Exhibit 10.15
2008-2010 EARNINGS PARTICIPATION AWARD AGREEMENT
This 2008-2010 EARNINGS PARTICIPATION AWARD AGREEMENT, dated April
15, 2005 (the "Agreement"), is made by and between Avatar Holdings Inc., a
Delaware corporation (the "Company") and Xxxxxxxx Xxxx (the "Participant").
1. AWARD. Pursuant to the provisions of the (i) Avatar Holdings Inc. 2005
Executive Incentive Compensation Plan, as the same may be amended, restated,
modified and supplemented from time to time (the "Executive Plan") the Committee
(as defined in the Executive Plan) hereby awards to the Participant, on the date
hereof, subject to the terms and conditions of the Executive Plan and subject
further to the terms and conditions and other provisions herein set forth, the
Cash Awards if, as of an applicable Performance Goal Test Date (as defined
below), the Performance Goal (as defined below) applicable to such Cash Award is
satisfied.
2. CERTAIN DEFINITIONS.
(a) Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Plans.
(b) Each reference contained in this Agreement to:
"Anniversary" shall mean, with respect to any date, the
annual recurrence of such date.
"Actual Gross Profit Amount" shall mean the Company's
cumulative Gross Profit during the Performance Period.
"Annual Cash Award" shall mean, with respect to each fiscal
year during the Performance Period ending on a Performance Goal Test
Date, a cash payment equal to two percent (2%) of the excess, if any,
of (x) the Gross Profit earned by the Company for such fiscal year,
over (y) the Minimum Gross Profit Level for such fiscal year.
"Business Plan" shall mean the Company's business plan for
the period commencing on January 1, 2005 and ending on December 31,
2010, as submitted to the Compensation Committee at a meeting held on
March 3, 2005.
"Cash Awards" shall mean, collectively, the Annual Cash
Award and the Cumulative Cash Award, and "Cash Award" shall mean each
of the Annual Cash Award and the Cumulative Cash Award.
"Change in Control" shall mean any of the following events:
(a) a person or entity or group of persons or entities, acting in
concert, becomes the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities of the Company representing ninety percent
(90%) or more of the combined voting power of the issued and
outstanding Common Stock; (b) the Board of Directors of the Company
approves any merger, consolidation or like business combination or
reorganization of the Company, the consummation of which would result
in the occurrence of the event described in clause (a) above, and
such transaction shall have been consummated; or (c) the Company
ceases to be engaged, directly or indirectly, and does not intend to
be engaged at any time in the foreseeable future, in any real estate
business. The date on which a Change in Control is consummated, with
respect to clauses (a) and (b), or occurs, with respect to clause
(c), is herein referred to as the "Change in Control Date."
"Common Stock" shall mean common stock, par value $1.00 per
share, of the Company.
"Cumulative Cash Award" shall mean a cash payment equal to
one and one-quarter percent (1.25%) of the excess, if any, of (x) the
Actual Gross Profit Amount over (y) the Target Gross Profit Amount.
"Excluded Amounts" shall mean, with respect to a fiscal
year of the Company, as at any date of determination, an amount equal
to the dollar amount of any Gross Profit attributable to Harbor
Islands and the Rio Rico Excluded Properties for such fiscal year.
"Gross Profit" shall mean, with respect to a fiscal year of
the Company, the excess, if any, of (x) the sum of (i) the amount set
forth in the Company's audited Consolidated Statements of Operations
as set forth in the Company's annual report on Form 10-K (the "Income
Statement") for such fiscal year with respect to the line item "Net
income (loss)" plus (ii) the amount reflected in the Company's Income
Statement for such fiscal year as compensation expense relating to
the 2008-2010 Earnings Participation Award Agreements, dated the date
hereof, between the Company and each of Xxxxxx Xxxxxx, Xxxxxxxx Xxxx
and Xxxxxxx Xxxx, plus (iii) the amount, if any, set forth in the
Company's Income Statement for such fiscal year with respect to the
line item "Income tax expense (benefit)", to the extent that there is
"Income tax expense" less (iv) the amount, if any, set forth in the
Company's Income Statement for such fiscal year with respect to the
line item "Income tax expense (benefit)", to the extent that there is
"Income tax (benefit)" plus (v) the amount(s), if any, set forth in
the Company's Income Statement for such fiscal year relating to any
income tax expense included in any income or (loss) attributable to
the discontinued operations and/or extraordinary items set forth in
the Income Statement less (vi) the amount(s), if any, set forth in
the Company's Income Statement for such fiscal year relating to any
income tax (benefit) included in any income or (loss) attributable to
such discontinued operations and/or extraordinary items set forth in
the Income Statement plus (vii) for purposes of determining the
Annual Cash Award, the Gross Profit Carry Forward Amount, if any,
with respect to the Company's prior fiscal year, over (y) the
Excluded Amounts for such fiscal year.
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"Gross Profit Carry Forward Amount" shall mean an amount
equal to (x) the excess of the amount of the Annual Cash Award that
would otherwise be payable to the Participant but for the Annual Cap,
over the amount of the Annual Cap, divided by (y) 2%; provided, that
in no event shall the Gross Profit Carry Forward Amount exceed
$20,000,000.
"Harbor Islands" shall mean the development and/or sale of
the Company's property in Hollywood, Florida, generally known by the
Company as parcels 1, 8 and 9 at "Harbor Islands."
"Minimum Cumulative Gross Profit Level" shall mean that, as
of Performance Goal Test Date applicable to the Cumulative Cash
Award, (x) the Actual Gross Profit Amount is greater than (y) the
Target Gross Profit Amount.
"Minimum Gross Profit Level" shall mean the Gross Profit
set forth opposite each fiscal year ending on the dates set forth
below:
FISCAL YEAR END GROSS PROFIT
--------------- ------------
December 31, 2008 $40,000,000
December 31, 2009 $50,000,000
December 31, 2010 $60,000,000
"Payment Date" shall have the meaning ascribed to such term
in Section 3(c).
"Performance Goal" shall mean (i) in the case of the Annual
Cash Award, the achievement of the Minimum Gross Profit Level in any
fiscal year, ending on December 31, during the Performance Period and
(ii) in the case of the Cumulative Cash Award, the achievement of the
Minimum Cumulative Gross Profit Level for the entire Performance
Period.
"Performance Goal Test Date" shall mean with respect to the
Annual Cash Award, December 31 of each year within the Performance
Period and with respect to the Cumulative Cash Award, the earlier of
(i) a Change in Control Date and (ii) the Last Day of the Performance
Period.
"Performance Period" shall mean the period commencing
January 1, 2008 and ending on December 31, 2010 (December 31, 2010,
being the "Last Day of the Performance Period").
"Rio Rico Excluded Properties" shall mean those parcels of
land not suitable for development in accordance with the Company's
current Business Plan due to environmental factors located in the
Company's property in Rio Rico, Arizona, generally known by the
Company as "Rio Rico".
"Target Gross Profit Amount" shall mean $390,000,000.
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(c) For purposes of this Agreement, the terms Administrator, Cause,
Without Cause, Good Reason, Without Good Reason, Disability, Retention Account,
Retention Account Procedures and Retention Date shall have the meanings ascribed
to such terms in the Participant's amended and restated employment agreement
with Avatar Properties Inc. ("Avatar Properties"), dated as of the date hereof,
as amended or restated from time to time; provided, however, if the Participant
is no longer employed pursuant to such employment agreement, each such term
shall have the meaning ascribed to it in the employment agreement last in effect
which contains such defined term.
3. TERMS AND CONDITIONS. The Cash Awards evidenced by this Agreement are 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 applicable to each Cash
Award.
(b) Subject to Section 4 hereof (i) the Participant shall be entitled
to receive a payment on the related Payment Date pursuant to the Annual Cash
Award if the applicable Performance Goal is satisfied on the applicable
Performance Goal Test Date and (ii) the Participant shall be entitled to receive
the Cumulative Cash Award on the related Payment Date if the applicable
Performance Goal is satisfied on the applicable Performance Goal Test Date.
(c) The Committee shall determine whether a Performance Goal has been
met as of the applicable Performance Goal Test Date and, (i) if it has, shall so
certify in writing and ascertain the amount of cash to be paid, if any, to the
Participant and (ii) if it has not, shall so certify in writing with a brief
explanation as to the methodology and calculation of the Committee in
determining that such Performance Goal has not been met. Payments of cash, if
any, pursuant to the Cash Awards shall be made to the Participant, in each case
within thirty (30) days following the filing with the Securities and Exchange
Commission of an annual report on Form 10-K (which contains audited financial
statements) for the year ended as of the applicable Performance Goal Test Date
(each such date being a "Payment Date").
(d) Notwithstanding anything to the contrary contained in this
Agreement, in the event a Change in Control Date occurs during the Performance
Period, (i) on the Change in Control Date, the Company shall deposit into the
Retention Account any cash payment pursuant to the Cumulative Cash Award (and
such amount shall be added to the Retention Amount) and, if the Employee's
employment has not been otherwise terminated by Avatar Properties for Cause or
by Participant Without Good Reason and the Employee is continuously employed by
Avatar Properties through the Retention Period such that the Employee's
employment terminates upon the Retention Date, the Administrator shall
distribute the Retention Amount to the Employee on or promptly following the
Retention Date, subject to and in accordance with the Retention Account
Procedures; provided, however, that if the Participant's employment with Avatar
Properties is terminated due to the Participant's death or Disability during the
Retention Period, (A) the Administrator shall disburse to the Employee, his
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designated beneficiary or to his estate a pro rata portion of the Retention
Amount as of the Date of Termination equal to the Retention Amount multiplied by
a fraction (x) the numerator of which is the number of days elapsed in the
Retention Period as of the Date of Termination and (y) the denominator of which
is the total number of days in the Retention Period and (B) the remaining
balance of the Retention Amount shall be disbursed by the Administrator as a
donation to one or more charitable, not-for-profit organizations designated by
the Board of Directors of Avatar, in its sole discretion, in each case subject
to and in accordance with the Retention Account Procedures, and (ii) the
Participant shall be entitled to receive a pro rata portion of the Annual Cash
Award (as of the Change in Control Date) for the fiscal year in which such
Change in Control Date occurs. The Committee shall determine the basis,
methodology and calculation for, and any estimates used in, determining the
prorated Actual Gross Profit Amount and prorated Minimum Gross Profit Level for
the portion of the fiscal year preceding the Change in Control Date. The
determination of the Committee as to any such partial award shall be final and
binding on all parties, including the Participant and the Company. Such prorated
Annual Cash Award shall be paid on or promptly following the Change in Control
Date.
4. LIMITATIONS ON AWARDS. Notwithstanding anything to the contrary herein:
(a) The maximum cash amount that may be paid to the Participant
pursuant to the Annual Cash Award (the "Annual Cap") shall be $1,600,000 for
each fiscal year during the Performance Period; provided, however, that in the
event that the Annual Cash Award is less than $1,600,000 with respect to either
or both of the first two (2) fiscal years of the Performance Period (the amount
by which such Annual Cash Awards are less than $1,600,000, in the aggregate, is
referred to herein as the "Shortfall Amount"), the Annual Cap with respect to
the third fiscal year of the Performance Period shall equal the sum of (x)
$1,600,000 plus (y) the Shortfall Amount; provided, further, that in no event
shall the Shortfall Amount exceed $400,000.
(b) The maximum cash amount that may be paid to the Participant
pursuant to the Cumulative Cash Award shall be $900,000.
(c) The maximum payment of cash pursuant to the Cash Awards shall be
subject to the limitations in the Executive Plan and the Participant's
employment agreement with the Company or a subsidiary or affiliate thereof (the
foregoing entities being referred to herein collectively as the "Avatar
Entities" and each as an "Avatar Entity"), each as may be amended, restated,
modified or supplemented from time to time.
5. TERMINATION OF EMPLOYMENT.
(a) If the Participant's employment with Avatar Properties is
terminated by Avatar Properties for Cause or by the Participant Without Good
Reason, in addition to any other consequences of such termination provided for
in this Agreement or any other agreement, notwithstanding Section 3 hereof,
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Participant shall forfeit any right to cash payments that would otherwise accrue
pursuant to this Agreement on or after the date of such termination.
(b) If the Participant's employment with Avatar Properties is
terminated by Avatar Properties Without Cause or by the Participant for Good
Reason, the Participant shall be entitled to continue to receive such cash
payments as would otherwise be made pursuant to this Agreement as though the
Participant's employment had not been terminated.
(c) If the Participant's employment with Avatar Properties is
terminated due to the Participant's death or Disability, subject to Section 3(d)
hereof:
(i) the Participant shall be entitled to receive only that
portion of any cash payments otherwise payable pursuant to Section
3(c) 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 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 the
applicable Performance Goal Test Date and (y) the amount of any cash
payments that would have been payable pursuant to Section 3(c) hereof
if the Participant remained an employee of Avatar Properties through
and including the Last Day of the Performance Period; provided,
however, that with respect to cash payments pursuant to the Annual
Cash Award, the Participant shall only be eligible to receive a cash
payment for the fiscal year in which the Participant's employment was
terminated for death or Disability, as the case may be, and the
Participant shall not be eligible for any additional cash payments;
and
(ii) the Participant will have no right to any other
payments hereunder.
Any payments 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) pursuant to this Section 5(c) shall be made no later than the
relevant Payment Date.
6. 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 agreement or other agreement with any
of the Avatar Entities (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 any cash payments
pursuant to this Agreement from and after the date of such breach.
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7. CLAWBACK; ADDITIONAL PAYMENTS; NO OFFSET BY PARTICIPANT; COMPANY OFFSET.
(a) In the event that the Company's financial statements with respect
to any fiscal year (or portion thereof) within the Performance Period are
restated within eighteen (18) months following the payment to the Participant of
cash pursuant to a Cash Award such that Gross Profit is less than previously
reported, the Participant shall pay to the Company upon demand by the Company
following the filing of such restated financial statements with the Securities
and Exchange Commission, 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 Coral
Gables, Florida for the relevant taxable period, taking into account the
deductibility of state and local income taxes for federal income tax purposes),
and (ii) 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 7(a) to the Company. For purposes of the preceding sentence, "Excess
Bonus Payments" shall mean an amount equal to the difference between (x) the
amount of the cash payment pursuant to the Cash Award paid to the Participant
and (y) the amount that cash payment pursuant to the Cash Award would have been
if the Company had used the restated financial statements to determine the
amount of the Company's Gross Profit for the Performance Goal Test Date.
(b) In the event that the Company's financial statements with respect
to any fiscal year (or portion thereof) within the Performance Period are
restated within eighteen (18) months following the payment to the Participant of
cash pursuant to a Cash Award such that Gross Profit is greater than previously
reported, the Company shall pay to the Participant upon demand by the
Participant following the filing of such restated financial statements with the
Securities and Exchange Commission, an amount equal to the difference between
(x) the amount that the cash payment pursuant to the Cash Award would have been
if the Company had used the restated financial statements to determine the
amount of the Company's Gross Profit for the Performance Goal Test Date less (y)
the amount of the cash payment pursuant to the Cash Award paid to the
Participant.
(c) The Participant shall be obligated to pay to the Company any
amount due pursuant to this Section 7 regardless of whether the Participant has
or claims to have any claim against the any of the Avatar Entities, and the
Participant shall have no right to offset any amount due or claimed to be due
from any of the Avatar Entities. The Company shall be obligated to pay to the
Participant any amount due pursuant to this Section 7 regardless of whether the
Company has or claims to have any claim against the Participant, and the Company
shall have no right to offset any amount due or claimed to be due from the
Participant or any of its affiliates.
(d) In the event that the Participant has failed to repay any amount
required pursuant to Section 7(a) above, the Company shall be entitled to offset
such amount against any amounts due from the Company to the Participant.
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(e) The foregoing provisions of this Section 7 shall not be
applicable to any restatement, after the consummation of a Change in Control (as
defined in clauses (a) and (b) of the definition of "Change in Control" above),
of the Company's financial statements with respect to any fiscal year (or
portion thereof) within the Performance Period.
8. TAXES. Any cash payment pursuant to a Cash 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 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 any of the Avatar Entities, 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 PROJECTS. This Agreement shall in no way obligate
the Company to pursue any projects, developments or sales of any assets, and the
Company may limit, abandon or change any projects, developments or sales of any
assets 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 any
projects, developments or sales of any assets.
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 Cash Awards and any interest of the Participant in any such
awards may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of. Any attempt to transfer any such Cash Awards in
contravention of this Section 12(a) is void ab initio. The Cash Awards 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
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may inure to the benefit of any affiliate of or successor to the Company. The
term "successor" shall mean, with respect to any Avatar Entity, 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 such
Avatar Entity.
(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 Plans and this Agreement will be construed by and
administered under the supervision of the applicable Committee in such
Committee's sole and absolute discretion, and all determinations of such
Committee will be final and binding on the Participant.
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: Chief Executive Officer, 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 EXECUTIVE PLAN. The Executive Plan is hereby incorporated
by reference and made a part of this Agreement, and this Agreement shall be
subject to the terms of the Executive Plan, as the Executive Plan may be amended
from time to time.
18. ATTORNEYS' FEES. In the event that either party hereto commences litigation
against the other to enforce such party's rights hereunder, the prevailing party
shall be entitled to recover all costs, expenses and fees, including reasonable
attorneys' fees (including in-house counsel), paralegals' fees, and legal
assistants' fees through all appeals.
19. 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.
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20. MISCELLANEOUS. This Agreement cannot be modified or terminated orally. This
Agreement, the Executive Plan and the letter agreement, dated as of the date
hereof, among the Company, Avatar Properties and the Participant, 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.
(signature page follows)
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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/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
/s/ Xxxxxxxx Xxxx
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Xxxxxxxx Xxxx
