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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
AVATAR HOLDINGS INC.
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(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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AVATAR
HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 23, 1996
To the Stockholders of Avatar Holdings Inc.:
The Annual Meeting of Stockholders of Avatar Holdings Inc. will be held at
the Hyatt Regency Coral Gables, 50 Alhambra Plaza, Coral Gables, Florida on May
23, 1996, at 10:00 a.m. local time, for the following purposes:
1. To elect eight directors.
2. To approve an employment agreement between Avatar and Edwin Jacobson,
the President and Chief Executive Officer of Avatar, to be effective
June 16, 1997.
3. To approve the appointment of Ernst & Young LLP, independent
accountants, to act as auditors for Avatar for the year ending December
31, 1996.
4. To transact such other business as properly may come before the meeting,
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 29, 1996 as
the record date for the determination of stockholders entitled to receive notice
of, and to vote at, the Annual Meeting or any adjournment or adjournments
thereof.
YOUR ATTENTION IS DIRECTED TO THE PROXY STATEMENT ATTACHED TO THIS NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS FOR INFORMATION WITH RESPECT TO THOSE PERSONS
WHO WILL BE ENTITLED TO VOTE AT THE MEETING AND OTHER RELEVANT MATTERS.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
POSTAGE-PREPAID ENVELOPE PROVIDED FOR YOUR CONVENIENCE. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON IF YOU WISH.
By Order of the Board of Directors,
Juanita I. Kerrigan
Vice President and Secretary
Dated: April 23, 1996.
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AVATAR HOLDINGS INC., 255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134 (305)
442-7000
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 23, 1996
This Proxy Statement and the enclosed form of proxy are furnished to the
stockholders of Avatar Holdings Inc., a Delaware corporation ("Avatar"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of Avatar for use at the Annual Meeting of Stockholders to be held at
the place and time and for the purposes set forth in the annexed Notice of
Annual Meeting of Stockholders.
VOTING RIGHTS AND PROXY INFORMATION
Record Date; Voting Rights
Pursuant to the By-Laws of Avatar, the Board of Directors has fixed the
close of business on March 29, 1996 as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting, or any
adjournment or adjournments thereof.
At the close of business on March 29, 1996, 9,095,102 shares of Common
Stock, $1.00 par value, of Avatar ("Common Stock"), which constitutes the only
class of voting securities of Avatar, were outstanding and entitled to vote. For
each share of Common Stock held of record as of the close of business on March
29, 1996, stockholders are entitled to one vote, except in regard to the
election of directors, for which there will be cumulative voting as described
under the heading "Election of Directors." In accordance with Avatar's By-Laws,
the holders of a majority of the outstanding shares of Common Stock, present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting.
Proxies
When a proxy is received, properly executed, in time for the Annual
Meeting, the shares represented thereby will be voted at the meeting as
directed. If no such direction is specified, the proxy will be voted: (1) FOR
the election as directors of Avatar of the eight nominees named therein; (2) FOR
approval of the employment agreement dated July 27, 1995, between Avatar and
Edwin Jacobson; (3) FOR approval of the appointment of Ernst & Young LLP,
independent accountants, as auditors of Avatar for the year ending December 31,
1996; and (4) in connection with the transaction of such other business as
properly may come before the meeting, in accordance with the judgment of the
person or persons voting the proxy. Any stockholder who executes a proxy may
revoke it at any time prior to its exercise by giving written notice of such
revocation to the Secretary of Avatar. In addition, a stockholder who attends
the meeting may vote in person, thereby cancelling any proxy previously given by
such stockholder.
Except for the election of directors, as to any particular proposal (i)
abstentions will have the same effect as a vote against the proposal because the
shares are considered present at the meeting but are not affirmative votes, and
(ii) broker non-votes are not counted in respect of the proposal.
This proxy statement and the form of proxy enclosed herewith, and the
accompanying Annual Report of Avatar for the fiscal year ended December 31,
1995, including financial statements, were first mailed to stockholders of
record as of the close of business on March 29, on or about April 23, 1996.
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PRINCIPAL STOCKHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
Principal Stockholders
The following table sets forth, as of March 29, 1996, information with
respect to each person or entity known by the Board of Directors to be the
beneficial owner of more than 5% of the outstanding Common Stock. Except as
otherwise indicated, all shares are owned directly.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
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Odyssey Partners, 31 West 52nd Street 2,107,763 23.2%
L.P.(1)(2) New York, NY 10019
Spears, Benzak, 45 Rockefeller Plaza 2,033,597 22.4%
Salomon & New York, NY 10111
Farrell(3)
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(1) Does not include shares owned by Leon Levy, who is Chairman of the
Board and a member of the Executive Committee of Avatar and is a general partner
of Odyssey Partners, L.P., a Delaware limited partnership ("Odyssey"). Mr. Levy,
Jack Nash, Stephen Berger, Joshua Nash and Brian Wruble, by virtue of being
general partners of Odyssey, share voting and dispositive power with respect to
the Common Stock owned by Odyssey and, accordingly, may each be deemed to own
beneficially the Common Stock owned by Odyssey. Each of the aforesaid persons
has expressly disclaimed any such beneficial ownership (within the meaning of
Exchange Act Rule 13d-3(d)(1)) which exceeds the proportionate interest in the
Common Stock which he may be deemed to own as a general partner of Odyssey.
Avatar has been advised that no other person exercises (or may be deemed to
exercise) any voting or investment control over the Common Stock owned by
Odyssey. Odyssey is a private partnership engaged in investment, trading and
related activities. Mr. Levy's ownership of Common Stock is indicated in the
table included in "Security Ownership of Management."
(2) By virtue of its present Common Stock ownership, Odyssey may be deemed
to be a "control" person of Avatar within the meaning of that term as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
(3) Based upon information set forth in the Schedule 13G, dated February 5,
1996, filed by Spears, Benzak, Salomon & Farrell (a registered investment
adviser), such shares are held for the benefit of various of its clients; it has
revocable shared dispositive power with such clients; and it has no power to
vote or direct the vote of such shares.
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Security Ownership of Management
The following table sets forth, as of March 29, 1996, information with
respect to the outstanding shares of Common Stock beneficially owned by each
present director, nominee for director, by each of the Named Executive Officers
identified herein under the caption "Summary Compensation Table", and by all
present directors and executive officers of Avatar as a group. Except as
otherwise indicated, all shares are owned directly.
PERCENT
AMOUNT AND NATURE OF OF
NAME OR GROUP BENEFICIAL OWNERSHIP(1) CLASS
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Leon Levy 2,385,758(2) 26.2%
Milton Dresner 500 *
Edwin Jacobson None
Leon T. Kendall 200(3) *
Martin Meyerson 2,347(4) *
William M. Porter 2,347 *
Kenneth T. Rosen 1,000 *
Fred Stanton Smith None
Henry King Stanford 200 *
Dennis J. Getman None
Charles L. McNairy None
G. Patrick Settles None
All directors and executive officers as a group
(consisting of 15 persons of whom 7 beneficially
own shares of Common Stock) 2,392,352(2)(3)(4) 26.3%
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* Represents less than one percent.
(1) The information as to securities owned by directors, officers and
nominees was furnished to Avatar by such directors, officers and nominees.
(2) Includes 2,107,763 shares owned by Odyssey. Mr. Levy is a general
partner of Odyssey and therefore may be deemed to own beneficially the shares of
Common Stock owned by Odyssey. See Notes (1) and (2) to the preceding table
included in "Principal Stockholders."
(3) Does not include an aggregate of 200 shares owned by Mr. Kendall's wife
for her own account, as to which shares Mr. Kendall disclaims beneficial
ownership.
(4) Does not include 847 shares owned by Mr. Meyerson's wife, as to which
shares Mr. Meyerson disclaims beneficial ownership.
1. ELECTION OF DIRECTORS
Eight directors are to be elected for the ensuing year and until their
respective successors are duly elected and qualified. Stockholders have
cumulative voting rights with respect to election of directors. Under cumulative
voting, each stockholder is entitled to the same number of votes per share as
the number of directors to be elected (or, for purposes of this election, eight
votes per share). A stockholder may cast all such votes for a single nominee or
distribute them among the nominees, as he wishes, either by so marking his
ballot at the meeting or by specific voting instructions sent to Avatar with a
signed proxy. In connection with the solicitation of proxies, discretionary
authority to cumulate votes is being solicited. Nominees for director will be
elected by a plurality of the votes cast at the Annual Meeting by the holders of
Common Stock present in person or by proxy and entitled to notice of, and to
vote at, the Annual Meeting. Consequently, only shares that are voted in favor
of a particular nominee will be counted toward such nominee's achievement of a
plurality. Shares present at the meeting that are not voted for a particular
nominee or shares present by proxy where the stockholder properly withheld
authority to vote for such nominee (including broker non-votes) will not be
counted toward such nominee's achievement of a plurality. Unless authority to
vote for the nominees for director is withheld, it is the intention of the
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persons named in the accompanying proxy to vote the proxies in such manner as
will elect as directors the nominees named below.
All of the nominees were elected at the May 25, 1995 Annual Meeting of
Avatar's Stockholders, except Milton Dresner who was elected by the Board of
Directors at its meeting held July 27, 1995. The Board of Directors met six
times during 1995, including the annual meeting of directors held immediately
following the 1995 Annual Meeting of Stockholders.
The Board of Directors does not contemplate that any of the persons named
below will be unable, or will decline, to serve. However, if any of such persons
is unable or declines to serve, the persons named in the accompanying proxy may
vote for another person or persons in their discretion.
The following table sets forth certain information with respect to each
nominee for director. Except as otherwise indicated, each nominee has held his
present occupation or occupations for more than the past five years and has not
been principally employed by any subsidiary or affiliate of Avatar. There are no
family relationships between any nominee, director or executive officer of
Avatar.
PRINCIPAL OCCUPATION OR
NAME AGE OCCUPATIONS AND DIRECTORSHIPS
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Leon Levy 70 Chairman of the Board of Avatar since January 22, 1981;
Director since General Partner, Odyssey Partners, L.P., a private
September 1980 partnership engaged in investment, trading and related
activities; Chairman of the Board of Oppenheimer Funds;
former Chairman of the Board (1974-1985) of Oppenheimer
Management Corp.; Director of S. G. Warburg & Co., Ltd.
(Jersey Funds).
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Milton Dresner 70 Founding Partner, The Highland Companies, since 1960, a
Director since diversified real estate development and management organi-
July 1995 zation; Director: Flagship Savings Bank, Hudson General
Corporation, Childtime Childcare, Northern Caring Homes.
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Edwin Jacobson 66 President and Chief Executive Officer of Avatar since
Director since February 27, 1994, and Chairman of the Executive Committee
June 1992 of Avatar since June 15, 1992; also, President and Chief
Executive Officer, Chicago Milwaukee Corporation, an
investment company, since June 1985, President and Chief
Executive Officer, CMC Heartland Partners, an operating
general partnership of a public limited partnership
engaged in the real estate business, since September 1990,
and President and Chief Executive Officer, since June
1985, of Milwaukee Land Company, a non-diversified,
closed-end management investment company, publicly trading
since July 1993.
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Leon T. Kendall 67 Professor of Finance and Real Estate, Kellogg School of
Director since Management, Northwestern University, since September 1988;
May 1983 formerly Chairman of the Board, Mortgage Guaranty
Insurance Corporation, and Vice Chairman of the Board,
MGIC Investment Corporation, from December 1981 to
December 1989; Director of: Universal Foods Corporation;
Asset Management Funds; and Chicago Board -- Options
Exchange.
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PRINCIPAL OCCUPATION OR
NAME AGE OCCUPATIONS AND DIRECTORSHIPS
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Martin Meyerson 73 Chairman, University of Pennsylvania Foundation, The
Director since University Professor of Public Policy, and President
May 1981 Emeritus, University of Pennsylvania, since February 1981,
and President thereof from 1970 to 1981; President, FISCIT
(Switzerland/U.S.); Director, Universal Health Services,
Inc.; First Union North, Board member; Trustee, Penn
Mutual Life Insurance Company.
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Kenneth T. Rosen 47 Professor of Business Administration, since 1979, and
Director since Chairman of the Center for Real Estate and Urban
September 1994 Economics, since 1981, University of California, Berkeley;
also President, Rosen Consulting Group, a real estate
consulting business, since 1990; Director: Golden West
Financial Corporation, The PMI Group, Inc., Coldwell
Banker Corporation.
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Fred Stanton Smith 68 Vice Chairman of the Board, The Keyes Company, a real
Director since estate brokerage, financing, management, insurance and de-
September 1980 velopment firm, since January 28, 1992; formerly
President, The Keyes Company; Director, Eagle National
Bank.
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Henry King Stanford 80 President Emeritus, The University of Miami since July
Director since 1981, and President Emeritus, University of Georgia since
September 1980 July 1987; formerly President, The University of Miami,
from July 1962 to June 1981; also formerly Interim
President, University of Georgia, from July 1986 to June
1987.
INFORMATION REGARDING THE BOARD OF DIRECTORS
Certain Committees of the Board
To assist it in carrying out its duties, the Board of Directors has
established an Executive Committee, an Audit Committee and a Community Affairs
Committee, the current members of which are as follows:
EXECUTIVE COMMITTEE AUDIT COMMITTEE COMMUNITY AFFAIRS COMMITTEE
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Edwin Jacobson(1)(2) Leon T. Kendall(1) Henry King Stanford(1)
Leon Levy(2) Milton Dresner Martin Meyerson
Fred Stanton Smith Martin Meyerson William M. Porter
William M. Porter Fred Stanton Smith
- - --------------------------------------------------------------------------------------------------
(1) Chairman
(2) Officer of Avatar
The Board of Directors has not established a Nominating Committee and, as
more fully described below and under "Executive Compensation and Other
Information -- Executive Committee Report on Executive Compensation," the
Executive Committee performs the functions of a compensation committee.
Executive Committee
The Executive Committee of the Board of Directors has authority to exercise
most powers of the full Board of Directors in connection with matters which
arise during the intervals between meetings of the Board of Directors. In
addition to such other functions as are assigned to it from time to time by the
Board of Directors, the Executive Committee also reviews and approves or
recommends to the Board the compensation and terms of employment of all officers
and employees of Avatar and its subsidiaries whose base salaries exceed $70,000
per annum. The Executive Committee met four times during the fiscal year ended
December 31, 1995.
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Audit Committee
The Audit Committee of the Board of Directors recommends to the Board of
Directors the appointment of the independent auditors, subject to approval by
the stockholders of Avatar; reviews the independent auditors' report and
management letters and reports to the Board of Directors with respect thereto;
reviews with the internal auditors Avatar's accounting policies and procedures,
including its internal accounting controls and internal auditing procedures;
determines whether there are any conflicts of interest in financial or business
matters between Avatar and any of its officers or employees; and reviews the
recommendations of the independent auditors. The Audit Committee also performs
such other tasks as are assigned to it from time to time by the Board of
Directors. The Audit Committee met seven times during the fiscal year ended
December 31, 1995.
Community Affairs Committee
The Community Affairs Committee of the Board of Directors monitors the
reputation and standing in the community of Avatar and its various subsidiaries
and divisions, and oversees the interaction of Avatar with the community. The
Community Affairs Committee also performs such other tasks as are assigned to it
from time to time by the Board of Directors. Although the Community Affairs
Committee did not meet during the fiscal year ended December 31, 1995 members of
the Committee regularly consulted with management during the year.
Directors' Compensation
Pursuant to resolutions of the Board of Directors, compensation for
directors who are not salaried employees of Avatar is $17,500 per annum. A
member of the Executive Committee who is not a salaried employee of Avatar
receives a fee of $500 for attendance at each meeting. Members and the Chairman
of the Audit Committee receive additional compensation of $12,000 and $14,000
per annum, respectively. Members and the Chairman of the Community Affairs
Committee receive additional compensation of $2,000 per annum plus a fee of $500
for attendance at each meeting.
On September 1, 1986, Mr. Porter entered into an agreement with the Avatar
Audit Committee pursuant to which he is paid $1,000 per month for consulting and
administrative services performed for the Audit Committee and on behalf of
Avatar, which services include acting as Secretary of the Audit Committee and as
liaison with Avatar's Internal Audit Department and such other services as may
be requested by the Audit Committee or by management.
Directors' Attendance
In fiscal year 1995 all of the incumbent directors attended 75% or more of
the aggregate of their respective Board and Committee meetings.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth information with respect to compensation of
the Chief Executive Officer and the three other highest paid executive officers
of Avatar whose total salary and bonus was $100,000 or more for the year ended
December 31, 1995 (these four executive officers being hereinafter referred to
as the "Named Executive Officers").
ANNUAL COMPENSATION(1)
------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY BONUS COMPENSATION(2)
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Edwin Jacobson(3) 1995 $325,000 --(4) --
President, Chief Executive 1994 311,731(4) -- --
Officer and Chairman of the 1993 250,000 -- --
Executive Committee
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Dennis J. Getman 1995 208,000 $12,500 $ 2,250
Executive Vice President and 1994 208,000 17,500(4) 2,249
General Counsel 1993 208,000 12,500 2,249
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Charles L. McNairy 1995 169,000 11,500(4) 2,250
Executive Vice President, 1994 156,065 -- 2,249
Treasurer and 1993 135,096 10,000 2,177
Chief Financial Officer
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G. Patrick Settles 1995 113,754 -- 1,706
Vice President and Assistant 1994 110,452 -- 1,657
General Counsel 1993 107,234 -- 1,609
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(1) Of the Named Executive Officers, Messrs. Jacobson, Getman and McNairy also
received automobile allowances and/or the use of company-leased
automobiles. Avatar also provides group life, health, hospitalization and
medical reimbursement plans which do not discriminate in scope, terms or
operation in favor of officers and are available to all full-time
employees. The aggregate value of these and any additional perquisite and
other personal benefits cannot be specifically or precisely ascertained but
do not, in any event, exceed 10% of the total annual salary and bonus
reported for each of the Named Executive Officers.
(2) Reflects for each Named Executive Officer Avatar's contribution to the
401(k) Plan.
(3) In addition to his position as Chairman of the Executive Committee, Mr.
Jacobson was elected as President and Chief Executive Officer effective as
of February 27, 1994 and his employment agreement was amended as of March
1, 1994 to reflect these additional responsibilities. See "Employment and
Other Agreements" below.
(4) For discussion of Avatar's employment agreement with Mr. Jacobson and its
incentive compensation agreements with Messrs. Getman and McNairy, see
"Employment and Other Agreements" below.
Long-Term Incentive Plans -- Awards
in Last Fiscal Year
The following table provides information regarding the award of incentive
compensation to Mr. Jacobson pursuant to his proposed new employment agreement,
which is subject to approval by stockholders. See "Approval of Employment
Agreement."
PERFORMANCE OR
NUMBER OF OTHER PERIOD
SHARES, UNTIL
UNITS OR MATURATION OR
NAME OTHER RIGHTS PAYOUT
- - -------------------------------------------------------------- ------------ ---------------
Edwin Jacobson................................................ 75,000 6/16/97-6/16/00
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Employment and Other Agreements
Avatar entered into an employment agreement with Mr. Jacobson, dated June
15, 1992, as amended as of March 1, 1994, pursuant to which Mr. Jacobson is
employed as Chairman of the Executive Committee and President and Chief
Executive Officer until June 15, 1997, unless sooner terminated in accordance
with the terms of the agreement. In addition to base salary of $325,000 per
annum (as increased as of March 1, 1994, as Mr. Jacobson assumed the additional
responsibilities of President and Chief Executive Officer), Mr. Jacobson was
granted a stock-based long-term incentive award ("Award") based upon an
aggregate of 150,000 shares of Avatar's Common Stock which will vest with
respect to 30,000 shares on each of the first five anniversary dates of the
agreement. Such Award provides for Mr. Jacobson to receive, within ten days
following June 15, 1997 (or the termination date, if earlier), a cash payment
equal to the excess of a formula amount based upon the closing prices of
Avatar's Common Stock during a specified period prior to June 15, 1997 (or the
termination date, if earlier) over the closing price of Avatar's Common Stock on
the date of grant ($25.25), multiplied by the number of shares which will have
become vested.
In the event of Mr. Jacobson's death, disability or his resignation for
Good Reason, as defined in his agreement, prior to the fifth anniversary of such
agreement, Mr. Jacobson or his estate would receive cash compensation at a rate
equal to full base salary through the date of death or termination and would
vest in fifty percent of the remaining unvested shares in addition to shares
already vested.
As of January 18, 1993 and as of September 9, 1993, respectively, Avatar
entered into Incentive Compensation Agreements with Mr. Getman and Mr. McNairy,
whereby each of Mr. Getman and Mr. McNairy was granted an Award based upon an
aggregate of 15,000 shares of Avatar's Common Stock, which vests with respect to
3,000 shares per year on each of the first five anniversary dates of each
agreement. Such Awards provide for each of Mr. Getman and Mr. McNairy to receive
within ten days following the respective fifth anniversary date (or the
respective termination date, if earlier) of their agreements, a cash payment
equal to the excess of a formula amount based upon the closing prices of
Avatar's Common Stock during a specified period prior to the respective fifth
anniversary date (or the respective termination date, if earlier) over the
closing price of Avatar's Common Stock on the respective date of grant ($33.75
per share and $36.00 per share, respectively), multiplied by the number of
shares which will have become vested.
Pursuant to Mr. Jacobson's employment agreement and the incentive
compensation agreements with Messrs. Getman and McNairy, the number of shares on
which such Awards are based and related market values are subject to adjustment
as the result of various occurrences, such as declaration or payment of stock
dividends, stock splits, subdivisions, combinations, consolidations, reverse
splits, distributions, reclassifications or recapitalizations. Mr. Jacobson also
is entitled to various employee benefits pursuant to his employment agreement.
See "Approval of Employment Agreement" with respect to the new agreement
with Mr. Jacobson.
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Notwithstanding any statement incorporating future filings in whole or in
part, including this Proxy Statement, in any of Avatar's previous filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, the following report and the Performance Graph below shall not be
incorporated by reference into any such filing.
Executive Committee Report on Executive Compensation
The Executive Committee of Avatar's Board of Directors traditionally
performs the functions of a compensation committee, including the review and
approval of compensation and terms of employment for all officers and those
employees of Avatar and its subsidiaries whose base salaries exceed $70,000 per
annum. However, the compensation arrangements regarding any executive officer
who is also a member of the Executive Committee has been acted on and approved
by the full Board of Directors (with such member not participating).
Avatar's executive compensation is intended to reward, retain and motivate
management. The primary component of compensation has been base salary. However,
for certain of the most senior executives, compensation packages now include
stock-based long-term incentive awards (the "Awards"). The grant of these Awards
is intended to align the interests of Avatar's most senior executives with those
of the stockholders over the term of the Awards, and to motivate these
executives to improve Avatar's long-term business position and performance. No
awards were made to the Chief Executive Officer and the other executive officers
of Avatar in 1995, except for an Award made to the Chief Executive Officer by a
special committee of the Board of Directors pursuant to a new employment
agreement, which is subject to approval by stockholders and certain other
conditions. See "Approval of Employment Agreement." The Executive Committee
believes that Avatar's executive compensation arrangements are reasonable in
light of the needs of Avatar, competitive compensation levels and the goals of
retention and motivation of management.
In determining salary levels for the executive officers, primary
consideration is given to each executive's level of responsibility and
individual performance, as well as compensation generally received by executives
in the real estate business.
EXECUTIVE COMMITTEE
Edwin Jacobson, Chairman
Leon Levy
Fred Stanton Smith
Compensation Committee Interlocks and Insider Participation
The members of the Executive Committee are Messrs. Jacobson, Levy and
Smith. The members of the special committee of Avatar's Board of Directors who
approved Mr. Jacobson's new employment agreement (see "Approval of Employment
Agreement"), are Messrs. Levy, Kendall, Meyerson, Porter, Smith and Stanford.
Mr. Jacobson serves as Chairman of the Executive Committee and President and
Chief Executive Officer, and Mr. Levy serves as Chairman of the Board of
Directors.
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Performance Graph
The following graph provides a comparison of the cumulative total returns
based on an investment of $100 after the close of the market on December 31,
1990 in Avatar's Common Stock, the NASDAQ Market Index and a composite peer
group index (the "Peer Index") for the periods indicated, in each case assuming
reinvestment of any dividends. The cumulative total returns for the NASDAQ
Market Index were prepared by Media General Financial Services, Inc. ("Media
General"). The Peer Index is a combination of the Real Estate Subdividers and
Developers Index and the Water Utilities Index, each of which is published by
Media General. The cumulative total returns for each index were prepared by
Media General and were combined by Avatar to form the Peer Index based on the
relative percentage of Avatar's assets applicable to each of Avatar's lines of
business (i.e., real estate and water utilities) at the end of each year
depicted in the graph.
[GRAPH]
Measurement Period Avatar
(Fiscal Year Covered) Holdings Inc. NASDAQ Peer Index
1990 100.00 100.00 100.00
1991 178.00 128.38 138.34
1992 278.00 129.64 151.88
1993 269.00 155.50 177.52
1994 304.00 163.26 169.82
1995 280.00 211.77 201.41
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2. APPROVAL OF EMPLOYMENT AGREEMENT
Avatar and Edwin Jacobson are parties to an employment agreement, dated
June 15, 1992, as amended as of March 1, 1994, pursuant to which Mr. Jacobson is
employed as Chairman of the Executive Committee and President and Chief
Executive Officer until June 15, 1997, unless sooner terminated in accordance
with the terms of the agreement (the "Original Employment Agreement"). See
"Executive Compensation and Other Information -- Employment and Other
Agreements."
In July 1995, a special committee of the Board of Directors (the "Special
Committee") was created to establish a performance goal for Mr. Jacobson and to
consider and approve a proposed new employment agreement with Mr. Jacobson
embodying such goal (the "New Employment Agreement") which, subject to approval
of stockholders, would become effective on June 16, 1997 (the day after the
expiration of the term of his Original Employment Agreement) and terminate on
the third anniversary thereof. The Special Committee was composed of Leon Levy
(Chairman), Leon T. Kendall, Martin Meyerson, William M. Porter, Fred Stanton
Smith and Henry King Stanford, each an "outside director" of Avatar within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") and the Treasury Regulations promulgated thereunder.
The Special Committee determined that it would be in Avatar's best interest
to enter into the New Employment Agreement to reward Mr. Jacobson for
redirecting Avatar's business pursuant to a strategic business plan he
developed, and to ensure his continued employment with Avatar. The Special
Committee concluded that the increase in Mr. Jacobson's base salary under the
New Employment Agreement is reasonable in relation to the services he will
render to Avatar and because Mr. Jacobson will not receive any salary increase
during the balance of the term of his Original Employment Agreement (i.e.,
through June 15, 1997). In addition, the Special Committee established a
performance goal for Mr. Jacobson in the form of an Incentive Compensation award
(as hereinafter defined). The Incentive Compensation award under the New
Employment Agreement, which would vest ratably over the three year term of the
agreement, would align Mr. Jacobson's interests with those of the stockholders
and would motivate him to improve Avatar's long-term business position and
performance.
The New Employment Agreement was approved by the Special Committee and
executed by Avatar and Mr. Jacobson on July 27, 1995. The New Employment
Agreement will become effective if (i) Mr. Jacobson is continuously employed by
Avatar through and including June 15, 1997, and is not then in breach of his
Original Employment Agreement, (ii) the material terms under which the Incentive
Compensation is to be paid under the New Employment Agreement has been disclosed
to Avatar's stockholders, and (iii) the New Employment Agreement has been
approved prior to June 16, 1997 at a meeting of Avatar's stockholders by a
majority of the shares present in person or represented by proxy and entitled to
vote on the matter.
With certain exceptions, Section 162(m) of the Code denies a deduction to
publicly-held corporations for compensation paid to the chief executive officer
and the other four highest compensated officers in excess of $1 million per
executive per taxable year. One exception under Section 162(m) is provided for
certain performance-based compensation. The Incentive Compensation granted
pursuant to Mr. Jacobson's New Employment Agreement generally will qualify for
the performance-based compensation exception, provided that, among other things,
the material terms of the Incentive Compensation is disclosed to, and
subsequently approved by, Avatar's stockholders. Accordingly, stockholder
approval of Mr. Jacobson's New Employment Agreement is being sought to qualify
the Incentive Compensation for the performance-based compensation exception.
Summary of Employment Agreement
The New Employment Agreement is summarized below. Such summary, however, is
not intended to be complete and is qualified in its entirety by reference to the
New Employment Agreement, a copy of which is attached as Exhibit 10(m) to
Avatar's Quarterly Report on Form 10-Q for the period ended September 30, 1995.
11
14
Pursuant to the New Employment Agreement, Mr. Jacobson will be employed as
the Chairman of the Executive Committee and President and Chief Executive
Officer of Avatar commencing on June 16, 1997 (the "Commencement Date") and
ending on June 16, 2000 (unless sooner terminated in accordance with the
agreement), if Mr. Jacobson is continuously employed by Avatar through June 15,
1997 and is not then in breach of his Original Employment Agreement.
Pursuant to the New Employment Agreement, Avatar will pay Mr. Jacobson a
base salary of not less than $400,000 per annum. Mr. Jacobson also will be
entitled to a payment (the "Final Payment") of $120,000 following the third
anniversary of the Commencement Date if he is still employed by Avatar on June
16, 2000 or if Avatar terminates his employment other than for Mr. Jacobson's
permanent disability or other than for Cause (as hereinafter defined), or if Mr.
Jacobson terminates his employment for Good Reason (as hereinafter defined).
Alternatively, Mr. Jacobson will be entitled to a Final Payment of $80,000 or
$40,000 or no payment if his employment is terminated during the third, second
or first year of his employment term, respectively.
The New Employment Agreement grants Mr. Jacobson a long-term incentive
award ("Incentive Compensation") based upon 75,000 shares of Avatar's Common
Stock (subject to adjustment upon the occurrence of certain events), which will
vest with respect to 25,000 shares on each of the first through third
anniversaries of the Commencement Date if Mr. Jacobson is employed by Avatar on
such anniversary. Such Incentive Compensation provides for Mr. Jacobson to
receive, within ten days following June 16, 2000 (or the termination date, if
earlier), a cash payment equal to the excess of a formula amount based upon the
closing prices of Avatar's Common Stock during a specified period prior to June
16, 2000 (or the termination date, if earlier) over the closing price of
Avatar's Common Stock on the date of grant ($35.50, the "Strike Price" (subject
to adjustment upon the occurrence of certain events)), multiplied by the number
of shares which have vested. If Mr. Jacobson's employment is terminated by his
death, by Avatar on account of his permanent disability, or by him for Good
Reason, 50% of his remaining unvested shares will vest and any remaining
unvested shares will be forfeited. If Mr. Jacobson's employment is terminated by
Avatar for Cause, any unvested shares will be forfeited.
The incentive compensation award granted under Mr. Jacobson's Original
Employment Agreement (see "Executive Compensation and Other Information --
Employment and Other Agreements") is to be determined and paid by reference to
June 16, 2000 (rather than June 15, 1997), or the termination date, if earlier.
The New Employment Agreement may be terminated: (i) automatically upon Mr.
Jacobson's death; (ii) by Avatar, if Mr. Jacobson becomes permanently disabled;
(iii) by Avatar for Cause; and (iv) by Mr. Jacobson, for Good Reason. The term
"Cause" means Mr. Jacobson committing material acts of fraud against Avatar,
being convicted of (or pleading nolo contendere to) a felony, or willfully,
repeatedly and demonstrably failing to perform substantially his duties for not
less than 30 days. The term "Good Reason" means: the failure of Avatar's Board
of Directors or stockholders to continue to elect Mr. Jacobson as a director;
any assignment to Mr. Jacobson of any material duties other than those
contemplated by, or any limitation of his powers not contemplated by, the New
Employment Agreement; or a reduction in Mr. Jacobson's compensation, or a
material reduction in his fringe benefits, or any other material failure by
Avatar to comply with certain provisions of the New Employment Agreement.
If Mr. Jacobson's employment is terminated by his death or permanent
disability, by Avatar for Cause, or by Mr. Jacobson other than for Good Reason,
Mr. Jacobson or his estate will receive his base salary through the date of
termination, a Final Payment, if any, and any Incentive Compensation payable. If
Avatar terminates Mr. Jacobson's employment other than for Cause, or if Mr.
Jacobson terminates his employment for Good Reason, then Mr. Jacobson will be
entitled to receive his full base salary through June 16, 2000, a Final Payment
and any Incentive Compensation payable.
Mr. Jacobson has agreed that during the term of his employment under the
New Employment Agreement and for a period of one year after termination of such
employment, without the prior
12
15
written approval of Avatar's Board of Directors, he will not solicit any
customer or employee of Avatar. Mr. Jacobson also has agreed that during and
after the term of his employment, he will not disclose to any person, without
the prior written approval of Avatar's Board of Directors, confidential
information pertaining to Avatar.
The terms of the New Employment Agreement may be modified, waived or
discharged in writing by Avatar and Mr. Jacobson without the consent of Avatar's
stockholders.
Other Information
The closing price of Avatar Common Stock on April 17, 1996 was $39 1/2 per
share.
Approval by the stockholders of the New Employment Agreement will require
the affirmative vote of a majority of the shares present at the meeting in
person or by proxy and entitled to vote on the matter. The Board of Directors
recommends that the accompanying proxy be voted FOR such approval and it is
intended that the proxies not otherwise limited will be voted in such manner.
3. APPOINTMENT OF AUDITORS
Ernst & Young LLP, independent accountants, audited the financial
statements of Avatar for the fiscal year ended December 31, 1995. Such audit
services consisted of the firm's examination of and report on the annual
financial statements and assistance and consultation in connection with filings
with the Securities and Exchange Commission and other matters.
Representatives of Ernst & Young LLP are expected to attend the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
Based upon the recommendation of the Audit Committee, and subject to
approval by the stockholders, the Board of Directors has appointed Ernst & Young
LLP, independent accountants, as auditors of Avatar for the fiscal year ending
December 31, 1996. Approval by the stockholders will require the affirmative
vote of a majority of the votes present at the meeting in person or by proxy and
entitled to be cast. The Board of Directors recommends that the accompanying
proxy be voted FOR such approval and it is intended that the proxies not
otherwise limited will be voted in such manner.
1997 STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting in
1997 must be received by the office of the Secretary, Avatar Holdings Inc., P.O.
Box 523000, Miami, Florida 33152, no later than December 24, 1996.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Avatar's
officers and directors, and any persons who own more than ten percent of
Avatar's Common Stock to file reports of initial ownership of Avatar's Common
Stock and subsequent changes in that ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent beneficial owners
are also required to furnish Avatar with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of the forms furnished to Avatar,
or written representations from certain reporting persons that no Forms 5 were
required, Avatar believes that during the 1995 fiscal year all Section 16(a)
filing requirements were complied with.
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16
ADDITIONAL INFORMATION
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the accompanying material will be paid by Avatar. In
addition to the solicitation of proxies by mail, Avatar will request brokers and
securities dealers to obtain proxies from and send proxy material to their
principals. Expenses incurred in this connection will be reimbursed by Avatar.
Proxies may be solicited personally, by telephone or telegraph, by the directors
and officers of Avatar without additional compensation. The Board of Directors
knows of no business to come before the meeting other than as stated in the
Notice of Annual Meeting of Stockholders. Should any business other than that
set forth in such Notice properly come before the meeting, or any adjournment or
adjournments thereof, it is the intention of the persons named in the
accompanying proxy to vote such proxy in accordance with their judgment on such
matters.
By Order of the Board of Directors,
Juanita I. Kerrigan
Vice President and Secretary
Dated: April 23, 1996.
14
17
Notice of 1996
Annual Meeting
and Proxy
Statement
- - --------------------------------------------------------------------------------
AVATAR
HOLDINGS INC.
18
APPENDIX A
AVATAR HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
July 27, 1995
Mr. Edwin Jacobson
2575 South Bayshore Drive
Penthouse A
Coconut Grove, Florida 33133
Dear Mr. Jacobson:
We are writing with respect to your employment by Avatar Holdings
Inc. (the "Company") as Chairman of the Executive Committee and President and
Chief Executive Officer of the Company. The Company acknowledges and recognizes
the value of your experience and abilities to the Company since the beginning of
your employment with the Company pursuant to an Employment Agreement, dated June
15, 1992 (the "Original Employment Agreement"), the term of which expires on
June 15, 1997, and desires to continue to retain and make secure for itself such
experience and abilities on the terms hereinafter provided.
1. Employment. The Company agrees to employ you and you agree to
be employed by the Company commencing on
19
June 16, 1997 (the "Commencement Date") and ending on the third anniversary
thereof (unless sooner terminated as hereinafter provided), on the terms and
subject to the conditions set forth in this agreement ("Agreement").
2. Duties. (a) You shall continue to be nominated as a director
of the Corporation and, subject to your election thereto by the Board of
Directors or the stockholders of the Company, you shall be employed as Chairman
of the Executive Committee of the Company; and you shall also be employed as the
President and Chief Executive Officer of the Company. In such capacities, you
shall serve as a senior executive officer of the Company and shall have the
duties and responsibilities prescribed for such positions by the By-Laws of the
Company, and shall have such other duties and responsibilities as may from time
to time be prescribed by the Board of Directors of the Company or the Executive
Committee of the Board of Directors, provided that such duties and
responsibilities are consistent with your positions as Chairman of the Executive
Committee and President and Chief Executive Officer. In the performance of your
duties, you shall be subject to the supervision and direction of the Board of
Directors of the Company and the Executive Committee of the Board of Directors.
20
(b) Subject to the term of your employment hereunder, you shall
devote such time as is reasonably necessary to the proper performance of your
duties and responsibilities as Chairman of the Executive Committee and President
and Chief Executive Officer. During the term of your employment hereunder, you
shall have the right to continue to be employed as President and Chief Executive
Officer of each of Chicago Milwaukee Corporation, CMC Heartland Partners and
Milwaukee Land Company. You hereby represent and warrant to the Company that,
except as described above, you have no obligations under any existing employment
or service agreement and that your performance of the services required of you
hereunder will not conflict with your other existing obligations described
above.
(c) You shall perform the services contemplated hereunder at the
principal executive office of the Company and at such other locations as may be
reasonably necessary to the performance of such services, but you shall not be
required to relocate your principal residence from its existing location.
3. Compensation.
(a) (i) Base Salary. During the term of your employment hereunder,
the Company shall pay you, and you shall accept from the Company for your
services, a salary at
21
the rate of not less than $400,000 per year ("Base Salary"), payable in
accordance with the Company's policy with respect to the compensation of
executives. You shall have the right to defer receipt of some or all of the
compensation which you are entitled to receive hereunder by written notice to
the Company, which notice shall set forth the date to which you wish to defer
receipt of such compensation. If you elect to defer receipt of all or any
portion of the Base Salary ("Deferred Compensation"), the amount due you shall
be adjusted periodically to reflect any interest that would be realized with
respect to the Deferred Compensation had it been invested at the rate of
interest announced publicly by Citibank, N.A. in New York, New York, from time
to time, as Citibank's base rate. No specific assets of the Company shall be
allocated or segregated with respect to the Deferred Compensation and the
foregoing shall not be construed to create a trust of any kind or a fiduciary
relationship between the Company and you, the executor or administrator of your
estate or any other person. Your right, or the right of your estate, to receive
the Deferred Compensation, as adjusted in accordance with this paragraph 3(a),
shall be no greater than the right of an unsecured general creditor of the
Company.
22
(ii) Final Payment. Subject to the provisions of paragraph
8(d)(ii) hereof, in addition to your Base Salary, within 10 days following the
third anniversary of the Commencement Date or, if earlier, the Date of
Termination (as hereinafter defined), the Company shall pay you an amount
("Final Payment") determined as follows:
(1) $120,000, provided that you are still employed by the Company on the
third anniversary of the Commencement Date;
(2) $80,000, in the event that there is a Date of Termination prior to
the third anniversary of the Commencement Date but on or after the
second anniversary of the Commencement Date;
(3) $40,000, in the event that there is a Date of Termination prior to
the second anniversary of the Commencement Date but on or after the
first anniversary of the Commencement Date; or
(4) no Final Payment if the Date of Termination shall occur prior to the
first anniversary of the Commencement Date.
(b) Incentive Compensation.
(i) In addition to the compensation provided in paragraph (a)
above, within 10 days following the third anniversary of the
Commencement Date or,
23
if earlier, the Date of Termination, the Company shall pay you, as
incentive compensation ("Incentive Compensation"), a cash amount equal
to the product of (x) the number of shares of the Company's Common
Stock in which you are vested (as the same may be adjusted pursuant to
paragraph 3(b)(ii)(x) below), times (y) the excess, if any, of the
market value per share of the Common Stock over the Strike Price
(being the closing price per share of the Common Stock on the date
hereof as reported on NASDAQ-NMS (as hereinafter defined), as the same
may be adjusted pursuant to paragraph 3(b)(ii)(y) below) on the third
anniversary of the Commencement Date or, if earlier, on the Date of
Termination (in either case, the "Determination Date"). For the
purposes of this paragraph 3(b)(i), you will vest in 25,000 shares of
Common Stock on each of the first through third anniversaries of the
Commencement Date provided that you are still employed by the Company
on such anniversary. In the event that there is a Date of Termination
prior to the third anniversary of the Commencement Date as a result of
the circumstances contemplated by paragraphs 7(a), (b) or (d)
24
hereof, you shall immediately vest on the Date of Termination in 50%
of the remaining unvested shares and you shall forfeit any unvested
shares. In the event there is a Date of Termination prior to the
third anniversary of the Commencement Date as a result of the
circumstances contemplated by paragraph 7(c) hereof, you shall forfeit
the remaining unvested shares.
(ii) In the event the Company shall at any time after the date
hereof (A) declare or pay any dividend on the Common Stock payable in
shares of Common Stock, (B) subdivide or split the outstanding shares
of Common Stock into a greater number of shares or (C) combine or
consolidate the outstanding shares of Common Stock into a smaller
number of shares or effect a reverse split of the outstanding shares
of Common Stock, then and in each such event (x) the number of shares
of Common Stock on the basis of which the Incentive Compensation is to
be calculated shall be adjusted by multiplying (a) such number of
shares as determined immediately prior to such event by (b) a fraction
(the "Adjustment Fraction"), the numerator of which is the number of
shares of
25
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
outstanding immediately prior to such event, and (y) the Strike Price
shall be adjusted by multiplying (a) the Strike Price as determined
immediately prior to such event by (b) the reciprocal of the
Adjustment Fraction.
In addition, in the event the Company shall at any time after
the date hereof make any distribution on the shares of Common Stock,
whether by way of a dividend or a reclassification of stock, a
recapitalization, a spin-off of interests in an affiliated entity, a
reorganization of the Company or otherwise, in cash or any debt
security, debt instrument, real or personal property or any other
property (other than any shares of Common Stock or other capital stock
of the Company), then for the purpose of calculating the Incentive
Compensation to be paid to you, the market value of the Common Stock
of the Company on the Determination Date shall be increased in
accordance with the remaining provisions of this paragraph 3(b)(ii).
In the case of a cash
26
dividend, the market value per share of the Common Stock on the
Determination Date shall be increased by an amount equal to the per
share cash amount of such dividend. In all other cases, the market
value per share of the Common Stock on the Determination Date shall be
increased by an amount equal to the excess of (A) the average market
value per share of the Common Stock for the five (5) business days
immediately preceding the ex-dividend date for a dividend or
distribution on such stock or the five (5) business days immediately
preceding the effective date of a reclassification, recapitalization
or other transaction involving such stock over (B) the average market
value per share of the Common Stock of the Company for the five (5)
business days next succeeding such ex- dividend date or effective
date, as the case may be; provided, however, that if the Company's
Board of Directors, in good faith, believes that the adjustment, as
determined by the preceding formula, is insufficient to reflect the
per share reduction in value of the Company as a result of such
transaction, in addition to the adjustment determined by such
27
formula the Board of Directors may increase the market value per share
of the Common Stock on the Determination Date by such amount as the
Board of Directors determines, in good faith, to be appropriate to
reflect such per share reduction in value of the Company. In addition
to the adjustments specifically provided for in this paragraph
3(b)(ii), the manner of determining the Incentive Compensation due to
you shall be further modified or amended as mutually determined by you
and the Board of Directors of the Company (acting in its good faith
judgment) to equitably account for any extraordinary transaction or
occurrence not specifically described in this paragraph 3(b)(ii) and
which would by itself adversely affect the value of the Common Stock
or the computation of the Incentive Compensation due and owing to you.
(iii) For purposes of this Agreement, the "market value" per
share of the Company's Common Stock as of a Determination Date shall
mean the average closing price (or, if there is no closing price on
any date, then the mean between the closing bid and asked prices) per
share of such
28
Common Stock during the twenty (20) business days immediately
preceding a Determination Date as reported in the trading reports of
the principal securities exchange the United States on which such
stock is listed, or, if such stock is not listed on a securities
exchange in the United States, as reported by the National Association
of Securities Dealers Automated Quotation - National Market System
("NASDAQ-NMS") or NASDAQ-NMS's successor, or if not reported on
NASDAQ-NMS, the fair market value per share of such stock as
determined by the Board of Directors in good faith.
(iv) Notwithstanding paragraph 3(b) of the Original Employment
Agreement and subject to paragraph 14(c) hereof, your Incentive
Compensation (as defined in the Original Employment Agreement) shall
not be determined and paid by reference to the date of June 15, 1997
(i.e., the fifth anniversary of your commencing employment pursuant to
the Original Employment Agreement), and instead shall be deferred and
determined and paid by reference to the third anniversary of the
Commencement Date hereunder or,
29
if the Date of Termination hereunder is earlier than the third
anniversary of the Commencement Date, such Date of Termination.
(v) You and the Company agree that the Incentive Compensation
hereunder is intended to qualify as "performance-based compensation"
within the meaning of Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as amended (the "Code").
(c) During your employment, you will be entitled to receive prompt
reimbursement for all reasonable expenses incurred by you in performing your
services hereunder, provided that you properly account therefor in accordance
with Company policy.
4. Vacations. During your employment, you shall be entitled to
reasonable vacations from time to time in accordance with the regular procedures
of the Company governing senior executives. You shall also be entitled to all
paid holidays given by the Company to its senior executives.
5. Participation in Benefit Plans. You shall be entitled to
participate in and to receive benefits under all the Company's employee benefit
plans and arrangements (other than plans relating to stock options, restricted
stock, stock appreciation rights, "phantom stock" or similar plans)
30
in effect on the date hereof, and you shall also be entitled to participate in
or receive benefits under any pension or retirement plan, savings plan, or
health-and-accident plan made available by the Company in the future to its
senior executives and other key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements and provided that you meet the eligibility requirements
thereof.
6. Other Offices. You further agree to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates.
7. Termination.
(a) Death. Your employment hereunder shall terminate upon your
death.
(b) Disability. In the event of your permanent disability (as
hereinafter defined) during the term of your employment hereunder, the Company
shall have the right, upon written notice to you, to terminate your employment
hereunder, effective upon the giving of such notice. For the purposes hereof,
"permanent disability" shall be defined as any physical or mental disability or
incapacity which renders you incapable of fully performing the services required
of you in accordance with your obligations here-
31
under for a period of 120 consecutive days or for shorter periods aggregating
120 days during any period of twelve (12) consecutive months.
(c) Cause. The Company may terminate your employment hereunder for
"Cause". For the purposes hereof, termination for "Cause" shall mean
termination after:
(i) your commission of a material act of fraud against the
Company or its affiliates;
(ii) your conviction of (or pleading by you of nolo contendere
to) any crime which constitutes a felony in the jurisdiction
involved; or
(iii) the willful, repeated and demonstrable failure by you
substantially to perform your duties over a period of not less than 30
days, other than any such failure resulting from your incapacity due
to physical or mental illness, or material breach of any of your
obligations under this Agreement, and your failure to cure such
failure or breach within 30 days after receipt of written notice from
the Chairman of the Board of Directors of the Company.
(d) Termination by You. You may terminate your employment hereunder
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (A)
the failure of the
32
Board of Directors or the stockholders of the Company to continue to elect you
as a director of the Company throughout the term of your employment hereunder,
provided that if you are not so continued, the Company shall be entitled to cure
such failure within thirty (30) days after you cease to serve as a director, (B)
any assignment to you of any material duties other than those contemplated by,
or any limitation of your powers or in any respect not contemplated by,
paragraph 2 hereof, provided that you first deliver written notice thereof to
the Chairman of the Board of Directors of the Company and the Company shall have
failed to cure such non-permitted assignment or limitation within thirty (30)
days after receipt of such written notice, or (C) a reduction in your rate of
compensation, or a material reduction in your fringe benefits or any other
material failure by the Company to comply with paragraphs 3 through 5 hereof,
provided that you first deliver written notice thereof to the Chairman of the
Board of the Company and the Company shall have failed to cure such reduction or
failure within thirty (30) days after receipt of such written notice.
(e) Any termination by the Company pursuant to paragraphs (b) or (c)
above or by you pursuant to paragraph (d) above shall be communicated by
written Notice of Termination to the other party hereto. For the purposes
hereof, a "Notice of
33
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(f) "Date of Termination" shall mean (i) if your employment is
terminated by your death, the date of your death, and (ii) if your employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation Upon Termination or During Disability.
(a) If your employment shall be terminated by reason of your death,
the Company shall pay, to such person as you shall designate in a notice filed
with the Company, or, if no such person shall be designated, to your estate as a
lump sum death benefit, an amount equal to (i) any accrued but unpaid Base
Salary at the time of your death, plus (ii) the Final Payment, if any, provided
for in paragraph 3(a)(ii) hereof, plus (iii) the Incentive Compensation provided
for in paragraph 3(b) hereof. This amount shall be exclusive of and in addition
to any payments
34
your widow, beneficiaries or estate may be entitled to receive pursuant to any
pension or employee benefit plan maintained by the Company. Your designated
beneficiary or the executor of your estate, as the case may be, shall accept the
payment provided for in this paragraph 8 in full discharge and release of the
Company of and from any further obligations under this Agreement.
(b) During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you shall continue
to receive your full Base Salary until your employment is terminated pursuant to
paragraph 7(b) hereof. If your employment is terminated by the Company pursuant
to paragraph 7(b), the Company shall be discharged and released of and from any
further obligations under this Agreement, other than the obligation of the
Company to pay the Final Payment, if any, provided for in paragraph 3(a)(ii)
hereof and Incentive Compensation provided for in paragraph 3(b) hereof. During
any such period and thereafter you shall continue to bear the obligations
provided for in paragraph 9 below in accordance with the terms of such paragraph
9.
(c) If your employment shall be terminated for Cause or you shall
terminate your employment other than for Good Reason, the Company shall pay you
your full Base Salary
35
through the Date of Termination or the date on which you terminate your
employment at the rate in effect at the time Notice of Termination is given or
the date on which you terminate your employment. The Company shall be
discharged and released of and from any further obligations under this
Agreement, other than the obligation of the Company to pay the Final Payment, if
any, pursuant to paragraph 3(a)(ii) hereof and Incentive Compensation pursuant
to paragraph 3(b) hereof. Thereafter you shall continue to have the obligations
provided for in paragraph 9 below. Nothing contained herein shall be deemed to
be a waiver by the Company of any rights that it may have against you in respect
of your actions which gave rise to the termination of your employment for Cause.
(d) If the Company shall terminate your employment other than
pursuant to paragraphs 7(b) or 7(c) hereof or if you shall terminate your
employment for Good Reason, then
(i) The Company shall continue to pay you your full Base Salary
in accordance with normal payroll practices and without interest
through the third anniversary of the Commencement Date at the rate in
effect at the time Notice of Termination is given in accordance with
paragraph 7(e) hereof;
36
(ii) Notwithstanding the provisions of paragraph 3(a)(ii)
hereof, the Company shall pay you the sum of $120,000 as the Final
Payment within 10 days following the third anniversary of the
Commencement Date;
(iii) The Company shall pay you the Incentive Compensation
provided for in paragraph 3(b) hereof; and
(iv) The Company shall maintain in full force and effect, for
your continued benefit for the full term this Agreement, all employee
benefit plans and programs in which you were entitled to participate
immediately prior to the Date of Termination provided that your
continued participation is possible under the general terms and
provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, you shall be
entitled to receive an amount equal to the annual contributions,
payments, credits or allocations made by the Company to you, to your
account or on your behalf under such plans and programs from which
your continued participation is barred.
37
(e) If the Company shall terminate your employment hereunder other
than pursuant to paragraphs 7(b) or 7(c) hereof, or if you shall terminate your
employment pursuant to paragraph 7(d) hereof, you agree, during the entire
period of time that you are entitled to receive any benefits pursuant to
paragraph 8(d) above, to make known your availability for employment involving
services of a nature substantially similar and of a comparable stature to those
performed by you on behalf of the Company in a manner customary for executives
holding positions substantially similar and of a comparable stature to your
position with the Company. You agree to keep the Chairman of the Board of the
Company (or his designee) appraised of your employment status during such period
and, if requested, you will provide appropriate supporting documentation with
respect to the salary, bonuses or other compensation earned by and benefits made
available to you in respect of such employment. In the event you secure
employment as described in this paragraph (e) (other than your existing
positions with Chicago Milwaukee Corporation, CMC Heartland Partners or
Milwaukee Land Company), the Company shall be entitled to (i) deduct from the
amounts payable to you pursuant to paragraphs 8(d)(i), 8(d)(ii) and 8(d)(iii)
above any salary, bonuses or other compensation paid to you in connection with
38
such employment or any increased salary, bonuses or other compensation (other
than routine increases that do not require the provision of additional services)
paid to you by Chicago Milwaukee Corporation, CMC Heartland Partners or
Milwaukee Land Company due to increases in the amount of time you are able to
devote to, or increased responsibilities you are able to assume with, one or
more of such companies due to the termination of your employment with the
Company and (ii) terminate your participation in (and shall not be required to
pay you any sums in respect of) any employee benefit plans and programs
described in paragraph 8(d)(iv) that are substantially similar to any employee
benefit plans and programs in which you participate in connection with such new
or existing employment. You agree promptly to repay to the Company any amounts
paid to you by the Company pursuant to paragraphs 8(d)(i), 8(d)(ii) and
8(d)(iii) which the Company was entitled to deduct from such amounts pursuant to
this paragraph (e).
9. Restrictive Covenants and Confidentiality; Injunctive Relief.
(a) You agree, as a condition to the performance by the Company of
its obligations hereunder, particularly its obligations under paragraph 3
hereof, that during the term of your employment hereunder and during the further
39
period of one (1) year after the termination of such employment, you shall not,
without the prior written approval of the Board of Directors of the Company,
directly or indirectly through any other person, firm or corporation:
(i) Solicit, raid, entice or induce any person, firm or
corporation that presently is or at any time during the term of your
employment hereunder shall be a customer of the Company, or any of its
subsidiary companies, to become a customer of any other person, firm
or corporation, and you shall not approach any such person, firm or
corporation for such purpose or authorize or knowingly approve the
taking of such actions by any other person; or
(ii) Solicit, raid, entice or induce any person that presently
is or at any time during the term of your employment hereunder shall
be an employee of the Company, or any of its subsidiary companies, to
become employed by any person, firm or corporation, and you shall not
approach any such employee for such purpose or authorize or knowingly
approve the taking of such actions by any other person.
40
(b) Recognizing that the knowledge, information and relationship
with customers, suppliers, and agents, and the knowledge of the Company's and
its subsidiary companies' business methods, systems, plans and policies which
you shall hereafter establish, receive or obtain as an employee of the Company
or its subsidiary companies, are valuable and unique assets of the respective
businesses of the Company and its subsidiary companies, you agree that, during
and after the term of your employment hereunder, you shall not (otherwise than
pursuant to your duties hereunder) disclose, without the prior written approval
of the Board of Directors of the Company, any such knowledge or information
pertaining to the Company or any of its subsidiary companies, their business,
personnel or policies, to any person, firm, corporation or other entity, for any
reason or purpose whatsoever. The provisions of this paragraph 9 shall not
apply to information which is or shall become generally known to the public or
the trade (except by reason of your breach of your obligations hereunder),
information which is or shall become available in trade or other publications,
information known to you prior to entering the employ of the Company, and
information which you are required to disclose by order of a court of competent
jurisdiction (provided that prior to your disclosure of any such information you
shall
41
provide the Company with reasonable notice and a reasonable opportunity to seek
a protective order to prevent such disclosure).
(c) The provisions of this paragraph 9 shall survive the termination
of your employment hereunder, irrespective of the reason therefor.
(d) You acknowledge that the services to be rendered by you are of a
special, unique and extraordinary character and, in connection with such
services, you will have access to confidential information vital to the
Company's and its subsidiary companies' businesses. By reason of this, you
consent and agree that if you violate any of the provisions of this Agreement
with respect to diversion of the Company's or its subsidiary companies'
customers or employees, or confidentiality, the Company and its subsidiary
companies would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction restraining you from committing or
continuing any such violation of this Agreement.
10. Deductions and Withholdings. The Company shall be entitled to
withhold any amounts payable under this Agreement on account of payroll taxes
and similar matters as
42
are required by applicable law, rule or regulation of appropriate governmental
authorities.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to you, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminated your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall include any successor
to the Company's business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 11 or which
43
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement and all your rights hereunder shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amounts would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there be no such designee, to
your estate. Your obligations hereunder may not be delegated and except as
otherwise provided herein relating to the designation of a devisee, legatee or
other designee, you may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement or any of your rights hereunder, and any
such attempted delegation or disposition shall be null and void and without
effect.
12. Notice. For the purposes of this Agreement, notices and all
other communications provided for shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
44
If to you:
Mr. Edwin Jacobson
2575 South Bayshore Drive
Penthouse A
Coconut Grove, Florida 33133
If to the Company:
Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: Chairman of the Board
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and by the Company. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement constitutes the
complete understanding between the parties with respect to your employment and
no agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been
45
made by either party which are not set forth expressly in this Agreement. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Florida.
14. Validity; Effectiveness.
(a) The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(b) This Agreement has been approved by the Board of Directors of
the Company, and the Incentive Compensation provided in paragraphs 3(b)(i)-(iii)
hereof has been established by a committee of the Board of Directors of the
Company, which is comprised solely of two or more outside directors within the
meaning of Section 162(m)(4) (C)(i) of the Code.
(c) This Agreement shall not become effective unless (i) you are
continuously employed by the Company through and including June 15, 1997, and
are not then in breach of the Original Employment Agreement, (ii) the material
terms under which Incentive Compensation is to be paid pursuant to paragraphs
3(b)(i)-(iii) hereof have been disclosed to the stockholders of the Company, and
(iii) the Agreement (including the material terms under which such
46
Incentive Compensation is to be paid) has been approved prior to the
Commencement Date at a meeting of stockholders of the Company by the affirmative
vote of a majority of the shares present in person or represented by proxy and
entitled to vote on the matter. The Company hereby undertakes to submit this
Agreement (including the material terms under which such Incentive Compensation
is to be paid) for approval by stockholders prior to the Commencement Date. If
this Agreement shall not be effective on the Commencement Date, you and the
Company shall continue to have the rights and obligations provided under the
Original Employment Agreement, including the obligation of the Company to pay
you Incentive Compensation (as defined in the Original Employment Agreement) in
accordance with the terms thereof.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
47
If the foregoing is satisfactory, would you please so indicate by
signing and returning to the Company the enclosed copy of this letter whereupon
this will constitute our agreement on the subject.
AVATAR HOLDINGS INC.
By: /s/ Leon Levy
---------------------
Leon Levy
Chairman of the Board
ACCEPTED AND AGREED TO:
/s/ Edwin Jacobson
- - -----------------------
Edwin Jacobson
48
APPENDIX B
PROXY
AVATAR HOLDINGS INC.
255 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edwin Jacobson and Juanita I. Kerrigan
as Proxies, each with the power to appoint his or her substitute; and hereby
authorizes them to represent and vote, as designated on the reverse side, all
the shares of Common Stock of Avatar Holdings Inc. held of record by the
undersigned at the close of business on March 29, 1996 at the Annual Meeting
of Stockholders to be held on May 23, 1996, or any adjournment or adjournments
thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
49
Please mark
/X/ your votes
as this
COMMON
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
FOR all nominees listed at left (except WITHHOLD AUTHORITY
as marked to the contrary below). to vote for all nominees listed.
Item 1 - ELECTION OF EIGHT DIRECTORS
Nominees: L. Levy, M. Dresner, E. Jacobson,
L.T. Kendall, M. Meyerson, / / / /
K.T. Rosen, F.S. Smith, H.K. Stanford.
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominees's name in the space provided below.)
- - ------------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Item 2 - APPROVAL OF THE
EMPLOYMENT
AGREEMENT WITH
EDWIN JACOBSON,
PRESIDENT AND / / / / / /
CHIEF EXECUTIVE
OFFICER OF AVATAR
HOLDINGS INC., TO
BE EFFECTIVE
JUNE 18, 1997.
Item 3 - APPROVAL OF THE
APPOINTMENT OF
ERNST & YOUNG, LLP,
INDEPENDENT / / / / / /
ACCOUNTANTS,
AS AUDITORS OF
AVATAR HOLDINGS
INC. FOR 1996.
ITEM 4 - IN THEIR DISCRE-
TION THE PROXIES
ARE AUTHORIZED
TO VOTE UPON
SUCH OTHER BUSI- / / / / / /
NESS AS MAY
PROPERLY COME
BEFORE THE
MEETING.
Dated: , 1996.
---------------------------------------------------------------
- - ----------------------------------------------------------------------------
Signature
- - ----------------------------------------------------------------------------
Signature if held jointly
Please sign exactly as name appears. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.