EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT
(‘‘Agreement’’) is made and entered into as of the 8th
day of
August, 2007 (the “Effective Date”), by and between American Real Estate
Partners, L.P., a Delaware limited partnership (“AREP”), Icahn Capital
Management LP, a Delaware limited partnership (the ‘‘Manager’’ and, together
with AREP, the “Employer”), and Xxxx X. Icahn (‘‘Executive’’). Where the context
permits, references to “the Employer” shall include AREP, the Manager and any
successor entities thereto. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in Section 10 herein.
W
I T N E S S E T H:
WHEREAS,
AREP
is a
master limited partnership that is a diversified holding company engaged in
a
variety of businesses, including real estate and home fashions;
WHEREAS,
AREP
is
acquiring the asset management operations operated by the predecessor of the
Manager and with respect to which the Executive has provided
services;
WHEREAS,
the
Manager is an indirect wholly-owned subsidiary of AREP and provides certain
services to the Funds;
WHEREAS,
AREP
and the Manager desire to secure the services of Executive for their benefit
and
the benefit of their controlled Affiliates from and after the date hereof;
and
WHEREAS,
Executive desires to provide such services subject to the terms and conditions
set forth herein;
NOW,
THEREFORE,
in
consideration of the mutual promises, covenants and agreements herein contained,
together with other good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
1. SERVICES
AND DUTIES.
From
and after the Effective Date, Executive shall be employed by AREP in the
capacity of its executive Chairman and by the Manager in the capacity of its
Chairman and Chief Executive Officer; in such capacity Executive shall be a
member and Chairman of the Manager’s Management Committee (the “MC”). In
addition, Executive shall act as and perform the duties of the chief executive
officer of each of the general partners of the Funds. The principal location
of
Executive’s employment with Employer shall be such present location at which
Employer maintains its principal location, although Executive understands and
agrees that Executive may also be required to travel from time to time for
business reasons. Executive shall devote his substantial time and efforts to
overseeing the strategic and business affairs of AREP and the asset management
operations of the Manager, subject in each case to his ability to continue
to
engage in his current outside business activities and such other future outside
business activities as are otherwise consistent with Section 7 of this Agreement
and comparable in scope to the outside business activities now conducted by
Executive. Executive will perform such duties as are required by Employer from
time to time and normally associated with Executive’s position, together with
such additional duties, commensurate with Executive’s positions with Employer
and with its Affiliates, as may be assigned to Executive from time to time
by
the Board of Directors of American Property Investors, Inc., the general partner
of AREP (the “Board”), or the MC consistent with the terms of this Agreement.
Executive shall follow and comply with all policies and procedures and
compliance manuals adopted by or in respect of Employer and its Affiliates,
as
may be applicable to Executive. Notwithstanding the foregoing, nothing herein
shall prohibit Executive from (i) subject to prior approval of the Board
and the MC, accepting directorships unrelated to Employer that do not give
rise
to any conflict of interests with Employer or its Affiliates and
(ii) engaging in charitable and civic activities, so long as such outside
interests, individually or in the aggregate, do not materially interfere with
the performance of Executive’s duties hereunder.
2. TERM.
Executive’s employment under the terms and conditions of this Agreement will
commence on the Effective Date. The term of this Agreement shall commence on
the
Effective Date and end on December 31, 2012 or immediately following such
earlier time that Executive’s employment terminates under Section 5 (such
period, the “Term”). The Term may be renewed or extended by mutual agreement of
the parties up to sixty (60) days prior to the end of the Term and if Executive
does not intend to renew or extend the term, he shall provide notice prior
to
such sixty (60) day period. The decision by the Employer not to extend the
Term
shall not be deemed a termination of Executive’s employment by Employer without
Cause for purposes of this Agreement. If the Term expires, and Executive is
employed by Employer thereafter, unless the parties agree otherwise in writing,
such employment shall be ‘‘at-will’’ on terms and conditions to be set by
Employer.
3. COMPENSATION.
(a) Base
Salary.
In
consideration of Executive’s full and faithful satisfaction of Executive’s
duties under this Agreement, Employer agrees to pay to Executive a salary in
the
amount of $900,000 per annum (the ‘‘Base Salary’’), payable in such installments
as Employer pays its similarly placed employees (but not less frequently than
each calendar month), subject to usual and customary deductions for withholding
taxes and similar charges, and customary employee contributions to the health,
welfare and retirement programs in which Executive is enrolled from time to
time. The Base Salary shall be reviewed on an annual basis by the Board and
the
MC and adjusted at the sole discretion of the Board and the MC; provided,
however,
in no
event shall the Base Salary be reduced without Executive’s written approval.
(b) Annual
Bonus Incentive.
In
addition to Base Salary, Executive shall be eligible for an annual bonus
incentive (the “Annual Bonus Incentive” or “Bonus”) as determined in accordance
with Exhibit A for each calendar year or portion thereof during the Term,
provided that Executive remains employed by Employer during such period. Any
Bonus earned by Executive pursuant to Exhibit A shall be paid in the manner
provided in Exhibit A, provided such payment (other than Deferral Amount(s))
shall be made no later than two and one-half months after the end of the period
to which such Bonus relates or ten days after the earnings for the calendar
year
are announced, whichever occurs first. Payment of the Bonus for each year shall
in all circumstances be contingent upon a certification of the Board that the
determination, calculation and payment of the Bonus is correct.
(c) Withholding.
All
taxable compensation payable to Executive pursuant to this Section 3 or
otherwise pursuant to this Agreement shall be subject to all applicable and
customary withholding taxes and such other excise or employment taxes as are
required under Federal law or the applicable law of any state or governmental
body to be collected with respect to compensation paid by Employer to an
employee.
(d) Other
AREP Compensation.
Other
than as provided for in this Agreement, Executive in his capacity as an employee
under this Agreement shall not be entitled to any other form of direct or
indirect compensation from AREP or its controlled Affiliates (including any
fees, remuneration or other benefits) without the express prior consent of
the
Board.
4. BENEFITS
AND EXPENSE REIMBURSEMENT.
(a) Retirement
and Welfare Benefits.
During
the Term, Executive will be entitled to participate in the usual and customary
employee benefit plans and programs offered to employees at Executive’s level by
Employer or its Affiliates, including sick time, vacation or paid time off,
and
participation in Employer’s or Affiliates’ medical, dental and insurance
programs, as well as the ability to participate in Employer’s or Affiliates
401(k) retirement savings plan, in each case in accordance with and subject
to
the terms of such plans as in effect from time to time. Nothing in this Section
4, however, shall require Employer or its Affiliates, if applicable, to adopt
or
maintain any benefit plan or provide any type or level of benefits to its
employees, including Executive.
(b) Reimbursement
of Expenses.
Employer shall reimburse Executive for any expenses reasonably and necessarily
incurred by Executive in furtherance of Executive’s duties hereunder, including
travel, meals and accommodations, upon submission by Executive of vouchers
or
receipts and in compliance with such rules and policies relating thereto as
Employer may from time to time adopt.
5. TERMINATION.
Executive’s employment shall be terminated at the earliest to occur of the
following: (i) at the end of the Term unless Executive agrees to continue
working for Employer on mutually agreeable terms, (ii) the date on which the
Board delivers written notice that Executive is being terminated for Disability
(as defined below), or (iii) the date of Executive’s death. In addition,
Executive’s employment with Employer may be terminated: (A) by Employer for
‘‘Cause’’ (as defined below), effective on the date on which a written notice to
such effect is delivered to Executive; (B) by Employer at any time without
Cause, effective on the date on which a written notice to such effect
is
delivered to Executive or such other date as is reasonably designated by
Employer; or (C) by Executive with “Good Reason” (as defined below).
(a) Termination
by Employer with Cause.
If
Executive’s employment with Employer is terminated by Employer with Cause,
Executive shall not be entitled to any further compensation or benefits other
than accrued but unpaid Base Salary (payable as provided in Section 3(a)
hereof), any accrued and unused vacation pay through the date of such
termination (collectively, the ‘‘Accrued Benefits”) and fifty percent (50%) of
the Unpaid Bonus (as defined below).
(b) Termination
by Employer without Cause or by Executive with Good Reason.
If
Executive’s employment is terminated by Employer without Cause or by Executive
with Good Reason prior to the end of the Term hereof, then Executive shall
be
entitled to: (i) the Accrued Benefits and any earned and unpaid portion of
an Annual Bonus Incentive for the year prior to the year of termination (the
“Unpaid Bonus”); (ii) a lump sum separation payment equal to one (1) time
the annual Base Salary plus one (1) time the Average Bonus (as defined below);
and (iii) for any year other than 2007, the Annual Bonus Incentive determined
for the full year based solely upon the operations and investment performance
of
AREP and its controlled Affiliates through the date of termination and
annualized for the remainder of the year multiplied by a fraction, the numerator
of which is the number of months (including the month of termination) during
the
then current year that Executive was employed under this Agreement and the
denominator of which is twelve (12) (the “Pro-Rata Annual Bonus Incentive”).
“Average Bonus” means the three-year average (or such lesser period during the
Term, if applicable) of the Annual Bonus Incentive; provided,
however,
that in
the event such termination occurs on or after December 31, 2007 and prior to
the
end of the 2008 Bonus period, the amount of the Average Bonus shall be equal
to
the average of (A) the 2007 Annual Bonus Incentive actually paid (or payable)
to
Executive and increased to represent an annualized amount and (B) the 2008
Annual Bonus Incentive which would have been paid if Executive had been employed
at the end of the 2008 Bonus period based solely upon the operations and
investment performance of AREP and its controlled Affiliates through the
termination date (and as otherwise determined in accordance with Exhibit A).
In
the event such termination occurs prior to the end of the 2007 Bonus period,
the
Average Bonus shall be equal to the 2007 Annual Bonus Incentive which would
have
been paid if Executive had been employed at the end of the 2007 Bonus period
based solely upon the operations and investment performance of AREP and its
controlled Affiliates through the termination date and annualized for the
remainder of the year (and as otherwise determined in accordance with Exhibit
A).
(c) Voluntary
Resignation, Death or Disability.
If
Executive’s employment is terminated voluntarily by Executive or by reason of
Executive’s death or Disability prior to the end of the Term, in lieu of any
other payments or benefits, Executive (or Executive’s estate, as applicable)
shall be entitled to (i) the Accrued Benefits and any Unpaid Bonus; (ii) a
lump sum payment equal to the remaining Base Salary payable through December
31
of the year of termination (assuming Executive’s employment had continued
through December 31); and (iii) fifty percent (50%) of the Pro-Rata Annual
Bonus
Incentive as provided for in Exhibit A, but which shall be determined based
upon
an interpolation of full year results for the year of termination based on
actual results as of the date of termination; provided that in the event of
Executive’s voluntary termination hereunder, Executive shall only be entitled to
fifty percent (50%) of the Unpaid Bonus payable under subsection (i) and shall
not be entitled to any payments under subsection (ii) herein.
(d) Termination
in Connection with a Change in Control.
If
Executive’s employment is terminated by Employer without Cause or by Executive
with Good Reason within the twelve-month period following the occurrence of
a
Change in Control, then in lieu of any other payments set forth in this Section
5, Executive shall be entitled to: (i) the Accrued Benefits and any Unpaid
Bonus; (ii) a lump sum separation payment equal to two (2) times the annual
Base Salary plus two (2) times the Average Bonus; and (iii) a pro-rata Annual
Bonus Incentive for the year of termination.
(e) Resignation
as Officer or Director. Upon
the termination of employment for any reason, Executive shall resign each
position (if any) that Executive then holds as an officer or director of
Employer or any of its Subsidiaries or controlled Affiliates.
(f) Section
409A.
To the
extent required to comply with Section 409A of the Code, as determined by
Executive’s counsel, if requested by Executive, one or more payments under this
Section 5 shall be delayed to the six-month anniversary of the date of
Executive’s separation from service, within the meaning of Section 409A of the
Code.
(g) Release
and Payment.
All
payments to the Executive provided for in this Section 5 shall be conditioned
upon Executive’s (or Executive’s estate, as applicable) providing Employer with
a signed release limited in scope to employment related claims in a form
acceptable to the Board. All such payments shall be made to Executive in cash
within sixty (60) days of his death or other termination of employment.
6. MAINTENANCE
OF FUNDS.
If at
any time between the Effective Date and the fifth (5th)
anniversary of the Effective Date, Executive shall, for any reason, cease to
serve as Chairman and Chief Executive Officer of the Manager and as the
individual primarily responsible for the management of the Funds’ investment
portfolios (a “Triggering Event”), Executive may elect to withdraw investments
in one of more of the Funds, provided that Executive (directly or through his
Affiliates, other than AREP and its controlled Affiliates) shall, from the
date
of the Triggering Event until the later of (x) the fifth anniversary of the
Effective Date and (y) the third anniversary of the Triggering Event (such
later
date, the “End Date”), maintain investments in one or more of the Funds in an
aggregate amount equal to not less than $1 billion, and shall not withdraw
such
amount or any amounts earned with respect thereto (the “Icahn Fund Commitment”);
provided
that for
purposes of this Section 6 only, if both a majority of the Board and a
majority of the independent Directors, on the Board vote to terminate
Executive's employment without cause, Executive shall not be subject to the
Icahn Fund Commitment. For the avoidance of doubt, at the time of the Triggering
Event, Executive may withdraw any investments of Executive or his Affiliates
(other than AREP or its controlled Affiliates) in the Funds exceeding an
aggregate of $1 billion. From and after the Triggering Event, the Icahn
Fund Commitment shall be subject to a management fee of 2% and an incentive
allocation of 20%. If at any time between the date of the Triggering Event
and
the End Date the value of the Icahn Fund Commitment is less than $1 billion,
the
management fee and incentive allocation assessed against the Icahn Committed
Funds shall equal to the fees applicable if the value of the Icahn Fund
Commitment were $1 billion.
7. RESTRICTIVE
COVENANTS.
(a) The
parties agree that the restrictive covenants set forth in Exhibit B hereto
(the
‘‘Restrictive Covenants’’) are incorporated herein by reference and shall be
deemed to be contained herein. Executive understands, acknowledges and agrees
that the Restrictive Covenants apply (i) during his employment under this
Agreement and during any period of employment by Employer or any controlled
Affiliate following the termination of this Agreement or the expiration of
the
Term of this Agreement, and (ii), as provided in Exhibit B hereto, during the
Non-Compete Period or any additional periods specified following termination
of
his employment with Employer and by any controlled Affiliate which may have
employed him.
(b) Executive
hereby acknowledges that the provisions of Exhibit B hereto are reasonable
and
necessary for the protection of Employer and its controlled Affiliates (the
“Other Parties”) and are not unduly burdensome to Executive and that Executive
acknowledges such obligations under such covenants. Executive further
acknowledges that the Other Parties will be irreparably harmed if such covenants
are not specifically enforced. Accordingly, Executive agrees that, in addition
to any other relief to which the Other Parties may be entitled, including claims
for damages, the Other Parties shall be entitled to seek and obtain injunctive
relief (without the requirement of any bond) from a court of competent
jurisdiction for the purpose of restraining Executive from an actual or
threatened breach of such covenants.
8. ASSIGNMENT.
This
Agreement, and all of the terms and conditions hereof, shall bind Employer
and
its successors and assigns and shall bind Executive and Executive’s heirs,
executors and administrators. No transfer or assignment of this Agreement shall
release Employer from any obligation to Executive hereunder. Neither this
Agreement, nor any of Employer’s rights or obligations hereunder, may be
assigned or are otherwise subject to hypothecation by Executive. Employer may
assign the rights and obligations of Employer hereunder, in whole or in part,
to
any of Employer’s Subsidiaries or Affiliates, or to any other successor or
assign in connection with the sale of all or substantially all of Employer’s
assets or equity or in connection with any merger, acquisition and/or
reorganization, provided the assignee assumes, in an assumption agreement in
form reasonably satisfactory to Executive, the obligations of Employer
hereunder.
9. REPRESENTATIONS
AND WARRANTIES.
Executive represents as follows:
(a) To
the
best of his knowledge, except as known to Employer, he is not a party to, or
involved in, or under investigation in, any pending or threatened litigation,
proceeding or investigation of any governmental body or authority or any private
person, corporation or other entity.
(b) Executive
is not subject to any restriction whatsoever which would cause him to not be
able fully to fulfill his duties under this Agreement.
10. DEFINITIONS.
As used
in this Agreement, the following defined terms have the meanings indicated
below:
(a) ‘‘Affiliate”
or
“Affiliates”
means
with respect to any specified Person, any other Person that, directly or
indirectly, owns or controls, is under common ownership or control with, or
is
owned or controlled by, such specified Person; provided “controlled Affiliates”
shall only mean a person that, directly or indirectly, is controlled by
AREP.
(b) ‘‘Cause’’
means:
(i) the
willful engaging by Executive in illegal, fraudulent or unethical conduct or
gross misconduct which, in each case, is materially and demonstrably injurious
(x) to Employer or its Subsidiaries or Affiliates, (y) to the reputation of
Executive, Employer or its Subsidiaries or Affiliates, or (z) to any of
Employer’s funds or businesses; or
(ii) conviction
of a felony or guilty or nolo contendere plea by Executive with respect thereto;
or
(iii) a
material breach by Executive of this Agreement (x) if such breach is curable
(in
the reasonable judgment of the Board) and is not cured within ten (10) business
days following receipt of a notice of such breach or (y) if such breach is
not
curable (in the reasonable judgment of the Board); provided that Employer shall
be required to provide notice under this sentence only one time during any
calendar year in connection with any single category of events constituting
Cause hereunder.
For
purposes of this definition, no act or failure to act on the part of Executive
shall be considered ‘‘willful’’ unless it is done, or omitted to be done, by
Executive in bad faith or without reasonable belief that Executive’s action or
omission was in the best interests of Employer (or its Affiliates, if
applicable) or was done or omitted to be done with reckless disregard to the
consequences. Any act, or failure to act, based upon authority given pursuant
to
a resolution duly adopted by the Board or based upon the advice of counsel
for
Employer shall be conclusively presumed to be done, or omitted to be done,
by
Executive in good faith and in the best interests of Employer. Cause shall
not
exist hereunder unless and until Employer has delivered to Executive, along
with
a notice of termination for Cause, a copy of a resolution duly adopted by the
Board (excluding Executive if Executive is a member of the Board) at a meeting
thereof called and held for such purpose (after reasonable notice to Executive
and an opportunity for Executive, together with counsel, to be heard before
the
Board), finding that in the good faith opinion of the Board an event set forth
in clauses (i) through (iii) has occurred and specifying the particulars thereof
in detail.
(c) “Change
in Control”
means
an event described in Section 409A(a)(2)(A)(v) of the Code, and regulations
promulgated thereunder.
(d) “Code”
means
the Internal Revenue Code of 1986, as amended.
(e) ‘‘Disability’’
means,
as determined by the Board in good faith, Executive’s inability, due to
disability or incapacity, to perform all of Executive’s duties hereunder on a
full-time basis for (i) periods aggregating one-hundred-eighty (180) days,
whether or not continuous, in any continuous period of
three-hundred-and-sixty-five (365) days or, (ii) where Executive’s absence is
adversely affecting the performance of Employer in a significant manner, periods
greater than ninety (90) days and Executive is unable to resume Executive’s
duties on a full time basis within ten (10) days of receipt of written notice
of
the Board’s determination under this clause (ii).
(f) “Fund”
or
“Funds”
mean
any one or more funds or similar collective investment vehicles or managed
accounts formed primarily for the purpose of investing the capital of third
parties (whether formed as a limited partnership, a corporation, a limited
liability company or other similar form) managed by Employer or its controlled
Affiliates.
(g) “Good
Reason”
means
the occurrence of one of the following:
(i) a
material diminution or other material adverse change in Executive’s office,
duties, salary, benefits or responsibilities;
(ii)
a
material breach by the Employer of this Agreement; or
(iii) a
requirement by the Employer that Executive’s principal place of work be moved to
a location more than fifty (50) miles away from its then current
location.
Good
Reason shall not exist hereunder unless Executive first provides sixty (60)
days
prior written notice to the Board which notice alleges the occurrence of one
of
the aforementioned events in specific detail. Notwithstanding the foregoing,
however, Executive shall not have the ability to terminate this Agreement if
the
facts alleged in such written notice have been cured prior to the expiration
of
such sixty (60) day notice period.
(h) “Non-Compete
Period”
means:
(i) in
the
event of a termination of employment upon the expiration of the Term or any
employment with Employer or its controlled Affiliates following the Term, or
in
the event of a termination by Employer for Cause or by Executive without Good
Reason, a period consisting of the Term plus the two (2) year period following
the termination of employment;
(ii) in
the
event of a termination by Executive with Good Reason or by Employer without
Cause (other than in connection with the occurrence of a Change in Control),
the
period consisting of the Term plus the one (1) year period following the
termination of employment; and
(iii) in
the
event of a termination of employment because of death or Disability, or in
the
event of a termination by Executive with Good Reason or by Employer without
Cause in connection with the occurrence of a Change in Control, the period
consisting of the Term only.
(i) “Person”
means
any natural person, corporation, limited liability company, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or governmental entity.
(j) ‘‘Subsidiary’’
means
a subsidiary of Employer (or other referenced entity, as the case may be) as
defined in Rule 405 of Regulation C of the Securities Act of 1933, as
amended.
11. GENERAL.
(a) Notices.
Any
notices provided hereunder must be in writing and shall be deemed effective
upon
the earlier of one business day following personal delivery (including personal
delivery by telecopy or telex), or the third business day after mailing by
first
class mail to the recipient at the address indicated below:
To
Employer:
General
Counsel
American
Real Estate Partners, LP
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx
Xxxxxx, Xxx Xxxx 00000
General
Counsel
Icahn
Capital Management, LP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Notices
to Executive shall be given at the location set forth in Employer’s records, or
to such other address or to the attention of such other person as the recipient
party may have specified by prior written notice to the sending
party.
(b) Severability.
Any
provision of this Agreement which is deemed invalid, illegal or unenforceable
in
any jurisdiction shall, as to that jurisdiction and subject to this paragraph
be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provisions of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant shall be modified so that the scope of
the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable.
(c) Entire
Agreement.
This
document, together with its attached exhibits, constitutes the final, complete,
and exclusive embodiment of the entire agreement and understanding between
the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by
or
between the parties, written or oral.
(d) Counterparts.
This
Agreement may be executed on separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together
will
constitute one and the same agreement.
(e) Amendments.
No
amendments or other modifications to this Agreement may be made except by a
writing signed by both parties. Nothing in this Agreement, express or implied,
is intended to confer upon any third person any rights or remedies under or
by
reason of this Agreement.
(f) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to agreements made and/or to be performed in that
State, without regard to any choice of law provisions thereof. Except as
provided under Section 11(k) hereto, all disputes arising out of or related
to
this Agreement shall be submitted to the state and federal courts of New York,
and each party irrevocably consents to such personal jurisdiction and waives
all
objections thereto, but does so only for the purposes of this
Agreement.
(g) Survivorship.
The
provisions of this Agreement necessary to carry out the intention of the parties
as expressed herein (including, without limitation, the Restrictive Covenants
provided in Section 7 hereof and Exhibit B hereto) shall survive the termination
or expiration of this Agreement.
(h) Waiver.
The
waiver by either party of the other party’s prompt and complete performance, or
breach or violation, of any provision of this Agreement shall not operate or
be
construed as a waiver of any subsequent breach or violation, and the failure
by
any party hereto to exercise any right or remedy which it may possess hereunder
shall not operate or be construed as a bar to the exercise of such right or
remedy by such party upon the occurrence of any subsequent breach or violation.
No waiver shall be deemed to have occurred unless set forth in a writing
executed by or on behalf of the waiving party. No such written waiver shall
be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
(i) Captions.
The
captions of this Agreement are for convenience and reference only and in no
way
define, describe, extend or limit the scope or intent of this Agreement or
the
intent of any provision hereof.
(j) Construction.
The
parties acknowledge that this Agreement is the result of arm’s-length
negotiations between sophisticated parties, each afforded representation by
legal counsel. Each and every provision of this Agreement shall be construed
as
though both parties participated equally in the drafting of the same, and any
rule of construction that a document shall be construed against the drafting
party shall not be applicable to this Agreement.
(k) Arbitration. Except
as necessary for Employer, its Subsidiaries, Affiliates, and their respective
successors or assigns or Executive to specifically enforce or enjoin a breach
of
this Agreement (to the extent such remedies are otherwise available, including
as provided and limited in Section 11(l) hereof), the parties agree that any
and
all disputes that may arise in connection with, arising out of or relating
to
this Agreement, or any dispute that relates in any way, in whole or in part,
to
Executive’s services on behalf of Employer or any Affiliate, the termination of
such services or any other dispute by and between the parties or their
Subsidiaries, Affiliates, and their respective successors or assigns, shall
be
submitted to binding arbitration in New York, New York, before
JAMS, pursuant to the JAMS Employment Arbitration Rules & Procedures (the
“Rules”), including the internal appeal process provided for in Rule 32 of the
Rules, and before a single arbitrator to be mutually agreed upon by the parties.
If JAMS is not in business or is no longer providing arbitration services,
then
the American Arbitration Association shall be substituted for JAMS for the
purposes of arbitration under this section, and its Commercial Arbitration
Rules
(and not National Rules for the Resolution of Employment Disputes) shall be
used. The parties further agree that each party shall pay its own costs,
arbitration expenses and attorneys’ fees, unless the arbitrator (or appeal
panel) determines it is just and proper under the circumstances to award costs,
arbitration expenses and/or attorneys’ fees to either party and provided
further, that if either party prevails on a statutory claim, which affords
the
prevailing party an award of costs and attorneys’ fees, then the arbitrator may
award reasonable costs and attorneys’ fees to the prevailing party, consistent
with applicable law. The arbitrator shall issue a written decision and award
supported by essential findings of fact and conclusions of law. The arbitrator
shall have no jurisdiction or authority to issue any award contrary to or
inconsistent with this Agreement or applicable law. Judgment in a court of
competent jurisdiction may be had on the decision and award of the arbitrator
(or the appeal panel). For this purpose, the parties agree to submit to the
jurisdiction of the state courts located in the Borough of Manhattan, New York
and the U.S. District Courts for the Southern District of New York.
Subject
to Section 11(l) hereof, this arbitration obligation extends to any and all
claims that may arise by and between the parties or their Subsidiaries,
Affiliates and their respective successors or assigns, and expressly extends
to,
without limitation, claims or causes of action for wrongful termination,
impairment of ability to compete in the open labor market, breach of an express
or implied contract, breach of the covenant of good faith and fair dealing,
breach of fiduciary duty, fraud, misrepresentation, defamation, slander,
infliction of emotional distress, disability, loss of future earnings, and
claims under the United States Constitution, and applicable state and federal
fair employment laws, federal and state equal employment opportunity laws,
and
federal and state labor statutes and regulations, including, but not limited
to,
the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, as
amended, the Americans With Disabilities Act of 1990, as amended, the
Rehabilitation Act of 1973, as amended, the Employee Retirement Income Security
Act of 1974, as amended, the Age Discrimination in Employment Act of 1967,
as
amended, and any other state or federal law.
(l) Third
Party Beneficiaries.
Except
as expressly provided herein, nothing in this Agreement shall confer any rights
or remedies upon any Person other than the parties hereto. In any provision
of
this Agreement that provides rights or remedies to, or permits the assignment
of
rights to, Affiliates or Subsidiaries of Employer, the terms “Affiliates” and
“Subsidiaries” shall be construed to exclude any Fund and any entities
controlled by any Fund. In the discretion of the MC, any right or remedy which
a
Fund or an entity controlled by a Fund would otherwise have (but for the
immediately preceding sentence) may be asserted or pursued by Employer or
another Affiliate of Employer on behalf of such Fund or its controlled entity;
further, in the discretion of the MC, any obligation (including, without
limitation, any obligation to arbitrate) which a Fund or an entity controlled
by
a Fund might otherwise have under this Agreement may be exclusively undertaken
by Employer or another Affiliate of Employer on behalf of such Fund or its
controlled entity.
[signature
page to follow]
| AMERICAN REAL ESTATE PARTNERS, L.P. | ||
| |
|
|
| By: |
AMERICAN
PROPERTY INVESTORS, INC.,
Its General Partner |
|
| By: | /s/ Xxxxxx Xxxxx | |
|
|
||
| ICAHN CAPITAL MANAGEMENT LP | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxx | |
|
Name: Xxxxxx Xxxxxxx
Title:
|
||
| /s/ Xxxx X. Icahn | |||
|
XXXx X. ICAHN
|
|||
Signature
Page for
AREP/New
Icahn Capital Management LP/Xxxx X. Icahn Employment Agreement
Annual
Bonus Incentive
As
provided for in the Employment Agreement, for each calendar year (or portion
thereof) during the Term, Executive shall be eligible to receive the AREP Bonus
Incentive and the Hedge Fund Bonus Incentive (together, the “Annual Bonus
Incentive” or “Bonus”). The Bonus for such calendar year shall be in an amount
equal to the AREP Bonus Incentive, if any, plus the Hedge Fund Bonus Incentive,
if any, calculated as set forth herein.
1. AREP
Bonus Incentive.
The
AREP Bonus Incentive for any completed calendar year shall be equal to the
product derived under subclauses (III) or (IV), if applicable, calculated by
(I)
determining the amount of Covered Net Income, if any, for such calendar year,
(II) determining the Covered Net Income Growth Rate, if any, for such
calendar year, (III) multiplying the amount of Covered Net Income in excess
of $400,000,000, if any, by the Payout Percent corresponding to the Covered
Net
Income Growth Rate and (IV), in the event there are Covered Net Losses carried
forward from prior calendar years ended during the Term (the “Net Loss Carry
Forward”), multiplying the product derived in (III) by the Loss Adjustment
Percent.
For
purposes of the foregoing calculations, the following terms shall have the
following meanings:
(a) “Covered
Net Income” or “Covered Net Losses” shall mean AREP’s net income or losses for
the applicable calendar year (or portion thereof) excluding all income and
losses that arise out of or result from the operations of the Hedge Fund
Business (as defined below) but including any income or losses (i) attributable
to any amounts invested by AREP and its controlled Affiliates in the funds
or
the Hedge Fund Business or (ii) attributable to any incentive allocations and/or
management fees reinvested or not withdrawn by AREP and its controlled
Affiliates (but excluding any income or loss on any amounts which
represent a management fee and/or incentive allocation payable to AREP or its
controlled Affiliates). Covered Net Income or Covered Net Losses shall be
determined on the basis of “net income” or “net loss” for AREP on a consolidated
basis and determined in accordance with United States generally accepted
accounting principles and as reported in AREP’s audited financial statements
(the “Financial Statements”), but (u) excluding any amounts accrued with respect
to the Bonus provided for under this Agreement (and related employer payroll
taxes for the applicable period), (v) excluding any amounts payable or accrued
or expenses or deductions incurred or accrued in connection with the acquisition
by AREP of the Hedge Fund Business, (w) excluding any gain from the sale of
AREP’s casino business under the terms of the transaction for such sale that has
been entered into and disclosed as of the date hereof (as such documentation
may
be amended in accordance with its terms), (x) for determining any gain or loss
realized from the sale of any asset acquired by AREP and/or its controlled
Affiliates from the Executive and his Affiliates (other than AREP and its
controlled Affiliates) after the Effective Date measured on a cost basis equal
to the price paid by AREP or its controlled Affiliates for the acquisition
of
such asset, as such cost basis may be adjusted; (y) excluding all results
relating to or arising from the Hedge Fund Business (except as provided for
in
sub-clauses (i) and (ii) in the preceding sentence) and (z) subject to such
adjustment as the Audit Committee of the Board (the “Audit Committee”) may
determine, in its good faith judgment, to account for any acquisitions,
dispositions, discontinued operations or any other extraordinary, infrequent,
non-recurring or comparable occurrences or matters (including, for example,
any
adjustments based solely on changes in accounting method), and such
determination of the Audit Committee shall be final and conclusive, absent
manifest error. “Hedge Fund Business” shall mean the operations of any
controlled Affiliate or Subsidiary of AREP that engages, in whole or in part,
in
any business deriving its revenues or income from providing investment
management services.
(b) “Covered
Net Income Growth Rate” for a calendar year shall be the positive percentage (if
any) obtained by dividing (i) the excess (if any) of Covered Net Income for
such
year over $400,000,000 by (ii) $400,000,000; provided
that
with respect to 2007 (x) Covered Net Income shall be determined with respect
to
operations on and after the Effective Date, and (y) the amount of $400,000,000
as used in subclauses (i) and (ii) herein shall be reduced on a pro rata basis
to account for the number of days between the Effective Date and December 31,
2007.
(c) “Payout
Percent corresponding to the Covered Net Income Growth Rate” is set forth in
Column II to Annex I attached hereto. In cases where the Covered Net Income
Growth Rate exceeds five percent (5%) and does not directly correspond to a
Payout Percent set forth on Annex I, the appropriate Payout Percent shall be
interpolated on a straight line basis from the closest entry in Column II
on Annex I and rounded to the nearest 1/100th
of a
percent.
(d) “Loss
Adjustment Percent” for a calendar year shall be a percentage obtained by
dividing (x) the greater of (i) zero and (ii) the sum of the Net Loss
Carry Forward, if any, and the current year Covered Net Income, if any, by
(y) the Covered Net Income, if any, for the calendar year for which the AREP
Bonus Incentive is being determined.
2. Hedge
Fund Bonus Incentive.
The
Hedge Fund Bonus Incentive for any completed calendar year (or portion thereof)
shall be equal to the product derived by multiplying the Fund Profit for such
calendar year (or portion thereof) by the Payout Percent.
(a) “Fund
Profit” shall be the aggregate net profits (if any) in respect of all of the
fee-paying assets of the Funds under management as determined in accordance
with
the partnership agreement and other governing documents of the Funds (but in
any
case (i) including net realized and unrealized gains and losses, net of all
applicable fees and expenses of the Funds and (ii) excluding from the
calculation of net profits and losses any management fees or incentive
allocations charged to the investors in the Funds in connection therewith)
for
each fiscal year of the Funds (or portion thereof) during the Term; provided
that any
such aggregate net profits shall be reduced to reflect previously incurred
aggregate net losses (if any and determined in a manner consistent with net
profits) (commencing as of the Effective Date) on all fee-paying assets of
the
Funds that have not already been offset against aggregate net profits (other
than those losses incurred by investors on fee-paying assets who have redeemed
their investments, to the extent that such losses will not reduce net profits
of
the Funds for purposes of determining incentive allocations).
(b) “Payout
Percent” corresponding to the Fund Return (as defined below) is set forth in
Column IV to Annex I attached hereto. In cases where the Fund Return exceeds
ten
percent (10%) and does not directly correspond to a Payout Percent set forth
on
Annex I, the appropriate Payout Percent shall be interpolated on a straight
line
basis from the closest entry in Column IV on Annex I and rounded to the nearest
1/100th
of a
percent.
For
purposes of determining the Payout Percent, the following terms have the
following meanings:
(a) “Assets
Under Management” shall be the sum of all assets under management in respect of
all of the fee-paying assets of the Funds as of the first day of the year (or
for calendar year 2007, the Effective Date) and as of the end of each calendar
month thereafter during the relevant year divided by (13) (or in respect of
2007, divided by six (6); and for any other period during the Term of less
than
one (1) year, such sum shall be divided by the number of dates on which the
Assets Under Management are measured during such period). For purposes of the
foregoing, (i) Assets Under Management as of each month end (other than the
first day of the year) shall be adjusted solely for subscriptions and
redemptions with respect to fee paying assets, but shall not be adjusted during
the year for net profits and losses and (ii) Assets Under Management as of
the
first day of the year shall include such net profits and losses that carry
over
from the immediately preceding year.
(b) “Fund
Return” shall be a percentage equal to the quotient determined by dividing Fund
Profit for the year (or shorter period) by Assets Under Management; provided that
with
respect to 2007, the foregoing percentage shall be adjusted to express an
annualized amount
3. Mandatory
Deferral.
Fifty
percent (50%) of the Annual Bonus Incentive payable to Executive with respect
to
any calendar year (or partial calendar year) hereunder (other than any Bonus
(or
portion thereof) payable to the Executive (or his estate) in the event of his
termination of employment or death under Section 5 of the Employment Agreement)
shall be deferred and treated as though invested in the Funds as of the Vesting
Commencement Date (as defined below)(such deferred portion, the “Deferral
Amount(s)”). Any Deferral Amount shall be deferred in a manner that complies
with Section 409A of the Code. Deferral Amounts deemed invested in the
Funds shall be deemed allocated pro rata across all the Funds (based on their
respective Assets Under Management as of the applicable Vesting Commencement
Date (as defined below) and shall be treated as though subject to a 2% annual
management fee but shall not be treated as though charged a performance
incentive fee. Executive’s right to receive any amounts or payments in respect
of the Deferral Amount shall be subject to and limited by the terms and
provisions of this Agreement. Executive shall have no rights to receive any
amounts or payments in respect of any Deferral Amount unless, and then only
to
the extent that, Executive is vested therein in accordance with the terms of
this Agreement (such amounts so vested, the “Vested Amount”). During the Term,
Executive’s rights in any Deferral Amount shall vest at the rate of one-third
(1/3) per annum on each anniversary of the last day of the calendar year with
respect to which the bonus has been determined (the “Vesting Commencement Date),
and be payable within sixty (60) days of vesting. In addition, all deemed
returns, earnings and profits (as referred to herein) on Deferral Amounts shall
vest at the same time as the Deferral Amount in respect of which such returns,
earnings and profits are derived. The amount of any such deemed relating
earnings and profits shall be calculated by Employer (whose determination shall
be final and binding on all parties). Vesting of the Deferral Amount shall
accelerate and be one hundred percent (100%) vested and payable in a lump sum
payment within sixty (60) days upon the occurrence of any one of the following
events during the Term:
(a) the
employment of Executive is terminated by Employer without Cause or by the
Executive for Good Reason; or
(b) the
employment of Executive is terminated on account of death or
Disability.
Except
as
provided in the final sentence of the paragraph immediately prior hereto
(including clauses (a) and (b) above), Executive will only vest in Deferral
Amounts during such periods as he continues to be an employee under this
Agreement during the Term; provided that upon his completion of service through
the end of the Term (12/31/12), all then unvested Deferral Amounts shall
accelerate and be one hundred percent (100%) vested and payable in a lump sum
payment within sixty (60) days of such date. Except for and to the extent of
the
one hundred percent (100% ) vesting that would occur upon the occurrence of
the
events set forth in (a) and (b) immediately above, or in the immediately
preceding sentence, all unvested amounts will be forfeited in all respects
by
Employee on any other cessation of his employment hereunder.
Exhibit
B
Restrictive
Covenants
Covenant
Not to Compete.
Executive acknowledges that (i) Executive will be a key employee of
Employer, (ii) Executive will receive payments pursuant to Section 3 of this
Agreement, (iii) Executive has and will continue to have knowledge, information
and other know-how regarding Employer’s business as a key employee thereof, and
(iv) Executive has and will continue to develop relationships and contacts
with
Employer’s clients and investors as a key employee of Employer, and that all of
these factors would permit him to compete with Employer. Executive further
acknowledges that the covenants set forth in this Exhibit B constitute a
material inducement to Employer to employ Executive pursuant to this Agreement
and that Employer would not have agreed to employ Executive unless Executive
had
agreed to the covenants set forth in this Exhibit B. Accordingly, Executive
therefore covenants and agrees as follows:
Nature
of Competition.
During
the Non-Compete Period, Executive shall not, without the Employer’s prior
written consent, directly or indirectly, for his own account, or in any capacity
on behalf of any other third Person, whether as an officer, director, employee,
partner, joint venturer, consultant, investor or otherwise, engage, or assist
others to engage, in whole or in part, in any business deriving more than 25%
of
its revenues or income from providing investment management services (a
“Competing
Business”);
provided,
however,
that
ownership of stock of a business shall not be deemed a violation of this Exhibit
B if and for so long as (i) the stock of such business is publicly traded;
(ii)
such ownership does not exceed 5% of the aggregate outstanding equity interest
of such business and (iii) Executive does not otherwise participate in the
management, operations or affairs of such business. Notwithstanding the
foregoing, nothing in this Agreement shall be construed to prohibit Executive
from rendering services to, acquiring an economic interest in or otherwise
providing assistance to the Funds, the Employer or any of their controlled
Affiliates or any pooled investment vehicle which is advised or sub-advised
by
the Partnerships or any of their respective controlled Affiliates, or providing
investment management services (whether personally or as an employee or partner
of a business formed for this purpose) solely on his own behalf or on behalf
of
one or more of his family members, including trusts of which his family members
are the principal beneficiaries and Persons established solely for the benefit
of, and wholly owned by, his family members. Furthermore, Executive may notify
the Employer of any proposed activity for the purpose of soliciting a conclusion
as to whether such activity would violate this Exhibit B. The Employer agrees
that it shall approve or disapprove Executive’s proposal within 30 days of such
notice. If the Employer approves such activity for purposes of this Exhibit
B,
then such activity, as disclosed in Executive’s request for approval, will not
constitute a violation of this Exhibit B.
Non-solicitation.
During
the Non-Compete Period, Executive shall not, directly or indirectly, whether
through his own efforts, or through the efforts, or in any way assisting or
employing the assistance, of any other Person (including through any consultant
or any Person employed by or associated with any entity with whom he may be
employed or associated), do any of the following: (i) solicit or otherwise
attempt to establish a Competing Business with any Person that was an investor
in the Funds, or prospective investor in the Funds to whom any Contributor
or
any Partnership has made a proposal within the prior six months or (ii) solicit
for employment, hire or otherwise engage in any capacity in any Competing
Business any investment professional or executive who is or has within the
previous one year been an employee or partner of any Contributor or any
Partnership or any of their respective controlled Affiliates, or solicit any
such Person to terminate his or her employment by such Contributor, Partnership
or controlled Affiliate.
Confidential
Information.
During
the Term and at all times thereafter, Executive shall hold in a fiduciary
capacity for the sole benefit of Employer, its controlled Affiliates and the
Funds, all secret or confidential information, knowledge or data (collectively,
"Confidential Information"), including without limitation trade secrets,
investments, contemplated investments, business opportunities, Fund or
investment performance, valuation models and methodologies, relating to the
business of the Funds, Employer, and their respective controlled Affiliates,
and
their respective businesses including, without limitation, the identity of
any
investors and the fact that such person is an investor in the Funds: (i)
obtained by Executive during Executive’s employment hereunder and (ii) not
otherwise in the public domain. Executive shall not, without prior written
consent of Employer (which may be granted or withheld in its sole and absolute
discretion), use, or communicate or divulge any Confidential Information, or
any
related knowledge or data to anyone other than Employer or its controlled
Affiliates or those designated by Employer or its controlled Affiliates, except
to the extent compelled pursuant to the order of a court or other body having
jurisdiction over such matter or based upon the advice of his counsel that
such
disclosure is legally required; provided, however, that Executive will assist
Employer or its controlled Affiliates, at Employer or such Affiliates’ expense,
in obtaining a protective order, other appropriate remedy or other reliable
assurance that confidential treatment will be accorded such information so
disclosed pursuant to the terms of this Agreement.
All
processes, technologies, investments, contemplated investments, business
opportunities, valuation models and methodologies, and inventions (collectively,
“Inventions”), including without limitation new contributions, improvements,
ideas, business plans, discoveries, trademarks and trade names, conceived,
developed, invented, made or found by Executive, alone or with others, during
the Term, whether or not patentable and whether or not on Employer’s, or its
respective controlled Affiliates’ time or with the use of their facilities or
materials, shall be the property of Employer or such controlled Affiliates,
as
applicable, and shall be promptly and fully disclosed by Executive to Employer
or such controlled Affiliates, as applicable. Executive shall perform all
necessary acts (including, without limitation, executing and delivering any
confirmatory assignments, documents, or instruments requested by Employer or
its
controlled Affiliates) to vest title to any such Invention in Employer or its
respective controlled Affiliate, as applicable, to enable such party, at its
expense, to secure and maintain domestic and/or foreign patents or any other
rights for such Inventions.
Without
limiting anything contained above, Executive agrees and acknowledges that all
personal and not otherwise public information about Employer, the Funds and
their respective Affiliates, including, without limitation, their respective
investments, investors, transactions, historical performance, or otherwise
regarding or concerning Employer or its controlled Affiliates, shall constitute
Confidential Information for purposes of this Agreement. In no event shall
Executive during or after his employment hereunder, disparage Employer or its
controlled Affiliates or any of their respective officers, directors or
employees.
The
provisions of this Exhibit B shall not be deemed to limit any of the rights
available to the respective parties under the any other agreements to which
they
may be parties and those which arise under applicable law.
Annex
I
|
AREP
Bonus Incentive
|
Hedge
Fund Bonus Incentive
|
||
|
I
|
II
|
III
|
IV
|
|
Covered
Net Income Growth Rate
|
Payout
Percent
|
Fund
Return
|
Payout
Percent
|
|
Below
5%
|
8%
|
Below
10%
|
0.30%
|
|
5%
|
8%
|
10%
|
0.30%
|
|
10%
|
11%
|
15%
|
0.50%
|
|
15%
|
14%
|
20%
|
0.70%
|
|
20%
|
17%
|
25%
|
0.90%
|
|
25%
|
20%
|
30%
|
1.10%
|
|
Above
25%
|
20%
|
Above
30%
|
1.10%
|
Annex
II
Annual
Bonus Incentive - Examples
AREP
Bonus Incentive
Example
1: Profit Scenario (with Interpolation)
|
Employment
Term Year
|
Covered
Net Income (CNI)
|
Covered
Net Income Growth Rate
|
Payout
Percent (PP)
|
Payout
Amount
(PP
x CNI > $400 mm)
|
|
Year
1
|
$100
|
n/a
|
n/a
|
0
|
|
Year
2
|
$400
|
n/a
|
n/a
|
0
|
|
Year
3
|
$500
|
25%
|
20%
|
$20
|
|
Year
4
|
$450
|
12.5%
|
12.5%1
|
$6.25
|
|
Year
5
|
$600
|
50%
|
20%
|
$40
|
Example
2: Cumulative Losses followed By Profit
|
Employment
Term Year
|
Covered
Net Income
|
Covered
Net Income Growth Rate
|
Payout
Percent
|
Payout
Amount
(PP
x CNI > $400 mm x Loss Adjustment Percent (LAP)
|
|
Year
1
|
$500
|
25%
|
20%
|
$20
|
|
Year
2
|
($300)
|
n/a
|
n/a
|
0
|
|
Year
3
|
($300)
|
n/a
|
n/a
|
0
|
|
Year
4
|
$500
|
25%
|
20%
|
02
|
|
Year
5
|
$700
|
75%
|
20%
|
51.433
|
1
In cases
where the Covered Net Income Growth Rate exceeds 5% and does not directly
correspond to a Payout Percent set forth on Annex I, the appropriate
Payout
Percent shall be interpolated on a straight line basis from the closest
entry in
Column II on Annex I and rounded to the nearest 1/100th
of a
percent. In the case of Growth Rates equal to 5% or greater, each 1%
increment
in Growth Rate translates into an additional 0.60% in Payout Rate.
Thus, the
Payout Percent for year 4 is interpolated as follows: a 12.5% Growth
Rate is
2.5% greater than 10% which corresponds to an 11% Payout Rate; 2.5
x .60 = 1.5,
which, when added to 11%, results in a Payout Percent equal to 12.5%.
2 The
Loss Adjustment Percent is 0, calculated as follows: the cumulative
loss carry
forward is equal to $600, and current year income is $500. Thus, (500
- 600)/500
= 0 [because 0 in the numerator is greater than -100]. The remaining
$100
cumulative loss (in excess of current year income) is carried forward
to year 5
(see
footnote
3).
3 The
Loss Adjustment Percent is 85.714% (6/7), calculated as follows: the
cumulative
loss carry forward is equal to $100, and current year income is $700.
Thus, (700
-100)/700 = 6/7. This amount, expressed as a percentage, is multiplied
against
the product of the Payout Percent multiplied by current year net income
in
excess of $400 million, or (20% x $300 x 85.714%) = $51.43.
Hedge
Fund Bonus Incentive
Example
3
|
Employment
Term Year
|
Assets
Under Management
|
Fund
Return
|
Payout
Percent
|
Payout
Amount
|
|
Year
1
|
$5
billion
|
10%
|
0.3%
|
$1.5
million
|
|
Year
2
|
$6
billion
|
20%
|
0.7%
|
$8.4
million
|
|
Year
3
|
$7
billion
|
25%
|
0.9%
|
$15.75
million
|
|
Year
4
|
$9
billion
|
25%
|
0.9%
|
$20.25
million
|
|
Year
5
|
$11
billion
|
13%
|
0.42%4
|
$6.006
million
|
4
In cases
where Fund Return exceeds 10% and does not directly correspond to
a Payout
Percent set forth on Annex I, the appropriate Payout Percent shall
be
interpolated on a straight line basis from the closest entry in Column IV
on Annex I and rounded to the nearest 1/100th
of a
percent. In the case of Fund Returns equal to 10% or greater, each
1% increment
in Fund Return translates into an additional 0.04% in Payout Rate.
Thus, in Year
5, the Payout Percent is interpolated as follows: a 13% Fund Return
is 3%
greater than 10% which corresponds to an 0.30% Payout Rate; 3 x 0.04%
= 0.12%,
which, when added to 0.30%, results in a Payout Percent equal to
0.42%.
