lieu of from third-party
lenders) with respect to the Project and (B) the greater of (x) 10%
per annum compounded monthly and (y) the Company's "cost of capital"
for funds at the relevant times; PROVIDED, HOWEVER, that "cash
receipts" and "cash disbursements" shall not include any principal
amounts borrowed from, or repaid to, third party lenders, or advanced
from, or repaid to, the Company or any of its subsidiaries; PROVIDED
FURTHER, HOWEVER, that cash disbursements shall not include In-Process
Hard Construction Costs (until such time as the sale of the unit to
which any such cost relates has closed).
"First Day of the Performance Period" shall mean November 1,
2000.
"In-Process Hard Construction Costs" shall mean the materials
costs, labor costs, architectural costs and other similar direct costs
related to units in the Project the sales of which have not closed (it
being understood that In-Process Hard Construction Costs shall not
include indirect costs (e.g., general and administrative costs, sales
and marketing costs and other overhead costs)).
"Inflation Measurement Amount" shall mean, as at any date of
determination, an amount equal to (i) if Cash Flow is a negative value
(or zero) at the beginning of the month in which there is a date of
determination, the Property Amount plus the absolute value of such
Cash Flow amount; (ii) if Cash Flow is a positive value (but does not
exceed the Property Amount) at the beginning of the month in which
there is a date of determination, the Property Amount minus such Cash
Flow amount; or (iii) if Cash Flow exceeds the Property Amount at the
beginning of the month in which there is a date of determination,
zero.
"Inflation Adjustment" in respect of any month shall mean an
amount equal to the product of (x) the Inflation Measurement Amount at
the beginning of such month and (y) the percentage rate change in the
consumer price index for all urban consumers (CPI-U) during such
month, without seasonal adjustment, as reported by the Bureau of Labor
Statistics of the U.S. Department of Labor (using all items and the
reference date of 1982-84 for the index); PROVIDED, HOWEVER, the
Inflation Adjustment for such month shall not be a negative value
(i.e., "deflation") except to the extent cumulative Inflation
Adjustments as of the end of the prior month is a positive value.
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"Monthly 10% Return Included in Hurdle Level" in respect of
any month shall mean the product of (A) 0.833333% (i.e., 10% per
annum) and (B) the 10% Return Measurement Amount as at the end of the
prior month (it being understood that for purposes of determining the
10% Return Included in Hurdle Level as at the end of the first month
following the First Day of the Performance Period, the 10% Return
Measurement Amount as at the end of the prior month shall be deemed
equal to the Property Amount).
"Performance Goal Test Date" shall mean (i) the last day of
each calendar quarter following the First Day of the Performance
Period and prior to the Last Day of the Performance Period (as defined
below) and (ii) the Last Day of the Performance Period.
"Project" shall mean the development and sale of the
Company's property in Hollywood, Florida, generally known by the
Company as parcels 1, 8 and 9 at "Harbor Islands".
"Property Amount" shall mean $17 million or, in the
discretion of the Committee, the current value of the land on which
the Project is located, as determined (prior to December 31, 2000) by
the Committee, if higher.
3. TERMS AND CONDITIONS. The Award evidenced by this Agreement is
subject to the following terms and conditions:
(a) The payment of performance based compensation described herein is
contingent upon the achievement of the Performance Goal during the period (the
"Performance Period") beginning on the First Day of the Performance Period and
ending on the earlier of (i) the last day of the month in which the Project has
been substantially completed, as determined by the Committee and (ii) October
31, 2008 (such earlier date being the "Last Day of the Performance Period").
(b) The Award is subject to, and no amount shall be payable pursuant
to the Award unless and until, the following conditions have been satisfied:
(i) the Plan shall have been approved by the Company's stockholders at any
annual or special meeting held prior to or on December 31, 2001; and (ii) the
Participant shall have entered into a new employment agreement with the Company
or a subsidiary of the Company (or an amendment to the Participant's existing
employment agreement) not later than December 15, 2000, providing for a term of
employment ending not earlier than December 31, 2005, and on other terms
satisfactory to the Company and the Participant.
(c) No amount shall be payable pursuant to the Award on any Payment
Date (as defined below) unless and until Cash Flow on the Performance Goal Test
Date immediately preceding such Payment Date exceeds an amount (the "Hurdle
Level") equal to the sum of (i) the Property Amount and (ii) the sum of the
Monthly 10% Returns Included in Hurdle Level for all months during the period
from and including the First Day of the Performance Period and through and
including such Performance Goal Test Date.
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(d) Subject to Sections 3(c), 4 and 5 hereof, if Cash Flow exceeds the
Hurdle Level as of a Performance Goal Test Date, then the Participant shall be
entitled to receive a bonus payment on the related Payment Date, in an amount
equal to the excess of (i) the Bonus Percentage multiplied by the Bonus
Measurement Amount as of such Performance Goal Test Date over (ii) the
aggregate amount of bonus payments paid to the Participant pursuant to this
Agreement prior to such Performance Goal Test Date; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the sum of all bonus payments for all awards
under the Plan granted with respect to the Project in respect of any
Performance Goal Test Date (such sum being referred to as the "Formula Payment
Amount") shall not exceed the excess, if any, of (A) Cash Flow as of such
Performance Goal Test Date over (B) the sum of (x) the Hurdle Level as of such
date and (y) the aggregate amount of bonus payments previously paid pursuant to
all awards under the Plan granted with respect to the Project (such excess
being referred to as the "Bonus Pool Amount"). If as of a Performance Goal Test
Date the Formula Payment Amount exceeds the Bonus Pool Amount, then subject to
Sections 3(c), 4 and 5 hereof, the Participant shall be entitled to receive a
bonus payment on the related Payment Date, in an amount equal to the product of
(A) a fraction, the numerator of which is the amount that the Participant would
have received if the Formula Payment Amount did not exceed the Bonus Pool
Amount on such date and the denominator of which is the Formula Payment Amount
on such date and (B) the Bonus Pool Amount.
(e) The Committee shall determine whether the Performance Goal has
been met as of the applicable Performance Goal Test Date and, if it has, shall
so certify in writing and ascertain the amount of the bonus, if any, payable to
the Participant. The amount of the bonus shall be paid to the Participant in
cash within 75 days after the Committee makes its determination (each such date
being a "Payment Date"); PROVIDED, HOWEVER, if a material change occurs in the
business plan of the Project (as determined by the Committee in its sole
discretion), the Committee may defer the payment of such bonus amount to such
date and to such extent as the Committee determines in its sole discretion.
4. CAP ON COMPENSATION. Notwithstanding anything to the contrary herein,
the maximum bonus amounts payable to the Participant shall be subject to the
limitations in the Plan and the Participant's employment agreement with the
Company or a subsidiary thereof, as the case may be, as amended from time to
time.
5. CLAWBACK; NO OFFSET BY PARTICIPANT.
(a) The Participant shall pay to the Company upon demand by the
Company following the Last Day of the Performance Period an amount equal to the
sum of (i) the excess of (A) the Excess Bonus Payments (as defined below) over
(B) the hypothetical income tax liability attributable to such Excess Bonus
Payments (as determined by the Committee by applying the highest marginal
United States federal, state and local individual income tax rates applicable
to an individual resident of Florida for the relevant taxable period, taking
into account the deductibility of state and local income taxes for federal
income tax purposes), (ii) interest on such excess (at a rate of 10% per annum
compounded monthly from the date of receipt of the relevant Excess Bonus
Payments until the date of refund), and (iii) as determined by the Committee,
the present value of any tax benefits accruing to the Participant as a result
of making any payments pursuant to this Section 5(a) to the Company. For
purposes of the preceding sentence, "Excess Bonus Payments" shall mean the
greater of (AA) the amount equal to the excess, if any, of (i) the aggregate
amount of all bonus payments paid to the Participant pursuant to this Agreement
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(including any such bonus payments paid or to be paid with respect to the
Performance Goal Test Date relating to such Last Day of the Performance Period)
over (ii) the product of the Bonus Percentage multiplied by the Bonus
Measurement Amount as of the close of business on the Last Day of the
Performance Period and (BB) the amount equal to the product of (x) a fraction,
the numerator of which is the aggregate amount of all bonus payments paid to
the Participant pursuant to this Agreement (including any such bonus payments
paid or to be paid with respect to the Performance Goal Test Date relating to
such Last Day of the Performance Period) and the denominator of which is the
aggregate amount of all bonus payments paid pursuant to all awards under the
Plan granted with respect to the Project (including any such bonus payments
paid or to be paid with respect to the Performance Goal Test Date relating to
such Last Day of the Performance Period) and (y) the excess, if any, of (i) the
aggregate amount of all bonus payments paid pursuant to all awards under the
Plan granted with respect to the Project (including any such bonus payments
paid or to be paid with respect to the Performance Goal Test Date relating to
such Last Day of the Performance Period)over (ii) the amount equal to the
excess, if any, of (1) Cash Flow as of the close of business on the Last Day of
the Performance Period over (2) the Hurdle Level as of the close of business on
the Last Day of the Performance Period .
(b) The Participant shall be obligated to pay to the Company any
amount due pursuant to this Section 5 regardless of whether the Participant has
or claims to have any claim against the Company or any of its subsidiaries, and
the Participant shall have no right to offset any amount due or claimed to be
due from the Company or any of its subsidiaries.
6. TERMINATION OF EMPLOYMENT.
(a) Subject to Sections 3 and 5 hereof:
(i) if the Participant's employment with the Company is
terminated by the Company for "cause" (as defined below) or by the Participant,
prior to December 31, 2005, for other than "good reason" (as defined below), in
addition to any other consequences of such termination provided for by this
Agreement or any other agreement, notwithstanding Section 3 hereof, Participant
shall forfeit any right to future bonus payments pursuant to this Agreement
from and after the date of such termination;
(ii) if the Participant's employment with the Company is
terminated by the Company other than for "cause" or by the Participant for
"good reason," the Participant shall be entitled to continue to receive such
bonus payments as would otherwise be payable pursuant to this Agreement as
though the Participant's employment had not been terminated; and
(iii) if the Participant dies while employed by the Company
or in the event the Participant's employment with the Company is terminated by
the Company by reason of the Participant's "permanent disability" (as defined
below), notwithstanding Section 3 hereof:
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(A) the Participant shall be entitled to receive
only that portion of the bonus payments otherwise payable pursuant to Section
3(d) hereof following such termination, equal to the product of (x) a fraction
(which in no event shall exceed one (1)) the numerator of which is the number
of completed whole months elapsed after the First Day of the Performance Period
to the date of death or permanent disability, as the case may be, and the
denominator of which is the number of whole months from the First Day of the
Performance Period until December 31, 2005 and (y) the amount of bonus payments
that would have been payable pursuant to Section 3(d) hereof if the Participant
remained an employee of the Company through and including the Last Day of the
Performance Period; PROVIDED, HOWEVER, subject to Section 5(a) hereof, on the
last Payment Date following the Last Day of the Performance Period, the
Participant shall be entitled to receive a bonus payment in an amount equal to
the excess, if any, of (A) the lesser of (i) $500,000 or (ii) the cumulative
amount of bonus payments that were paid to the Participant (in respect of
periods prior to the Participant's death or permanent disability) pursuant to
Section 3(d) hereof and that would have been payable to the Participant (in
respect of periods subsequent to the Participant's death or permanent
disability) pursuant to Section 3(d) hereof if the Participant remained an
employee of the Company through and including the Last Day of the Performance
Period, over (B) the aggregate amount of all bonus payments paid to the
Participant pursuant to this Agreement (including any such bonus payments paid
or to be paid with respect to the Performance Goal Test Date relating to such
Last Day of the Performance Period); and
(B) the Participant will have no right to any other
payments hereunder.
Any payments shall be made to the Participant (or the
executor or administrator of the deceased Participant's estate or the person or
persons to whom the deceased Participant's rights shall pass by will or the
laws of descent or distribution, as applicable) on the Payment Date.
(b) For purposes of Section 6(a) hereof, the terms "cause", "good
reason" and "permanent disability", shall have the meanings ascribed to such
terms in the Participant's employment agreement with the Company or a
subsidiary thereof, as the case may be, as amended from time to time; PROVIDED,
HOWEVER, if the Participant is no longer employed pursuant to an employment
agreement but is continuing in employ, such terms shall have the meanings
ascribed to such terms in the employment agreement last in effect.
7. FORFEITURE UPON BREACH OF RESTRICTIVE COVENANTS. Notwithstanding
anything to the contrary set forth in this Agreement, if the Participant
breaches any provision relating to the Participant's covenant to keep
information confidential, not to compete, not to solicit or similar restrictive
covenant contained in the Participant's employment or other agreement with the
Company or any of its subsidiaries (after the expiration of any notice and cure
period), then in addition to any other rights or remedies arising from or
relating to such breach the Participant shall forfeit any right to future bonus
payments pursuant to this Agreement from and after the date of such breach.
8. TAXES. Any bonus payment pursuant to the Award shall be net of any
amounts required to be withheld pursuant to applicable federal, state, local
and foreign tax withholding requirements. The Company shall have the right to
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withhold the amount of such taxes from any other sums due or to become due from
the Company to the Participant as the Committee shall prescribe.
9. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not confer upon the
Participant any right to continued employment by the Company or any of its
subsidiaries or affiliated companies, nor shall it interfere in any way with
the right of the Participant's employer to terminate the Participant's
employment at any time for any reason or no reason.
10. NO OBLIGATION TO PURSUE PROJECT. This Agreement shall in no way obligate
the Company to pursue the Project, and the Company may limit, abandon or change
the Project at any time in its sole discretion and the Company shall have no
obligation to take any action or provide any financing with respect to the
Project.
11. UNSECURED CREDITOR STATUS; NO PARTNERSHIP. The Participant shall rely
solely upon the unsecured promise of the Company, as set forth herein, for
payment hereunder, and nothing herein contained shall be construed to give to
or vest in the Participant or any other person now or at any time in the
future, any right, title, interest, or claim in or to any specific asset, fund,
reserve, account, insurance or annuity policy or contract, or other property of
any kind whatsoever owned by the Company, or in which the Company may have any
right, title, or interest, nor at any time in the future. This Agreement is an
agreement to pay compensation for services provided by the Participant and is
not a partnership or joint venture and is not intended to create a partnership
or joint venture between the Company and the Participant or any other person.
The Participant shall take no position inconsistent with this characterization.
12. ASSIGNMENT; SUCCESSORS.
(a) The Award and any interest of the Participant therein may not be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed of.
Any attempt to transfer the Award in contravention of this Section 12(a) is
void AB INITIO. The Award shall not be subject to execution, attachment or
other process.
(b) The Company's rights and obligations hereunder may be assigned or
transferred by the Company to and may be assumed by and become binding upon and
may 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, any other corporation or other business entity which, by merger,
consolidation, purchase of assets, or otherwise, acquires all or a material
part of the assets of the Company.
(c) In the event of the Participant's death, the Participant's rights
and obligations hereunder shall be binding upon and inure to the benefit of the
Participant's heirs and legal representatives.
13. CONSTRUCTION. The Plan and this Agreement will be construed by and
administered under the supervision of the Committee in its sole and absolute
discretion, and all determinations of the Committee will be final and binding
on the Participant.
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14. NOTICES. Any notice required or permitted under this Agreement shall be
deemed given when delivered personally, or when deposited in a United States
Post Office, postage prepaid, addressed, as appropriate, (i) to the Participant
at the last address specified in the Participant's employment records, or such
other address as the Participant may designate in writing to the Company, or
(ii) to the Company, Avatar Holdings Inc., 000 Xxxxxxxx Xxxxxx, Xxxxx Xxxxxx,
Xxxxxxx 00000 Attention: Chairman of the Board, with a copy to the Company's
Corporate Secretary, or such other address as the Company may designate in
writing to the Participant.
15. FAILURE TO ENFORCE NOT A WAIVER. The failure of either party hereto to
enforce at any time any provision of this Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
16. GOVERNING LAW. This Agreement shall be governed by and construed according
to the laws of the State of Delaware, without regard to the conflicts of laws
provisions thereof.
17. INCORPORATION OF PLAN. The Plan is hereby incorporated by reference and
made a part of this Agreement, and this Agreement shall be subject to the terms
of the Plan, as the Plan may be amended from time to time.
18. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be an original but all of which together shall represent
one and the same agreement.
19. MISCELLANEOUS. This Agreement cannot be changed or terminated orally. This
Agreement and the Plan contain the entire agreement between the parties
relating to the subject matter hereof. The section headings herein are intended
for reference only and shall not affect the interpretation hereof.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
AVATAR HOLDINGS INC.
By: /s/ XXXX XXXX
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Name: Xxxx Xxxx
Title: Chairman of the Board
/s/ XXXXXX X. XXXXXX
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Xxxxxx X. Xxxxxx
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