EXHIBIT 10.3B
PROFITS INTEREST AGREEMENT
THIS PROFITS INTEREST AGREEMENT ("Agreement") is made and entered into
effective as of April 1, 2003, by and between CENTEX DEVELOPMENT COMPANY, L.P.,
a Delaware limited partnership ("CDCLP"), whose address is 0000 Xxxxx Xxxxxxx,
Xxxxxx, Xxxxx 00000, Attn: Xxxxxxx X. Xxxxxxxx, and XXXXXXX X. XXXXXX
("Executive"), an individual whose address is 000 Xxxxx Xxxxx, Xxxxxxx, Xxxxx
00000.
RECITALS
A. Vista Properties Company (now known as Centex-Vista Properties), a
division of Centex Homes, a Nevada general partnership ("Centex-Vista"), and
Executive entered into an Employment Agreement dated as of July 26, 1996 (the
"1996 Agreement"). Executive and Xxxxx Xxxxx, acting on behalf of Centex-Vista
and CDCLP, executed a Memorandum dated July 31, 1998 (the "Memorandum"), to
clarify that the terms of the 1996 Agreement apply to all activities of
Executive performed on behalf of Centex-Vista and CDCLP.
B. Effective as of April 1, 2001, CDCLP and Executive entered into a
new Employment Agreement (the "Original 2001 Agreement"), which replaced, in its
entirety, the 1996 Agreement and the Memorandum. The Original 2001 Agreement was
modified by a First Amendment to Employment Agreement dated December 19, 2002
(the "First Amendment"), which, among other things, provided for the termination
of the Original 2001 Agreement as of close of business on March 31, 2003. (The
Original 2001 Agreement, as modified by the First Amendment, is referred to as
the "2001 Agreement".)
C. CDCLP and Executive have agreed to enter into this Agreement to
reflect the terms of certain compensation to be paid to Executive beginning with
fiscal year 2004 with respect to the commercial real estate projects developed
or purchased by CDCLP and Centex-Vista during Executive's employment with CDCLP
or Centex-Vista. This compensation, which is in addition to Executive's salary
and bonus, will be referred to as a "carried" or "profits" interest in the
earnings generated by those projects.
AGREEMENT
NOW, THEREFORE, CDCLP and Executive mutually undertake and agree as
follows:
1. Profits Interest.
A. Within 60 days after the end of each fiscal year, beginning
with fiscal year 2004, CDCLP will pay to Executive a Profits
Interest (herein so called) in an amount equal to the sum of
the following:
(1) 6% of the Net Operating Earnings generated by the
operation of the Existing Projects; plus
(2) 6% of the Net Sales Earnings generated by the sale of
the Existing Projects; plus
(3) 5% of the Net Operating Earnings generated by the
operation of the the New Projects; plus
(4) 5% of the Net Sales Earnings generated by the sale of
the New Projects.
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B. For purposes of calculating the Profits Interest to be paid to
Executive, the following defined terms apply:
(1) "Net Operating Earnings" means rental income, minus
operating expenses (including maintenance, property
taxes and insurance), depreciation and interest
expenses. For purposes of calculating "Net Operating
Earnings", there will be no charge for income taxes
or overhead.
(2) "Net Sales Earnings" means gross sales proceeds, plus
Deferred Earnings realized upon the sale to a third
party, minus project development and construction
costs, other capitalized items (e.g. tenant
improvements), sales costs (including commissions and
other closing expenses), depreciation and
amortization.
(3) "Deferred Earnings" means the difference between the
value at which land is transferred from Centex-Vista
to CDCLP and the basis at which the land is carried
on the books of Centex-Vista.
(4) "Existing Projects" means the real estate projects
listed on Exhibit A attached to this Agreement.
(5) "New Projects" means (i) the real estate projects
listed on Exhibit B attached to this Agreement, and
(ii) new real estate development projects that (A)
have been approved by the Chief Executive Officer of
CDCLP by March 31, 2003, as evidenced by the signing
of a financial package (e.g. a Board approval
package) by the Chief Executive Officer, and (B) are
ultimately completed by CDCLP. "New Projects"
specifically excludes undeveloped land and any
Existing Projects.
C. No overhead charge, capital charge or credit will be applied
to the calculation of Net Operating Earnings or Net Sale
Earnings.
D. Executive is not entitled to a Profits Interest with respect
to Desert Sky Festival Shopping Center (Westfest LLC), since
Executive already owns a direct ownership interest in that
project.
E. Other than as set forth in a separate letter agreement between
CDCLP and Executive, Executive is not entitled to a Profits
Interest on any earnings generated by the sale of undeveloped
land after March 31, 2003.
F. This Profits Interest is paid to Executive separate and apart
from Executive's other compensation as an employee of CDCLP:
(1) an annual salary; and (2) an annual bonus ("Bonus") based
on a percentage of the "bonus pool" established for senior
employees of CDCLP. The "bonus pool" is calculated as a
percentage of the net operating earnings of CDCLP and
Centex-Vista. Because the Profits Interest is also based on
the operating earnings from certain Existing Projects and New
Projects within CDCLP and Centex-Vista, the Net Sale Earnings
and Net Operating Earnings used for calculating the Profits
Interest will be excluded for purposes of calculating
Executive's Bonus. If Executive resigns from employment with
CDCLP or is terminated by CDCLP (other than for acts of theft,
embezzlement, fraud, dishonesty or other illegal acts), CDCLP
will pay to Executive the Bonus accrued through the date of
termination.
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2. Payment of Profits Interest After Employment.
A. If Executive resigns from employment with CDCLP or is
terminated by CDCLP (other than for acts of theft,
embezzlement, fraud, dishonesty or other illegal acts), CDCLP
will continue to pay to Executive the Profits Interest each
year in the manner described in Section 1, above. However,
CDCLP may elect at any time to make a Lump-Sum Profits
Interest Payment (as defined below) to Executive, in lieu of
making annual payments to Executive under Section 1.
B. For purposes of calculating the Lump-Sum Profits Interest
Payment to be paid to Executive, the following defined terms
apply:
(1) "Lump-Sum Profits Interest Payment" means the sum of
(a) any Profits Interest accrued through the date of
termination, (b) the Lump-Sum Profits Interest
Payment (Existing Projects), and (c) the Lump-Sum
Profits Interest Payment (New Projects).
(2) "Lump-Sum Profits Interest Payment (Existing
Projects)" is equal to 6% of the sum of:
(a) the difference between:
(i) the Aggregate Fair Market Value of
all of the Existing Projects, and
(ii) the cost book basis of CDCLP or
Centex, as the case may be, in all
of such Existing Projects; plus
(b) the Deferred Earnings relating to Existing
Projects.
(3) Lump-Sum Profits Interest Payment (New Projects)" is
equal to 5% of the sum of:
(a) the difference between:
(i) the Aggregate Fair Market Value of
all of the New Projects, and
(ii) the cost book basis of CDCLP or
Centex, as the case may be, in all
of such New Projects; plus
(b) the Deferred Earnings relating to New
Projects.
(4) "Aggregate Fair Market Value" means the total fair
market value of the Existing Projects and the New
Projects, as mutually agreed upon by CDCLP and
Executive at the time that CDCLP elects to make a
Lump-Sum Profits Interest Payment. If CDCLP and
Executive are unable to reach an agreement, the
Aggregate Fair Market Value will be determined by an
appraiser mutually acceptable to CDCLP and Executive.
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3. Term. This Agreement will continue in full force and effect until all
of the Existing Projects and the New Projects have been sold and CDCLP
has paid to Executive the last component of the Profits Interest.
4. Miscellaneous.
A. This Agreement will be governed by, and construed and
interpreted in accordance with, the substantive laws of the
State of Texas without giving effect to any conflict-of-laws
rule or principle that would result in the application of the
laws of another jurisdiction.
B. For fiscal year 2003, Executive's salary, bonus and other
compensation will be determined under the 2001 Agreement. The
terms of this Profits Interest Agreement become effective for
compensation earned during fiscal year 2004 (after March 31,
2003).
C. This Agreement expresses the entire agreement between
Executive and CDCLP with reference to the subject matter of
this Agreement and supersedes all prior written or oral and
all contemporaneous oral discussions, arrangements,
negotiations, and agreements with respect to the subject
matter of this Agreement. No waiver, modification, or
amendment of this Agreement or of any covenant, condition or
limitation in this Agreement will be valid, unless it is in a
written document signed by the party most detrimentally
affected by the waiver or modification. The parties further
agree that the provisions of this paragraph may not be waived
except as in the manner described in this paragraph.
D. If attorneys' fees or other costs and expenses are incurred to
secure performance of any of the obligations described in this
Agreement, or to establish damages for the breach or default
under this Agreement or to obtain any other appropriate
relief, whether by way of prosecution or defense, the
prevailing party (which will be the party who receives the
substance of the relief sought) will be entitled to recover
reasonable attorneys' fees and costs incurred in such action.
IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement in Dallas, Texas as of the day and year first above
written.
EXECUTIVE: CDCLP:
CENTEX DEVELOPMENT COMPANY, L.P.,
a Delaware limited partnership
By: 3333 Development Corporation,
------------------------ a Nevada corporation
Xxxxxxx X. Xxxxxx
By:
-------------------------------------
Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
12803
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Exhibit A
Existing Projects
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Exhibit B
New Projects
Northfield B, F & G
Camarillo Ranch VI
Camarillo Business Center (existing building occupied by G&H only)
Hilltop Business Center
CC Desoto
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